MALAN REALTY INVESTORS INC, S-2/A, 1998-06-02

MALAN REALTY INVESTORS INC
S-2/A, 1998-06-02
REAL ESTATE INVESTMENT TRUSTS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 2, 1998

REGISTRATION NO. 333-48937
================================================================================

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2

TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

MALAN REALTY INVESTORS, INC.
(Exact Name of Registrant as Specified in its Articles of Incorporation)
------------------------

MICHIGAN
(State or Other Jurisdiction of
Incorporation or Organization)
38-1841410
(I.R.S. Employer Identification No.)

------------------------
30200 TELEGRAPH ROAD
SUITE 105
BIRMINGHAM, MICHIGAN 48025-4503
(248) 644-7110
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
------------------------

ANTHONY S. GRAMER
MALAN REALTY INVESTORS, INC.
30200 TELEGRAPH ROAD
SUITE 105
BIRMINGHAM, MICHIGAN 48025-4503
(248) 644-7110
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
------------------------

Copies to:

KENNETH H. GOLD, ESQ.
MIRO WEINER & KRAMER
500 N. WOODWARD AVENUE
SUITE 100
BLOOMFIELD HILLS, MICHIGAN 48304
DONALD J. KUNZ, ESQ.
HONIGMAN MILLER SCHWARTZ AND COHN
2290 FIRST NATIONAL BUILDING
DETROIT, MICHIGAN 48226

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2

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

SUBJECT TO COMPLETION, DATED JUNE 2, 1998

PROSPECTUS
MALAN REALTY LOGO

1,500,000 SHARES

MALAN REALTY INVESTORS, INC.

COMMON STOCK
------------------

Malan Realty Investors, Inc. (the "Company") is a self-administered and
self-managed real estate investment trust (a "REIT") that owns, acquires,
develops, redevelops, manages and operates properties which are leased primarily
to national and regional retail companies. The Company owns a portfolio of 66
properties (the "Properties") located in 10 states and containing an aggregate
of approximately 6.1 million square feet of gross leasable area ("GLA"). As of
December 31, 1997, the portfolio was 93.3% leased.

All of the 1,500,000 Shares of Common Stock, $.01 par value per share (the
"Shares"), offered by this Prospectus (the "Offering") are being sold by the
Company. Upon the closing of the Offering, approximately 9.1% of the outstanding
shares of Common Stock of the Company (the "Common Stock") will be beneficially
owned by the Company's executive officers and directors. To ensure that the
Company remains a REIT for Federal income tax purposes, among other reasons, the
Company's Articles of Incorporation ("Articles"), in general, prevent a
shareholder from owning more than 9.9% of the Common Stock. See "Restrictions on
Transfer."

The Common Stock is listed on the New York Stock Exchange (the "NYSE")
under the symbol "MAL". On May 29, 1998 the last reported sale price of the
Common Stock on the NYSE was $17.75 per share. The Company has paid a regular
quarterly distribution on the Common Stock of $.425 since the consummation of
its initial public offering in June 1994 (the "IPO"). See "Price Range of Common
Stock and Distribution History."

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

SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR CERTAIN FACTORS
RELEVANT TO AN INVESTMENT IN THE SHARES.

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

<TABLE>
<CAPTION>
======================================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.................................. $ $ $
- ----------------------------------------------------------------------------------------------------------------------
Total(3)................................... $ $ $
======================================================================================================================
</TABLE>

(1) The Company has agreed to indemnify the underwriters (the "Underwriters")
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."

(2) Before deducting estimated expenses of approximately $ payable by
the Company.

(3) The Company has granted the Underwriters a 30 day option to purchase up to
225,000 additional Shares on the same terms and conditions as the Shares
offered hereby solely to cover over-allotments, if any. If the option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to the Company will be $ , $ and
$ , respectively. See "Underwriting."
------------------

The Shares are offered severally by the Underwriters, as specified herein,
subject to receipt and acceptance by them and subject to their right to reject
any order in whole or in part. It is expected that the Shares will be ready for
delivery through the facilities of The Depository Trust Company in New York, New
York, on or about , 1998 against payment therefor in immediately
available funds.
------------------

RONEY CAPITAL MARKETS LOGO FIRST OF MICHIGAN CORPORATION LOGO
The date of this Prospectus is , 1998
<PAGE> 3

[Location Map]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SHARES.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING
AND MAY BID FOR, AND PURCHASE, SHARES IN THE OPEN MARKET. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING".

SAFE HARBOR STATEMENT

In addition to historical information, this Prospectus contains certain
forward-looking statements, including, but not limited to, statements regarding
the Company's future financial performance and financial condition. These
statements involve a number of risks and uncertainties. Any forward-looking
statements made by the Company herein are not guarantees of future performance,
and actual results may differ materially from those in such forward-looking
statements as a result of various factors, including but not limited to, those
referred to under "Risk Factors" herein.
<PAGE> 4
[MALAN REALTY INVESTORS, INC. LOGO]

<TABLE>
<S> <C>
[1/2 OFF CARD SHOP PHOTO] [GATEWAY COUNTRY PERSONAL COMPUTER STORE PHOTO]

CLINTON POINTE SHOPPING CENTER THE SHOPS AT FAIRLANE MEADOWS
Clinton Township, Michigan Dearborn, Michigan

[HOLLYWOOD THEATER PHOTO] [DICK'S CLOTHING & SPORTING GOODS STORE PHOTO]

SOUTHWIND THEATRE WESTLAND SHOPPING CENTER
Lawrence, Kansas Westland, Michigan

</TABLE>

<PAGE> 5

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITY OTHER THAN THE SHARES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE SHARES OFFERED
HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF
OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY.......................................... 5
The Company............................................... 5
Objectives and Strategies................................. 7
The Portfolio............................................. 8
Tax Status................................................ 9
The Offering.............................................. 10
Summary Selected Financial Data........................... 11
RISK FACTORS................................................ 13
Reliance Upon Major Tenants............................... 13
Acquisition, Development and Redevelopment Risks.......... 13
Risks of High Distribution Payout Percentage.............. 13
Real Estate Investment Considerations..................... 14
Adverse Effect of Increase in Market Interest Rates on
Common Stock Price and Financial Position.............. 15
Inability to Comply with REIT Distribution Requirements... 15
Dependence on Key Personnel............................... 16
No Limitation on the Incurrence of Debt................... 16
Risks Associated with Borrowing, Including Foreclosure.... 16
Ability to Change Investment and Financing Policies
without Shareholder Approval........................... 17
Failure to Qualify as a REIT.............................. 17
Environmental Matters..................................... 17
Limitations on Ownership and Change in Control............ 18
Future Dilution from Convertible Securities, Options,
Warrants and Future Share Offerings.................... 19
Financing of Future Developments or Acquisitions.......... 19
Risk of Reduced Funds Available for Distribution Upon the
Exercise of Certain Purchase Options................... 19
Treatment of Assets of the Company as Plan Assets under
ERISA.................................................. 19
Risks Involved in Development Activities Through
Partnerships and Joint Ventures........................ 20
USE OF PROCEEDS............................................. 21
PRICE RANGE OF COMMON STOCK AND DISTRIBUTION HISTORY........ 21
CAPITALIZATION.............................................. 22
SELECTED FINANCIAL DATA..................................... 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 25
Overview.................................................. 25
Results of Operations..................................... 25
Liquidity and Capital Resources........................... 28
Inflation................................................. 32
</TABLE>

3
<PAGE> 6

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
BUSINESS AND PROPERTIES..................................... 32
The Company............................................... 32
Objectives and Strategies................................. 34
Properties................................................ 35
Summary of Properties..................................... 37
Major Tenants............................................. 42
Summary of Major Tenants.................................. 43
Tenant Lease Expirations and Renewals..................... 44
Options to Purchase Granted to Certain Tenants............ 45
Rental Revenues........................................... 45
Capital Expenditures...................................... 45
Competition............................................... 45
Employees................................................. 46
Legal Proceedings......................................... 46
Insurance................................................. 46
MORTGAGE INDEBTEDNESS....................................... 47
RECENT DEVELOPMENTS......................................... 47
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES................. 49
Acquisition and Investment Policies....................... 49
Financing Policies........................................ 50
Working Capital Reserves.................................. 51
Other Operating Policies.................................. 51
MANAGEMENT.................................................. 51
Executive Officers and Directors.......................... 51
Executive Compensation.................................... 53
Stock Option Plan......................................... 53
Compensation of Directors................................. 54
PRINCIPAL SHAREHOLDERS...................................... 55
DESCRIPTION OF COMMON STOCK................................. 57
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND
BYLAWS.................................................... 58
RESTRICTIONS ON TRANSFER.................................... 59
FEDERAL INCOME TAX CONSIDERATIONS........................... 59
ERISA CONSIDERATIONS........................................ 69
UNDERWRITING................................................ 71
LEGAL MATTERS............................................... 72
EXPERTS..................................................... 72
AVAILABLE INFORMATION....................................... 72
INCORPORATION BY REFERENCE.................................. 73
GLOSSARY.................................................... 74
INDEX TO FINANCIAL STATEMENTS............................... F-1
</TABLE>

4
<PAGE> 7

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements and related notes appearing elsewhere in
this Prospectus. Unless otherwise indicated, the information contained in this
Prospectus assumes that the Underwriters' over-allotment option is not
exercised.

THE COMPANY

The Company is a self-administered, self-managed real estate investment
trust which owns, acquires, develops, redevelops, manages and operates
properties which are leased primarily to national and regional retail companies.
The Properties are typically located in select geographic markets with an
emphasis on small to medium-sized communities where the Properties can be
positioned among the leading centers in their respective trade areas. At
December 31, 1997, the Company had 53 properties located in 9 states, consisting
of 26 community shopping centers, 26 freestanding stores and 1 entertainment
facility and containing an aggregate of approximately 5.7 million square feet of
GLA. On February 23, 1998 the Company acquired a community shopping center in
Westland, Michigan (the "Westland Acquisition") which contains an aggregate of
approximately 85,000 square feet of GLA. In addition, on May 29, 1998, the
Company acquired twelve community shopping centers (the "Sandor Acquisition")
which contain an aggregate of approximately 328,000 square feet of GLA.
Currently, the Company's portfolio consists of 66 Properties located in 10
states consisting of 39 community shopping centers, 24 freestanding stores and 3
entertainment facilities (2 of which are under redevelopment) and contains an
aggregate of approximately 6.1 million square feet of GLA. An entertainment
facility consists of a multi-screen movie theater with stadium seating, digital
sound and the latest concepts in food concession. As of December 31, 1997, 93.3%
of GLA (95.7% excluding the Properties being redeveloped) in the portfolio was
leased and 93.7% of the Company's annualized base rent was attributable to
national and regional retailers. At December 31, 1997, Kmart Corporation
("Kmart") and Wal-Mart Corporation ("Wal-Mart") represented 35.7% and 6.6%,
respectively, of annualized base rent and leased 54.0% and 7.1%, respectively,
of the Company's GLA.

From 1966 to 1985, the Company specialized in building and managing
properties to suit for national and regional retailers who had signed long-term
leases prior to commencement of construction. The Properties were initially
owned by affiliates of the Company and subsequently by third party owners. Prior
to the IPO, the Company managed these Properties. In 1981, Anthony S. Gramer,
President and Chief Executive Officer, joined the Company and in 1986 he
acquired the Company from its original owners. The Company became a REIT in June
1994 and continued to expand the retail property business previously managed by
the Company. The Company believes that this strategy of developing properties
based on executed long-term leases primarily with national and regional retail
tenants provides the shareholders with a predictable source of income and also
provides future opportunities for development of additional properties at
attractive returns on investment, without the lease-up risks inherent in
speculative development.

The Company is one of the original developers of properties for Kmart and
ranks among the leading operators of shopping centers in the United States.
Since its inception in 1966, the Company has developed or redeveloped a total of
39 community shopping centers, 76 freestanding stores, and one regional enclosed
mall, totaling more than 14 million square feet of GLA. In connection with the
IPO, the Company acquired 45 income-producing retail properties with a GLA of
4.7 million square feet, all of which were either developed or redeveloped, and
subsequently managed, by the Company.

Recent Developments:

5
<PAGE> 8

Acquisition purchase agreement, the Company agreed to acquire a
community shopping center located in Decatur, Illinois for $4.2
million that contains over 40,000 square feet of GLA and has Wal-Mart
and Sam's Club as anchor tenants (the stores and their underlying pads
are owned and managed by independent third parties). The acquisition
of the Decatur, Illinois property is scheduled to close in November
1998 after the seller completes a redevelopment of the property. The
acquisition of all 13 Properties under the Sandor Acquisition purchase
agreement is hereinafter referred to as the "Midwest Acquisition."

- In the Westland Acquisition, the Company acquired a community shopping
center in Westland, Michigan for $7.9 million. This center has Dick's
Sporting Goods and MedMax as its major tenants and contains over
85,000 square feet of GLA. At May 29, 1998, 100% of the GLA of the
community shopping center was leased.

Also, since the IPO, the Company has:

- Acquired the following 8 Properties:

(i) Five community shopping centers in Indiana (3), Illinois (1) and
Ohio (1) which have Wal-Mart as the major tenant and contain over
665,000 square feet of GLA;

(ii) A community shopping center in Dearborn, Michigan which has Best
Buy and Kids "R" Us, as major tenants, contains over 137,000
square feet of GLA and is also anchored by Mervyn's and Target
(which own their stores and underlying pads);

(iii) A community shopping center in Clinton Township, Michigan which
has Office Max and Sports Authority as major tenants, contains
over 135,000 square feet of GLA and is also anchored by Target
(which owns its store and underlying pad); and

(iv) A 12-plex entertainment facility in Lawrence, Kansas which is
leased to Hollywood Theaters under a sale-leaseback agreement
and contains over 42,000 square feet of GLA.

- Begun the redevelopment of two of the Company's freestanding stores,
which were previously anchored by Kmart, into entertainment facilities
which are scheduled to be completed in 1998. These facilities contain,
in the aggregate, over 117,000 square feet of GLA.

- Begun the redevelopment and expansion of an existing shopping center
anchored by Kmart in Lawrence, Kansas. The expansion will add a Kohl's
Department Store as an anchor tenant as well as other national and
regional retailers. The renovated shopping center will contain over
255,000 square feet of GLA.

- Diversified the tenant base and reduced the percentage of annualized
base rent received from Kmart to 35.7% as of December 31, 1997 from
59.6% at the IPO.

- Continued to operate the Properties at occupancy rates in excess of
93.3% with minimal tenant defaults.

The Company's three senior executives, Anthony S. Gramer -- President and
Chief Executive Officer, Michael K. Kaline -- Vice President, and Elliott J.
Broderick -- Chief Accounting Officer, have been actively involved in the
management, leasing, acquisition, development and redevelopment of shopping
centers, freestanding stores and entertainment facilities, including all of the
Properties, and collectively have over 50 years of experience in the real estate
industry.

The Company's executive offices are located at 30200 Telegraph Road, Suite
105, Birmingham, MI 48025-4503. The telephone number is (248) 644-7110.

6
<PAGE> 9

OBJECTIVES AND STRATEGIES

OBJECTIVES

The Company's primary objectives are (i) to realize steady and predictable
cash flows through the ownership of high quality properties leased primarily to
good credit quality national and regional retailers, (ii) to increase Funds From
Operations per share through the development, redevelopment or acquisition of
additional properties, (iii) to have leases with national and regional retailers
in place prior to development of any property, (iv) to develop vacant parcels
adjacent to existing Properties and (v) to structure financing arrangements that
are beneficial to the Company's long-term growth objectives. The Company
presently intends to achieve these objectives by implementing the growth,
operating and financing strategies outlined below.

GROWTH, OPERATING AND FINANCING STRATEGIES

In seeking to attain these objectives, the Company has applied and intends
to continue to apply the same strategies that have been its guiding principles
since the Company's inception. These strategies include the following:

- Developing or acquiring each property with the objective of leasing
it to good credit quality national or regional retailers and holding
it for long-term investment value.

- Developing or acquiring properties in what the Company considers to
be attractive long-term locations. Such locations typically have (i)
convenient access to transportation arteries with a traffic count
that is higher than average for the local market, (ii)
concentrations of other retail properties and (iii) demographic
characteristics which are attractive to the retail tenant which will
lease the property upon completion.

- Purchasing land and beginning development of a property upon the
execution of a lease or leases with a national or regional retailer
or retailers on terms which provide a return on estimated cost that
is attractive relative to the Company's cost of capital.

- Directing all aspects of development and redevelopment, including
design, construction, leasing and management. Property management
and leasing activities are handled directly by Company personnel.
The Company believes that this approach to development and
management enables it to operate efficiently and enhances the
ability of the Company to develop and maintain assets of high
quality which are designed, leased and maintained to maximize
long-term value.

- Developing vacant parcels that are adjacent to some of the
Properties and outlots on existing Properties to enhance the value
of the Properties as well as the cash flow of the Company.

- Locking in the Company's returns on property investments through the
use of intermediate to long-term, fixed-rate financing alternatives.

The Company believes that the relationships established by management with
national and regional retailers as well as the financing relationships
management has developed with lenders provide it with an advantage in achieving
its objectives.

7
<PAGE> 10

THE PORTFOLIO

The 66 Properties are located in 10 states and consist of 39 community
shopping centers, 24 freestanding stores and 3 entertainment facilities (2 of
which are under redevelopment) and contain an aggregate of approximately 6.1
million square feet of GLA. One of the community shopping centers is being
redeveloped and expanded. The Company developed 45 of the 66 Properties and all
of the Properties are owned in fee or held pursuant to long-term ground leases.
At December 31, 1997, Kmart and Wal-Mart represented 35.7% and 6.6%,
respectively, of annualized base rent. The Properties are designed to meet the
needs of the surrounding local communities and are anchored by national and
regional retail tenants who offer a broad range of discount consumer goods. As
of December 31, 1997, 93.3% (95.7% excluding the Properties under redevelopment)
of the GLA of the Properties was leased.

LOCATIONS OF THE PROPERTIES(1)

<TABLE>
<CAPTION>
NUMBER GROSS PERCENT OF
OF LEASABLE AREA GLA LEASED AS OF
STATE PROPERTIES (SQ. FT.) DECEMBER 31, 1997
- ----- ---------- ------------- -----------------
<S> <C> <C> <C>
Illinois............................................... 13 1,400,743 88.9%
Kansas................................................. 12 755,360 83.0
Wisconsin.............................................. 11 1,431,312 98.2
Indiana................................................ 6 809,407 94.6
Missouri............................................... 5 519,277 98.7
Michigan............................................... 3 412,508 97.2
California............................................. 1 94,282 100.0
Maryland............................................... 1 84,180 100.0
Ohio................................................... 1 145,607 97.4
-- ---------
Total................................................ 53 5,652,676 93.3%
== =========
</TABLE>

- -------------------------
(1) The Sandor Acquisition and the Westland Acquisition occurred after December
31, 1997; thus, the effect of these acquisitions is not included in the
table. See "Recent Developments."

ANNUALIZED BASE RENT OF THE PROPERTIES(1)

The following is a breakdown of annualized base rent as of December 31,
1997 for the Properties by type of tenant:

<TABLE>
<CAPTION>
ANNUALIZED PERCENT OF TOTAL
BASE RENT AS OF ANNUALIZED BASE RENT AS OF
TYPE OF TENANT DECEMBER 31, 1997(2) DECEMBER 31, 1997
- -------------- -------------------- --------------------------
<S> <C> <C>
National............................................ $19,964,000 82.4%
Regional............................................ 2,744,000 11.3
Local............................................... 1,516,000 6.3
----------- -----
Total............................................... $24,224,000 100.0%
=========== =====
</TABLE>

(2) "Annualized Base Rent" of the Company as of December 31, 1997 is determined
by multiplying by 12 the monthly rent as of that date, but excluding from
the monthly rent (i) percentage rents, (ii) additional rent payable by
tenants such as common area maintenance, real estate taxes and other expense
reimbursements and (iii) future contractual rent increases.

8
<PAGE> 11

MAJOR TENANTS(1)

The following table sets forth certain information with respect to the
Company's major tenants as of December 31, 1997:

<TABLE>
<CAPTION>
PERCENT OF TOTAL
NUMBER ANNUALIZED BASE RENT ANNUALIZED BASE RENT
TENANT OF LEASES AS OF DECEMBER 31, 1997(2) AS OF DECEMBER 31, 1997(2)
- ------ --------- -------------------------- --------------------------
<S> <C> <C> <C>
Kmart.................................. 33 $ 8,640,000 35.7%
Wal-Mart............................... 5 1,598,000 6.6
Toys "R" Us............................ 3 823,000 3.4
Cineplex-Odeon......................... 1 617,000 2.5
Hollywood Theater...................... 1 587,000 2.4
Best Buy............................... 1 485,000 2.0
Levitz................................. 1 433,000 1.8
Jay C. Foods........................... 2 370,000 1.5
Sports Authority....................... 1 362,000 1.5
Sportmart(3)........................... 1 356,000 1.5
1/2 Off Card Shop...................... 2 307,000 1.3
Roundy's............................... 1 289,000 1.2
-- ----------- ----
TOTAL.................................. 52 $14,867,000 61.4%
== =========== ====
</TABLE>

(3) Subsidiary of Dick's Sporting Goods.

TAX STATUS

The Company has elected to be taxed as a REIT under Sections 856 through
860 of the Internal Revenue Code of 1986, as amended (the "Code") and the
applicable Treasury Regulations (the "REIT Requirements"). The Company believes
that it is organized and operates in such a manner as to qualify for taxation as
a REIT under the Code, and the Company intends to continue to operate in such a
manner; however, no assurance can be given that it has operated in such a manner
or that it will continue to operate in a manner so as to qualify or remain
qualified as a REIT. See "Risk Factors -- Failure to Qualify as a REIT." As a
REIT, the Company generally is not subject to Federal corporate income taxes on
that portion of its ordinary income or capital gain that is currently
distributed to shareholders. Even if the Company qualifies as a REIT, it will,
however, still be subject to certain Federal, state and local taxes. See
"Federal Income Tax Considerations."

9
<PAGE> 12

THE OFFERING

COMMON STOCK OFFERED........................ 1,500,000 shares (1)

COMMON STOCK OUTSTANDING AFTER THE
OFFERING.................................... shares (1)

USE OF PROCEEDS............................. The proceeds from the sale of
the Shares will be used to
reduce existing indebtedness and
to redevelop certain Properties.
The balance will be available
for general corporate purposes,
including the acquisition of
additional properties. See "Use
of Proceeds."

DISTRIBUTION POLICY......................... The Company has paid regular
quarterly distributions to its
shareholders of $.425 per share
($1.70 per share on an
annualized basis) on the Common
Stock since the completion of
the IPO. Future distributions
will depend on the Company's
actual results of operations,
cash flows from operations,
economic conditions and other
factors, such as working capital
requirements, cash requirements
to fund investing and financing
activities, debt service
requirements, including the
repayment or refinancing of
indebtedness, capital
expenditure requirements,
including improvements to and
expansions of existing
Properties and the development
of additional properties. For
Federal income tax purposes,
100%, 79.4%, and 27.3% of the
distributions of $1.70 per share
paid in 1997, 1996 and 1995,
respectively, represented a
return of capital.

RESTRICTIONS ON OWNERSHIP................... Ownership by a single holder of
more than 9.9% of the Common
Stock of the Company is
restricted in order, among other
things, to ensure that the
Company remains qualified as a
REIT for Federal income tax
purposes. See "Restrictions on
Transfer."

NYSE SYMBOL................................. The Common Stock is listed on
the NYSE under the symbol MAL.
- -------------------------
(1) Does not include 225,000 shares that may be issued upon the exercise of the
Underwriters' over-allotment option. See "Underwriting".

10
<PAGE> 13

SUMMARY SELECTED FINANCIAL DATA

The unaudited pro forma operating data is presented as if the Midwest
Acquisition, the Westland Acquisition and the Offering and related transactions
had occurred on January 1, 1997. The pro forma balance sheet data is presented
as if the Midwest Acquisition and the Offering and related transactions had
occurred on March 31, 1998. The pro forma financial information is not
necessarily indicative of what the actual financial position and results of
operations of the Company would have been as of and for the periods indicated,
nor does it purport to represent the financial position and results of
operations for future periods. See "Recent Developments" and the pro forma
financial statements of the Company.

The selected financial data of Malan Realty Investors, Inc. for the year
ended December 31, 1994, consists of the operations of Malan (Predecessor) for
the period beginning January 1 through June 23, 1994, combined with the
operations of Malan Realty Investors, Inc. from June 24 through December 31,
1994. The selected financial data of Malan Realty Investors, Inc. includes the
effects of the IPO and related offerings and the Company's subsequent
acquisitions. The selected financial data presented as of and for the period
ended December 31, 1993 is derived from the combined financial statements of
Malan (Predecessor). The following data should be read in conjunction with the
financial statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED MARCH 31, -----------------------------------------------------
------------------------------- THE COMPANY
PRO FORMA HISTORICAL -----------------------------------------------------
--------- ------------------- PRO FORMA
1998 1998 1997 1997 1997 1996 1995 1994
---- ---- ---- --------- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Total revenues........................ $10,160 $ 9,054 $ 8,887 $ 39,687 $ 34,983 $ 34,963 $ 32,247 $ 17,377
Operating expenses
Property operating and maintenance... 791 736 1,065 3,200 2,867 2,769 1,961 823
Other operating expenses............. 347 347 329 1,493 1,493 1,481 1,216 841
Real estate taxes.................... 2,042 1,957 1,919 8,281 7,891 7,715 7,511 4,251
General and administrative........... 389 389 394 1,545 1,545 1,664 1,463 1,488
Depreciation and amortization........ 1,525 1,310 1,265 5,975 5,068 4,920 4,597 2,125
------- -------- -------- -------- -------- -------- -------- --------
Total operating expenses.............. 5,094 4,739 4,972 20,494 18,864 18,549 16,748 9,528
------- -------- -------- -------- -------- -------- -------- --------
Operating income...................... 5,066 4,315 3,915 19,193 16,119 16,414 15,499 7,849
Interest expense...................... 4,265 4,016 3,922 17,338 15,576 15,815 13,749 6,477
------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before minority interest
in partnership....................... 801 299 (7) 1,855 543 599 1,750 1,372
Minority interest in partnership...... 151
------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)..................... $ 801 $ 299 $ (7) $ 1,855 $ 543 $ 599 $ 1,750 $ 1,523
======= ======== ======== ======== ======== ======== ======== ========
OTHER DATA
Funds From Operations(1).............. $ 2,773 $ 2,056 $ 1,641 $ 9,450 $ 7,231 $ 7,100 $ 7,171 $ 3,757
======= ======== ======== ======== ======== ======== ======== ========
Basic earnings per share(2)........... $ 0.15 $ 0.08 $ 0.00 $ 0.37 $ 0.15 $ 0.17 $ 0.49 $ 0.72
======= ======== ======== ======== ======== ======== ======== ========
Weighted average basic shares......... 5,284 3,784 3,464 5,046 3,546 3,464 3,547 2,114
======= ======== ======== ======== ======== ======== ======== ========
Diluted earnings per share(2)......... $ 0.15 $ 0.08 $ 0.00 $ 0.36 $ 0.15 $ 0.17 $ 0.49 $ 0.72
======= ======== ======== ======== ======== ======== ======== ========
Weighted average diluted shares....... 5,328 3,828 3,464 5,091 3,591 3,475 3,547 2,114
======= ======== ======== ======== ======== ======== ======== ========
Cash distributions declared per basic
common share......................... $ 0.425 $ 0.425 $ 1.70 $ 1.70 $ 1.70 $ 0.85
======== ======== ======== ======== ======== ========
Gross leasable area at period
end(3)............................... 6,066 5,738 5,713 6,066 5,653 5,707 5,695 5,407
======= ======== ======== ======== ======== ======== ======== ========

</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------
MALAN
(PREDECESSOR)
-------------
1993
----

<S> <C>
OPERATING DATA
Total revenues........................ $ 6,778
Operating expenses
Property operating and maintenance... 285
Other operating expenses............. 778
Real estate taxes.................... 1,447
General and administrative........... 818
Depreciation and amortization........ 682
-------
Total operating expenses.............. 4,010
-------
Operating income...................... 2,768
Interest expense...................... 3,130
-------
Income (loss) before minority interest
in partnership....................... (362)
Minority interest in partnership...... 274
-------
Net income (loss)..................... $ (88)
=======
OTHER DATA
Funds From Operations(1).............. $ 390
=======
Basic earnings per share(2)...........
Weighted average basic shares.........
Diluted earnings per share(2).........
Weighted average diluted shares.......
Cash distributions declared per basic
common share.........................
Gross leasable area at period
end(3)............................... 294
=======

</TABLE>

PRO
FORMA THE COMPANY
-------- ----------------------------------------------------------------
MARCH 31, DECEMBER 31,
------------------------------- -----------------------------------------
1998 1998 1997 1997 1996 1995 1994
-------- -------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Real estate, before accumulated depreciation..... $240,325 $223,710 $207,590 $215,785 $207,590 $206,085 $174,173
Total assets..................................... 263,212 224,605 212,987 216,138 217,852 223,360 192,184
Mortgage indebtedness............................ 112,389 98,739 82,331 88,585 83,643 83,734 43,123
Convertible debentures........................... 55,484 55,484 61,285 56,680 61,285 61,285 63,795
Convertible notes................................ 27,000 27,000 27,000 27,000 27,000 27,000 27,000
Minority interest in partnership.................
Shareholder's equity (deficit)................... 58,778 33,821 33,528 33,942 34,993 41,243 48,091

</TABLE>

<TABLE>
<CAPTION>
MALAN
(PREDECESSOR)
DECEMBER 31,
-------------
1993
-------------
<S> <C>
BALANCE SHEET DATA
Real estate, before accumulated deprec $30,617
Total assets.......................... 31,960
Mortgage indebtedness................. 35,843
Convertible debentures................
Convertible notes.....................
Minority interest in partnership...... (3,261)
Shareholder's equity (deficit)........ (5,162)
</TABLE>

(footnotes on next page)

11
<PAGE> 14

(footnotes for previous page)
- -------------------------
(1) Management considers Funds From Operations to be an appropriate measure of
performance of an equity real estate investment trust. The Company
calculates Funds From Operations as net income or (loss) excluding gains and
losses from sales of property, further adjusted for certain non-cash items
including depreciation and amortization of deferred financing costs included
in interest expense. It is the opinion of management that reduction for or
inclusion of these items is not meaningful in evaluating income-producing
real estate which, in general, has historically not depreciated. Funds From
Operations does not represent cash generated from operating activities in
accordance with generally accepted accounting principals and is not
necessarily indicative of cash available to fund cash needs, including
distributions. Funds From Operations should not be considered as an
alternative to net income as an indicator of the Company's operating
performance or as an alternative to cash flow as a measure of liquidity or
the ability to pay distributions but rather as a supplemental tool to be
used in conjunction with these factors in analyzing the Company's overall
performance. The Company is aware that there are variations between
companies in the REIT industry as to how Funds From Operations is
calculated. See "Funds From Operations" in "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

(2) The Company adopted Statement of Financial Accounting Standards ("SFAS"),
No. 128, "Earnings per Share", for the year ended December 31, 1997;
accordingly, all prior-period data has been restated. In accordance with
SFAS No. 128, the effect of conversion of all of the debt securities would
be antidilutive and as such is not included in the weighted average diluted
shares reported above.

(3) Malan (Predecessor) GLA includes only Bricktown Square.

12
<PAGE> 15

RISK FACTORS

An investment in the Shares involves various risks. Prospective investors
should carefully consider, among other factors, the matters described below.

RELIANCE UPON MAJOR TENANTS

As of December 31, 1997, 54.0% and 7.1% of the GLA at the Properties was
leased to Kmart and Wal-Mart, respectively, and annualized base rents from Kmart
and Wal-Mart represented 35.7% and 6.6%, respectively, of the annualized base
rents from the Properties. The Company, and some tenants in the community
shopping centers anchored by Kmart or Wal-Mart stores, could be adversely
affected in the event of Kmart's or Wal-Mart's bankruptcy or insolvency, a
change in the business strategy of either retailer, a downturn in Kmart's or
Wal-Mart's business due to economic conditions or competition from other
national and local retailers and discount stores, or in the event that either
Kmart or Wal-Mart closes any of their stores prior to the expiration of their
respective leases and continues to pay the rent for the remainder of the lease
term or does not renew their leases as they expire. If Kmart or Wal-Mart decides
to vacate an anchor store in a community shopping center and is not replaced by
a new anchor tenant, the customer volume at the community shopping center may be
affected, thereby reducing the revenue of other tenants at the community
shopping center and potentially decreasing the percentage rents the Company
collects. Furthermore, certain tenants may have termination or abatement rights
should Kmart or Wal-Mart withdraw from a community shopping center.

ACQUISITION, DEVELOPMENT AND REDEVELOPMENT RISKS

The Company intends to continue to evaluate and pursue acquisition
opportunities for community shopping centers, freestanding stores and other
retail and entertainment properties. Any acquisition, including the Sandor
Acquisition, the Westland Acquisition and the acquisition of the entertainment
facility located in Lawrence, Kansas, entails risks that investments will fail
to perform in accordance with expectations and that judgments with respect to
the costs of improvements to bring an acquired property up to standards
established by the Company for the market position intended for that property
will prove inaccurate. In addition, any real estate investment involves a degree
of general investment risk.

While the Company's policies with respect to development and redevelopment
activities are intended to limit some of the risks otherwise associated with
development, the Company will nevertheless incur certain risks, including the
expenditure of funds on, and devotion of management's time to, projects which
may not come to fruition; the risk that construction costs with respect to a
project may exceed original estimates, possibly making the project uneconomic;
and the risk that occupancy rates and rents at a completed project will not be
sufficient to make the project profitable.

Furthermore, there are numerous developers and real estate companies, some
of whom have greater financial and other resources than the Company, that
compete with the Company in seeking properties for acquisition and tenants who
will lease space in these properties. There can be no assurance that the Company
will be able to continue to successfully compete with such entities in its
development, acquisition and leasing activities.

RISKS OF HIGH DISTRIBUTION PAYOUT PERCENTAGE

Since the IPO, the annual distribution rate of $1.70 per share has resulted
in a payout ratio ranging from 82.9% to 85.4% of Funds From Operations. This
payout level could have a negative impact on the operations of the Company since
the Company's remaining cash from operations for acquisitions, development and
other activities could be limited. No assurances can be given that the Company
will be able to maintain this distribution rate.

13
<PAGE> 16

REAL ESTATE INVESTMENT CONSIDERATIONS

Economic Performance and Value of Shopping Centers Dependent on Many
Factors.

Shopping center economic performance and values could be adversely affected
by a number of factors, including changes in the national, regional, and local
economic climate, the quality of tenant management, local conditions (such as
the supply and demand for retail space), the attractiveness of the Properties to
tenants and their customers, the ability and willingness of the Company to
provide adequate maintenance and insurance, operating costs and the public
perception of the safety of customers at the Properties. In addition to the
factors affecting economic performance of shopping centers, shopping center
values could be adversely affected by such factors as government regulations and
changes in real estate zoning and tax laws, interest rate levels, the
availability of financing and potential liability under environmental and other
laws. Adverse changes in one or more of these factors could adversely affect the
Company's income and funds available for distribution, as well as the value of
the Properties.

Dependence on Rental Income from Real Property.

Substantially all of the Company's income is derived from rental income
from real property. If sales at the tenants' stores operating in the Properties
decline sufficiently, tenants might be unable to pay their existing minimum
rents or expense recovery charges, since such rents and charges would represent
a higher percentage of their sales. In addition, if there were such declines in
sales, new tenants would be less likely to be willing to pay minimum rents as
high as they would otherwise pay. In a recessionary environment, such risks are
increased.

If tenants were unable to meet their lease obligations or if the Company
was unable to lease space or collect rental payments, the Company's income and
cash flow would be adversely affected. In the event of a default by a tenant,
the Company may experience delays in enforcing its rights as lessor and may
incur substantial costs in protecting its investment.

The Company will be subject to the risks that upon expiration, leases may
not be renewed, the space may not be relet or the terms of renewal or reletting
(including the cost of required renovations) may be less favorable than the
expired lease terms.

Inability to Compete.

The tenants at the Properties compete with other retailers in attracting
customers. Community shopping centers face increasing competition from discount
stores, outlet malls, discount shopping clubs, direct mail and telemarketing.
There are numerous community shopping centers that compete with the Properties
in seeking tenants to lease space and numerous companies that compete with the
Company in seeking properties for acquisition or development. No assurance can
be given that the Properties will be able to compete successfully in the future.
The inability of one or more of the Properties to compete successfully would
adversely affect the Company's revenues and, consequently, funds available to
pay distributions.

Bankruptcy or Insolvency of Tenants.

From time to time, tenants at the Properties have defaulted on their leases
or sought the protection of the bankruptcy laws. Such events could result in the
termination of a tenant's lease and cause a reduction in the Company's Funds
From Operations.

In the event of bankruptcy or insolvency of a lessee, the Company may
experience delays in enforcing its rights as lessor and may incur substantial
costs in protecting its investment. No assurance can be given that tenants will
not become subject to a bankruptcy proceeding in the future or, if any tenants
become subject to such a proceeding, that they will affirm their leases and
continue to make rental payments in a timely manner. In addition, a tenant from
time to time may experience a downturn in its business which may weaken its
financial condition and result in the failure to make rental payments when due.
If tenant leases are not affirmed following bankruptcy or a tenant's financial
condition weakens, the Company's income may be adversely affected.
14
<PAGE> 17

Illiquidity of Real Estate Investments.

