S-3/A

As filed with the United States Securities and Exchange Commission on October 18, 2005

Registration No. 333-128458

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

PRE-EFFECTIVE AMENDMENT NO.1 TO

FORM S-3

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

BRT REALTY TRUST

(Exact name of registrant as specified in its charter)

Massachusetts	13-2755856
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

60 Cutter Mill Road

Great Neck, New York 11021

(516) 466-3100

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Mark H. Lundy, Esq.

Senior Vice President

BRT Realty Trust

60 Cutter Mill Road

Great Neck, New York 11021

(516) 466-3100

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copy to:

Jeffrey A. Baumel, Esq. McCarter & English, LLP Four Gateway Center 100 Mulberry Street Newark, New Jersey 07102 (973) 622-4444 Wayne D. Boberg, Esq. Winston & Strawn LLP 35 West Wacker Drive Chicago, Illinois 60601 (312) 558-5600

Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement.

If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box.  ¨

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box.  x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.  ¨

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 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus supplement and accompanying prospectus is not complete and may be changed. We may not sell these securities until the prospectus supplement is delivered. This prospectus supplement and the accompanying prospectus are not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED OCTOBER 18, 2005

PRELIMINARY PROSPECTUS SUPPLEMENT

(To Prospectus dated October 18, 2005)

1,600,000 Preferred Shares

        % Series A Cumulative Redeemable Preferred Shares

Liquidation Preference $25.00 Per Share

We are offering 1,600,000 shares of our         % Series A Cumulative Redeemable Preferred Shares, par value $1.00 per share, which we refer to as our Series A Preferred Shares. We will pay cumulative dividends on our Series A Preferred Shares from the date of original issuance in the amount of $            per share, each year, which is equivalent to             % of the $25.00 liquidation preference per share. Dividends will be payable quarterly in arrears, beginning on December 15, 2005. Holders of our Series A Preferred Shares will generally have no voting rights, but will have limited voting rights if we fail to pay dividends for six or more quarters and in certain other events.

We may not redeem our Series A Preferred Shares until                     , 2010, except in limited circumstances. On or after                     , 2010, we may, at our option, redeem our Series A Preferred Shares, in whole or in part, at any time and from time to time, for cash at $25.00 per share, plus accrued and unpaid dividends, if any, to the redemption date. Our Series A Preferred Shares have no stated maturity date and will not be convertible into any other securities. Our Series A Preferred Shares are subject to certain restrictions on ownership and transfer designed to preserve our qualification as a real estate investment trust for federal income tax purposes.

No public market currently exists for our Series A Preferred Shares. We intend to file an application to list our Series A Preferred Shares on the New York Stock Exchange (NYSE) under the symbol “BRT PrA.” If this application is approved, we expect trading of our Series A Preferred Shares to commence within 30 days of their initial delivery. Our common shares are listed on the NYSE under the symbol “BRT.”

Investing in our Series A Preferred Shares involves risks. You should carefully consider the information under the headings “Additional Risk Factors” on page S-11 of this prospectus supplement and “ Risk Factors” on page 3 of the accompanying prospectus before deciding whether to invest in our Series A Preferred Shares.

	Per Share		Total
Public Offering Price	$	25.00	$	40,000,000
Underwriting Discounts and Commissions	$	0.7875	$	1,260,000
Proceeds, Before Expenses, to Us	$	24.2125	$	38,740,000

The underwriters are severally underwriting the Series A Preferred Shares being offered. We have granted the underwriters a 30-day option to purchase up to an additional 240,000 of our Series A Preferred Shares to cover over-allotments, if any, at the public offering price per share, less the underwriting discounts and commissions.

The underwriters expect that the Series A Preferred Shares will be available for delivery in book-entry form through the facilities of the Depository Trust Company on or about                     , 2005.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.

FRIEDMAN BILLINGS RAMSEY

RYAN BECK & CO.

STIFEL, NICOLAUS & COMPANY

                            INCORPORATED

                                  CANTOR FITZGERALD

October     , 2005

You should rely only on the information contained in or incorporated by reference into this prospectus supplement and the accompanying prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. The information in this prospectus supplement and the accompanying prospectus is accurate only as of the date it is presented. Our business, financial condition, results of operations and prospects may have changed since these dates.

TABLE OF CONTENTS

PROSPECTUS SUPPLEMENT
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION	ii
OUR COMPANY	S-1
THE OFFERING	S-5
USE OF PROCEEDS	S-7
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA	S-8
CAPITALIZATION	S-9
RATIO OF EARNINGS TO COMBINED FIXED CHARGES	S-10
ADDITIONAL RISK FACTORS	S-11
OUR MANAGEMENT	S-13
DESCRIPTION OF SERIES A PREFERRED SHARES	S-16
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS	S-24
UNDERWRITING	S-27
LEGAL MATTERS	S-28
EXPERTS	S-28
INCORPORATION BY REFERENCE	S-28
PROSPECTUS DATED OCTOBER 18, 2005
ABOUT THIS PROSPECTUS	1
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS	2
ABOUT BRT REALTY TRUST	3
RISK FACTORS	3
USE OF PROCEEDS	11
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES	11
DESCRIPTION OF SECURITIES	12
PROVISIONS OF OUR DECLARATION OF TRUST	15
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS	17
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS	19
PLAN OF DISTRIBUTION	33
LEGAL MATTERS	34
EXPERTS	34
INCORPORATION BY REFERENCE	34
WHERE YOU CAN FIND MORE INFORMATION	35

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This prospectus supplement and the accompanying prospectus contain or incorporate by reference certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements, some of which are based on various assumptions and events that are beyond our control, may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “anticipate,” “continue,” “intends,” plans,” “estimates” or similar terms or variations on those terms or the negative of those terms. Actual results could differ materially from those set forth in forward-looking statements due to a variety of factors, including, but not limited to, our ability to generate sufficient liquidity, including raising equity capital, the amount of interest we earn on our mortgage loans, interest rate fluctuations on our assets that differ from those on our liabilities, changes in the difference between short-term and long-term interest rates, changes in assumptions regarding estimated loan losses or fair value amounts, the availability of financing and, if available, the terms of any financing, growth in markets which we serve, and changes in general market and economic conditions. For a discussion of the risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, please read the “Additional Risk Factors” beginning on page S-11 of this prospectus supplement and “Risk Factors” beginning on page 3 of the accompanying prospectus as well as our Annual Report on Form 10-K for the year ended September 30, 2004, our Quarterly Reports on Form 10-Q for the quarters ended June 30 and March 31, 2005 and December 31, 2004, and our other filings under the Exchange Act. We do not undertake, and specifically disclaim any obligation, to publicly release the results of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

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The following information is qualified in its entirety by the more detailed information and the consolidated financial statements and notes thereto appearing elsewhere in, or incorporated by reference into, this prospectus supplement and the accompanying prospectus. We encourage you to read this prospectus supplement and the accompanying prospectus, as well as the information which is incorporated by reference into this prospectus supplement and the accompanying prospectus, in their entireties. You should carefully consider the factors set forth under “Additional Risk Factors” in this prospectus supplement and “Risk Factors” in the accompanying prospectus before making an investment decision to purchase our Series A Preferred Shares. All references to “we,” “us” or “our company” in this prospectus supplement and the accompanying prospectus mean BRT Realty Trust and its consolidated subsidiaries. Unless otherwise specified, the information in this prospectus supplement assumes that the underwriters do not exercise their over-allotment option described herein under “Underwriting.”

OUR COMPANY

Our Business

We are a real estate investment trust, also known as a REIT, primarily engaged in originating and holding for investment senior and junior commercial mortgage loans secured by real property in the United States. These loans generally have high yields and are short term or bridge loans with an average duration ranging from six months to three years. We generally lend at a floating rate of interest based on a spread over the prime rate and receive an origination fee for the loans we originate. At June 30, 2005, we had 39 loans outstanding that were secured by properties located in 13 states. Our ability to act promptly on loan requests and to expedite a closing provides us with many lending opportunities and enables us to be competitive with other firms that offer similar lending products. As of June 30, 2005, our portfolio consisted of approximately $157.7 million in mortgage loans with an average interest rate of 11.99%. From time to time, we have also participated as both an equity investor in, and as a mortgage lender to, joint ventures which acquire income-producing real property and we have purchased equity securities in other REITs. As of June 30, 2005, we had equity investments totaling approximately $8.9 million in eight real estate joint ventures, and we owned approximately 1.0 million common shares of Entertainment Properties Trust.

We were organized as a business trust under the laws of the Commonwealth of Massachusetts in 1972. Our principal executive offices are located at 60 Cutter Mill Road, Great Neck, New York 11021 and our telephone number is (516) 466-3100. Our website is www.brtrealty.com. The information contained on our website is not part of this prospectus and you should not rely on it in deciding whether to invest in our securities.

Our Investment Strategy and Underwriting Criteria

Our primary strategy is to maintain and increase the cash available for distribution to our shareholders by originating mortgage loans secured by a diversified portfolio of real property. We actively pursue lending opportunities with property owners and prospective property owners who require short-term financing until permanent financing can be obtained or until the property is sold. Our investment policy emphasizes the origination for our own account of short-term senior and junior real estate mortgage loans secured by liens on improved real property which generate rental income. As of June 30, 2005, 93% of the aggregate principal balance of our portfolio consisted of first mortgage loans. Our lending activities focus on operating properties such as multi-family residential properties, office buildings, shopping centers, mixed use buildings, hotels/motels and industrial buildings. We also originate and hold for investment loans secured by improved commercial or multi-family residential property which is vacant, pending renovation and sale or leasing, as well as loans secured by undeveloped real property.

We may sell, from time to time, senior, junior or pari passu participations in mortgage loans that we originate. We may also acquire participations in mortgage loans originated by others, and we may invest in the securities of other REITs.

S-1

When underwriting a loan, the primary focus of our analysis is the intrinsic value of a property, which we determine by considering a number of factors including, without limitation, its location, potential for alternative use, net operating income and local demographics. We also examine the creditworthiness of a borrower or its principals and take into consideration its or their ability to meet the operational needs of the property and the experience of the borrower or its principals in the real estate industry. Because of our emphasis on fundamental property value, we believe that in the event of default, foreclosure and acquisition of title to a property, we will generally be able to manage a property until market conditions present a favorable opportunity to dispose of the property.

Our Origination Process

Loan originations are generated by us in a number of ways. We rely on the relationships developed by our officers and loan originators with real estate investors, commercial real estate brokers, mortgage brokers and bankers. We have also experienced a great deal of repeat business with our borrowers. Once a loan application is processed, it goes through our due diligence process.

Loan approvals are based on a review of property information as well as other due diligence activities undertaken by us, including a site visit to the property, an in-house property valuation, a review of the results of operations of the property or in a case of an acquisition by our borrower, a review of the borrower’s projected results of operations for the property, and a review of the financial condition of the prospective borrower and its principals. If management determines that an environmental assessment of the underlying property is necessary, then such an assessment is conducted by a third-party. Before a loan commitment is issued, a loan must be approved by our loan committee. Loan approval occurs after the assent of not less than four of the seven members of our loan committee, all of whom are our executive officers. We generally obtain a non-refundable cash payment allocable for legal and other expenses from a prospective borrower at the time of issuing a loan commitment, and our loan commitments are generally issued subject to receipt by us of title documentation, in a form satisfactory to us, for the underlying property. The approval of our Board of Trustees is required for each loan which exceeds $20 million in principal amount, and the approval of our Board of Trustees is also required where loans by us to one borrower exceed $30 million, in the aggregate.

We require either a personal guarantee or a “walk-away guarantee” from the principal or principals of the borrower, in substantially all of the loans originated by us. A “walk-away guarantee” generally provides that the full guarantee terminates only if (1) the borrower conveys title to the property to us within a negotiated period of time after a loan default and (2) the borrower or the guarantor satisfy certain obligations, such as current payment of all real estate taxes and operating expenses. The “walk-away guarantee” is intended to provide an incentive to the principals of a borrower to have the collateral deeded to us in lieu of foreclosure, thereby eliminating the cost of foreclosure proceedings. By complying with the terms of the “walk-away guarantee,” the principals of the borrower avoid the further risk of being personally responsible for any difference between the amount owed to us and the amount we recover in a foreclosure proceeding. If we make more than one loan to a borrower, we may require that all outstanding loans to that borrower be cross-collateralized.

Our Loan Portfolio

At June 30, 2005, we had 39 outstanding mortgage loans, aggregating approximately $157.7 million in principal amount before allowances of $669,000, which include senior and junior mortgage loans, senior and junior participations in mortgage loans and loans to joint ventures in which we are an equity participant. Our allowances of $669,000 relate to three of our mortgage loans (to two borrowers), aggregating $3.1 million, which were non-performing as of October 17, 2005. At June 30, 2005, our loan portfolio was secured by real property located in 13 states. Loans representing 49% of the principal amount of our total outstanding loans were secured by properties located in the New York metropolitan area, including New Jersey and Connecticut, 20% of the principal amount by properties located in Florida, 11% of the principal amount by properties located in Tennessee, and 20% of the principal amount by properties in the remaining states.

S-2

During the nine months ended June 30, 2005, we originated approximately $177.3 million of mortgage loans, approximately $113.7 million of our outstanding loans were repaid in whole or in part and we sold participation interests of approximately $38.5 million. Our three largest mortgage loans outstanding at June 30, 2005 of approximately $15.0 million, $13.3 million and $12.6 million represented 6.4%, 5.7% and 5.4%, respectively, of our total assets. There were no other mortgage loans in our portfolio that represented more than 5.0% of our total assets as of June 30, 2005. From the period commencing with our 1999 fiscal year, or October 1, 1998, through June 30, 2005, we originated $630.7 million of real estate loans on which we have realized losses of $212,000.

At June 30, 2005, approximately 92% of our mortgage loans had a floating rate of interest calculated based on a variable spread above the prime rate, with a stated minimum interest rate (also referred to as adjustable rate mortgages), and approximately 8% of our mortgage loans provided for a fixed rate of interest. Interest on our mortgage loans is payable to us monthly. Under our first mortgage loans, we usually require and hold funds in escrow that are payable to us monthly and which are used to pay real estate taxes and casualty insurance premiums. We may require a borrower to fund an interest reserve out of the net loan proceeds, from which all or a portion of the interest payments due us are made for a specified period of time.

Our Credit Facilities

We have two separate credit facilities with a group of banks consisting of North Fork Bank, Valley National Bank, Merchants Bank Division and Signature Bank to finance our real estate mortgage lending. Under the credit facilities, North Fork Bank, Valley National Bank, Merchants Bank Division and Signature Bank make available up to an aggregate of $102 million on a revolving basis, of which $85 million matures, under one facility, on February 16, 2007, and of which $17 million matures, under the other facility, on November 1, 2005. The maximum amount which can be outstanding under the credit facilities is the lesser of 65% of the first mortgages pledged to the lending banks as collateral or $102 million. At September 30, 2005, $102 million was available to be drawn based on the lending formula under our credit facilities and $89 million was outstanding. Borrowings under the credit facilities bear interest at the prime rate of North Fork Bank plus  ¹/2 of 1%, or 7.25% per annum as of September 30, 2005. The loan agreements between us and our lenders contain affirmative and negative covenants, including (1) a requirement that the ratio of shareholders’ equity to bank debt shall not be less than 1.30 to 1.00 until November 1, 2005 and not less than 1.50 to 1.00 thereafter, and (2) a required debt coverage ratio of 1.65 to 1. We are currently engaged in discussions with our lenders with respect to the establishment of an increased credit facility.

We also have the ability to borrow under a margin line of credit maintained with a national brokerage firm, secured by the common shares we own in Entertainment Properties Trust (“EPR”). Under the terms of this line of credit, we may borrow up to an amount equal to 50% of the market value of the EPR shares we own. At September 30, 2005, $22.5 million was available under this facility, of which $21.4 million was outstanding. At September 30, 2005, the interest rate paid on this margin facility was 5.75%.

Our Structure

We share facilities, personnel and other resources with several affiliated entities including, among others, Gould Investors L.P., a limited partnership involved in the ownership and operation of a diversified portfolio of real estate, and One Liberty Properties, Inc., a publicly-traded REIT. See “Certain Relationships and Related Party Transactions” in the accompanying prospectus. Jeffrey A. Gould, our President and Chief Executive Officer, George Zweier, our Vice President and Chief Financial Officer, two officers engaged in loan origination and underwriting activities, and two others engaged in underwriting activities devote substantially all of their business time to our company, while our other personnel share their services on a part-time basis with us and other affiliated entities that share our executive offices. The allocation of expenses for the shared facilities, personnel and other resources is computed in accordance with a shared services agreement by and among us and

S-3

the affiliated entities, which we refer to as the Shared Services Agreement. The allocation is based on the estimated time devoted by executive, administrative and clerical personnel to the affairs of each entity that is a party to the Shared Services Agreement.

In addition, we are party to an advisory agreement, which we refer to as the Advisory Agreement, between us and REIT Management Corp. Pursuant to the Advisory Agreement, REIT Management furnishes advisory and administrative services with respect to our business, including, without limitation, arranging credit lines for us, participating in our loan analysis and approvals, providing investment advice, providing assistance with building inspections and litigation support. For services performed by REIT Management under the Advisory Agreement, REIT Management receives an annual fee of 1% payable on mortgages receivable, subordinated land leases and investments in unconsolidated ventures, as well as an annual fee of  ¹/2 of 1% of our invested assets other than mortgages receivable, subordinated land leases and investments in unconsolidated ventures. During the year ended September 30, 2004 and the nine months ended June 30, 2005, we paid $1.4 million and $1.3 million, respectively, to REIT Management under the Advisory Agreement. In addition, our borrowers pay fees directly to REIT Management based their loans, which generally are one-time fees payable upon funding of the loan commitment in the amount of 1% of the total commitment amount. During the year ended September 30, 2004 and the nine months ended June 30, 2005, these fees totaled $2.0 million and $1.8 million, respectively. REIT management is wholly owned by the chairman of our Board of Trustees and he and other of our executive officers receive compensation, directly or indirectly, from REIT Management.

We believe that the Shared Services Agreement and the Advisory Agreement allow our company to benefit from access to, and from the services of, a group of senior executives with significant real estate knowledge and experience. If not for the structure established under these agreements, we believe that a company of our size would not have access to the skills and expertise of these executives at the cost that it currently incurs.

Our Investment in Entertainment Properties Trust

As of September 30, 2005, we owned approximately 1.0 million common shares of EPR. These shares were purchased at an average cost for book purposes of $13.14 per share. As of September 30, 2005, the market value of this investment was approximately $45.0 million, or $44.63 per share. In our 2005 fiscal year, EPR paid or declared cash dividends to its shareholders at a quarterly rate of $0.625 per share, which provided us with an annual yield of 19% on our book cost. From time to time, we evaluate our investment in EPR and determine whether or not to sell any EPR shares, taking into consideration EPR’s results of operations and business prospects, as well as general market conditions.

Our Real Estate Assets

In addition to originating mortgage loans, we supervise the management of our real estate assets, which include properties that were acquired by foreclosure and properties owned by joint ventures in which we participate as an equity investor. At June 30, 2005, approximately 4% of our total assets, or an aggregate of approximately $9.9 million, were represented by four operating properties, three of which were acquired by foreclosure. At June 30, 2005, approximately 4% of our total assets, or an aggregate of approximately $8.9 million, were represented by interests in the joint ventures that collectively own eight properties. From time to time, we evaluate the status of our real estate assets and determine our short-term and long-term objectives for these investments.

S-4

THE OFFERING

Issuer BRT Realty Trust

Securities offered 1,600,000             % Series A Cumulative Redeemable Preferred Shares (referred to herein as the Series A Preferred Shares). We may sell up to 240,000 additional shares of Series A Preferred Shares upon exercise of the underwriters’ over-allotment option.

Dividends Investors will be entitled to receive cumulative cash dividends on the Series A Preferred Shares at a rate of             % per year of the $25.00 liquidation preference (equivalent to $            per year per share). Beginning on December 15, 2005, dividends will be payable quarterly, when and as declared, in arrears on the fifteenth calendar day of each March, June, September and December or, if not a business day, the next succeeding business day. Dividends will be cumulative from the date of original issuance, which is expected to be October             , 2005. The first dividend, to be paid on December 15, 2005, will be for less than a full quarter and pro rated accordingly. If our common shares are delisted from the New York Stock Exchange or any other national securities exchange or market as a result of a change of control or a going-private transaction, holders of our Series A Preferred Shares will be entitled to receive, when and as authorized by our Board of Trustees and declared by us, out of funds legally available for the payment of dividends, cumulative cash dividends from and after the date of such delisting at a rate of             % (100 basis points in excess of the current dividend) per annum of the $25.00 liquidation preference, equivalent to $            per annum per share. If the date that our common shares cease to be listed occurs prior to             , 2010, then the provisions limiting the redemption of the Series A Preferred Shares will be removed as of the date of such delisting.

Liquidation preference If we liquidate, dissolve or wind up our operations, holders of the Series A Preferred Shares will have the right to receive $25.00 per share, plus accrued and unpaid dividends (whether or not declared) to the date of payment, before any payments are made to the holders of our common shares.

Optional redemption We may not redeem the Series A Preferred Shares prior to             , 2010, except in certain limited circumstances. On or after             , 2010, we may, at our option, redeem the Series A Preferred Shares, in whole or part, at any time and from time to time, for cash at $25.00 per share, plus accrued and unpaid dividends, if any at the redemption date.

Not convertible The Series A Preferred Shares will not be convertible into any other securities.

Limited voting rights Holders of the Series A Preferred Shares will generally have no voting rights, but will have limited voting rights if we fail to pay dividends for six or more quarters and in certain other events.

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Information rights During any period in which we are not subject to the reporting requirements of the Exchange Act, but our Series A Preferred Shares are outstanding, we will mail to all holders of our Series A Preferred Shares, as their names and addresses appear in our record books, copies of the annual reports and quarterly reports that we would have been required to file with the Securities and Exchange Commission if we were so subject (other than any exhibits that would have been required). We will mail the reports within 15 days after the respective dates by which we would have been required to file the reports with the SEC if we were subject to the reporting requirements of the Exchange Act. In addition, during the same period, we will, promptly upon written request, supply copies of such reports to any prospective holder of our Series A Preferred Shares.

Restrictions on Ownership In order to maintain our qualification as a REIT for federal income tax purposes, no person may own, directly or indirectly, more than 22.0% of our Series A Preferred Shares. Our declaration of trust also includes provisions which limit a shareholder’s ownership of our capital stock. See “Description of Series A Preferred Shares – Restrictions on Ownership and Transfer.”

Ranking The Series A Preferred Shares, with respect to dividend rights and the distribution of assets upon our liquidation, dissolution or winding up, will rank (1) senior to all classes or series of our common shares and to all equity securities the terms of which specifically provide that such equity securities rank junior to the Series A Preferred Shares; (2) on a parity with all equity securities issued by us other than those referred to in clauses (1) and (3); (3) junior to all equity securities issued by us the terms of which specifically provide that such equity securities rank senior to such Series A Preferred Shares, and (4) junior to all existing and future indebtedness.

No maturity The Series A Preferred Shares have no stated maturity date.

Listing We intend to list the Series A Preferred Shares on the New York Stock Exchange under the symbol “BRT PrA.” If approved for listing, we expect trading of the Series A Preferred Shares on the NYSE to commence within the 30-day period after the initial delivery of the Series A Preferred shares.

Form The Series A Preferred Shares will be maintained in book-entry form registered in the name of the nominee of The Depository Trust Company, except under limited circumstances.

No rating The Series A Preferred Shares have not been rated.

Use of proceeds We are raising funds in this offering primarily to reduce our indebtedness under our revolving credit facilities.

Risk Factors See “Additional Risk Factors” beginning on page S-11 of this prospectus and “Risk Factors” beginning on page 3 of the accompanying prospectus to read about certain risks you should consider before buying our Series A Preferred Shares.

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USE OF PROCEEDS

The net proceeds from this offering, after deducting the underwriting discount but before our expenses, will be approximately $38.7 million (or approximately $44.5 million if the underwriters exercise their over-allotment option in full). We intend to use the net proceeds from this offering to satisfy all amounts outstanding, if any, under our $17 million credit facility with North Fork Bank, Valley National Bank, Merchants Bank Division and Signature Bank, and we intend to use the balance of the net proceeds to reduce amounts outstanding under our $85 million credit facility with North Fork Bank, Valley National Bank, Merchants Bank Division and Signature Bank. Borrowings under the credit facilities bear interest at the prime rate of North Fork Bank plus  ¹/2 of 1%, or 7.25% per annum as of September 30, 2005. The $85 million credit facility matures on February 16, 2007 and the $17 million credit facility matures on November 1, 2005.

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SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The following selected consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2004 and in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2005. Dollars are in thousands, except per share amounts.

	For the Nine Months Ended June 30,				For the Year Ended September 30,
	2005		2004		2004		2003		2002
	(unaudited)
Consolidated Statement of Operations Data
Interest and fees on real estate loans	$	14,634	$	9,637	$	13,913	$	9,813	$	11,897
Operating income from real estate properties		1,898		1,742		2,294		2,324		2,269
Recovery of previously provided allowances		—		—		—		—		500
Other, primarily investment income		1,908		1,775		2,376		2,667		2,732
Total revenue		18,440		13,154		18,583		14,804		17,398
Total expenses		8,629		7,133		9,642		6,388		6,152
Income before equity in earnings of unconsolidated real estate ventures, gain on sale of available-for-sale securities, minority interest and discontinued operations		9,811		6,021		8,941		8,416		11,246
Gain on sale of available-for-sale securities		680		1,641		1,641		4,332		—
Discontinued operations		—		1,150		1,261		499		807
Net income		10,537		8,854		12,002		13,683		12,586
Income per beneficial share:
Income from continuing operations	$	1.36	$	1.01	$	1.41	$	1.76	$	1.60
Discontinued operations		—		0.15		0.17		0.07		0.11
Basic earnings per share	$	1.36	$	1.16	$	1.58	$	1.83	$	1.71
Income from continuing operations	$	1.35	$	0.99	$	1.39	$	1.73	$	1.57
Discontinued operations		—		0.15		0.16		0.07		0.11
Diluted earnings per share	$	1.35	$	1.14	$	1.55	$	1.80	$	1.68
Cash distribution per common share	$	1.46	$	1.31	$	1.79	$	1.30	$	1.04
	As of June 30,				As of September 30,
	2005		2004		2004		2003		2002
	(unaudited)
Consolidated Balance Sheet Data
Total assets		235,424		187,314		198,005		139,002		134,931
Earning real estate loans (1)		157,739		124,144		132,229		63,733		84,112
Non-earning real estate loans (1)		—		3,096		3,096		3,145		415
Real estate assets (1)		19,106		13,962		14,005		13,391		13,529
Available-for-sale securities at market		50,672		39,362		41,491		36,354		31,178
Borrowed funds		82,163		45,313		53,862		4,755		14,745
Mortgage payable		2,559		2,628		2,609		2,680		2,745
Shareholders’ equity		141,506		130,404		132,063		125,932		114,291

(1) Earning and non-earning loans and real estate assets are presented without deduction of the related allowance for possible losses or any valuation allowance.

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CAPITALIZATION

The following table sets forth our actual capitalization at June 30, 2005 and our capitalization as adjusted to give effect to the issuance of 1,600,000 of our Series A Preferred Shares in this offering at the offering price and the application of the estimated net proceeds from this offering, after deducting the estimated underwriting discount and commissions payable by us. The capitalization information set forth in the table below is qualified by the more detailed consolidated financial statements and notes thereto included in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2005. All figures presented in the table below are expressed in thousands, other than the share information and the figures included in the footnotes to the table.

	As of June 30, 2005
	Actual			As Adjusted (1)
Debt:
Mortgage notes payable	$	2,559		$	2,559
Borrowings under credit facilities		63,550			24,810
Margin loan		18,613			18,613
Total Debt		84,722			45,982
Shareholders’ Equity (2):
Preferred shares, $1 par value: Authorized 10,000,000 shares, none issued (actual) and 1,600,000 (Series A Preferred Shares issued as adjusted)		—			1,600
Shares of beneficial interest, $3 par value: Authorized number of shares - unlimited, issued—8,924,000 shares		26,772			26,772
Additional paid-in capital		83,440			120,580
Accumulated other comprehensive income—net unrealized gain on available-for-sale securities		34,717			34,717
Unearned compensation		(1,528	)		(1,528	)
Retained earnings		8,692			8,692
Cost of 1,229,000 treasury shares (3)		(10,587	)		(10,587	)
Total shareholders’ equity		141,506			180,246
Total capitalization	$	226,228		$	226,228

(1) The “As Adjusted” amounts include the estimated net proceeds, after the underwriting discount and commissions to be paid by us, from the sale of 1,600,000 Series A Preferred Shares in this offering (without giving effect to any exercise of the underwriters’ over-allotment option).

(2) Excludes minority interest of $165,000.

(3) Includes 89,686 common shares reserved for issuance upon the exercise of outstanding options. We have historically transferred shares held by us as treasury shares to our option holders upon their exercise of their options.

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RATIO OF EARNINGS TO COMBINED FIXED CHARGES

The following table sets forth the historical ratio of earnings to combined fixed charges for the periods indicated:

	Nine Months Ended June 30, 2005	Year Ended September 30,
		2004	2003	2002	2001	2000
Ratio of Earnings to Combined Fixed Charges	5.06	7.48	25.06	23.87	13.59	19.33

For purposes of calculating the above ratios, earnings is calculated as income before equity in earnings of unconsolidated real estate ventures, minority interest and discontinued operations plus distributed earnings from equity investees and fixed charges. Fixed charges is calculated as the sum of interest expense and amortization of deferred financing costs. During the period commencing with the Trust’s fiscal year ended September 30, 2000 through June 30, 2005, the Trust did not have any preferred shares outstanding. The ratios are based solely on historical financial information and no pro forma adjustments have been made thereto.

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ADDITIONAL RISK FACTORS

You should consider the following additional risk factors, as well as the risk factors beginning on page 3 of the accompanying prospectus, before deciding to invest in our Series A Preferred Shares. We also refer you to the discussion of risk factors set forth in our Annual Report on Form 10-K for the year ended September 30, 2004, which is incorporated by reference into this prospectus supplement.

Dividends on the Series A Preferred Shares will not be paid unless declared by our Board of Trustees. We will pay quarterly dividends on the Series A Preferred Shares only if declared by our Board of Trustees. The Board of Trustees is not obligated or required to declare quarterly dividends. To the extent not paid, dividends on the Series A Preferred Shares will accrue and accumulate.

Investors in our Series A Preferred Shares may experience losses, volatility and poor liquidity, and we may reduce or delay payment of our dividends in a variety of circumstances. Our earnings, cash flow, book value, and dividends can be volatile and difficult to predict. Although we will seek to pay the regular Series A Preferred Shares dividend in the amount of $            per share each year, we may cut or delay our dividend payments in the future for a variety of reasons. We may not provide public warnings of such dividend reductions or payment delays prior to their occurrence. Fluctuations in our current and prospective earnings, cash flow and dividends, financial condition, performance and prospects, the market for similar securities, as well as many other factors such as general economic conditions, stock market conditions, or conditions in the financial or real estate markets, can affect the price of our Series A Preferred Shares. For example, higher market interest rates could cause the market price of our Series A Preferred Shares to go down. In addition, liquidity in the trading of our shares may be insufficient to allow investors to sell their shares in a timely manner or at a reasonable price.