Equity investments in real estate are relatively illiquid and such
illiquidity limits the ability of the Company to promptly change its portfolio
in response to changes in economic or other conditions.

Uninsured Loss.

The Company carries comprehensive liability, fire, flood, earthquake,
tornado, extended coverage and rental loss insurance on the Properties, with
those policy specifications and insured limits customarily carried for similar
properties. There are, however, certain types of losses (generally of a
catastrophic nature, such as from wars, riots or civil disturbances) which may
be either uninsurable or for which the cost of insuring is not economically
justifiable. Should an uninsured loss occur, the Company could lose both its
invested capital in and anticipated profits from the Property which would
nevertheless continue to be subject to the obligation of any mortgage
indebtedness. Any such loss could adversely affect the profitability and cash
flow of the Company. See "Objectives and Strategies -- Insurance."

ADVERSE EFFECT OF INCREASE IN MARKET INTEREST RATES ON COMMON STOCK PRICE AND
FINANCIAL POSITION

Two of the factors that will influence the price of the Common Stock will
be the yield and annual distribution rate on the Common Stock. An increase in
market interest rates may lead Common Stock purchasers to demand a higher yield
and higher annual distribution rate on the Common Stock. If the annual
distribution rate is not increased, the market price of the Common Stock could
be adversely affected as investors transfer their investments to higher yielding
securities, potentially resulting in a lower Common Stock price. In addition, an
increase in interest rates will increase interest expense under the Company's
variable rate indebtedness. The Company has entered into a $25 million revolving
loan agreement (the "Greenwich Capital Line") with Greenwich Capital Markets,
Inc., a division of National Westminster Bank Plc ("Greenwich"). Amounts
outstanding under the Greenwich Capital Line bear interest at LIBOR plus 150
basis points (7.14% on May 29, 1998). The Greenwich Capital Line may be
increased to $50 million with the pledge of additional collateral. The Company
also has a secured $4.5 million line of credit with First Chicago NBD. Amounts
outstanding under this line of credit bear interest at LIBOR plus 200 basis
points or in certain instances, the bank's prime rate (8.5% on May 29, 1998). As
of May 29, 1998, the Company had $20.1 million outstanding under these loans.
The Company is therefore subject to the risk of interest rate fluctuations on
this variable rate indebtedness. See "Mortgage Indebtedness."

INABILITY TO COMPLY WITH REIT DISTRIBUTION REQUIREMENTS

REIT Requirements.

To obtain the favorable tax treatment for REITs qualifying under the Code,
the Company generally is required each year to distribute to its shareholders at
least 95% of its otherwise taxable income (after certain adjustments). In
addition, the Company will be subject to a 4% nondeductible excise tax on the
amount, if any, by which certain distributions paid by it with respect to any
calendar year are less than the sum of (i) 85% of its ordinary income for the
calendar year; (ii) 95% of its capital gains net income for the calendar year;
and (iii) any undistributed taxable income from prior periods. Failure to comply
with the 95% distribution requirement would result in the Company failing to
qualify as a REIT and the Company's income being subject to tax at regular
corporate rates.

Inability of the Company to Maintain Distributions.

Distributions by the Company are dependent on a number of factors,
including the Company's rental income and financial condition, any decision to
reinvest funds rather than to distribute such funds, capital expenditures, the
annual distribution requirements under the REIT provisions of the Code and such
other factors as the Company deems relevant. In the event of a default or a
lease termination by a lessee, there could be a decrease or cessation of rental
payments. In addition, the amount available to make distributions may decrease
if properties acquired in the future yield lower than expected operating cash
flow. If the Company

15
<PAGE> 18

incurs additional indebtedness in the future, it will require additional funds
to service such indebtedness and, as a result, amounts available to make
distributions may decrease.

The Company intends to make distributions to its shareholders to comply
with the 95% distribution provisions of the Code and to avoid the nondeductible
excise tax discussed above. The Company anticipates that the cash flow from
operations will be sufficient to enable it to pay its operating expenses and
meet the distribution requirements discussed above, but no assurances can be
given in this regard.

In addition, differences in timing between the receipt of income and the
payment of expenses in arriving at taxable income of the Company could require
the Company to borrow funds to meet the 95% distribution requirement.

DEPENDENCE ON KEY PERSONNEL

The Company is dependent on the efforts of its executive officers,
particularly Messrs. Gramer, Kaline and Broderick, the President, Vice President
and Chief Accounting Officer, respectively. While the Company believes that it
could find suitable replacements for these key personnel, the loss of their
services or the limitation of their availability could have an adverse effect on
the Company's financial condition and results of operations. Mr. Gramer has
entered into an employment agreement with the Company that is effective from
June 25 to June 24 of each year and that is automatically renewed each year for
an additional one-year period unless the Company or Mr. Gramer notifies the
other party prior to March 25 that the employment arrangement will cease.
Pursuant to the terms of the employment agreement, Mr. Gramer agrees not to
compete with the Company during his employment and for one year thereafter. The
Company has key-man life insurance only on Mr. Gramer.

NO LIMITATION ON THE INCURRENCE OF DEBT

The Company intends to maintain a capital structure with a ratio of
long-term debt (excluding the Company's outstanding convertible debentures and
convertible notes) to total market capitalization of 50% or less. Fluctuations
in the market price of the Company's Common Stock may cause this ratio to vary
from time to time. Furthermore, the Company may elect from time to time to
operate with debt levels which are in excess of 50% of total market
capitalization. The organizational documents of the Company contain no
limitation on the amount or percentage of indebtedness which the Company may
incur. Therefore, the Board of Directors, without a vote of the shareholders,
could alter the general policy on borrowings at any time. If the Company's debt
capitalization policy is changed, the Company could become more leveraged,
resulting in an increase in debt service that could adversely affect the
Company's operating cash flow and its ability to make expected distributions to
shareholders and could result in an increased risk of default on its
obligations.

Additionally, the Company may consider factors other than total market
capitalization in making decisions regarding the incurrence of debt (such as the
relative costs of debt and equity capital, the market value of the Properties,
growth and acquisition opportunities and the ability of particular Properties
and the Company, as a whole, to generate cash flow to cover expected debt
service). See "Policies with Respect to Certain Activities -- Financing
Policies."

RISKS ASSOCIATED WITH BORROWING, INCLUDING FORECLOSURE

In the event that rental income from the Properties and any properties that
may be acquired or developed by the Company in the future is insufficient to
pay, or the Company is otherwise unable to pay, any principal or interest due
under its secured indebtedness (see "Capitalization" and "Financial Statements")
or the Company otherwise fails to meet its other obligations under its secured
indebtedness, the Properties securing such indebtedness may be foreclosed.
Furthermore, much of the Company's secured indebtedness is cross-collateralized
such that default with respect to a single property could result in foreclosure
actions against many Properties.

The borrowings of the Company are not expected to amortize over the life of
such loans and will therefore require balloon payments. The ability to repay
indebtedness at maturity or otherwise will depend on the ability

16
<PAGE> 19

of the Company either to refinance such indebtedness, to raise additional equity
or to sell Properties. A sale of the Properties could result in a "prohibited
transaction", thereby subjecting the Company to a 100% tax on the gain from such
a sale. See "Federal Income Tax Considerations -- Requirements for
Qualification." The Company has obtained no commitments with respect to
refinancing any indebtedness. There can be no assurance that such refinancing
will be available on reasonable terms and conditions, or that the amounts that
may be received from such refinancing will be sufficient to make the required
balloon payments. If the Company is otherwise unable to repay any of its
borrowings on or before their respective maturity dates, the Company may have to
sell or borrow against any Properties that are not encumbered by such borrowings
to meet such repayments or limit or eliminate distributions that it otherwise
intended to make to its shareholders. Any resulting limitation or elimination of
distributions could have an adverse impact upon the Company's status as a REIT.
See "Inability to Comply with REIT Distribution Requirements -- Inability of the
Company to Maintain Distributions."

The Company may, without shareholder vote, use leverage through borrowing
on any unencumbered Properties to increase the Company's rate of return on its
investments and allow the Company to increase the number and size of its
investments. Such use of leverage increases the risk that the cash generated by
operations may be insufficient to meet debt payment obligations or to make
expected distributions and/or distributions required by the REIT provisions of
the Code.

ABILITY TO CHANGE INVESTMENT AND FINANCING POLICIES WITHOUT SHAREHOLDER APPROVAL

The investment and financing policies of the Company and its policies with
respect to certain other activities, including its growth, capitalization,
distributions, and investment and operating policies, are determined by the
Board of Directors. These policies may be changed from time to time at the
discretion of the Board of Directors without a vote of the shareholders of the
Company. See "Policies with Respect to Certain Activities."

FAILURE TO QUALIFY AS A REIT

Although the Company believes that it is organized and operates in such a
manner so as to qualify as a REIT under the Code, no assurance can be given that
the Company will remain so qualified. Qualification as a REIT involves the
application of highly technical and complex Code provisions for which there are
only limited judicial or administrative interpretations. The determination of
various factual matters and circumstances not entirely within the Company's
control may affect its ability to qualify as a REIT. In addition, no assurance
can be given that legislation, new regulations, administrative interpretations,
or court decisions will not significantly change the tax laws with respect to
the qualification as a REIT or the Federal income tax consequences of such
qualification.

If in any taxable year the Company fails to qualify as a REIT, the Company
would not be allowed a deduction for distributions to shareholders in computing
its taxable income and would be subject to Federal income tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates. As a result, the amount available for distribution to the Company's
shareholders would be reduced for the year or years involved. In addition,
unless entitled to relief under certain statutory provisions, the Company would
also be disqualified from treatment as a REIT for the four taxable years
following the year during which qualification was lost.

Notwithstanding that the Company currently operates in a manner designed to
qualify as a REIT, future economic, market, legal, tax, or other considerations
may cause the Company to determine that it is in the best interest of the
Company and its shareholders to revoke the REIT election. The Company would be
disqualified to elect treatment as a REIT for the four taxable years following
the year of such revocation. See "Federal Income Tax Considerations."

ENVIRONMENTAL MATTERS

Under various Federal, state and local laws, ordinances and regulations, an
owner or an operator of real estate may be liable for the costs of removal or
remediation of certain hazardous or toxic substances on or in
17
<PAGE> 20

such property. Such laws often impose liability without regard to whether the
owner or operator knew of, or was responsible for, the presence of such
hazardous or toxic substances. The cost of any required remediation and the
owner's or operator's liability therefor as to any property is generally not
limited under such laws and could exceed the value of the property and/or the
aggregate assets of the owner. In addition, the presence of such substances, or
the failure to properly remediate such substances, may adversely affect the
owner's ability to borrow using such property as collateral.

Each of the Properties has been the subject of a Phase I environmental
assessment (which generally involved inspection without soil sampling or ground
water analysis) by an independent environmental consultant. The Company has
pursued or is pursuing investigation or corrective action whenever the reports
from the Phase I environmental assessments recommend further investigation or
corrective action. Reports from the Phase I environmental assessments have not
revealed, nor is the Company aware of, any environmental liability (including
asbestos-related liability) that the Company's management believes would have a
material adverse effect on the Company's business, assets or results of
operations. No assurance, however, can be given as to the reliability of these
reports or that these reports reveal all environmental liabilities or that no
prior owner or prior or current tenant created any material adverse
environmental condition not known to the Company. In addition to the Properties,
the Company manages certain third-party retail properties and may thus be
considered an "operator" of such properties under the environmental laws and,
under certain circumstances, may have liability under the environmental laws for
environmental liabilities related to such third-party properties.

The Company believes that it is in compliance in all material respects with
all Federal, state and local ordinances and regulations regarding hazardous or
toxic substances. The Company has not been notified by any governmental
authority of any material non-compliance, liability or other claim in connection
with any of the Properties.

LIMITATIONS ON OWNERSHIP AND CHANGE IN CONTROL

Ownership Limit.

In order to maintain its qualification as a REIT, not more than 50% in
value of the outstanding stock of the Company may be owned, directly or
indirectly, by five or fewer individuals (as defined in the Code, to include
certain entities). The Company's Articles prohibit the direct or constructive
ownership of more than 9.9% (the "Ownership Limit") of the Common Stock by any
single shareholder, with certain exceptions. The constructive ownership rules
are complex and may cause Common Stock owned, directly or constructively, by a
group of related individuals or entities to be deemed to be constructively owned
by one individual or entity.

The Ownership Limit may have the effect of precluding or deterring
acquisition of control of the Company by a third party even where a change in
control may be in the best interest of the shareholders. See "Restrictions on
Transfer."

Preferred Stock.

The Articles authorize the Board of Directors to approve the issuance of
shares of preferred stock and to establish the preferences and rights (including
the right to vote and the right to convert into shares of Common Stock) of any
such shares issued. See "Certain Provisions of the Articles of Incorporation and
By-Laws -- Preferred Stock." The issuance of preferred stock could have the
effect of delaying or preventing a change in control of the Company even where a
change in control is in the shareholders' interest.

Control Shares.

The Michigan Business Corporation Act (the "MBCA") provides certain
restrictions upon the voting rights of "control shares" in a Michigan
corporation, which may have an antitakeover effect. "Control shares" are voting
shares of stock which, if aggregated with all other such shares of stock
previously acquired by the holder thereof, would entitle the acquiror to
exercise a certain degree of voting power, as described in the MBCA, in electing
the directors. The MBCA provides that "control shares" have no voting rights
except to

18
<PAGE> 21

the extent approved by an affirmative vote of a majority of the outstanding
shares entitled to vote on the matter, excluding shares held by the acquiror and
the officers and any directors who are also employees of the Company.

FUTURE DILUTION FROM CONVERTIBLE SECURITIES, OPTIONS, WARRANTS AND FUTURE SHARE
OFFERINGS

The Company has outstanding convertible notes and debentures maturing July
2003 and 2004, respectively, which upon conversion, could result in the issuance
of 1,588,235 and 3,235,529, respectively, additional freely tradeable shares of
Common Stock. The conversion price for the notes and debentures is $17.00 per
share. In addition, the Company reserved 400,000 shares of Common Stock for
issuance pursuant to options under an employee stock option plan. Options
covering 250,000 shares were granted in connection with the IPO and options
covering 53,366 shares (net of options previously exercised) have since been
granted under the employee stock option plan. See "Management -- Stock Option
Plan." Furthermore, the Company reserved 80,000 shares of Common Stock, subject
to certain adjustments, for issuance pursuant to a non-employee director stock
option plan. Options to purchase up to 13,792 shares (net of options previously
executed) have been issued in connection with the non-employee director stock
option plan. Finally, as part of the IPO, National Westminster Bank Plc, New
York Branch, was issued warrants to acquire up to 353,000 shares of Common Stock
at $20.40 per share. The warrants expire in June 1999.

No prediction can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price of the Common Stock. Sales of substantial amounts of the shares, or the
perception that such sales could occur, could adversely affect the prevailing
market price for the Common Stock.

The Company and Messrs. Gramer, Kaline and Broderick have agreed, subject
to certain limited exceptions, not to offer, sell, contract to sell or otherwise
dispose of any Common Stock for a period of 180 days after the date of the
Prospectus without the prior written consent of the Underwriters. See
"Underwriting."

FINANCING OF FUTURE DEVELOPMENTS OR ACQUISITIONS

The Company expects to redevelop existing Properties and develop and
acquire additional properties. Since the Company must distribute 95% of its REIT
taxable income to qualify as a REIT, there may not be sufficient available cash
in excess of distributions to fund such future developments or acquisitions.
Thus, the necessary funds for future developments, redevelopments, acquisitions
or required tenant improvements will be obtained, to the extent available,
primarily from cash flow in excess of that required to be distributed, net
proceeds from the issuance of equity securities, and, within certain debt
limitations, bank borrowings and the issuance of debt securities. There can be
no assurance that financing for future projects will be available to the Company
on satisfactory terms at the times required. See "Adverse Effect of Increase in
Market Interest Rates on Common Stock Price and Financial Position" and "Use of
Proceeds".

RISK OF REDUCED FUNDS AVAILABLE FOR DISTRIBUTION UPON THE EXERCISE OF CERTAIN
PURCHASE OPTIONS

Several of the Properties are subject to purchase options granted to
certain tenants. In the event that the purchase options are exercised, the
Company may be unable to reinvest the proceeds resulting from the exercise of
such purchase options, which may have the effect of reducing funds available to
pay distributions. See "Business and Properties -- Options to Purchase Granted
to Certain Tenants."

TREATMENT OF ASSETS OF THE COMPANY AS PLAN ASSETS UNDER ERISA

The Company believes that the Shares offered hereby will be
"publicly-offered securities" for purposes of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and that, consequently, the assets of
the Company are not, and will not be, "plan assets" of an ERISA plan, individual
retirement account, or other non-ERISA plan that invests in the Shares. If the
Company's assets are deemed to be plan assets of any such plan, then the
Company's ability to engage in business transactions would be hampered because:
(i) certain persons exercising discretion as to the Company's assets might be
considered to be fiduciaries
19
<PAGE> 22

under ERISA; (ii) transactions involving the Company undertaken at their
direction or pursuant to their advice might violate ERISA; and (iii) certain
transactions that the Company might enter into in the ordinary course of its
business might constitute "prohibited transactions" under ERISA and the Code.
See "ERISA Considerations."

RISKS INVOLVED IN DEVELOPMENT ACTIVITIES THROUGH PARTNERSHIPS AND JOINT VENTURES

Instead of developing properties directly, the Company may develop them as
a partner or co-venturer, although the Company has not done so to date.
Partnership or joint venture developments may, under certain circumstances,
involve risks not otherwise present, including the possibility that the
Company's partner or co-venturer might become bankrupt, or that such partner or
co-venturer might at any time have economic or other business interests or goals
which are inconsistent with the business interests or goals of the Company. Such
partner or co-venturer may also take action contrary to the instructions or
requests of the Company or contrary to the Company's policies or objectives,
including the Company's policy with respect to maintaining its qualification as
a REIT. Actions by such partner or co-venturer might result in subjecting
properties owned by the partnership or joint venture to additional risk. Such
investments also have the potential risk of impasse on decisions because neither
the partner nor the co-venturer would have full control over the partnership or
joint venture. There is no limitation as to the amount of available funds that
may be invested by the Company in partnerships or joint ventures.

20
<PAGE> 23

USE OF PROCEEDS

The net proceeds to the Company from the Offering are estimated to total
$25,028,000 ($28,782,000 if the Underwriters' over-allotment is exercised in
full) based on an assumed offering price of $17.75 per share, the last reported
sale price of the Common Stock on the NYSE on May 29, 1998. The Company intends
to use a portion of the net proceeds of the Offering to pay off (i) the
Greenwich Capital Line, which had an outstanding balance of $19.1 million on May
29, 1998, an interest rate of 7.14% and a maturity date of November 1999 and
(ii) the line of credit with First Chicago NBD which had an outstanding balance
of $1.0 million on May 29, 1998, an interest rate of 8.5% and a maturity date of
March 1999. Net borrowings under the Greenwich Capital Line have been used to
(i) fund a portion of the Sandor Acquisition, (ii) acquire the entertainment
facility located in Lawrence, Kansas, (iii) fund the Westland Acquisition and
(iv) pay costs associated with the redevelopment and expansion of the community
shopping center in Lawrence, Kansas. Net borrowings under the First Chicago NBD
line of credit have been used to fund a portion of the Sandor Acquisition. The
Company intends to use the balance of the net proceeds for general corporate
purposes, which may include the redevelopment of certain Properties and the
acquisition of additional properties. Proceeds not immediately required for the
purposes described above may be invested in short-term, interest bearing
accounts and securities, which are consistent with the Company's qualifications
as a REIT.

PRICE RANGE OF COMMON STOCK AND DISTRIBUTION HISTORY

The Common Stock is listed on the NYSE under the symbol "MAL." The
following table sets forth the reported high and low sale prices of the Common
Stock for the periods indicated and the distributions per share paid in such
periods.

CLOSING PRICE PER SHARE

<TABLE>
<CAPTION>
DISTRIBUTIONS
HIGH LOW PER SHARE(1)
---- --- -------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
1st Quarter............................................... $14.50 $11.38 $.425
2nd Quarter............................................... 15.50 13.63 .425
3rd Quarter............................................... 14.88 13.88 .425
4th Quarter............................................... 16.38 13.88 .425
YEAR ENDED DECEMBER 31, 1997:
1st Quarter............................................... 17.13 15.88 .425
2nd Quarter............................................... 18.38 16.38 .425
3rd Quarter............................................... 18.00 16.88 .425
4th Quarter............................................... 19.56 17.19 .425
YEAR ENDED DECEMBER 31, 1998:
1st Quarter............................................... 18.31 17.31 .425
2nd Quarter (through May 29, 1998)........................ 18.00 17.13 .425
</TABLE>

- -------------------------
(1) Distributions are shown for the periods during which they were declared.
These distributions were or will be paid in the immediate subsequent period.

On May 29, 1998, the closing sale price of the Common Stock as reported on
the NYSE was $17.75 per share. As of May 29, 1998, there were 3,840,375 shares
of Common Stock outstanding which were held by approximately 165 record holders.
The record holders do not reflect the persons or entities who held their shares
in nominee or "street" name.

The Company has paid regular quarterly distributions to its shareholders of
$.425 per share ($1.70 per share on an annualized basis) on the Common Stock
since the completion of the IPO. The Company intends to continue to declare
quarterly distributions to its shareholders. However, distributions by the
Company are determined by the Board of Directors and will depend on the
Company's actual results of operations, cash flows from operations, economic
conditions and other factors, such as debt service requirements, cash
requirements, including the repayment or refinancing of indebtedness, capital
expenditure requirements, including improvements to and expansions of existing
Properties, the development of additional properties, and such other factors as
the Board of Directors deems relevant.
21
<PAGE> 24

CAPITALIZATION

The following table sets forth the capitalization of the Company at March
31, 1998, the pro forma capitalization of the Company to give effect to the
Sandor Acquisition as though it had occurred on March 31, 1998, and as adjusted
to give effect to the sale of the Shares offered hereby at an assumed public
offering price of $17.75 per share and the application of the estimated net
proceeds therefrom as described under the caption "Use of Proceeds." The
information set forth in the table should be read in conjunction with the
historical and pro forma Financial Statements of the Company and the Notes
thereto.

<TABLE>
<CAPTION>
MARCH 31, 1998
-------------------------------------------
ACTUAL PRO FORMA(1) AS ADJUSTED(1)(2)
------ ------------ -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
DEBT:
Mortgages........................................... $ 98,739 $126,739 $106,689
Convertible debentures.............................. 55,484 55,484 55,484
Convertible notes................................... 27,000 27,000 27,000
-------- -------- --------
Total Debt....................................... $181,223 $209,223 $189,173
======== ======== ========
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value 5 million shares
authorized, none issued and outstanding.......... -- -- --
Common stock, $.01 par value 30 million shares
authorized; 3,811,463 shares issued and
outstanding on an actual and pro forma basis;
5,311,463 issued and outstanding on an as
adjusted basis................................... 38 38 53
Additional paid in capital.......................... 51,684 51,684 76,697
Accumulated distributions in excess of net income... (17,901) (17,901) (17,901)
-------- -------- --------
Total Shareholders' Equity....................... 33,821 33,821 58,849
-------- -------- --------
Total Capitalization............................. $215,044 $243,044 $248,022
======== ======== ========
</TABLE>

- -------------------------
(1) Gives effect to the Sandor Acquisition as if it had occurred on March 31,
1998.

(2) Assumes the Underwriters' over-allotment option to purchase up to 225,000
shares of Common Stock is not exercised. Further assumes that certain
options and warrants are not exercised and the debentures and notes are not
converted. See "Description of Common Stock -- Additional Equity." In
addition, Directors may elect to be compensated in stock (see "Management --
Compensation of Directors").

22
<PAGE> 25

SELECTED FINANCIAL DATA

The following table sets forth certain selected financial data for the
Company and its predecessor, Malan (Predecessor), as defined herein, on a
historical basis and selected financial data of the Company on a pro forma
basis. Malan (Predecessor) is not a legal entity but, rather, a combination of
the principal real estate properties of a partnership, Bricktown Square
Associates ("BTS"), and the real estate management operations of an affiliated
S-Corporation, Malan Construction Company ("MCC"), which managed the operations
of BTS. On June 24, 1994, MCC completed its IPO and began operating as a REIT
under the name Malan Realty Investors, Inc.
The unaudited pro forma operating data is presented as if the Midwest
Acquisition, the Westland Acquisition and the Offering and related transactions
had occurred on January 1, 1997. The pro forma balance sheet data is presented
as if the Midwest Acquisition and the Offering and related transactions had
occurred on March 31, 1998. The pro forma financial information is not
necessarily indicative of what the actual financial position and results of
operations of the Company would have been as of and for the periods indicated,
nor does it purport to represent the financial position and results of
operations for future periods. See "Recent Developments" and the pro forma
financial statements of the Company.
The selected financial data of Malan Realty Investors, Inc. for the year
ended December 31, 1994, consists of the operations of Malan (Predecessor) for
the period beginning January 1 through June 23, 1994, combined with the
operations of Malan Realty Investors, Inc. from June 24 through December 31,
1994. The selected financial data of Malan Realty Investors, Inc. includes the
effects of the IPO and related offerings and the Company's subsequent
acquisitions. The selected financial data presented as of and for the period
ended December 31, 1993 is derived from the combined financial statements of
Malan (Predecessor). The following data should be read in conjunction with the
financial statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED MARCH 31, -----------------------------------------------------
------------------------------- THE COMPANY
PRO FORMA HISTORICAL -----------------------------------------------------
--------- ------------------- PRO FORMA
1998 1998 1997 1997 1997 1996 1995 1994
---- ---- ---- --------- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Revenues
Minimum rent......................... $ 7,234 $ 6,283 $ 5,983 $ 28,123 $ 24,092 $ 23,836 $ 22,100 $ 11,029
Percentage and overage rents......... 301 301 304 1,177 1,177 1,164 963 573
Recoveries from tenants.............. 2,547 2,399 2,513 9,906 9,271 9,340 8,662 4,577
------- -------- -------- -------- -------- -------- -------- --------
Total rental revenues................ 10,082 8,983 8,800 39,206 34,540 34,340 31,725 16,179
Management and leasing fees.......... 12 12 12 47 47 48 50 899
Interest and other income............ 66 59 75 434 396 575 472 299
------- -------- -------- -------- -------- -------- -------- --------
Total revenues........................ 10,160 9,054 8,887 39,687 34,983 34,963 32,247 17,377
Operating expenses
Property operating and maintenance... 791 736 1,065 3,200 2,867 2,769 1,961 823
Other operating expenses............. 347 347 329 1,493 1,493 1,481 1,216 841
Real estate taxes.................... 2,042 1,957 1,919 8,281 7,891 7,715 7,511 4,251
General and administrative........... 389 389 394 1,545 1,545 1,664 1,463 1,488
Depreciation and amortization........ 1,525 1,310 1,265 5,975 5,068 4,920 4,597 2,125
------- -------- -------- -------- -------- -------- -------- --------
Total operating expenses.............. 5,094 4,739 4,972 20,494 18,864 18,549 16,748 9,528
------- -------- -------- -------- -------- -------- -------- --------
Operating income...................... 5,066 4,315 3,915 19,193 16,119 16,414 15,499 7,849
Interest expense...................... 4,265 4,016 3,922 17,338 15,576 15,815 13,749 6,477
------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before minority interest
in partnership....................... 801 299 (7) 1,855 543 599 1,750 1,372
Minority interest in partnership...... 151
------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)..................... $ 801 $ 299 $ (7) $ 1,855 $ 543 $ 599 $ 1,750 $ 1,523
======= ======== ======== ======== ======== ======== ======== ========
CASH FLOW DATA
Cash flows provided by (used for)
operating activities................. (903) (1,741) $ 5,149 $ 7,117 $ 8,541 $ 9,369
Cash flows provided by (used for)
investing activities................. (1,911) 457 (8,216) (2,162) (33,337) (144,307)
Cash flows provided (used for)
financing activities................. 2,682 (2,781) (2,182) (7,084) 22,142 145,589
-------- -------- -------- -------- -------- --------
Net increase (decrease) in cash and
cash equivalents..................... (132) (4,065) $ (5,249) $ (2,129) $ (2,654) $ 10,651
======== ======== ======== ======== ======== ========
OTHER DATA
Funds From Operations(1).............. $ 2,773 $ 2,056 $ 1,641 $ 9,450 $ 7,231 $ 7,100 $ 7,171 $ 3,757
======= ======== ======== ======== ======== ======== ======== ========
Basic earnings per share(2)........... $ 0.15 $ 0.08 $ 0.00 $ 0.37 $ 0.15 $ 0.17 $ 0.49 $ 0.72
======= ======== ======== ======== ======== ======== ======== ========
Weighted average basic shares......... 5,284 3,784 3,464 5,046 3,546 3,464 3,547 2,114
======= ======== ======== ======== ======== ======== ======== ========
Diluted earnings per share(2)......... $ 0.15 $ 0.08 $ 0.00 $ 0.36 $ 0.15 $ 0.17 $ 0.49 $ 0.72
======= ======== ======== ======== ======== ======== ======== ========
Weighted average diluted shares....... 5,328 3,828 3,464 5,091 3,591 3,475 3,547 2,114
======= ======== ======== ======== ======== ======== ======== ========
Cash distributions declared per basic
common share......................... $ 0.425 $ 0.425 $ 1.70 $ 1.70 $ 1.70 $ 0.85
======== ======== ======== ======== ======== ========
Gross leasable area at period
end(3)............................... 6,066 5,738 5,713 6,066 5,653 5,707 5,695 5,407
======= ======== ======== ======== ======== ======== ======== ========
PRO
FORMA THE COMPANY
-------- ----------------------------------------------------------------
MARCH 31, DECEMBER 31,
------------------------------- -----------------------------------------
1998 1998 1997 1997 1996 1995 1994
-------- -------- --------- -------- -------- -------- --------
BALANCE SHEET DATA
Real estate, before accumulated depreciation..... $240,325 $223,710 $207,590 $215,785 $207,590 $206,085 $174,173
Total assets..................................... 263,212 224,605 212,987 216,138 217,852 223,360 192,184
Mortgage indebtedness............................ 112,389 98,739 82,331 88,585 83,643 83,734 43,123
Convertible debentures........................... 55,484 55,484 61,285 56,680 61,285 61,285 63,795
Convertible notes................................ 27,000 27,000 27,000 27,000 27,000 27,000 27,000
Minority interest in partnership.................
Shareholder's equity (deficit)................... 58,778 33,821 33,528 33,942 34,993 41,243 48,091

<CAPTION>
YEAR ENDED DECEMBER 31,
-------------
MALAN
(PREDECESSOR)
-------------
1993
----

<S> <C>
OPERATING DATA
Revenues
Minimum rent......................... $ 3,268
Percentage and overage rents......... 21
Recoveries from tenants.............. 1,698
-------
Total rental revenues................ 4,987
Management and leasing fees.......... 1,705
Interest and other income............ 86
-------
Total revenues........................ 6,778
Operating expenses
Property operating and maintenance... 285
Other operating expenses............. 778
Real estate taxes.................... 1,447
General and administrative........... 818
Depreciation and amortization........ 682
-------
Total operating expenses.............. 4,010
-------
Operating income...................... 2,768
Interest expense...................... 3,130
-------
Income (loss) before minority interest
in partnership....................... (362)
Minority interest in partnership...... 274
-------
Net income (loss)..................... $ (88)
=======
CASH FLOW DATA
Cash flows provided by (used for)
operating activities................. $ 1,920
Cash flows provided by (used for)
investing activities................. 23
Cash flows provided (used for)
financing activities................. (1,698)
-------
Net increase (decrease) in cash and
cash equivalents..................... $ 245
=======
OTHER DATA
Funds From Operations(1).............. $ 390
=======
Basic earnings per share(2)...........
Weighted average basic shares.........
Diluted earnings per share(2).........
Weighted average diluted shares.......
Cash distributions declared per basic
common share.........................
Gross leasable area at period
end(3)............................... 294
=======
MALAN
(PREDECESSOR)
DECEMBER 31,
-------------
1993
-------------
BALANCE SHEET DATA
Real estate, before accumulated deprec $30,617
Total assets.......................... 31,960
Mortgage indebtedness................. 35,843
Convertible debentures................
Convertible notes.....................
Minority interest in partnership...... (3,261)
Shareholder's equity (deficit)........ (5,162)
</TABLE>

(footnotes on next page)

23
<PAGE> 26

(2) The Company adopted SFAS No. 128, "Earnings per Share," for the year ended
December 31, 1997; accordingly, all prior period data has been restated. In
accordance with SFAS No. 128, the effect of conversion of all of the debt
securities would be antidilutive and as such is not included in the weighted
average diluted shares reported above.

(3) Malan (Predecessor) GLA includes only Bricktown Square.

24
<PAGE> 27

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

OVERVIEW

The following discussion should be read in conjunction with the Selected
Financial Data and the Company's consolidated financial statements and notes
thereto appearing elsewhere in this Prospectus.

RESULTS OF OPERATIONS

Comparison of Three Months Ended March 31, 1998 to Three Months Ended March 31,
1997

Total revenue increased approximately $167,000. This is primarily
attributable to an increase in minimum rent of $300,000 offset by a decrease in
recoveries from tenants of $114,000. The increase in minimum rent is primarily
due to the acquisitions of Westland Shopping Center in Westland, Michigan in
February 1998 and the Southwind Theater complex in Lawrence, Kansas in November
1997, which accounted for $236,000 of the increase. The decrease in recoveries
from tenants is due to a decrease in property operating and maintenance expenses
discussed below.

Total operating expenses decreased approximately $233,000 from 1997 to
1998. Property operating and maintenance expense decreased $329,000 primarily
due to lower snow removal costs in 1998. Real estate taxes increased
approximately $38,000 due to the acquisitions of Westland Shopping Center and
the Southwind Theater complex. Depreciation and amortization increased
approximately $45,000, primarily related to depreciation on capitalized roof and
parking lot expenditures incurred in the second half of 1997 and depreciation
related to the acquisitions discussed above.

Interest expense (including related amortization of deferred financing
costs) increased approximately $94,000 primarily due to increased debt levels
from the acquisitions, draws on the Company's lines of credit to fund
acquisitions and the amortization of the deferred financing costs associated
with a $25 million line of credit obtained in November 1997.

Overall, net income increased approximately $306,000 to $299,000 in 1998
from a net loss of approximately $7,000 in 1997 primarily from the acquisitions
discussed above.

Comparison of Year Ended December 31, 1997 to Year Ended December 31, 1996

Total revenue increased approximately $20,000 which is attributable to
increases in minimum and percentage rents of approximately $269,000 offset by
decreases in recoveries from tenants of approximately $69,000 and interest and
other income of $180,000. The increases in rents are primarily attributable to
additional revenues from the acquisition of the Southwind Theater in Lawrence,
Kansas and to the re-leasing and re-tenanting of two vacant former Kmart
buildings in late 1996 offset by revenues lost due to the termination of Kmart's
lease at North Aurora, Illinois. Increases in percentage rents of approximately
$13,000 are attributable to increases in sales for Kmart and Wal-Mart, the
Company's two largest tenants, offset by a decrease resulting from the loss of a
nonrecurring percentage rent of approximately $80,000 received from a tenant in
1996. The decrease in interest and other income resulted primarily from
brokerage commissions and lease termination income earned in 1996 as well as
decreased levels of investable cash resulting from the utilization of $1.25
million of cash reserves to satisfy the repayment of the balance on a mortgage
collateralized by The Shops at Fairlane Meadows ("Fairlane Meadows") in
Dearborn, Michigan. The resulting decrease in interest income is partially
offset by a decrease in interest expense on the mortgage.

Total operating expenses increased approximately $315,000. Increases in
property operating and maintenance, real estate taxes and depreciation and
amortization were approximately $98,000, $176,000 and $148,000, respectively.
The increase in property operating and maintenance was primarily due to
increases in parking lot repairs and snowplowing. Real estate taxes increased
primarily due to increased assessments at Fairlane Meadows and other centers
offset by reductions obtained through successful appeals of tax assessments at
certain centers. Depreciation and amortization increased primarily due to
depreciation on capitalized roof and parking lot expenditures. General and
administrative expenses decreased approximately
25
<PAGE> 28

$119,000, primarily due to lower payroll costs of $48,000 and a decrease in the
cost of directors and officers insurance of $41,000.

Interest expense, including related amortization of deferred financing
costs, decreased approximately $239,000. The decrease is due primarily to
conversions of $4.605 million aggregate principal amount of the Company's 9.5%
subordinated convertible debentures into shares of common stock during 1997. The
debenture conversions accounted for a net decrease in interest expense of
approximately $201,000. The refinancing of a $12.45 million mortgage utilized
for the acquisition of Fairlane Meadows with an $11.2 million loan with Daiwa
Finance Corporation accounted for a decrease in interest expense of
approximately $69,000. An increase in amortization of deferred financing costs
of approximately $40,000, related primarily to a $25 million line of credit
obtained from Greenwich in November 1997, offset the overall decrease from 1996.

Overall, net income decreased $56,000 primarily as a result of increases in
non-cash expenses such as depreciation and amortization of approximately
$148,000 and amortization of deferred financing costs of $40,000 and operating
expenses which could not be recovered from tenants, offset by a decrease in
interest expense resulting from conversions of debentures into common stock.