Our Series A Preferred Shares have not been rated. Our Series A Preferred Shares have not been rated by any nationally recognized statistical rating organization, which may negatively affect their market value and your ability to sell them.

Our Series A Preferred Shares will be subordinate to our existing and future debt. Our Series A Preferred Shares will be subordinate to all of our existing and future debt, including our future debt convertible into our equity securities.

Holders of our Series A Preferred Shares will have limited voting rights. Your voting rights as a holder of Series A Preferred Shares will be limited. Our common shares are the only class of shares that have full voting rights. The voting rights of the Series A Preferred Shares exist primarily with respect to changes in the terms of the Series A Preferred Shares, the creation of additional classes or series of preferred shares that are senior to the Series A Preferred Shares, and in the event we do not pay dividends on the Series A Preferred Shares for six or more quarters. In general, only common shareholders can replace or remove any of our trustees. However, if we do not declare and pay full dividends for a total of six quarters, whether or not such quarters are consecutive, the holders of our Series A Preferred Shares and the holders of all other shares of any class or series ranking on a parity with the Series A Preferred Shares upon which like voting rights have been conferred and are exercisable, will acquire the right, voting as a single class, to appoint two additional trustees. The term of these two additional trustees will terminate when we pay the unpaid cumulative dividends on the Series A Preferred Shares, and those other shares, at which time the term of office of these two additional trustees will expire and the size of the Board of Trustees will be reduced by two trustees. The right to elect two trustees will be triggered again each time full dividends on any outstanding Series A Preferred Shares have not been paid for six or more quarterly periods, whether or not such quarters are consecutive. If holders of any other series of preferred shares have similar voting rights, they may have the right to vote with the holders of Series A Preferred Shares as a class in the election of such trustees.

There is no fixed maturity date or required redemption of the Series A Preferred Shares. There is no fixed maturity date or required redemption of the Series A Preferred Shares. Holders of Series A Preferred Shares do not have the right to require us to redeem or repurchase their shares.

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Listing on the New York Stock Exchange does not guarantee a market for the Series A Preferred Shares. Although we intend to list our Series A Preferred Shares on the New York Stock Exchange, an active or liquid trading market may not develop. If an active trading market does not develop, the market price and liquidity of the Series A Preferred Shares will be adversely affected. Because the Series A Preferred Shares have no stated maturity date, investors seeking liquidity may be limited to selling their Series A Preferred Shares in the secondary market. If a market does develop, it may not be sustained or provide you with a means to sell your Series A Preferred Shares. In addition, we cannot guarantee you that the market price for the Series A Preferred Shares will equal or exceed the price you pay for the Series A Preferred Shares. The marketplace determines the trading prices for the Series A Preferred Shares and may be influenced by many factors, including our history of paying dividends on the Series A Preferred Shares, variations in our financial results, the market for similar securities, investors’ perception of us and general economic, industry, interest rate and market conditions. Because the Series A Preferred Shares will carry a fixed dividend rate, their value in the secondary market will be influenced by changes in interest rates and will tend to move inversely to such changes.

We can redeem the Series A Preferred Shares in our discretion after [            ], 2010. We have an option to redeem your Series A Preferred Shares beginning [            ], 2010. We may redeem the Series A Preferred Shares, in whole or in part, at a redemption price of $25.00 per share, plus accrued and unpaid dividends (whether or not declared), if any, to the redemption date. We can do this even if the market price for our Series A Preferred Shares exceeds the redemption amount payable for those Series A Preferred Shares.

Future offerings of debt or preferred equity securities may adversely affect the value of the Series A Preferred Shares. Our declaration of trust authorizes the issuance of up to 10,000,000 preferred shares in one or more series. Any new series of preferred shares may have rights, including rights to dividends, voting rights and rights to payments on liquidation, equal to those of the Series A Preferred Shares. The issuance of additional preferred shares on a parity with or senior to the Series A Preferred Shares could have the effect of diluting the interests and voting rights of holders of our Series A Preferred Shares. In addition, the Series A Preferred Shares will be subordinated to all our existing and future debt, including debt convertible into our equity securities. The certificate of designations for our Series A Preferred Shares does not contain any specific provisions affording the holders of our Series A Preferred Shares protection in the event of a highly leveraged transaction or other transaction, including a merger or the sale, lease or conveyance of all or substantially all of our assets or business, that might adversely affect the holders of our Series A Preferred Shares.

Your ability to acquire our Series A Preferred Shares is subject to restrictions. The Internal Revenue Code of 1986, as amended, (the “Code”) provides that not more than 50% by value of all of the capital stock of a REIT may be held by five or fewer individuals, directly or constructively, at any time during the last half of any taxable year, which is referred to as the five-or-fewer rule. Our declaration of trust provides that our Board of Trustees may redeem the shares owned by any shareholder if such shareholder’s ownership of our shares would cause our company to not qualify as a REIT pursuant to the five-or-fewer rule or pursuant to other rules applicable to REITs. In order to assure that we do not violate the five-or-fewer rule, the certificate of designation for the Series A Preferred Shares provides that no one person may own, directly or indirectly, in excess of 22.0% of our Series A Preferred Shares. In the event that our Board of Trustees is of the opinion, in good faith, that direct or indirect ownership of our equity securities has or may become concentrated in a manner inconsistent with the REIT provisions of the Code, our Board of Trustees will have the power to call for the redemption of the shares that are causing, or that may cause, such a concentration in ownership at a price equal to the closing bid price for the shares on the date fixed for such redemption. In addition to limiting the investment opportunity for certain investors, this limitation may have the effect of precluding an acquisition of control by a third party without the approval of our Board of Trustees even if a change in control were in your best interest.

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OUR MANAGEMENT

The following sets forth information with respect to our executive officers and trustees:

Name	Age	Office
Fredric H. Gould	70	Chairman of the Board of Trustees
Jeffrey A. Gould	40	President and Chief Executive Officer; Trustee
Matthew J. Gould	46	Senior Vice President; Trustee
Simeon Brinberg	71	Senior Vice President, Secretary
David W. Kalish	58	Senior Vice President, Finance
Israel Rosenzweig	58	Senior Vice President
George E. Zweier	41	Vice President, Chief Financial Officer
Mark H. Lundy	43	Senior Vice President
Seth D. Kobay	50	Vice President, Treasurer
David Heiden	39	Vice President
Mitchell K. Gould	32	Vice President
Kenneth F. Bernstein	44	Trustee
Patrick J. Callan	69	Trustee
Louis Grassi	49	Trustee
David Herold	63	Trustee
Gary Hurand	57	Trustee
Jeffrey Rubin	37	Trustee

Fredric H. Gould has been our Chairman of the Board of Trustees since 1983. He was our Chief Executive Officer from 1996 to December 31, 2001. Mr. Gould has also served as Chairman of the Board of Directors, since 1989, and as President and Chief Executive Officer, from December 1999 to December 2001 and from July 2005 through the present, of One Liberty Properties, Inc., a real estate investment trust engaged in the ownership of income producing real properties leased to tenants under long term leases. Since 1985, Mr. Gould has been an executive officer (and is currently Chairman of the Board) of Georgetown Partners, Inc., the managing general partner of Gould Investors L.P., a limited partnership primarily engaged in the ownership and operation of real properties, and he serves as sole member of a limited liability company that is the other general partner of Gould Investors L.P. He is president of the advisor to BRT Realty Trust and a director of East Group Properties, Inc., a REIT the securities of which are traded on the New York Stock Exchange. Fredric H. Gould is the father of Jeffrey A. and Matthew J. Gould.

Jeffrey A. Gould has been our President and Chief Executive Officer since January 1, 2002. From March 1996 to January 1, 2002, he was our President and Chief Operating Officer. Mr. Gould has served as a member of the Board of Trustees of BRT Realty Trust since March 1997. Further, Mr. Gould has been Vice President since 1989 and a Senior Vice President and director since December 1999 of One Liberty Properties, Inc. He has also served as a Senior Vice President of the managing general partner of Gould Investors L.P. since 1996. Jeffrey A. Gould is the son of Fredric H. Gould.

Matthew J. Gould has been a Senior Vice President since 1996. He has been a member of our Board of Trustees since June 2004 and was previously a member of our Board of Trustees from March 2001 to March 2004. Mr. Gould also serves as a Vice President of the advisor to BRT Realty Trust. Additionally, Mr. Gould served as President and Chief Executive Officer from 1989 to December 1999 of One Liberty Properties, Inc. and became a Senior Vice President and member of its Board of Directors in December 1999. Further, Mr. Gould has served as President of the managing general partner of Gould Investors L.P. since 1996. Matthew J. Gould is the son of Fredric H. Gould.

Simeon Brinberg has been our Secretary since 1983 and a Senior Vice President since 1988. Mr. Brinberg has been a Vice President of Georgetown Partners, Inc., the managing general partner of Gould Investors L.P., since October 1988. Since June 1989, Mr. Brinberg has been a Vice President of One Liberty Properties, Inc.

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Mr. Brinberg is a member of the bar of New York and was engaged in the private practice of law for approximately thirty years prior to 1988. Simeon Brinberg is the father-in-law of Mark H. Lundy.

David W. Kalish has been our Senior Vice President, Finance since August 1998. He was our Vice President and Chief Financial Officer from June 1990 until August 1998. He has also been Chief Financial Officer of One Liberty Properties, Inc. and Georgetown Partners, Inc. since June 1990. For more than five years prior to June 1990, Mr. Kalish, a certified public accountant, was a partner of Buchbinder Tunick & Company and its predecessors.

Israel Rosenzweig has been a Senior Vice President since April 1998. Mr. Rosenzweig has been a Vice President of Georgetown Partners, Inc. since May 1997 and since 2000 he has been President of GP Partners, Inc., an affiliate of Gould Investors L.P. which is engaged in providing advisory services in the real estate and financial services industries to an investment advisor. He also has been a Senior Vice President of One Liberty Properties, Inc. since May 1997.

George E. Zweier has been employed by us since June 1998 and was elected Vice President, Chief Financial Officer in August 1998. For approximately five years prior to joining us, Mr. Zweier, a certified public accountant, was an accounting officer with the Bank of Tokyo—Mitsubishi Limited in its New York office.

Mark H. Lundy has been a Senior Vice President since March 2005 and, prior to that, was a Vice President since 1993. He has been Secretary of One Liberty Properties, Inc. since June 1993 and he also serves as a Senior Vice President of One Liberty Properties, Inc. Mr. Lundy has been a Vice President of Georgetown Partners, Inc. since July 1990. He is a member of the bars of New York and Washington, D.C. Mark H. Lundy is the son-in-law of Simeon Brinberg.

Seth D. Kobay has been a Vice President and our Treasurer since March 1994. In addition, Mr. Kobay, a certified public accountant, has been the Vice President of Operations of Georgetown Partners, Inc. for more than the past five years and is a Vice President and Treasurer of One Liberty Properties, Inc.

David Heiden has been employed by us since April 1998 and has been a Vice President since March 1999. From May 1997 until April 1998, Mr. Heiden was an associate at GMAC Commercial Mortgage engaged in originating and underwriting commercial real estate loans for securitization. He is a licensed real estate appraiser and real estate broker.

Mitchell K. Gould has been employed by us since May 1998 and has been a Vice President since March 1999. From January 1998 until May 1998, he was employed by Bear Stearns Companies, Inc. where he was engaged in originating and underwriting commercial real estate loans for securitization. Mr. Gould is President of the Metropolitan Mortgage Officers Association and a director of the Young Mortgage Bankers Association.

Kenneth F. Bernstein has been a member of our Board of Trustees since March 2004. Mr. Bernstein has served as President and Chief Executive Officer of Acadia Realty Trust since January 2001 and has served as President of Acadia Realty Trust since August 1998.

Patrick J. Callan has been a member of our Board of Trustees since March 1984. Mr. Callan has been a real estate consultant since January 2001 and was a senior principal of the RREEF Funds, a real estate investment manager for pension funds, from 1984 to January 2001. In addition, Mr. Callan has served as a director of M&T Bank Corporation and as the Advisory Director of M&T Bank Corporation, New York City Division.

Louis Grassi has been a member of our Board of Trustees since March 2003. Mr. Grassi has been the managing partner of Grassi & Co., CPAs since 1984 and is a director of the Flushing Financial Corp.

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David Herold has been a member of our Board of Trustees since March 1997. Mr. Herold is a private investor who served as the President and Chief Executive Officer of Metro Bancshares, Inc., the savings and loan holding company for Bayside Federal Saving and Loan Association, from 1988 to 1994.

Gary Hurand has been a member of our Board of Trustees since March 1990. Since 1973, Mr. Hurand has served as President of Dawn Donut Systems, Inc. In addition, Mr. Hurand has served as President of Management Diversified, Inc., a real property management and development company, since 1987. Mr. Hurand also serves as a member of the Board of Directors of Republic Bancorp, Inc.

Jeffrey Rubin has been a member of our Board of Trustees since March 2004. Mr. Rubin has also served as President and director of Newtek Business Services, Inc., a holding company for several wholly and majority owned operating subsidiaries and certified capital companies, since February 1999.

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DESCRIPTION OF SERIES A PREFERRED SHARES

The following is a summary of the terms and provisions of the Series A Preferred Shares. This is a summary and does not completely describe our Series A Preferred Shares. For a complete description, we refer you to our Third Amended and Restated Declaration of Trust (which we refer to as our declaration of trust), the certificate of designations designating the Series A Preferred Shares and our bylaws, each of which is incorporated by reference in this prospectus supplement and the accompanying prospectus.

General

Under our declaration of trust, our Board of Trustees is authorized to issue an unlimited number of shares of beneficial interest, par value $3.00 per share, which we refer to in this prospectus supplement as our common shares, and 10,000,000 shares of preferred stock, par value $1.00 per share, which we refer to in this prospectus supplement as our preferred shares. Our Board of Trustees has adopted a certificate of designations which is part of our declaration of trust and which establishes the number and fixes the terms, designations, powers, preferences, rights, limitations and restrictions of a series of preferred shares designated the             % Series A Cumulative Redeemable Preferred Shares, which we refer to as the Series A Preferred Shares. The certificate of designations classifies and designates 1,840,000 of our authorized but unissued preferred shares as the Series A Preferred Shares. In this offering, we will issue 1,600,000 Series A Preferred Shares (or 1,840,000 Series A Preferred Shares if the underwriters’ over-allotment option is exercised in full). As of the date of this prospectus supplement, there are currently no other classes or series of preferred shares authorized and outstanding.

We intend to list the Series A Preferred Shares on the NYSE, under the symbol “BRT PrA.” If approved for listing, we expect trading of the Series A Preferred Shares to commence within the 30-day period after the initial delivery of the Series A Preferred Shares. We will use our best efforts to maintain the listing of our Series A Preferred Shares on the New York Stock Exchange in accordance with the rules and regulations of the exchange.

Ranking

The Series A Preferred Shares, with respect to dividend rights and the distribution of assets upon our liquidation, dissolution or winding up, will rank (1) senior to all classes or series of our common shares and to all equity securities the terms of which specifically provide that such equity securities rank junior to the Series A Preferred Shares; (2) on a parity with all equity securities issued by us other than those referred to in clauses (1) and (3); (3) junior to all equity securities issued by us the terms of which specifically provide that such equity securities rank senior to such Series A Preferred Shares, and (4) junior to all existing and future indebtedness.

Dividends

As holders of Series A Preferred Shares, you will be entitled to receive, when, as and if authorized by our Board of Trustees, out of legally available funds, cumulative preferential cash dividends at the rate of             % of the liquidation preference per annum, which is equivalent to $            per share of Series A Preferred Shares per year.

Dividends on the Series A Preferred Shares will accrue and cumulate from the date of original issuance (October     , 2005) and will be payable quarterly in arrears on the fifteenth calendar day of each March, June, September and December or, if not a business day, the next succeeding business day. The initial dividend on the Series A Preferred Shares will be paid on December 15, 2005 if authorized by our Board of Trustees, and will be for less than a full quarter. We will pro rate and compute this initial dividend and any dividend payable for a partial dividend period on the basis of a 360-day year consisting of twelve 30-day months.

We will pay dividends to holders of record as they appear in our share records at the close of business on the applicable dividend record date. The dividend record date will be the first day of the calendar month in which the related dividend payment date falls, or such other date that our Board of Trustees designates for the payment of dividends that is not more than 30 nor less than 10 calendar days prior to the dividend payment date.

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No dividend on the Series A Preferred Shares will be authorized or declared or paid or set apart for payment by us if such authorization, declaration, payment or setting apart for payment would violate any of our agreements or is restricted or prohibited by law.

Notwithstanding the foregoing, dividends on the Series A Preferred Shares will accrue whether or not we have earnings, whether or not there are funds legally available for payment of dividends and whether or not such dividends are authorized by our Board of Trustees. Accumulated but unpaid dividends will cumulate as of the dividend payment date on which they first become payable or on the date of redemption, as the case may be.

When dividends are not paid in full (or a sum sufficient for such full payment is not so set apart) on the Series A Preferred Shares and all other equity securities ranking on a parity as to dividends with the Series A Preferred Shares, all dividends declared upon the Series A Preferred Shares and any other equity securities ranking on a parity as to dividends with the Series A Preferred Shares shall be declared pro rata so that the amount of dividends declared per share of Series A Preferred Shares and such other series of preferred shares shall in all cases bear to each other the same ratio that accumulated dividends per share on the Series A Preferred Shares and such other equity security (which shall not include any accumulation in respect of unpaid distributions for prior dividends periods if such other equity securities do not have a cumulative dividend) bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series A Preferred Shares which may be in arrears.

Except as provided in the immediately preceding paragraph, unless full cumulative dividends on the Series A Preferred Shares have been or contemporaneously are authorized and paid or authorized and a sum sufficient set apart for payment for all past distribution periods and the then current dividend period:

• no dividends, other than distributions in kind of our common shares or other shares of our equity securities ranking junior to Series A Preferred Shares as to distributions and upon liquidation, may be authorized or paid or set aside for payment, and no other dividend may be authorized or made upon our common shares or any other shares of our equity securities ranking junior to or on a parity with the Series A Preferred Shares as to distributions or upon liquidation (other than pro rata dividends on preferred shares ranking on a parity as to distributions with the Series A Preferred Shares); and

• no common shares or any other shares of our equity securities ranking junior to or on a parity with the Series A Preferred Shares as to distributions or upon liquidation may be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any such shares) by us, except by conversion into or exchange for other shares ranking junior to the Series A Preferred Shares as to distributions and amounts upon liquidation.

Holders of Series A Preferred Shares shall not be entitled to any distribution, whether payable in cash, property or shares, in excess of full cumulative dividends on the Series A Preferred Shares as described above. We will credit any dividend payment we make on the Series A Preferred Shares against the earliest accumulated but unpaid dividend due with respect to the Series A Preferred Shares which remains payable.

If our common shares are delisted from the New York Stock Exchange or any other national securities exchange or market as a result of a change of control or a going-private transaction, holders of our Series A Preferred Shares will be entitled to receive, when and as authorized by our Board of Trustees and declared by us, out of funds legally available for the payment of dividends, cumulative cash dividends from and after the date of such delisting at a rate of         % (100 basis points in excess of the current dividend) per annum of the $25.00 liquidation preference, equivalent to $             per annum per share. If the date that our common shares cease to be listed occurs prior to                     , 2010, then the provisions limiting the redemption of the Series A Preferred Shares will be removed as of the date of such delisting.

A “change of control” shall be deemed to have occurred at such time as (a) a “person” or “group” (within the meaning of Sections 13(d) and 14(d) of the Exchange Act) other than Frederic H. Gould, Jeffrey A. Gould, Matthew J Gould or any entity controlled by any one or more of them, becomes the ultimate “beneficial owner” (as defined by Rules 13d-3 and 13d-5 under the Exchange Act, except that a person or group shall be deemed to

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have beneficial ownership of all shares of voting stock that such person or group has the right to acquire regardless of when such right is first exercisable), directly or indirectly, of voting stock representing 35% of the total voting power of the total voting stock of our company on a fully diluted basis; (b) the date we sell, transfer or otherwise dispose of substantially all of our assets; or (c) the date of the consummation of a merger or share exchange of our company with another entity where our shareholders immediately prior to the merger or share exchange, would not beneficially own immediately after the merger or share exchange, shares representing 50% or more of all votes (without consideration of the rights of any class of stock to elect directors by a separate group vote) to which all shareholders of the corporation issuing cash or securities in the merger or share exchange would be entitled in the election of directors, or where members of the board of directors immediately prior to the merger, or share exchange would not immediately after the merger or share exchange constitute a majority of the board of directors of the corporation issuing cash or securities in the merger or share exchange. “Voting stock” shall mean capital stock of any class or kind having the power to vote generally for the election of directors. A “going-private transaction” shall be deemed to have occurred at such time as a transaction under Rule 13(e)(3) of the Exchange Act has occurred.

Liquidation Preference

Upon our voluntary or involuntary liquidation, dissolution or winding up, as a holder of Series A Preferred Shares you will be entitled to receive out of our assets available for distribution to shareholders (after payment or provision for all of our debts and other liabilities) a liquidating distribution in the amount of a liquidation preference of $25.00 per share, plus any accumulated and unpaid dividends to the date of payment, whether or not authorized, before any distribution of assets is made to holders of our common shares and any other shares of our equity securities ranking junior to the Series A Preferred Shares as to liquidation rights.

If, upon our voluntary or involuntary liquidation, dissolution or winding up, our assets are insufficient to make full payment of the liquidating distributions to holders of the Series A Preferred Shares and any other shares of our equity securities ranking on a parity with the Series A Preferred Shares as to liquidation rights, then the holders of the Series A Preferred Shares and parity shares will share ratably in any distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled.

After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Series A Preferred Shares will have no right or claim to any of our remaining assets.

Our consolidation or merger with or into another entity, the merger of another entity with or into us, a statutory share exchange by us, or the sale, lease, transfer or conveyance of all or substantially all of our property or business, will in each case not be deemed to constitute our liquidation, dissolution or winding up.

As permitted by Massachusetts law, the certificate of designations creating the Series A Preferred Shares provides that the liquidating preference of outstanding Series A Preferred Shares will not be added to our total liabilities in determining whether we may make a dividend or other distribution (other than upon voluntary or involuntary dissolution) on our common shares (or any other class or series of shares that are junior to the Series A Preferred Shares with respect to liquidating distributions). Massachusetts law does not allow a corporation to make a distribution if, after giving effect to the distribution, (a) the corporation would not be able to pay its obligations as they become due in the usual course of business or (b) the corporation’s total assets would be less than its total liabilities. Unless the corporation’s charter provides otherwise, liquidation preferences of shareholders whose preferential rights on dissolution are superior to those receiving the distribution are considered liabilities for the purpose of this test.

Redemption

The Series A Preferred Shares will not be redeemable prior to             , 2010. On or after             , 2010, we may, at our option and after giving the notice described below, redeem the Series A Preferred Shares, in whole or from time to time in part, for cash, at a redemption price of $25.00 per share, plus all accumulated and unpaid dividends to the date of redemption, whether or not authorized.

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If we redeem fewer than all of the outstanding Series A Preferred Shares, our Board of Trustees will determine the number of shares to be redeemed. In such circumstances, the Series A Preferred Shares to be redeemed generally will be selected pro rata, by lot or in another equitable manner determined by our Board of Trustees. If such redemption is to be by lot and as a result of such redemption any holder of Series A Preferred Shares would become a holder either directly or indirectly of a number of Series A Preferred Shares in excess of the ownership limit described in the accompanying prospectus because such holder’s Series A Preferred Shares were not redeemed, or were only redeemed in part, then, we will redeem the requisite number of Series A Preferred Shares from such holder such that such shareholder will not hold in excess of the ownership limit subsequent to such redemption or otherwise transfer the shares as described in the accompanying prospectus.

Notwithstanding the foregoing, unless full cumulative dividends on all Series A Preferred Shares have been or contemporaneously are authorized and paid, or a sum sufficient for payment for all past dividend periods and the current dividend period is set apart, we will not:

• redeem any Series A Preferred Shares unless we simultaneously redeem all outstanding Series A Preferred Shares; and

• purchase or otherwise acquire directly or indirectly any Series A Preferred Shares or any other shares of our equity securities ranking junior to or on a parity with the Series A Preferred Shares as to distributions or upon liquidation, except by conversion into or exchange for shares ranking junior to the Series A Preferred Shares as to distributions and upon liquidation.

The foregoing restrictions on redemptions, purchases and other acquisitions will not prevent the repurchase or redemption of our Series A Preferred Shares to preserve our REIT status and enforce against an individual holder the restrictions on ownership described in this prospectus supplement. These restrictions also do not prevent the repurchase or redemption of Series A Preferred Shares pursuant to a purchase or exchange offer made on the same terms to all holders of the Series A Preferred Shares.

Immediately prior to any redemption of Series A Preferred Shares, we will pay, in cash, any accumulated and unpaid dividends to the redemption date, whether or not authorized, unless a redemption date falls after a dividend record date and prior to the corresponding dividend payment date, in which case each holder of Series A Preferred Shares at the close of business on such dividend record date will be entitled to the dividend payable on such shares on the corresponding distribution payment date notwithstanding the redemption of such shares before the dividend payment date. Except as provided in the previous sentence, we will make no payment or allowance for unpaid dividends, whether or not in arrears, on Series A Preferred Shares to be redeemed.

We will mail to you, if you are a record holder of Series A Preferred Shares, a notice of redemption not less than 30 days nor more than 60 days before the redemption date. We will send the notice to your address, as shown on our share transfer books. Each notice will state, in addition to any information required by law or by the applicable rules of any exchange upon which the Series A Preferred Shares may be listed or admitted to trading, the following:

• the redemption date;

• the redemption price;

• the number of Series A Preferred Shares to be redeemed;

• the place where you may surrender certificates for payment of the redemption price; and

• that the dividends on the Series A Preferred Shares to be redeemed will cease to accumulate on the redemption date.

If we redeem fewer than all of the outstanding Series A Preferred Shares, we will specify in the notice to you the number of Series A Preferred Shares to be redeemed from you.

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On or after the date fixed for redemption, each holder of Series A Preferred Shares to be redeemed must present and surrender each certificate representing his or her Series A Preferred Shares to us at the place designated in the applicable notice and thereupon the redemption price of such Preferred Shares will be paid to or on the order of the person whose name appears on such certificate representing the Series A Preferred Shares as the owner thereof and each surrendered certificate will be cancelled. If fewer than all the Preferred Shares represented by any such certificate representing Series A Preferred Shares are to be redeemed, a new certificate will be issued representing the unredeemed shares.

At our election, prior to a redemption date, we may irrevocably deposit the redemption price (including accumulated and unpaid dividends) of the Series A Preferred Shares so called for redemption in trust for the holders thereof with a bank or trust company, in which case the notice to holders of the Series A Preferred Shares to be redeemed will (1) state the date of such deposit, (2) specify the office of such bank or trust company as the place of payment of the redemption price and (3) require such holders to surrender the certificates representing such shares at such place on or about the date fixed in such redemption notice (which may not be later than such redemption date) against payment of the redemption price (including all accumulated and unpaid dividends to the redemption date). Any interest or other earnings earned on the redemption date (including all accumulated and unpaid dividends) deposited with a bank or trust company will be paid to us. Any monies so deposited which remain unclaimed by the holders of the Series A Preferred Shares at the end of two years the redemption date will be returned to us by such bank or trust company.

From and after the redemption date (unless we default in payment of the redemption price), all dividends will cease to cumulate on the Series A Preferred Shares designated for redemption and all of your rights as a holder of the Series A Preferred Shares will terminate with respect to such Preferred Shares, except the right to receive the redemption price and all accumulated and unpaid dividends up to the redemption date.

Maturity

The Series A Preferred Shares do not have a stated maturity and are not subject to any sinking fund or mandatory redemption provisions.

Voting Rights

As a holder of Series A Preferred Shares, you will not have any voting rights, except as set forth below.

Whenever dividends on the Series A Preferred Shares are in arrears for six or more quarterly periods, whether or not such quarterly periods are consecutive, the holders of Series A Preferred Shares will be entitled, voting together as a single class with all other series of preferred shares of ours upon which like voting rights have been conferred and are exercisable, to elect a total of two additional trustees to our Board of Trustees at an annual meeting of shareholders or a special meeting held in place thereof or a properly called meeting of holders of the Series A Preferred Shares together with holders of any other series of preferred shares as to which dividends are so in arrears, and at each subsequent annual meeting or special meeting of shareholders until all dividends accumulated on the Series A Preferred Shares for the past dividend periods and the then current dividend period shall have been fully paid or declared and a sum sufficient for the payment thereof set aside for payment. In such case, our entire Board of Trustees will be increased by two trustees.

So long as any Series A Preferred Shares remain outstanding, we may not, without the affirmative vote of holders of at least two-thirds of the outstanding Series A Preferred Shares voting separately as a class:

• authorize, or create, or increase the authorized or issued amount of, any class or series of equity securities ranking senior to the outstanding Series A Preferred Shares with respect to the payment of dividends or the distribution of assets upon our voluntary or involuntary liquidation, dissolution or winding up;

• reclassify any authorized equity securities into any such senior equity securities;

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• create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such senior equity securities; or

• amend, alter or repeal the provisions of our declaration of trust (including the certificate of designations for the Series A Preferred Shares), whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privilege or voting power of the Series A Preferred Shares or the holders thereof.

However, with respect to any such amendment, alteration or repeal of the provisions of our declaration of trust (including the certificate of designations for the Series A Preferred Shares), whether by merger or consolidation, so long as the Series A Preferred Shares remain outstanding with the terms thereof materially unchanged in any adverse respect, taking into account that, upon the occurrence of such event, we may not be the surviving entity and such surviving entity may thereafter be the issuer of the Series A Preferred Shares, the occurrence of any such event will not be deemed to materially and adversely affect the rights, preferences, privileges or voting powers of Series A Preferred Shares or the holders thereof. In addition, (1) any increase in the amount of the authorized preferred shares or the creation or issuance of any other series of preferred shares or (2) any increase in the amount of authorized Series A Preferred Shares or any other class or series of our preferred shares, in each case ranking on a parity with or junior to the Series A Preferred Shares with respect to the payment of dividends and the distribution of assets upon voluntary or involuntary liquidation, dissolution or our winding up, will not be deemed to materially and adversely affect the rights, preferences, privileges or voting powers of Series A Preferred Shares or the holders thereof.

The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required will be effected, all outstanding Series A Preferred Shares have been redeemed or called for redemption and sufficient funds shall have been deposited in trust to effect such redemption.

Conversion

The Series A Preferred Shares are not convertible into or exchangeable for our property or securities.

Information Rights

During any period in which we are not subject to Sections 13 or 15(d) of the Exchange Act and any of our Series A Preferred Shares are outstanding, we will (1) transmit by mail to all holders of Series A Preferred Shares, as their names and addresses appear in our record books and without cost to such holders, copies of the annual reports and quarterly reports that we would have been required to file with the Securities and Exchange Commission (the “SEC”) pursuant to Section 13 or 15(d) of the Exchange Act were we subject to Sections 13 or 15(d) (other than any exhibits that would have been required), and (2) promptly upon written request, supply copies of such reports to any prospective holder of our Series A Preferred Shares. We will mail the reports to the holders of our Series A Preferred Shares within 15 days after the respective dates by which we would have been required to file the reports with the SEC were we subject to Sections 13 or 15(d) of the Exchange Act.

Restrictions on Ownership and Transfer

For us to qualify as a REIT under the Code, among other things, not more that 50% in value of our outstanding shares may be owned, directly or indirectly, by five or fewer individuals (defined in the Code to include certain entities) during the last half of a taxable year (other than the first taxable year for which we elected to be taxed as a REIT). This test is applied by “looking through” certain shareholders which are not individuals (e.g., corporations or partnerships) to determine indirect ownership of us by individuals. Additionally, our outstanding shares must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months (other than the first taxable year for which we elected to be taxed as a REIT) or during a proportionate part of a shorter taxable year.

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In order to ensure that that not more than 50% by value of all of our capital stock will ever be held by five or fewer individuals, directly or indirectly, at any time during the last half of any taxable year, our declaration of trust provides that if our Board of Trustees shall at any time and in good faith be of the opinion that direct or indirect ownership of our equity securities has or may become concentrated to an extent which is inconsistent with the requirements of the REIT provisions of the Code, our Board of Trustees shall have the power, in its sole discretion, to refuse to sell, transfer or deliver our shares to any person, corporation, partnership, trust or any other legal entity, or to call for redemption (from the person or entity whose most recent acquisition or purchase of our shares resulted in a concentration of shares which is believed to be contrary to the REIT provisions of the Code), of a number of our shares held by such person or entity sufficient in the opinion of our board of Trustees to bring the direct or indirect ownership of our shares into conformity with the requirements of the Code. In addition, the Certificate of designations designating our Series A Preferred Shares provides that no person may own, directly or indirectly, more than 22.0% of our Series A Preferred Shares.

In the event of any redemption called for by our Board of Trustees as described above, the redemption price shall be equal to the fair market value of the shares as reflected in the closing bid price for the shares as of the date fixed for redemption. From and after the date fixed for redemption by our Board of Trustees, the holder of any shares so called for redemption shall cease to be entitled to dividends, voting rights and other benefits with respect to such shares, except only the right to payment of the redemption price. These restrictions will not preclude settlement of transactions through the New York Stock Exchange.

In addition, our declaration of trust provides that our shareholders shall upon demand be required to disclose to us in writing any information with respect to the direct, indirect and constructive ownership of our shares as our Board of Trustees deems necessary to comply with the REIT provisions of the Code.

These restrictions may have the effect of delaying, deferring or preventing a change in control in our company unless our Board of Trustees determines that maintenance of REIT status is no longer in our best interest.

Book-Entry, Delivery and Form

We will initially issue the Series A Preferred Shares in the form of one or more global securities, subject, at our option, to certain exceptions where we may issue the Series A Preferred Shares in certificated form. The global securities will be deposited with, or on behalf of, a depositary (the “Depository”) and registered in the name of the Depositary or its nominee. Except as set forth below, the global securities may be transferred, in whole and not in part, only to the Depositary or another nominee of the Depositary. Investors may hold their beneficial interests in the global securities directly through the Depositary if they have an account with the Depositary or indirectly through organizations which have accounts with the Depositary.

The Depositary has advised us as follows: The Depositary is a limited-purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act. The Depositary was created to hold securities of institutions that have accounts with the Depositary (“participants”) and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. The Depositary’s participants include securities brokers and dealers (which may include the underwriters), banks, trust companies, clearing corporations and certain other organizations. Access to the Depositary’s book-entry system is also available to others such as banks, brokers, dealers and trust companies (“indirect participants”) that clear through or maintain a custodial relationship with a participant, whether directly or indirectly.

We expect that pursuant to procedures established by the Depositary, upon the deposit of the global securities with, or on behalf of, the Depositary, the Depositary will credit, on its book-entry registration and transfer system, the liquidation preference of the Series A Preferred Shares represented by such global securities

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to the account of participants. The accounts to be credited shall be designated by the underwriters of such Series A Preferred Shares. Ownership of beneficial interests in the global securities will be limited to participants or persons that may hold interests through participants. Ownership of beneficial interests in the global securities will be shown on, and the transfer of those ownership interests will be effected only through, records maintained by the Depositary (with respect to participants’ interests) and such participants and indirect participants (with respect to the owners of beneficial interests in the global securities other than participants). The laws of some jurisdictions may require that some purchasers of securities take physical delivery of the securities in definitive form. Such limits and laws may impair the ability to transfer or pledge beneficial interests in the global securities.

So long as the Depositary, or its nominee, is the registered holder and owner of the global securities, the Depositary or such nominee, as the case may be, will be considered the sole legal owner and holder of the Series A Preferred Shares evidenced by the global certificates for all purposes of such Series A Preferred Shares and the certificate of designation. Except as set forth below as an owner of a beneficial interest in the global certificates, you will not be entitled to have the Series A Preferred Shares represented by the global securities registered in your name, will not receive or be entitled to receive physical delivery of certificated Series A Preferred Shares in definitive form and will not be considered to be the owner or holder of any Series A Preferred Shares under the global securities. We understand that under existing industry practice, in the event an owner of a beneficial interest in the global securities desires to take any action that the Depositary, as the holder of the global securities, is entitled to take, the Depositary will authorize the participants to take such action, and that the participants will authorize beneficial owners owning through such participants to take such action or would otherwise act upon the instructions of beneficial owners owning through them.

All payments on Series A Preferred Shares represented by the global securities registered in the name of and held by the Depositary or its nominee will be made to the Depositary or its nominee, as the case may be, as the registered owner and holder of the global securities.

We expect that the Depositary or its nominee, upon receipt of any payment on the global securities, will credit participants’ accounts with payments in an amount proportionate to their respective beneficial interests in the liquidation preference of the global securities as shown on the records of the Depositary or its nominee. We also expect that payments by participants or indirect participants to owners of beneficial interest in the global securities held through such participants or indirect participants will be governed by standing instructions and customary practices and will be the responsibility of such participants or indirect participants. We will not have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the global securities for any Series A Preferred Shares or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for any other aspect of the relationship between the Depositary and its participants or indirect participants or the relationship between such participants or indirect participants and the owners of beneficial interests in the global securities owning through such participants or indirect participants.

Although the Depositary has agreed to the foregoing procedures in order to facilitate transfers of interests in the global securities among participants or indirect participants of the Depositary, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither we nor the transfer agent will have any responsibility or liability for the performance by the Depositary or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

This section supplements the discussion under the same heading in the accompanying prospectus. The following discussion summarizes certain U.S. federal income tax considerations relating to the ownership and disposition of our Series A Preferred Shares. Holders of our Series A Preferred Shares should also consult the summary describing the principal U.S. federal income tax consequences of the acquisition, ownership and disposition of our shares in the accompanying prospectus. This discussion does not address any aspects of U.S. federal income taxation relating to our election to be taxed as a REIT. A summary of certain U.S. federal income tax considerations relating to our election to be taxed as REIT is provided in the accompanying prospectus.

In connection with this prospectus supplement, McCarter & English, LLP, our tax counsel, has opined that (1) the information contained in the accompanying prospectus under the heading “Certain Federal Income Tax Considerations,” to the extent that such information involves matters of law, is correct in all material respects under the Code; and (2) we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT under the Code, commencing with the taxable year ended December 31, 2001, and that our method of operation will enable us to continue to meet the requirements for qualification as a REIT under the Code. Investors should be aware that McCarter & English, LLP’s opinion is based upon customary assumptions, is conditioned upon certain representations made by us as to factual matters, including representations regarding the nature of our assets and the conduct of our business, and is not binding upon the Internal Revenue Service or any court. In addition, McCarter & English, LLP’s opinion is based on existing federal income tax law governing qualification as a REIT, which is subject to change either prospectively or retroactively. Moreover, our qualification and taxation as a REIT depends upon our ability to meet on a continuing basis, through actual annual operating results, certain qualification tests set forth in the federal tax laws. Those qualification tests involve the percentage of income that we earn from specified sources, the percentage of our assets that falls within specified categories, the diversity of our share ownership and the percentage of our earnings that we distribute. McCarter & English, LLP will not review our compliance with those tests on a continuing basis. Accordingly, no assurance can be given that the actual results of our operation for any particular taxable year will satisfy such requirements. For a discussion of the tax consequences of our failure to qualify as a REIT, see “Certain Federal Income Tax Considerations—Failure to Qualify” in the accompanying prospectus.

We urge prospective investors to consult their own tax advisors regarding the specific tax consequences to them of the acquisition, ownership, and disposition of our Series A Preferred Shares and of our election to be taxed as a REIT. Specifically, prospective investors should consult their own tax advisors regarding the U.S. federal, state, local, foreign, and other tax consequences of such acquisition, ownership, disposition, and election, and regarding potential changes in applicable tax laws.

Taxation of Series A Preferred Shares

Dividends

As long as we qualify to be taxed as a REIT, distributions made to our shareholders out of current or accumulated earnings and profits will be treated as dividends for federal income tax purposes and thus taxed to them as ordinary income, except that distributions of net capital gains designated by us as capital gain dividends will be taxed to them as long-term capital gain. Dividends received from REITs are generally not eligible for the new reduced tax rates (with a maximum rate of 15%) for corporate dividends received by individuals in years 2003 through 2008. See the discussion under the caption “Certain Federal Income Tax Considerations—Taxation of Taxable U.S. Shareholders” in the accompanying prospectus. To the extent that distributions exceed current and accumulated earnings and profits, they will constitute a return of capital, rather than dividend or capital gain income, and will reduce the basis for the shareholder’s shares with respect to which the distributions are paid or, to the extent that they exceed such basis, will be taxed in the same manner as gain from the sale of such shares. For purposes of determining whether distributions are out of current or accumulated earnings and profits, our earnings and profits will be allocated first to our preferred shares and then to our common shares. Therefore,

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depending on our earnings and profits, distributions with respect to our Series A Preferred Shares (as compared to distributions with respect to our common shares) are more likely to be treated as dividends rather than a return of capital or a distribution in excess of basis.

Capital Gain Dividends

We may, for any taxable year, elect to designate as capital gain dividends any portion of the dividends paid for the year to the holders of our shares (not in excess of our net capital gain for the year). In general, distributions from us that are designated as capital gain dividends will be taxed at maximum federal rates of 15% (through 2008) in the case of individuals and 35% in the case of corporations. If, for any taxable year, we make such designation, the portion of the amount so designated that will be allocable to the holders of our Series A Preferred Shares will be the amount so designated multiplied by a fraction, the numerator of which will be the total dividends (within the meaning of the Code and after allocating earnings and profits as described above under “Dividends”) paid to the holders of the Series A Preferred Shares for the year and the denominator of which will be the total dividends paid to the holders of shares of all classes of our shares for the year. See, generally, the discussion under the caption “Certain Federal Income Tax Considerations—Taxation of Taxable U.S. Shareholders” in the accompanying prospectus.

Redemption of Series A Preferred Shares

We may redeem our Series A Preferred Shares at our option, in whole or from time to time in part, beginning on                             , 2010 for cash at $25.00 per share plus any accrued and unpaid dividends through the date of redemption. See, generally, the discussion under “Certain Federal Income Tax Considerations—Taxation of U.S. Shareholders on Cash Redemption of Preferred Shares” in the accompanying prospectus. A redemption of Series A Preferred Shares will be treated under Section 302 of the Code as a distribution taxable as a dividend (to the extent of our current and accumulated earnings and profits) at ordinary income rates, unless the redemption satisfies one of the tests set forth in Section 302(b) of the Code and is therefore treated as a sale or exchange of the redeemed shares. The redemption will be treated as a sale or exchange if it (1) is “substantially disproportionate” with respect to the holder, (2) results in a “complete termination” of the holder’s share interest in our company, or (3) is “not essentially equivalent to a dividend” with respect to the holder, all within the meaning of Section 302(b) of the Code. In determining whether any of these tests has been met, the common shares and preferred shares considered to be owned by the holder by reason of certain constructive ownership rules set forth in the Code, as well as the common shares and preferred shares actually owned by the holder, must generally be taken into account. If a holder of Series A Preferred Shares owns (actually and constructively) no outstanding common shares or an insubstantial percentage thereof, a redemption of Series A Preferred Shares of that holder is likely to qualify for sale or exchange treatment because the redemption would be “not essentially equivalent to a dividend.” However, because the determination as to whether any of the alternative tests of Section 302(b) of the Code will be satisfied with respect to any particular holder of Series A Preferred Shares depends upon the facts and circumstances at the time the determination must be made, prospective holders of our Series A Preferred Shares are advised to consult their own tax advisors to determine such tax treatment.

If a redemption of our Series A Preferred Shares is not treated as a distribution taxable as a dividend to a particular holder, it will be treated as a taxable sale or exchange by that holder. As a result, the holder will recognize gain or loss for federal income tax purposes in an amount equal to the difference between (1) the amount of cash and the fair market value of any property received (less any portion thereof attributable to accumulated and declared but unpaid dividends, which will be taxable as a dividend to the extent of our current and accumulated earnings and profits) and (2) the holder’s adjusted tax basis in the Series A Preferred Shares. Such gain or loss will be capital gain or loss if the Series A Preferred Shares were held as a capital asset, and will be long-term gain or loss if such shares were held for more than one year. Long-term capital gains are generally taxable at maximum federal rates of 15% (through 2008) in the case of individuals and will be taxed at ordinary income tax rates (of up to 35% through 2010) if the Series A Preferred Shares are held for one year or less. Gains recognized by U.S. holders that are corporations are subject to federal income tax at a maximum rate of 35%,

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whether or not classified as long-term capital gains. See, generally, the discussion under the caption “Certain Federal Income Tax Considerations—Taxation of U.S. Shareholders On the Disposition Of Shares” in the accompanying prospectus.

If a redemption of Series A Preferred Shares is treated as a distribution taxable as a dividend, the amount of the distribution will be measured by the amount of cash and the fair market value of any property received by the holder. The holder’s adjusted tax basis in the redeemed Series A Preferred Shares will be transferred to the holder’s remaining BRT shares, if any. If the holder owns no other BRT shares, such basis may, under certain circumstances, be transferred to a related person or it may be lost entirely.

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UNDERWRITING

We and the underwriters named below have entered into an underwriting agreement concerning the Series A Preferred Shares being offered. Subject to certain conditions, each underwriter has severally agreed to purchase the number of Series A Preferred Shares indicated next to its name in the following table. The underwriters are obligated to purchase all of the Series A Preferred Shares other than those covered by the over-allotment option described below, if they purchase any of the Series A Preferred Shares, subject to approval of legal matters by counsel and to certain other conditions.

Underwriters	Number of Shares
Friedman, Billings, Ramsey & Co., Inc.	[	]
Ryan Beck & Co., Inc.	[	]
Stifel, Nicolaus & Company, Incorporated	[	]
Cantor Fitzgerald	[	]
Total	1,600,000

If the underwriters sell more Series A Preferred Shares than the total number set forth in the table above, the underwriters have a 30-day option to buy up to an additional 240,000 Series A Preferred Shares from us, at the public offering price less the underwriting discounts and commissions, to cover these sales. If any Series A Preferred Shares are purchased under this option, the underwriters will severally purchase Series A Preferred Shares in approximately the same proportion as set forth in the table above.

The following table provides information regarding the amount of the discount to be paid to the underwriters. The amounts are shown assuming both no exercise and full exercise of the over-allotment option to purchase up to 240,000 additional Series A Preferred Shares, if any.

			Total
	Per Share		No Exercise of Option		Full Exercise of Option
Public offering price	$	25.00	$	40,000,000	$	46,000,000
Underwriting discount and commissions to be paid by us	$	0.7875	$	1,260,000	$	1,449,000
Proceeds, before expenses, to us	$	24.2125	$	38,740,000	$	44,551,000

We estimate that our total expenses of this offering, excluding underwriting discounts and commissions, will be approximately $250,000.

Series A Preferred Shares sold by the underwriters to the public will initially be offered at the public offering price set forth on the cover of this prospectus supplement. Any Series A Preferred Shares sold by the underwriters to securities dealers may be sold at the public offering price per share less a concession not in excess of $0.50 per share, of which $0.10 per share may be reallocated to other dealers. If all of the Series A Preferred Shares are not sold at the public offering price, the underwriters may change the offering price and the other selling terms.

In connection with this offering, the underwriters may purchase and sell Series A Preferred Shares in the open market, pursuant to Regulation M under the Securities Act. These transactions may include stabilizing transactions, short sales and purchases to cover positions created by short sales. Stabilizing transactions consist of bids or purchases made for the purpose of preventing or retarding a decline in the market price of our Series A Preferred Shares while this offering is in progress. Short sales involve the sale by the underwriters of a greater number of Series A Preferred Shares than they are required to purchase in this offering. Short sales may be either “covered short sales” or “naked short sales.” Covered short sales are sales made in any amount not greater than the underwriters’ over-allotment option to purchase additional shares in this offering. The underwriters may close out any covered short position by either exercising their over-allotment option or purchasing Series A Preferred Shares in the open market. In determining the source of Series A Preferred Shares to close out the covered short

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position, the underwriters will consider, among other things, the price of the Series A Preferred Shares available for purchase in the open market as compared to the price at which they may purchase Series A Preferred Shares through the over-allotment option. Naked short sales are sales in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing Series A Preferred Shares in the open market. A naked short position is more likely to be created if the underwriters are concerned there may be downward pressure on the price of shares in the open market after pricing that could adversely affect investors who purchase shares in this offering.

The underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the other underwriters a portion of the underwriting discount received by it because the other underwriters have repurchased Series A Preferred Shares sold by, or for the account of, that underwriter in stabilizing or short covering transactions.

These activities by the underwriters may stabilize, maintain or otherwise affect the market price of our Series A Preferred Shares. As a result, the price of our Series A Preferred Shares may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued by the underwriters at any time. These transactions may be effected on the New York Stock Exchange or otherwise.

No underwriter is obligated to conduct market-making activities in our Series A Preferred Shares and any such activities may be discontinued at any time without notice, at the sole discretion of the underwriter.

We have agreed to indemnify the several underwriters against some liabilities, including liabilities under the Securities Act and to contribute to payments that the underwriters may be required to make in respect thereof.

LEGAL MATTERS

Certain legal matters in connection with this offering will be passed upon for us by McCarter & English, LLP. The validity of the Series A Preferred Shares will be passed upon by Rich May, a Professional Corporation. In addition, the description of federal income tax consequences in “Certain Federal Income Tax Considerations” is based on the opinion of McCarter & English, LLP. Certain legal matters in connection with this offering will be passed upon for the underwriters by Winston & Strawn LLP.

EXPERTS

The consolidated financial statements of BRT Realty Trust and subsidiaries, and for each of the three years in the period ended September 30, 2004, including the schedules appearing therein, incorporated herein by reference in this prospectus supplement and registration statement have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon incorporated by reference herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

INCORPORATION BY REFERENCE

The SEC allows us to “incorporate by reference” information into this prospectus supplement, which means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is deemed to be part of this prospectus supplement, except for any information superseded by information in this prospectus supplement.

Any documents we file pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus supplement and prior to the termination of the offering of the securities to which this prospectus

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supplement relates will automatically be deemed to be incorporated by reference in this prospectus supplement and to be part hereof from the date of filing those documents.

Any statement contained in this prospectus supplement or in a document incorporated by reference shall be deemed to be modified or superseded for all purposes to the extent that a statement contained in this prospectus supplement or in any other document which is also incorporated by reference modifies or supersedes that statement. You may obtain copies of all documents which are incorporated in this prospectus supplement by reference (other than the exhibits to such documents unless the exhibits are specifically incorporated herein by reference in the documents that this prospectus supplement incorporates by reference), as well as a paper copy of this prospectus supplement and the accompanying prospectus, without charge upon written or oral request to BRT Realty Trust, 60 Cutter Mill Road, Great Neck, New York, 11021, telephone (516) 466-3100.

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PROSPECTUS

BRT REALTY TRUST

Common Shares

Preferred Shares

Warrants

$100,000,000

We may offer and sell, from time to time, our common shares, preferred shares or warrants, in one or more offerings up to a total dollar amount of $100,000,000.

This prospectus describes the general manner in which our securities may be offered using this prospectus. We will inform you about the specific terms of any offerings of our securities, and we may add to, update or modify the information contained in this document, in one or more prospectus supplements to this prospectus. Before you decide to invest, you should carefully read this prospectus, the applicable prospectus supplement and the information incorporated by reference in this prospectus and the applicable prospectus supplement.

Our common shares are listed for trading on the New York Stock Exchange under the trading symbol “BRT.”

Investing in our securities involves certain risks. You should read this entire prospectus and the applicable prospectus supplement carefully before you make your investment decision. Please carefully consider the “ Risk Factors” beginning on page 3 of this Prospectus.

This prospectus may not be used to offer or sell any securities unless accompanied by a prospectus supplement.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

October 18, 2005

TABLE OF CONTENTS

ABOUT THIS PROSPECTUS	1
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	2
ABOUT BRT REALTY TRUST	3
RISK FACTORS	3
USE OF PROCEEDS	11
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES	11
DESCRIPTION OF SECURITIES	12
PROVISIONS OF OUR DECLARATION OF TRUST	15
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS	17
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS	19
PLAN OF DISTRIBUTION	33
LEGAL MATTERS	34
EXPERTS	34
INCORPORATION BY REFERENCE	34
WHERE YOU CAN FIND MORE INFORMATION	35

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission, or the SEC, utilizing a “shelf” registration process, which allows us to sell any combination of our common shares, preferred shares and warrants from time to time in one or more offerings for total proceeds of up to $100,000,000.

This prospectus provides you with a general description of the securities we may offer. Each time we sell any securities under this prospectus, we will provide a prospectus supplement that will contain specific information about the terms of that offering. Prospectus supplements may also add to, update or change the information contained in this prospectus. You should read both this prospectus and the applicable prospectus supplement together with additional information described below under the heading “Where You Can Find More Information.”

You should rely only on the information contained or incorporated by reference in this prospectus and the applicable prospectus supplement or in any amendment to this prospectus. We have not authorized any other person to provide you with different information, and if anyone provides, or has provided, you with different or inconsistent information, you should not rely on it. We will not make an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus as well as the information we filed previously with the SEC and incorporated herein by reference is accurate only as of the date of the document containing the information.

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In this prospectus, references to “Trust,” “Company,” “we,” “us,” “our,” “registrant” and “BRT” refer to BRT Realty Trust. The phrase “this prospectus” refers to this prospectus and the applicable prospectus supplement, unless the context otherwise requires. References to “securities” refer to the common shares, preferred shares and warrants offered by this prospectus.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus and other documents we file with the SEC contain forward-looking statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, the industry in which we operate, our beliefs and our management’s assumptions. In addition, other written or oral statements that constitute forward-looking statements may be made by us or on our behalf. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. These forward-looking statements are subject to various risks and uncertainties, including those related to:

• our ability to originate loans on favorable terms;

• increased competition from entities engaged in mortgage lending;

• general and local real estate conditions;

• general and local economic conditions;

• changes in federal, state and local government laws and regulations;

• our ability to maintain our qualification as a real estate investment trust; and

• the availability of, and costs associated with, sources of liquidity.

Other risks, uncertainties and factors, including those discussed under “Risk Factors” in this prospectus and in any applicable prospectus supplement or described in reports that we file from time to time with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, could cause our actual results to differ materially from those projected in any forward-looking statements.

Except as required under the federal securities laws and the rules and regulations of the SEC, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this prospectus, whether as a result of new information, future events, changes in assumptions, or otherwise.

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ABOUT BRT REALTY TRUST

We are a real estate investment trust, also known as a REIT, primarily engaged in originating senior and junior real estate mortgage loans. In addition, we originate participating mortgage loans and purchase pari passu, senior and junior participations in existing mortgage loans originated by others. We also originate senior and junior mortgage loans for joint ventures in which we are an equity participant. Our investments in mortgage loans are generally secured by income producing real property; however, at times, we originate loans secured by improved commercial or multi-family residential properties that are vacant, pending renovation and sale or leasing, or secured by interests in the owner of the property (commonly referred to as “mezzanine” loans). In addition to these activities, from time to time, we provide mortgage financing secured by undeveloped real property and invest in the equity securities of other REITs.

We were organized as a business trust under the laws of the Commonwealth of Massachusetts in 1972. Our principal executive offices are located at 60 Cutter Mill Road, Great Neck, New York 11021 and our telephone number is (516) 466-3100. Our website is www.brtrealty.com. The information contained on our website is not part of this prospectus and you should not rely on it in deciding whether to invest in our securities.

RISK FACTORS

In addition to the information contained in this prospectus, in the applicable prospectus supplement, and in the documents incorporated by reference into this prospectus, you should carefully consider the following information before making an investment decision. If any of the following risks actually occur, our financial condition and our results of operations could be materially and adversely affected. Additional risks and uncertainties not presently known to us may also impair our business operations.

Risks Related to Our Business

If borrowers default on loans, we will experience a decrease in income and any recovery may be limited by the value of the underlying property.

Loan defaults will result in a decrease in interest income and an increase in loan loss reserves. The decrease in interest income resulting from loan defaults may be for a prolonged period of time as we seek to recover the outstanding principal balance, accrued interest, default interest and our legal costs. These legal proceedings, which may include foreclosure actions and bankruptcy and reorganization proceedings, are expensive and time consuming. The decrease in interest income and the costs involved in seeking to recover the outstanding amounts will reduce the amount of cash available to meet our expenses. In addition, the decrease in interest income combined with increases in loan loss reserves will have an adverse impact on our net income, taxable income and shareholders’ equity. The decrease in interest income and the costs involved in seeking to recover the outstanding amounts could also have an adverse impact on the cash distributions paid by us to our shareholders and our ability to continue to pay cash distributions in the future.

Our primary source of recovery in the event of a loan default is the real property underlying a defaulted loan and, therefore, the value of our loan depends upon the value of the underlying real property. The value of the underlying property is dependent on numerous factors outside of our control, including national, regional and local business and economic conditions, government economic policies, the level of interest rates and non performance of lease obligations by tenants occupying space at the underlying real property. The loan to value ratio of certain of our loans exceeds 80%. The loan to value ratio is the ratio of the amount of one of our loans, plus any senior indebtedness, to the value of the real property underlying the loan as determined by our own in-house procedures. The higher the loan to value ratio, the greater the risk that the amount obtainable from a foreclosure or bankruptcy sale may be insufficient to repay the loan in full upon default. In addition, we may find it necessary to acquire the property at a foreclosure sale or bankruptcy auction, in which event we assume the risks that may result from ownership of the property.

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If a significant number of our mortgage loans are in default or we otherwise must write down our loans, a breach of our revolving credit facility could occur.

Our revolving credit facility with North Fork Bank, Valley National Bank, Merchants Bank Division and Signature Bank includes financial covenants that require us to maintain certain financial ratios, including a debt service ratio and an equity to indebtedness ratio. If a significant number of our mortgage loans are in default or if a recessionary environment exists under which generally accepted accounting principles require us to take provisions against our loans or against our real estate assets, our financial position could be materially adversely affected causing us to be in breach of the financial covenants.

A breach by us of the covenants to maintain the financial ratios would place us in default under our revolving credit facility, and, if the banks called a default and required us to repay the full amount outstanding under the revolving credit facility, we might be required to dispose of assets in a rapid fashion, which could have an adverse impact on the amounts we would receive on such disposition. If we are unable to dispose of assets in a timely fashion to the satisfaction of the banks, the banks could foreclose on all, or any portion of, our loan portfolio pledged to the banks as collateral, which could result in the disposition of loans at below market values. The disposition of loans at below our carrying value would adversely affect our net income, reduce our net worth and adversely affect our ability to pay cash distributions to our shareholders.

The inability of our borrowers to refinance or sell underlying real property may lead to defaults on our loans.

A substantial majority of our mortgage portfolio is short term and due within five years. In addition, our borrowers are required to pay all or substantially all of the principal balance of our loans at maturity, in most cases with little or no amortization of principal over the term of the loan. Accordingly, in order to satisfy this obligation, at the maturity of a loan, a borrower will be required to refinance or sell the property or otherwise raise a substantial amount of cash. The ability to refinance or sell or otherwise raise a substantial amount of cash is dependent upon factors which neither we nor our borrowers control, such as national, local and regional business and economic conditions, government economic policies and the level of interest rates. If a borrower is unable to pay the balance due at maturity, and we are not willing to extend or restructure the loan, in most cases we will be required to foreclose on the property, which can be expensive and time consuming and could adversely affect our net income, shareholders’ equity and cash distributions to shareholders.

A significant portion of our loans are subordinate loans which may carry a greater risk of loss than senior loans.

We also loan funds to our borrowers in the form of junior mortgage loans or junior participations in mortgage loans. Because of their subordinate position, junior liens carry a greater risk than senior liens, including a substantially greater risk of non-payment of interest or principal. A decline in real estate values in the region in which the underlying property is located could adversely affect the value of our collateral, so that the outstanding balance of senior liens may exceed the value of the underlying property.

In the event of a default on a junior lien, if permitted, we may elect to make payments to the senior mortgage holder in order to prevent foreclosure of the senior lienholder. However, in certain situations, we may not have the right to make payments to the senior lienholder, or may choose not to make such payments despite having the right to do so. In such case, the senior lienholder may foreclose and we will be entitled to share in the proceeds of the foreclosure sale only after amounts due to senior lienholders have been paid in full. This can result in the loss of all or part of our investment, adversely affecting our net income, shareholders’ equity and cash distributions to our shareholders.

We may suffer a loss if a borrower defaults on a loan that is secured by undeveloped land.

We may provide loans that are secured by undeveloped land. These loans may be subject to a higher risk of default because such properties generally are not income-producing properties. Following a borrower’s default, we may experience delays in enforcing our rights as a lender and may incur costs in protecting our investment. In

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addition, the market value of such properties may be volatile. Consequently, in the event of a default and foreclosure, we may not be able to sell such a property for an amount equal to our investment quickly or at all. As a result, we may lose all or part of our investment, adversely affecting our net income, shareholders’ equity and cash distributions to our shareholders.

We may suffer a loss if a borrower defaults on a loan that is not secured by underlying real estate.

We occasionally provide loans that are secured by equity interests in the borrowing entities. These loans are subject to the risk that other lenders may be directly secured by the real estate assets of the borrower. In the event of a default and foreclosure or bankruptcy sale, those secured lenders would have priority over us with respect to the proceeds of a sale of the underlying real estate. As a result, we may lose all or part of our investment, adversely affecting our net income, shareholders’ equity and cash distributions to our shareholders.

We are subject to the risks associated with loan participations, such as lack of full control rights.

Some of our investments are participating interests in loans in which we share the rights, obligations and benefits of the loan with other participating lenders. We may need the consent of these parties to exercise our rights under such loans, including rights with respect to amendment of loan documentation, enforcement proceeding and the institution of, and control over, foreclosure proceedings. In addition, to the extent our participation represents a minority interest, a majority of the participants may be able to take actions which are not consistent with our objectives.

We may have less control of our investment when we invest in joint ventures.