Comparison of Year Ended December 31, 1996 to Year Ended December 31, 1995

Results of operations from Properties increased from 1995 to 1996 primarily
due to the Company's acquisitions of Clinton Pointe Shopping Center ("Clinton
Pointe") located in Clinton Township, Michigan, purchased on June 5, 1995, and
Fairlane Meadows, purchased on September 15, 1995. Accordingly, results of
operations for the year ended December 31, 1995 include the results of Clinton
Pointe and Fairlane Meadows since their respective acquisition dates only.

Total revenue increased approximately $2.716 million, which is attributable
to increases in minimum and percentage rents and recoveries from tenants of
approximately $2.615 million and interest and other income of $103,000. The
increases in rents and recoveries from tenants are primarily attributable to the
addition of revenues from Clinton Pointe and Fairlane Meadows of approximately
$2.722 million, increases in percentage rents of approximately $201,000 and
increased recoveries from tenants due to additional recoverable property
operating expenses discussed below, offset by revenues lost of approximately
$718,000 due to lease terminations by Kmart and Builders Square which took
effect in the latter part of 1995. Percentage rents increased primarily due to
increased sales at the Company's largest tenants, Kmart and Wal-Mart, and a
nonrecurring percentage rent payment of approximately $80,000 received from a
tenant at Bricktown Square in Chicago, Illinois, partially offset by percentage
rents lost from tenants, such as Dillons in Wichita, Kansas, who are no longer
operating in their spaces. The increase in interest and other income resulted
primarily from brokerage commissions and lease termination income earned in 1996
as well as investment earnings due to increased levels of investable cash
resulting from the buildup of cash reserves that are required under the
Company's real estate mortgage investment conduit ("REMIC") financing.

Total operating expenses increased approximately $1.801 million. Increases
in property operating and maintenance, other operating expenses, real estate
taxes and depreciation and amortization were approximately $808,000, $265,000,
$204,000 and $323,000, respectively. Increases resulting from the acquisitions
of Clinton Pointe and Fairlane Meadows accounted for approximately $527,000,
$12,000, $382,000 and $367,000, respectively, which were partially offset due to
lower tax assessments on some Properties as a result of appeals and lower
amortization of leasing costs in 1996. Additional repairs and maintenance
performed at some of the Properties also contributed to the increase in property
operating and maintenance. General and administrative expenses increased
approximately $201,000, primarily due to increases in payroll and state income
and franchise taxes as well as professional and other fees related to the
administration of the Company's REMIC financing.

Interest expense, including related amortization of deferred financing
costs, increased approximately $2.066 million. The increase is due primarily to
increased debt levels from 1995 offset by interest rate reductions and decreases
attributable to conversions of $2.510 million aggregate principal amount of the
Company's 9.5% subordinated convertible debentures into shares of common stock,
which occurred during 1995. The debenture conversions accounted for a net
decrease in interest expense of approximately $112,000.
26
<PAGE> 29

The conversion of the Company's acquisition line of credit to the Securitized
Mortgage Loan at more favorable rates, coupled with additional borrowings
thereunder accounted for an increase of approximately $705,000, while interest
on a $12.45 million mortgage utilized for the acquisition of Fairlane Meadows
increased approximately $717,000. Increase in amortization of deferred financing
costs of approximately $756,000, related primarily to the Securitized Mortgage
Loan and the Fairlane Meadows mortgage, comprised the balance of the increase
from 1995.

Overall, net income decreased $1.151 million primarily as a result of
increases in non-cash expenses such as depreciation and amortization of
approximately $323,000 and amortization of deferred financing costs of $756,000.

Year 2000 Date Conversion

Certain computer systems that have time-sensitive programs may not properly
recognize the year 2000 which could result in major system failures or
miscalculations. The Company has performed an inquiry of its major software
vendors as to the likelihood of such a problem existing in the software products
which the Company utilizes. Based on such inquiry, the Company does not believe
that a year 2000 problem exists within its system or that any such problem that
may arise would have a material impact on the Company's operations. The Company
has not assessed the impact of any year 2000 problem within outside parties such
as vendors or tenants.

Funds From Operations

Management considers Funds From Operations to be an appropriate measure of
performance of an equity real estate investment trust. The Company calculates
Funds From Operations as net income or (loss) excluding gains and losses from
sales of property, further adjusted for certain non-cash items including
depreciation and amortization and amortization of deferred financing costs
included in interest expense. It is the opinion of management that reduction for
or inclusion of these items is not meaningful in evaluating income-producing
real estate which, in general, has historically not depreciated. Funds From
Operations does not represent cash generated from operating activities in
accordance with generally accepted accounting principles and is not necessarily
indicative of cash available to fund cash needs, including distributions. Funds
From Operations should not be considered as an alternative to net income as an
indicator of the Company's operating performance or as an alternative to cash
flow as a measure of liquidity or the ability to pay distributions but rather as
a supplemental tool to be used in conjunction with these factors in analyzing
the Company's overall performance.

The Company is aware that there are variations between companies in the
REIT industry as to how Funds From Operations is calculated. In 1995, the
National Association of Real Estate Investment Trusts ("NAREIT") issued an
opinion paper (the "White Paper") clarifying the definitions of certain
components of Funds From Operations. The primary differences between the method
in which the Company reports Funds From Operations and the White Paper
definition is in the treatment of amortization of deferred financing costs and
certain depreciation expense.

27
<PAGE> 30

The following table shows the components that comprise the Company's Funds
From Operations for the quarters ended March 31, 1998 and 1997 and each of the
three years in the period ended December 31, 1997. Data for the years ended
December 31, 1996 and 1995 has been restated to conform with the current
presentation.

<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
---------------- --------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net income (loss)................................... $ 299 $ (7) $ 543 $ 599 $1,750
Depreciation and Amortization:
Depreciation of buildings and improvements........ 1,251 1,209 4,845 4,766 4,333
Amortization of tenant allowances and
improvements................................... 29 26 97 46 65
Amortization of leasing costs..................... 28 23 96 56 163
------ ------ ------ ------ ------
"White Paper" Funds From Operations................. 1,607 1,251 5,581 5,467 6,311
Depreciation of furniture, equipment and leasehold
improvements...................................... 2 8 30 52 36
Amortization of deferred financing costs included in
interest expense:
Mortgages......................................... 363 294 1,271 1,228 461
Convertible debt.................................. 84 88 349 353 363
------ ------ ------ ------ ------
Funds From Operations............................... $2,056 $1,641 $7,231 $7,100 $7,171
====== ====== ====== ====== ======
ADDITIONAL INFORMATION
Weighted average shares outstanding:
Basic............................................. 3,784 3,464 3,546 3,464 3,547
====== ====== ====== ====== ======
Shares issuable upon debt conversions............. 4,877 5,193 5,113 5,193 5,303
====== ====== ====== ====== ======
Convertible debt interest, excluding amortization of
deferred financing costs.......................... $1,896 2,029 $7,916 $8,117 $8,223
====== ====== ====== ====== ======
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

The Company is authorized to repurchase up to 755,000 shares of its Common
Stock under a plan approved by its Board of Directors in January 1995. Since
inception of the plan, the Company has repurchased 468,000 shares at a cost of
approximately $6.168 million or an average cost of $13.18 per share. The Company
does not intend to purchase any shares of Common Stock at the current price.

The Company has a $63 million loan (the "Securitized Mortgage Loan")
outstanding which is administered under a REMIC. Payments of interest only are
due monthly through the maturity date of August 10, 2002. Certificates issued by
the REMIC trust carry ratings from "AAA" to "A" by both Fitch Investors
Services, Inc. and Duff & Phelps Credit Rating Co. Under the loan agreement, the
Company is also required to fund certain reserves on a monthly basis and request
disbursement of funds as certain requirements are met. The Capital
Improvements/Replacement Reserve requires an annual deposit (funded monthly)
equal to $0.20 per qualifying square foot as defined in the loan agreement or
approximately $575,000 per year. The Basic Carrying Cost Reserve which is
utilized to pay real estate taxes, ground lease payments and insurance payments
related to the Properties which collateralize the loan requires a monthly
deposit equal to one-twelfth of the estimated annual cost of these expenses
which is estimated to be approximately $1.3 million in 1998.

An additional provision in the agreement provides that in the event that
the long-term debt rating of either of the two major tenants of the Properties,
Kmart or Wal-Mart, is downgraded to "BB+" or lower, the Company will be required
to maintain an additional amount in the Basic Carrying Cost Reserve equal to 1/4
of the applicable real estate tax obligation borne by those tenants. In January
1996, the long-term debt rating of Kmart was lowered to "BB" and, accordingly,
the Company was required to make an additional deposit to the Basic Carrying
Cost account of $561,000.

28
<PAGE> 31

In connection with the Securitized Mortgage Loan, the Company entered into
two interest rate cap agreements which effectively fix the overall rate of
interest on the loan at 7.57% through February 10, 2002; thereafter, the
interest rate on $42 million of the mortgage loans converts to a variable rate
which is capped at 8.75% through the end of the term. While the Company has not
yet decided how it will fund the repayment of the Securitized Mortgage Loan upon
maturity, possible sources include additional public offerings of equity and/or
debt, refinancing with conventional fixed rate debt instruments or the issuance
of additional secured or unsecured debt obligations.

In September 1995, the Company reached an agreement with its largest
tenant, Kmart, regarding several stores within its portfolio. Under the
agreement, the Company received a cash payment on October 31, 1995 of $2.56
million as consideration for the termination of leases on five stores previously
closed by Kmart. In addition, the agreement (i) provides that the Company assume
leases at three locations that were subleased by Kmart; (ii) amends certain
lease provisions on four other Properties leased by Kmart; and (iii) allows the
Company to develop outlots at seven Kmart properties and retain all revenue
generated from these outlots. The cash payment has been recorded as deferred
income and is being amortized as income on a straight-line basis over a six-year
period which represents the weighted average remaining base term of the leases
involved. Revenue recognized under the agreement was $428,000 during each of
1997 and 1996 and $71,000 during 1995.

The Company has re-leased two of the five closed stores on terms which
approximate the annual revenue received under the previous leases with Kmart,
and intends to re-lease the remaining three stores. The Company has also leased
three of the outlots and intends to develop and lease the remaining outlots. It
is possible that the Company may be unable to re-lease the remaining stores or
develop and lease the remaining outlots within the next several years. Such loss
of revenue may have an affect on the Company's future cash flows and results of
operations.

In order to fund its commitments and other potential uses of cash discussed
below, the Company obtained the Greenwich Capital Line, a $25 million secured
line of credit, in November 1997. The loan is secured by separate
cross-collateralized and cross-defaulted mortgages or deeds of trust on 16
Properties owned by a wholly owned subsidiary, Malan Revolver, Inc. The
Greenwich Capital Line has a two-year term, which may be extended for a period
of one year and can be expanded up to $50 million for additional acquisitions.
The facility carries an interest rate of London Interbank Offered Rate ("LIBOR")
plus 150 basis points. Payments of interest only are due monthly. At May 29,
1998, $1.68 million was available for borrowing under the facility and $19.05
million was outstanding.

In January 1997 the Company refinanced certain bank debt with an $11.2
million loan with Daiwa Finance Corporation ("Daiwa"). The Daiwa loan is
collateralized by Fairlane Meadows and contained an earn-out provision whereby
the property could be revalued and the loan increased if the revised valuation
supported such an increase. In December 1997, pursuant to the earn-out
provision, the Company received an additional $1.67 million from Daiwa and the
loan was increased to $12.796 million. Current terms of the loan call for
monthly payments totaling $96,000 consisting of interest at the rate of 8.18%
per annum and principal amortized over a 30 year life. Real estate tax payments
and an annual replacement reserve of $32,000 are required to be escrowed
monthly. The loan is due in full on February 1, 2007, at which time a balloon
payment of approximately $11.4 million will be due.

The Company has a line of credit with First Chicago NBD totaling $4.5
million. The line is collateralized by the Company's interest in Orchard-14
Shopping Center in Farmington Hills, Michigan and is subject to certain other
restrictions as to its use. The line matures on March 31, 1999. Payments of
interest only at LIBOR plus 200 basis points or in certain instances, the bank's
prime rate are due monthly until maturity. As of May 29, 1998 there was $1.0
million outstanding under the line.

In November 1997, the Company acquired a 42,000 square foot, 12-plex
theater complex in Lawrence, Kansas under a sale and leaseback agreement with an
existing tenant. The total cost of the theater was approximately $4.2 million
which was funded out of proceeds from the Greenwich Capital Line. The lease is
for a twenty-year term at a base rent of $587,000 per year, increasing to
$629,000 after ten years, and requires payment of all real estate taxes and
operating expenses by the tenant.
29
<PAGE> 32

In July 1997, the Company signed an agreement with Cinemark USA
("Cinemark") to construct a 60,000 square foot, 17-plex theater complex on its
property in North Aurora, Illinois. Once completed, the Company will provide a
construction allowance to Cinemark of $65 per square foot or approximately $3.9
million. Cinemark will subsequently ground lease the property from the Company
for a base term of twenty years with annual rent of approximately $746,000, plus
reimbursement of real estate taxes and operating costs. The site had previously
been leased to Kmart under an agreement which expired March 31, 1997 that had
provided approximately $39,000 and $126,000 in net cash flow during calendar
years 1997 and 1996, respectively. Construction of the theater began in October
1997 and is anticipated to be completed in July 1998. Total costs of the
development to the Company are estimated to be approximately $4.3 million and
are anticipated to be funded out of proceeds from the Greenwich Capital Line.

On December 1, 1995, the Company's lease with Builders Square at its
Melrose Park, Illinois property was terminated. On an annual basis, revenues
from this lease were approximately $650,000. In 1997 and 1996, the net decreases
in revenues from 1995 resulting from the termination were approximately $537,000
and $347,000, respectively. The Company has entered into a separate agreement
with Cinemark to construct a 58,000 square foot, 10-plex theater complex on the
property. Construction was originally anticipated to begin in the second quarter
1997 and to be completed in the first quarter 1998, however the project
commencement date was delayed until February 1998 and completion is now
anticipated to take place in November 1998. Once completed, the Company will
provide a construction allowance of $65 per square foot to Cinemark who will
then ground lease the property for a term of twenty years with annual rent of
approximately $963,000 plus reimbursement of real estate taxes and operating
costs. Total costs of the development are estimated to be approximately $4.2
million and are anticipated to be funded out of proceeds from the Greenwich
Capital Line.

The Company has outstanding as of December 31, 1997 and 1996 $56.680
million and $61.285 million, respectively, in convertible debentures and $27
million in convertible notes. The debentures are 10-year unsecured general
obligations of the Company due July 15, 2004, have a coupon rate of interest of
9.5% per annum, payable semiannually and carry a rating of B3 from Moody's
Investors Services, Inc. The debentures are convertible, at anytime after
issuance and prior to maturity into shares of Common Stock at the conversion
price of $17 per share subject to adjustment under certain conditions. The
debentures are not redeemable by the Company prior to July 15, 2001, except for
certain reasons intended to protect the Company's status as a REIT. During 1997,
$4.605 million aggregate principal of debentures was converted into 270,878
shares of Common Stock.

The convertible notes are nine-year general obligations due July 15, 2003
secured by a first mortgage on the Bricktown Square Shopping Center and bear
interest at the rate of 8.5% per annum, payable semiannually and are convertible
into shares of Common Stock at any time after June 24, 2002 at a conversion
price of $17 per share. Prior to this date, the holder may also demand
conversion of limited quantities of the notes subject to certain timing
restrictions. None of the notes have been converted to date.

The Company is currently redeveloping its existing retail center in
Lawrence, Kansas. In addition to expansion and improvement of the existing Kmart
store, the Company intends to add approximately 150,000 square feet of new
retail space. Total cost of the redevelopment project to the Company is
anticipated to be approximately $9 million including land costs. In order to
facilitate the additional space, the Company purchased approximately 9 acres of
land in November 1997 for $2.9 million which was funded out of proceeds from the
Greenwich Capital Line.

In February 1998, the Company acquired the Westland Shopping Center in
Westland, Michigan for $7.925 million. Terms of the agreement included
assumption of a $5.9 million, 8.02% mortgage with Wells Fargo Bank and a cash
payment of $2.025 million, which was funded out of proceeds from the Greenwich
Capital Line. The mortgage calls for monthly payments of interest and principal
amortized over a 30-year life and is due in full in November 2007. Net operating
income from the 85,000 square foot center, which has Dick's Sporting Goods and
MedMax, Inc. as its anchor tenants, is anticipated to be approximately $893,000
annually.

The Company has been informed by Kmart that it will not renew its lease at
the Company's Gary, Indiana shopping center which expires on September 30, 1998.
Annual revenues under this lease are
30
<PAGE> 33

approximately $257,000. Kmart closed this store in 1995 and subsequently sublet
the building to a non-retail user. The Company is currently negotiating with the
sublessee to either re-lease the building or acquire the entire property and is
also marketing the property in an attempt to obtain other potential tenants
and/or purchasers. It is possible that the Company may be unable to lease or
sell the property or that revenues generated from any lease or sale may be less
than that currently received from Kmart. If such events occur, future cash flows
may be impacted.

The Company incurs capital expenditures in the ordinary course of business
in order to maintain the Properties. Such capital expenditures typically include
roof, parking lot and other structural repairs, some of which are reimbursed by
tenants. In 1997, the Company spent approximately $1 million for capital
expenditures funded primarily out of the Capital Improvement/Replacement Reserve
required for the Company's Securitized Mortgage Loan financing and partially
from operating cash flows. The Company anticipates spending approximately $1.1
million for capital expenditures in 1998, also to be funded from similar
sources.

Occasionally it is necessary for the Company to provide inducements such as
building allowances or space improvements and/or to pay leasing commissions to
outside brokers in order to procure new tenants or renegotiate expiring leases
with current tenants. The total cost of these expenditures in 1997 was
approximately $501,000. These expenditures are generally funded by operating
cash flows and increased revenues resulting from such expenditures. In 1998, the
Company anticipates spending approximately $242,000 on such expenditures.

The Company has entered into the following commitments as of May 29, 1998:

<TABLE>
<CAPTION>
ANTICIPATED
APPROXIMATE FUNDING
AMOUNT DATE
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Payment of tenant construction allowance on 17-plex theater
complex -- North Aurora, IL............................... $ 3,835 July 1998
Replacement of roofs on two retail buildings................ 237 July 1998
Redevelopment of existing retail property -- Lawrence, KS... 1,454(1) June 1998-
October 1998
Payment of tenant construction allowance on 10-plex theater
complex -- Melrose Park, IL............................... 3,773 November 1998
Acquisition of community shopping center in Decatur,
Illinois.................................................. 4,230(2) November 1998
-------
Total.................................................. $13,529
=======
</TABLE>

- -------------------------
(1) Contracts awarded as of May 29, 1998.

(2) Pursuant to Agreement of Sale and Purchase dated May 6, 1998 with Sandor
Development Company, as agent for various related entities.

In addition to these commitments and other potential uses of cash discussed
above, several other new developments and redevelopments are being contemplated
by the Company and may be completed within the next year. It is anticipated that
the additional revenue generated by these projects, as well as the Company's
existing equity in each, will create sufficient value so that each project will
fully fund itself using property specific financing and long-term loans. In
addition, as of May 29, 1998 the Company had approximately $1.68 million
available on the Greenwich Capital Line for further acquisitions, redevelopments
and working capital.

The Company anticipates that its cash flow from operations will generally
be sufficient to fund its cash needs for payment of expenses, capital
expenditures (other than acquisitions and redevelopments) and to maintain the
Company's current distribution policy. At May 29, 1998, the Company had
available borrowing of up to $3.5 million on the First Chicago NBD line of
credit for temporary working capital needs and it is anticipated that the
Company will extend this line beyond it current expiration date at an increased
amount.

31
<PAGE> 34

The Company intends to enter into other secured and unsecured financing
agreements in the future as the need arises.

The Company's major tenant, Kmart, accounted for approximately 39.0% of its
gross revenue and 39.4% of its minimum rent in 1997. Since its IPO, the Company
has substantially reduced its exposure to Kmart through acquisitions and
redevelopments of Properties, lease termination agreements with Kmart and the
assumption of certain Kmart sublease agreements. At the IPO, Kmart accounted for
approximately 59.6% of the Company's annualized base rent.

On May 27, 1998, Malan Midwest, L.L.C., a limited liability company
wholly-owned by the Company, entered into a Loan Agreement with Bloomfield
Acceptance Company, L.L.C. in connection with the Sandor Acquisition. See
"Recent Developments". Pursuant to the Loan Agreement, the Company borrowed $18
million to pay a portion of the purchase price of the Sandor Acquisition. The
Loan Agreement provides for payments of principal and interest based on a 30
year amortization schedule with a final payment of principal and interest of
approximately $13.5 million due in 15 years.

Each of the above statements regarding future revenues or expenses may be a
"forward looking statement" within the meaning of the Securities Exchange Act of
1934. Such statements are subject to important factors that could cause actual
results to differ materially from those in the forward looking statement,
including the factors set forth in the Management's Discussion and Analysis of
Financial Condition and Results of Operations.

INFLATION

The Company's long-term leases contain provisions to mitigate the adverse
impact of inflation on its results from operations. Such provisions include
clauses entitling the Company to receive (i) scheduled base rent increases and
(ii) percentage rents based upon tenants' gross sales, which generally increase
as prices rise. In addition, many of the Company's non-anchor leases are for
terms of less than ten years, which permits the Company to seek increases in
rents upon re-rental at then current market rates if rents provided in the
expiring leases are below then existing market rates. Most of the Company's
leases require tenants to pay a share of operating expenses, including common
area maintenance, real estate taxes, insurance and utilities, thereby reducing
the Company's exposure to increases in costs and operating expenses resulting
from inflation.

BUSINESS AND PROPERTIES

THE COMPANY

The Company is a self-administered, self-managed real estate investment
trust which owns, acquires, develops, redevelops, manages and operates
properties which are leased primarily to national and regional retail companies.
The Properties are typically located in select geographic markets with an
emphasis on small to medium-sized communities where the Properties can be
positioned among the leading centers in their respective trade areas. At
December 31, 1997, the Company had 53 properties located in 9 states, consisting
of 26 community shopping centers, 26 freestanding stores and 1 entertainment
facility and containing an aggregate of approximately 5.7 million square feet of
GLA. On February 23, 1998 the Company acquired a community shopping center in
Westland, Michigan which contains an aggregate of approximately 85,000 square
feet of GLA. In addition, on May 29, 1998, the Company acquired twelve community
shopping centers which contain an aggregate of approximately 328,000 square feet
of GLA. Currently, the Company's portfolio consists of 66 Properties located in
10 states consisting of 39 community shopping centers, 24 freestanding stores
and 3 entertainment facilities (2 of which are under redevelopment) and contains
an aggregate of approximately 6.1 million square feet of GLA. An entertainment
facility consists of a multi-screen movie theater with stadium seating, digital
sound and the latest concepts in food concession. As of December 31, 1997, 93.3%
of GLA (95.7% excluding the Properties being redeveloped) in the portfolio was
leased and 93.7% of the Company's annualized base rent was attributable to
national and regional retailers. At December 31, 1997, Kmart Corporation
("Kmart") and Wal-Mart Corporation ("Wal-Mart") represented

32
<PAGE> 35

35.7% and 6.6%, respectively, of annualized base rent and leased 54.0% and 7.1%,
respectively, of the Company's GLA.

Recent Developments:

- In the Sandor Acquisition, the Company acquired twelve community
shopping centers located in: Indiana (3), Michigan (3), Illinois (2),
Kansas (2), Minnesota (1) and Ohio (1) for $29.5 million. These
Properties have Maurice's, Fashion Bug and Dollar Tree as major
tenants, contain a total of over 328,000 square feet of GLA and are
anchored by a Wal-Mart (each Wal-Mart store and its underlying pad are
owned and managed by an independent third party). At May 29, 1998,
94.8% of the GLA in the Sandor Acquisition was leased. In addition,
pursuant to the Sandor Acquisition purchase agreement, the Company
agreed to acquire a community shopping center located in Decatur,
Illinois for $4.2 million that contains over 40,000 square feet of GLA
and has Wal-Mart and Sam's Club as anchor tenants (the stores and
their underlying pads are owned and managed by independent third
parties). The acquisition of the Decatur, Illinois property is
scheduled to close in November 1998 after the seller completes a
redevelopment of the center.

Also, since the IPO, the Company has:

- Acquired the following 8 Properties:

(i) Five community shopping centers in Indiana (3), Illinois (1) and
Ohio (1) which have Wal-Mart as the major tenant and contain over
665,000 square feet of GLA;

(iv) A 12-plex entertainment facility in Lawrence, Kansas which is
leased to Hollywood Theaters under a sale-leaseback agreement
and contains over 42,000 square feet of GLA.

33
<PAGE> 36

- Diversified the tenant base and reduced the percentage of annualized
base rent received from Kmart to 35.7% as of December 31, 1997 from
59.6% at the IPO.

- Continued to operate the Properties at occupancy rates in excess of
93.3% with minimal tenant defaults.

OBJECTIVES AND STRATEGIES

Objectives

Growth, Operating and Financing Strategies

- Developing or acquiring each property with the objective of leasing it to
good credit quality national or regional retailers and holding it for
long-term investment value.

- Developing or acquiring properties in what the Company considers to be
attractive long-term locations. Such locations typically have (i)
convenient access to transportation arteries with a traffic count that is
higher than average for the local market, (ii) concentrations of other
retail properties and (iii) demographic characteristics which are
attractive to the retail tenant which will lease the property upon
completion.

- Generally, purchasing land and beginning development of a property only
upon the execution of a lease or leases with a national or regional
retailer or retailers on terms which provide a return on estimated cost
that is attractive relative to the Company's cost of capital.

- Directing all aspects of development and redevelopment, including design,
construction, leasing and management. Property management and leasing
activities are handled directly by Company personnel. The Company
believes that this approach to development and management enables it to
operate efficiently and enhances the ability of the Company to develop
and maintain assets of high construction quality which are designed,
leased and maintained to maximize long-term value.

34
<PAGE> 37

- Developing vacant parcels that are adjacent to some of the Properties and
outlots on existing Properties to enhance the value of the Properties as
well as the cash flow of the Company.

- Locking in the Company's returns on investment in Properties through the
use of intermediate to long-term fixed rate financing alternatives.

PROPERTIES

The 66 Properties include 39 community shopping centers, 24 freestanding
stores and 3 entertainment facilities (2 of which are under redevelopment) and
contain an aggregate of approximately 6.1 million square feet of GLA. One of the
community shopping centers is being redeveloped and expanded. The Company
developed 45 of the 66 Properties and all of the Properties are either owned in
fee or held pursuant to long term ground leases. The Properties are designed to
meet the needs of the surrounding local communities and are anchored by national
and regional credit tenants who offer a broad range of discount consumer goods.
The Properties are located throughout 10 states including Illinois (15), Kansas
(14), Wisconsin (11), Indiana (9), Michigan (7), Missouri (5), Ohio (2),
California (1), Maryland (1) and Minnesota (1). The majority of the Properties
are situated in small to medium-sized communities and typically are considered
to be among the leading community shopping centers in their respective trade
areas. As of December 31, 1997, the Properties were 93.3% leased (95.7%
excluding Properties being redeveloped ).

LOCATIONS OF THE PROPERTIES(1)

The following table sets forth the number of Properties, the GLA of the
Properties and the percentage of GLA leased, as of December 31, 1997.

<TABLE>
<CAPTION>
NUMBER TOTAL GROSS PERCENT OF
OF LEASABLE AREA GLA LEASED AS OF
STATE PROPERTIES (SQ. FT.) DECEMBER 31, 1997
- ----- ---------- ------------- -----------------
<S> <C> <C> <C>
Illinois............................................... 13 1,400,743 88.9%
Kansas................................................. 12 755,360 83.0
Wisconsin.............................................. 11 1,431,312 98.2
Indiana................................................ 6 809,407 94.6
Missouri............................................... 5 519,277 98.7
Michigan............................................... 3 412,508 97.2
California............................................. 1 94,282 100.0
Maryland............................................... 1 84,180 100.0
Ohio................................................... 1 145,607 97.4
-- ---------
Total................................................ 53 5,652,676 93.3%
== =========
</TABLE>

35
<PAGE> 38

ANNUALIZED BASE RENT OF THE PROPERTIES(1)

The following is a breakdown of annualized base rent as of December 31,
1997 for the Properties by type of tenant:

36
<PAGE> 39

SUMMARY OF PROPERTIES

The following table sets forth, on a property-by-property basis, certain
summary information regarding the Properties:
COMMUNITY SHOPPING CENTERS(5)
<TABLE>
<CAPTION>
OWNERSHIP GROSS TOTAL AVERAGE
INTEREST YEAR LEASABLE ANNUALIZED BASE ANNUAL
(EXPIRATION DEVELOPED/ LAND AREA AREA (GLA) BASE RENT PER PERCENTAGE
PROPERTY INCL. OPTIONS) RENOVATED (ACRES) (SQ. FT.) RENT(1) SQ. FT.(2) RENT(3)
-------- -------------- ---------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Bricktown Square............... Fee 1987 26.00 306,433 $ 3,359,000 $11.33 $ 33,000
Chicago, IL
Sherwood Plaza................. Fee 1975/1991 13.85 125,101 684,000 5.65 19,000
Springfield, IL
Woodriver Plaza................ Fee 1987 19.40 111,899 610,000 5.57 71,000
Woodriver, IL
Clifty Crossing................ Fee 1989 19.90 190,919 973,000 5.28 18,000
Columbus, IN
Miller Mall, Gary, IN.......... Ground Lease (2048) 1973 17.95 129,914 308,000 3.03
Broadway Center................ Fee 1974/1997 19.89 177,692 895,000 4.23 47,000
Merrillville, IN
Flatrock Village............... Fee 1988 14.00 73,608 290,000 4.07 4,000
Rushville, IN
Cherry Tree Plaza.............. Fee 1988 20.60 143,682 758,000 5.40 28,000
Washington, IN
Pine Ridge Plaza............... Fee 1974/1989 8.12 91,048 209,000 2.53 17,000
Lawrence, KS
Kmart Topeka, KS............... Ground Lease (2049) 1974 13.93 108,960 249,000 2.96 1,000
South City Center.............. Fee 1976 13.74 130,380 464,000 3.56 55,000
Wichita, KS
Orchard-14..................... Fee 1973/1997 11.49 139,670 618,000 4.67 2,000
Farmington Hills, MI
Clinton Pointe Shopping
Center....................... Fee 1992 11.72 135,330 1,352,000 9.99
Clinton Township, MI
The Shops at Fairlane
Meadows...................... Fee 1987 17.73 137,508 1,881,000 14.35 6,000
Dearborn, MI

<CAPTION>
PERCENT
LEASED ANCHOR TENANTS
OF (LEASE EXPIRATION/
PROPERTY GLA OPTION EXPIRATION)
-------- ------- ------------------
<S> <C> <C>
Bricktown Square............... 96.8% Toys "R" Us (2013/2038)
Chicago, IL Kids "R" Us (2014/2039)
Marshall's(2000/2015)
Sportmart(2003/2018)
Cineplex-Odeon(2008/2018)
Frank's Nursery(2009/2029)
Sherwood Plaza................. 96.8 Kmart (2011/2061)
Springfield, IL
Woodriver Plaza................ 97.8 Wal-Mart (2007/2037)
Woodriver, IL
Clifty Crossing................ 96.8 Wal-Mart (2009/2039)
Columbus, IN Jay C. Foods (2009/2034)
Miller Mall, Gary, IN.......... 82.4 Kmart (1998/2048)
Broadway Center................ 98.2 Kmart (2011/2061)
Merrillville, IN
Flatrock Village............... 94.7 Wal-Mart(2008/2038)
Rushville, IN
Cherry Tree Plaza.............. 94.9 Wal-Mart (2008/2038)
Washington, IN Jay C. Foods(2008/2033)
Pine Ridge Plaza............... 90.9 Kmart(2011/2061)
Lawrence, KS
Kmart Topeka, KS............... 77.3 Kmart(2011/2049)
South City Center.............. 100.0 Kmart(2011/2061)
Wichita, KS
Orchard-14..................... 93.7 Kmart(2011/2061)
Farmington Hills, MI
Clinton Pointe Shopping
Center....................... 100.0 Office Max(2007/2017)
Clinton Township, MI Sports Authority(2017/2067)
Target (4)
The Shops at Fairlane
Meadows...................... 98.0 Best Buy(2009/2024)
Dearborn, MI Kids "R" Us(2003/2018)
Target (4)
Mervyn's (4)
</TABLE>

(footnotes on next page)

37
<PAGE> 40
<TABLE>
<CAPTION>
OWNERSHIP GROSS TOTAL AVERAGE
INTEREST YEAR LEASABLE ANNUALIZED BASE ANNUAL
(EXPIRATION DEVELOPED/ LAND AREA AREA (GLA) BASE RENT PER PERCENTAGE
PROPERTY INCL. OPTIONS) RENOVATED (ACRES) (SQ. FT.) RENT(1) SQ. FT.(2) RENT(3)
-------- -------------- ---------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Kmart Jefferson City, MO....... Fee 1973/1991 9.76 118,798 $ 280,000 $ 2.36 $ 43,000
Prairie View Plaza............. Ground Lease (2050) 1975/1992 3.24 104,490 380,000 3.80 57,000
Kansas City, MO
Levitz Furniture............... Fee 1977 14.89 117,255 563,000 4.88
Manchester, MO
Kmart Plaza.................... Fee 1978/1991 7.41 98,878 329,000 3.33 16,000
Springfield, MO
Shannon Station................ Fee 1989 20.20 145,607 718,000 5.10 4,000
Van Wert, OH
Kmart Plaza.................... Fee 1979 8.90 88,608 283,000 3.20
Ft. Atkinson, WI
Kmart Green Bay, WI............ Fee 1974/1992 11.59 118,988 321,000 2.70 13,000
County Fair Shopping Ctr....... Fee 1974/1991 10.50 152,165 519,000 2.82 43,000
Hales Corners, WI
Kmart Plaza.................... Fee 1973/1994 9.95 119,726 382,000 2.56 41,000
Kenosha, WI
Westland Plaza................. Fee 1978/1992 12.40 122,534 544,000 3.73 12,000
Madison, WI
Northway Mall.................. Ground Lease (2022) 1978/1994 21.63 288,245 1,011,000 3.41 96,000
Marshfield, WI
Kmart Stevens Point, WI........ Fee 1972/1990 8.00 109,197 213,000 1.95 27,000
------ --------- ----------- --------
TOTAL COMMUNITY SHOPPING
CENTERS.................. 366.79 3,586,635 $18,193,000 $653,000
====== ========= =========== ========

<CAPTION>
PERCENT
LEASED ANCHOR TENANTS
OF (LEASE EXPIRATION/
PROPERTY GLA OPTION EXPIRATION)
-------- ------- ------------------
<S> <C> <C>
Kmart Jefferson City, MO....... 100.0% Kmart(2011/2061)
Prairie View Plaza............. 95.2 Kmart(2011/2050)
Kansas City, MO
Levitz Furniture............... 98.3 Levitz Furniture(2004/2056)
Manchester, MO
Kmart Plaza.................... 100.0 Kmart(2011/2061)
Springfield, MO
Shannon Station................ 97.4 Wal-Mart(2009/2039)
Van Wert, OH
Kmart Plaza.................... 100.0 Kmart(2004/2054)
Ft. Atkinson, WI
Kmart Green Bay, WI............ 100.0 Kmart(1999/2049)
County Fair Shopping Ctr....... 93.0 Kmart(2011/2061)
Hales Corners, WI
Kmart Plaza.................... 100.0 Kmart(2011/2061)
Kenosha, WI
Westland Plaza................. 98.7 Kmart(2002/2053)
Madison, WI
Northway Mall.................. 95.1 Kmart(2011/2022)
Marshfield, WI J.C. Penney(1999/2019)
Younkers(2004/2019)
Kmart Stevens Point, WI........ 100.0 Kmart(2011/2061)
TOTAL COMMUNITY SHOPPING
CENTERS..................
</TABLE>

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

(1) Total annualized base rents of the Company for leases signed as of December
31, 1997, excluding (i) percentage rents, (ii) additional amounts payable by
tenants such as common area maintenance, real estate taxes and other expense
reimbursements and (iii) future contractual rent escalations or cost of
living increases.

(2) Based upon leased and occupied space at December 31, 1997.

(3) Based on percentage rent income recognized in 1997.

(4) These stores and the underlying pads are owned directly by the tenants.

(5) Excludes the Sandor Acquisition and the Westland Acquisition.