We have made loans to, and acquired equity interests in, joint ventures that own income producing real property. Our co-venturers may have different interests or goals than we do or our co-venturers may not be able or willing to take an action that is desired by us. A disagreement with respect to the activities of the joint venture could result in a substantial diversion of time and effort by our management and could result in our exercise, or one of our co-venturer’s exercise, of the buy/sell provision typically contained in our joint venture organizational documents. In addition, there is no limitation under our charter documents as to the amount of funds that we may invest in joint ventures. Accordingly, we may invest a substantial amount of our funds in joint ventures which ultimately may not be profitable as a result of disagreements with or among our co-venturers.

Our allowance for loan losses may not be adequate to cover actual losses.

A significant source of risk arises from the possibility that losses could be sustained because borrowers, guarantors and related parties may fail to perform in accordance with the terms of their loans. We maintain an allowance for loan losses to manage the risk associated with loan defaults and non-performance by assessing the likelihood of non-performance, tracking loan performance and diversifying our portfolio. However, unexpected losses may occur that could have a material adverse effect on our business, financial condition, results of operations and cash flows. Unexpected losses may arise from a wide variety of specific or systemic factors, many of which are beyond our ability to predict, influence or control.

The allowance for loan losses reflects our estimate of the probable losses in our loan portfolio at the relevant balance sheet date. Our allowance for loan losses is based on prior experience, as well as an evaluation of the known risks in the current portfolio, composition and growth of the loan portfolio and economic factors. The determination of an appropriate level of loan loss allowance is an inherently difficult process and is based on numerous assumptions. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, that may be beyond our control and these losses may exceed current estimates. Our allowance for loan losses may not be adequate to cover actual loan losses, and future provisions for loan losses could materially and adversely affect our business, financial condition, results of operations and cash flows.

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We are exposed to risk of environmental liabilities with respect to properties to which we take title.

In the course of our business, we may foreclose and take title to real estate, and could be subject to environmental liabilities with respect to these properties. We may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to investigate or clean up hazardous or toxic substances, or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. In addition, as the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination associated with the property. If we become subject to significant environmental liabilities, our business, financial condition, results of operations and cash flows could be materially adversely affected.

The geographic concentration of our portfolio may make our revenues and the value of our portfolio vulnerable to adverse changes in local economic conditions.

A substantial amount of our outstanding loans are secured by properties located in the New York metropolitan area, including New Jersey and Connecticut, although we originate and hold for investment loans secured by real property located anywhere in the United States and Puerto Rico. A lack of geographical diversification may make our mortgage portfolio more sensitive to local or regional economic conditions, which may result in higher default rates than might be incurred if our portfolio were more geographically diverse.

We face intense competition in acquiring desirable mortgage investments.

We encounter significant competition from other REITs, banks, pension funds, public and private lending companies and mortgage bankers. Many of our competitors are larger than us, may have greater access to capital and other resources and may have other advantages over us in providing certain services to borrowers. Competition may result in higher prices for mortgage assets, lower yields and a narrower spread of yields over borrowing costs. In addition, an increase in funds available to lenders, or a decrease in borrowing activity, may increase competition for making loans and may result in loans available to us having a greater risk.

Our revenues and the value of our portfolio are affected by a number of factors that affect investments in real estate generally.

We are subject to the general risks of the real estate market. These include adverse changes in general and local economic conditions, demographics, retailing trends and traffic patterns, competitive overbuilding, casualty losses and other factors beyond our control. The value of the collateral underlying our loans, as well as the real estate owned by us and by joint ventures in which we participate, also may be negatively affected by factors such as the cost of complying with environmental regulations and liability under applicable environmental laws, interest rate changes and the availability of financing. Income from a commercial or multifamily residential property will also be adversely affected if a significant number of tenants are unable to pay rent, if tenants terminate or cancel leases or if available space cannot be rented on favorable terms. Operating and other expenses of properties, particularly significant expenses such as real estate taxes, maintenance costs and casualty and liability insurance costs, generally do not decrease when income decreases and even if revenues increase, operating and other expenses may increase faster than revenues.

Changes in interest rates may harm our results of operations.

Our results of operations are likely to be harmed during any period of unexpected or rapid changes in interest rates. A substantial or sustained increase in interest rates could harm our ability to originate mortgage loans or acquire participations in mortgage loans. Interest rate fluctuations may also harm our earnings by causing an increase in mortgage prepayments or by changing the spread between the interest rates on our borrowings and the interest rates on our mortgage assets.

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Our revenues and the value of our portfolio may be negatively affected by casualty events occurring on properties securing our loans.

We require our borrowers to obtain, for our benefit, comprehensive insurance covering the property and any improvements to the property collateralizing our loan in an amount intended to be sufficient to provide for the costs of replacement in the event of casualty. In addition, joint ventures in which we are a participant carry comprehensive insurance covering the property and any improvements to the property owned by the venture for the costs of replacement in the event of a casualty. Further, we carry insurance for such purpose on properties owned by us. However, the amount of insurance coverage maintained for any property may not be sufficient to pay the full replacement cost following a casualty event. In addition, the rent loss coverage under a policy may not extend for the full period of time that a tenant may be entitled to a rent abatement that is a result of, or that may be required to complete restoration following, a casualty event. In addition, there are certain types of losses, such as those arising from earthquakes, floods, hurricanes and terrorist attacks that may be uninsurable or that may not be economically insurable. Changes in zoning, building codes and ordinances, environmental considerations and other factors may make it impossible for our borrower, a joint venture or us, as the case may be, to use insurance proceeds to replace damaged or destroyed improvements at a property. If any of these or similar events occur, the amount of coverage may not be sufficient to replace a damaged or destroyed property and/or to repay in full the amount due on all loans collateralized by such property. As a result, our returns and the value of our investment may be reduced.

Senior management and other key personnel are critical to our business and our future success may depend on our ability to retain them.

We depend on the services of Fredric H. Gould, chairman of our board of trustees, Jeffrey A. Gould, our president and chief executive officer, and other members of our senior management to carry out business and investment strategies. In addition to Jeffrey A. Gould, only three other officers, our vice presidents, David Heiden and Mitchell Gould, and our vice president and chief financial officer, George Zweier, devote substantially all of their business time to our company. The remainder of our executive management personnel share their services on a part-time basis with entities affiliated with us and located in the same executive offices. In addition, Jeffrey A. Gould devotes a limited amount of his business time to entities affiliated with us. As we grow our business, we will need to attract and retain qualified senior management and other key personnel, both on a full-time and part-time basis. The loss of the services of any of our senior management or other key personnel or our inability to recruit and retain qualified personnel in the future, could impair our ability to carry out our business and our investment strategies. We do not carry key man life insurance on members of our senior management.

Our transactions with affiliated entities involve conflicts of interest.

Entities affiliated with us and with certain of our officers provide services to us and on our behalf and we intend to continue the relationships with such entities in the future. Although our policy is to ensure that we receive terms in transactions with affiliates that are at least as favorable as those that we would receive if the transactions were entered into with unaffiliated entities, these transactions raise the potential that we may not receive terms as favorable as those that we would receive if the transactions were entered into with unaffiliated entities.

We will be adversely affected by a decrease in the market value of, or cash distributions paid on, shares of Entertainment Properties Trust.

The closing market value of the shares of Entertainment Properties Trust (“EPR”) owned by us at June 30, 2005 was $46,441,600 while our cost basis was $13,262,000. At June 30, 2005, our balance sheet reflects as an asset $50,672,000 of available-for-sale securities, of which $46,441,600 represents the market value of the shares of EPR owned by us on June 30, 2005 and $33,180,000, or 23% of our shareholders’ equity, represents the difference between our cost basis for such shares and the market value for such shares. We have no business

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relationship, affiliation with or influence over the business or operations of EPR. Any substantial decrease in the market value of EPR shares, whether resulting from activities of EPR, its management, market forces or otherwise, could result in a material decrease in our total assets and our shareholders’ equity.

Our ownership of shares of EPR resulted in the receipt by us for the fiscal year ended September 30, 2004 of cash dividends of $2,271,000. In the fiscal year ended September 30, 2004, we sold 61,300 EPR shares for a gain of $1,378,000. If there is a decrease in the EPR dividend, for any reason, it could reduce the amount of cash distributions available for our shareholders. In addition, if the market price of EPR’s common shares were to decline, our profit from the sale of these shares would decline or could be eliminated.

We have established a margin line of credit collateralized by the EPR shares owned by us. At June 30, 2005, $23,221,000 was available under this line of credit of which $18,613,000 was outstanding. When we have amounts outstanding under the margin line of credit, a significant decrease in the value of the EPR shares could result in a margin call and, if cash is not available from other sources, a sale of EPR shares may be required at a time when we would prefer not to sell EPR shares, resulting in the possibility that such shares could be sold at a per share loss.

Risks Related to the REIT Industry

Failure to qualify as a REIT would result in material adverse tax consequences and would significantly reduce cash available for distributions.

We believe that we operate so as to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). Qualification as a REIT involves the application of technical and complex legal provisions for which there are limited judicial and administrative interpretations. The determination of various factual matters and circumstances not entirely within our control may affect our 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 qualification as a REIT or the federal income tax consequences of such qualification. If we fail to qualify as a REIT, we will be subject to federal, state and local income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates and would not be allowed a deduction in computing our taxable income for amounts distributed to shareholders. In addition, unless entitled to relief under certain statutory provisions, we would be disqualified from treatment as a REIT for the four taxable years following the year during which qualification is lost. The additional tax would reduce significantly our net income and the cash available for distributions to shareholders.

We are subject to certain distribution requirements that may result in our having to borrow funds at unfavorable rates.

To obtain the favorable tax treatment associated with being a REIT, we generally will be required, among other things, to distribute to our shareholders at least 90% of our taxable income (subject to certain adjustments) each year. To the extent that we satisfy the distribution requirement, but distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which certain distributions paid by us with respect to any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.

As a result of differences in timing between the receipt of income and the payment of expenses, and the inclusion of such income and the deduction of such expenses in arriving at taxable income, and the effect of nondeductible capital expenditures, the creation of reserves and the timing of required debt service (including amortization) payments, we may need to borrow funds on a short-term basis in order to make the distributions to our shareholders necessary to retain the tax benefits associated with qualifying as a REIT, even if we believe that then prevailing market conditions are not generally favorable for such borrowings. Such borrowings could reduce our net income and the cash available for distributions to holders of our shares.

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Compliance with REIT requirements may hinder our ability to maximize profits.

In order to qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning among other things, our sources of income, the amounts we distribute to our shareholders and the ownership of securities. We may also be required to make distributions to shareholders at disadvantageous times or when we do not have funds readily available for distribution. Accordingly, compliance with REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

In order to qualify as a REIT, we must also ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified REIT real estate assets. The remainder of our investment in securities cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of such issuer. In addition, no more than 5% of the value of our assets can consist of the securities of any one issuer, other than a qualified REIT security. If we fail to comply with these requirements, we must dispose of a portion of our assets within 30 days after the end of the calendar quarter in order to avoid losing our REIT status and suffering adverse tax consequences. This requirement could cause us to dispose of assets for consideration of less than their true value and could lead to a material adverse impact on our results of operations and financial condition.

Your investment in our shares has various U.S. federal, state and local income tax risks that could affect the value of your investment.

Although the provisions of the Code relevant to your investment in our shares are generally described in “Certain Federal Income Tax Considerations,” we strongly urge you to consult your own tax advisor concerning the effects of U.S. federal, state and local income tax law on an investment in our shares because of the complex nature of the tax rules applicable to REITs and their shareholders.

Risks Related to Ownership of Our Securities

We may issue securities with rights or preferences that are senior to the rights of the securities you purchase.

Our declaration of trust authorizes the issuance of up to 10,000,000 preferred shares in one or more series. Any series of preferred shares may have rights to dividends that are equal or senior to those of the securities you purchase. Our board of trustees, without any action by our shareholders, may amend our declaration of trust to increase or decrease the aggregate number of shares or the number of shares of any class that we are authorized to issue. The issuance of preferred shares could have the effect of decreasing the amount of income available for distribution to common shareholders. The issuance of an additional series of preferred shares on a parity with or senior to an initial series of preferred shares could have the effect of diluting the interests and voting rights of holders of an initial series of preferred shares.

We may sell additional common shares in order to expand our business, which will dilute your percentage ownership and may cause the price of our common shares to decline.

There are 7,804,429 of our common shares outstanding as of September 15, 2005. This prospectus may relate to the offering of common shares or other securities exercisable for, convertible into or exchangeable for common shares. In order to expand our business, we may sell additional common shares, or other securities convertible into or exchangeable for our common shares, which would cause dilution of our existing shareholders and could result in a decrease in the market price of our common shares.

Future sales of our shares may cause the price of our shares to decline.

Substantially all of our outstanding common shares are freely tradable without restriction or further registration. Affiliates must sell all shares they own in compliance with the volume and other requirements of Rule 144, except for the holding period requirements. Nevertheless, sales of substantial amounts of our shares by our shareholders or even the potential for such sales, may have an adverse effect on the market price of our shares and could impair our ability to raise capital through the sale of our equity securities.

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Increases in interest rates could lower the trading price of our shares.

The trading prices of equity securities issued by REITs historically have been affected by changes in broader market interest rates, with increases in interest rates resulting in decreases in trading prices. As a result, an increase in market interest rates could lower the trading price of our equity securities.

There is no guarantee that there will be an active or liquid market for our preferred shares.

As of the date of this prospectus, we do not have any preferred shares outstanding. If we issue preferred shares, an active or liquid trading market for the preferred shares may not develop. Even if a market does develop, it may not be sustained and may not provide you with a means to sell your preferred shares. If an active trading market does not develop, the market price and liquidity of our preferred shares will be adversely affected. Even if an active public market does develop, we cannot guarantee you that the market price for preferred shares that you purchase will equal or exceed the price you pay for the preferred shares.

Our shareholders may have personal liability for our acts and obligations.

It is possible that certain states may not recognize the limited liability of shareholders, although BRT’s Third Amended and Restated Declaration of Trust, (which we refer to herein as our declaration of trust) provides that our shareholders shall not be subject to any personal liability for our acts or obligations. Upon payment of any such liability, however, the shareholder will, in the absence of willful misconduct on the shareholder’s part, be entitled to reimbursement from our general assets, to the extent such assets are sufficient to satisfy the claim.

We cannot assure you of our ability to pay dividends in the future.

We intend to pay quarterly dividends and to make distributions to our shareholders in amounts such that all or substantially all of our taxable income in each year, subject to certain adjustments, is distributed. This, along with other factors, should enable us to qualify for the tax benefits accorded to a REIT under the Code. We have not established a minimum dividend payment level and our ability to pay dividends may be adversely affected by the risk factors described in this prospectus. All distributions will be made at the discretion of our board of trustees and will depend on our earnings, our financial condition, maintenance of our REIT status and such other factors as our board of trustees may deem relevant from time to time. We cannot assure you that we will be able to pay dividends in the future.

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USE OF PROCEEDS

Unless otherwise indicated in the applicable prospectus supplement, we anticipate that the net proceeds from the sale of the securities that we may offer under this prospectus will be used for general business purposes, including, without limitation, the repayment of debt and the origination of or the acquisition of real estate mortgage loans, participations in mortgage loans, or the acquisition of other real estate assets. We will have significant discretion in the use of any net proceeds. Investors will be relying on the judgment of our management regarding the application of the proceeds from any sale of the securities. We may invest the net proceeds temporarily until we use them for their stated purpose.

RATIOS OF EARNINGS TO COMBINED FIXED CHARGES

The following table sets forth the ratios of earnings to combined fixed charges for the Trust for each of the five years ended September 30, 2004, 2003, 2002, 2001 and 2000 and for the nine months ended June 30, 2005.

	For the nine months ended June 30, 2005	For the years ended September 30,
		2004	2003	2002	2001	2000
Fixed charge coverage (1)	5.06	7.48	25.06	23.87	13.59	19.33

(1) Earnings is calculated as income before equity in earnings of unconsolidated real estate ventures, minority interest and discontinued operations plus distributed earnings from equity investees and fixed charges. Fixed charges is calculated as the sum of interest expense and amortization of deferred financing costs. During the period commencing with the Trust’s fiscal year ended September 30, 2000 through June 30, 2005, the Trust did not have any preferred shares outstanding.

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DESCRIPTION OF SECURITIES

The following paragraphs constitute a summary as of the date of this prospectus and do not purport to be a complete description of our securities. The following paragraphs are qualified in their entirety by our declaration of trust, our bylaws and Massachusetts law. For a complete description of our securities, we refer you to our declaration of trust and our bylaws, each of which is incorporated by reference in this prospectus and any accompanying prospectus supplement.

Overview

Our authorized capital consists of an unlimited number of shares of beneficial interest, par value $3.00 per share, which we refer to in this prospectus as our common shares, and 10,000,000 shares of preferred stock, par value $1.00 per share, which we refer to in this prospectus as our preferred shares. As of September 15, 2005, 7,804,429 of our common shares were outstanding (including 86,310 shares awarded under restricted stock grants subject to vesting conditions) and no preferred shares were outstanding. We may issue and sell as many common shares as our board of trustees determines in its sole discretion.

Description of Common Shares

Unless otherwise provided for in the applicable prospectus supplement, our common shares have equal non-cumulative voting, distribution, liquidation, redemption and other rights and have one vote per share on all matters submitted to a vote of the shareholders. Holders of common shares have no preference, conversion, exchange, sinking fund, redemption or preemptive rights. Holders of common shares are entitled to receive distributions, when and as authorized by our board of trustees, out of legally available funds. All of our common shares issuable under this prospectus have been duly authorized and will be fully paid and non-assessable.

Subject to our declaration of trust, each outstanding common share entitles the holder to one vote on all matters submitted to a vote of shareholders. Our declaration of trust provides that shareholders are entitled to vote only upon the following matters:

• election or removal of trustees;

• amendment of our declaration of trust or termination of the trust;

• any transaction involving our merger or consolidation, or the sale, lease or exchange of all or substantially all of our property and assets;

• termination of any contract with an advisor to which our trustees have delegated the authority to conduct our business; and

• determination of whether a court action, proceeding or claim should be brought or maintained derivatively or as a class action on our behalf or on behalf of our shareholders.

Except with respect to these matters, no action taken by our shareholders at any meeting shall in any way bind our board of trustees.

There is no cumulative voting in the election of trustees. Accordingly, holders of a majority of the outstanding common shares entitled to vote in any election of trustees may elect all of the trustees standing for election, subject to the voting rights, if any, of any class or series of our preferred shares that may be outstanding from time to time.

Description of Preferred Shares

Our charter authorizes us to issue up to 10,000,000 preferred shares. As of the date of this prospectus, no preferred shares are outstanding. Subject to limitations of Massachusetts law, our declaration of trust and the New York Stock Exchange rules, our board of trustees is authorized to fix the number of shares constituting each

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series of preferred shares and the terms, rights, restrictions and qualifications, including preferences, voting powers, dividend or distribution rights and redemption, sinking fund and conversion rights, and such other subjects or matters as may be fixed by resolution of our board of trustees or a duly authorized committee thereof.

Any preferred shares issued may rank prior to the common shares as to dividends and will rank prior to the common shares as to distributions in the event of our liquidation, distribution or winding up. The ability of our board of trustees to issue preferred shares could, among other things, adversely affect the voting powers of common shareholders. If we issue preferred shares, the preferred shares will be validly issued, fully paid and non-assessable.

Prior to the issuance of a new series of preferred shares, we will file, with the Secretary of the Commonwealth of Massachusetts, an Amendment of Trust that will become part of our declaration of trust that will set forth the terms of the new series. The prospectus supplement relating to any preferred shares offered thereby will describe the specific terms of the preferred shares, including:

• the title and stated value;

• the number of shares offered, liquidation preference, if any, and offering price;

• the distribution rate, if any, and if applicable, the distribution periods and payment dates;

• any cumulative, non-cumulative or partially cumulative feature of any distribution;

• the date on which distribution, if any, begin to accrue, and, if applicable, accumulate;

• any auction and remarketing procedures;

• any retirement or sinking fund requirement;

• the terms and conditions of any redemption right;

• the terms and conditions of any conversion or exchange right;

• any listing of the offered shares on any securities exchange;

• any voting rights;

• the relative ranking and preferences of the preferred shares as to distributions, liquidation, dissolution or winding up;

• any limitations on issuances of any other series of preferred shares ranking senior to or on a parity with the series of preferred shares as to distributions, liquidation, dissolution or winding up;

• any limitations on direct or beneficial ownership and restrictions on transfer; and

• any other specific terms, preferences, rights, limitations or restrictions.

Description of Warrants

We may issue warrants to purchase common shares or preferred shares, which we refer to in this prospectus as “warrants.” Warrants may be issued independently or together with any securities and may be attached to or separate from such securities. Each series of warrants will be issued under a separate warrant agreement to be entered into between us and a specified warrant agent. The warrant agent will act solely as our agent in connection with the warrants of such series and will not assume any obligation or relationship of agency or trust for or with any holders or beneficial owners of warrants.

The prospectus supplement relating to any warrants offered thereby will describe the specific terms of the warrants, including:

• the title of the warrants;

• the aggregate number of outstanding warrants;

• the price or prices at which the warrants will be issued;

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• the price or prices at which the securities purchasable upon exercise of the warrants may be purchased;

• the designation, amount and terms of the securities purchasable upon exercise of the warrants;

• if applicable, the date on and after which the warrants and the securities purchasable upon exercise of the warrants will be separately transferable;

• the date on which the right to exercise the warrants shall commence and the date on which such right shall expire;

• the minimum or maximum amount of the warrants which may be exercised at any one time;

• information with respect to book-entry procedures, if any;

• a discussion of federal income tax considerations; and

• any other material terms of the warrants, including terms, procedures and limitations relating to the exchange and exercise of the warrants.

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PROVISIONS OF OUR DECLARATION OF TRUST

Restrictions on Acquisition and on Transfer

Our board of trustees may (1) refuse to issue, sell, transfer or deliver an amount of our common shares or preferred shares to any person or entity, or (2) call for the redemption of an amount of our common shares or preferred shares from any person or entity if, in either case, the acquisition of an amount of our common shares or preferred shares by such person or entity would, in the opinion of our board of trustees, result in our disqualification as a REIT. All certificates representing our common shares bear a legend referring to these restrictions and, in the event we issue any preferred shares, all certificates representing such preferred shares shall also bear a legend referring to these restrictions. If so requested by us, you must file a written response to our request for share ownership information which we will mail to you. In addition, you must disclose to us in writing any additional information we request in order to determine the extent of your direct or indirect ownership of our shares and its effect, if any on our REIT status.

Restrictions on Acquisition of Control

Our declaration of trust contains provisions that may delay, defer or prevent a takeover attempt, which may prevent shareholders from receiving a “control premium” for their shares. These provisions may defer or prevent tender offers for our common shares or purchases of large blocks of our common shares which could thereby limit the opportunities for our shareholders to receive a premium for their common shares over then-prevailing market prices. These provisions include the following:

• Authorization of “blank check” preferred shares. Under the terms of our declaration of trust, we are authorized to issue up to 10 million “blank check” preferred shares and to determine the price, privileges and terms of those shares. Specific rights we may grant to future holders of preferred shares could be used to restrict an ability to merge with, or sell our assets to, a third party.

• Classified board structure. Our board of trustees is divided into three classes. Trustees in each class are elected to serve for a term of three years, with the terms of each class beginning in different years.

• Restrictions on Transfer. Our board of trustees has the power to prevent the sale, transfer or delivery of our shares to any person or entity if the board of trustees determines, in good faith and in its sole discretion, that any such sale, transfer or delivery of our shares would result in a concentration of ownership, whether direct or indirect, of our shares not permitted by the provisions of the Internal Revenue Code applicable to REITs.

Amendment of Declaration of Trust or Termination of Trust

Our declaration of trust may be amended or terminated (1) by written consent of a majority of the trustees and the holders of a majority of our outstanding shares entitled to vote or (2) at a meeting called for such purpose, by vote of a majority of our outstanding shares entitled to vote. Two-thirds of the trustees may, on the advice of counsel, amend our declaration of trust without the consent of our shareholders to the extent necessary to comply with the provisions of the Internal Revenue Code of 1986, as amended, applicable to REITs, the regulations thereunder, and any ruling thereunder or interpretation thereof.

Trustees

Our declaration of trust requires that we have not less than five nor more than 15 trustees as fixed from time to time by the board of trustees. We currently have nine trustees. Our board of trustees is divided into three classes, each of which is elected for a staggered term of three years. A classified board may delay, defer or prevent a change in control or other transaction that might involve a premium over the then prevailing market price for our shares or may delay, defer or prevent other changes that our shareholders consider desirable. In addition, a classified board could prevent shareholders who disagree with the policies of our board from replacing a majority of our board for two years, except in the event of removal for cause.

A trustee may be removed by a vote of two-thirds of the other trustees only for cause. A trustee may be removed, with or without cause, at any meeting of the shareholders by the affirmative vote of a majority of the

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outstanding shares entitled to vote, provided a quorum is present at such meeting. Any vacancy on the board of trustees, resulting from the death, resignation, or removal of a trustee, or from another cause specified in our declaration of trust, may be filled by a majority of the remaining trustees. No bond is required to secure the performance of a trustee.

Responsibility of Trustees

Our board of trustees is responsible for our general policies and for such general supervision and management of our business as may be necessary to insure that our business conforms to the provisions of our declaration of trust. Our declaration of trust provides that the trustees have full, absolute and exclusive power, control, and authority over and management of our assets and over our business and our affairs to the same extent as if the trustees were the sole owners thereof in their own right, subject to the limitations expressly stated in the declaration of trust. The trustees have the power to enter into commitments to make any investment, purchase or acquisition or to exercise any power authorized by our declaration of trust, including the power to retain, employ or contract with an advisor and to delegate any of the trustees’ powers and duties to an advisor.

Indemnification of Trustees, Officers, Employees and Agents

Our declaration of trust provides that we will indemnify and hold harmless our trustees, officers, employees and agents, or an Indemnified Party, against expense or liability, including attorneys’ fees reasonably incurred, in connection with the defense or disposition of any action, suit or proceeding in which they may be involved or which they may be threatened because of being or having been our trustees, officers, employees or agents to the fullest extent permitted by applicable law; provided, however, that (1) no such indemnification shall be made with respect to any matter in which the Indemnified Party is adjudicated to have not acted in good faith in the reasonable belief that his actions were in our best interests, or with respect to any matter in which the Indemnified Party is adjudicated to have acted with bad faith, willful misconduct, reckless disregard of his duties or gross negligence, (2) no indemnification shall be provided in a case where any matter is disposed of by a compromise payment by an Indemnified Party unless such compromise payment is approved by a majority of the disinterested trustees or unless we have received a written opinion from independent legal counsel indicating that such Indemnified Party appears to have acted in good faith in the reasonable belief that his action was in our best interests.

Pursuant to our declaration of trust, an Indemnified Party may only satisfy any right of indemnity out of our assets, and no shareholder shall be personally liable with respect to any claim for indemnity.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our trustees, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by one of our trustees, officers or controlling persons in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

Possible Shareholder Liability; Indemnification of Shareholders

It is possible that certain states may not recognize the limited liability of our shareholders, although our declaration of trust provides that our shareholders will not be subject to any personal liability for our acts or obligations. Our declaration of trust provides that we will indemnify our shareholders against expense or liability, including attorney’s fees reasonably incurred, as a result of being or having been shareholders; provided however, that we will not indemnify shareholders for taxes assessed against them because of ownership of our shares and we will not reimburse shareholders for losses suffered because of changes in the market value of our shares.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Fredric H. Gould, chairman of our board of trustees, is chairman of the board of directors, president and chief executive officer of One Liberty Properties, Inc., a REIT listed on the New York Stock Exchange that is engaged in the ownership of a diversified portfolio of income-producing real properties that are net leased to tenants, generally under long-term leases. He is also chairman of the board of directors and sole stockholder of the managing general partner of Gould Investors L.P., a limited partnership engaged in real estate ownership, and he is the sole member of a limited liability company which is also a general partner of Gould Investors L.P. Jeffrey A. Gould, a trustee and our president and chief executive officer, is a senior vice president and director of One Liberty Properties, Inc. and a vice president of the managing general partner of Gould Investors L.P. Matthew J. Gould, one of our senior vice presidents, is a senior vice president and director of One Liberty Properties, Inc., and president of the managing general partner of Gould Investors L.P. Gould Investors L.P. owns approximately 27.2% of our outstanding common shares. In addition, David W. Kalish, Simeon Brinberg, Mark H. Lundy and Israel Rosenzweig, each of whom is an executive officer of our company, are also executive officers of One Liberty Properties, Inc. and of the corporate managing general partner of Gould Investors L.P.

We and certain related entities, including Gould Investors L.P. and One Liberty Properties, Inc., occupy common office space and use certain services and personnel in common. In 2004, we paid Gould Investors L.P. $754,000 for general and administrative expenses, including rent, telecommunication services, computer services, bookkeeping, secretarial and other clerical services and legal and accounting services. This amount included $52,000 contributed to the annual rent of $349,000 paid by Gould Investors L.P., One Liberty Properties, Inc. and related entities to a subsidiary of Gould Investors L.P. which owns the building in which the offices of these entities are located, and an aggregate of $570,787 allocated to us for services (primarily legal and accounting) performed by some of the above executive officers who are not engaged by us on a full-time basis, including $151,589, $80,741 and $107,428 of salary allocated by Mark H. Lundy, David W. Kalish and Simeon Brinberg respectively. The allocation of general and administrative expenses is computed in accordance with a shared services agreement, or the “Shared Services Agreement,” and is based on the estimated time devoted by executive, administrative and clerical personnel to the affairs of each participating entity to the Shared Services Agreement. The services of secretarial personnel generally are allocated on the same basis as that of the executive to whom each secretary is assigned. We also lease under a direct lease with a subsidiary of Gould Investors L.P. approximately 1,800 square feet at an annual rental of $51,000, which is a competitive rent for comparable office space in the area in which the building is located.

In 2004, we paid Majestic Property Management Corp., a company in which we have no ownership interest and which is 100% owned by Fredric H. Gould, chairman of our board of trustees, fees for management services and brokerage fees totaling $128,000, representing approximately 4% of the 2004 revenues of Majestic Property Management Corp. In addition, in 2004, eight unconsolidated joint ventures in which we own a 50% joint venture interest paid fees to Majestic Property Management Corp. for management fees, brokerage commissions and construction supervisory fees totaling $272,000, representing approximately 8% of the 2004 revenues of Majestic Property Management Corp. Majestic Property Management Corp. provides real property management, real estate brokerage and construction supervision services for affiliated and non-affiliated entities. Fredric H. Gould received compensation from Majestic Property Management Corp. of $19,172 in 2004, and our executive officers received compensation from Majestic Property Management Corp. in 2004 as follows: Jeffrey A. Gould, $310,000; Matthew J. Gould, $77,645; David W. Kalish, $37,545; Simeon Brinberg, $20,606; Mark H. Lundy, $42,333; and Israel Rosenzweig, $308,000. The management services provided by Majestic Property Management Corp. to us include, among other things, rent, billing and collection, leasing (including compliance with regulatory statutes and rules; i.e., New York City rent control and rent stabilization rules), property maintenance and repair and property sales.

We and REIT Management Corp. are parties to an advisory agreement (known as the “Advisory Agreement”), pursuant to which REIT Management furnishes advisory and administrative services with respect to our assets, subject to the supervision of our trustees. Among other things, REIT Management arranges credit

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lines for us and its personnel participate in our loan analysis and approvals, investment advice, building inspections and litigation support. For services performed by REIT Management under the Advisory Agreement, REIT Management receives an annual fee of ½ of 1% of invested assets (as defined in the Advisory Agreement) other than mortgages receivable, subordinated land leases and investments in unconsolidated ventures, with a 1% fee payable on mortgages receivable, subordinated land leases and investments in unconsolidated ventures. The fee to REIT Management includes non-accruing mortgage receivables to the extent they exceed allowances for loan losses. The fee is computed and payable quarterly, subject to adjustment at year end. In 2004, REIT Management earned $1,444,000 under the Advisory Agreement. Our borrowers pay fees directly to REIT Management based on loans originated. These fees totaled $2,029,000 in fiscal 2004.

All of the outstanding shares of REIT Management are owned by Fredric H. Gould, the chairman of our board of trustees. Fredric H. Gould and Matthew J. Gould, a trustee of our company, who are salaried officers of REIT Management, received compensation from REIT Management of $941,946 and $637,360, respectively in 2004. Simeon Brinberg, David W. Kalish and Mark H. Lundy, officers of our company, received compensation from REIT Management in 2004 of $187,919, $374,238 and $398,628, respectively. Although Jeffrey A. Gould, our President and Chief Executive Officer, did not receive any direct compensation from REIT Management in 2004, he received compensation from other affiliated service companies in 2004, none of which, other than Majestic Property Management Corp., received fees from our company in 2004. Jeffrey A. Gould may be deemed to have indirectly received from REIT Management in 2004 the net amount of approximately $371,000, because the compensation paid by affiliated service companies to Jeffrey A. Gould and our officers referred to in this section “Certain Relationships and Related Party Transactions” is not determined by the profitability of any one company but is related to the total profitability of these service companies.

The Advisory Agreement provides that directors, officers, and employees of REIT Management may serve as trustees, officers and employees of our company, but such persons may not receive cash compensation from us for services rendered in the latter capacities.

The Advisory Agreement, which was entered into in February 1983, has been renewed for a term ending December 31, 2009 and is renewable on an annual basis by the board of trustees, for a maximum five year period. Notwithstanding such renewal, the shareholders have the right to rescind the renewal of the Advisory Agreement authorized at the preceding board of trustees’ meeting, if at a special meeting of shareholders specifically called for such purpose by holders of at least 20% of the outstanding shares, a majority of the outstanding shares entitled to vote thereon determine that the Advisory Agreement shall not be renewed. In the event the Advisory Agreement is not renewed in any year by the board of trustees or such renewal is rescinded by a majority of the outstanding shares entitled to vote thereon at a special meeting called for such purpose, the Advisory Agreement will have a balance of four years remaining on the existing term.

The fees paid by us to Majestic Property Management Corp. and REIT Management and the expenses reimbursed to Gould Investors L.P. under the Shared Services Agreement were approved by our Audit Committee and board of trustees. The fees to Majestic Property Management Corp. were based on fees which would have been charged by unaffiliated persons for comparable services. The fees paid to REIT Management by us are pursuant to the Advisory Agreement and the expenses reimbursed to Gould Investors L.P. were reimbursed pursuant to the Shared Services Agreement, which has been approved by the board of trustees.

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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

This section summarizes the U.S. federal income tax issues that you, as a prospective investor, may consider relevant. The applicable prospectus supplement delivered with this prospectus may, to the extent necessary, provide additional information about certain other federal income tax considerations that may be considered relevant with respect to the particular securities then being offered. Because this section is a summary, it does not address all of the tax issues that may be important to you. In particular, this section does not address any tax issues applicable to any holder of our warrants. In addition, this section does not address the tax issues that may be important to certain types of prospective investors that are subject to special treatment under U.S. federal income tax laws, including, without limitation, insurance companies, tax-exempt organizations (except to the extent discussed in “Taxation of Tax-Exempt Shareholders” below), financial institutions or broker-dealers, and non-U.S. individuals and foreign corporations (except to the extent discussed in “Taxation of Non-U.S. Shareholders” below).

The statements in this section are based on current U.S. federal income tax laws. We cannot assure you that new laws, interpretations of law, or court decisions, any of which may have retroactive effect, will not cause one or more statements in this section to be inaccurate.

We have not requested and do not intend to request a ruling from the Internal Revenue Service (“IRS”) as to our current status as a REIT. However, McCarter & English, LLP (“McC&E”) is rendering an opinion, which will be filed as an exhibit to the registration statement of which this prospectus is a part. McC&E will opine that we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with the taxable year ended December 31, 2001, and that our organization and proposed method of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT under the Code. It must be emphasized that this opinion is based on various assumptions and on our representations concerning our organization and operations, including representations regarding the nature of our assets and the conduct and method of operation of our business, and it cannot be relied upon if any of those assumptions and representations later prove incorrect. Moreover, continued qualification and taxation as a REIT depends upon our ability to meet, through actual annual operating results, distribution levels and diversity of share ownership, as well as the other various qualification tests imposed under the Code, the results of which will not be reviewed by McC&E. Accordingly, no assurance can be given that the actual results of our operations will satisfy such requirements. The opinion of McC&E is based upon current law, which is subject to change either prospectively or retroactively. Changes in applicable law could modify the conclusions expressed in McC&E’s opinion. Moreover, unlike a tax ruling (which we will not seek), an opinion of counsel is not binding on the IRS, and no assurance can be given that the IRS will not or could not successfully challenge our status as a REIT.

WE URGE YOU TO CONSULT YOUR OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO YOU OF INVESTING IN OUR SECURITIES AND OF OUR ELECTION TO BE TAXED AS A REIT. SPECIFICALLY, YOU SHOULD CONSULT YOUR OWN TAX ADVISOR REGARDING THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES OF SUCH INVESTMENT AND ELECTION, AND REGARDING POTENTIAL CHANGES IN APPLICABLE TAX LAWS.

Taxation of our Company as a REIT

We have elected to be taxed as a REIT under the U.S. federal income tax laws. We believe that we have operated in a manner qualifying us as a REIT since our election and intend to operate in a manner that will preserve that qualification. No assurance, however, can be given that we in fact have qualified or will remain qualified as a REIT.

This section discusses the material aspects of the laws governing the U.S. federal income tax treatment of a REIT and its shareholders. These laws are highly technical and complex. This section is qualified in its entirety

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by the applicable Code provisions, rules and regulations promulgated under the Code, and the administrative and judicial interpretations of the Code.

Our qualification as a REIT depends on our ability to meet, on a continuing basis, qualification tests set forth in the U.S. federal tax laws. Those qualification tests involve the percentage of income that we earn from specified sources, the percentages of our assets that fall within specified categories, the diversity of our share ownership, and the percentage of our earnings that we distribute. While we intend to operate so that we qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations and the possibility of future changes in our circumstances or in the law, no assurance can be given that we so qualify or will continue to so qualify. We describe the REIT qualification tests in more detail below. For a discussion of the tax treatment of us and our shareholders if we fail to qualify as a REIT, see “Failure to Qualify,” below.

If we qualify as a REIT, we generally will not be subject to U.S. federal income tax on the taxable income that we distribute to our shareholders. The benefit of that tax treatment is that it avoids the “double taxation” (i.e., taxation at both the corporate and shareholder levels) that generally results from owning stock in a corporation. However, even if we qualify as a REIT, we will be subject to U.S. federal tax in the following circumstances:

• We will pay U.S. federal income tax at regular corporate rates on taxable income, including net capital gain, that we do not distribute to shareholders during, or within a specified time period after, the calendar year in which the income is earned.

• We may be subject to the “alternative minimum tax” on any items of tax preference under certain circumstances.

• We will pay income tax at the highest corporate rate on:

• net income from the sale or other disposition of property acquired through foreclosure (“foreclosure property”) that we hold primarily for sale to customers in the ordinary course of business, and

• other non-qualifying income from foreclosure property.

• We will pay a 100% tax on net income from “prohibited transactions” (i.e., sales or other dispositions of property, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business).

• If we fail to satisfy the 75% gross income test or the 95% gross income test, as described below under “Requirements for Qualification,” and nonetheless continue to qualify as a REIT because we meet other requirements, we will pay a 100% tax on the gross income attributable to the greater of the amounts by which we fail the 75% and 95% gross income tests, multiplied by a fraction intended to reflect our profitability.

• Commencing with our taxable year beginning January 1, 2005, if we fail to satisfy the REIT asset tests, as described below, by more than a de minimis amount, due to reasonable cause and not willful neglect and we nonetheless maintain our REIT qualification because of specified cure provisions, we will be required to pay a tax equal to the greater of $50,000 or the highest corporate tax rate multiplied by the net income generated by the non-qualifying assets.

• Commencing with our taxable year beginning January 1, 2005, if we fail to satisfy any provisions of the Code that would result in our failure to qualify as a REIT (other than a violation of the REIT gross income and assets tests summarized in the preceding two bullet points) and the violation is due to reasonable cause and not willful neglect, we may retain our REIT qualification but we will be required to pay a penalty of $50,000 for each such failure.

• If we fail to distribute during a calendar year at least the sum of:

• 85% of our REIT ordinary income for the year,

• 95% of our REIT capital gain net income for the year, and

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• any undistributed taxable income from earlier periods, then

we will pay a 4% excise tax on the excess of the required distribution over the amount we actually distributed.

• We may elect to retain and pay income tax on our net long-term capital gain.

• We will be subject to a 100% excise tax on transactions with a taxable REIT subsidiary that are not conducted on an arm’s-length basis.

• If we acquire any asset from a “C” corporation (or any other corporation that generally is subject to full corporate-level tax) in a merger or other transaction in which we acquire a basis in the asset that is determined by reference either to the C corporation’s basis in the asset or to another asset (a “conversion transaction”), we will pay tax at the highest regular corporate rate applicable if we recognize any net built-in gain on the sale or disposition of such asset during the 10-year period after we acquire such asset.

• We will generally be subject to tax on the portion of any “excess inclusion income” derived from an investment in residual interests in real estate mortgage investment conduits (or REMICs) to the extent our shares are held by specified tax exempt organizations not subject to tax on unrelated business taxable income.

Requirements For Qualification as a REIT

A REIT is an entity that meets each of the following requirements:

1. It is managed by trustees or directors.

2. Its beneficial ownership is evidenced by transferable shares, or by transferable certificates of beneficial interest.

3. It would be taxable as a domestic corporation, but for the REIT provisions of the U.S. federal income tax laws.

4. It is neither a financial institution nor an insurance company subject to special provisions of the U.S. federal income tax laws.

5. At least 100 persons are beneficial owners of its shares or ownership certificates.

6. Not more than 50% in value of its outstanding shares or ownership certificates is owned, directly or indirectly, by five or fewer individuals, which the U.S. federal income tax laws define to include certain entities, during the last half of any taxable year.

7. It elects to be a REIT, or has made such election for a previous taxable year, and satisfies all relevant filing and other administrative requirements established by the IRS that must be met to elect and maintain REIT status.

8. It meets certain other qualification tests, described below, regarding the nature of its income and assets and the amount of its distributions.

We must meet requirements 1 through 4 during our entire taxable year and must meet requirement 5 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. If we comply with all the applicable requirements for ascertaining the ownership of our outstanding shares in a taxable year and we do not know, or would not have known through the exercise of reasonable diligence, that we violated requirement 6, we will be deemed to have satisfied requirement 6 for that taxable year. For purposes of determining share ownership under requirement 6, an “individual” generally includes a supplemental unemployment compensation benefits plan, a private foundation, or a portion of a trust permanently set aside or used exclusively for charitable purposes. An “individual,” however, generally does not

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include a trust that is a qualified employee pension or profit sharing trust under the U.S. federal income tax laws, and beneficiaries of such a trust will be treated as holding our shares in proportion to their actuarial interests in the trust for purposes of requirement 6. We have issued sufficient shares to facilitate satisfaction of requirements 5 and 6. In addition, our declaration of trust restricts the acquisition and transfer of the shares in order to ensure that there is sufficient diversity of ownership. The provisions of our declaration of trust restricting the acquisition and transfer of our shares are described in “Provisions of our Declaration of Trust - Restrictions on Acquisition and on Transfer.”

A corporation that is a “qualified REIT subsidiary” is not treated as a corporation separate from its parent REIT. All assets, liabilities and items of income, deduction and credit of a “qualified REIT subsidiary” are treated as assets, liabilities and items of income, deduction and credit of the parent REIT. A “qualified REIT subsidiary” is a corporation, all of the capital stock of which is owned by the REIT and for which no election has been made to treat such corporation as a “taxable REIT subsidiary.” We own certain of our properties through corporate subsidiaries. Each of our corporate subsidiaries qualify as “qualified REIT subsidiaries” under U.S. federal income tax law. Accordingly, for U.S. federal income tax purposes, our corporate subsidiaries are ignored as separate entities, and all of their assets, liabilities and items of income, deduction and credit are treated as our assets, liabilities and items of income, deduction and credit.

An unincorporated domestic entity with two or more owners is generally treated as a partnership for U.S. federal income tax purposes. In the case of a REIT that is a partner in an entity treated as a partnership, the REIT is treated as owning its proportionate share of the assets of the partnership and as earning its allocable share of the gross income of the partnership for purposes of the applicable REIT qualification tests. Thus, our proportionate share of the assets, liabilities and items of income of any partnership or limited liability company that is treated as a partnership for U.S. federal income tax purposes in which we have acquired or will acquire an interest, directly or indirectly (a “subsidiary partnership”), will be treated as our assets and gross income for purposes of applying the various REIT qualification tests. We hold ownership interests as a partner or member in nine business entities taxed as partnerships for federal income tax purposes. Accordingly, our proportionate share of the assets, liabilities and items of income of such entities will be treated as our assets and gross income for purposes of applying the various REIT qualification tests discussed in this section.

Tax legislation enacted in 1999 allows a REIT to own up to 100% of the stock of a “taxable REIT subsidiary” (“TRS”), in taxable years beginning on or after January 1, 2001. A TRS may earn income that would not be qualifying income if earned directly by the parent REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A TRS will pay income tax at regular corporate rates on any income that it earns. In addition, the Code contains rules that limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. Further, the rules impose a 100% excise tax on transactions between a TRS and its parent REIT (or the REIT’s tenants) that are not conducted on an arm’s-length basis. We do not currently have any TRSs, but cannot foreclose the formation of one or more TRSs in future taxable years.

Income Tests

We must satisfy two gross income tests annually to maintain our qualification as a REIT. First, at least 75% of our gross income (excluding gross income from prohibited transactions, as described below) for each taxable year must consist of specific types of income that we derive, directly or indirectly, from investments relating to real property or mortgages on real property or qualified temporary investment income. Qualifying income for purposes of this 75% gross income test generally includes:

• rents from real property;

• interest on debt secured by mortgages on real property, or on

• interests in real property;

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• dividends or other distributions on, and gain from the sale of, shares in other REITs;

• gain from the sale or other disposition of real property, including interests in real property and interests in mortgages on real property, that is not inventory or dealer property;

• income and gain derived from foreclosure property (as described below); and

• non-contingent amounts received or accrued as consideration for entering into agreements to make loans secured by mortgages on real property, or on interests in real property, or to purchase or lease real property.

Second, in general, at least 95% of our gross income (excluding gross income from prohibited transactions, as described below) for each taxable year must consist of income that is qualifying income for purposes of the 75% gross income test, other types of interest and dividends, gain from the sale or disposition of stock or securities, or any combination of the foregoing.

A REIT will incur a 100% tax on the net income derived from any “prohibited transactions” (i.e., any sale or other disposition of property, other than foreclosure property, that the REIT holds primarily for sale to customers in the ordinary course of a trade or business). We believe that none of our assets are held primarily for sale to customers and that a sale of any of our assets would not be in the ordinary course of our business. Whether a REIT holds an asset “primarily for sale to customers in the ordinary course of a trade or business” depends, however, on the facts and circumstances in effect from time to time, including those related to a particular asset. Nevertheless, we will attempt to comply with the terms of safe-harbor provisions in the U.S. federal income tax laws prescribing when an asset sale will not be characterized as a prohibited transaction. We cannot assure you, however, that we can comply, or that we have complied, with the safe-harbor provisions or that we will avoid owning property that may be characterized as property that we hold “primarily for sale to customers in the ordinary course of a trade or business.”

While income from foreclosure property qualifies for purposes of satisfying the 75% and 95% gross income tests, we will be subject to tax at the maximum corporate rate on any income from such foreclosure property, other than any portion of such income that otherwise would be qualifying income for purposes of the 75% gross income test, less expenses directly connected with the production of that income. “Foreclosure property” is any real property, including interests in real property, and any personal property incident to such real property:

• that is acquired by a REIT as a result of the REIT having bid on such property at foreclosure, or having otherwise reduced such property to ownership or possession by agreement or process of law, after there was a default (or default was imminent) on a lease of such property or on indebtedness that such property secured;

• for which the related loan was acquired by the REIT at a time when the default was not imminent or anticipated; and

• for which the REIT makes a proper election to treat the property as foreclosure property.

However, a REIT will not be considered to have foreclosed on a property where the REIT takes control of the property as a mortgagee-in-possession and cannot receive any profit or sustain any loss except as a creditor of the mortgagor. Property generally ceases to be foreclosure property at the end of the third taxable year following the taxable year in which the REIT acquired the property, or longer if an extension is granted by the Secretary of the Treasury. This grace period terminates and foreclosure property ceases to be foreclosure property on the first day:

• on which a lease is entered into for the property that, by its terms, will give rise to income that does not qualify for purposes of the 75% gross income test, or any amount is received or accrued, directly or indirectly, pursuant to a lease entered into on or after such day that will give rise to income that does not qualify for purposes of the 75% gross income test;

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• on which any construction takes place on the property, other than completion of a building or any other improvement where more than 10% of the construction of such building or other improvement was completed before default became imminent; or

• which is more than 90 days after the day on which the REIT acquired the property and the property is used in a trade or business which is conducted by the REIT, other than through an independent contractor from whom the REIT itself does not derive or receive any income.

In January 2005, we took ownership of a property as a result of a foreclosure action but have not made an election, which is not due yet. In any event, we will take all necessary actions to ensure that our ownership of the foreclosed property does not cause us to fail to qualify as a REIT for federal income tax purposes.

If we fail to satisfy one or both of the gross income tests for any taxable year, we nevertheless may qualify as a REIT for that year if we qualify for relief under certain provisions of the U.S. federal income tax laws. Those relief provisions generally will be available if:

• our failure to meet such tests is due to reasonable cause and not due to willful neglect;

• we attach a schedule of the sources of our income to our tax return; and

• any incorrect information on such schedule is not due to fraud with intent to evade tax.

However, commencing with our taxable year beginning January 1, 2005, these relief provisions have been modified, as follows: If we fail to satisfy one or both of the gross income tests, such failure must be due to reasonable cause and not due to willful neglect, and, following our identification of such failure for any taxable year, we must set forth a description of each item of our gross income that satisfied the REIT gross income tests in a schedule for the taxable year filed in accordance with regulations prescribed by the U.S. Department of Treasury.

We cannot predict whether in any relevant circumstance we would qualify for the relief provisions referenced above. If the relief provisions referenced above do not apply to the relevant circumstance, we would fail to qualify as a REIT. In addition, as discussed above in “Taxation of our Company as a REIT,” even if the relief provisions apply, we would incur a 100% tax on the gross income attributable to the greater of the amounts by which we fail the 75% and 95% gross income tests, multiplied by a fraction intended to reflect our profitability.

We believe that we have satisfied the gross income tests described above for REIT qualification and will endeavor to manage our income and operations to continue to satisfy such gross income tests. Despite our efforts to continue to satisfy the gross income tests for REIT qualification, we may not always be able to maintain compliance with such gross income tests.

Asset Tests

To maintain our qualification as a REIT, we also must satisfy certain asset tests at the end of each quarter of each taxable year as hereinafter described. First, at least 75% of the value of our total assets must consist of:

• cash or cash items, including certain receivables;

• government securities;

• interests in real property, including leaseholds and options to acquire real property and leaseholds;

• interests in mortgages on real property;

• shares in other REITs; and

• investments in stock or debt instruments during the one-year period following our receipt of new capital that we raise through equity offerings or offerings of debt featuring at least a five-year term.

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Furthermore, not more than 25% of the value of our total assets may be securities other than securities in the 75% asset class described above.

Also, except for (i) securities in the 75% asset class, (ii) securities in a TRS or qualified REIT subsidiary, (iii) certain partnership interests, and (iv) for purposes of the 10% value asset test described in the third bullet below, certain straight debt obligations:

• no more than 5% of the value of our total assets may be represented by securities of any one issuer;

• we may not own securities that possess more than 10% of the total voting power of the outstanding securities of any one issuer; and

• beginning January 1, 2001, we may not own securities that have a value of more than 10% of the total value of the outstanding securities of any one issuer.

In addition, beginning January 1, 2001, no more than 20% of the value of our total assets may be represented by securities of one or more TRSs.

We believe that we have satisfied and will be able to satisfy the asset test for each calendar quarter. We will monitor the status of our assets for purposes of the various asset tests and will manage our portfolio in order to comply at all times with such tests.

After meeting the asset tests at the close of any quarter, we will not lose our status as a REIT if we fail to satisfy the asset tests at the end of a later quarter solely by reason of changes in asset values. In addition, if we fail to satisfy the asset tests because we acquire assets during a quarter, we can cure this failure by disposing of sufficient non-qualifying assets within 30 days after the close of that quarter. Commencing with our taxable year beginning January 1, 2005, in the event that we violate the 5% value test or the 10% vote or value tests described above at the end of any calendar quarter, we will not lose our REIT status if (i) the failure does not exceed the lesser of 1% of our assets or $10 million and (ii) we dispose of assets or otherwise comply with the asset tests within six months after the last day of the quarter. If we fail any of the other asset tests or our failure of the 5% or 10% asset test is in excess of the amount described in the preceding sentence, as long as the failure was due to reasonable cause and not willful neglect, we will not lose our REIT status if we (i) dispose of assets or otherwise comply with such asset tests within six months after the last day of the quarter and (ii) pay a tax equal to the greater of $50,000 or the highest federal corporate tax rate multiplied by the net income from the non-qualifying assets during the period in which we failed to satisfy such asset tests; provided that we file a schedule for such quarter describing each asset that causes us to fail to satisfy the asset test in accordance with the regulations prescribed by the U.S. Department of Treasury. Although we plan to take steps to ensure that we satisfy the various asset tests for any quarter in which testing is to occur, there can be no assurance that such steps will always be successful. If we fail to timely cure any noncompliance with these asset tests, we would fail to qualify as a REIT.

While we do not currently own stock in a TRS, as described above, in taxable years beginning after December 31, 2001, REITs are permitted to own up to 100% of the stock of one or more TRSs. TRSs can perform activities unrelated to our tenants, such as third-party management, development, and other independent business activities, as well as provide services to our tenants. Should such an entity be organized, we and the relevant subsidiary must elect for the subsidiary to be treated as a TRS. A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS itself. The deductibility of interest paid or accrued by a TRS to us is limited to assure that the TRS is subject to an appropriate level of corporate taxation. Further, there is a 100% excise tax on transactions between a TRS and us or our tenants that are not conducted on an arm’s-length basis. We may not own more than 10% of the voting power or value of the stock of a taxable subsidiary that is not treated as a TRS. As noted above, no more than 20% of our assets can consist of securities of TRSs.

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Distribution Requirements

We must distribute dividends, other than capital gain dividends and deemed distributions of retained capital gain, to our shareholders in an aggregate amount at least equal to:

• the sum of

• 90% of our “REIT taxable income,” computed without regard to the dividends paid deduction and excluding net capital gain, and

• 90% of our after-tax net income, if any, from foreclosure property, minus

• the sum of certain items of non-cash income.

We are generally required to distribute income in the taxable year in which it is earned, or in the following taxable year. If dividend distributions are declared during the last three months of the taxable year, payable to shareholders of record on a specified date during such period and paid during January of the following year, such distributions are treated as paid by us and received by our shareholders on December 31 of the year in which they are declared. In addition, at our election, a distribution for a taxable year may be declared before we timely file our tax return and paid on or before our first regular dividend payment following such declaration, provided such payment is made during the twelve-month period following the close of such taxable year. Such distributions are taxable to holders of shares in the year in which paid, even though they related to our prior year for purposes of our 90% distribution requirement.

We will pay U.S. federal income tax at the applicable corporate tax rates on taxable income, including net capital gain, that we do not distribute to shareholders. Furthermore, if we fail to distribute during a calendar year, or by the end of January following the calendar year in the case of distributions with declaration and record dates falling in the last three-months of the calendar year, at least the sum of:

• 85% of our REIT ordinary income for such year,

• 95% of our REIT capital gain net income for such year, and

• any undistributed taxable income from prior periods,

we will incur a 4% nondeductible excise tax on the excess of such required distribution over the amounts we actually distributed. We may elect to retain and pay income tax on the net long-term capital gain we receive in a taxable year. See “Taxation of Taxable U.S. Shareholders,” below. If we so elect, we will be treated as having distributed any such retained amount for purposes of the 4% excise tax described above. We have made, and we intend to continue to make, timely distributions sufficient to satisfy the foregoing annual distribution requirements.

It is possible that, from time to time, we may not have sufficient cash or other liquid assets to meet the above distribution requirement due to timing differences between the actual receipt of income and actual payment of deductible expenses, and the inclusion of that income and the deduction of such expenses in arriving at our REIT taxable income. If these timing differences occur, we may need to incur short-term, or possibly long-term, borrowings in order to meet the REIT distribution requirements.

Under certain circumstances, we may be able to correct a failure to meet the distribution requirement for a year by paying “deficiency dividends” to our shareholders in a later year. We may include such deficiency dividends in our deduction for dividends paid for the earlier year. Although we may be able to avoid income tax on amounts distributed as deficiency dividends, we will be required to pay interest to the IRS based upon the amount of any deduction we take for deficiency dividends.

Recordkeeping Requirements

We must maintain certain records in order to qualify as a REIT. In addition, to avoid a monetary penalty, we must request information from our shareholders on an annual basis designed to disclose the actual ownership of our outstanding shares. We have complied, and we intend to continue to comply, with these requirements.

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Excess Inclusion Income

If we are deemed to have issued debt obligations having two or more maturities, the payments on which correspond to payments on mortgage loans owned by us, such arrangement will be treated as a “taxable mortgage pool” for federal income tax purposes. If all or a portion of our Company is considered a taxable mortgage pool, our status as a REIT generally should not be impaired; however, a portion of our taxable income may be characterized as “excess inclusion income” and allocated to our shareholders. In addition, if we hold residual interests in real estate mortgage conduits, a portion of our taxable income may be characterized as “excess inclusion income” and allocated to our shareholders. Any excess inclusion income:

• Could not be offset by unrelated net operating loses of a shareholder;

• Would be subject to tax as “unrelated business taxable income” to a tax-exempt shareholder;

• Would be subject to the application of federal income tax withholding (without reduction pursuant to any otherwise applicable income tax treaty) with respect to amounts allocable to non-U.S. shareholders; and

• Would be taxable (at the highest corporate tax rate) to us, rather than our shareholders, to the extent allocable to our shares held by disqualified organizations (generally, tax-exempt entities not subject to unrelated business income tax, including governmental organizations).

Failure To Qualify

If we fail to qualify as a REIT in any taxable year, and no relief provision is available, we would be subject to U.S. federal income tax, including any applicable alternative minimum tax, and possibly increased state and local tax, on our taxable income at regular corporate rates. Such taxation would reduce the cash available for distribution by us to our shareholders. In calculating our taxable income in a year in which we fail to qualify as a REIT, we would not be able to deduct distributions paid to shareholders. Moreover, we would not be required to distribute any amounts to shareholders in that year. In such event, distributions to our shareholders will be subject to tax to the extent of our current and accumulated earnings and profits and, in the case of shareholders who are individual U.S. shareholders, at the 15% qualified dividend rate through 2008 and, subject to certain limitations of the U.S. federal income tax laws, corporate shareholders may be eligible for the dividends received deduction. Unless we qualified for relief under specific statutory provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year during which we ceased to qualify as a REIT. Commencing with our taxable year beginning January 1, 2005, if we violate a provision of the Code that would otherwise result in our failure to qualify as a REIT (other than violations of the REIT gross income or asset tests, described above, for which other specific cure provisions are available), we will be granted relief if (i) the violation is due to reasonable cause and not willful neglect, and (ii) we pay a penalty of $50,000 for each failure to satisfy the provision. We cannot predict whether, under any applicable circumstances, we would qualify for any available statutory relief if we ever fail to qualify as a REIT.

Taxation Of Taxable U.S. Shareholders

When using the term “U.S. shareholder,” we mean a holder of our common shares or our preferred shares (which are referred to collectively herein as our shares) that, for U.S. federal income tax purposes, is:

• a citizen or resident of the U.S.,

• an entity created or organized under the laws of the U.S. or of a political subdivision of the U.S.,

• an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source, or

• any trust with respect to which a U.S. court is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions.

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If an entity taxed as a partnership for U.S. federal income tax purposes holds our shares, the tax treatment of any partner or member of such entity will generally depend upon the status of such partner or member and the activities of such entity. If you are a partner or member of an entity taxed as a partnership for U.S. federal income tax purposes that holds our shares, you should consult with your own tax advisor regarding the consequences of the ownership and disposition of our shares.

As long as we qualify as a REIT, distributions made out of our current or accumulated earnings and profits that we do not designate as capital gain dividends or retained long-term capital gain must be taken into account by a taxable U.S. shareholders as ordinary income. For purposes of determining whether a distribution is made out of our current or accumulated earnings and profits, our earnings and profits will be allocated first to dividends on outstanding preferred shares (if any) and then to dividends on our outstanding common shares. Provided we qualify as a REIT, a corporate U.S. shareholder will not qualify for the dividends received deduction generally available to corporations with respect to such distributions. Dividends received from REITs are generally not eligible to be taxed at the preferential qualified dividend income rates, currently up to 15% through 2008, applicable to individual U.S. shareholders who receive dividends from taxable “C” corporations. Provided certain holding period requirements are met with respect to the dividend-paying shares, an exception applies, however, and individual U.S. shareholders are taxed at such preferential qualified dividend income rates on dividends designated by and received from REITs, to the extent that the dividends are attributable to (i) “REIT taxable income” that the REIT previously retained in the prior year, and on which it was subject to corporate level tax, (ii) dividends received by the REIT from taxable domestic C corporations, and certain foreign corporations or (iii) income from sales of appreciated property acquired from “C” corporations in carryover basis transactions that has been subject to tax.

A U.S. shareholder will not incur tax on a distribution with respect to such shareholder’s shares in excess of our current and accumulated earnings and profits if the distribution does not exceed the adjusted tax basis that such shareholder has in our shares. Instead, the distribution will reduce the adjusted tax basis of the shares in the U.S. shareholder’s hands. A U.S. shareholder will recognize and pay tax on a distribution in excess of both our current and accumulated earnings and profits and such shareholder’s adjusted tax basis in his, her or its shares as long-term capital gain (or short-term capital gain if the shares have been held by the shareholder for one year or less) assuming the shares are a capital asset in the hands of the U.S. shareholder.