38
<PAGE> 41

FREESTANDING STORES
<TABLE>
<CAPTION>
GROSS TOTAL AVERAGE
OWNERSHIP INTEREST YEAR LEASABLE ANNUALIZED BASE RENT ANNUAL
(EXPIRATION INCL. DEVELOPED/ LAND AREA AREA (GLA) BASE PER PERCENTAGE
PROPERTY OPTIONS) RENOVATED (ACRES) (SQ. FT.) RENT(1) SQ. FT.(2) RENT(3)
-------- ------------------ ---------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Kmart Colma, CA........... Fee 1980/1991 8.29 94,282 $ 537,000 $5.70 $ 45,000
Kmart Chicago, IL......... Fee 1977 8.51 96,268 392,000 4.07 28,000
Kmart Fairview Hgts, IL... Ground Lease (2051) 1976/1992 12.65 96,268 296,000 3.08 24,000
Kmart Franklin Park, IL... Fee 1975 9.84 96,268 352,000 3.66
Kmart Lansing, IL......... Fee 1976/1992 10.48 96,268 449,000 4.66 32,000
Kmart Lincoln, IL......... Fee 1975 4.86 39,797
Kmart Loves Park, IL...... Ground Lease (2026) 1971/1991 12.50 106,084 288,000 1.86 1,000
Kmart New Lenox, IL....... Fee 1977 8.72 88,580 354,000 4.00 29,000
Kmart Rockford, IL........ Fee 1971/1991 10.70 110,471 292,000 1.61
Kmart Valparaiso, IN...... Ground Lease (2050) 1974/1990 9.61 93,592 265,000 2.09 35,000
Arkansas City, KS......... Fee 1976 4.41 39,797
Emporia, KS............... Fee 1976 6.55 39,797 99,000 2.49
Food Bonanza.............. Fee 1977/1991 5.60 39,797 117,000 2.94
Garden City, KS
Great Bend, KS............ Fee 1977 5.41 55,552
Orscheln Farm Supply...... Fee 1977 4.96 40,050 112,000 2.79
Hayes, KS
Food 4 Less............... Fee 1976/1990 4.12 39,797 111,000 2.80
Independence, KS
Standard Supply........... Fee 1977 4.57 40,279 85,000 2.10
Liberal, KS
Kmart Salina, KS.......... Fee 1978/1991 16.00 87,406 213,000 2.43 86,000
Kmart Forestville, MD..... Fee 1979 8.00 84,180 348,000 4.13
Kmart Cape Girardeau,
MO...................... Fee 1974/1991 5.68 79,856 169,000 2.11 36,000
Kmart Janesville, WI...... Fee 1968/1991 13.78 104,000 161,000 1.55 89,000
Kmart Madison, WI......... Fee 1968/1991 12.53 106,058 250,000 2.36 33,000
Kmart Milwaukee, WI....... Fee 1971 11.23 117,791 280,000 2.38
Kmart Oshkosh, WI......... Fee 1968/1992 10.00 104,000 161,000 1.55 76,000
------ --------- ---------- --------
TOTAL FREESTANDING
STORES.............. 209.00 1,896,238 $5,331,000 $514,000
====== ========= ========== ========

PERCENT ANCHOR TENANTS
LEASED (LEASE EXPIRATION/
PROPERTY OF GLA OPTION EXPIRATION)
-------- ------- ------------------
<S> <C> <C>
Kmart Colma, CA........... 100.0% Kmart (2011/2061)
Kmart Chicago, IL......... 100.0 Kmart (2011/2061)
Kmart Fairview Hgts, IL... 100.0 Kmart (2001/2051)
Kmart Franklin Park, IL... 100.0 Kmart (2011/2061)
Kmart Lansing, IL......... 100.0 Kmart (2011/2061)
Kmart Lincoln, IL......... (4)
Kmart Loves Park, IL...... 100.0 Kmart (2011/2026)
Kmart New Lenox, IL....... 100.0 Kmart (2011/2061)
Kmart Rockford, IL........ 100.0 Kmart (2011/2061)
Kmart Valparaiso, IN...... 100.0 Kmart (2011/2050)
Arkansas City, KS......... (4)
Emporia, KS............... 100.0 Big Lots (2002/2007)
Food Bonanza.............. 100.0 Food Bonanza (2002/2029)
Garden City, KS
Great Bend, KS............ (4)
Orscheln Farm Supply...... 100.0 Orscheln Farm Supply
Hayes, KS (2004/2014)
Food 4 Less............... 100.0 Food 4 Less (2001/2026)
Independence, KS
Standard Supply........... 100.0 Standard Supply (2003/2013)
Liberal, KS
Kmart Salina, KS.......... 100.0 Kmart (2011/2061)
Kmart Forestville, MD..... 100.0 Kmart (2011/2061)
Kmart Cape Girardeau,
MO...................... 100.0 Kmart (2011/2061)
Kmart Janesville, WI...... 100.0 Kmart (2003/2038)
Kmart Madison, WI......... 100.0 Kmart (2002/2022)
Kmart Milwaukee, WI....... 100.0 Kmart (2011/2061)
Kmart Oshkosh, WI......... 100.0 Kmart (2003/2038)
TOTAL FREESTANDING
STORES..............
</TABLE>

- -------------------------
(1) Total annualized base rents of the Company for leases signed as of December
31, 1997, excluding (i) percentage rents, (ii) additional amounts payable by
tenants such as common area maintenance, real estate taxes and other expense
reimbursements and (iii) future contractual rent escalations or cost of
living increases.

(2) Based upon leased and occupied space at December 31, 1997.

(3) Based on percentage rent income recognized in 1997.

(4) The leases on these stores were terminated effective November 1, 1995 as
part of an agreement with Kmart and these properties are currently vacant.

39
<PAGE> 42

ENTERTAINMENT FACILITIES
<TABLE>
<CAPTION>
GROSS AVERAGE
OWNERSHIP LEASABLE TOTAL BASE
INTEREST YEAR LAND AREA ANNUALIZED RENT PER ANNUAL
(EXPIRATION DEVELOPED/ AREA (GLA) BASE SQ. PERCENTAGE
PROPERTY INCL. OPTIONS) RENOVATED (ACRES) (SQ. FT.) RENT(1) FT.(2) RENT(3)
-------- -------------- ---------- ------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Melrose Park,IL............ Ground Lease (2048) (4) 10.90 122,450 $ 53,000 $ 2.05
North Aurora, IL........... Fee (4) 11.36 4,856 60,000 1.75 $ 10,000
Southwind Theater Lawrence,
KS....................... Fee 1997 7.89 42,497 587,000 13.81
------ --------- ----------- ----------
TOTAL ENTERTAINMENT
FACILITIES........... 30.15 169,803 700,000 10,000
------ --------- ----------- ----------
TOTAL(5)............... 605.94 5,652,676 $24,224,000 $1,177,000
====== ========= =========== ==========

PERCENT
LEASED ANCHOR TENANTS
OF (LEASE EXPIRATION/
PROPERTY GLA OPTION EXPIRATION)
-------- ------- ------------------
<S> <C> <C>
Melrose Park,IL............ 18.7% Cinemark USA(4)
North Aurora, IL........... 100.0 Cinemark USA(4)
Southwind Theater Lawrence,
KS....................... 100.0 Hollywood Theater (2017/2027)
TOTAL ENTERTAINMENT
FACILITIES...........
TOTAL(5)...............
</TABLE>

(2) Based upon leased and occupied space at December 31, 1997.

(3) Based on percentage rent income recognized in 1997.

(4) These Properties are being redeveloped into multiplex theater complexes
under agreement with Cinemark USA. See section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources" for further discussion.

(5) Excludes the Sandor Acquisition and the Westland Acquisition.

40
<PAGE> 43

RECENT COMMUNITY SHOPPING CENTER ACQUISITIONS
<TABLE>
<CAPTION>
OWNERSHIP GROSS TOTAL AVERAGE
INTEREST YEAR LEASABLE ANNUALIZED BASE ANNUAL
(EXPIRATION DEVELOPED/ LAND AREA AREA (GLA) BASE RENT PER PERCENTAGE
PROPERTY INCL. OPTIONS) RENOVATED (ACRES) (SQ. FT.) RENT(1) SQ. FT.(2) RENT(3)
-------- -------------- ---------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Westland Acquisition
Westland Shopping Center
Westland, MI............. Fee 1996 6.99 85,000 $ 893,000 $10.51
Sandor Acquisition
Wal-Mart Plaza
Champaigne, IL........... Fee 1994 1.00 11,458 127,000 11.08
Jacksonville, IL......... Fee 1995 6.89 52,880 498,000 9.42
Crawfordsville, IN....... Fee 1991/1996 11.32 25,750 213,000 10.34
Decatur, IN.............. Fee 1994/1997 5.80 36,300 321,000 9.21
Huntington, IN........... Fee 1995 1.00 12,485 120,000 9.61
Chanute, KS.............. Fee 1995 1.00 15,447 113,000 7.95
El Dorado, KS............ Fee 1996 1.70 20,000 162,000 9.64
Benton Harbor, MI........ Fee 1995 1.30 14,280 143,000 10.01
Owosso, MI............... Fee 1993/1996 10.00 60,324 535,000 8.87
Sturgis, MI.............. Fee 1994 1.00 12,000 123,000 10.25
Little Falls, MN......... Fee 1996 1.00 12,456 109,000 9.94
Mansfield, OH............ Fee 1993/1998 3.90 55,316 568,000 11.16
------ --------- ----------- ----------
TOTAL RECENT COMMUNITY
SHOPPING CENTER
ACQUISITIONS........ 52.90 413,696 $ 3,925,000
------ --------- ----------- ----------
GRAND TOTAL............ 658.84 6,066,372 $28,149,000 $1,177,000
====== ========= =========== ==========

PERCENT ANCHOR TENANTS
LEASED (LEASE EXPIRATION/
PROPERTY OF GLA OPTION EXPIRATION)
-------- ------- ------------------
<S> <C> <C>
Westland Acquisition
Westland Shopping Center
Westland, MI............. 100% Dick's Sporting Goods (2011)
Sandor Acquisition
Wal-Mart Plaza
Champaigne, IL........... 100 Wal-Mart(4)/Sam's(4)
Jacksonville, IL......... 100 Wal-Mart(4)/Country Market(4)
Crawfordsville, IN....... 80 Wal-Mart(4)
Decatur, IN.............. 96 Wal-Mart(4)
Huntington, IN........... 100 Wal-Mart(4)
Chanute, KS.............. 92 Wal-Mart(4)
El Dorado, KS............ 84 Wal-Mart(4)
Benton Harbor, MI........ 100 Wal-Mart(4)/Lowe's(4)
Owosso, MI............... 100 Wal-Mart(4)
Sturgis, MI.............. 100 Wal-Mart(4)
Little Falls, MN......... 88 Wal-Mart(4)
Mansfield, OH............ 92 Wal-Mart(4)
TOTAL RECENT COMMUNITY
SHOPPING CENTER
ACQUISITIONS........
GRAND TOTAL............
</TABLE>

- -------------------------
(1) Total annualized base rents of the Company for leases signed as of May 29,
1998, excluding (i) percentage rents, (ii) additional amounts payable by
tenants such as common area maintenance, real estate taxes and other expense
reimbursements and (iii) future contractual rent escalations or cost of
living increases.

(2) Based upon leased and occupied space at May 29, 1998.

(3) Based on percentage rent income recognized in 1997.

(4) These stores and the underlying pads are owned and managed by independent
third parties.

41
<PAGE> 44

MAJOR TENANTS

As one of the original developers of properties for Kmart and a leader in
the shopping center industry, the Company has established long-standing
relationships with Kmart and other national and regional retailers, many of
which lease space in the Properties.

Kmart

Kmart is one of the world's largest mass merchandise retailers. The
dominant portion of Kmart's operations is in a single industry: general
merchandise retailing. As of January 29, 1997, Kmart operated 2,134 discount
stores, including 96 Super Kmart centers.

Senior unsecured debt securities of Kmart were recently upgraded from Ba3
to Ba2 by Moody's Investor Services, Inc. (out of a range of Aaa (highest) to D)
and from BB- to BB by Standard & Poor's Corporation (out of a range of AAA
(highest) to D).

Kmart is the Company's most significant tenant and is currently leasing 33
Properties from the Company. These Properties represented 54.0% of the Company's
GLA and 35.7% of the Company's annualized base rent at December 31, 1997. At the
time of the IPO, Kmart represented 77.5% of the Company's GLA and 59.6% of the
Company's annualized base rent. Although the Company has a long standing
relationship with Kmart, it has actively sought to diversify its tenant base and
reduce the portion of its portfolio that is related to Kmart. These efforts have
successfully reduced Kmart's percentage of the Company's GLA and annualized base
rent since the IPO by approximately 30% and 40%, respectively.

Twenty-five of the 33 Kmart leased Properties have lease expirations in
2011 and options to extend the leases beyond this date. The Company has one
Property leased to Kmart for which the lease expires in September 1998. This
Property is located in Gary, Indiana and is currently sub-leased to a non-retail
user. Kmart has informed the Company that it will not renew this lease, however,
the Company is negotiating with the current sub-lessee regarding the purchase of
the Company's interest in the Property at the end of the lease.

In connection with its stated intention of reducing its concentration with
Kmart, the Company has taken a number of steps with Kmart intended to reduce the
risk and increase the stability of the Kmart portfolio. In late 1994, Kmart
announced a restructuring and store closing program. The Company initiated
discussions during 1995 with Kmart in connection with its restructuring and
store closing program. These discussions addressed Kmart stores in the Company's
portfolio that Kmart was interested in closing as well as other Properties under
lease to Kmart. The result of the discussions was an extensive, mutually
beneficial agreement affecting 16 of the Properties (the "Agreement"). The
principal terms of this Agreement are as follows:

(i) the Company terminated leases on 5 stores and received a cash payment
in October 1995 of $2.56 million (which represented approximately 75%
of the present value of the remaining lease payments on the 5
stores);

(ii) the Company assumed sub-leases at 3 locations at which Kmart was the
sub-lessor;

(iii) the Company amended certain lease provisions on 4 other Kmart
Properties to provide the Company with more favorable real estate tax
recovery terms; and

(iv) the Company received pre-approval to develop outlots at 7 Kmart
Properties and retain all of the revenue generated from these outlots.

Lease Terminations

The Agreement provided for the termination of 5 leases on the
Company's freestanding stores located in Arkansas City, Emporia, Great Bend
and Liberal, Kansas and in Lincoln, Illinois. These stores had been closed
previously by Kmart, but had remaining lease terms ranging from 4.5 to 7
years. In turn, the Company received a cash payment of $2.56 million which
represented approximately 75% of the net present value of the remaining
rental income for these 5 Properties. The Company has subsequently re-
leased 2 of the Properties, Liberal to Standard Supply in November 1995,
and Emporia to Consolidated

42
<PAGE> 45

Stores in November 1996, at rental rates slightly in excess of those under
the previous Kmart leases. The Company intends to re-lease the remaining 3
locations. The cash payment is being recognized as income on a straight
line basis over a 6 year period which represents the weighted average
remaining life of the terminated Kmart leases.

Subleased Stores

Kmart previously sublet stores in Garden City, Hayes and Independence,
Kansas to certain local and regional retail operators. The economic terms
of these subleases approximated the underlying leases which Kmart had with
the Company. Under the Agreement, the Company assumed these subleases from
Kmart and released Kmart from any further obligations thereunder.

Real Estate Tax Recoveries

Leases with Kmart at 4 of the Properties were gross leases whereby the
Company was responsible for payment of all real estate taxes. Under the
Agreement, these leases were amended to provide that Kmart pay the amount
by which the real estate taxes for the year exceeded any percentage rent
due for that year. This provision was phased in over a 2 year period, will
remain in place for the duration of each lease and will increase the
revenue of the Company.

Outlots

Under the Agreement, the Company acquired the right to, and obtained
pre-approval to, develop 7 outlots at existing Kmart stores. The Company
will receive all of the economic benefits and burdens of such outlots.
Three outlots have been developed to date, providing the Company with
$93,000 of incremental annualized revenue.

Wal-Mart

Wal-Mart, a chain of discount department stores, is America's largest
retailer measured by total revenues. During the fiscal year ended January 31,
1997, Wal-Mart had net sales of $105 billion. Domestically, at January 31, 1997,
Wal-Mart operated 1,960 stores.

Senior unsecured debt securities of Wal-Mart are rated Aa2 by Moody's
Investor Services, Inc. (out of a range of Aaa (highest) to D) and AA by
Standard & Poor's Corporation (out of a range of AAA (highest) to D). Wal-Mart's
commercial paper is rated P1 by Moody's Investor Services, Inc. (out of a range
of P1 (highest) to no rating) and A-1+ by Standard & Poor's Corporation (out of
a range of A-1+ (highest) to no rating.)

SUMMARY OF MAJOR TENANTS

The following table sets forth as of December 31, 1997, with respect to the
Properties leased to anchor and/or national tenants which individually accounted
for more than 1.0% of the Company's minimum rent, (i) the number of stores for
each such tenant, (ii) the amount of GLA leased by each such tenant, (iii) the
percentage of GLA which was leased by each such tenant, (iv) the 1997 gross
annual rent represented by each such tenant, (v) the percentage of the Company's
total 1997 gross annual rents which was represented by each such tenant, (vi)
the December 31, 1997 annualized base rent represented by each tenant and (vii)
the

43
<PAGE> 46

percentage of the Company's total December 31, 1997 annualized base rent which
was represented by each such tenant:

<TABLE>
<CAPTION>
PERCENTAGE OF
GLA GROSS PERCENTAGE OF TOTAL
NUMBER (SQUARE PERCENTAGE ANNUAL TOTAL GROSS ANNUALIZED ANNUALIZED
TENANT(1) OF STORES FEET) OF GLA RENT(2) ANNUAL RENT BASE RENT BASE RENT
- --------- --------- ------- ---------- ------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Kmart................ 33 3,054,546 54.0% $ 9,470,000 37.5% $ 8,640,000 35.7%
Wal-Mart............. 5 400,602 7.1 1,688,000 6.7 1,598,000 6.6
Toys "R" Us.......... 3 85,535 1.5 823,000 3.3 823,000 3.4
Cineplex-Odeon....... 1 35,280 0.6 617,000 2.4 617,000 2.5
Hollywood Theater.... 1 42,497 0.8 587,000 2.3 587,000 2.4
Best Buy............. 1 36,586 0.6 485,000 1.9 485,000 2.0
Levitz............... 1 96,268 1.7 433,000 1.7 433,000 1.8
Jay C. Foods......... 2 72,171 1.3 370,000 1.5 370,000 1.5
Sports Authority..... 1 42,610 0.8 362,000 1.4 362,000 1.5
Sportmart(3)......... 1 36,495 0.6 356,000 1.4 356,000 1.5
1/2 Off Card Shop.... 2 26,475 0.5 307,000 1.2 307,000 1.3
Roundy's............. 1 52,477 0.9 289,000 1.1 289,000 1.2
-- --------- ---- ----------- ---- ----------- ----
TOTAL................ 52 3,981,542 70.4% $15,787,000 62.4% $14,867,000 61.4%
== ========= ==== =========== ==== =========== ====
</TABLE>

(2) Gross annual rent represents annualized base rent at December 31, 1997 plus
percentage rents for the period ended December 31, 1997.

(3) Subsidiary of Dick's Sporting Goods.

TENANT LEASE EXPIRATIONS AND RENEWALS

The following table shows tenant lease expirations at the Properties
through the year 2003, assuming that none of the tenants exercises any renewal
option.

LEASE EXPIRATION SCHEDULE(1)

<TABLE>
<CAPTION>
ANNUALIZED 1997 BASE
GROSS LEASABLE AREA RENTAL INCOME(2)
LEASE NO. OF ----------------------- -----------------------
EXPIRATION LEASES APPROXIMATE PERCENT PERCENT
YEAR EXPIRING SQUARE FEET OF TOTAL AMOUNT OF TOTAL
---------- -------- ----------- -------- ------ --------
<S> <C> <C> <C> <C> <C>
1998........................................ 41 280,581 5.0% $ 1,229,000 5.1%
1999........................................ 48 302,068 5.3 1,933,000 8.0
2000........................................ 44 133,384 2.4 1,455,000 6.0
2001........................................ 34 342,575 6.1 1,749,000 7.2
2002........................................ 34 521,595 9.2 2,263,000 9.3
2003........................................ 25 487,841 8.6 1,895,000 7.8
--- --------- ---- ----------- ----
Total through 2003.......................... 226 2,068,044 36.6% $10,524,000 43.4%
=== ========= ==== =========== ====
</TABLE>

(2) Amounts are computed using annualized base rent at December 31, 1997 and do
not include future rent increases, if any.

44
<PAGE> 47

OPTIONS TO PURCHASE GRANTED TO CERTAIN TENANTS

Four of the Properties are subject to purchase options granted to certain
tenants as follows:

- The freestanding store in Milwaukee, Wisconsin is subject to a
purchase option at a fixed price of $1.4 million, exercisable at any
time after January 1, 1997, while the lease remains in effect. For
1997, $280,000 of rental income and $279,000 of net operating income
were attributable to this Property.

- The freestanding store in Rockford, Illinois is subject to a
purchase option at a fixed price of $1.3 million, exercisable at any
time after December 1, 1997, while the lease remains in effect. For
1997, $292,000 of rental income and $289,000 of net operating income
were attributable to this Property.

- A tenant which leases 20,000 square feet of GLA at the community
shopping center in Marshfield, Wisconsin has a purchase option for
its premises at a fixed price of $117,000, exercisable throughout
the term of its lease (which lease, including renewal options, will
terminate in November 2006). For 1997, $14,000 of rental income was
attributable to this tenant.

- The freestanding store in Liberal, Kansas is subject to a purchase
option at a fixed price of $325,000 upon expiration of the primary
term of the lease on April 30, 2003. For 1997, $89,000 of rental
income and $83,000 of net operating income were attributable to this
Property.

The Company believes that even if all of the purchase options are
exercised, such exercise will not have a material adverse effect upon the
operations of the Company or its ability to maintain its distribution policy. In
addition, if any purchase option is exercised, the Company intends to either
distribute the cash proceeds to its shareholders or reinvest the cash proceeds
in additional properties. No assurance can be given that such distribution or
reinvestment will occur.

RENTAL REVENUES

Substantially all of the income from the Properties consists of rent
received under long-term leases. In addition, the leases provide for payment
from tenants of a pro rata share of the real estate taxes, insurance, utilities
and common area maintenance of the Property ("expense reimbursements"). A
substantial number of leases at the Properties also provide for the payment of
percentage rents. Percentage rents represented 3.0% of the Company's total
rental revenue, or approximately $1.2 million, for the year ended December 31,
1997.

CAPITAL EXPENDITURES

The Properties are subject to regular physical maintenance and renovation
where necessary, to preserve and enhance their value. These projects usually
include renovating existing facades, installing uniform signage, repairing
roofs, resurfacing parking lots and increasing parking lot lighting. In addition
to repair and maintenance costs (which are expensed as incurred), the Company
has budgeted approximately $1.138 million (net of tenant recoveries) for capital
improvements to the Properties in 1998. In 1997, 1996 and 1995 the Company spent
$1.039 million, $1.261 million and $472,000, respectively, on capital
expenditures.

COMPETITION

All of the Properties are located in areas which have community shopping
centers and other retail facilities. Generally, there are other neighborhood and
community shopping centers within close proximity of a Property. The amount of
rentable retail space in an area could have a material adverse effect on the
amount of rent charged by the Company and on the Company's ability to rent
vacant space and/or renew leases. There are numerous commercial developers, real
estate companies, REITs and major retailers that compete with the Company in
seeking land for development, properties for acquisition and tenants for
properties, some of which may have greater financial and other resources than
the Company and may have operating or development experience greater than that
of the Company and its officers. There are numerous shopping facilities that
compete with the Properties in attracting retailers to lease space. In addition,
retailers at the Properties face

45
<PAGE> 48

increasing competition from outlet malls, discount shopping clubs, catalog
companies, direct mail and telemarketing.

EMPLOYEES

Virtually all operating and administrative functions of the Company,
including leasing, finance, accounting and data processing, are performed
in-house either by or under the supervision of the Company's executive officers.
The Company employs approximately 19 full-time persons at its corporate
headquarters in Michigan, and its relationship with all of its employees is
good.

None of the Company's executive officers intends, or will be permitted,
without the prior approval of the Board of Directors, to engage in, while he is
an officer or director of the Company (and for one year thereafter in Mr.
Gramer's case), the acquisition, development or management of commercial real
estate except through the Company.

LEGAL PROCEEDINGS

The Company is not presently involved in any litigation nor, to its
knowledge, is any litigation threatened against the Company or any of the
Properties, except for routine litigation arising in the ordinary course of
business which, in the opinion of the executive officers of the Company, would
not have a material adverse effect on the Company.

INSURANCE

The Company believes that the Properties are covered by adequate fire,
flood, earthquake, tornado and property insurance provided by reputable
companies and with commercially reasonable deductibles and limits. Such coverage
will also be obtained with respect to any additional properties acquired by the
Company in the future. The Company will maintain a blanket policy to cover all
of its properties with an insurance company or companies having an A.M. Best
rating of A+ or higher. The Company has obtained title insurance relating to the
Properties in an aggregate amount which the Company believes to be adequate to
protect the Company's interest in the Properties.

46
<PAGE> 49

MORTGAGE INDEBTEDNESS

The following table sets forth certain information regarding the Company's
debt outstanding as of May 29, 1998, and December 31, 1997 and 1996.

<TABLE>
<CAPTION>
BALANCE
----------------------------
MAY 29, DECEMBER 31,
-------- -----------------
MORTGAGES COLLATERAL INTEREST RATE MATURITY DATE 1998 1997 1996
--------- ---------- ------------- ------------- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Greenwich Capital Line
of Credit............ 16 Properties LIBOR + 150 Basis November 1999 $ 19,050 $ 4,700 $
Points
UDAG Loan.............. Bricktown Square 5% increasing to March 2023 8,048 8,097 8,193
9%
Securitized Mortgage
Loan................. 25 Properties 7.57%(1) August 2002 63,000 63,000 63,000

Daiwa Finance Corp. ... The Shops at 8.18% February 2007 12,742 12,788 12,450
Fairlane Meadows
First Chicago NBD Line
of Credit............ Orchard-14 LIBOR +200 March 1999 1,000
Shopping Center Basis Points
Bloomfield Acceptance
Company.............. 12 Properties 7.43% May 18,000
2013
Wells Fargo Bank....... Westland Shopping 8.02% November 2007 5,872
Center
-------- ------- -------
TOTAL MORTGAGES........ $127,712 $88,585 $83,643
======== ======= =======
Convertible
Debentures........... $ 55,004 $56,680 $61,285
None 9.5% July 2004 ======== ======= =======
Convertible Notes...... $ 27,000 $27,000 $27,000
Bricktown Square 8.5% July 2003 ======== ======= =======
</TABLE>

- -------------------------
(1) Overall blended rate. The interest rates on four different tranches are
either fixed or capped through the use of interest rate caps and floors.

Approximate scheduled principal payments for the years subsequent to
December 31, 1997 are as follows (in thousands):

<TABLE>
<S> <C>
1998 (subsequent to May 29, 1998)........................... $ 244
1999........................................................ 20,487
2000........................................................ 470
2001........................................................ 505
2002........................................................ 63,542
2003 and thereafter......................................... 124,468
--------
Total.................................................. $209,716
========
</TABLE>

RECENT DEVELOPMENTS

ACQUISITIONS, REDEVELOPMENTS, DEVELOPMENTS AND LEASING

As of May 29, 1998 the following were either under construction or recently
completed:

Melrose Park, Illinois -- The Company executed a 20-year lease having an
annual rental of $963,000 with Cinemark USA for a 58,000 square foot 10 plex
entertainment facility. The theater is under construction and is expected to
open in November 1998 at a total cost to the Company of $4.2 million.

47
<PAGE> 50

North Aurora, Illinois -- The Company executed a 20-year lease having an
annual rental of $746,000 with Cinemark USA for a 60,000 square foot 17 plex
entertainment facility. The theater is under construction and is expected to
open in July 1998 at a total cost to the Company of $4.3 million.

Westland, Michigan -- In February 1998, the Company acquired the 85,000
square foot Westland Shopping Center in Westland, Michigan for $7.9 million. The
community shopping center has Dick's Sporting Goods and MedMax as its anchor
tenants, and at May 29, 1998, 100% of the GLA at the center was leased.

Sandor Acquisition -- In May 1998, the Company acquired twelve community
shopping centers located in: Indiana (3), Michigan (3), Illinois (2), Kansas
(2), Minnesota (1) and Ohio (1) for $29.5 million. These Properties have
Maurice's, Fashion Bug and Dollar Tree as major tenants, contain a total of
328,000 square feet of GLA and are anchored by a Wal-Mart (each Wal-Mart store
and its underlying pad are owned and managed by an independent third party). At
May 29, 1998, 94.8% of the GLA in the Sandor Acquisition was leased. In
addition, pursuant to the Sandor Acquisition purchase agreement, the Company
agreed to acquire a community shopping center located in Decatur, Illinois for
$4.2 million that contains over 40,000 square feet of GLA and has Wal-Mart and
Sam's Club as anchor tenants (the stores and their underlying pads are owned and
managed by independent third parties). The acquisition of the Decatur, Illinois
property is scheduled to close in November 1998 after the seller completes a
redevelopment of the property.

LOCATIONS OF THE SANDOR COMMUNITY SHOPPING CENTERS

<TABLE>
<CAPTION>
GROSS LEASABLE PERCENT OF GLA LEASED
STATE NUMBER OF PROPERTIES AREA (SQ FT.) AS OF MAY 29, 1998
----- -------------------- -------------- ---------------------
<S> <C> <C> <C>
Indiana.................................... 3 75,000 91.1%
Michigan................................... 3 87,000 100.0%
Illinois(1)................................ 2 64,000 100.0%
Kansas..................................... 2 35,000 87.5%
Minnesota.................................. 1 12,000 88.0%
Ohio....................................... 1 55,000 92.0%
-- -------
Total...................................... 12 328,000 94.8%
== =======
</TABLE>

- -------------------------
(1) Does not include the community shopping center in Decatur, Illinois, the
purchase of which is scheduled to close in November 1998.

ANNUALIZED BASE RENT OF THE SANDOR COMMUNITY SHOPPING CENTERS(1)

The following is a breakdown of annualized base rent as of May 29, 1998 for
the properties by type of tenant:

<TABLE>
<CAPTION>
ANNUALIZED BASE RENT PERCENT OF TOTAL ANNUALIZED
TYPE OF TENANT AS OF MAY 29, 1998(2) BASE RENT AS OF MAY 29, 1998
-------------- --------------------- ----------------------------
<S> <C> <C>
National.......................................... $1,606,000 53.0%
Regional.......................................... 255,000 8.4
Local............................................. 1,171,000 38.6
---------- ------
Total............................................. $3,032,000 100.0%
========== ======
</TABLE>

- -------------------------
(1) Does not include the community shopping center in Decatur, Illinois, the
purchase of which is scheduled to close in November 1998.

(2) "Annualized Base Rent" of the Company as of May 29, 1998 is determined by
multiplying by 12 the monthly rent as of that date, but excluding from the
monthly rent (i) percentage rents, (ii) additional rent payable by tenants
such as common area maintenance, real estate taxes and other expense
reimbursements and (iii) future contractual rent increases.

48
<PAGE> 51

MAJOR TENANTS AT THE SANDOR COMMUNITY SHOPPING CENTERS(1)

The following table sets forth certain information with respect to the
major tenants at the properties as of May 29, 1998:

<TABLE>
<CAPTION>
PERCENT OF TOTAL
NUMBER OF ANNUALIZED BASE RENT ANNUALIZED BASE RENT
TENANT LEASES AS OF MAY 29, 1998(2) AS OF MAY 29, 1998
------ --------- --------------------- --------------------
<S> <C> <C> <C>
Maurice's..................................... 8 $ 338,000 11.2%
Fashion Bug................................... 3 294,000 9.7
On Cue Records................................ 5 189,000 6.2
Dollar Tree................................... 5 183,000 6.0
Rentway....................................... 3 107,000 3.5
Famous Footwear............................... 2 99,000 3.3
GNC........................................... 6 97,000 3.2
-- ---------- ----
Total......................................... 32 $1,307,000 43.1%
== ========== ====
</TABLE>

- -------------------------
(1) Does not include the community shopping center in Decatur, Illinois, the
purchase of which is scheduled to close in November 1998.

FINANCINGS

In November 1997, the Company entered into the Greenwich Capital Line, a
$25 million revolving loan agreement secured by 16 Properties. The Greenwich
Capital Line bears interest at LIBOR plus 150 basis points and may be increased
to $50 million with the pledge of additional collateral.

In February 1998, the Company assumed a $5.9 million secured term loan with
Wells Fargo Bank in connection with the Westland Acquisition. The loan is
secured by the Westland Shopping Center and bears interest at 8.02%.

In April 1998, First Chicago NBD entered into a $4.5 million secured line
of credit with the Company. The line of credit is collateralized by the
Company's shopping center in Farmington Hills, Michigan and bears interest at
LIBOR plus 200 basis points or in certain instances the bank's prime rate.

In May 1998, the Company entered into an $18 million secured mortgage loan
with Bloomfield Acceptance Company secured by the 12 Properties acquired in the
Sandor Acquisition. This loan bears interest at 7.43%.

POLICIES WITH RESPECT TO CERTAIN ACTIVITIES

The following is a discussion of the Company's acquisition and investment
policies, financing policies and policies with respect to certain other
activities. The Company's policies with respect to these activities have been
determined by the executive officers of the Company and may be amended or
revised from time to time at the discretion of the Board of Directors without a
vote of the shareholders of the Company.

ACQUISITION AND INVESTMENT POLICIES

The Company's investment objective is to increase cash flow and the value
of its portfolio of properties and to seek continued growth through the
selective acquisition, development, redevelopment and renovation of
income-producing real estate properties, primarily community shopping centers.
Management believes that opportunities to acquire existing community shopping
centers and other retail properties are and will continue to be available to
buyers, such as the Company, with access to the capital markets.

The Company's primary investment objective is to acquire high quality,
well-located community shopping centers and other retail properties with
attractive initial yields and strong prospects for future cash flow growth and
capital appreciation. To the extent that the Company acquires such properties in
geographical

49
<PAGE> 52

areas where it has an established presence, the Company expects to be able to
manage such additional community shopping centers without a substantial increase
in operating and management costs.

The Company will continue to concentrate its acquisition activities in the
markets where its Properties are presently located in order to take maximum
advantage of its knowledge of such markets and its working relationships with
tenants whose stores serve these markets. The Company believes that its focus on
community shopping centers that are anchored by national or regional credit
tenants with long-term leases that are located in select geographic areas has
enabled its Properties to compete favorably in their respective retail trade
areas, factors which have contributed to the Company's stability and ability to
maintain its occupancy rate and cash flow levels. The Company's ability to
evaluate an acquisition opportunity, together with its research to determine an
appropriate tenant mix for a specific site and the Company's overall knowledge
of the retail market, have allowed it to develop and operate successful
Properties.

The Company plans to continue, on a limited basis, the business of managing
commercial properties for third parties. Through such management activities, the
Company expects to be able to identify properties which potentially represent
attractive acquisition opportunities and are complementary to the Company's
current portfolio.

The Company also plans to undertake selective development of community
shopping centers and other commercial properties. Development and redevelopment
have in the past been primary components of the Company's business. The Company
developed or redeveloped 45 of the Properties. The Company's management believes
that its development experience will enable the Company to take advantage of
attractive development opportunities that may rise in the future.

FINANCING POLICIES

In order to most effectively pursue its acquisition and development and
operating strategies, the Company intends to maintain a capital structure with a
ratio of long-term debt (excluding its outstanding convertible debentures and
convertible notes) to total market capitalization of no more than 50%. At March
31, 1998, the Company had a long-term debt (excluding its outstanding
convertible debentures and convertible notes) to total market capitalization
ratio of approximately 39% (73% if its outstanding convertible debentures and
convertible notes were included as long-term debt). Fluctuations in the market
price of the Company's Common Stock, however, may cause this ratio to vary.
Additionally, the Company may from time to time re-evaluate its debt
capitalization policy in light of then current economic conditions, relative
costs of debt and equity capital, the market values of its Properties, growth
and acquisition opportunities and other factors, and the Company may modify its
debt financing policy and may increase or decrease its ratio of long-term debt
to total market capitalization. The Company has established its financing
policies relative to the total market capitalization of the Company rather than
relative to the book value of the Company's assets, a comparison that is
frequently employed by others. The Company uses market capitalization because
management believes that the book value of the Company's assets does not
accurately reflect the fair market value of such assets or the Company's ability
to borrow and to meet debt service requirements. The market capitalization of
the Company, however, is more variable than book value and does not necessarily
reflect the fair market value of the underlying assets of the Company at all
times.

The Company intends to seek additional debt as required by its operations
through public or private markets utilizing structured financings, unsecured
debt sold to the public or private investors, traditional mortgage debt on its
properties and lines of credit in a manner consistent with its debt financing
policy. The mortgages may be recourse, non-recourse or cross-collateralized and
may contain cross-default provisions. The Company does not have a policy
limiting the number of mortgages that may be placed on, or the amount of
indebtedness that may be secured by, any particular property, but mortgage
financing instruments usually limit additional indebtedness on such properties.

The Company intends to finance its acquisitions and developments with the
most appropriate sources of capital, which may include undistributed funds
otherwise available for distribution, the issuance of equity securities, bank
and other institutional borrowings and the issuance of debt securities.

50
<PAGE> 53

WORKING CAPITAL RESERVES

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

OTHER OPERATING POLICIES

The Company intends to operate in a manner that will not subject it to
regulation under the Investment Company Act of 1940. The Company does not intend
to (i) invest in the securities of other issuers for the purpose of exercising
control over such issuers; (ii) underwrite securities of other issuers; or (iii)
actively trade in loans or other investments.

The Company does not intend to engage in any related party transactions. In
addition, none of the Company's executive officers intends, or will be
permitted, without the prior approval of the Board of Directors, to engage while
he is an officer or director of the Company (and for one year thereafter in Mr.
Gramer's case) in the acquisition, development or management of commercial real
estate other than through the Company.

The Company may, under certain circumstances, purchase its shares of Common
Stock in the open market, if such purchases are approved by the Board of
Directors. The Board of Directors has authorized the Company to repurchase up to
755,000 of its shares of Common Stock. During 1995 and 1996, the Company
acquired 468,000 shares of Common Stock at an average price per share of $13.18.
No shares were purchased in 1997 or 1998 as of the date of this Prospectus. The
Company does not intend to purchase any shares of Common Stock at the current
price.