A U.S. shareholder generally will recognize and be taxed on distributions that we designate as capital gain dividends as long-term capital gain without regard to the period for which the U.S. shareholder has held his, her or its shares. Long-term capital gains are generally taxable at maximum federal tax rates of 15% (through 2008) in the case of U.S. shareholders who are individuals and 35% for corporations, however, capital gains attributable to the sale of depreciable real property held for more than 12 months are subject to a 25% maximum federal income tax rate for U.S. shareholders who are individuals, to the extent of previously claimed depreciation deductions. A corporate U.S. shareholder, however, may be required to treat up to 20% of certain capital gain dividends as ordinary income.

We may elect to retain, rather than distribute as a capital gain dividend, all or a portion of our net long-term capital gain. If this election is made, we would pay tax on such retained capital gains and a U.S. shareholder would be taxed on his, her or its proportionate share of our undistributed long-term capital gain. The U.S. shareholder would, however, receive a credit or refund for his, her or its proportionate share of the tax we paid with respect to such retained capital gains. The U.S. shareholder would increase the basis in his, her or its shares by the amount of such shareholder’s proportionate share of our undistributed long-term capital gain, minus such shareholder’s share of the tax we paid with respect to such retained capital gains.

Dividends that we declare in October, November or December of any year and actually pay to you during January of the following year generally are treated as if we had paid, and you had received such dividends, on December 31 of the calendar year and not on the date actually paid or received. In addition, we may elect to treat

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other dividends distributed after the close of the taxable year as having been paid during the taxable year, so long as they meet the requirements described in the applicable U.S. federal income tax laws, but you will be treated as having received these dividends in the taxable year in which the distribution is actually made.

Shareholders may not include in their individual income tax returns any of our net operating losses or capital losses. Instead, these losses are generally carried over by us for potential offset against our future income. Taxable distributions from us and gain from the disposition of shares will not be treated as passive activity income and, therefore, shareholders generally will not be able to apply any “passive activity losses” against such income or gain. In addition, taxable distributions from us generally will be treated as investment income for purposes of the investment interest limitations.

Taxation Of U.S. Shareholders On The Disposition Of Shares

Except as discussed below with respect to the cash redemption of preferred shares, in general, a U.S. shareholder who sells or otherwise disposes of his, her or its shares will recognize gain or loss for federal income tax purposes in an amount equal to the difference between (i) the amount of cash and the fair market value of any property received on the sale or other disposition, and (ii) such shareholder’s adjusted tax basis in such shares. In general, capital gains recognized by individuals and other non-corporate U.S. shareholders upon the sale or disposition of our shares will, pursuant to current U.S. federal income tax laws, be subject to a maximum federal income tax rate of 15% for taxable years through 2008, if the shares are held for more than 12 months, and at ordinary income rates (of up to 35% through 2010) if the shares are held for 12 months or less. Gains recognized by U.S. shareholders that are corporations are subject to federal income tax at a maximum rate of 35%, whether or not classified as long-term capital gains. Capital losses recognized by a U.S. shareholder upon the disposition of our shares, if held for more than one year at the time of disposition, will be considered long-term capital losses, and are generally available only to offset capital gain income of the U.S. shareholder but not ordinary income (except in the case of individuals, who may offset up to $3,000 of ordinary income each year). In addition, any loss incurred upon a sale or exchange of shares by a U.S. shareholder who has held the shares for six months or less, after applying the holding period rules, will be treated as a long-term capital loss to the extent of distributions received from us that are required to be treated by the U.S. shareholder as long-term capital gain.

Taxation of U.S. Shareholders on Cash Redemption of Preferred Shares

A cash redemption of preferred shares will be treated under section 302 of the Code as a distribution taxable as a dividend, to the extent of our current and accumulated earnings and profits, at ordinary income rates unless the redemption satisfies one of the tests set forth in the Code for treatment as a sale or exchange of the redeemed preferred shares. The cash redemption will be treated as a sale or exchange if it (1) is “substantially disproportionate” with respect to the holder, (2) results in a “complete termination” of the holder’s interest in our shares, or (3) is “not essentially equivalent to a dividend” with respect to the holder. In determining whether any of these tests have been met, our shares, including common shares and certain other equity interests, considered to be owned by the holder by reason of certain constructive ownership rules set forth in the Code, as well as shares actually owned by the holder, must generally be taken into account. In general, a non-pro rata redemption of preferred shares from a shareholder who owns only preferred shares is treated as a sale or exchange and not a dividend. Nevertheless, because the determination as to whether any of the alternative tests for capital gain treatment as a redemption will be satisfied with respect to any particular holder of the preferred shares depends upon the facts and circumstances at the time that the determination must be made, prospective holders of the preferred shares are advised to consult their own tax advisors to determine such tax treatment.

If a cash redemption of preferred shares is not treated as a distribution taxable as a dividend to a particular holder, it will be treated, as to that holder, as a taxable sale or exchange. As a result, such holder will recognize gain or loss for federal income tax purposes in an amount equal to the difference between (1) the amount of cash and the fair market value of any property received, less any portion thereof attributable to accumulated and declared but unpaid dividends, which will be taxable as a dividend to the extent of our current and accumulated

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earnings and profits, and (2) the holder’s adjusted basis in the preferred shares for tax purposes. Such gain or loss will be capital gain or loss if the preferred shares have been held as a capital asset, and will be long-term gain or loss if such shares have been held for more than one year.

If a redemption of preferred shares is treated as a distribution taxable as a dividend, the amount of the distribution will be measured by the amount of cash and the fair market value of any property received by the holder. The holder’s adjusted basis in the redeemed preferred shares for tax purposes will be transferred to the holder’s remaining shares, if any.

Information Reporting Requirements And Backup Withholding

We will report to our shareholders and to the IRS the amount of distributions we pay during each calendar year, and the amount of tax we withhold, if any. Under the backup withholding rules, a shareholder may be subject to backup withholding with respect to distributions unless the holder:

• is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact; or

• provides a taxpayer identification number or social security number, certifies as to no loss of exemption from backup withholding, and otherwise complies with the applicable requirements of the backup withholding rules.

A shareholder who does not provide us with its correct taxpayer identification number or social security number also may be subject to penalties imposed by the IRS. Backup withholding is not an additional tax. Any amount paid as backup withholding will be creditable against the shareholder’s income tax liability. In addition, we may be required to withhold a portion of capital gain distributions to any shareholders who fail to certify their non-foreign status to us. For a discussion of certain withholding rules as applied to non-U.S. shareholders, see “Taxation of Non-U.S. Shareholders,” below.

Taxation Of Tax-Exempt Shareholders

Tax-exempt entities, including qualified employee pension and profit sharing trusts and individual retirement accounts, generally are exempt from U.S. federal income taxation. However, they are subject to taxation on their unrelated business taxable income. While many investments in real estate generate unrelated business taxable income, the IRS has issued a ruling that dividend distributions from a REIT to an exempt employee pension trust do not constitute unrelated business taxable income. Based on that ruling, provided that a tax-exempt U.S. shareholder has not held its shares as “debt financed property” (within the meaning of the U.S. federal income tax laws), the shares are not otherwise used in an unrelated trade or business and the REIT has not incurred any “excess inclusion income,” as described above, amounts that we distribute to tax-exempt shareholders generally should not constitute unrelated business taxable income. If, however, a tax-exempt

shareholder were to finance its acquisition of our shares with debt, a portion of the income that it receives from us would constitute unrelated business taxable income pursuant to the “debt-financed property” rules. Furthermore, social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans that are exempt from taxation under special provisions of the U.S. federal income tax laws are subject to different unrelated business taxable income rules, which generally will require them to characterize distributions that they receive from us as unrelated business taxable income. Finally, in certain circumstances, a qualified employee pension or profit sharing trust that owns more than 10% of our shares must treat a percentage of the dividends that it receives as unrelated business taxable income. Such percentage is equal to the gross income we would be deemed to derive from an unrelated trade or business, determined as if we were a pension trust, divided by our total gross income for the year in which we pay the dividends. This rule applies to a pension trust holding more than 10% of our shares only if:

• the percentage of our dividends that the tax-exempt trust must treat as unrelated business taxable income is at least 5%;

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• we qualify as a REIT by reason of the modification of the rule requiring that no more than 50% of our shares be owned by five or fewer individuals that allows the beneficiaries of the pension trust to be treated as holding our shares in proportion to their actuarial interests in the pension trust; and

• either

• one pension trust owns more than 25% of the value of our shares; or

• a group of pension trusts individually holding more than 10% of the value of our shares collectively owns more than 50% of the value of our shares.

Taxation Of Non-U.S. Shareholders

The rules governing U.S. federal income taxation of nonresident alien individuals, foreign corporations, foreign partnerships, and other foreign shareholders are complex. This section is only a summary of such rules. WE URGE PROSPECTIVE NON-U.S. SHAREHOLDERS TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE IMPACT OF U.S. FEDERAL, STATE, AND LOCAL INCOME TAX LAWS (AS WELL AS THE TAX LAWS OF THEIR HOME JURISDICTIONS) ON OWNERSHIP OF OUR SECURITIES, INCLUDING ANY REPORTING REQUIREMENTS.

A non-U.S. shareholder that receives a distribution that is not attributable to gain from our sale or exchange of U.S. real property interests, as defined below, and that we do not designate as a capital gain dividend or retained capital gain will recognize ordinary income to the extent that we pay the distribution out of our current or accumulated earnings and profits. A withholding tax equal to 30% of the gross amount of the distribution ordinarily will apply unless an applicable tax treaty reduces or eliminates the tax. However, if a distribution is treated as effectively connected with the non-U.S. shareholder’s conduct of a U.S. trade or business, the non-U.S. shareholder generally will be subject to U.S. federal income tax on the distribution at graduated rates, in the same manner as U.S. shareholders are taxed on distributions and also may be subject to the 30% branch profits tax in the case of a non-U.S. shareholder that is a non-U.S. corporation. We plan to withhold U.S. income tax at the rate of 30% on the gross amount of any distribution paid to a non-U.S. shareholder unless either:

• a lower treaty rate applies and the non-U.S. shareholder files the required form evidencing eligibility for that reduced rate with us, or

• the non-U.S. shareholder files the required form with us claiming that the distribution is effectively connected income.

Any portion of a dividend paid by us to a non-U.S. shareholder that is treated as excess inclusion income from a REMIC will not be eligible for exemption from the 30% withholding tax or a reduced treaty rate. In addition, if U.S. Department of Treasury regulations are issued allocating our excess inclusion income (if any) from taxable mortgage pools among our shareholders, some percentage of our dividends would not be eligible for exemption from the 30% withholding tax or a reduced treaty withholding tax rate in the hands of non-U.S. shareholders.

A non-U.S. shareholder will not incur tax on a distribution with respect to such shareholder’s shares that is in excess of our current and accumulated earnings and profits if the distribution does not exceed the adjusted basis of such shareholder’s shares. Instead, the distribution will reduce the adjusted basis of such non-U.S. shareholder in those shares. A non-U.S. shareholder will be subject to tax on a distribution with respect to such shareholder’s shares that exceeds both our current and accumulated earnings and profits and the adjusted basis of such shareholder’s shares if such shareholder otherwise would be subject to tax on gain from the sale or disposition of his, her or its shares, as described below. Because we generally cannot determine at the time we make a distribution whether or not the distribution will exceed our current and accumulated earnings and profits, we normally will withhold tax on the entire amount of any distribution at the same rate as we would withhold on a dividend. However, a non-U.S. shareholder may obtain a refund of amounts that we withhold if we later determine that a distribution, in fact, exceeded our current and accumulated earnings and profits.

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We also may be required to withhold 10% of any distribution that exceeds our current and accumulated earnings and profits. Consequently, although we intend to withhold at a rate of 30% on the entire amount of any distribution, to the extent that we do not do so, we may withhold at a rate of 10% on any portion of a distribution not subject to withholding at a rate of 30%.

For any year in which we qualify as a REIT, a non-U.S. shareholder will incur tax on distributions that are attributable to gain from our sale or exchange of “U.S. real property interests” under special provisions of the U.S. federal income tax laws known as “FIRPTA.” The term “U.S. real property interests” includes interests in U.S. real property (but generally does not include mortgage loans) and shares in corporations at least 50% of whose assets consists of interests in U.S. real property. Under those rules, a non-U.S. shareholder is taxed on distributions attributable to gain from sales of U.S. real property interests as if the gain were effectively connected with a U.S. business of the non-U.S. shareholder. A non-U.S. shareholder thus would be taxed on the distribution at the normal capital gain rates applicable to U.S. shareholders, subject to applicable alternative minimum tax and a special alternative minimum tax in the case of a nonresident alien individual. A non-U.S. corporate shareholder not entitled to treaty relief or exemption also may be subject to the 30% branch profits tax on such a distribution. We must withhold 35% of any distribution to a non-U.S. shareholder that we could designate as a capital gain dividend. The amount withheld is creditable against the non-U.S. shareholder’s FIRPTA tax liability and, to the extent it exceeds such non-U.S. shareholder’s tax liability, will be refundable. Commencing with our taxable year beginning January 1, 2005, any capital gain dividend with respect to our shares will not be subject to FIRPTA, and therefore will not be subject to the 35% withholding tax if the non-U.S. shareholder does not own more than 5% of our shares at any time during the taxable year and our shares are regularly traded on an established securities market located in the United States. Instead, any capital gain dividend paid to such a non-U.S. shareholder will be treated as an ordinary dividend distribution (generally subject to withholding at a rate of 30% unless a reduced treaty withholding rate applies).

A non-U.S. shareholder generally will not incur tax under FIRPTA as long as at all times, non-U.S. persons hold, directly or indirectly, less than 50% in value of our shares. We cannot assure you that that test will be met at all times or at any specific time. However, a non-U.S. shareholder that owned, actually or constructively, 5% or less of our shares at all times during a specified testing period will not incur tax under FIRPTA if the shares are “regularly traded” on an established securities market. If the gain on the sale of our shares were taxed under FIRPTA, a non-U.S. shareholder would be taxed on that gain in the same manner as U.S. shareholders subject to applicable alternative minimum tax, a special alternative minimum tax in the case of nonresident alien individuals, and the possible application of the 30% branch profits tax in the case of non-U.S. corporations. Furthermore, a non-U.S. shareholder generally will incur tax on gain not subject to FIRPTA if:

• the gain is effectively connected with the non-U.S. shareholder’s U.S. trade or business, in which case the non-U.S. shareholder will be subject to the same tax treatment as U.S. shareholders with respect to such gain, or

• the non-U.S. shareholder is a nonresident alien individual who was present in the U.S. for 183 days or more during the taxable year and other conditions are met, in which case the non-U.S. shareholder will incur a 30% tax on his or her capital gains.

State and Local Taxes

We and/or our shareholders may be subject to taxation by various states and localities, including those in which we or a shareholder transacts business, owns property or resides. The state and local tax treatment may differ from the U.S. federal income tax treatment described above. Consequently, shareholders should consult their own tax advisors regarding the effect of state and local tax laws upon an investment in our securities.

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Possible Legislation or Other Actions Affecting REITs

The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department. Changes to the tax law, which may have retroactive application, could adversely affect us and our shareholders. It cannot be predicted whether, when, in what forms or with what effective dates, the tax law applicable to us or our shareholders will be changed.

IMPORTANCE OF OBTAINING PROFESSIONAL TAX ADVICE

THE TAX DISCUSSION SET FORTH ABOVE IS FOR GENERAL INFORMATION ONLY. TAX CONSEQUENCES MAY VARY BASED UPON THE PARTICULAR CIRCUMSTANCES OF EACH INVESTOR. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE U.S. FEDERAL, STATE AND LOCAL AND APPLICABLE FOREIGN TAX CONSEQUENCES OF AN INVESTMENT IN OUR SECURITIES.

PLAN OF DISTRIBUTION

These securities may be sold directly by us, through dealers or agents designated from time to time, or to or through underwriters or may be sold directly by us for consideration which may consist of goods and property, including real property, or through a combination of these methods. The prospectus supplement with respect to the securities being offered will set forth the terms of the offering, including the names of the underwriters, dealers or agents, if any, the purchase price of the securities, our net proceeds, any underwriting discounts, commissions and other items constituting underwriters’ compensation, public offering price and any discounts or concessions allowed or reallowed or paid to dealers, any commissions paid to agents and any securities exchanges on which such securities may be listed.

If underwriters are used in an offering, we will execute an underwriting agreement with such underwriters and will specify the name of each underwriter and the terms of the transaction (including any underwriting discounts and other terms constituting compensation of the underwriters and any dealers) in a prospectus supplement. If an underwriting syndicate is used, the managing underwriter(s) will be specified on the cover of the prospectus supplement. If underwriters are used in the sale, the offered securities will be acquired by the underwriters for their own accounts and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. Any public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. Unless otherwise set forth in the prospectus supplement, the obligations of the underwriters to purchase the offered securities will be subject to certain conditions precedent and the underwriters will be obligated to purchase all of the offered securities if any are purchased.

If dealers are used in an offering, we will sell the securities to the dealers as principals. The dealers may resell the securities to the public at varying prices, which they determine at the time of resale. The names of the dealers and the terms of the transaction will be specified in a prospectus supplement.

The securities may be sold directly by us or through agents we designate. If agents are used in an offering, the names of the agents and the terms of the agency will be specified in a prospectus supplement. Unless otherwise indicated in a prospectus supplement, the agents will act on a best-efforts basis for the period of their appointment.

Dealers and agents named in a prospectus supplement may be deemed to be underwriters (within the meaning of the Securities Act) of the securities described therein. In addition, we may sell the securities directly to institutional investors or others who may be deemed to be underwriters within the meaning of the Securities Act with respect to any resales thereof.

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Underwriters, dealers and agents, may be entitled to indemnification by us against specific civil liabilities, including liabilities under the Securities Act, or to contribution with respect to payments which the underwriters or agents may be required to make in respect thereof, under underwriting or other agreements. The terms of any indemnification provisions will be set forth in a prospectus supplement. Certain underwriters, dealers or agents and their associates may engage in transactions with and perform services for us in the ordinary course of business.

If so indicated in a prospectus supplement, we will authorize underwriters or other persons acting as our agents to solicit offers by institutional investors to purchase our securities pursuant to contracts providing for payment and delivery on a future date specified in such prospectus supplement. The applicable prospectus supplement will set forth the price to be paid for such securities pursuant to these contracts as well as the commissions payable for solicitation of these contracts. There may be limits on the minimum amount that may be purchased by any institutional investor or on the portion of the aggregate principal amount of the particular securities that may be sold pursuant to these contracts. We may enter into contracts with commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions and other institutional investors, but in all cases those institutions must be approved by us. The obligations of any such purchaser under any such contract will only be subject to the condition that at the time of delivery, the purchase of the particular securities by any such institution will not be prohibited by the laws of any jurisdiction to which the institution is subject. The underwriters and other agents will not be responsible for the validity of such contracts or for the performance of us or of the institutional investors under such contracts.

Unless otherwise indicated in an applicable prospectus supplement, any shares offered under this prospectus will be eligible for trading on the New York Stock Exchange, subject to official notice of issuance. Any underwriters to whom securities are sold by us for public offering and sale may make a market in the securities, but such underwriters will not be obligated to do so and may discontinue any market making at any time without notice.

LEGAL MATTERS

Certain legal matters will be passed upon for us by McCarter & English, LLP. The validity of the securities offered hereby will be passed upon by Rich May, a Professional Corporation.

EXPERTS

The consolidated financial statements of BRT Realty Trust and subsidiaries (collectively, the “Trust”) appearing in the Trust’s Annual Report (Form 10-K) for the year ended September 30, 2004, including the schedules appearing therein, have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report included thereon and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

INCORPORATION BY REFERENCE

This prospectus incorporates by reference important business and financial information about us that is not otherwise included in this prospectus. The following documents filed by us with the SEC, Commission File No. 001-07172, are incorporated by reference in this prospectus and shall be deemed to be a part of this prospectus:

1. Annual Report on Form 10-K for the fiscal year ended September 30, 2004, filed on December 14, 2004;

34

2. Quarterly Reports on Form 10-Q for the three month periods ended December 31, 2004, March 31, 2005 and June 30, 2005, filed on February 8, 2005, May 10, 2005, and August 9, 2005, respectively;

3. Current Reports on Form 8-K filed on February 17, 2005 and August 18, 2005; and

4. The description of our shares included in our registration statement on Form 8-A, filed on December 10, 1987, as updated by the description of our capital stock included in our Current Report on Form 8-K, filed on September 10, 2004.

Current Reports on Form 8-K furnished under Item 2.02 of Form 8-K and under Item 7.01 of Form 8-K are not incorporated by reference in this prospectus.

All documents and reports filed by us with the SEC (other than Current Reports on Form 8-K furnished pursuant to Item 2.02 or Item 7.01 of Form 8-K, unless otherwise indicated therein) pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, also known as the Exchange Act, after the date of this prospectus and prior to the termination of this offering shall be deemed incorporated by reference in this prospectus and shall be deemed to be a part of this prospectus from the date of filing of such documents and reports. Any statement contained in a document incorporated or deemed to be 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 subsequently filed document or report 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 only be deemed to constitute a part of this prospectus as, and to the extent that, it is so modified or superseded.

WHERE YOU CAN FIND MORE INFORMATION

We are subject to the information reporting requirements of the Exchange Act and accordingly file annual, quarterly and current reports, proxy statements and other information with the SEC. Members of the public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room located at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site at http://www.sec.gov that contains materials we file electronically with the SEC.

We will provide without charge to each person, including any beneficial owner, to whom this prospectus is delivered, upon written or oral request of such person, a copy of any or all of the documents incorporated by reference in this prospectus other than exhibits, unless such exhibits specifically are incorporated by reference into such documents or this prospectus.

Requests for such documents should be addressed in writing or by telephone to:

Mark H. Lundy

BRT Realty Trust

60 Cutter Mill Road

Great Neck, New York 11021

(516) 466-3100

35

1,600,000 Preferred Shares

PROSPECTUS SUPPLEMENT

FRIEDMAN BILLINGS RAMSEY

RYAN BECK & CO.

STIFEL, NICOLAUS & COMPANY

    INCORPORATED

CANTOR FITZGERALD

October     , 2005

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution.

The following table sets forth the estimated expenses payable by the registrant in connection with the sale and distribution of the securities registered hereby. All amounts other than the SEC registration fee are estimated.

SEC Registration Fee	$	12,670
Accounting Fees and Expenses	$	15,000
Legal Fees and Expenses	$	50,000
Printing Fees and Expenses	$	20,000
Miscellaneous	$	2,330
Total:	$	100,000

Item 15. Indemnification of Trustees and Officers.

Our declaration of trust provides that we will indemnify and hold harmless our trustees, officers, employees and agents (each, an “Indemnified Party”) against expense or liability, including attorneys’ fees reasonably incurred, in connection with the defense or disposition of any action, suit or proceeding in which they may be involved or which they may be threatened because of being or having been our trustees, officers, employees or agents; provided, that, (1) the majority of independent trustees determine, or independent legal counsel provides an opinion, that the Indemnified Party acted in good faith, (2) such liability or loss was not the result of bad faith, reckless disregard, negligence or misconduct on the part of the Indemnified Party and (3) such indemnification or agreement to hold harmless is recoverable only out of our assets and not from our shareholders.

We purchased and maintain insurance on behalf of our trustees and officers against liability asserted against such trustees and officers in their capacities as such.

Section 67 of Chapter 156B of the Massachusetts General Laws provides that indemnification of directors and officers may be provided to the extent specified or authorized by the articles of organization or bylaws, provided that no indemnification may be provided with respect to any matter as to which the director or officer shall have been adjudicated not to have acted in good faith in the reasonable belief that his or her action was in the best interest of the company.

Item 16. Exhibits.

1.1*	Underwriting Agreement (for Common Shares).
1.2*	Underwriting Agreement (for Preferred Shares).
3.1	Third Amended and Restated Declaration of Trust.
4.1**	Common Share Certificate.
4.2*	Form of Certificate for Preferred Shares.
4.3*	Form of Warrant Agreement.
5.1	Opinion of Rich May, a Professional Corporation.
8.1	Opinion of McCarter & English, LLP with respect to tax matters.
12.1**	Statement regarding Computation of Ratios of Earnings to Combined Fixed Charges.
23.1	Consent of Rich May, a Professional Corporation (contained in Exhibit 5.1).
23.2	Consent of Ernst & Young LLP, independent registered public accounting firm.
23.3	Consent of McCarter & English, LLP (contained in Exhibit 8.1).
24.1**	Powers of Attorney (included on the signature page of this Registration Statement).

II-1

* To be filed by amendment or by a report on Form 8-K

** Previously filed as part of, or as an exhibit to, this Registration Statement.

Item 17. Undertakings.

(A) The undersigned registrant hereby undertakes:

(1) To file, during the 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;

(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;

(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 the registration statement;

provided, however, that paragraphs (A)(1)(i) and (A)(1)(ii) 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 Exchange Act that are incorporated by reference in the registration statement.

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

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

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

II-2

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Village of Great Neck Plaza, State of New York, on October 18, 2005.

BRT REALTY TRUST
By:	/S/    JEFFREY A. GOULD
	Jeffrey A. Gould
	President, Chief Executive Officer and Trustee

Signature	Title
* Fredric H. Gould	Chairman of the Board of Trustees
/S/    JEFFREY A. GOULD         Jeffrey A. Gould	President, Chief Executive Officer and Trustee (principal executive officer)
* George E. Zweier	Vice President and Chief Financial Officer (principal financial officer and principal accounting officer)
Patrick J. Callan	Trustee
* Louis C. Grassi	Trustee
* Matthew J. Gould	Trustee
* Gary Hurand	Trustee
* Kenneth Bernstein	Trustee
* David Herold	Trustee
* Jeffrey Rubin	Trustee

* By: Attorney-in-fact pursuant to power of attorney filed as part of this registration statement

/S/    JEFFREY A. GOULD        

Jeffrey A. Gould

INDEX TO EXHIBITS

Exhibit No.	Description of Exhibit
1.1*	Underwriting Agreement (for Common Shares).
1.2*	Underwriting Agreement (for Preferred Shares).
3.1	Third Amended and Restated Declaration of Trust.
4.1**	Common Share Certificate.
4.2*	Form of Certificate for Preferred Shares.
4.3*	Form of Warrant Agreement.
5.1	Opinion of Rich May, a Professional Corporation.
8.1	Opinion of McCarter & English, LLP with respect to tax matters.
12.1**	Statement regarding Computation of Ratios of Earnings to Combined Fixed Charges.
23.1	Consent of Rich May, a Professional Corporation (contained in Exhibit 5.1).
23.2	Consent of Ernst & Young LLP, independent registered public accounting firm.
23.3	Consent of McCarter & English, LLP (contained in Exhibit 8.1).
24.1**	Powers of Attorney (included on the signature page of this Registration Statement).

* To be filed by amendment or in a report on Form 8-K.

** Previously filed as part of, or as an exhibit to, this Registration Statement.

EX-3.1

EXHIBIT 3.1

THIRD AMENDED AND RESTATED

DECLARATION OF TRUST

BRT REALTY TRUST

TABLE OF CONTENTS

ARTICLE I-NAME, PRINCIPAL PLACE OF BUSINESS AND TITLE TO PROPERTY		2
1.1	Name	2
1.2	Location	2
1.3	Nature of Trust	2
1.4	Definitions	2
ARTICLE II-TRUSTEES		6
2.1	Number and Qualification	6
2.2	Term and Election	7
2.3	Resignation and Removal	7
2.4	Vacancies	8
2.5	Meetings	8
2.6	Executive and Investment Committees	9
2.7	Officers	9
2.8	By-Laws	9
2.9	Trustees May Own Shares	9
ARTICLE III-POWERS OF THE TRUSTEES		9
3.1	General	9
3.2	Investments	10
3.3	Appraisals	10
3.4	Legal Title	10
3.5	Disposition, Renting, Etc. of Assets	11
3.6	Financing; Issuance of Securities; Facsimiles	11
3.7	Taxes	12
3.8	Right as Holder of Mortgages and Securities	12
3.9	Collection	13
3.10	Expenses	13
3.11	Guaranties	13
3.12	Deposits	13
3.13	Allocation	14
3.14	Valuation	14
3.15	Fiscal Year	14
3.16	FHA Qualification	14
3.17	Power to Contract	14
3.18	Organization of Business Entities	15

3.19	Associations	15
3.20	Insurance	15
3.21	Pension and Other Plans	16
3.22	Seal	16
3.23	Charitable Contributions	16
3.24	Indemnification	16
3.25	Remedies	16
3.26	Trustees May Appoint Advisor	16
3.27	Independence of Trustees	17
3.28	Prohibition Against Self-Dealing and Misuse of Trust Assets	17
3.29	Further Powers	20
3.30	Transfer of Advisory Contract	20
3.31	Qualification as “Real Estate Investment Trust”	20
ARTICLE IV-INVESTMENT POLICIES		21
4.1	Statement of Investment Policy	21
4.2	Uninvested Assets	21
4.3	Restrictions	22
ARTICLE V-LIMITATIONS OF LIABILITY		23
5.1	Liability to Third Persons	23
5.2	Liability to Trust of to Shareholders	23
5.3	Indemnification	23
5.4	Surety Bonds	24
5.5	Apparent Authority	25
5.6	Express Exculpatory Clauses in Instruments	25
5.7	Reliance on Experts, Etc.	25
ARTICLE VI-SHARES OF BENEFICIAL INTEREST		25
6.1	Description of Shares	25
6.2	Shares Represent Beneficial Interest or Preferred Interest	26
6.3	Certificates and Transfer	27
6.4	Issuance of Shares and Fractional Shares	27
6.5	Shareholder Register	27
6.6	Transfer Agents and Registers	28
6.7	Method of Transfer	28
6.8	Transfers by Operation of Law	28
6.9	Form of Ownership of Shares	28
6.10	Limitation of Trustees’ Duty to Inquire	29
6.11	Replacement of Lost Certificates	29
6.12	Dividends, Distributions and Retained Earnings	29
6.13	Statement of Source of Distributed Funds	30
6.14	Shareholders Notices	30
6.15	Purchase of Trust Shares	30
6.16	Trustees May Purchase or Sell Shares	30
6.17	Information from Holders of Securities of the Trust	30
6.18	Warrants	30

6.19	No Pre-emptive Rights	31
6.20	Redemption and Stop Transfers for Tax Purposes	31
6.21	Issuance of Units	32
ARTICLE VII-RIGHTS OF SHAREHOLDERS		32
7.1	Limits of Shareholder Interest	32
7.2	Death of Shareholder	32
7.3	Meetings of Shareholders	32
7.4	Notice of Meetings	33
7.5	Majority for Quorum	33
7.6	Voting Rights of Shareholders	33
7.7	Record Date for Meetings	34
7.8	Proxies	34
7.9	Reports	34
7.10	Inspection of Records	35
ARTICLE VIII-AMENDMENT OR TERMINATION OF TRUST		35
8.1	Amendment or Termination	35
8.2	Power to Effect Reorganization	36
8.3	Compliance with Internal Revenue Code	36
8.4	Trustees May Terminate Prior to Effective Date	37
ARTICLE IX-MISCELLANEOUS		37
9.1	Recording	37
9.2	Counterparts	37
9.3	Reliance by Third Parties	37
9.4	Governing Law	38
9.5	Construction of Trust Instrument	38
ARTICLE X-DURATION OF TRUST		39
10.1	Duration	39

THIRD AMENDED

AND RESTATED

DECLARATION OF TRUST

OF

BRT REALTY TRUST

This Third Amended and Restated Declaration of Trust of BRT Realty Trust, a Massachusetts business trust (the “Trust”), dated as of October 5, 2005, is made by a majority of the Trustees of the Trust, having a usual place of business at 60 Cutter Mill Road, Suite 303, Great Neck, New York 11021, and filed in the office of the Secretary of the Commonwealth of Massachusetts and in the office of the Clerk of the City of Boston, has been restated in its entirety by the affirmative vote of a majority of the Trustees pursuant to Section 9.1 of the Second Amended and Restated Declaration of Trust, as amended, as follows:

WHEREAS, the Trust was organized as a Massachusetts business trust under the name “Berg Enterprises Realty Group” with the filing of its Declaration of Trust, dated June 16, 1972, in the office of the Secretary of the Commonwealth of Massachusetts and in the office of the Clerk of the City of Boston;

WHEREAS, a First Amended and Restated Declaration of Trust, dated November 6, 1972, was filed in the office of the Secretary of the Commonwealth of Massachusetts;

WHEREAS, the Trust changed its name to BRT Realty Trust by the filing of a Certificate of Amendment to Declaration of Trust, dated June 17, 1975, in the office of the Secretary of the Commonwealth of Massachusetts;

WHEREAS, a Second Amended Declaration of Trust, dated January 27, 1984, was filed in the office of the Secretary of the Commonwealth of Massachusetts;

WHEREAS, amendments to the Second Amended and Restated Declaration of Trust, dated August 20, 1986, March 2, 1987, and March 2, 1988, respectively, and a Certificate of Designations, dated July 7, 1993 (which designated and authorized a series of preferred stock of the Trust that has been subsequently canceled pursuant to its terms), were filed in the office of the Secretary of the Commonwealth of Massachusetts;

WHEREAS, the Trustees desires to restate the Second Amended and Restated Declaration of Trust, as amended, in its entirety.

NOW, THEREFORE, the Second Amended and Restated Declaration of Trust is hereby restated in its entirety as follows:

ARTICLE I

NAME, PRINCIPAL PLACE OF BUSINESS AND TITLE TO PROPERTY

Section 1.1 Name. The name of the trust created by this Declaration of Trust is BRT Realty Trust (hereinafter called the “Trust”) and so far as may be practicable the Trustees shall conduct the Trust’s activities, execute all documents and be sued under that name, which name (and the word “Trust” wherever used in this Declaration of Trust, except where the context otherwise requires) shall refer to the Trustees in their capacity as Trustees, and not individually or personally, and shall not refer to the officers, agents, employees, or Shareholders of the Trust or of such Trustees. Should the Trustees determine that the use of such name is not practicable, legal or convenient, they may use such other designation or they may adopt such other name for the Trust as they deem proper and the Trustees may hold property and conduct the Trust’s activities under such designation or name.

Section 1.2 Location. The principal place of business shall be in Great Neck, New York*, at such address as the Trustees may from time to time designate; however, the Trustees may change the principal place of business to any other location as they in their discretion determine appropriate. The Trust may have such other offices or places of business as the Trustees may from time to time determine.

Section 1.3 Natures of Trust. The Trust shall be of the type commonly termed a Massachusetts business trust. The Trust is not intended to be, shall not be deemed to be, and shall not be treated as, a general partnership, limited partnership, joint venture, corporation or joint stock company, but nothing herein shall preclude the Trust from being taxable as an association under the REIT Provisions of the Internal Revenue Code (as hereinafter defined). The Shareholders shall be beneficiaries and their relationship to the Trustees shall be solely in-that capacity in accordance with the rights conferred upon them hereunder. The Trust may, but is not required to, conduct business in a manner intended to qualify as a “real estate investment trust” as that term is defined in the REIT Provisions of the Internal Revenue Code and this Declaration of Trust, and all actions of the Trustees hereunder shall be construed in accordance with such intent.

Section 1.4 Definitions. As used in this Declaration of Trust, the following terms shall have the following meanings unless the context hereof otherwise requires:

“Advisor” shall mean any Person appointed, employed or contracted with by the Trustees pursuant to the provisions of Section 3.26 hereof.

“Affiliate” shall mean as to any corporation, partnership or trust, any Person who (a) holds beneficially, directly or indirectly, 1% or more of the outstanding capital stock, shares or equity interests of such corporation, partnership or trust or (b) is an officer, director, employee, general partner or trustee of such corporation, partnership or trust or of any Person which controls, is controlled by, or is under common control with, such corporation, partnership or trust, or (c) directly or indirectly controls, is controlled by, or is under common control with, such corporation, partnership or trust.

* 60 Cutter Mill Road, Suite 303, Great Neck, NY 11021

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“Appraisal” shall mean a determination of the fair market value, as of the date of the Appraisal, of Real Property in its existing state or in a state to be created, by any bank, insurance company or other Person which makes appraisals in connection with its lending, brokerage or servicing activities (whether or not an Affiliate of the Advisor), or by a disinterested Person having no economic interest in the Real Property, provided such Person is, in the sole judgment of the Trustees, properly qualified to make such a determination.

“Certificates of Deposit” shall mean evidence of deposits in, or obligations of, banking institutions and savings institutions which are members of the Federal Deposit Insurance Corporation or of the Federal Home Loan Bank System.

“Construction Loans” shall mean Mortgage Loans made to finance the construction of buildings and other improvements on land and may include the financing of all or part of the cost of the acquisition, of such land (including leaseholds therein).

“Conventional Loans” shall mean Mortgage Loans (which may be Construction, Development or Permanent Loans) which are not guaranteed by FHA or VA.

“Declaration of Trust” shall mean this Declaration of Trust as amended, restated or modified from time to time. References in this Declaration of Trust to “Declaration” “hereof”, “herein” and “hereunder” shall be deemed to refer to the Declaration of Trust and shall not be limited to the particular text, article or section in which such words appear.

“Development Loans” shall mean Mortgage Loans made to finance the development of land into a site or sites suitable for the construction of improvements thereon or suitable for other residential, recreational, commercial, industrial or public uses and may include the financing of all or part of the cost of the acquisition of such land (including leaseholds therein).

“Equity Investments in Real Property” shall mean investments in the ownership of, or participations in the ownership of, Real Property including the development thereof and any interest therein other than Mortgage Loans or any type of interest in any corporation or other entity principally involved in owning, developing, improving, financing, operating or managing Real Property.

“Equity Securities” shall mean Shares and other Securities of the Trust convertible at any time into shares with or without the payment of additional consideration.

“FHA” shall mean the Federal Housing Administration and any successor thereto.

“FHA Loans” shall mean loans guaranteed by the FHA.

“First Mortgage” shall mean a Mortgage which takes priority or precedence over all other charges or encumbrances upon Real Property, other than a leasehold interest

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therein, and which must be satisfied before such other charges are entitled to participate in the proceeds of any sale or other disposition of such Real Property. However, such priority shall not be deemed to be abrogated by liens for taxes, assessments which are not due or remain payable without penalty, contracts and leases acceptable to the Trust (other than contracts for repayment of borrowed monies) mechanics’ and material men’s liens and other similar liens for work performed and materials furnished for the improvement of real estate which are not in default or are in good faith being contested, and other claims normally deemed in the same jurisdiction in which the Real Property is located to abrogate the priority of a first mortgage.

“First Mortgage Loans” shall mean Mortgage Loans secured or collateralized by First Mortgages.

“Fiscal Year” shall mean any period for which an income tax return is submitted to the Internal Revenue Service and which is treated by the Internal Revenue Service as a reporting period.

“Gap Loans” shall mean Junior Mortgage Loans made or acquired by the Trust to finance the difference between the minimum amount which a permanent lender has agreed to fund and the maximum amount which such permanent lender would fund if certain occupancy, rental or other requirements are met.

“Government Securities” shall mean Securities which are obligations of, or guaranteed by, the United States Government, any State or Territory of the United States of America, or any agency or political subdivision thereof, including, without limitation, all Government Securities from time to time constituting qualified real estate investment trust assets under the Internal Revenue Code.

“Junior Mortgage” shall mean a Mortgage which (1) has the same priority of precedence over all other charges or encumbrances upon Real Property as that required for a First Mortgage except that it is subject to the priority of one or more other Mortgages and (2) must be satisfied before such other charges or encumbrances (other than prior Mortgages) are entitled to participate in the proceeds of any sale or other disposition of such Real Property.

“Junior Mortgage Loans” shall mean Mortgage Loans secured or collateralized by Junior Mortgages.

“Long-Term” in relation to loans shall mean loans having a maturity (disregarding sinking fund or optional prepayment provisions prior to the maturity date of such loan) of at least 10 years from the date of original issue.

“Medium Term” in relation to loans shall mean loans having a maturity (disregarding sinking fund or optional prepayment provisions prior to the maturity date of such loan) of not less than 5 years nor more than 10 years from the date of original issue.

“Mortgage Loans” shall mean loans evidenced by notes, debentures, bonds and

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other evidences of indebtedness or obligations, which are negotiable or non-negotiable and which are secured or collateralized by Mortgages.

“Mortgages” shall mean mortgages, deeds of trust or other security interests in Real Property or on rights or interests, including leasehold interests, in Real Property.

“Non-Recourse Indebtedness” shall mean indebtedness of the Trust incurred in connection with the acquisition or financing of any asset wherein the liability of the Trust is limited to the asset acquired or financed and income and proceeds attributable thereto and which does not— represent a general obligation of the Trust.

“Permanent Takeout” shall mean a commitment by a lender of substantial financial standing to purchase the Trust’s Construction Loan no later than the expiration of the term thereof or to provide a permanent loan no later than the expiration of the term of the Trust’s Construction Loan, the proceeds of which permanent loan shall be sufficient to reimburse the Trust for its Construction Loan.

“Person” shall mean and include individuals, corporations, limited partnerships, general partnerships, joint stock companies or associations, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts, or other organizations whether or not legal entities, and governments and agencies and political subdivisions thereof.

“Commercial Paper” shall mean indebtedness of the Trust evidenced by unsecured promissory notes maturing not more than 270 days after the date of issue which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions.

“Real Property” shall mean land, rights in land, interests (including. without limitation, air rights and leasehold interests as lessee or lessor), and buildings, structures, improvements, furniture and fixtures located on or used in connection with land and rights in land or interests therein, but not including Mortgages, Mortgage Loans or interests therein.

“REIT Provisions of the Internal Revenue Code” shall mean Sections 856 through 858 of the Internal Revenue Code of 1954, as now enacted or hereafter amended, or successor statutes and regulations and rulings promulgated thereunder, provided, however, that any such statute, regulation or ruling enacted or promulgated after the date hereof which is by its terms applicable to real estate investment trusts in existence on the date hereof only upon the election of, or failure to elect otherwise by such trust, shall be applicable to this Trust only if this Trust shall so elect or fail to elect otherwise in accordance with the terms thereof.

“Securities” shall mean any stock, shares, voting trust certificates, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise or in general any instruments commonly known as “securities” or any certificates of interest, shares or participations in temporary or interim certificates

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for, guarantees of or any warrant or right to subscribe to, purchase or acquire any of the foregoing.

“Securities of the Trust” shall mean any Securities issued by the Trust.

“Shareholders” shall mean as of any particular time all holders of record of outstanding Shares at such time.

“Shares” shall mean the shares of beneficial interest and shares of preferred stock of the Trust, as the case may be.

“Short-Term” in relation to loans shall mean loans other than Long-Term and Medium-Term loans.

“Total Assets of the Trust” shall mean the aggregate value of all of the assets included in the Trust Property as such value appears on the most recent balance sheet of the Trust, prepared in accordance with sound accounting practice, without deduction for Mortgage Loans or other security interests to which such assets are subject and before provision for depreciation, depletion and amortization but after provision for bad debt loss and similar reserves.

“Trust Property” shall mean as of any particular time any and all property, real, personal or otherwise, tangible or intangible, which is transferred, conveyed or paid to the Trust or Trustees and all rents, income, profits and gains therefrom and which at such time is owned or held by, or for the account of the Trust or the Trustees.

“VA Loans” shall mean Mortgage Loans (which may be Construction, Development or Permanent Loans) which are guaranteed under the provisions of the Servicemen’s Readjustment Act of 1944, as amended.

“Warehousing Loans” shall mean loans which are secured by a pledge of Mortgage Loans owned by the borrower.

“Wraparound Loans” shall mean Junior Mortgage Loans made pursuant to an agreement obligating the borrower to pay the Trust a principal amount equal to that of any senior Mortgage Loan plus that of such Junior Mortgage Loan with interest on the combined principal and obligating the Trust to pay, as received from the borrower, the principal and interest due on any such Senior Mortgage Loan.

ARTICLE II

TRUSTEES

Section 2.1 Number and Qualification. The number of Trustees shall be not less than 5 nor more than 15 persons. The exact number of Trustees within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the

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Trustees then in office pursuant to a resolution adopted by the entire Board of Trustees. No reduction in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his term. Whenever a vacancy in the number of Trustees shall occur, until such vacancy is filled, the Trustees or Trustee continuing in office, regardless of their number, shall have all the powers granted to the Trustees and shall discharge all the duties imposed upon the Trustees by this Declaration of Trust. A Trustee shall be an individual at least 21 years of age who is not under legal disability. The Trustees, in their capacity as Trustees, shall not be required to devote their entire time to the business and affairs of the Trust. Trustees shall be United States citizens. Trustees may, but need not, own Shares or other Securities of the Trust.

Section 2.2 Term and Election. At the 1984 meeting of Shareholders, the Trustees shall be divided into three classes, as nearly equal in number as possible, with the term of office of the first class to expire at the 1985 annual meeting of Shareholders, the term of office of the second class to expire at the 1986 annual meeting of Shareholders and the term of office of the third class to expire at the 1987 annual meeting of Shareholders. At each annual meeting of Shareholders following such initial classification and election, Trustees elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of Shareholders after their election.

Subject to the rights of the holders of any series of preferred stock then outstanding, newly created trusteeships resulting from any increase in the authorized number of Trustees or any vacancies in the Board of Trustees resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled by a majority vote of the Trustees than in office, although less than a quorum, and Trustees so chosen shall hold office for a term expiring at the annual meeting of Shareholders at which the term of the class to which they have been elected expires. If the number of Trustees is changed any increase or decrease shall be apportioned among the classes so as to maintain the number of Trustees in each class as nearly equal as possible. No decrease in the number of Trustees constituting the Board of Trustees shall shorten the term of any incumbent Trustee.

Notwithstanding the foregoing, whenever the holders of any class of stock (other than holders of beneficial Shares) issued by Trust shall have the right, voting as a class or otherwise, to elect Trustees, the then authorized number of Trustees of the Trust shall be increased by the number of additional Trustees to be elected.

Section 2.3 Resignation and Removal. Any Trustee may resign his trust (without need for prior or subsequent accounting) by an instrument in writing signed by him and delivered or mailed to the President or the Secretary of the Trust and such resignation shall be effective upon such delivery, or at a later date according to the terms of the notice. Any of the Trustees may be removed either (a) for cause, as determined in the reasonable judgment of two-thirds of the remaining Trustees or (b) with or without cause, at any meeting of Shareholders by the affirmative vote of the holders of at least a majority of the Shares entitled to vote present in person or by proxy at such meeting provided a quorum is at such meeting.

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Section 2.4 Vacancies. The term of office of a Trustee shall terminate and a vacancy shall occur in the event of the death, resignation, bankruptcy, adjudicated incompetence or other incapacity to exercise the duties of the office, or removal of such Trustee. No such vacancy shall operate to annul this Declaration of Trust or to revoke any existing agency created pursuant to the terms of this Declaration of Trust.

Section 2.5 Meetings. Meetings of the Trustees shall be held from time to time upon the call of the President or the Secretary of the Trust or any two Trustees. Regular meetings of the Trustees may be held without call or notice at a time and place fixed by resolution of the Trustees. Notice of any other meeting shall be mailed or otherwise given not less than 48 hours before the meeting but may be waived in writing by any Trustee either before or after such meeting. The attendance of a Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Trustee attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting has not been lawfully called or convened. A quorum for all meetings of the Trustees shall be a majority of the Trustees. Unless specifically provided otherwise in this Declaration of Trust, any action of the Trustees may be taken at a meeting by vote of a majority of the Trustees present (a quorum being present). The execution of any agreement, deed, mortgage, lease or other instrument of writing by one or more of the Trustees or by any authorized Person may be authorized or ratified by action of the Trustees and shall thereafter be valid and binding upon the Trustees and upon the Trust.

Any Executive or Investment Committee may act with or without a meeting. A quorum for all meetings of any such Committee shall be a majority of the members thereof. Unless specifically provided otherwise in this Declaration of Trust., any action of any Investment or Executive Committee may be taken at a meeting by vote of a majority of the members present (a quorum being present) or without a meeting by written consents of a majority of the members,

With respect to actions of the Trustees and any Executive or Investment Committee, Trustees who are affiliated or otherwise interested in any action to be taken may be counted for quorum purposes under this Section 2.5 and shall be entitled to vote. Any action of the Trustees or of a committee taken without a meeting may be taken without prior notice and without a vote if a consent in writing, setting forth the action so taken, shall be signed by a majority of the Trustees then in office or the then members of the committee (as the case may be), or such other proportion thereof as would be necessary to authorize or take such action at a meeting of the Trustees or the committee (as the case may be) at which all Trustees or all members of such committee (as the case may be) were present, provided that notice of the taking of the action without a meeting by less than unanimous written consent of the Trustees or the committee (as the case may be) shall be given, within 15 days after the execution of such consent by the last Trustee whose execution thereof shall be required for effective action to be taken thereby, to those Trustees or members who have not so consented in writing.

All or any one or more Trustees may participate in a meeting of the Trustees or any committee thereof by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other

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and participation in a meeting pursuant to such communications shall constitute presence in person at such meeting. The minutes of any meeting of Trustees held by telephone shall be prepared in the same manner as a meeting of Trustees held in person.

Section 2.6 Executive and Investment Committees. The Trustees may appoint from among their own members an Executive and/or Investment Committee of two or more persons to whom the Trustees may delegate, consistent with their ultimate responsibility to supervise the affairs of the Trust, such of the powers herein given to the Trustees as they may deem expedient, except as herein otherwise provided.

Section 2.7 Officers. The Trustees shall annually elect a President from among their number who shall be the chief executive officer of the Trust. The Trustees may elect or appoint, from among their number or otherwise, or may authorize the President to appoint one or more Vice Presidents, a Treasurer and a Secretary, a Comptroller, one or more Assistant Secretaries and Assistant Treasurers and such other officers or agents who shall have such powers, duties and responsibilities as the Trustees may deem to be advisable and who shall act as agents of the Trustees and be subject to the provisions of this Declaration of Trust. Two or more offices may be held by the same person, except that the President may not also be the Secretary. The Board of Trustees may, in its discretion, elect a Chairman of the Board.

Section 2.8 By-Laws. The Trustees (by majority vote) may adopt and from time to time amend or repeal By-Laws not inconsistent with this Declaration of Trust for the conduct of the business of the Trust, and in such By-Laws may define the duties of the officers, agents, employees and representatives of the Trust.

Section 2.9 Trustees May Own Shares. Any Trustee, officer or agent may acquire, hold and sell Shares on his personal account, either in his individual name, or in a fiduciary capacity or jointly with other persons, or as a member of a firm or association or otherwise, without being thereby disqualified as a Trustee, officer or agent, and while so holding any Shares on his personal account shall be entitled to the same rights and privileges as other Shareholders.

ARTICLE III

POWERS OF THE TRUSTEES

Section 3.1 General. The Trustees shall have, without other or further authorization, continuing full, absolute and exclusive power, control, and authority over and management of the Trust Property and of the affairs of the Trust, to the same extent as if the Trustees were the sole owners of such property in their own right, subject only to the limitations herein expressly stated. Such powers of the Trustees may be exercised without the necessity of applying to any court or to the Shareholders for leave to do so. No person shall in any event be bound to see to the application of any money or property paid to or delivered to the Trustees or their authorized representatives. The enumeration of any specific power or authority herein shall not be construed as limiting the aforesaid power or authority or any other power or authority.

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Section 3.2 Investments. The Trustees shall have power, for such consideration as they may deem proper, to invest in, purchase or otherwise acquire, for cash or other property or through the issuance of Securities of the Trust, and hold or retain for investment full or participating interests of any type in real, personal or mixed, tangible or intangible, property of any kind wherever located: including, without limitation, the following: (a) a full or participating interest in Securities of every nature, whether or not secured by Mortgages; (b) a full or participating interest in rents, lease payments or other income from, or the profits from, or the equity or ownership of, Real Property; and (c) a full or participating interest in investments secured by the pledge or transfer of Mortgage Loans.

In the exercise of their powers, the Trustees shall not be limited to investing in obligations maturing before the possible termination of the Trust, nor shall the Trustees be limited by any law now or hereafter in effect limiting the investments which may be held or retained by trustees or other fiduciaries, but they shall have full authority and power to make any and all investments within the limitations of this Declaration of Trust, that they, in their absolute discretion, shall determine, and without liability for loss, even though such investments shall be of a character or in amount not considered proper for investment of trust funds or which do not or may not produce income. No investment or reinvestment of the Trust property hereunder shall be deemed improper because of its speculative character, or because a greater proportion of the Trust property is invested therein than is usual for trustees, or solely by reason of any interest therein, direct or indirect, of the Trustees or any other party whatsoever.

Section 3.3 Appraisals. If the Trustees should at any time purchase Real Property (other than where such purchase results from a foreclosure or satisfaction of indebtedness to the Trust or is made in connection with the acquisition of a mortgage loan), the consideration paid for such Real Property shall be based upon the fair market value of the property as determined by an Appraisal or as determined in the discretion of the Trustees; provided, however, that no purchase of Real Property from an Affiliate of the Trust or the Advisor, shall be effected without an Appraisal made by a Person who is not an Affiliate of the Trust or the Advisor. The Trustees may in good faith rely on a previous Appraisal made on behalf of other Persons provided it meets the aforesaid standards and was made in connection with an investment in which the Trust acquires an entire or participating interest.

Section 3.4 Legal Title. Legal title to all the Trust Property shall be vested in the Trustees as joint tenants and held by and transferred to the Trustees, except that, insofar as permitted by applicable law, the Trustees shall have power to cause legal title to any Trust Property to be held by or in the name of one or more of the Trustees with suitable reference to their trustee status, or in the name of the Trust, or in the name of any other Person as nominee, or, in the case of securities, in bearer form, on such terms, in such manner and with such powers as the Trustees may determine, so long as in their judgment the interest of the Trust is adequately protected.

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The right, title and interest of the Trustees in and to the Trust Property shall vest automatically in all persons who may hereafter become Trustees upon their due election without any further act. Upon the death, resignation, removal, bankruptcy, adjudicated incompetence or other incapacity to exercise the duties of the office of a Trustee, he (and in the event of his death, his estate) shall automatically cease to have any right, title or interest in or to any of the Trust Property, and the right, title and interest of such Trustee in and to the Trust Property including any and all Trust Property held in his name alone or jointly with one or more other Trustees shall vest automatically in the remaining Trustees without any further act. Such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered.

For the purpose of more fully effectuating the foregoing, upon the resignation or removal of a Trustee, or his otherwise ceasing to be a Trustee, the remaining Trustees may require such Trustee to execute and deliver such documents for the purpose of conveying to the Trust or the remaining Trustees, any Trust Property held in the name of the resigning or removed Trustee. Upon the incapacity or death of any Trustee, his legal representative shall execute and deliver on his behalf such documents as the remaining Trustees shall require as provided in the preceding sentence.

Section 3.5 Disposition, Renting, Etc. of Assets. The Trustees shall have power to sell, grant security interests in, otherwise encumber, lease, exchange, grant options with respect to or otherwise dispose of any and all Trust Property free and clear of any and all trusts, at public or private sale, for cash or on terms or for Securities, or a combination thereof, without advertisement, and subject to such restrictions, stipulations, agreements and reservations as they shall deem proper, including the power to take back mortgages to secure the whole or any part of the purchase price of any of the Trust Property sold or transferred by them, and to execute and deliver any deed or other instrument in connection with the foregoing. The Trustees shall also have power to:

(a) rent, lease or hire from others or to others for terms which may extend beyond the termination of this Declaration of Trust any property or rights to property, real, personal or mixed, tangible or intangible, and to own, manage, use and hold such property and such rights;

(b) subdivide, partition or improve Real Property and tear down, alter or make improvements thereon and grant easements or impose restrictions in relation thereto;

(c) give consents and make contracts relating to Trust Property or its use;

(d) release, dedicate or adjust the boundaries of any Trust Property; and

(e) develop, operate, pool, unitize, grant production payments out of or lease or otherwise dispose of oil, gas and other mineral properties and rights.

Section 3.6 Financings; Issuance of Securities; Facsimiles. The Trustees shall have power to lend money, whether secured or unsecured, to borrow or in any other manner raise such sum or sums of money or other property as they shall determine in any amount and in any manner and on any terms, and to evidence the same by Securities which may mature at

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any time or times even beyond the possible date of termination of the Trust, to reacquire any such Securities, to enter into other contracts on behalf of the Trust and to execute and deliver any Mortgage, pledge or other instrument to secure any such Securities or other obligations or contracts; provided that the Trustees shall not issue debt securities to the public unless the historical cash flow of the Trust or the estimated future cash flow of the Trust, excluding extraordinary items, is sufficient in the judgment of the Trustees to cover the interest on such debt securities. Any Securities, instruments or other obligations of the Trust may, at the discretion of the Trustees, without vote of the Shareholders, be convertible or exercisable into Shares at such time and on such terms as the Trustees may prescribe.

Subject to the provisions of Section 6.18, the Trustees shall have power to issue any type of Securities of the Trust, without vote or other action by the Shareholders, to such Persons for such cash, property, services, expenses or other consideration (including Securities issued or created by, or interests in, any Person) at such time or times and in such amounts and in such manner and on such terms as the Trustees may deem advisable and to list any of the foregoing Securities of the Trust or any depositary receipts representing such Securities on any securities exchange and to purchase or otherwise acquire, hold, cancel, reissue, sell and transfer any such Securities of the Trust or any depositary receipts representing such Securities. The Trustees may authorize the use of facsimile signatures and/or a facsimile seal of the Trust on Securities of the Trust or any depositary receipts representing such Securities, provided that where facsimile signatures are so used, one of the authorized signatures be manual or the Securities or any such depositary receipts be manually countersigned or authenticated (except with respect to any type of Security with respect to which the then current commercial practice does not require manual countersignature or manual authentication) by a transfer agent or registrar or by an authenticating agent or trustee or similar person. In case any Person who shall have signed (or whose facsimile signature shall appear on) Securities of the Trust or any such depositary receipts shall have ceased to occupy the office or perform the function with respect to which such signature was authorized before such Securities or any such depositary receipts shall have been actually issued, such Securities or any such depositary receipts may nevertheless be issued with the same effect as though such Person had not ceased to occupy such office or perform such function.

Section 3.7 Taxes. The Trustees shall have power to pay all taxes or assessments, of whatever kind or nature, imposed upon or against the Trust or the Trustees in connection with the Trust Property, or upon or against the Trust Property or income of any part thereof, to settle and compromise disputed tax liabilities, and for the foregoing purposes to make such returns and do all such other acts and things as may be deemed by the Trustees necessary or desirable.

Section 3.8 Rights as Holder of Mortgages and Securities. The Trustees shall have power to exercise all the rights, powers and privileges appertaining to the ownership of all or any Mortgages or Securities forming part of the Trust Property to the same extent that any individual might, and, without limiting the generality of the foregoing, to vote or give any consent, request or notice or waive any notice either in person or by proxy or power of attorney with or without power of substitution, to one or more Persons, which proxies and

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powers of attorney may be for meetings or action generally or for any particular meetings or action, and may include the exercise of discretionary powers.

Section 3.9 Collection. The Trustees shall have power to collect, sue for, receive and receipt for all sums money or other property due to the Trust, to consent to extensions of the time for payment, or to the renewal, of any Securities or obligations; to engage or intervene in, prosecute, defend, compound, compromise, abandon or adjust by arbitration or otherwise any actions, suits, proceedings, disputes, claims, demands or things relating to the Trust Property; to foreclose any Mortgage or other Security securing any notes, debentures, bonds, obligations or contracts, by virtue of which any sums of money are owed to the Trust; to exercise any power of sale held by them, and to convey good title thereunder free of any and all trusts, and, in connection with any such foreclosure or sale, to purchase or otherwise acquire title to any property; to be parties to reorganizations and to transfer to and deposit with any corporation, committee, voting trustee or other Person any Securities or obligations of any corporation, trust, association or other organization, the Securities of which form a part of the Trust Property, for the purpose of any reorganization of any such corporation, trust, association or other organization, or otherwise to participate in any arrangement for enforcing or protecting the interests of the Trustees as the owners or holders of such Securities or obligations and to pay any assessment levied in connection with such reorganization or arrangement; to extend the time with or without security for the payment or delivery of any debt or property and to execute and to enter into releases, agreements and other instruments; and to pay or satisfy any debts or claims upon any evidence that the Trustees shall think sufficient.

Section 3.10 Expenses. The Trustees shall have power to incur and pay any charges or expenses which in the opinion of the Trustees are necessary or incidental or proper for carrying out any of the purposes of this Declaration of Trust, and to reimburse others for the payment therefor, and to pay appropriate compensation or fees from the funds of the Trust to themselves as Trustees and to persons with whom the Trust has contracted or transacted business. The Trustees shall fix the compensation of all officers and Trustees. The Trustees may be paid reasonable compensation for their general services as Trustees and officers hereunder, and the Trustees may pay themselves or any one or more of themselves such compensation for special services, including legal services, as they in good faith may deem reasonable and reimbursement for expenses reasonably incurred by themselves or any one or more of themselves on behalf of the Trust.

Section 3.11 Guaranties. The Trustees shall have power to endorse or guarantee the payment of any notes or other obligations of any Person other than the Trustees acting in their individual capacity: to make contracts of guaranty or suretyship, or otherwise assume liability for payment thereof; and to mortgage and pledge the Trust Property or any part thereof to secure any of or all such obligations.

Section 3.12 Deposits. The Trustees shall have power to deposit any moneys or Securities included in the Trust Property with any one or more banks, trust companies or other banking institutions, whether or not such deposit will draw interest, provided that no funds of the Trust shall be commingled with funds of the Advisor. Such deposits are to be subject to withdrawal in such manner as the Trustees may determine, and the Trustees

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shall have no responsibility for any loss which may occur by reason of the failure of the bank, trust company or other banking institution with whom the moneys or Securities have been deposited.

Section 3.13 Allocation. The Trustees shall have power to determine whether moneys or other assets received by the Trust shall be charged or credited to income or capital or allocated between income and capital, including the power to amortize or fail to amortize any part or all of any premium or discount, to treat any part or all the profit resulting from the maturity or sale of any asset, whether purchased at a premium or at a discount, as income or capital or apportion the same between income and capital to apportion the sale price of any asset between income and capital, and to determine in what manner any expense or disbursements are to be borne as between income and capital, whether or not in the absence of the power and authority conferred by this Section 3.13 such assets would be regarded as income or as capital or such expense or disbursements would be charged to income or to capital; to treat any dividend or other distribution on any investment as income or capital or apportion the same between income or capital; to provide or fail to provide reserves for depreciation, amortization or obsolescence in respect of any Trust Property in such amounts and by such methods and for such purposes as they shall determine, and to allocate to the share of beneficial interest account less than all of the consideration received for Shares (but not less than the par value thereof) and to allocate the balance thereof to paid-in capital, all as the Trustees may reasonably deem proper.