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The Board of Directors of the Company consists of five members, four of
whom are "Independent," as defined in the Articles (that is, not affiliated with
the Company). Under the Articles, at least three of the Company's Directors must
be independent. All Directors of the Company serve terms of one year or until
the election of their respective successor. Officers serve at the pleasure of
the Board of Directors.

The Directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE TITLE
- ---- --- -----
<S> <C> <C>
Anthony S. Gramer........................... 55 President, Chief Executive Officer and Director
Michael K. Kaline........................... 35 Vice President
Elliott J. Broderick........................ 40 Chief Accounting Officer
Robert D. Kemp, Jr.(1)(2)................... 57 Director
William McBride III(1)(3)................... 38 Director
William F. Pickard(1)(2).................... 57 Director
Richard T. Walsh(1)(3)...................... 62 Director
</TABLE>

- -------------------------
(1) Independent director

(2) Member of Compensation Committee

(3) Member of Audit Committee

Set forth below is biographical information for the executive officers and
the members of the Board of Directors.

Anthony S. Gramer is the President, Chief Executive Officer and a Director
of the Company, as well as an associate real estate broker of the Company. Mr.
Gramer joined the Company in 1981 and acquired the Company in 1986. From 1972
until 1981, Mr. Gramer served in various executive capacities at companies in
the real estate, banking and mortgage industries. Prior to 1972, Mr. Gramer was
a member of the audit staff of

51
<PAGE> 54

Touche Ross & Co., now known as Deloitte & Touche. Mr. Gramer is also a past
chairman of the legislative committee of the Mortgage Bankers Association of
Michigan. Mr. Gramer has been a Director of the Company since 1986.

Michael K. Kaline serves as Vice President of the Company. Since joining
the Company in 1984, Mr. Kaline has been responsible for overseeing the leasing
of the entire portfolio of the Company. In addition, Mr. Kaline is responsible
for acquisition, development, and property management and is an associate real
estate broker of the Company.

Elliott J. Broderick is the Chief Accounting Officer of the Company and
oversees the accounting and reporting functions of the Company, as well as
regulatory and tax compliance, short-term investments, information systems and
fiscal planning and budgets. Prior to joining the Company in 1991, Mr. Broderick
was employed for seven years by Plante & Moran, Michigan's largest regional CPA
firm. Mr. Broderick is a certified public accountant and a licensed real estate
salesperson and is a member of the American Institute of Certified Public
Accountants and the Michigan Association of Certified Public Accountants.

Robert D. Kemp, Jr. is a co-founder of Wilson, Kemp, and Associates, Inc.,
where he served as the President, Chief Operating Officer and a director since
1968. Wilson, Kemp & Associates, Inc., is a wholly-owned subsidiary of Comerica
Incorporated. In addition, Mr. Kemp currently serves as a director of Wholesale
Auto Receivables Corporation, a wholly-owned subsidiary of General Motors
Acceptance Corporation. Mr. Kemp also serves as the Treasurer, a director and a
member of the Executive Committee of the Detroit and Wayne County Tuberculosis
Foundation. Mr. Kemp has been a Director of the Company since 1994.

William McBride III is Chairman of the Board, Chief Executive Officer and
one of the founders, of Assisted Living Concepts, Inc., an AMEX listed
owner/operator of assisted living facilities based in Portland, Oregon. He has
been serving as Chairman of the Board since August of 1994, and CEO since
October 1997. He is also a member of the Board of Directors for Newcare Health
Corporation, a nursing home operating company listed on NASDAQ. Prior to joining
Assisted Living Concepts, Inc. in the full time position of CEO, Mr. McBride
cofounded LTC Properties, Inc., a REIT, where he was President, Chief Operating
Officer and Board member from August 1992 to October 1997. Prior to co-founding
LTC Properties, Mr. McBride served from April 1988 to July 1992 as Vice
President, Controller and Chief Accounting Officer at Beverly Enterprises, Inc.,
an owner/operator of long-term care facilities, retirement living facilities and
pharmacies. Prior to that, Mr. McBride worked at Ernst & Young, an international
accounting and consulting firm. Mr. McBride has been a Director of the Company
since 1994.

William F. Pickard has served as the Chairman of the Board and Chief
Executive Officer of Regal Plastics Company since 1985. Dr. Pickard currently
serves as a director of Michigan National Corporation (a bank holding company
and a subsidiary of National Australia Bank), WTVS (a Detroit television
station), National Association of Black Automotive Suppliers, Detroit Economic
Development Corporation, Michigan Cancer Foundation and Detroit Science Center.
Dr. Pickard is also a member of the U.S. Advisory Committee for Trade Policy and
Negotiations and the Executive Board of the National Association for the
Advancement of Colored People. From 1983 until 1987, Dr. Pickard was also
Chairman of the Board of Directors of the African Development Foundation. Dr.
Pickard has been a Director of the Company since 1994.

Richard T. Walsh is President of RT Enterprises, a private firm involved in
business consulting and investments, where he has served in that capacity since
1992. Since July 1994, Mr. Walsh has also served as chairman of Pioneer
Industries, Inc., a manufacturer of steel doors and frames. Mr. Walsh served as
the President and Chief Executive Officer of Core Industries Inc, a NYSE listed
company, from 1991 until 1992 and as President and Chief Operating Officer of
Core Industries Inc from 1986 until 1991. From 1982 until 1992, Mr. Walsh also
served as a Director of Core Industries Inc. Mr. Walsh is a Trustee of Walsh
College and a member of the Financial Executive Institute. Mr. Walsh has been a
Director of the Company since 1994.

52
<PAGE> 55

EXECUTIVE COMPENSATION

The following table sets forth, for the years ended December 31, 1997, 1996
and 1995 information concerning the annual and long-term compensation for
services in all capacities to the Company of those persons who, during 1997
were, (i) the chief executive officer and (ii) the other executive officers of
the Company whose compensation is required to be disclosed pursuant to the rules
of the Securities and Exchange Commission:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------- ---------------------------------
AWARDS PAYOUTS
----------------------- -------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND COMPENSATION AWARDS OPTIONS(1) PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS ($) ($) (#) ($) ($)
------------------ ---- ------ ----- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Anthony S. Gramer,...... 1997 $287,500 -- -- -- -- -- $4,750(3)
President, Chief
Executive 1996 $287,500 -- -- -- 19,500 -- --
Officer and Director 1995 $250,000 $60,000 -- -- 39,400 -- --
Michael K. Kaline,...... 1997 $137,500 -- $6,910(2) -- -- -- $3,223(3)
Vice President 1996 $125,000 -- -- -- 15,250 -- --
1995 $115,000 $50,000 -- -- 33,900 -- --
</TABLE>

- -------------------------
(1) See "Stock Option Plan."

(2) Represents loan forgiveness by Company.

(3) Represents amount of employer's contribution to 401(k) Plan.

STOCK OPTION PLAN

Prior to the IPO, the Company adopted The Malan Realty Investors, Inc. 1994
Stock Option Plan (the "Stock Option Plan" or "Plan") to enable employees of the
Company to participate in the ownership of the Company. The Stock Option Plan is
designed to align the interests of management with those of the shareholders, to
provide employees with incentives to continue in the employ of the Company, to
attract new employees with outstanding qualifications and to promote the success
of the Company's long-term business objectives.

Under the Stock Option Plan, executive officers and employees of the
Company may be granted options to acquire shares of Common Stock of the Company
("Options"). The Plan is administered by the Compensation Committee of the
Company's Board of Directors, which is authorized to select the executive
officers and other employees to whom Options are to be granted. No member of the
Compensation Committee is eligible to participate in the Stock Option Plan.

The Compensation Committee, in its discretion, determines the number of
Options to be granted to an employee. However, in accordance with the
requirements of the Code for performance-based compensation, the provisions of
the Plan limit the aggregate number of option shares that the Compensation
Committee may grant to an executive officer during any single year to 100,000
shares.

The exercise price of each Option is equal to the aggregate fair market
value of the underlying shares on the date of grant. With the exception of those
Options granted on the date of the IPO, Options vest over a five-year period at
the rate of 20% per year, beginning on the first anniversary of the date of
grant. Options granted on the date of the IPO vest over a three-year period, in
one-third increments, with the initial one-third vesting on the first
anniversary of the date of grant. If an optionee's employment is terminated
within the first year of the date of grant for any reason other than death,
disability, or retirement, the right to exercise the Option is forfeited. If the
optionee's employment is terminated more than one year after the date of grant
for reasons other than death, disability, retirement, or cause, the Option may
be exercised to the extent it was exercisable at the time of termination of
employment. If the termination of employment is for cause, the right to exercise

53
<PAGE> 56

the Option is forfeited. If the termination of employment is because of death,
disability, or retirement, the Option may be exercised in full. No Option may be
exercised ten years after the date of grant.

Notwithstanding the foregoing paragraph, the Compensation Committee, in its
sole and absolute discretion, may accelerate the vesting of any Option that has
been held by an optionee for at least six months from the date of grant of the
Stock Option.

No options were granted in 1997 or to date in 1998 under the Stock Option
Plan.

COMPENSATION OF DIRECTORS

The Company pays its Directors who are not employees of the Company an
annual fee of $12,000 plus a fee of $1,000 for each quarterly meeting of the
Board of Directors attended, plus travel expenses. In 1997, the Company paid, in
the aggregate, $64,000 to Messrs. Kemp, McBride, Pickard and Walsh for serving
as Directors of the Company and as members of a committee of the Board of
Directors. No travel expenses were incurred in 1997 for the Directors.

Pursuant to the terms of the Malan Realty Investors, Inc. 1995 Stock Option
Plan for Non-Employee Directors (the "Directors Stock Option Plan"), each
non-employee Director of the Company is automatically granted a non-qualified
stock option to purchase 1,000 shares of Common Stock of the Company following
the Annual Meeting of the Board of Directors. In the event a vacancy arises on
the Board following the Annual Meeting of Shareholders in any year and a
non-employee Director is nominated to fill such vacancy prior to December 31 of
the same year, such non-employee Director would automatically be granted an
option to acquire 1,500 shares of Common Stock (in lieu of the normal 1,000
share grant) immediately following the next Annual Meeting of the Board of
Directors. Following each Annual Meeting of the Board of Directors thereafter,
the non-employee Director would receive the normal 1,000 share grant, assuming
he is reelected to the Board.

The aggregate number of shares of Common Stock issuable under the Directors
Stock Option Plan is 80,000, subject to certain adjustments. All options granted
must have an exercise price equal to the fair market value of the underlying
shares on the date of grant. Options vest upon grant but do not become
exercisable by the Director until six months following the date of grant.
Options remain exercisable until the tenth anniversary of the date of grant or,
if earlier, until one year after the Director ceases to be a member of the
Board.

Options to acquire 1,000 shares of Common Stock were granted to Messrs.
Kemp, McBride, Pickard and Walsh on both May 15, 1997, and May 13, 1998, at an
exercise price of $17.125 and $17.688, respectively.

Under the Company's 1995 Stock Compensation Plan for Non-Employee Directors
(the "Stock Compensation Plan"), non-employee Directors may make an election
each year to receive all or a portion of their Director's compensation for the
following calendar year in the form of Common Stock of the Company in lieu of
cash. Once made, the election is irrevocable for the following year's
compensation. The number of shares to be paid to a Director in lieu of cash
compensation is determined based on the closing price of the Common Stock on the
New York Stock Exchange on the day before the compensation is earned by a
Director (i.e., the closing price on the day before a Board meeting). For 1997,
Messrs. Kemp and Pickard received 100% of their Directors' compensation in the
form of Common Stock of the Company, and Messrs. McBride and Walsh received 50%
of their Directors' compensation in the form of Common Stock of the Company.

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<PAGE> 57

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of May 29, 1998. The Company has
relied upon information supplied by its officers, directors, and certain
shareholders and upon information contained in filings with the Securities and
Exchange Commission.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF SHARES
- ------------------------------------ -------------------- -----------------
<S> <C> <C>
Anthony S. Gramer.......................................... 322,995(1) 8.5%
30200 Telegraph Road, Suite 105
Birmingham, Michigan 48025
Michael K. Kaline.......................................... 81,906(2) 2.2
Elliott J. Broderick....................................... 49,786(3) 1.3
Robert D. Kemp, Jr......................................... 10,731(4) *
William McBride III........................................ 7,614(5) *
William F. Pickard......................................... 7,306(6) *
Richard T. Walsh........................................... 7,614(7) *
Directors and Executive Officers as a Group (consisting of
seven individuals named)................................. 487,952(8) 12.7
Credit Suisse First Boston................................. 1,176,470(9) 23.7
Paradeplatz 8
8070 Zurich, Switzerland
FMR Corp................................................... 244,900(10) 6.5
82 Devonshire Street
Boston, Massachusetts 02109
Peter T. Kross............................................. 220,000 5.8
248 Grosse Pointe Blvd.
Grosse Pointe Farms, MI 48236
Merrill Lynch Asset Management, L.P. ...................... 294,116(11) 7.2
800 Scudders Mill Road
Plainsboro, New Jersey 08536
National Westminster Bank Plc.............................. 353,000(12) 8.5
175 Water Street
New York, NY 10038
Putnam Investments, Inc. .................................. 437,653 11.5
One Post Office Square
Boston, Massachusetts 02109
The Prudential Insurance Company of America................ 770,000(13) 18.4
751 Broad Street
Newark, New Jersey 07102-3777
SAFECO Corporation......................................... 371,800 9.8
SAFECO Plaza
Seattle, Washington 98185
Smith Barney, Inc. ........................................ 588,235 15.5
1345 Avenue of the Americas
New York, NY 10105
</TABLE>

- -------------------------
* Less than 1%

(1) Includes 4,235 shares registered in Mr. Gramer's name as custodian for a
minor child and 96,440 shares subject to vested stock options held by Mr.
Gramer. Excludes 1,865 shares owned by Mr. Gramer's son, who shares his
household. See "Management -- Stock Option Plan."

(2) Includes 76,440 shares subject to vested stock options. See "Management --
Stock Option Plan."

(3) Includes 44,620 shares subject to vested stock options. See "Management --
Stock Option Plan."

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<PAGE> 58

(4) Includes 3,500 shares subject to vested stock options. See "Management --
Compensation of Directors."

(5) Includes 4,500 shares subject to vested stock options. See "Management --
Compensation of Directors."

(6) Includes 3,792 shares subject to vested stock options. See "Management --
Compensation of Directors."

(7) Includes 2,000 shares subject to vested stock options. See "Management --
Compensation of Directors."

(8) See Notes 1 through 7 above.

(9) Represents shares that Credit Suisse First Boston has the right to acquire
through conversion of convertible debentures of the Company.

(10) Based on a group filing of a Schedule 13G made by FMR Corp., Edward C.
Johnson and Abigail P. Johnson. Through their ownership of common stock of
FMR Corp. and a shareholders' voting agreement, Mr. Johnson and Ms. Johnson
may also be deemed beneficial owners of the shares.

(11) Represents shares that may be acquired through conversion of convertible
debentures of the Company. Includes 279,411 shares (approximately 7% of the
Common Stock) beneficially owned by Merrill Lynch Global Allocation Funds,
Inc., for which Merrill Lynch Asset Management, L.P. acts as investment
adviser.

(12) Represents shares that may be acquired upon the exercise of warrants of the
Company held by National Westminster Bank Plc.

(13) Includes 400,000 shares that The Prudential Insurance Company of America
has the right to acquire through conversion of convertible debentures of
the Company.

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<PAGE> 59

DESCRIPTION OF COMMON STOCK

GENERAL

The Articles authorize the issuance of up to 30 million shares of Common
Stock, par value $.01 per share, and 5 million shares of Preferred Stock, par
value $.01 per share. As of May 29, 1998, there were 3,840,375 shares of Common
Stock issued and outstanding held by approximately 165 shareholders of record,
but no Preferred Stock issued and outstanding. The Company does not have any
current plans to issue any Preferred Stock.

All Common Stock now outstanding is, and the Shares when issued will be,
fully paid and nonassessable.

VOTING RIGHTS

The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of the shareholders.

The Common Stock possesses ordinary voting rights for the election of
directors and, in respect of other corporate matters, each share entitles the
holder thereof to one vote. Holders of Common Stock do not have cumulative
voting rights in the election of directors, which means that holders of more
than 50% of the shares of Common Stock voting for the election of directors can
elect all of the directors if they choose to do so and the holders of the
remaining shares cannot elect any directors. Holders of shares of Common Stock
do not have preemptive rights, which means they have no right to acquire any
additional shares of Common Stock that may be issued by the Company at a
subsequent date.

Because the Board of Directors has the power to establish the preferences
and rights of each series of Preferred Stock, it may afford the holders of any
series of Preferred Stock powers, preferences, and rights (voting or otherwise)
senior to the rights of the holders of Common Stock. See "Restrictions on
Transfer" and "Certain Provisions of the Articles of Incorporation and Bylaws."

DISTRIBUTIONS AND LIQUIDATION RIGHTS

Subject to such preferential rights as may be granted by the Board of
Directors in connection with the issuance of Preferred Stock, holders of Common
Stock are entitled to receive ratably such distributions as may be declared on
the Common Stock by the Board of Directors in its discretion from funds legally
available for the payment of distributions. In the event of the liquidation,
dissolution, or winding up of the Company, holders of Common Stock are entitled
to share ratably in all assets remaining after payment of all debts and other
liabilities and any liquidation preference the holders of any Preferred Stock
may have.

RESTRICTIONS ON TRANSFER, ETC.

The Articles generally prevent any holder from owning more than 9.9% in
value of the Company's outstanding Common Stock. See "Restrictions on Transfer"
and "Certain Provisions of the Articles of Incorporation and Bylaws" for a
further discussion of the material restrictions on the transfer and ownership of
Common Stock and other provisions of the Company's organization documents that
may impede a hostile takeover of the Company.

ADDITIONAL EQUITY

As of May 29, 1998, up to 5,493,922 million shares of Common Stock may be
issued, in the aggregate, (i) in exchange for the outstanding debentures of the
Company, (ii) in exchange for the outstanding notes of the Company, (iii) upon
the exercise of outstanding warrants, (iv) upon the exercise of outstanding
stock options under the Company's 1994 Stock Option Plan and (v) upon the
exercise of outstanding options under the Company's 1995 Stock Option Plan for
Non-Employee Directors. In addition, Directors may elect to be compensated in
stock. See "Management -- Compensation of Directors."

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<PAGE> 60

LISTING AND TRANSFER AGENT

The Common Stock is listed on the NYSE under the symbol "MAL." The
registrar and transfer agent for the Common Stock is The Bank of New York.

CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND BYLAWS

Set forth below is a description of certain provisions of the Articles and
the Company's Bylaws (the "Bylaws") as in effect on the date of this Prospectus.
The description is a summary only, and is qualified in its entirety by reference
to the Articles and Bylaws, which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part.

Under the Articles, the Company is authorized to issue a total of 35
million shares of all classes of stock, consisting of 30 million shares of
Common Stock and up to 5 million shares of Preferred Stock. See "Restrictions on
Transfer."

NUMBER OF DIRECTORS; REMOVAL

The Articles provide that the number of directors will be fixed by the
Bylaws. The Bylaws currently provide that the number of directors will be 5 or
such greater number as is necessary to ensure that a majority of the directors
are Independent Directors.

Directors may be removed only upon the affirmative vote of a majority of
all shares of stock outstanding and entitled to vote.

PREFERRED STOCK

Although the Company does not have any current plans to issue Preferred
Stock, the Articles authorize the Board of Directors to establish one or more
series of Preferred Stock and to determine, with respect to any series of
Preferred Stock, the preferences, rights (including voting and conversion
rights), and other terms of such series. The Company believes that the ability
of the Board of Directors to issue one or more series of Preferred Stock will
provide the Company with increased flexibility in meeting corporate needs. The
authorized shares of Preferred Stock, as well as unissued shares of Common
Stock, are available for issuance without further action by the Company's
shareholders, unless such action is required by applicable law or the rules of
any stock exchange or automated quotation system on which the Company's
securities may be listed or traded. Although the Board of Directors has no
present intention to do so, it could issue a series of Preferred Stock that
(because of its terms) could impede a merger, tender offer, or other transaction
that some of the Company's shareholders might believe to be in their best
interests or in which shareholders might receive a premium over the
then-prevailing market prices for their shares.

AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS

The Articles may be amended only by the affirmative vote of a majority of
the votes cast by such holders present in person or by proxy and entitled to
vote. A majority of the members of the Board of Directors may amend the Bylaws
at any time, except with respect to a bylaw that is adopted by the shareholders
and that, by its terms, can be amended only by the shareholders. The
shareholders can amend the Bylaws only upon the affirmative vote of a majority
of the votes cast by such holders present in person or by proxy and entitled to
vote.

OWNERSHIP LIMIT

The Ownership Limit set forth in the Articles could have the effect of
discouraging offers to acquire the Company and of increasing the difficulty of
consummating any such acquisition. See "Restrictions on Transfer."

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<PAGE> 61

RESTRICTIONS ON TRANSFER

To maintain its qualification as a REIT, the Company cannot be "closely
held" within the meaning of applicable provisions of the Code and Treasury
Regulations. In general, a REIT is "closely held" if five or fewer individuals
(as defined by the Code and Regulations) own more than 50% in value of the
REIT's outstanding capital stock. Under the Articles, in general, no shareholder
may own more than 9.9% in value of the Company's Common Stock (the "Ownership
Limit").

The Articles provide that if the transfer of any shares of Common Stock or
a change in the Company's capital structure would cause any person (other than a
Note Holder or certain look through entities) to own Common Stock in excess of
the Ownership Limit (which refers to 9.9% in value of the outstanding Common
Stock), or in excess of the applicable Note Holder or look through entity limit,
then the transfer is void ab initio.

Any person holding 5% or more of the Company's Common Stock must provide
the Company with information regarding such person's ownership of Common Stock.

The Ownership Limit will not be automatically removed even if the REIT
provisions are changed so as to no longer contain any ownership concentration
limitation or if the concentration limitation is increased. In addition to
preserving the Company's status as a REIT, the effect of the Ownership Limit is
to prevent any person from acquiring unilateral control of the Company. Any
change in the Ownership Limit would require an amendment to the Articles.
Currently, amendments to the Articles require the affirmative vote of a majority
of the votes cast by such holders present in person or by proxy and entitled to
vote.

All certificates evidencing shares of Common Stock or Preferred Stock bear
or will bear a legend referring to the restrictions described above.

FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of certain Federal income tax considerations
that may be relevant to a prospective purchaser of the Shares, is based upon
current law, and is not tax advice. This discussion does not address all aspects
of taxation that may be relevant to particular shareholders in light of their
personal investment or tax circumstances or to certain types of shareholders
(including insurance companies, financial institutions, or broker-dealers)
subject to special treatment under the Federal income tax laws.

This discussion was prepared by Miro Weiner & Kramer, counsel to the
Company, and is based on current provisions of the Code, existing, temporary,
and currently proposed Treasury Regulations under the Code, the legislative
history of the Code, existing administrative rulings and practices of the IRS,
and judicial decisions. No assurance can be given that legislative, judicial, or
administrative changes will not affect the accuracy of any statements in this
Prospectus with respect to transactions entered into or contemplated prior to
the effective date of such changes.

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

GENERAL

The Company has made an election to be taxed as a REIT under Sections 856
through 860 of the Code and applicable Treasury Regulations, which are the
requirements for qualifying as a REIT. The Company believes that it is organized
and operates in such a manner as to qualify for taxation as a REIT under the
Code, and the Company intends to continue to operate in such a manner; however,
no assurance can be given that it has operated in such a manner or that it will
continue to operate in a manner so as to qualify or remain qualified.
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<PAGE> 62

The REIT Requirements relating to the Federal income tax treatment of REITs
and their shareholders are highly technical and complex. The following
discussion sets forth only a summary of the material aspects of those sections.

TAXATION OF THE COMPANY

As a REIT, the Company generally will not be subject to Federal corporate
income taxes on that portion of its ordinary income or capital gain that is
currently distributed to shareholders.

The REIT provisions of the Code generally allow a REIT to deduct
distributions paid to its shareholders. This deduction for distributions paid to
shareholders substantially eliminates the Federal "double taxation" on earnings
(once at the corporate level and once again at the shareholder level) that
results from investment in a corporation.

Even if the Company qualifies for taxation as a REIT, the Company may be
subject to Federal income tax as follows:

First, the Company will be taxed at regular corporate rates on any
undistributed REIT taxable income and undistributed net capital gains.

Second, under certain circumstances, the Company may be subject to the
"alternative minimum tax" on its items of tax preference, if any.

Third, if the Company has (i) net income from the sale or other
disposition of "foreclosure property" (generally, property acquired by
reason of a default on a lease or an indebtedness held by a REIT) that is
held primarily for sale to customers in the ordinary course of business or
(ii) other nonqualifying net income from foreclosure property, it will be
subject to tax at the highest corporate rate on such income.

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

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

Sixth, if the Company should fail to distribute with respect to each
calendar year at least the sum of (i) 85% of its REIT ordinary income from
such year, (ii) 95% of its REIT capital gain net income for such year, and
(iii) any undistributed taxable income from prior periods, the Company
would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed.

Seventh, if a REIT acquires any asset from a C corporation (i.e.,
generally a corporation subject to full corporate-level tax) in a carryover
basis transaction (or if a REIT such as the Company holds assets beginning
on the first day of the first taxable year for which the Company qualifies
as a REIT) and the REIT subsequently recognizes gain on the disposition of
such asset during the 10-year period (the "Recognition Period") beginning
on the date on which the asset was acquired by the REIT (or the REIT first
qualified as a REIT), then the excess of (a) the fair market value of the
asset as of the beginning of the applicable Recognition Period, over (b)
the REIT's adjusted basis in such asset as of the beginning of such
Recognition Period will be subject to tax at the highest regular corporate
rate, pursuant to guidelines issued by the IRS (the "Built-In Gain Rules").

REQUIREMENTS FOR QUALIFICATION

To qualify as a REIT, the Company must meet the requirements discussed
below relating to the Company's organization, sources of income, nature of
assets, and distributions of income to shareholders.

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<PAGE> 63

Organizational Requirements

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

(i) that is managed by one or more trustees or directors;

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

(iii) that would be taxable as a domestic corporation but for the REIT
Requirements;

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

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

(vi) during the last half of each taxable year not more than 50% in
value of the outstanding stock of which is owned, directly or
indirectly through the application of certain attribution rules,
by five or fewer individuals (as defined in the Code to include
certain entities).

In addition, certain other tests, described below, regarding the nature of its
income and assets must also be satisfied.

The Code provides that conditions (i) through (iv), inclusive, must be met
during the entire taxable year and that condition (v) must be met during at
least 335 days of a taxable year of 12 months, or during a proportionate part of
a taxable year of less than 12 months.

The Company satisfies the requirements set forth in (i) through (v) above
and believes that it satisfies the requirement set forth in (vi) above. In
addition, the Articles currently include certain restrictions regarding transfer
of the Company's shares. These restrictions are intended (among other things) to
assist the Company in continuing to satisfy the share ownership requirements
described in (v) and (vi) above.

Income Tests

To maintain qualification as a REIT, there are two gross income
requirements that must be satisfied annually.

- First, at least 75% of the Company's gross income, excluding gross
income from certain dispositions of property held primarily for sale
to customers in the ordinary course of a trade or business
("prohibited transactions"), for each taxable year must be derived
directly or indirectly from investments relating to real property or
mortgages (including "rents from real property" and, in certain
circumstances, interest) or from certain types of temporary
investments.

- Second, at least 95% of the Company's gross income (excluding gross
income from prohibited transactions) for each taxable year must be
derived from such real property investments described above and from
distributions, interest, and gain from the sale or disposition of
stock or securities or from any combination of the foregoing.

Rents received or deemed to be received by the Company will qualify as
"rents from real property" in satisfying the gross income requirements for a
REIT described above only if several conditions are met.

- First, the amount of rent must not be based in whole or in part on
the income or profits of any person. An amount received or accrued
generally will not be excluded from the term "rents from real
property" solely by reason of being based on a fixed percentage or
percentages of receipts or sales. Rents based on net income or
profits do not include rents received from a tenant based on the
tenant's income from the property if the tenant derives
substantially all of its income with respect to such property from
the leasing or subleasing of substantially all of such property,
provided that the tenant receives from subtenants only amounts that
would be treated as rents from real property if received directly by
a REIT.

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<PAGE> 64

- Second, the Code provides that rents received from a tenant will not
qualify as "rents from real property" in satisfying the gross income
tests if the REIT, or an owner of 10% or more of the REIT, directly,
indirectly, or constructively owns 10% or more of such tenant (a
"Related Party Tenant").

- Third, if rent attributable to personal property, leased in
connection with a lease of real property, is greater than 15% of the
total rent received under the lease, then the portion of the rent
attributable to such personal property will not qualify as "rents
from real property."

- Finally, if a REIT provides services to tenants of a property, the
rent received from such property will qualify as "rents from real
property" only if the services are of a type that a tax-exempt
organization can provide to its tenants without causing its rental
income to be unrelated business taxable income under the Code (that
is, if such services are "usually or customarily rendered in
connection with the rental of space for occupancy only" and are not
otherwise considered "primarily for the tenant's convenience").
Services which would give rise to unrelated business taxable income
("Prohibited UBTI Service Income") if provided by a tax-exempt
organization must be provided by an "independent contractor" (as
defined in the Code) who is adequately compensated and from whom the
REIT does not derive any income. In any event, receipts from
services furnished (whether or not rendered by an independent
contractor) which are not customarily provided to tenants in
properties of a similar class in the geographic market in which the
property is located will in no event qualify as "rents from real
property." The Taxpayer Relief Act of 1997 (the "1997 Act") added a
de minimis rule which provides that in determining whether a REIT
satisfies the income tests, a REIT's rental income from a property
will not cease to qualify as "rents from real property" merely
because the REIT performs services for a tenant other than permitted
customary services if the amount that the REIT received or is deemed
to have received as a result of performing impermissible services
does not exceed one percent of all amounts received, directly or
indirectly, by the REIT with respect to such property. The amount
that a REIT will be deemed to have received for performing
impermissible services is not less than 150% of the direct cost to
the REIT of providing those services.

Substantially all of the Company's income is derived from rents from the
Properties. The Company's income is largely derived from its interests in the
Properties, which qualify as "rents from real property" for purposes of the 75%
and the 95% gross income tests.

The Company does not charge rent for any property that is based in whole or
in part on the income or profits of any person (except by reason of being based
on a fixed percentage of receipts or sales, as described above). The Company
does not derive rent attributable to personal property leased in connection with
real property that exceeds 15% of the total rents.

The Company does not believe that it derives rent from property rented to a
Related Party Tenant; however, the determination of whether the Company owns 10%
or more of any tenant is made after the application of complex attribution rules
under which the Company will be treated as owning interests in tenants that are
owned by its "Ten Percent Stockholders." In identifying the Company's Ten
Percent Stockholders, each individual or entity will be treated as owning the
Common Stock held by related individuals and entities. Accordingly, the Company
cannot be absolutely certain whether all Related Party Tenants have been or will
be identified. Although rent derived from a Related Party Tenant will not
qualify as rents from real property and, therefore, will not be qualifying
income under the 75% or 95% gross income tests, the Company believes that the
aggregate amount of such rental income (and any other nonqualifying income) in
any taxable year will not cause the Company to exceed the limits on
nonqualifying income under such gross income tests. See "Federal Income Tax
Considerations -- Failure to Qualify."

The Company receives fees in exchange for the performance of certain
management and administrative services for unrelated third parties. Such
management fees generated generally may not be qualified income under the 75% or
95% gross income tests; however, the Company believes that the aggregate amount
of such fees (and any other nonqualifying income) in any taxable year has not
exceeded and will not exceed the limits on nonqualifying income under the 75%
and 95% gross income tests.
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<PAGE> 65

The term "interest," for purposes of satisfying the income tests, generally
does not include any amount received or accrued (directly or indirectly) if the
determination of such amount depends in whole or in part on the income or
profits of any person. An amount received or accrued generally will not be
excluded from the term "interest," however, solely by reason of being based on a
fixed percentage or percentages of receipts or sales. The Company may advance
money from time to time to tenants for the purpose of financing tenant
improvements. The Company does not intend to charge interest that will depend in
whole or in part on the income or profits of any person.

The term "prohibited transaction," for purposes of the income tests and the
excise tax described below, generally means a sale or other disposition of
property (other than foreclosure property) that is held primarily for sale to
customers in the ordinary course of a trade or business. The net income from a
"prohibited transaction" is subject to a 100% tax. The Company owns real
property that is situated on the periphery of certain of the Properties. The
Company believes that this peripheral property is not held for sale to customers
and that the sale of such peripheral property is not in the ordinary course of
the Company's business. Whether property is held "primarily for sale to
customers in the ordinary course of its trade or business" depends, however, on
the facts and circumstances in effect from time to time, including those
relating to a particular property. As a result, no assurance can be given that
the Company can avoid being deemed to own property that the IRS later
characterizes as property held "primarily for sale to customers in the ordinary
course of its trade or business."

If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. These relief
provisions will be generally available if (i) the Company's failure to meet such
tests was due to reasonable cause and not due to willful neglect, (ii) the
Company attaches a schedule of the sources of its income to its return, and
(iii) any incorrect information on the schedule was not due to fraud with intent
to evade tax. It is not possible, however, to state whether in all circumstances
the Company would be entitled to the benefit of these relief provisions. For
example, if the Company fails to satisfy the gross income tests because
nonqualifying income that the Company intentionally earns exceeds the limits on
such income, the IRS could conclude that the Company's failure to satisfy the
tests was not due to reasonable cause. As discussed above in "Federal Income Tax
Considerations -- Taxation of the Company," even if these relief provisions
apply, a tax would be imposed with respect to the excess gross income.

Asset Tests

The Company, at the close of each quarter of its taxable year, must also
satisfy three tests relating to the nature of its assets.

- First, at least 75% of the value of the Company's total assets must be
represented by real estate assets (which for this purpose include
stock or debt instruments held for not more than one year purchased
with the proceeds of a stock offering or a long-term (at least five
years) debt offering of the Company), cash, cash items, and government
securities.

- Second, not more than 25% of the value of the Company's total assets
may be represented by securities other than those in the 75% asset
class.

- Third, of the investments included in the 25% asset class, the value
of any one issuer's securities owned by the Company may not exceed 5%
of the value of the Company's total assets, and the Company may not
own more than 10% of any one issuer's outstanding voting securities.

The Company believes that more than 75% of the value of its assets qualify
as "real estate assets."

After initially meeting the asset tests at the close of any quarter, the
Company will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset values.
If the failure to satisfy the asset tests results from an acquisition of
securities or other property during a quarter, the failure can be cured by a
disposition of sufficient nonqualifying assets within 30 days after the close of
that quarter. The Company believes that it maintains adequate records of the
value of its assets to ensure compliance with the asset tests and to enable the
Company to take such other action within 30 days

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<PAGE> 66

after the close of any quarter as may be required to cure any noncompliance.
There can be no assurance, however, that such other action will always be
successful.

Annual Distribution Requirements

In order to be treated as a REIT, the Company is required to make
distributions (other than capital gain distributions) to its shareholders in an
amount at least equal to (i) the sum of (a) 95% of the Company's "REIT taxable
income" (computed without regard to the distributions paid deduction and the
Company's net capital gain) and (b) 95% of the net income, if any, from
foreclosure property in excess of the special tax on income from foreclosure
property, minus (ii) the sum of certain items of noncash income.

To the extent that the Company does not distribute all of its net capital
gain or distributes at least 95% (but less than 100%) of its "REIT taxable
income," as adjusted, it will be subject to tax thereon at regular ordinary and
capital gains corporate tax rates.

Furthermore, if the Company fails to distribute during each calendar year
at least the sum of (a) 85% of its REIT ordinary income for such year, (b) 95%
of its REIT capital gain net income for such year, and (c) any undistributed
taxable income from prior periods, the Company will be subject to a 4% excise
tax on the excess of such required distribution over the amounts actually
distributed. The Company intends to make timely distributions sufficient to
satisfy this annual distribution requirement.

The Company's REIT taxable income consists substantially of rents from the
Properties. Currently the Company's REIT taxable income is less than its funds
available for distribution, due to the allowance of depreciation and other
non-cash charges in computing REIT taxable income. Accordingly, the Company
anticipates that it will generally have sufficient cash or liquid assets to
enable it to satisfy the 95% distribution requirement.

It is possible that, from time to time, the Company may not have sufficient
cash or other liquid assets to meet the 95% distribution requirement due to
timing differences between (i) the actual receipt of income and actual payment
of deductible expenses and (ii) the inclusion of such income and deduction of
such expenses in arriving at taxable income of the Company. In the event that
such an insufficiency or such timing differences occur, in order to meet the 95%
distribution requirement, the Company may find it necessary to arrange for
short-term, or possibly long-term, borrowings or to pay distributions in the
form of taxable stock distributions.

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

FAILURE TO QUALIFY

If the Company fails to qualify for taxation as a REIT in any taxable year,
the Company will be subject to tax (including any applicable alternative minimum
tax) on its taxable income at regular corporate rates. Distributions to
shareholders in any year in which the Company fails to qualify will not be
deductible by the Company nor will they be required to be made. In such event,
to the extent of current and accumulated earnings and profits, all distributions
to shareholders will be taxable as ordinary income, and subject to certain
limitations of the Code, corporate distributees may be eligible for the
distributions-received deduction (although special rules apply in the case of
any "extraordinary dividend" as defined in Code Section 1059). Unless entitled
to relief under specific statutory provisions, the Company will also be
disqualified from taxation as a REIT for the four taxable years following the
year during which qualification was lost. It is not possible to state whether in
all circumstances the Company would be entitled to such statutory relief. For
example, if the Company fails to satisfy the gross income tests because
nonqualifying income that the Company intentionally earns exceeds the limits on
such income, the IRS could conclude that the Company's failure to satisfy the

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tests was not due to reasonable cause. See "Federal Income Tax
Considerations -- Requirements for Qualification -- Income Tests."

TAXATION OF U.S. SHAREHOLDERS

As used in the following discussion, the term "U.S. Shareholder" means a
holder of Common Stock that (for United States Federal income tax purposes) (i)
is a citizen or resident of the United States, (ii) is a corporation,
partnership, or other entity created or organized in or under the laws of the
United States or of any political subdivision thereof, or (iii) is an estate or
trust the income of which is subject to United States Federal income taxation
regardless of its source. For any taxable year for which the Company qualifies
for taxation as a REIT, amounts distributed to taxable U.S. Shareholders will be
taxed as follows.

Distributions Generally

Distributions to U.S. Shareholders, other than capital gain distributions
discussed below, constitute distributions to such shareholders up to the amount
of the Company's current or accumulated earnings and profits and are taxable to
such shareholders as ordinary income. Such distributions are not eligible for
the distributions-received deduction for corporations. Under current law, the
maximum Federal income tax rate applicable to ordinary income of individuals is
39.6% and applicable to corporations is 35%. To the extent that the Company
makes distributions in excess of its current or accumulated earnings and
profits, such distributions will first be treated as a tax-free return of
capital, reducing the tax basis in the U.S. Shareholders' Common Stock, and
distributions in excess of the U.S. Shareholders' tax basis in their respective
Common Stock are taxable as gain realized from the sale of such shares. A
dividend declared by the Company in October, November, or December of any year
payable to a shareholder of record on a specified date in any such month is
treated as both paid by the Company and received by the shareholder on December
31 of such year, provided that the dividend is actually paid by the Company
during January of the following calendar year. Shareholders may not include on
their own income tax returns any tax losses of the Company. Pursuant to
Regulations to be promulgated by the Treasury, a portion of the Company's
distributions may be subject to the alternative minimum tax to the extent of the
Company's items of tax preference, if any, allocated to the shareholders.

The Company will be treated as having sufficient earnings and profits to
treat as a dividend any distribution by the Company up to the amount required to
be distributed in order to avoid imposition of the 4% excise tax discussed in
"Federal Income Tax Considerations -- Taxation of the Company" above. As a
result, U.S. Shareholders may be required to treat certain distributions that
would otherwise result in a tax-free return of capital as taxable distributions.
Moreover, any "deficiency dividend" will be treated as a "dividend" (an ordinary
dividend or a capital gain dividend, as the case may be), regardless of the
Company's earnings and profits.

Capital Gain Distributions

A dividend paid to a U.S. Shareholder that is properly designated by the
Company as a capital gain dividend will be treated as long-term capital gain to
the extent it does not exceed the Company's actual net capital gain for the
taxable year without regard to the period for which the shareholder has held his
Common Stock; however, corporate shareholders may be required to treat up to 20%
of certain capital gains distributions as ordinary income. Capital gain
distributions are not eligible for the distributions-received deduction for
corporations.

Pursuant to the 1997 Act, a REIT may elect to require its shareholders to
include the REIT's undistributed net capital gains in their income. If the REIT
makes such an election, the REIT's shareholders will include in their income as
long-term capital gain their proportionate share of the undistributed net long-
term capital gains and will receive a credit or refund for their proportionate
share of the tax paid by the REIT on such undistributed capital gains as well as
an increase in basis for the amount of capital gain so included in their income
reduced by the amount of the credit or refund. The 1997 Act, however, did not
change the 4% excise tax imposed upon a failure to make required distributions.
See "Federal Income Tax Considerations -- Requirements for
Qualification -- Annual Distribution Requirements."
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<PAGE> 68

The 1997 Act significantly changed the taxation of capital gains by
taxpayers who are individuals, estates, or trusts. Subject to certain
exceptions, the maximum rate for individuals, trusts, and estates on gain from
the sale or exchange of assets held for more than 18 months has been reduced to
20%. The maximum rate has been reduced to 18% for assets acquired after December
31, 2000 and held for more than five years. The maximum capital gains rate for
capital assets held for more than one year but not more than 18 months remains
at 28%. The maximum rate for net capital gains attributable to the sale of
depreciable real property held for more than 18 months is 25% to the extent of
the deductions for depreciation with respect to such property. With respect to
any depreciable real property held for more than one year but not more than 18
months, depreciation deductions claimed in excess of the depreciation that would
have been allowed if computed on a straight-line basis will be taxed at the
rates applicable to ordinary income with the remaining gain being taxed at a
maximum rate of 28%.

On November 10, 1997, the IRS issued IRS Notice 97-64, which provides
generally that the Company may classify portions of its designated capital gain
distributions as (i) subject to the 20% rate, (ii) an unrecaptured Section 1250
gain distribution (which would be taxed as long-term capital gain at the 25%
rate), or (iii) subject to the 28% rate. If no designation is made, the entire
designated capital gain dividend will be subject to the 28% rate. IRS Notice
97-64 provides that a REIT must determine the maximum amount that it may
designate as distributions subject to the 20% and 25% rates by performing the
computation required by the Code as if the REIT were an individual whose
ordinary income were subject to a marginal tax rate of at least 28%. The Notice
further provides that designations made by the REIT will only be effective to
the extent that they comply with Revenue Ruling 89-81, which requires that
distributions made to different classes of shares not be composed
disproportionately of distributions of a particular type.

Passive Activity Loss and Investment Interest Limitations

Distributions from the Company and gain from the disposition of Common
Stock will not be treated as passive activity income, and therefore, U.S.
Shareholders generally will not be able to apply any "passive losses" against
such income. Distributions from the Company (to the extent they do not
constitute a return of capital) and gain from the disposition of shares
generally may be treated as investment income for purposes of the investment
interest limitation.

Certain Dispositions of Common Stock

A U.S. Shareholder will recognize gain or loss on the sale or exchange of
Common Stock to the extent of the difference between the amount realized on such
sale or exchange and the shareholder's tax basis in such Common Stock. Such gain
or loss generally will constitute long-term capital gain or loss if the
shareholder has held such shares for more than one year. Losses incurred on the
sale or exchange of Common Stock held for 180 days or less (after applying
certain holding period rules), however, will generally be deemed long-term
capital loss to the extent of any long-term capital gain distributions received
by the U.S. Shareholder with respect to such Common Stock. For a discussion of
the tax rates imposed on capital gains see "Federal Income Tax
Considerations -- Taxation of U.S. Shareholders -- Capital Gain Distributions."

Treatment of Tax-Exempt Shareholders

Distributions from the Company to a tax-exempt employee's pension trust or
other domestic tax-exempt shareholder will not constitute "unrelated business
taxable income" ("UBTI") unless such shareholder has borrowed to acquire or
carry the Common Stock or the Company is a "pension-held REIT," as discussed
below.

Qualified trusts that hold more than 10% (by value) of the shares of
certain REITs ("pension-held REITS") may be required to treat a certain
percentage of such a REIT's distributions as UBTI. This requirement will apply
only if (i) the REIT would not qualify as such for Federal income tax purposes
but for the application of a "look-through" exception to the five-or-fewer
requirement applicable to shares held by qualified trusts and (ii) the REIT is
"predominantly held" by qualified trusts. A REIT is predominantly held if either
(i) a single qualified trust holds more than 25% by value of the REIT interests
or (ii) one or more

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qualified trusts, each owning more than 10% by value of the REIT interests, hold
in the aggregate more than 50% of the REIT interests. The percentage of any REIT
dividend treated as UBTI is equal to the ratio of (a) the UBTI earned by the
REIT (treating the REIT as if it were a qualified trust and therefore subject to
tax on UBTI) to (b) the total gross income (less certain associated expenses) of
the REIT. A de minimis exception applies when the ratio set forth in the
preceding sentence is less than 5% for any year. For these purposes, a qualified
trust is any trust described in section 401(a) of the Code and exempt from tax
under section 501(a) of the Code. The provisions requiring qualified trusts to
treat a portion of REIT distributions as UBTI will not apply if the REIT is able
to satisfy the five-or-fewer requirement without relying upon the "look-through"
exception. The Company believes that it is not a "pension-held REIT." No
assurance can be given, however, that the Company will not become a pension-held
REIT in the future.

SPECIAL TAX CONSIDERATIONS FOR FOREIGN SHAREHOLDERS

The rules governing United States Federal income taxation of nonresident
alien individuals, foreign corporations, foreign partnerships, and foreign
trusts and estates (collectively, "Non-U.S. Shareholders") are complex, and the
following discussion is intended only as a summary of such rules. Prospective
Non-U.S. Shareholders should consult with their own tax advisors to determine
the impact of Federal, state, and local income tax laws on an investment in the
Company, including any reporting requirements.

In general, a Non-U.S. Shareholder will be subject to regular United States
income tax with respect to its investment in the Company if such investment is
"effectively connected" with the Non-U.S. Shareholder's conduct of a trade or
business in the United States. A corporate Non-U.S. Shareholder that receives
income that is (or is treated as) effectively connected with a U.S. trade or
business may also be subject to the branch profits tax under Section 884 of the
Code, which is payable in addition to regular United States corporate income
tax. The following discussion will apply to Non-U.S. Shareholders whose
investment in the Company is not so effectively connected.

A distribution by the Company that is not attributable to gain from the
sale or exchange by the Company of a United States real property interest and
that is not designated by the Company as a capital gain dividend will be treated
as an ordinary income dividend to the extent made out of current or accumulated
earnings and profits. Generally, any ordinary income dividend will be subject to
a United States withholding tax equal to 30% of the gross amount of the dividend
unless such tax is reduced by an applicable tax treaty. Such a distribution of
cash in excess of the Company's earnings and profits will be treated first as a
return of capital that will reduce a Non-U.S. Shareholder's basis in its Common
Stock (but not below zero) and then as gain from the disposition of such Common
Stock, the tax treatment of which is described under the rules discussed below
with respect to disposition of Common Stock.

Distributions by the Company that are attributable to gain from the sale or
exchange of a United States real property interest will be taxed to a Non-U.S.
Shareholder under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, such distributions are taxed to a Non-U.S. Shareholder
as if such distributions were gains "effectively connected" with a United States
trade or business. Accordingly, a Non-U.S. Shareholder will be taxed at the
normal capital gain rates applicable to a U.S. Shareholder (subject to any
applicable alternative minimum tax and a special alternative minimum tax in the
case of nonresident alien individuals). Distributions subject to FIRPTA may be
subject to a 30% branch profits tax in the hands of a foreign corporate
shareholder that is not entitled to treaty exemption.

The Company will be required to withhold from distributions to Non-U.S.
Shareholders, and remit to the IRS, (i) 35% of designated capital gain
distributions (or, if greater, 35% of the amount of any distributions that could
be designated as capital gain distributions) and (ii) 30% of ordinary
distributions paid out of earnings and profits. In addition, if the Company
designates prior distributions as capital gain distributions, subsequent
distributions, up to the amount of such prior distributions, will be treated as
capital gain distributions for purposes of withholding. A distribution in excess
of the Company's earnings and profits may be subject to 30% dividend withholding
if at the time of the distribution it cannot be determined whether the
distribution will be in an amount in excess of the Company's current and
accumulated earnings and profits. Tax treaties may reduce the Company's
withholding obligations. If the amount withheld by the Company with

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respect to a distribution to a Non-U.S. Shareholder exceeds such shareholder's
United States tax liability with respect to such distribution (as determined
under the rules described in the two preceding paragraphs), the Non-U.S.
Shareholder may file for a refund of such excess from the IRS. It should be
noted that the 35% withholding tax rate on capital gain distributions currently
corresponds to the maximum income tax rate applicable to corporations, but is
higher than the 28% maximum rate on capital gains of individuals.

Unless the Common Stock constitutes a "United States real property
interest" within the meaning of FIRPTA, the sale of Common Stock by a Non-U.S.
Shareholder generally will not be subject to United States taxation. The Common
Stock will not constitute a United States real property interest if the Company
is a "domestically controlled REIT." A domestically controlled REIT is a REIT in
which at all times during a specified testing period less than 50% in value of
its shares is held directly or indirectly by Non-U.S. Shareholders. Currently,
the Company believes that it is a domestically controlled REIT, and therefore
the sale of Common Stock is not subject to taxation under FIRPTA. Because the
Common Stock is publicly traded, however, no assurance can be given that the
Company will continue to be a domestically controlled REIT. If the Company does
not constitute a domestically controlled REIT, whether a Non-U.S. Shareholder's
sale of Common Stock would be subject to tax under FIRPTA as a sale of a United
States real property interest would depend on whether the shares were "regularly
traded" (as defined by applicable Treasury Regulations) on an established
securities market (e.g., the New York Stock Exchange) and on the size of the
selling shareholder's interest in the Company.

If the gain on the sale of the Common Stock were subject to taxation under
FIRPTA, the Non-U.S. Shareholder would be subject to the same treatment as a
U.S. Shareholder with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals). In any event, a purchaser of Common Stock from a Non-U.S.
Shareholder will not be required under FIRPTA to withhold on the purchase price
if the purchased Common Stock is "regularly traded" on an established securities
market or if the Company is a domestically controlled REIT. Otherwise, under
FIRPTA the purchaser of Common Stock may be required to withhold 10% of the
purchase price and remit such amount to the IRS, and the Company may be required
to withhold 10% of certain distributions to Non-U.S. Shareholders.
Notwithstanding the foregoing, capital gain not subject to FIRPTA will be
taxable to a Non-U.S. Shareholder if the Non-U.S. Shareholder is a nonresident
alien individual who is present in the United States for 183 days or more during
the taxable year and certain other conditions apply, in which case the
nonresident alien individual will be subject to a 30% tax on such individual's
capital gains.

INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX

Under certain circumstances, U.S. Shareholders of Common Stock may be
subject to backup withholding at a rate of 31% on payments made with respect to,
or cash proceeds of a sale or exchange of, Common Stock. Backup withholding will
apply only if the holder (i) fails to furnish its taxpayer identification number
("TIN") (which, for an individual, would be his social security number), (ii)
furnishes an incorrect TIN, (iii) is notified by the IRS that it has failed
properly to report payments of interest and distributions, or (iv) under certain
circumstances, fails to certify, under penalty of perjury, that it has furnished
a correct TIN and has not been notified by the IRS that it is subject to backup
withholding for failure to report interest and dividend payments. Backup
withholding will not apply with respect to payments made to certain exempt
recipients, such as corporations and tax-exempt organizations. U.S. Shareholders
should consult their own tax advisors regarding their qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption. Backup withholding is not an additional tax. Rather, the amount of
any backup withholding with respect to a payment to a U.S. Shareholder will be
allowed as a credit against such U.S. Shareholder's United States Federal income
tax liability and may entitle such U.S. Shareholder to a refund, provided that
the required information is furnished to the IRS.

Additional issues may arise pertaining to information reporting and backup
withholding with respect to Non-U.S. Shareholders, and Non-U.S. Shareholders
should consult their tax advisors with respect to any such information reporting
and backup withholding requirements. Backup withholding with respect to Non-U.S.
Shareholders is not an additional tax. Rather, the amount of any backup
withholding with respect to a payment to a Non-U.S. Shareholder will be allowed
as a credit against any United States Federal income tax
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liability of such Non-U.S. Shareholder. If withholding results in an overpayment
of taxes, a refund may be obtained, provided that the required information is
furnished to the IRS.

STATE AND LOCAL TAXES

The Company is, and its shareholders may be, subject to state, local, or
other taxation in various state, local, or other jurisdictions, including those
in which they transact business or reside. The tax treatment in such
jurisdictions may differ from the Federal income tax consequences discussed
above. Consequently, prospective shareholders should consult their own tax
advisors regarding the effect of state and local tax laws on their investment in
the Company.

ERISA CONSIDERATIONS

The following is a summary of material considerations arising under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the
prohibited transaction provisions of Section 4975 of the Code that may be
relevant to prospective investors. This discussion does not purport to deal with
all aspects of ERISA or the Code that may be relevant to particular investors in
light of their particular circumstances. A PROSPECTIVE INVESTOR THAT IS AN
EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA, A TAX QUALIFIED RETIREMENT PLAN, AN IRA
OR A GOVERNMENTAL, CHURCH OR OTHER PLAN THAT IS EXEMPT FROM ERISA IS ADVISED TO
CONSULT ITS OWN LEGAL ADVISOR REGARDING THE SPECIFIC CONSIDERATIONS ARISING
UNDER APPLICABLE PROVISIONS OF ERISA, THE CODE AND STATE LAW WITH RESPECT TO THE
PURCHASE, OWNERSHIP, OR SALE OF THE SHARES BY SUCH PLAN OR IRA.

FIDUCIARY DUTIES AND PROHIBITED TRANSACTIONS

A fiduciary of a pension, profit-sharing, retirement, or other employee
benefit plan subject to ERISA (an "ERISA Plan") should consider the fiduciary
standards under ERISA in the context of the ERISA Plan's particular
circumstances before authorizing an investment of any portion of the ERISA
Plan's assets in the Shares. Accordingly, such fiduciary should consider (i)
whether the investment satisfies the diversification requirements of Section
404(a)(1)(C) of ERISA; (ii) whether the investment is in accordance with the
documents and instruments governing the ERISA Plan as required by Section
404(a)(1)(D) of ERISA; (iii) whether the investment is prudent under Section
404(a)(1)(B) of ERISA; and (iv) whether the investment is solely in the
interests of the ERISA Plan participants and beneficiaries and for the exclusive
purpose of providing benefits to the ERISA Plan participants and beneficiaries
and defraying reasonable administrative expenses of the ERISA Plan as required
by Section 404(a)(1)(A) of ERISA.

In addition to the imposition of fiduciary standards, ERISA and Section
4975 of the Code prohibit a wide range of transactions between an ERISA Plan, an
IRA or certain other plans (collectively, a "Plan") and persons who have certain
specified relationships to the Plan ("parties in interest" within the meaning of
ERISA and "disqualified persons" within the meaning of the Code). Thus, a Plan
fiduciary or person making an investment decision for a Plan also should
consider whether the acquisition or the continued holding of the Shares might
constitute or give rise to a direct or indirect prohibited transaction.

PLAN ASSETS

The prohibited transaction rules of ERISA and the Code apply to
transactions with a Plan and also to transactions with the "plan assets" of a
Plan. The "plan assets" of a Plan include the Plan's interest in an entity in
which the Plan invests and, in certain circumstances, the assets of the entity
in which the Plan holds such interest. The term "plan assets" is not
specifically defined in ERISA or the Code, nor, as of the date hereof, has it
been interpreted definitively by the courts in litigation. On November 13, 1986,
the United States Department of Labor, the governmental agency primarily
responsible for administering ERISA, adopted a final regulation (the "DOL
Regulation") establishing the standards it will apply in determining whether an
equity investment in an entity will cause the assets of such entity to
constitute "plan assets." The DOL Regulation applies for purposes of both ERISA
and Section 4975 of the Code.
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<PAGE> 72

Under the DOL Regulation, if a Plan acquires an equity interest in an
entity, which equity interest is not a "publicly-offered security," and equity
participation by Plan investors is "significant" as defined in the DOL
Regulation, the Plan's assets generally would include both the equity interest
and an undivided interest in each of the entity's underlying assets unless
certain specified exceptions apply. The DOL Regulation defines a
publicly-offered security as a security that is "widely held," "freely
transferable," and either part of a class of securities registered under Section
12(b) or 12(g) of the Exchange Act or sold pursuant to an effective registration
statement under the Securities Act (provided the securities are registered under
the Exchange Act within 120 days after the end of the fiscal year of the issuer
during which the offering occurred). The Shares offered by this Prospectus are
being sold in an offering registered under the Securities Act and are registered
under Section 12(b) of the Exchange Act.

The DOL Regulation provides that a security is "widely held" only if it is
part of a class of securities that is owned by 100 or more investors independent
of the issuer and of one another. A class of securities will not fail to be
"widely held," however, solely because the number of independent investors falls
below 100 subsequent to an initial public offering as a result of events beyond
the issuer's control. The Company believes that the Shares are "widely held" for
purposes of the DOL Regulation.

The DOL Regulation provides that whether a security is "freely
transferable" is a factual question to be determined on the basis of all the
relevant facts and circumstances. The DOL Regulation further provides that when
a security is part of an offering in which the minimum investment is $10,000 or
less, as will be the case with this Offering, certain restrictions ordinarily
will not affect, alone or in combination, the finding that such securities are
freely transferable. The Company believes that the restrictions imposed under
the Articles on the transfer of the Shares are limited to restrictions on
transfer generally permitted under the DOL Regulation and are not likely to
result in the failure of the Shares to be "freely transferable." See
"Restrictions on Transfer." The DOL Regulation only establishes a presumption in
favor of a finding of free transferability; therefore, no assurance can be given
that the Department of Labor or the Treasury Department would not reach a
contrary conclusion with respect to the Shares.

Assuming that the Shares will be "widely held" and "freely transferable,"
the Company believes that the Shares will be publicly-offered securities for
purposes of the DOL Regulation and that the assets of the Company will not be
deemed to be "plan assets" of any Plan that invests in the Shares.

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UNDERWRITING

Under the terms and subject to the conditions contained in the Underwriting
Agreement, the Underwriters named below, for whom Roney Capital Markets and
First of Michigan Corporation are acting as the representatives (the
"Representatives"), have severally agreed, subject to the terms and conditions
of the Underwriting Agreement, to purchase, and the Company has agreed to sell
to them severally, the respective number of Shares set forth opposite their
names below:

<TABLE>
<CAPTION>
NUMBER OF SHARES
TO BE PURCHASED
----------------
<S> <C>
Roney Capital Markets ......................................
First of Michigan Corporation...............................
---------
Total.................................................. 1,500,000
=========
</TABLE>

Roney Capital Markets is a division of First Chicago Capital Markets, Inc.,
an indirect, wholly-owned subsidiary of First Chicago NBD Corporation, which
owns NBD Bank, a lender to the Company.

The Representatives have advised the Company that they propose initially to
offer the Shares directly to the public at the public offering price set forth
on the cover page of this Prospectus, and to certain dealers at such price less
a concession not in excess of $ per share. The Underwriters may allow,
and such dealers may reallow, a discount not in excess of $ per share to
certain other dealers. After the public offering of the Shares, the public
offering price, concession, and discount may be changed by the Representatives.

The Company has granted the Underwriters an option, exercisable within 30
days from the date of this Prospectus, to purchase up to an additional 225,000
shares of Common Stock at the same price per share as the 1,500,000 shares of
Common Stock offered to the public hereby, less underwriting discounts and
commissions. The Underwriters may exercise the option only for the purpose of
covering over-allotments, if any, made in connection with the distribution of
the Shares.

The Company has agreed that, until 180 days after the date of this
Prospectus, it will not, without the prior written consent of the
Representatives, sell, offer to sell, issue, distribute or otherwise dispose of
any Common Stock or any securities or interests convertible into or exercisable
or exchangeable for shares of Common Stock or register for sale under the
Securities Act of 1933, as amended, any shares of Common Stock, except for the
Shares offered hereby, the shares of Common Stock issuable upon conversion of
the debentures and notes, the shares of Common Stock issuable upon the exercise
of options granted under the employee and director stock option plans, and
shares available pursuant to the warrants issued in connection with the IPO.

Anthony S. Gramer, Michael K. Kaline and Elliott J. Broderick have also
agreed with the Underwriters not to offer to sell, sell, contract to sell, grant
any option to purchase, pledge, hypothecate or otherwise dispose of any shares
of Common Stock for a period of 180 days after the date of this Prospectus
without the prior written consent of the Representatives.

Pursuant to the Underwriting Agreement, the Company has agreed to indemnify
the Underwriters against certain civil liabilities, including liabilities under
the Securities Act of 1933, as amended, or to contribute to payments the
Underwriters may be required to make in respect thereof.

In order to facilitate the offering of the Shares, the Underwriters may
engage in transactions that stabilize, maintain, or otherwise affect the price
of the Shares. Specifically, the Underwriters may over-allot in connection with
this offering, creating a short position in the Shares for their own account. In
addition, to cover over-allotments or to stabilize the price of the Shares, the
Underwriters may bid for, and purchase, the Shares in the open market. Finally,
the underwriting syndicate may reclaim selling concessions allowed to an
underwriter or a dealer for distributing the Shares in this offering, if the
syndicate repurchases previously distributed Shares in transactions to cover the
syndicate short positions, in stabilization transactions, or otherwise. Any of
these activities may stabilize or maintain the market price of the Shares above
independent

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<PAGE> 74

market levels. The Underwriters are not required to engage in these activities,
and may end any of these activities at any time.

In the ordinary course of business, the Underwriters and their affiliates
may in the future perform investment banking and consulting services for the
Company.

LEGAL MATTERS

The validity of the Shares offered by this Prospectus, as well as certain
legal matters, will be passed upon for the Company by Miro Weiner & Kramer, 500
N. Woodward Avenue, Suite 100, Bloomfield Hills, Michigan 48304. Certain legal
matters for the Underwriters will be passed upon by Honigman Miller Schwartz and
Cohn. Kenneth H. Gold, a senior member of Miro Weiner & Kramer, is the Secretary
of the Company.

EXPERTS

The consolidated financial statements of Malan Realty Investors, Inc. as of
December 31, 1997 and 1996 and for each of the three years in the period ended
December 31, 1997 included and incorporated by reference in this Prospectus, and
the related consolidated financial statement schedule incorporated by reference
in this Prospectus, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports, which are included and incorporated by
reference herein, and have been so included and incorporated in reliance upon
the reports of such firm given upon their authority as experts in accounting and
auditing.

The combined statement of revenues and certain expenses of the Midwest
Shopping Center Retail Portfolio for the year ended December 31, 1997, included
in this Prospectus, has been audited by Katz, Sapper & Miller, LLP, independent
auditors, as stated in their report, appearing herein, and has been so included
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.

AVAILABLE INFORMATION

The Company has filed a Registration Statement on Form S-2 (together with
all amendments and exhibits thereto, the "Registration Statement") under the
Securities Act. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement and the exhibits
filed as part thereof. Statements contained herein are qualified in their
entirety by reference to the Registration Statement and such exhibits.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
reports, proxy statements, and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements, and
other information filed by the Company with the Commission can be inspected and
copied at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
regional offices of the Commission: 7 World Trade Center, Suite 1300, New York,
New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material can also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, the Company's Common Stock is traded on the NYSE
under the symbol "MAL." These reports, proxy statements, and other information
filed by the Company can also be inspected at the NYSE's offices at 20 Broad
Street, New York, New York 10005.

The Commission maintains a World Wide Web Site (http://www.sec.gov) that
contains such material regarding issuers that file electronically with the
Commission. The Registration Statement has been so filed and may be obtained at
such site. Any statements contained in this Prospectus concerning the provisions
of any document are not necessarily complete, and in each instance, reference is
made to the copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference.
72
<PAGE> 75

INCORPORATION BY REFERENCE

The Company's Annual Report on Form 10-K for the year ended December 31,
1997, and the Quarterly Report on Form 10-Q for the quarterly period ended March
31, 1998 are hereby incorporated by reference.

All documents filed by the Company pursuant to Sections 13(a), 13(c), 14,
or 15(d) of the Exchange Act (including any documents incorporated by reference
in such documents) after the date of this Prospectus and prior to the
termination of the offering of the Shares offered by this Prospectus shall be
deemed to be incorporated by reference in this Prospectus and to be a part of
this Prospectus from the date of filing such documents.

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

The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, upon the written or oral request of any such
person, a copy of any or all of the documents incorporated by reference in this
Prospectus (other than exhibits to such documents that are not specifically
incorporated by reference in such documents). Written or oral requests for
copies should be directed to Malan Realty Investors, Inc., 30200 Telegraph Road,
Suite 105, Birmingham, Michigan 48025-4503, Attention: Chief Accounting Officer
(telephone: (248) 644-7110).

73
<PAGE> 76

GLOSSARY

Unless the context otherwise requires, the following capitalized terms
shall have the meanings set forth below for the purposes of this Prospectus:

"1997 Act" means The Taxpayer Relief Act of 1997.

"Agreement" means the 1995 agreement between Kmart and the Company.

"Annualized Base Rent" means the monthly rent as of the specified date,
multiplied by 12, but excluding from the monthly rent (i) percentage rents, (ii)
additional rent payable by tenants such as common area maintenance, real estate
taxes and other expense reimbursements and (iii) future contractual rent
increases.

"Articles" means the Company's Amended and Restated Articles of
Incorporation.

"Asset Tests" means, under the DOL Regulation's guidelines for an entity to
qualify as a real estate operating company, the requirement that on certain
specified valuation dates, at least 50% of its assets (valued at cost and
excluding certain short-term investments) be invested in real estate which is
managed or developed and with respect to which such entity has the right to
substantially participate directly in the management or development activities.

"By-Laws" means the Company's By-Laws, as amended.

"Built-in Gain" means the difference between the fair market value and the
adjusted basis of an asset subject to the Built-in-Gain Rules as determined by
the Company with the advice of counsel.

"Built-in-Gain Rules" has the meaning ascribed to it under the caption
"Federal Income Tax Considerations -- Taxation of the Company."

"Cinemark" means Cinemark USA.

"Clinton Pointe" means the Clinton Pointe Shopping Center.

"Code" means the Internal Revenue Code of 1986, as amended.

"Commission" means the United States Securities and Exchange Commission.

"Common Stock" means the Common Stock of the Company.

"Company" means Malan Realty Investors, Inc., a Michigan corporation.

"Daiwa" means Daiwa Finance Corporation.

"DOL" means the United States Department of Labor.

"DOL Regulation" means a regulation, issued by the DOL, defining "plan
assets."

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

"ERISA Plan" means a pension, profit-sharing, or other employee benefit
plan subject to Title I of ERISA.

"Excess Stock" means shares owned, or deemed to be owned, or transferred to
a shareholder in excess of the Ownership Limit.

"Fairlane Meadows" means The Shops at Fairlane Meadows.

"FIRPTA" means the Foreign Investment in Real Property Act of 1980.

"Funds From Operations" means net income (computed in accordance with
generally accepted accounting principals), excluding gains (or losses) from
sales of property, adjusted for certain non-cash items, primarily depreciation,
amortization and minority partners' interest.

"GLA" means gross leasable area.

"Greenwich" means Greenwich Capital Markets, Inc., a division of National
Westminster Bank Plc.
74
<PAGE> 77

"Greenwich Capital Line" means the Company's Secured Line of Credit with
Greenwich.

"Independent Directors" means the directors of the Company who are
unaffiliated with the Company.

"IPO" means the Company's initial public offering in June 1994.

"IRA" means an individual retirement account.

"IRS" means the United States Internal Revenue Service.

"Kmart" means Kmart Corporation.

"LIBOR" means the London Interbank Offered Rate.

"Malan (Predecessor)" as used in the financial and operating data, means a
combination of the then existing real estate management operations of the
Company, prior to the acquisition of the Properties, and the principal real
estate properties of Bricktown Square Associates (i.e., Bricktown).

"MBCA" means the Michigan Business Corporation Act.

"Midwest Acquisition" means the acquisition of the Midwest Shopping Center
Retail Portfolio.

"Midwest Shopping Center Retail Portfolio" means the 12 Properties acquired
in the Sandor Acquisition plus the property located in Decatur, Illinois,
acquired pursuant to the Sandor Acquisition purchase agreement (the purchase of
which is expected to close in November 1998).

"NAREIT" means the National Association of Real Estate Investment Trusts.

"Non-U.S. Shareholders" means non-resident alien individuals, foreign
corporations, foreign partnerships and foreign trusts and estates.

"Note Holder" means Merrill Lynch Global Allocation Fund, Inc., a Maryland
corporation, and any Person to whom a Note Holder transfers Beneficial Interest
of Common Stock provided that (i) such transferee is a look through entity, (ii)
the result of such transfer would be to cause the transferee to beneficially own
or constructively own shares of Common Stock in excess of the greater of the
Ownership Limit or any pre-existing Note Holder Limit with respect to such
transferee (such excess being herein referred to as the "Excess Percentage") and
(iii) the transferor Note Holder, by notice to the Corporation in connection
with such transfer, designates such transferee as a successor Note Holder (it
being understood that, upon any such transfer, the Note Holder Limit for the
transferor Note Holder shall be reduced by the Excess Percentage (as defined in
the Articles) and the applicable Ownership Limit or Note Holder Limit for the
transferee Note Holder shall be increased by such Excess Percentage).

"Note Holder Limit" means 40% of the outstanding Common Stock of the
Company.

"Offering" means the offering of the Shares pursuant to this Prospectus.

"Ownership Limit" means the limit on direct or constructive ownership by
any shareholder of more than 9.9% in value of the outstanding Common Stock of
the Company.

"Preferred Stock" means the Preferred Stock of the Company.

"Prohibited UBTI Service Income" means services that would give rise to
UBTI.

"Properties" means the 66 income producing properties owned by the Company.

"Prospectus" means this Prospectus relating to the sale of 1,500,000 shares
of Common Stock of the Company in the Offering, plus the 225,000 shares subject
to the Underwriters' over-allotment.

"Recognition Period" means the recognition period pertaining to
Built-in-Gain as defined pursuant to Regulations to be issued under Section
337(d) of the Code.

"REIT" means a real estate investment trust as defined pursuant to Sections
856 through 860 of the Code.

75
<PAGE> 78

"REIT Requirements" means the requirements for qualifying as a REIT under
the Code and Treasury Regulations.

"Related Party Tenant" means a tenant that is owned, directly or
constructively, by a REIT or an owner of 10% or more of a REIT.

"Sandor Acquisition" means the acquisition of 12 Properties from the Sandor
Development Company, as agent for various related entities, for $29.47 million.

"Securities Act" means the Securities Act of 1933, as amended from time to
time.

"Securitized Mortgage Loan" means the Company's outstanding $63 million
loan under a real estate mortgage conduct.

"Shares" means the shares of Common Stock being offered by this Prospectus.

"TIN" means Taxpayer Identification Number.

"Ten Percent Stockholder" means each individual or entity which owns,
either directly or through related individuals and entities under the applicable
attribution rules of the Code, 10% or more of the Company's outstanding shares
of Common Stock.

"Treasury Regulations" means the Income Tax Regulations promulgated under
the Code.

"UBTI" means unrelated business taxable income as defined in Section 512(a)
of the Code.

"Underwriters" means the underwriters set forth under the caption
"Underwriting" in this Prospectus.

"Underwriting Agreement" means the Underwriting Agreement between the
Company and the Underwriters.

"Wal-Mart" means Wal-Mart Corporation.

"Westland Acquisition" means the acquisition of the community shopping
center located in Westland, Michigan for $7.925 million.

76
<PAGE> 79

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
MALAN REALTY INVESTORS, INC.
Pro Forma Condensed Consolidated Financial Information:
Pro Forma Condensed Consolidated Balance Sheet
(Unaudited)............................................ F-2
Pro Forma Condensed Consolidated Statement of Operations
for the Three Months Ended March 31, 1998
(Unaudited)............................................ F-3
Pro Forma Condensed Consolidated Statement of Operations
for the Year Ended December 31, 1997 (Unaudited)....... F-4
Consolidated Financial Statements
Independent Auditors' Report of Deloitte & Touche LLP..... F-5
Consolidated Balance Sheets as of December 31, 1997 and
1996 (Audited) and as of March 31, 1998 (Unaudited).... F-6
Consolidated Statements of Operations for Each of the
Three Years in the Period Ended December 31, 1997
(Audited), and for the Three Months Ended March 31,
1998 and 1997
(Unaudited)............................................ F-7
Consolidated Statements of Shareholders' Equity for Each
of the Three Years in the Period Ended December 31,
1997 (Audited), and for the Three Months Ended March
31, 1998 (Unaudited)................................... F-8
Consolidated Statements of Cash Flows for Each of the
Three Years in the Period Ended December 31, 1997
(Audited), and for the Three Months Ended March 31,
1998 and 1997 (Unaudited).............................. F-9
Notes to Consolidated Financial Statements................ F-10
SANDOR COMMUNITY SHOPPING CENTERS
Combined Financial Statements:
Independent Auditors' Report of Katz, Sapper & Miller,
LLP.................................................... F-21
Midwest Shopping Center Retail Portfolio Combined
Statements of Revenue and Certain Expenses as of
December 31, 1997 (Audited) and March 31, 1998
(Unaudited)............................................ F-22
Midwest Shopping Center Retail Portfolio Note to Combined
Statements of Revenues and Certain Expenses as of
December 31, 1997 (Audited) and March 31, 1998
(Unaudited)............................................ F-23
</TABLE>

F-1
<PAGE> 80

MALAN REALTY INVESTORS, INC.

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
(UNAUDITED)

The unaudited Pro Forma Condensed Consolidated Balance Sheet is presented
as if Malan Realty Investors, Inc. (the "Company") had acquired the Midwest
Shopping Center Retail Portfolio (the "Midwest Acquisition") and had completed
the Offering and related transactions on March 31, 1998. The Midwest Shopping
Center Retail Portfolio consists of the 12 properties acquired in the Sandor
Acquisition and an additional community shopping center in Decatur, Illinois.
Such statement should be read in conjunction with all the financial statements
and notes thereto contained elsewhere in this Prospectus. In management's
opinion, all adjustments necessary to reflect the acquisition and the Offering
and related transactions have been made.

The unaudited Pro Forma Condensed Consolidated Balance Sheet is not
necessarily indicative of what the actual financial position of the Company
would have been assuming the acquisition and the Offering and related
transactions had been completed on March 31, 1998, nor does it purport to
represent the future financial position of the Company.

<TABLE>
<CAPTION>
THE COMPANY
THE COMPANY MIDWEST THE -----------
HISTORICAL(A) ACQUISITION OFFERING PRO FORMA
------------- ----------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Real estate, net......................... $206,625 $33,700(b) $240,325
Accounts receivable, net................. 2,505 2,505
Deferred financing and other............. 11,876 11,876
Cash and cash equivalents................ 1,585 $ 24,957(c) 6,492
(20,050)(d)
Escrow deposits.......................... 2,014 2,014
-------- ------- -------- --------
Total Assets.......................... $224,605 $33,700 $ 4,907 $263,212
======== ======= ======== ========
LIABILITIES
Mortgages................................ $ 98,739 $33,700(b) $(20,050)(d) $112,389
Convertible debentures................... 55,484 55,484
Convertible notes........................ 27,000 27,000
Deferred income.......................... 2,150 2,150
Accrued distributions payable............ 1,620 1,620
Accounts payable and other............... 1,491 1,491
Accrued property taxes................... 2,045 2,045
Accrued interest payable................. 2,255 2,255
-------- ------- -------- --------
Total Liabilities..................... 190,784 33,700 (20,050) 204,434
-------- ------- -------- --------
STOCKHOLDERS' EQUITY
Common stock............................. 38 15(c) 53
Additional paid in capital............... 51,684 24,942(c) 76,626
Accumulated distributions in excess of
net income............................ (17,901) (17,901)
-------- ------- -------- --------
Total shareholders' equity............ 33,821 0 24,957 58,778
-------- ------- -------- --------
Total Liabilities and Shareholders'
Equity................................ $224,605 $33,700 $ 4,907 $263,212
======== ======= ======== ========
</TABLE>

- -------------------------
(a) Reflects the Company's historical consolidated balance sheet as of March 31,
1998.
(b) On May 29, 1998, the Company acquired for $29.47 million twelve community
shopping centers and agreed to acquire for $4.23 million an additional
community shopping center. The acquisition was funded out of proceeds from
the Greenwich Capital Line and a loan with Bloomfield Acceptance Company.
(c) Represents the proceeds received from the Offering, net of costs associated
with the offering which are estimated at 6% of gross proceeds, assuming a
sale of 1,500,000 shares at $17.70 per share (which represents the 30 day
average stock price through May 27, 1998.) This price is not necessarily
indicative of the price at which the stock will actually be offered.
(d) Represents the expected payoff of the Greenwich Capital Line.

F-2
<PAGE> 81

MALAN REALTY INVESTORS, INC.

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)

The unaudited Pro Forma Condensed Consolidated Statement of Operations for
the three months ended March 31, 1998 is presented as if the Midwest Acquisition
and the Westland Acquisition had occurred on January 1, 1997 and the Offering
and all related transactions had also occurred on that date. Such statement
should be read in conjunction with all the financial statements and notes
thereto contained elsewhere in this Prospectus. In management's opinion, all
adjustments necessary to reflect the acquisitions and the Offering and related
transactions have been made.

The unaudited Pro Forma Condensed Consolidated Statement of Operations is
not necessarily indicative of what the actual results of operations of the
Company would have been assuming the acquisitions and the Offering and related
transactions had been completed as of January 1, 1997, nor does it purport to
represent the results of operations for future periods.

<TABLE>
<CAPTION>
THE COMPANY MIDWEST WESTLAND THE THE COMPANY
HISTORICAL(A) ACQUISITION(B) ACQUISITION(C) OFFERING PRO FORMA
------------- -------------- -------------- -------- -----------
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
REVENUES:
Rental income............................... $6,283 $820 $131 $ 7,234
Percentage and overage rents................ 301 301
Recoveries from tenants..................... 2,399 144 4 2,547
------ ---- ---- ----- -------
Total rental revenues....................... 8,983 964 135 10,082
Management and leasing fees................. 12 12
Interest and other income................... 59 7 66
------ ---- ---- ----- -------
Total revenues................................ 9,054 971 135 10,160
OPERATING EXPENSES:
Property operating and maintenance.......... 736 49 6 791
Other operating expenses.................... 347 347
Real estate taxes........................... 1,957 85 2,042
General and administrative.................. 389 389
Depreciation and amortization............... 1,310 190 25 1,525
------ ---- ---- ----- -------
Total operating expenses...................... 4,739 324 31 5,094
------ ---- ---- ----- -------
Operating income.............................. 4,315 647 104 5,066
Interest expense.............................. 4,016 617 104 $(472)(d) 4,265
------ ---- ---- ----- -------
Net income (loss)............................. $ 299 $ 30 $ -- $ 472 $ 801
====== ==== ==== ===== =======
Basic earnings per share(e)................... $ 0.08 $ 0.15
====== =======
Diluted earnings per share(e)................. $ 0.08 $ 0.15
====== =======
</TABLE>

- -------------------------
(a) Reflects the Company's historical consolidated statement of operations for
the three months ended March 31, 1998.
(b) On May 29, 1998, the Company acquired for $29.47 million twelve community
shopping centers and agreed to acquire for $4.23 million an additional
community shopping center. The Midwest Acquisition was funded out of
proceeds of an $18 million loan with Bloomfield Acceptance Company and the
balance from the Greenwich Capital Line. Revenues and expenses other than
depreciation and interest represent historical amounts of the Midwest
Shopping Center Retail Portfolio which include all properties in the Sandor
Acquisition as well as the additional community shopping center.
Depreciation on the new cost basis of the buildings is computed on the
straight line method over a useful life of 40 years. Interest expense was
computed utilizing current terms of Greenwich Capital Line and the loan from
Bloomfield Acceptance Company. A 1/8% increase in the interest rate of the
Greenwich Capital Line would increase the adjustment to interest expense and
decrease the adjustment to net income by $5,000.
(c) In February 1998, the Company acquired the Westland Shopping Center for
$7.925 million. Terms of the agreement included assumption of a $5.9 million
mortgage note and a cash payment of $2.025 million which was funded out of
the Greenwich Capital Line. Revenues and expenses other than depreciation
and interest represent the historical amounts of the Westland Shopping
Center prior to the acquisition. Depreciation on the new cost basis of the
buildings is computed on the straight line method over a useful life of 40
years. Interest expense was computed utilizing the terms of the mortgage
assumed and current terms of the Greenwich Capital Line. A 1/8% increase in
the interest rate of the Greenwich Capital Line would increase the
adjustment to interest expense and decrease the adjustment to net income by
$1,000.
(d) Reflects reduction of interest costs associated with expected paydown of
Greenwich Capital Line from Offering proceeds.
(e) Based on weighted average common shares outstanding of 3,784,022 on a
historical basis and 5,284,022 on a pro forma basis, and on weighted average
common and dilutive shares outstanding of 3,827,971 and 5,327,971 on a
historical and pro forma basis, respectively.

F-3
<PAGE> 82

MALAN REALTY INVESTORS, INC.

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1997

(UNAUDITED)

The unaudited Pro Forma Condensed Consolidated Statement of Operations for
the twelve months ended December 31, 1997 is presented as if the Midwest
Acquisition and the Westland Acquisition had occurred on January 1, 1997 and the
Offering and all related transactions had also occurred on that date. Such
statement should be read in conjunction with all the financial statements and
notes thereto contained elsewhere in this Prospectus. In management's opinion,
all adjustments necessary to reflect the acquisitions and the Offering and
related transactions have been made.

The unaudited Pro Forma Condensed Consolidated Statement of Operations is
not necessarily indicative of what the actual results of operations of the
company would have been assuming the acquisitions and the Offering and related
transactions had been completed as of January 1, 1997, nor does it purport to
represent the results of operations for future periods.

<TABLE>
<CAPTION>
THE COMPANY MIDWEST WESTLAND THE THE COMPANY
HISTORICAL(A) ACQUISITION(B) ACQUISITION(C) OFFERING PRO FORMA
------------- -------------- -------------- -------- -----------
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
REVENUES:
Minimum rent............................ $24,092 $3,192 $ 839 $28,123
Percentage and overage rents............ 1,177 1,177
Recoveries from tenants................. 9,271 517 118 9,906
------- ------ ------ ------- -------
Total rental revenues................... 34,540 3,709 957 39,206
Management and leasing fees............. 47 47
Interest and other income............... 396 38 434
------- ------ ------ ------- -------
Total revenues............................ 34,983 3,747 957 39,687
OPERATING EXPENSES:
Property operating and maintenance...... 2,867 308 25 3,200
Other operating expenses................ 1,493 1,493
Real estate taxes....................... 7,891 291 99 8,281
General and administrative.............. 1,545 1,545
Depreciation and amortization........... 5,068 758 149 5,975
------- ------ ------ ------- -------
Total operating expenses.................. 18,864 1,357 273 20,494
------- ------ ------ ------- -------
Operating income.......................... 16,119 2,390 684 19,193
Interest expense.......................... 15,576 2,462 617 $(1,317)(d) 17,338
------- ------ ------ ------- -------
Net income (loss)......................... $ 543 $ (72) $ 67 $ 1,317 $ 1,855
======= ====== ====== ======= =======
Basic earnings per share(e)............... $ 0.15 $ 0.37
======= =======
Diluted earnings per share(e)............. $ 0.15 $ 0.36
======= =======
</TABLE>

- -------------------------
(a) Reflects the Company's historical consolidated statement of operations for
the twelve months ended December 31, 1997.

(b) On May 29, 1998, the Company acquired for $29.47 million twelve community
shopping centers and agreed to acquire for $4.23 million an additional
community shopping center. The Midwest Acquisition was funded out of
proceeds of an $18 million loan with Bloomfield Acceptance Company and the
balance from the Greenwich Capital Line. Revenues and expenses other than
depreciation and interest represent historical amounts of the Midwest
Shopping Center Retail Portfolio, which include all properties in the Sandor
Acquisition as well as the additional community shopping center.
Depreciation on the new cost basis of the buildings is computed on the
straight line method over a useful life of 40 years. Interest expense was
computed utilizing current terms of Greenwich Capital Line and the loan from
Bloomfield Acceptance Company. A 1/8% increase in the interest rate of the
Greenwich Capital Line would increase the adjustment to interest expense and
decrease the adjustment to net income by $20,000.

(c) In February 1998, the Company acquired the Westland Shopping Center for
$7.925 million. Terms of the agreement included assumption of a $5.9 million
mortgage note and a cash payment of $2.025 million which was funded out of
the Greenwich Capital Line. Revenues and expenses other than depreciation
and interest represent the historical amounts of the Westland Shopping
Center prior to the acquisition. Depreciation on the new cost basis of the
building is computed on the straight line method over a useful life of 40
years. Interest expense was computed utilizing the terms of the mortgage
assumed and current terms of the Greenwich Capital Line. A 1/8% increase in
the interest rate of the Greenwich Capital Line would increase the
adjustment to interest expense and decrease the adjustment to net income by
$3,000.

(d) Reflects reduction of interest costs associated with expected paydown of
Greenwich Capital Line from Offering proceeds.

(e) Based on weighted average common shares outstanding of 3,545,759 on a
historical basis and 5,045,759 on a pro forma basis, and based on weighted
average common and dilutive shares outstanding of 3,590,985 on a historical
basis and 5,090,985 on a pro forma basis.
F-4
<PAGE> 83

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and
Stockholders of Malan Realty Investors, Inc.

We have audited the consolidated balance sheets of Malan Realty Investors,
Inc. and subsidiaries (the "Company") as of December 31, 1997 and 1996, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1997. 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31,
1997 and 1996, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.

DELOITTE & TOUCHE LLP
Detroit, Michigan
January 30, 1998

F-5
<PAGE> 84

MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, --------------------
1998 1997 1996
--------- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
ASSETS:
Real Estate (Note 2):
Land................................................... $ 24,262 $ 22,302 $ 18,296
Buildings and improvements............................. 199,448 193,483 189,294
-------- -------- --------
Total.................................................. 223,710 215,785 207,590
Less: accumulated depreciation......................... (17,085) (15,817) (10,907)
-------- -------- --------
Total.................................................. 206,625 199,968 196,683
Other Assets:
Accounts receivable (net of allowance of $78, $78 and
$96 at March 31, 1998, December 31, 1997 and December
31, 1996)............................................ 2,505 1,608 1,332
Deferred financing and other........................... 11,876 10,705 10,752
Cash and cash equivalents.............................. 1,585 1,717 6,966
Escrow deposits (Note 2)............................... 2,014 2,140 2,119
-------- -------- --------
Total Assets........................................... $224,605 $216,138 $217,852
======== ======== ========
LIABILITIES:
Mortgages (Note 2)........................................ $ 98,739 $ 88,585 $ 83,643
Convertible debentures (Note 2)........................... 55,484 56,680 61,285
Convertible notes (Note 2)................................ 27,000 27,000 27,000
Deferred income (Note 9).................................. 2,150 2,102 2,493
Accrued distributions payable............................. 1,620 1,620 1,472
Accounts payable and other................................ 1,491 845 1,535
Accrued property taxes.................................... 2,045 1,184 1,157
Accrued interest payable.................................. 2,255 4,180 4,274
-------- -------- --------
Total liabilities...................................... 190,784 182,196 182,859
-------- -------- --------
COMMITMENTS AND CONTINGENCIES (NOTE 5)
SHAREHOLDERS' EQUITY (NOTES 3, 4 AND 8)
Common stock ($.01 par value, 30 million shares
authorized, 3,811,463, 3,737,936 and 3,463,684 shares
issued and outstanding as of March 31, 1998, December
31, 1997 and December 31, 1996)........................ 38 37 35
Additional paid in capital................................ 51,684 50,485 45,960
Accumulated distributions in excess of net income......... (17,901) (16,580) (11,002)
-------- -------- --------
Total shareholders' equity........................... 33,821 33,942 34,993
-------- -------- --------
Total Liabilities and Shareholders' Equity............. $224,605 $216,138 $217,852
======== ======== ========
</TABLE>

See Notes to Consolidated Financial Statements

F-6
<PAGE> 85

MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
---------------------- -----------------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Minimum rent (Note 5)................. $ 6,283 $ 5,983 $ 24,092 $ 23,836 $ 22,100
Percentage and overage rents.......... 301 304 1,177 1,164 963
Recoveries from tenants............... 2,399 2,513 9,271 9,340 8,662
Interest and other income............. 71 87 443 623 522
--------- --------- --------- --------- ---------
Total Revenues..................... 9,054 8,887 34,983 34,963 32,247
--------- --------- --------- --------- ---------
EXPENSES
Property operating and maintenance.... 736 1,065 2,867 2,769 1,961
Other operating expenses.............. 347 329 1,493 1,481 1,216
Real estate taxes..................... 1,957 1,919 7,891 7,715 7,511
General and administrative............ 389 394 1,545 1,664 1,463
Depreciation and amortization......... 1,310 1,265 5,068 4,920 4,597
--------- --------- --------- --------- ---------
Total Operating Expenses........... 4,739 4,972 18,864 18,549 16,748
--------- --------- --------- --------- ---------
OPERATING INCOME........................ 4,315 3,915 16,119 16,414 15,499
INTEREST EXPENSE........................ 4,016 3,922 15,576 15,815 13,749
--------- --------- --------- --------- ---------
NET INCOME.............................. $ 299 $ (7) $ 543 $ 599 $ 1,750
========= ========= ========= ========= =========
BASIC EARNINGS PER SHARE (NOTE 13)...... $ 0.08 $ (0.00) $ 0.15 $ 0.17 $ 0.49
========= ========= ========= ========= =========
Weighted average common shares
outstanding........................... 3,784,022 3,463,806 3,545,759 3,464,323 3,546,883
========= ========= ========= ========= =========
DILUTED EARNINGS PER SHARE (NOTE 13).... $ 0.08 $ (0.00) $ 0.15 $ 0.17 $ 0.49
========= ========= ========= ========= =========
Weighted average common and dilutive
shares outstanding.................... 3,827,971 3,463,806 3,590,985 3,475,095 3,546,883
========= ========= ========= ========= =========
</TABLE>

See Notes to Consolidated Financial Statements

F-7
<PAGE> 86

MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
ACCUMULATED DEFERRED
DISTRIBUTIONS IN COMPENSATION TOTAL
PAR ADDITIONAL EXCESS OF -INCENTIVE SHAREHOLDERS'
VALUE PAID-IN CAPITAL NET INCOME SHARES EQUITY
----- --------------- ---------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995............ $38 $49,682 $ (1,444) $(185) $48,091
Amortization of deferred
compensation-incentive shares
(Note 3)....................... 125 125
Conversion of debt securities..... 2 2,398 2,400
Common shares repurchased......... (4) (5,096) (5,100)
Distributions -- $1.70 per
share.......................... (6,023) (6,023)
Net income........................ 1,750 1,750
--- ------- -------- ----- -------
BALANCE, DECEMBER 31, 1995.......... 36 46,984 (5,717) (60) 41,243
Amortization of deferred
compensation-incentive shares
(Note 3)....................... 60 60
Common shares repurchased......... (1) (1,096) (1,097)
Directors compensation paid in
stock.......................... 48 48
Stock options exercised........... 24 24
Distributions -- $1.70 per
share.......................... (5,884) (5,884)
Net income........................ 599 599
--- ------- -------- ----- -------
BALANCE, DECEMBER 31, 1996.......... 35 45,960 (11,002) 34,993
Conversion of debt securities..... 2 4,469 4,471
Directors compensation paid in
stock.......................... 48 48
Stock options exercised........... 8 8
Distributions -- $1.70 per
share.......................... (6,121) (6,121)
Net income........................ 543 543
--- ------- -------- ----- -------
BALANCE, DECEMBER 31, 1997.......... $37 $50,485 $(16,580) $33,942
Conversion of debt securities
(unaudited).................... 1 1,151 1,152
Directors compensation paid in
stock (unaudited).............. 12 12
Stock options exercised
(unaudited).................... 36 36
Distributions -- $.425 per share
(unaudited).................... (1,620) (1,620)
Net income (unaudited)............ 299 299
--- ------- -------- ----- -------
BALANCE, MARCH 31, 1998
(UNAUDITED)....................... $38 $51,684 $(17,901) $33,821
=== ======= ======== ===== =======
</TABLE>

See Notes to Consolidated Financial Statements

F-8
<PAGE> 87

MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------ --------------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss).......................... $ 299 $ (7) $ 543 $ 599 $ 1,750
------- ------- -------- -------- --------
Adjustments to reconcile net income to net
cash flows provided by operating
activities:
Depreciation and amortization........... 1,310 1,265 5,068 4,920 4,597
Amortization of deferred financing
costs................................. 447 383 1,620 1,581 824
Amortization of deferred compensation
expense............................... 60 125
Directors compensation issued in
stock................................. 12 12 48 48
Change in operating assets and
liabilities that provided (used) cash:
Accounts receivable and other......... (2,601) (1,307) (982) (961) 1,225
Accounts payable, deferred income and
other accrued liabilities.......... (370) (2,087) (1,148) 870 20
------- ------- -------- -------- --------
Total adjustments....................... (1,202) (1,734) 4,606 6,518 6,791
------- ------- -------- -------- --------
Net cash flows provided by (used for)
operating activities.................. (903) (1,741) 5,149 7,117 8,541
------- ------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Real estate developed, acquired or improved
net of mortgage assumed................. (2,037) (8,195) (1,505) (31,868)
Additions to leasehold improvements and
equipment............................... (8)
Deposits to escrow......................... (4,741) (3,408) (17,274) (17,642) (5,876)
Disbursements from escrow.................. 4,867 3,865 17,253 16,985 4,415
------- ------- -------- -------- --------
Net cash flows provided by (used for)
investing activities.................. (1,911) 457 (8,216) (2,162) (33,337)
------- ------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Draws on lines of credit................... 4,350 6,200 15,500
Repayment of lines of credit............... (1,500) (50,250)
Net proceeds from REMIC offering........... 55,751
Principal repayments on mortgages.......... (84) (1,312) (1,428) (91) (88)
Net proceeds from mortgages................ 1,670 12,450
Distributions to shareholders.............. (1,620) (1,472) (5,973) (5,921) (6,121)
Debt issuance costs........................ (1,159)
Proceeds from stock options exercised...... 36 3 8 24
Repurchases of common stock................ (1,096) (5,100)
------- ------- -------- -------- --------
Net cash flows provided by (used for)
financing activities.................. 2,682 (2,781) (2,182) (7,084) 22,142
------- ------- -------- -------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS.... (132) (4,065) (5,249) (2,129) (2,654)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD..................................... 1,717 6,966 6,966 9,095 11,749
------- ------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD... $ 1,585 $ 2,901 $ 1,717 $ 6,966 $ 9,095
======= ======= ======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION -- Cash paid for interest
during the period.......................... $ 5,515 $ 5,601 $ 14,058 $ 14,139 $ 13,104
======= ======= ======== ======== ========
</TABLE>

See Notes to Consolidated Financial Statements
F-9
<PAGE> 88

MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (AUDITED) AND
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General -- The Company is engaged in the ownership, management, leasing,
acquisition, development and redevelopment of shopping centers and entertainment
facilities and leases space to tenants pursuant to lease agreements. The lease
agreements provide for terms ranging from one to 25 years and, in some cases,
for annual rentals which are subject to upward adjustment based on operating
expense levels and sales volume.

Basis of Combination and Principles of Consolidation -- The accompanying
consolidated financial statements include the activity of the Company and its
wholly owned subsidiaries, Malan Mortgagor, Inc., Malan Meadows, Inc. and Malan
Revolver, Inc. All significant inter-company balances and transactions have been
eliminated.

Reclassifications -- Certain reclassifications have been made to prior
years financial statements in order to conform with the current year
presentation.

Real Estate is stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are provided on a straight line
basis over the estimated useful lives of the assets as follows:

<TABLE>
<S> <C>
Buildings................................................... 40 Years
Land and Building Improvements.............................. 10-40 Years
</TABLE>

Maintenance and repairs are charged to expense as incurred. Renovations
which improve or extend the life of the asset are capitalized.

Deferred Financing and Other consists primarily of deferred financing costs
and lease procurement costs. Deferred financing costs at December 31, 1997 and
1996 of $12,764,000 and $11,738,000, respectively, are amortized on a straight
line basis over the terms of the applicable debt agreements. Accumulated
amortization of deferred financing costs at December 31, 1997 and 1996 was
$4,147,000 and $2,527,000, respectively, and amortization expense for 1997, 1996
and 1995 was $1,620,000, $1,581,000 and $824,000, respectively, and is included
in interest expense in the Consolidated Statements of Operations.

Lease procurement costs of $1,605,000 and $1,176,000 at December 31, 1997
and 1996, respectively, consist of leasing costs, tenant allowances and tenant
improvements and are amortized on a straight line basis over the terms of the
applicable tenant lease. Accumulated amortization of lease procurement costs at
December 31, 1997 and 1996 was $273,000 and $150,000, respectively, and
amortization expense for 1997, 1996 and 1995 was $193,000, $102,000, and
$199,000, respectively.

Revenue Recognition -- Minimum rents are recognized on the straight line
method over the terms of the leases. Percentage rents are recognized as earned.
The leases also typically provide for tenant reimbursement of common area
maintenance and other operating expenses which are included in the accompanying
Consolidated Statements of Operations as recoveries from tenants.

Income received on lease terminations is deferred and recognized on a
straight line basis over the remaining term of the leases involved. Deferred
income related to such terminations was approximately $1,674,000 and $2,187,000
at December 31, 1997 and 1996, respectively, and approximately $577,000,
$428,000 and $71,000 was recognized as rental income for the years ended
December 31, 1997, 1996 and 1995, respectively. Payments received under normal
lease clauses which provide for the acceleration of the lease expiration date
upon receipt of such payment are recognized as income when received.

Income Taxes -- The Company has elected to be taxed as a real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended
(the "Code"). As a REIT, the Company generally will not be subject to federal
income taxation at the corporate level to the extent it distributes annually at
least 95% of its real estate investment trust taxable income, as defined in the
Code, to its stockholders and satisfies certain

F-10
<PAGE> 89
MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
CONTINUED

other requirements. Accordingly, no provision has been made for federal income
taxes in the accompanying financial statements.

Earnings per common share -- The Company adopted Statement of Financial
Accounting Standards (SFAS) No.128, "Earnings per Share," for the year ended
December 31, 1997. SFAS No. 128 replaces the presentation of primary earnings
per share ("EPS") and fully diluted EPS with a presentation of basic EPS and
diluted EPS, respectively. Basic EPS excludes potential share dilution and is
computed by dividing earnings available to common shareholders by the
weighted-average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution of securities that could share in the earnings
but does not include shares issuable upon conversion of securities that would
have an antidilutive effect on earnings per share. All prior-period EPS data
have been restated. The adoption of this new accounting standard does not have a
material effect on the Company's reported EPS amounts.

Distributions of $1.70 per common share were declared for each of the years
ended December 31, 1997, 1996 and 1995 of which $1.70, $1.34 and $.46,
respectively, represent a return of capital for federal income tax purposes.

Cash and cash equivalents consist of deposits in banks and certificates of
deposit with maturities of three months or less at the date of purchase.

Long-lived assets and long-lived assets to be disposed of -- The Company
accounts for long-lived assets and long-lived assets to be disposed of in
accordance with SFAS No. 121. This statement establishes accounting standards
for the impairment of long-lived assets, certain identifiable intangibles and
goodwill related to those assets to be held and used, and long-lived assets and
certain identifiable intangibles to be disposed of. The Company's assets are
periodically reviewed throughout the year for impairments in value and in
management's opinion no impairments have occurred requiring writedowns during
the years ended December 31, 1997, 1996 and 1995.

Management estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Unaudited interim statements -- The unaudited interim financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial reporting, and the rules and regulations of the Securities
and Exchange Commission. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation of the Company's consolidated financial position, results of
operations and cash flows have been included. The results of such interim
periods are not necessarily indicative of the results of operations for the full
year.

2. MORTGAGES, DEBENTURES AND NOTES

The Company has a $63 million term mortgage loan (the "Securitized Mortgage
Loan") utilizing a real estate mortgage investment conduit (REMIC). The loan is
secured by separate cross-collateralized and cross-defaulted mortgages or deeds
of trust on 25 properties owned by a wholly-owned subsidiary, Malan Mortgagor,
Inc., and matures on August 10, 2002. Payments of interest only are due monthly.
Through the use of interest rate caps and floor agreements, the effective
interest rate is fixed at 7.57% through February 10, 2002; thereafter, the
interest rate on $42 million of the mortgage loans converts to a variable rate
based on certain requirements.

F-11
<PAGE> 90
MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

2. MORTGAGES, DEBENTURES AND NOTES -- CONTINUED
As part of the Securitized Mortgage Loan, the Company must continue to fund
certain up-front reserves on an ongoing basis and request disbursement of funds
as certain requirements are met. The Capital Improvements/Replacement Reserve
requires an annual deposit (funded monthly) equal to $0.20 per qualifying square
foot as defined in the agreement or approximately $575,000 per year. The Basic
Carrying Cost Reserve which is utilized to pay certain real estate taxes, ground
lease payments and insurance payments related to the properties of Malan
Mortgagor, Inc. requires a monthly deposit equal to one-twelfth of the estimated
annual cost of these expenses or approximately $1.3 million per annum.

An additional provision in the agreement provides that in the event that
the long-term debt rating of either of the two major tenants of the
collateralized properties, Kmart or Wal-Mart, is downgraded to 'BB+' or lower,
the Company is required to maintain an additional amount in the Basic Carrying
Cost Reserve equal to 1/4 of the applicable real estate tax obligation borne by
those tenants. In January 1996, the long-term debt rating of Kmart was lowered
to 'BB' and accordingly, the Company was required to make an additional deposit
to the Basic Carrying Cost account of $561,000.

In November 1997, the Company obtained a $25 million secured line of credit
provided by Greenwich Capital Markets, Inc., a division of National Westminister
Bank, Plc. The loan is secured by separate cross-collateralized and
cross-defaulted mortgages or deeds of trust on 16 properties owned by a
wholly-owned subsidiary, Malan Revolver, Inc. The line of credit has a two-year
term, which may be extended for a period of one year and can be expanded up to
$50 million for additional acquisitions. The facility carries an interest rate
of London Interbank Offered Rate ("LIBOR") plus 150 basis points. Payments of
interest only are due monthly. At December 31, 1997, $20.69 million was
available for borrowing under the facility and $4.7 million was outstanding on
the line of credit.

In January 1997, the Company refinanced certain bank debt with an $11.2
million loan with Daiwa Finance Corporation ("Daiwa"). The Daiwa loan is
collateralized by the Company's interest in The Shops at Fairlane Meadows
("Fairlane Meadows") in Dearborn, Michigan and contained an earn-out provision
whereby the property could be revalued and the loan increased if the revised
valuation supported such an increase. In December 1997, pursuant to the earn-out
provision, the Company received an additional $1.67 million from Daiwa and the
loan was increased to $12.796 million. Current terms of the loan call for
monthly payments totaling $96,000 consisting of interest at the rate of 8.18%
per annum and principal amortized over a 30-year life. Real estate tax payments
and an annual replacement reserve of $32,000 are required to be escrowed
monthly. The loan is due in full on February 1, 2007, at which time a balloon
payment of approximately $11.4 million will be due. As part of the loan
agreement with Daiwa, the Company transferred its interest in Fairlane Meadows
to a wholly-owned subsidiary, Malan Meadows, Inc. in January 1997.

The Company has a line of credit with First Chicago NBD totaling $1.5
million. The line is collateralized by the Company's interest in Orchard-14
Shopping Center in Farmington Hills, Michigan and is subject to certain other
restrictions as to its use. The line originally matured on January 23, 1998 but
has been extended to March 23, 1998 for the purpose of providing time to
complete a reappraisal of the property to increase the available loan amount.
Payments of interest only at either the bank's prime rate, or LIBOR plus 200
basis points under certain conditions, are due monthly until maturity. As of
December 31, 1997 there is no outstanding balance on the line.

The Company has outstanding as of December 31, 1997 and 1996 $56.680
million and $61.285 million, respectively, in Convertible Debentures (the
"Debentures") and $27 million in Convertible Notes (the "Notes"). The Debentures
are 10-year unsecured general obligations of the Company due July 15, 2004, have
a coupon rate of interest of 9.5% per annum, payable semiannually and carry a
rating of B3 from Moody's Investors Services, Inc. The Debentures are
convertible, at anytime after issuance and prior to maturity into

F-12
<PAGE> 91
MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

2. MORTGAGES, DEBENTURES AND NOTES -- CONTINUED
shares of Common Stock at the conversion price of $17 per share subject to
adjustment under certain conditions. The Debentures are not redeemable by the
Company prior to July 15, 2001, except for certain reasons intended to protect
the Company's status as a REIT. During 1997, $4.605 million aggregate principal
of Debentures were converted into 270,878 shares of Common Stock.

The Notes are nine-year general obligations due July 15, 2003 secured by a
first mortgage on Bricktown Square in Chicago, Illinois and bear interest at the
rate of 8.5% per annum, payable semiannually and are convertible into shares of
Common Stock at any time after June 24, 2002 at a conversion price of $17 per
share. Prior to this date, the holder may also demand conversion of limited
quantities of the Notes subject to certain timing restrictions.

Net settlement costs paid under interest rate cap agreements are recorded
on an accrual basis and recognized as an adjustment to interest expense.

Several of the above debt agreements contain restrictive financial
covenants, all of which the Company was in compliance with as of December 31,
1997.

The following table sets forth certain information regarding the Company's
debt outstanding as of December 31, 1997 and 1996.

<TABLE>
<CAPTION>
BALANCE DECEMBER 31,
MATURITY ---------------------
COLLATERAL INTEREST RATE DATE 1997 1996
---------- ------------- -------- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
MORTGAGES
Greenwich Capital Line of 16 Retail Properties LIBOR + 150 November $ 4,700 $ --
Credit Basis Points 1999
UDAG Loan Bricktown Square 5% increasing March 8,097 8,193
to 9% 2023
Securitized Mortgage Loan 25 Retail Properties 7.57%(1) August 63,000 63,000
2002
Daiwa Finance Corp. The Shops at 8.18% February 12,788 12,450
Fairlane Meadows 2007
------- -------
Total Mortgages $88,585 $83,643
======= =======
CONVERTIBLE DEBENTURES None 9.5% July 2004 $56,680 $61,285
======= =======
CONVERTIBLE NOTES Bricktown Square 8.5% July 2003 $27,000 $27,000
======= =======

</TABLE>

- -------------------------
(1) Overall blended rate. The interest rates on four different tranches are
either fixed or capped through the use of interest rate caps and floors.

Approximate scheduled principal payments for the years subsequent to
December 31, 1997 are as follows (in thousands):

<TABLE>
<S> <C>
1998........................................................ $ 193
1999........................................................ 4,908
2000........................................................ 222
2001........................................................ 238
2002........................................................ 63,255
2003 and thereafter......................................... 103,449
--------
Total..................................................... $172,265
========
</TABLE>

F-13
<PAGE> 92
MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

3. INCENTIVE SHARES

Upon completion of its initial public offering, the Company's president and
chief executive officer donated 23,700 shares of Common Stock to be distributed
in varying amounts to substantially all of the Company's employees, subject to
certain forfeiture restrictions. The donation was recorded at its fair market
value as additional paid in capital and deferred compensation expense.
Compensation expense recognized during 1996 and 1995 was $60,000 and $125,000,
respectively. On June 18, 1996 all forfeiture restrictions lapsed and the
unforfeited shares became the unrestricted property of each recipient.

4. WARRANTS AND STOCK OPTION AND COMPENSATION PLANS

Warrants -- In connection with its initial public offering, the Company
issued warrants to National Westminster Bank Plc, New York Branch, an affiliate
of one of the underwriters at the time of the initial public offering, for the
purchase of 353,000 shares of common stock. The warrants are exercisable for a
period of four years commencing June 17, 1995 at a price of $20.40 per share. No
warrants have been exercised.

Employee Option Plan -- The Company has a stock option plan (the "Employee
Option Plan") to enable its employees to participate in the ownership of the
Company. Under the Employee Option Plan, executive officers and employees of the
Company may be granted options to acquire shares of Common Stock of the Company
("Options"). The Employee Option Plan is administered by the compensation
committee of the Board of Directors (the "Board"), which is authorized to select
the executive officers and other employees to whom Options are to be granted. No
member of the compensation committee is eligible to participate in the Employee
Option Plan. The aggregate number of shares of Common Stock that may be issued
upon the exercise of all Options is 400,000 shares.

The exercise price of each Option granted is equal to the aggregate fair
market value of the underlying shares on the date of grant. With the exception
of those granted on the date of the Company's initial public offering, which
vested over a three-year period at the rate of 33 1/3% per year, Options vest
over a five-year period at the rate of 20% per year, beginning on the first
anniversary of the date of grant and are exercisable until the tenth anniversary
of the date of grant.

Directors Option Plan -- In 1995, the Company adopted the 1995 Stock Option
Plan for Non-employee Directors of the Company (the "Directors Option Plan").
Under the Directors Option Plan, each non-employee Director of the Company
received an option to purchase 1,500 shares of Common Stock of the Company
following the 1995 Annual Meeting of the Board. Following each Annual Meeting of
the Board thereafter, each non-employee Director will automatically be granted
an option to purchase 1,000 shares of Common Stock.

All Options granted under the Directors Option Plan will have an exercise
price equal to the fair market value of the underlying shares on the date of the
grant. Each Option granted will vest immediately upon grant but will not become
exercisable by the Director until six months following the date of grant.
Options granted to a Director will remain exercisable until the tenth
anniversary of the date of grant or, if earlier, until one year after the
Director ceases to be a member of the Board for any reason. The aggregate number
of shares that may be issued under the Directors Option Plan is 80,000 shares.

F-14
<PAGE> 93
MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

4. WARRANTS AND STOCK OPTION AND COMPENSATION PLANS -- CONTINUED
The following table summarizes the activity for the Company's Stock Option
Plans:

<TABLE>
<CAPTION>
EMPLOYEE OPTION PLAN DIRECTORS OPTION PLAN
-------------------------------------------- --------------------------------------------
SHARES WEIGHTED SHARES WEIGHTED
SUBJECT EXERCISE PRICE AVG. EXERCISE SUBJECT EXERCISE PRICE AVG. EXERCISE
TO OPTION PER SHARE PRICE TO OPTION PER SHARE PRICE
--------- -------------- ------------- --------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995....... 148,500 $17.000 $17.000
Options Granted 1995........... 101,500 $13.375 $13.375 6,000 $14.500 $14.500
------- ------
Balance, December 31, 1995..... 250,000 $15.528 6,000 $14.500
Options Granted 1996........... 54,000 $14.375-$15.375 $14.449 4,000 $14.375 $14.375
Options Exercised 1996......... (1,708) $14.375 $14.375
------- ------
Balance, December 31, 1996..... 304,000 $13.375-$17.000 $15.383 8,292 $14.375-$14.50 $14.465
Options Granted 1997........... 4,000 $17.125 $17.125
Options Exercised 1997......... (634) $13.375 $13.375
------- ------
Balance December 31, 1997...... 303,366 $13.375-$17.000 $15.383 12,292 $14.375-$17.125 $15.331
======= ======
Options Exercisable at
December 31, 1997............ 199,266 $16.135 12,292 $15.331
======= ======= ====== =======
</TABLE>

In accordance with the Statement of Financial Accounting Standard No. 123,
"Accounting for Stock-Based Compensation", the Company has elected to continue
to report compensation by applying the requirements of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" and therefore
has recorded no charge to income for stock options. There would have been no
effect on the Company's pro forma net income and earnings per share for 1997 and
1996 had the Company recognized compensation expense using the Black-Scholes
option pricing model utilizing the following values and weighted-average
assumptions:

<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Option value................................................ $ 0.54 $ 0.03
Dividend yield.............................................. 9.9 % 11.8 %
Expected volatility......................................... 17 % 10 %
Risk-free interest rate..................................... 6 % 6 %
Expected lives (in years)................................... 10 10
</TABLE>

The outstanding stock options at December 31, 1997 have a weighted average
contractual life of 7.97 years.

Stock Compensation Plan -- In order to provide an opportunity for
non-employee Directors to increase their ownership, the Company adopted in May
1995, the 1995 Stock Compensation Plan for Non-employee Directors (the "Stock
Compensation Plan"). Under the Stock Compensation Plan, each non-employee
Director may make an election by June 30 of each year to receive all or a
portion of the Director's compensation for the following calendar year in the
form of Common Stock of the Company in lieu of cash. Once made, the election is
irrevocable for the following year's compensation.

The number of shares of Common Stock to be paid to a Director instead of
cash compensation will be determined based on the closing price of the Common
Stock on the New York Stock Exchange on the day before the compensation is
earned by the Director (i.e., the day before a Board meeting). The plan became
effective January 1, 1996. A maximum of 100,000 shares may be issued under the
Stock Compensation Plan. During 1997 and 1996, a total of 2,740 and 3,272
shares, respectively, were issued under the plan reflecting compensation of
$48,000 in each year.

F-15
<PAGE> 94
MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

5. COMMITMENTS AND CONTINGENCIES

Revenues derived from the Company's major tenant, Kmart, amounted to 39.0%,
38.2% and 46.4% of consolidated revenues arising from lease agreements for the
years ended December 31, 1997, 1996 and 1995, respectively. Amounts receivable
from the major tenant were $56,000 and $47,000 at December 31, 1997 and 1996,
respectively.

Approximate future minimum rent under operating leases for the years
subsequent to December 31, 1997, assuming no new or renegotiated leases or
option extensions, are as follows (in thousands):

<TABLE>
<S> <C>
1998........................................................ $ 23,792
1999........................................................ 22,539
2000........................................................ 20,599
2001........................................................ 19,381
2002........................................................ 17,247
2003 and thereafter......................................... 104,009
--------
Total..................................................... $207,567
========
</TABLE>

Approximate future minimum rental payments under the terms of all
non-cancelable operating leases in which the Company is the lessee, principally
for ground leases and office rent, subsequent to December 31, 1997, are as
follows (in thousands):

<TABLE>
<S> <C>
1998........................................................ $ 503
1999........................................................ 472
2000........................................................ 442
2001........................................................ 388
2002........................................................ 270
2003 and thereafter......................................... 8,134
-------
Total..................................................... $10,209
=======
</TABLE>

Rent expense for operating leases for the years ended December 31, 1997,
1996 and 1995 was $498,000 $457,000 and $481,000, respectively.

The Company has entered into the following commitments as of December 31,
1997:

<TABLE>
<CAPTION>
ANTICIPATED
APPROXIMATE FUNDING
AMOUNT DATE
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Payment of tenant construction allowance on
17-plex theater complex -- North Aurora, IL.... $ 3,835 July 1998
Replacement of roof on one retail building....... 209 May 1998
Redevelopment of existing retail property -- March 1998 -
Lawrence, KS................................... 2,500(1) October 1998
Payment of tenant construction allowance on
10-plex theater complex -- Melrose Park, IL.... 3,773 November 1998
-------
Total............................................ $10,317
=======
</TABLE>

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

(1) Contracts awarded as of December 31, 1997

F-16
<PAGE> 95
MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

5. COMMITMENTS AND CONTINGENCIES -- CONTINUED
The Company, as an owner of real estate, is subject to various
environmental laws. Compliance by the Company with existing laws has not had a
material adverse financial effect during the three-year period ended December
31, 1997, nor does management believe it will have a material impact in the
future. However, management cannot predict the impact of new or changed laws or
regulations on its current properties or properties that it may acquire.

6. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosure of estimated fair value was determined using
available market information and appropriate valuation methodologies. This
disclosure is made as required by SFAS No. 107, "Disclosures about Fair Value of
Financial Instruments".

Cash and Cash Equivalents -- The carrying amount for cash and cash
equivalents approximates fair value due to the short maturity of these
instruments.

Interest Rate Hedging Instruments -- The Company entered into interest rate
agreements to reduce its exposure to changes in the cost of the floating rate
portion of its Securitized Mortgage Loan.

As of December 31, 1997, the following interest rate cap agreements were
outstanding:

<TABLE>
<CAPTION>
NOTIONAL
AMOUNT LIBOR FREQUENCY OF
(IN THOUSANDS) CAP RATE RATE RESETS TERM
- -------------- -------- ------------ ----
<S> <C> <C> <C>
$42,000 6.67% Monthly July 1995 to February 2002
42,000 8.75% Monthly February 2002 to August 2002
</TABLE>

The Company is exposed to credit risk in the event of nonperformance by the
counterparties to its interest rate cap agreements, but has no off-balance sheet
risk of loss. The Company anticipates that its counterparties will fully perform
their obligations under the agreements.

The carrying value of the interest rate caps as of December 31, 1997 and
1996 was $1,310,000 and $1,595,000, respectively, and the fair value was
$890,000 and $1,200,000, respectively.

Mortgages -- The fair value of the mortgages is based on the present value
of contractual cash flows and is as follows at December 31 (in thousands):

<TABLE>
<CAPTION>
1997 1996
--------------------- ---------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
UDAG Loan............................................. $ 8,097 $ 4,529 $ 8,193 $ 4,455
Fairlane Meadows Mortgage............................. 12,788 12,788 12,450 12,450
Greenwich Capital Line of Credit...................... 4,700 4,700 -- --
Securitized Mortgage Loan............................. 63,000 63,000 63,000 63,000
------- ------- ------- -------
Total............................................ $88,585 $85,017 $83,643 $79,905
======= ======= ======= =======
</TABLE>

Convertible Debentures and Convertible Notes -- The fair value of the
Convertible Debentures is based on the traded value at the close of business at
year end. The carrying value of the Convertible Debentures as of December 31,
1997 and 1996 is $56.680 million and $61.285 million, respectively. The
estimated fair value based upon the traded value at the close of business on
December 31, 1997 and 1996 was $60.081 million and $60.672 million,
respectively. Management believes that the carrying value of the Convertible
Notes as of December 31, 1997 and 1996 approximates the fair value.

F-17
<PAGE> 96
MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

6. FAIR VALUE OF FINANCIAL INSTRUMENTS -- CONTINUED
The fair value estimates presented herein are based on information
available to management as of December 31, 1997 and 1996. Although management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such financial instruments have not been comprehensively revalued
for purposes of these financial statements since that date, and current
estimates of fair value may differ significantly from the amounts presented
herein.

7. SIGNIFICANT NONCASH TRANSACTIONS

Significant noncash transactions for the three years ended December 31,
1997 are as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Conversion of debentures into 270,878 in 1997 and 147,646 in
1995 shares of common stock, net of unamortized costs..... $4,471 $2,400
Distributions declared not yet paid......................... $1,620 $1,472 $1,509
</TABLE>

8. STOCK REPURCHASE PLAN

In January 1995, the Company's Board of Directors approved a plan to
repurchase up to 755,000 shares of the Company's Common Stock. Under the plan,
any purchases of Common Stock are to be made in the open market or in privately
negotiated transactions subject to SEC rules and regulations regarding such
transactions. During 1996 and 1995, the Company repurchased 91,500 and 376,500
shares, respectively, at an average cost of $11.98 and $13.47, respectively. No
shares were repurchased during the year ended December 31, 1997.

9. DEFERRED INCOME

In September 1995, the Company entered into an agreement with its largest
tenant, Kmart, regarding several stores within its portfolio. Under the
agreement, the Company received a cash payment on October 31, 1995 totaling
approximately $2.56 million as consideration for the termination of leases on
five stores previously closed by Kmart. In addition, the agreement (i) provides
that the Company assume leases at three locations that were subleased by Kmart;
(ii) amends certain lease provisions on four other properties leased by Kmart;
and (iii) allows the Company to develop outlots at seven Kmart properties and
retain all revenue generated from these outlots. The cash payment has been
recorded as deferred income and is being amortized as income on a straight-line
basis over a six-year period which represents the weighted average remaining
base term of the leases involved.

The Company has re-leased two of the closed stores at terms which
approximate the annual revenue received under the previous leases with Kmart and
intends to re-lease the remaining three stores. The Company has also leased two
of the outlots. Management intends to develop and lease the remaining outlots
discussed above. It is possible that the Company may be unable to re-lease the
remaining stores or develop and lease the outlots within the next several years.
Such loss of revenue may have an impact on the Company's future cash flows and
results of operations.

F-18
<PAGE> 97
MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

10. PROPERTY ACQUISITIONS

During the three years ended December 31, 1997, the Company acquired the
following properties:

<TABLE>
<CAPTION>
GROSS
ACQUISITION LEASABLE
DATE PROPERTY LOCATIONS AREA COST
- ----------- -------- --------- -------- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
3/1/95 Expansion of Existing Wal-Mart Store..... Washington, IN 21,295 $ 1,625
6/4/95 Clinton Pointe Shopping Center........... Clinton Twp., MI 135,330 12,262
9/16/95 The Shops at Fairlane Meadows............ Dearborn, MI 137,508 16,617
11/24/97 Southwind Theater........................ Lawrence, KS 42,497 4,207
-------- -------
Totals................................... 336,630 $34,711
======== =======
</TABLE>

11. PRO FORMA INFORMATION

The following unaudited table of pro forma information has been presented
as if the acquisitions of Clinton Pointe Shopping Center and The Shops at
Fairlane Meadows had occurred on January 1, 1995. In management's opinion, all
adjustments necessary to reflect the acquisitions of properties have been made.
The pro forma information is not necessarily indicative of what the actual
results of operations of the Company would have been had such transactions
actually occurred as of January 1, 1995, nor do they purport to represent the
results of the operations of the Company for future periods (in thousands except
per share data).

<TABLE>
<CAPTION>
1995
----
<S> <C>
Total revenues.............................................. $35,118
Net income.................................................. $ 1,270
Net income per share........................................ $ 0.36
</TABLE>

12. QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly financial data for the periods indicated are as
follows (in thousands except per share amounts):

<TABLE>
<CAPTION>
BASIC EARNINGS DILUTED EARNINGS
1997 REVENUES NET INCOME (LOSS) PER SHARE PER SHARE
---- -------- ----------------- -------------- ----------------
<S> <C> <C> <C> <C>
March 31................................. $ 8,887 $ (7) $ -- $ --
June 30.................................. 8,528 71 0.02 0.02
September 30............................. 8,787 213 0.06 0.06
December 31.............................. 8,781 266 0.07 0.07
------- ---- ----- -----
Total.................................... $34,983 $543 $0.15 $0.15
======= ==== ===== =====
1996
March 31................................. $ 8,919 $ 87 $0.03 $0.03
June 30.................................. 8,702 120 0.03 0.03
September 30............................. 8,868 220 0.06 0.06
December 31.............................. 8,474 172 0.05 0.05
------- ---- ----- -----
Total.................................... $34,963 $599 $0.17 $0.17
======= ==== ===== =====
</TABLE>

F-19
<PAGE> 98
MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

13. EARNINGS PER SHARE

Earnings per share ("EPS") data were computed as follows (in thousands
except per share amounts):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net Income.................................................. $ 543 $ 599 $1,750
====== ====== ======
BASIC EPS:
Weighted-average shares outstanding......................... 3,546 3,464 3,547
====== ====== ======
Basic earnings per share.................................... $ 0.15 $ 0.17 $ 0.49
====== ====== ======
DILUTED EPS:
Weighted-average shares outstanding......................... 3,546 3,464 3,547
Shares issued upon exercise of dilutive options............. 312 160 --
Shares purchased with proceeds of options................... (267) (149) --
------ ------ ------
Shares applicable to diluted earnings....................... 3,591 3,475 3,547
====== ====== ======
Diluted earnings per share.................................. $ 0.15 $ 0.17 $ 0.49
====== ====== ======
</TABLE>

Diluted EPS reflects the potential dilution of securities that could share
in the earnings but does not include shares issuable upon conversion of
securities that would have an antidilutive effect on earnings per share.

14. SUBSEQUENT EVENTS

In January 1998, the Company entered into an agreement to acquire Westland
Shopping Center in Westland, Michigan for $7.925 million. Terms of the
acquisition include a cash payment of $2.025 million which is anticipated to be
funded out of the Company's line of credit with Greenwich Capital Markets, Inc.
and the assumption of a $5.9 million mortgage with Wells Fargo Bank. The
mortgage calls for monthly payments of interest at the rate of 8.02% per annum
and principal amortized over 30 years and is due in full November 1, 2007.

Subsequent to December 31, 1997 $946,000 aggregate principal of Debentures
were converted into 55,644 shares of common stock.

Subsequent to March 31, 1998, the Company acquired for $29.47 million
twelve community shopping centers and agreed to acquire for $4.23 million an
additional community shopping center. The acquisition was funded out of proceeds
from an $18 million mortgage loan collateralized by the properties and the
balance out of the Company's lines of credit. The mortgage loan is for a term of
15 years and requires monthly payments of interest at the rate of 7.43% per
annum and principal amortized over a 30 year term.

F-20
<PAGE> 99

INDEPENDENT AUDITORS' REPORT

To the Owners
Midwest Shopping Center
Retail Portfolio

We have audited the accompanying combined statement of revenues and certain
expenses (defined as being operating revenues less direct operating expenses) of
the Midwest Shopping Center Retail Portfolio for the year ended December 31,
1997. This combined statement of revenues and certain expenses is the
responsibility of the management of the Midwest Shopping Center Retail
Portfolio. Our responsibility is to express an opinion on this combined
statement of revenues and certain expenses based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined statement of revenues and
certain expenses is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the combined
statement of revenues and certain expenses. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the combined statement of revenues and
certain expenses. We believe that our audit provides a reasonable basis for our
opinion.

The accompanying combined statement of revenues and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Form S-2 of Malan Realty
Investors, Inc. Material amounts, described in Note 1 to the combined statement
of revenues and certain expenses, that would not be comparable to those
resulting from the proposed future operations of the Midwest Shopping Center
Retail Portfolio are excluded and the statement is not intended to be a complete
presentation of the revenues and expenses of these properties.

In our opinion, such combined statement of revenues and certain expenses
presents fairly, in all material respects, the revenues and certain expenses, as
described above, of the Midwest Shopping Center Retail Portfolio for the year
ended December 31, 1997 in conformity with generally accepted accounting
principles.

KATZ, SAPPER & MILLER, LLP
Certified Public Accountants
Indianapolis, Indiana
May 15, 1998

F-21
<PAGE> 100

MIDWEST SHOPPING CENTER RETAIL PORTFOLIO

COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1997 (AUDITED) AND
THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED)

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
(UNAUDITED)
<S> <C> <C>
REVENUE:
Minimum rents............................................. $820,203 $3,191,986
Recoveries from tenants................................... 144,097 517,382
Interest and other........................................ 7,315 37,986
-------- ----------
Total Revenues....................................... 971,615 3,747,354
CERTAIN EXPENSES:
Property operating and maintenance........................ 49,229 308,158
Real estate taxes......................................... 85,420 290,560
-------- ----------
Total Expenses....................................... 134,649 598,718
-------- ----------
REVENUES IN EXCESS OF CERTAIN EXPENSES...................... $836,966 $3,148,636
======== ==========
</TABLE>

See Accompanying Note to Combined Statements of Revenues and Certain Expenses.

F-22
<PAGE> 101

MIDWEST SHOPPING CENTER RETAIL PORTFOLIO

NOTE TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1997 (AUDITED) AND
THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Midwest Shopping Center Retail Portfolio ("Properties") consists of
thirteen retail shopping center properties located throughout the Midwestern
United States. Revenue is derived primarily from noncancelable operating lease
agreements that provide for payment of guaranteed minimum rent and other
miscellaneous charges to cover certain operating expenses and have terms which
range up to six years.

The owners of the Portfolio have entered into an agreement to sell the
Properties to Malan Realty Investors, Inc. for an aggregate sales price of $33.7
million. Closing on twelve of the properties is expected to occur on or before
May 29, 1998, while closing on the one remaining property is expected to occur
on or before November 30, 1998.

Basis of Presentation. Operating revenues and certain direct operating
expenses are presented on the accrual basis of accounting. The accompanying
combined statements of revenues and certain expenses are not representative of
the actual operations for the periods presented because certain expenses which
may not be comparable to the expenses expected to be incurred by Malan Realty
Investors in the proposed future operations of the Properties have been
excluded. Expenses excluded are interest, depreciation and amortization,
management fees and other costs not directly related to the future operations of
the Properties.

Revenue Recognition. Minimum rents are recorded on the straight-line method
over the terms of the related leases. Percentage rents are recognized as earned
on the accrual basis over the terms of the leases. The leases also typically
provide for tenant reimbursement of common areas maintenance and other operating
expenses which are included in the accompanying combined statement of revenues
and certain expenses as recoveries from tenants.

The approximate future minimum rent revenues under operating leases for
years subsequent to December 31, 1997, assuming no new or renegotiated leases,
or option extensions are as follows:

<TABLE>
<S> <C>
1998........................................................ $ 3,348,469
1999........................................................ 3,228,387
2000........................................................ 2,882,358
2001........................................................ 2,137,549
2002........................................................ 1,393,077
2003 and thereafter......................................... 1,719,107
-----------
Total.................................................. $14,708,947
===========
</TABLE>

Unaudited Interim Statements: The unaudited interim combined statement of
revenue and certain expenses has been prepared in accordance with the accounting
policies described above. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the combined statement of revenues and certain expenses for the
interim period have been made. The results for the interim period are not
necessarily indicative of the results for a full fiscal year.

F-23
<PAGE> 102

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

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

SUMMARY TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................... 5
Risk Factors............................. 13
Use of Proceeds.......................... 21
Price Range of Common Stock and
Distribution History................... 21
Capitalization........................... 22
Selected Financial Data.................. 23
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 25
Business and Properties.................. 32
Mortgage Indebtedness.................... 47
Recent Developments...................... 47
Policies with Respect to Certain
Activities............................. 49
Management............................... 51
Principal Shareholders................... 55
Description of Common Stock.............. 57
Certain Provisions of the Articles of
Incorporation and Bylaws............... 58
Restrictions on Transfer................. 59
Federal Income Tax Considerations........ 59
ERISA Considerations..................... 69
Underwriting............................. 71
Legal Matters............................ 72
Experts.................................. 72
Available Information.................... 72
Incorporation by Reference............... 73
Glossary................................. 74
Index to Financial Statements............ F-1
</TABLE>

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

=========================================================
- ---------------------------------------------------------

1,500,000 SHARES

MALAN REALTY LOGO

MALAN REALTY

INVESTORS, INC.

COMMON STOCK

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

PROSPECTUS

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

RONEY CAPITAL MARKETS LOGO

FIRST OF MICHIGAN CORPORATION LOGO

, 1998

=========================================================
<PAGE> 103

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.(1)

Malan Realty Investors, Inc. (the "Registrant") estimates that expenses
payable by the Registrant in connection with the sale of the securities being
registered (other than underwriting discounts and commissions) will be as
follows:

<TABLE>
<S> <C>
Registration Fee............................................ $ 9,013
Printing.................................................... 125,000
Legal Fees and Expenses..................................... 135,000
NASD Fee.................................................... 3,555
NYSE Additional Listing Fee................................. 5,250
Accounting Fees and Expenses................................ 60,000
Blue Sky Fees and Expenses.................................. 1,000
Miscellaneous............................................... 5,000
--------
Total.................................................. $343,818
========
</TABLE>

(1) All amounts except the registration fee are estimates.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Registrant's Articles of Incorporation provide that no director of the
Registrant shall be liable to the Registrant or the shareholders for monetary
damages for breach of the director's fiduciary duty. Such provision does not
limit a director's liability to the Registrant or its shareholders resulting
from:

(i) breach of the director's duty of loyalty to the Registrant or its
shareholders;

(ii) acts or omissions of the director not in good faith or that
involve intentional misconduct or knowing violation of law;

(iii) a violation of Section 551(1) of the Michigan Business Corporation
Act (relating to unlawful payments of distributions);

(iv) a transaction from which the director derived an improper personal
benefit; or

(v) any act or omission occurring prior to November 20, 1992.

The Registrant's Articles of Incorporation provide for mandatory
indemnification by the Registrant of its directors (including directors of
subsidiaries) to the fullest extent permitted or not prohibited by existing law
or to such greater extent as may be permitted or not prohibited under succeeding
provisions of law. The Registrant's Articles of Incorporation provide that the
Registrant shall pay the expenses incurred by a director of the Registrant
(including a director of a subsidiary) in defending a civil or criminal action,
suit, or proceeding involving such person's acts or omissions as a director of
the Registrant (or of a subsidiary).

The Registrant's Articles of Incorporation authorize the Registrant to
indemnify any officer of the Registrant (or of a subsidiary), if such person
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Registrant or its shareholders and,
with respect to a criminal action or proceeding, if the person had no reasonable
cause to believe his or her conduct was unlawful. Unless ordered by a court,
indemnification of an officer shall be made by the Registrant only as authorized
in a specific case upon the determination that indemnification of the officer is
proper in the circumstances because he or she has met the applicable standard of
conduct. Such determination shall be made (i) by majority vote of the directors
of the Registrant who are not parties to the action, suit or proceeding, (ii) by
independent legal counsel in a written opinion, or (iii) by the shareholders of
the Registrant. The Registrant's Articles of Incorporation authorize the
Registrant to pay the expenses incurred by an officer in defending a civil or
criminal action, suit, or proceeding in advance of the final disposition
thereof, upon receipt of an undertaking by or on behalf of such officer to repay
the expenses if it is ultimately

II-1
<PAGE> 104

determined that the person is not entitled to be indemnified by the Registrant.
Such undertaking shall be by unlimited general obligation of the person on whose
behalf advances are made but need not be secured.

The Registrant has the power to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee, or agent of the
Registrant or is liable as a director of the Registrant, or is or was serving,
at the request of the Registrant, as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, regardless of whether the
Registrant would have power to indemnify him against such liability.

The Registrant has purchased a policy of directors' and officers' insurance
that insures both the Registrant and its officers and directors against expenses
and liabilities of the type normally insured against under such policies,
including the expense of the indemnifications described above.

ITEM 16. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <S> <C>
*1 -- Form of Underwriting Agreement.
3(a) -- Amended and Restated Articles of Incorporation of Malan
Realty Investors, Inc. (incorporated herein by reference to
Exhibit 3(a) filed with the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994 (the "1994
Second Quarter Form 10-Q").
3(b) -- By-Laws of Malan Realty Investors, Inc. (incorporated herein
by reference to Exhibit 3(b) filed with the 1994 Second
Quarter Form 10-Q).
4(a) -- Indenture, dated as of June 24, 1994, between Malan Realty
Investors, Inc. and The Bank of New York, as Trustee, with
respect to the 9 1/2% Convertible Subordinated Debentures
due 2004 (incorporated herein by reference to Exhibit 4(a)
filed with the 1994 Second Quarter Form 10-Q).
4(b) -- Indenture, dated as of June 24, 1994, between Malan Realty
Investors, Inc. and IBJ Schroeder, as Trustee, with respect
to the 8 1/2% Secured Convertible Notes due 2003
(incorporated herein by reference to Exhibit 4(b) filed with
the 1994 Second Quarter Form 10-Q).

*5 -- Opinion of Miro Weiner & Kramer, counsel to Registrant, as
to the validity of the Securities.

II-2
<PAGE> 105

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <S> <C>
10(g) -- Malan Realty Investor, Inc. 1995 Stock Option Plan for
Non-Employee Directors (incorporated herein by reference to
Exhibit 10(p) filed with the 1994 Form 10-K).
10(h) -- Malan Realty Investors, Inc. 1995 Stock Compensation Plan
for Non-Employee Directors (incorporated herein by reference
to Exhibit 10(q) filed with the 1994 Form 10-K).
10(i) -- Purchase and Sale Agreement, dated as of April 13, 1995,
between Malan Realty Investors, Inc. and Clinton Pointe
Joint Venture (incorporated herein by reference to Exhibit
10(s) filed with the 1995 First Quarter Form 10-Q).
10(j) -- Agreement of Sale and Purchase, dated as of July 18, 1995,
among TG-Ford Associates and Ford Motor Land Development
Corporation, collectively, and Malan Realty Investors, Inc.
(incorporated herein by reference to Exhibit 10(x) filed
with the 1995 Second Quarter Form 10-Q).
10(k) -- $63,000,000 Amended and Restated Credit Agreement, dated as
of August 16, 1995, between Malan Realty Investors, Inc. and
National Westminster Bank Plc, New York Branch (incorporated
herein by reference to Exhibit 10(y) filed with Malan Realty
Investors, Inc.'s Amended Quarterly Report on Form 10-Q/A
for the quarter ended September 30, 1995 (the "1995 Third
Quarter Form 10-Q/A")).
10(l) -- $63,000,000 Malan Mortgage Securities Trust 1995-A, Trust
and Servicing Agreement, dated as of August 16, 1995, by and
among Malan Depositor, Inc., as Depositor, Banker's Trust
Company, as Servicer, and Marine Midland Bank, as Trustee
(incorporated herein by reference to Exhibit 10(z) field
with the 1995 Third Quarter Form 10-Q/A).
10(m) -- First Amendment to Employment Agreement, dated as of August
15, 1997 between the Company and Anthony S. Gramer
(incorporated herein by reference to Exhibit 10(m) filed
with the 1997 Form 10-K).
10(n) -- Change in Control Agreement, dated as of August 15, 1997
between the Company and Michael K. Kaline (incorporated
herein by reference to Exhibit 10(n) filed with the 1997
Form 10-K).
10(o) -- Change in Control Agreement, dated as of August 15, 1997
between the Company and Elliott Broderick (incorporated
herein by reference to Exhibit 10(o) filed with the 1997
Form 10-K).
10(p) -- Revolving Loan Agreement among Malan Revolver Inc., as
Company, Malan Realty Investors, Inc. as Parent and
Greenwich Capital Markets, Inc. as Lender dated as of
November 24, 1997 (incorporated herein by reference to
Exhibit 10(p) filed with the 1997 Form 10-K).
10(q) -- Agreement for Purchase of Real Estate between Brandon
Associates Westland, L.L.C., "Seller" and Malan Realty
Investors, Inc., "Buyer" dated as of January 29, 1998
(incorporated herein by reference to Exhibit 10(q) filed
with the 1997 Form 10-K).
*10(r) -- Agreement of Sale and Purchase between Sandor Development
Company, as agent for sellers, and Malan Realty Investors,
Inc., as buyer dated as of May 6, 1998.
*10(s) -- Loan Agreement among Malan Midwest, L.L.C., and Bloomfield
Acceptance Company, L.L.C., dated as of May 27, 1998.
23(a) -- Consent of Deloitte & Touche LLP.
*23(b) -- Consent of Miro Weiner & Kramer (included in Exhibits 5 and
8).
23(c) -- Consent of Katz, Sapper & Miller, LLP.
*24 -- Powers of Attorney.
</TABLE>

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

* Previously Filed

II-3
<PAGE> 106

ITEM 17. UNDERTAKINGS.

A. Rule 415 Offering.

The Registrant undertakes:

(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:

(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement; and

(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in this
Registration Statement;

(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof; and

(3) to remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the
termination of the offering.

Paragraphs (1)(i) and (1)(ii) above do not apply if the information required to
be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.

B. Filings Incorporating Subsequent Exchange Act Documents by Reference.

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

C. Request for Acceleration of Effective Date or Filing of Registration
Statement on Form S-8.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the 1933 Act and
is, therefor, unenforceable. In the event that claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by

II-4
<PAGE> 107

controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.

The undersigned Registrant hereby undertakes to supplement the Prospectus,
after the expiration of the subscription period, to set forth the results of the
subscription offer, the transactions by the underwriters during the subscription
period, the amount of unsubscribed securities to be purchased by the
underwriters, and the terms of any subsequent reoffering thereof. If any public
offering by the underwriters is to be made on terms differing from those set
forth on the cover page of the Prospectus, a post-effective amendment will be
filed to set forth the terms of such offering.

II-5
<PAGE> 108

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-2 and has duly caused this Amendment
No. 2 to Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Birmingham, State of Michigan, on the
2nd day of June, 1998.

MALAN REALTY INVESTORS, INC.

By: /s/ ANTHONY S. GRAMER

------------------------------------
Anthony S. Gramer, President and
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ ANTHONY S. GRAMER President, Chief Executive June 2, 1998
- ----------------------------------------------------- Officer, and Director
Anthony S. Gramer

/s/ ELLIOTT J. BRODERICK Chief Accounting Officer June 2, 1998
- -----------------------------------------------------
Elliott J. Broderick

* Director June 2, 1998
- -----------------------------------------------------
Robert D. Kemp, Jr.

* Director June 2, 1998
- -----------------------------------------------------
William McBride III

* Director June 2, 1998
- -----------------------------------------------------
William F. Pickard

* Director June 2, 1998
- -----------------------------------------------------
Richard T. Walsh

*By: /s/ ELLIOTT J. BRODERICK
------------------------------------------------
Elliott J. Broderick
Attorney-in-Fact
</TABLE>

II-6
<PAGE> 109

EXHIBIT INDEX

*1 -- Form of Underwriting Agreement.
3(a) -- Amended and Restated Articles of Incorporation of Malan
Realty Investors, Inc. (incorporated herein by reference to
Exhibit 3(a) filed with the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994 (the "1994
Second Quarter Form 10-Q").
3(b) -- By-Laws of Malan Realty Investors, Inc. (incorporated herein
by reference to Exhibit 3(b) filed with the 1994 Second
Quarter Form 10-Q).
4(a) -- Indenture, dated as of June 24, 1994, between Malan Realty
Investors, Inc. and The Bank of New York, as Trustee, with
respect to the 9 1/2% Convertible Subordinated Debentures
due 2004 (incorporated herein by reference to Exhibit 4(a)
filed with the 1994 Second Quarter Form 10-Q).
4(b) -- Indenture, dated as of June 24, 1994, between Malan Realty
Investors, Inc. and IBJ Schroeder, as Trustee, with respect
to the 8 1/2% Secured Convertible Notes due 2003
(incorporated herein by reference to Exhibit 4(b) filed with
the 1994 Second Quarter Form 10-Q).

*5 -- Opinion of Miro Weiner & Kramer, counsel to Registrant, as
to the validity of the Securities.

*8 -- Opinion of Miro Weiner & Kramer, counsel to Registrant, as
to certain tax matters.
10(a) -- The Malan Realty Investors, Inc. 1994 Stock Option Plan
(incorporated herein by reference to Exhibit 10(a) filed
with the 1994 Second Quarter Form 10-Q).
10(b) -- Employment Agreement, dated as of June 25, 1994, between
Malan Realty Investors, Inc. and Anthony S. Gramer
(incorporated herein by reference to Exhibit 10(b) filed
with the 1994 Second Quarter Form 10-Q).
10(c) -- Note Purchase Agreement, dated as of June 24, 1994, between
Malan Realty Investors Inc. and Merrill Lynch Global
Allocation Fund, Inc. (incorporated herein by reference to
Exhibit 10(e) filed with the 1994 Second Quarter Form 10-Q).
10(d) -- Warrant Agreement, dated as of June 17, 1994, between Malan
Realty Investors, Inc. and National Westminster Bank Plc,
New York Branch (incorporated herein by reference to Exhibit
10(f) filed with the 1994 Second Quarter Form 10-Q).
10(e) -- Mortgage, Security Agreement, Assignment of Rents and
Financing Statement, dated as of June 24, 1994, made by
Malan Realty Investors, Inc. to IBJ Schroeder Bank & Trust
Company, as modified by First Modification of Mortgage,
Security Agreement, Assignment of Rents and Financing
Statement, dated as of August 1, 1994 (incorporated herein
by reference to Exhibit 10(g) filed with the 1994 Second
Quarter Form 10-Q).
10(f) -- Registration Rights Agreement, dated as of June 24, 1994,
between Malan Realty Investors, Inc. and Merrill Lynch
Global Allocation Fund, Inc. (incorporated herein by
reference to Exhibit 10(h) filed with the 1994 Second
Quarter Form 10-Q).
10(g) -- Malan Realty Investor, Inc. 1995 Stock Option Plan for
Non-Employee Directors (incorporated herein by reference to
Exhibit 10(p) filed with the 1994 Form 10-K).
10(h) -- Malan Realty Investors, Inc. 1995 Stock Compensation Plan
for Non-Employee Directors (incorporated herein by reference
to Exhibit 10(q) filed with the 1994 Form 10-K).
10(i) -- Purchase and Sale Agreement, dated as of April 13, 1995,
between Malan Realty Investors, Inc. and Clinton Pointe
Joint Venture (incorporated herein by reference to Exhibit
10(s) filed with the 1995 First Quarter Form 10-Q).
10(j) -- Agreement of Sale and Purchase, dated as of July 18, 1995,
among TG-Ford Associates and Ford Motor Land Development
Corporation, collectively, and Malan Realty Investors, Inc.
(incorporated herein by reference to Exhibit 10(x) filed
with the 1995 Second Quarter Form 10-Q).
</TABLE>

<PAGE> 110

<TABLE>
<S> <C> <C>
10(k) -- $63,000,000 Amended and Restated Credit Agreement, dated as of August 16, 1995, between Malan Realty
Investors, Inc. and National Westminster Bank Plc, New York Branch (incorporated herein by reference
to Exhibit 10(y) filed with Malan Realty Investors, Inc.'s Amended Quarterly Report on Form 10-Q/A for
the quarter ended September 30, 1995 (the "1995 Third Quarter Form 10-Q/A")).
10(l) -- $63,000,000 Malan Mortgage Securities Trust 1995-A, Trust and Servicing Agreement, dated as of August
16, 1995, by and among Malan Depositor, Inc., as Depositor, Banker's Trust Company, as Servicer, and
Marine Midland Bank, as Trustee (incorporated herein by reference to Exhibit 10(z) field with the 1995
Third Quarter Form 10-Q/A).
10(m) -- First Amendment to Employment Agreement, dated as of August 15, 1997 between the Company and Anthony
S. Gramer (incorporated herein by reference to Exhibit 10(m) filed with the 1997 Form 10-K).
10(n) -- Change in Control Agreement, dated as of August 15, 1997 between the Company and Michael K. Kaline
(incorporated herein by reference to Exhibit 10(n) filed with the 1997 Form 10-K).
10(o) -- Change in Control Agreement, dated as of August 15, 1997 between the Company and Elliott Broderick
(incorporated herein by reference to Exhibit 10(o) filed with the 1997 Form 10-K).
10(p) -- Revolving Loan Agreement among Malan Revolver, Inc., as Company, Malan Realty Investors, Inc. as
Parent and Greenwich Capital Markets, Inc. As Lender dated as of November 24, 1997 (incorporated
herein by reference to Exhibit 10(p) filed with the 1997 Form 10-K).
10(q) -- Agreement For Purchase of Real Estate between Brandon Associates Westland, L.L.C., "Seller" and Malan
Realty Investors, Inc., "Buyer" dated as of January 29, 1998 (incorporated herein by reference to
Exhibit 10(q) filed with the 1997 Form 10-K).

*10(r) -- Agreement of Sale and Purchase between Sandor Development Company, as agent for sellers, and Malan
Realty Investors, Inc., as buyer dated as of May 6, 1998.

*10(s) -- Loan Agreement among Malan Midwest, L.L.C., and Bloomfield Acceptance Company, L.L.C., dated as of May
29, 1998.
23(a) -- Consent of Deloitte & Touche LLP.

*23(b) -- Consent of Miro Weiner & Kramer (included in Exhibits 5 and 8).
23(c) -- Consent of Katz, Sapper & Miller, LLP.

*24 -- Powers of Attorney.
</TABLE>

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

* Previously Filed

<PAGE> 1

EXHIBIT 23(a)

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Amendment No. 2 to Registration Statement No.
333-48937 of Malan Realty Investors, Inc. on Form S-2 of our report dated
January 30, 1998, included in the Annual Report on Form 10-K of Malan Realty
Investors, Inc. for the year ended December 31, 1997, and to the use of our
report dated January 30, 1998, appearing in the Prospectus, which is part of
this Registration Statement. We also consent to the reference to us under the
heading "Experts" in such Prospectus.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Detroit, Michigan
May 29, 1998

<PAGE> 1

EXHIBIT 23(c)

CONSENT OF INDEPENDENT AUDITORS

We consent to the use in this Registration Statement of Malan Realty Investors,
Inc. on Form S-2 of our report on the combined statement of revenues and
certain expenses of the Midwest Shopping Center Retail Portfolio dated May 15,
1998, appearing in the Prospectus, which is part of this Registration
Statement, and to the reference to us under the heading "Experts" in such
Prospectus.

/s/ Katz, Sapper & Miller, LLP
KATZ, SAPPER & MILLER, LLP
Certified Public Accountants

Indianapolis, Indiana
June 1, 1998