Section 3.14 Valuation. The Trustees shall have power to determine conclusively the value of any of the Trust Property and of any services, Securities, assets or other consideration hereafter to be acquired or disposed of by the Trust, and to revalue the Trust Property.

Section 3.15 Fiscal Year. The Trustees shall have power to determine the fiscal year of the Trust and the method or form in which its accounts shall be kept and from time to time to change the fiscal year or method or form of accounts.

Section 3.16 FHA Qualification. If the Trust shall be an “FHA Approved Mortgagee”, the Trustees shall have power to sell or otherwise dispose of any FHA loan or an interest therein which the Trust owns in accordance with the provisions of the National Housing Act of 1934, as amended, and regulations promulgated thereunder. The Trustees shall have the power to execute on behalf of the Trust, in connection with any project on which FHA has insured the indebtedness, in whole or in part, any and all deeds of trust or mortgages, and other agreements, documents and forms which may be required by FHA in connection with the approval of FHA of the transfer of physical assets from any entity to the Trustees or the insurance by FHA of any indebtedness on any project as to which the Trustees are or shall become owners pursuant to this Declaration of Trust, and the provisions of any such agreement shall be binding upon the Trust notwithstanding any conflict with or limitation of this Declaration of Trust.

Section 3.17 Power to Contract. The Trustees shall have power to appoint, employ or contract with any Person (including one or more of themselves and any corporation, partnership or trust of which one or more of them may be an Affiliate, subject to the

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applicable requirements of Section 3.28 hereof) as the Trustees may deem necessary or desirable for the transaction of the business of the Trust including any Person who, under the supervision of the Trustees, may, among other things: administer the day-to-day affairs of the Trust; serve as the Trust’s investment advisor and consultant in connection with the Trust’s investments; act as consultants, accountants, mortgage loan originators or servicers, correspondents, leaders, technical advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow agents, depositories, custodians or agents for collection, insurers or insurance agents, transfer agents or registrars or paying agents for Securities of the Trust, or in any other capacity deemed by the Trustees necessary or desirable; investigate, select, and, on behalf of the Trust, conduct relations with Persons acting in such capacities and pay appropriate fees to, and enter into appropriate contracts with, or employ, or retain services performed or to be performed by, any of them in connection with the investments acquired, sold, or otherwise disposed of; substitute any other Person for any such Person; act as attorney-in-fact or agent in the purchase or sale or other disposition of investments, and in the handling, prosecuting or settling of any claims of the Trust, including the foreclosure or other endorsement of any mortgage or other lien or other security securing investments; and assist in the performance of such ministerial functions necessary in the management of the Trust as may be agreed upon with the Trustees or officers of the Trust. The Trust shall not knowingly appoint, employ or contract with, or extend the term of any advisory or other contract with, any Trustee or any Person of whom any Trustee may be an Affiliate unless such contract shall be made, approved or ratified, after disclosure of such relationship, by a majority of the Trustees not so affiliated.

Section 3.18 Organization of Business Entities. The Trustees shall have power to cause to be organized or assist in organizing any Person under the laws of any jurisdiction to acquire the Trust Property or any part or parts thereof or indirectly have an interest, and, subject to the provisions of this Declaration of Trust, to cause the Trust to merge with such Person or any existing Person or to sell, rent, lease, hire, convey, negotiate, assign, exchange or transfer the Trust Property or any part or parts thereof to or with any such Person or any existing Person in exchange for the Securities thereof or otherwise, and to lend money to, subscribe for the Securities of, and enter into any contract with, any such Person in which the Trust holds or is about to acquire Securities or any other interest.

Section 3.19 Associations. The Trustees shall have power to enter into joint ventures, general or limited partnerships and any other combinations or associations.

Section 3.20 Insurance. The Trustees shall have the power to purchase and pay for entirely out of Trust Property insurance policies insuring the Shareholders, Trustees, officers, employees, and agents. investment advisors, including the Advisor, or independent contractors of the Trust individually against all claims and liabilities of every nature arising by reason of holding, being or having held any such office or position, or by reason of any action alleged to have been taken or omitted by any such Person or Shareholder, Trustee, officer, employee, agent. investment advisor, or independent contractor, including any action taken or omitted that may be determined to constitute negligence whether or not the Trust would have the power to indemnify such Person against such liability.

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Section 3.21 Pension and Other Plans. The Trustees shall have the power to pay pensions for faithful service, as deemed appropriate by the Trustees, and (except as provided in Section 6.18 hereof) to adopt, establish and carry out pension, profit-sharing, Share bonus, Share purchase, savings, thrift and other retirement, incentive and benefit plans, trusts and provisions, including the purchasing of life insurance and annuity contracts as a means of providing such retirement and other benefits, for any or all of the Trustees, officers, employees and agents of the Trust.

Section 3.22 Seal. The Trustees shall have the power to adopt and use a seal for the Trust, but unless otherwise required by the Trustees, the seal shall not be necessary to be placed on, and its absence shall not impair the validity of, any document, instrument or other paper executed and delivered by or on behalf of the Trust.

Section 3.23 Charitable Contributions. The Trustees shall have power to make donations, irrespective of benefit to the Trust, for the public welfare or for community fund, hospital, charitable. religious, educational, scientific, civic or similar purpose, and in time or war or other national emergency in aid thereof.

Section 3.24 Indemnification. The Trustees shall have power to the extent permitted by law to indemnify or enter into agreements with respect to indemnification with any Person with whom the Trust has dealings, including, without limitation, any investment advisor, including the Advisor, or independent contractor, to such extent as the Trustees shall determine.

Section 3.25 Remedies. Notwithstanding any provision of this Declaration of Trust, when the Trustees deem that there is a significant risk that an obligor to the Trust may default or is in default under the terms of any obligation to the Trust, the Trustees shall have power to pursue any remedies permitted by law which, in their sole judgment, are in the interests of the Trust, and the Trustees shall have the power to enter into any investment, commitment or obligation of the Trust resulting from the pursuit of such remedies or necessary or desirable to dispose of property acquired in the pursuit of such remedies.

Section 3.26 Trustees May Appoint Advisor. The Trustees are responsible for the general policies of the Trust and for such general supervision of the business of the Trust conducted by officers, agents, employees, investment advisors or independent contractors of the Trust as may be necessary to insure that such business conforms to the provisions of the Declaration of Trust. However, the Trustees are not required personally to conduct the business of the Trust and, consistent with their ultimate responsibility as stated herein, the Trustees shall have power to appoint, employ, or contract with any such natural or, legal person or persons (including one or more of themselves and any corporation, partnership or trust in which one or more of them may be directors, officers, stockholders, partners or trustees) as the Trustees may deem necessary or desirable for the transaction of the business of the Trust. The Trustees may, therefore, employ or contract with a corporation, partnership, trust or individual (herein referred to as the “Advisor”), and the Trustees may grant or delegate such authority to the Advisor as the Trustees may, in their sole discretion, deem necessary or desirable, without regard to whether such authority is normally granted or delegated by trustees.

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The Trustees shall have the power to determine the terms of compensation of the Advisor or any other person or persons whom they may employ or with whom they may contract; provided, however, that any determination to appoint, employ, or contract with any Trustee or any entity with which a Trustee is affiliated by reason of a managerial or ownership interest, shall be valid only if made, approved or ratified, after disclosure of such relationship, by a majority of the Trustees not so affiliated. The Trustees may exercise broad discretion in allowing the Advisor to administer and regulate the operations of the Trust, to act as agent for the Trust, to execute documents on behalf of the Trustees, and to make executive decisions which conform to general policies and general principles previously established by the Trustees.

The contract entered into by the Trustees with any Advisor may have a term of up to five full years. The term of each renewal of extension of any such contract with the same Advisor may be renewed by a majority of the Board of Trustees for a period equal to a maximum of five years. However, at a special meeting of shareholders called by the shareholders pursuant to Section 7.3(b) herein, a majority of the outstanding Shares shall have the right to rescind the renewal of the Advisory Agreement which was authorized by the Board of Trustees at the immediately preceding Board of Trustees meeting, but any such recession shall no effect on the term of the Advisory Agreement, as same may have been previously renewed.

Section 3.27 Independence of Trustees. Not more than 49% of the total number of Trustees or of the total number of members of any Investment Committee may be Affiliates of the Advisor, provided, however, that if at any time the percentage of all Trustees or of members of such Investment Committee then in office, because of the death, resignation, removal or change in affiliation of a Trustee or member of such Investment Committee who is not such an Affiliate, such requirement shall not be applicable for a period of sixty (60) days, during which time a majority of all the Trustees then in office shall appoint a sufficient number of other individuals as Trustees or as members of such Investment Committee so that there is again not more than 49% of the total number of all Trustees or members of such Investment Committee then in office who are Affiliates of the Advisor. The Trustees shall at all times endeavor to comply with such requirement, but failure so to comply shall not affect the validity or effectiveness of any action of the Trustees or of the lnvestment Committee as the case may be.

Section 3.28 Prohibition Against Self-Dealing and Misuse of Trust Assets. (a) Notwithstanding any other provisions of this Declaration of Trust, the Trustees, when acting on behalf of the Trust, may not knowingly, directly or indirectly, lend any of the Trust Property to, purchase or otherwise acquire any property whatsoever from, sell or otherwise transfer any property whatsoever to, contract with, or pay any commission or other remuneration, directly or indirectly, in connection with the purchase or sale of Trust assets to (i) any Trustee, officer or employee of the Trust (acting in their individual capacities), (ii) the Advisor, (iii) any corporation, partnership, trust or other organization with which a Trustee, any officer or employee of the Trust, the Advisor, any independent contractor to the Trust or any officer, director or employee of the Advisor, or any such

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independent contractor to the Trust is an Affiliate, or (iv) any officer, managing agent, director or employee (acting in their individual capacities) of the Advisor, of any Affiliate of the Advisor or of any independent contractor to the Trust; except that the Trustees shall be entitled to engage in any transaction on behalf of the Trust notwithstanding any such affiliation, provided (i) each such transaction has been approved or ratified, after full disclosure of such affiliation, by a majority of the Trustees including a majority of the Trustees who are not Affiliates of any Person (other than the Trust) who is a party to the transaction, or by a majority of the-members of any committee of the Trustees including a majority of the members of such committee who are not Affiliates of any Person (other than the Trust) who is a party to the transaction, and (ii) the Trustees approving the transaction have determined that such transaction is fair and reasonable to the Shareholders of the Trust and that such transaction is on terms not less favorable to the Trust than terms available for a comparable transaction with others that are not so affiliated, and (iii) if such transaction relates to: (x) the acquisition by the Trust of federally insured or guaranteed mortgages, it shall be effected at prices not exceeding the currently quoted prices at which the Federal National Mortgage Association is purchasing comparable mortgages; or (y) the acquisition by the Trust of other property, it shall be effected at prices not exceeding the fair value thereof as determined by an independent Appraisal. For purposes of this Section 3.28 the term “independent contractor” means an “independent contractor” as defined in Section 856(d)(3) of the Internal Revenue Code which furnishes or renders services to tenants of or manages or operates Real Property owned by the Trust. The simultaneous acquisition by the Trust and the Advisor or any Affiliate of the Advisor of participations in a loan or other investment shall not be deemed to constitute an acquisition or sale of property by one of them to the other, provided that the terms, other than the size of the participation, are not less favorable to the Trust than to such other Person.

Any Trustee or officer, employee or agent of the Trust may acquire, own, hold and dispose of Securities of the Trust, for his individual account, and may exercise all rights of a holder of such Securities to the same extent and in the same mariner as if he were not such a Trustee or officer, employee or agent. The Trustees shall use their best efforts to obtain through an Advisor or other Persons a continuing and suitable investment program, consistent with the investment policies and objectives of the Trust, and the Trustees shall be responsible for reviewing and approving or rejecting investment opportunities presented by the Advisor or such other Persons. So long as there is such Advisor or other Person, the Trustees shall have no responsibility for the origination of investment opportunities for the Trust. Any Trustee or officer, employee, or agent of the Trust may, in his personal capacity, or in a capacity of trustee, officer, director, stockholder, partner, member, advisor or employee of any Person, have business interests and engage in business activities in addition to those relating to the Trust, which interests and activities may be similar to those of the Trust and include the acquisition, syndication, holding, management, operation or disposition, for his own account or for the account of such Person, of interests in Mortgages, interests in Real Property, or interests in Persons engaged in the real estate business, and each Trustee, officer, employee and agent of the Trust shall be free of any obligation to present to the Trust any investment opportunity which comes to him in any capacity other than solely as Trustee, officer, employee or agent of the Trust, even if such opportunity is of a character which, if presented to the

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Trust, could be taken by the Trust, provided, however, that no Trustee, advisor, officer, employee, or agent of the Trust may compete with the Trust in (i) any transaction in which the Trust is engaged or (ii) any proposed transaction which has been presented to the Trustees in writing for their consideration and which has not been rejected by the vote of a majority of the Trustees not interested in such a proposed transaction. Each Trustee shall disclose any interest he has, and any interest known to him of any Affiliate of his, in any investment opportunity presented to the Trust. Subject to the provisions of this Section 3.28 any Trustee or officer, employee or agent of the Trust may be interested as trustee, officer, director, shareholder, partner, member, advisor or employee of, or otherwise have a direct or indirect interest in, any Person who may be engaged to render advice or services to the Trust, and may receive compensation from such Person as well as compensation as Trustee, officer, employee or agent of the Trust or otherwise hereunder. None of the activities referred to in, and permitted by, this paragraph shall be deemed to conflict with his duties and powers as Trustee, officer, employee or agent of the Trust.

The Trust shall not, in dealing with any Trustee, investment officer or employee of the Trust, enter into any transaction contrary to the obligations imposed upon fiduciaries acting under the Declaration of Trust by courts in Massachusetts having equity powers. No investment recommended to the Trust by the Advisor shall be made by the Trust at a time when a Trustee is an Affiliate of the Advisor unless such investment has been approved by a majority of the Trustees including a majority of Trustees not so affiliated or by a majority of the members of any Investment Committee of the Trustees including a majority of the members of such committee not so affiliated.

(b) Notwithstanding any other provisions of this Declaration of Trust, in connection with any “Business Combination” (as hereinafter defined) with any “Related Person” (as hereinafter defined) the Trustees of the Trust who are not affiliated with the Related Person (the “Independent Trustees”) shall have the authority to negotiate with the Related Person on behalf of the Shareholders of the Trust, other than the Related Person (the “Minority Shareholders”), with the assistance of legal counsel and such other persons as the Independent Trustees deem necessary for that purpose (the fees and expenses of such legal counsel and other persons to be borne by the Trust), and shall approve the terms and conditions of the definitive agreement which embodies the Business Combination. As a condition to the consummation of the Business Combination, the Board of Trustees of the Trust shall have received a written opinion from an investment banking firm of national reputation that the proposed Business Combination is fair to Minority Shareholders from a financial point of view. Such determination shall be based upon the value of the Trust as a whole and the fact that the Shares held by the Minority Shareholders represent a minority interest in the Trust shall not be considered to diminish their value.

The provisions set forth in this Section 3.28(b) may not be repealed or amended in any respect, unless such action is approved by the affirmative vote of the holders of not less than a majority of the outstanding shares of Voting Stock held by Minority Shareholders. In the event a quorum of such Minority Shareholders is not present at two successive annual meetings of Shareholders at which the repeal or amendment of the provisions set forth in this Section 3.28(b) is proposed, then the requisite vote for such action shall be

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governed by Section 8.1 hereof. The term “Voting Stock” shall mean all outstanding Shares of the Trust or another corporation entitled to vote generally in the election of Trustees and each reference to a proportion of shares of Voting Stock shall refer to such proportion of the votes entitled to be cast by such shares.

For the purposes of this Section 3.28(b):

(i) The term “Business Combination” shall mean (a) any merger or consolidation of the Trust or a subsidiary of the Trust with or into a Related Person, (b) any sale, lease, exchange, transfer or other disposition, including without limitation a mortgage or any other security device of all or substantially all of the assets either of the Trust or of a subsidiary of the Trust, to a Related Person, (c) any merger or consolidation of a Related Person with or into the Trust, (d) any sale, lease, exchange, transfer or other disposition of all or substantially all of the assets of a Related Person to the Trust or a subsidiary of the Trust or (e) any agreement, contract or other arrangement providing for any of the transactions described in the Business Combination; and

(ii) The term “Related Person” shall mean and include any individual, corporation, partnership or other person or entity which, together with its “Affiliates” and “Associates” (as defined on November 1, 1982 in Rule 12b-2 under the Securities Exchange Act) “Beneficially Owns” (as defined on November 1, 1982 in Rule 13d-3 under the Securities Exchange Act of 1934) in the aggregate 50 percent or more of the outstanding Voting Stock of the Trust, and any Affiliate or Associate of any such individual, corporation, partnership or other person or entity.

Section 3.29 Further Powers. The Trustees shall have power to do all such other matters and things and execute all such instruments as they deem necessary, proper or desirable in order to carry out, promote or advance the interests of the Trust although such matters or things are not herein specifically mentioned. Any determination as to what is in the interests of the Trust made by the Trustees in good faith shall be conclusive. In construing the provisions of this Declaration of Trust, the presumption, shall be in favor of a grant of power to the Trustees. The Trustees will not be required to obtain any court order to deal with the Trust Property.

Section 3.30 Transfer of Advisory Contract. Neither the Trust nor any holder of Equity Securities shall have any rights in or with respect to any income, assets or profit realized by the Advisor, any holders of Securities of the Advisor, or any director, officer or employee of the Advisor by reason of the transfer or assignment of the contract with the Advisor referred to in Section 3.26 hereof or any other agreement with the Advisor of any securities issued by the Advisor, and each such holder and the Trust shall be deemed to have consented to any such transfer or assignment (except such as specifically require consent of the Trust under the terms of such contract) and to have expressly and irrevocably waived any rights in such income, assets or profits, whether arising under the laws of the United States or any State or territory or any judicial decision thereunder.

Section 3.31 Qualification as “Real Estate Investment Trust”. The Trustees shall have the power to determine whether or not in any fiscal year to qualify for taxation as a “real estate investment trust” as described in the REIT Provisions of the Internal Revenue Code.

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ARTICLE IV

INVESTMENT POLICIES

Section 4.1 Statement of Investment Policy. The investment objective of the Trust is to invest the Trust Property in Real Property, Mortgage Loans, and other investments related to Real Property in such proportions as the Trustees may deem advisable from time to time in light of changing economic conditions. Except as specifically provided herein, there shall be no percentage limitation, either minimum or maximum, with respect to the proportion of assets of the Trust which may be placed at any given time in any type or category of investments. Investments of the Trust may be made in various combinations and may involve participations with other Persons. Such investments may incorporate a variety of real property financing techniques, including, without limitation, Conventional Loans, Long, Medium and Short Term Loans, Construction Loans with or without a Permanent Takeout, Equity Investments in Real Property, FHA Loans, VA Loans, First and Junior Mortgage Loans, Gap Loans, Warehousing Loans, Wraparound Loans, Development Loans, sale and leasebacks, land purchase-leases, net lease financings, purchase and installment sale lease backs, high credit lease-secured mortgages, convertible Mortgages and Mortgages of special interests including, without limitation, leaseholds, air rights and condominiums.

The Trustees, may, but shall not be required to, make investments in such a manner as to comply with the requirements of the REIT Provisions of the Internal Revenue Code with respect to the composition of the Trust’s investments and the derivation of its income; provided, however, that no Trustee, director, officer, employee or agent of the Trust or the Advisor shall be liable to any Person for any act or omission resulting in the loss of tax benefits under the Internal Revenue Code, except for that arising from his or its own bad faith, willful misconduct, gross negligence or reckless disregard of his or its duties or for his failure to act in good faith in the reasonable belief that such action was in the best interest of the Trust.

Section 4.2 Uninvested Assets. To the extent that the Trust has assets not otherwise invested in accordance with Section 4.1 hereof the Trustees may invest such assets in;

(a) obligations of or guaranteed or insured by, the United States Government or any agencies or political subdivisions thereof, including the FHA and the Federal National Mortgage Association;

(b) obligations of or guaranteed by, any state, territory or possession of the United States of America or any agencies or political subdivision thereof;

(c) evidences of deposits in, or obligations of, banking institutions, state and federal savings and loan associations and savings institutions which are members of the Federal Deposit Insurance Corporation or of the Federal Home Loan Bank System;

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(d) shares of other real estate investment trusts, but in the event the Trust is being operated as a “real estate investment trust” as described in the REIT Provisions of the Internal Revenue Code, then only to the extent permitted by the REIT Provisions of the Internal Revenue Code, except as prohibited by Section 4.3(e); and

(e) other marketable Securities but in the event the Trust is being operated as a “real estate investment trust” as described in the REIT Provisions of the Internal Revenue Code, then only marketable securities which, in the opinion of the Trustees, may be held by the Trust without jeopardizing the Trust’s qualification as a real estate investment trust under the REIT Provisions of the Internal Revenue Code.

Section 4.3 Restrictions. Notwithstanding anything in this Declaration of Trust which may be deemed to authorize the contrary, the Trustees shall not:

(a) invest in commodities, foreign currencies, bullion or chattels, except as required in the day-to-day business of the Trust or in connection with its investments;

(b) invest in real estate contracts for sale (except under circumstances wherein the investment of the Trust is substantially equivalent to a mortgagee’s interest) in excess of a value of 1% of the Total Assets of the Trust; provided, however, that nothing in this Section 4.3 shall prevent the holding of contracts of sale as security for loans made by the Trust and the acquisition and ownership of such contracts of sale upon foreclosure of, or realization upon, such security interests, and contracts of sale so held or owned shall be excluded from the computation required by this Section 4.3;

(c) engage in any short sale;

(d) issue “redeemable securities” as defined in Section 2(a) (31) of the Investment Company Act of 1940;

(e) if the Trust is being operated as a “real estate investment trust” as described in the REIT Provisions of the Internal Revenue Code hold securities in any real estate investment trust which, to the actual knowledge of the Trustees, is then holding investments or engaging in activities prohibited to the Trustees under this Section 4.3, if, as a result thereof, the Trust will fail to qualify as a real estate investment trust under the REIT Provisions of the Internal Revenue Code;

(f) engage in trading as compared with investment activities, or engage in the business or underwriting or agency distribution of Securities issued by others, but this prohibition shall not prevent the Trust from buying or selling Mortgage Loans, including participations therein, or interests in Real Property;

(g) hold property primarily for sale to customers in the ordinary course of the trade or business of the Trust, but this prohibition shall not be construed to deprive the Trust of the power to sell any property which it owns at any time;

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(h) invest in equity securities (except securities acquired in connection with the acquisition of or foreclosure on mortgage loans made by the Trust) of any Person which to the knowledge of the Trustees is then holding investments or engaging in activities prohibited to the Trust, if, after giving effect to such investment, the aggregate value, as determined by a majority of the Trustees of such investments would exceed 5% of the total assets of the Trust.

ARTICLE V

LIMITATIONS OF LIABILITY

Section 5.1 Liability to Third Persons. No Shareholder shall be subject to any personal liability whatsoever, in tort, contract or otherwise, to any Person or Persons in connection with Trust Property or the affairs of the Trust; and no Trustee, officer, employee or agent of the Trust shall be subject to any personal liability whatsoever, in tort, contract or otherwise, to any other Person or Persons in connection with Trust Property or the affairs of the Trust, save only that arising from his bad faith, willful misconduct, gross negligence or reckless disregard of his duties or for his failure to act in good faith in the reasonable belief that his action was in the best interest of the Trust; and all such other Persons shall look solely to the Trust Property for satisfaction of claims of any nature arising in connection with the affairs of the Trust. If any Shareholder, Trustee, officer, employee or agent, as such, of the Trust is made a party to any suit or proceedings to enforce any such liability, he shall not on account thereof be held to any personal liability.

Section 5.2 Liability to Trust or Shareholders. No Trustee, officer, employee or agent of the Trust shall be liable to the Trust or to any Shareholder, Trustee, officer, employee or agent of the Trust for any action or failure to act (including without limitation the failure to compel in any way any former or acting Trustee to redress any breach of trust) except for his own bad faith, willful misconduct, gross negligence or reckless disregard of his duties or for his failure to act in good faith in the reasonable belief that his action was in the best interests of the Trust.

Section 5.3 Indemnification. The Trust shall indemnify and hold each Shareholder harmless from and against all claims and liabilities, whether they proceed to judgment or are settled or otherwise brought to a conclusion, to which such Shareholder may become subject by reason of his being or having been a Shareholder, and shall reimburse such Shareholder for all legal and other expenses reasonably incurred by him in connection with any such claim or liability; provided, however, that the Trust shall have no liability to reimburse Shareholders for taxes assessed against them by reason of their ownership of Shares (unless such tax is of a character which in the Commonwealth of Massachusetts would be assessed against the Trust Property or the Trustees, but is assessed in the jurisdiction assessing such tax against all Shareholders ratably rather than against the Trust Property or the Trustees), nor for any losses suffered by reason of changes in the market value of Securities of the Trust. Subject to the proviso clause and except for expenses not reasonably incurred, the foregoing sentence is intended to provide for indemnification of each Shareholder to the fullest extent permitted by law. The rights accruing to a Shareholder under this Section 5.3 shall not exclude any other right to which

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such Shareholder may be lawfully entitled, nor shall anything herein contained restrict the right of the Trust to reimburse or indemnify a Shareholder in any appropriate situation even though not specifically provided herein.

The Trust shall indemnify each of its Trustees, officers, employees and agents (including any Person who serves at its request as director, officer or trustee of another organization in which it has any interest as a shareholder, creditor or otherwise), against all liabilities and expenses, including amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees, reasonably incurred by him in connection with the defense or disposition of any action, suit or other proceeding by the Trust or any other Person, whether civil or criminal, in which he may be involved or with which he may be threatened, while in office or thereafter, by reason of his being or having been such a Trustee, officer, employee or agent; provided, however, that no indemnification shall be made with respect to any matter as to which he shall have been adjudicated to have acted in bad faith or with willful misconduct or reckless disregard of his duties or gross negligence or not to have acted in good faith in the reasonable belief that his action was in the best interests of the Trust and further provided, that as to any matter disposed of by a compromise payment by such Trustee, officer, employee or agent, pursuant to a consent decree or otherwise, no indemnification either for said payment or for any other expense shall be provided unless such a compromise shall be approved as in the best interests of the Trust by a majority of the disinterested Trustees or unless the Trust shall have received a written opinion from independent legal counsel to the effect that such Trustee, officer, employee or agent appears to have acted in good faith in the reasonable belief that his action was in the best interests of the Trust. Subject to the proviso clauses, and except for expenses not reasonably incurred, the foregoing sentence is intended to provide for indemnification of Trustees, officers, employees and agents to the fullest extent provided by law. The rights accruing to any Trustee, officer, employee or agent under these provisions shall not exclude any other right to which he may be lawfully entitled; provided, however, that no Trustee, officer, employee or agent may satisfy any right of indemnity or reimbursement granted herein or to which he may be otherwise entitled except out of the Trust Property, and no Shareholder shall be personally liable to any Person with respect to any claim for indemnity or reimbursement or otherwise. The Trustees may make advance payments in connection with indemnification under this Section 5.3, provided that the indemnified Trustee, officer, employee or agent shall have given a written undertaking to reimburse the Trust in the event it is subsequently determined that he is not entitled to such indemnification.

Any action taken in good faith by or conduct engaged in good faith on the part of the Advisor, a Trustee, officer, employee or agent of the Trust in conformity with or in reliance upon any of the provisions of this Declaration of Trust shall not, for the purposes of this Trust, constitute bad faith, willful misconduct, gross negligence or reckless disregard of his duties or failure to act in good faith or in the reasonable belief that his action was in the best interests of the Trust.

Section 5.4 Surety Bonds. No Trustee shall, as such, be obligated to give any bond or surety or other security for the performance of any of his duties.

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Section 5.5 Apparent Authority. No purchaser, lender, transfer agent or other Person dealing with the Trustees or any officer, employee or agent of the Trust shall be bound to make inquiry concerning, or be liable for, the application of money or property paid, loaned or delivered to or on the duly authorized order of the Trustees or of such officer, employee or agent.

Section 5.6 Express Exculpatory Clauses in Instruments. Every note, debenture, bond, obligation, contract, instrument, certificate, Share or undertaking and every other act or thing whatsoever executed in connection with the Trust shall be conclusively presumed to have been executed or done by a Trustee or Trustees or an officer, employee or agent of the Trust only in his or their capacity as Trustee or Trustees under this Declaration of Trust or in the capacity of officer, employee or agent of the Trust. The Trustees shall cause every note, debenture, bond, obligation, contract, instrument, certificate, Share or undertaking made or issued by or on behalf of the Trust to refer to this Declaration of Trust and contain a recital to the effect that the obligations thereunder are not binding on, nor shall resort be had to the private property of, any of the Trustees, their employees or the Shareholders of the Trust individually, but only upon the Trustees as trustees and upon the Trust Property, and may contain any further recital which they may deem appropriate, but the omission of such recital or further recital shall not be construed to evidence an intention to impose personal liability on any of the Trustees, Shareholders, officers, employees or agents of the Trust. The Trustees shall, at all times, maintain insurance for the protection of the Trust Property, its Shareholders, Trustees, officers, employees or agents in such amount as the Trustees shall deem adequate to cover all foreseeable tort liability to the extent available at reasonable rates.

Section 5.7 Reliance on Experts, Etc. Each Trustee and each officer of the Trust shall, in the performance of his duties, be fully and completely justified and protected with regard to any act or any failure to act resulting from reliance in good faith upon the books of account or other records of the Trust, upon an opinion of counsel or upon reports made to the Trust by any of its officers or employees or by the Advisor, accountants, appraisers or other experts or consultants selected with reasonable care by the Trustees or officers of the Trust, regardless of whether such counsel or expert may also be a Trustee.

ARTICLE VI

SHARES OF BENEFICIAL, INTEREST

Section 6.1 Description of Shares. The Trust shall have authority to issue Shares of beneficial interest, having a par value $3.00 per Share, and Shares of preferred stock, having a par value of $1.00 per Share. No Shares shall be issued for a consideration having a value of less than the aggregate par value of such Shares. All Shares duly issued hereunder shall be deemed fully paid, and no assessment shall ever be made upon shareholders except against holders of Shares as to which the entire par value has not been paid in, but only to the extent of such unpaid par value.

The number of Shares of beneficial interest authorized hereunder is unlimited. All Shares of beneficial interest shall have equal non-cumulative voting, distribution, liquidation and

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other rights, and shall have no preference, conversion, exchange, preemptive or redemption rights.

The number of Shares of preferred stock authorized hereunder is 10,000,000. The preferred stock may be issued, from time to time, in one or more series as authorized by the Board of Trustees. Prior to issuance of a series, the Board of Trustees by resolution shall designate that series to distinguish it from other series and classes of stock of the Trust, shall specify the number of shares to be included in the series, and shall fix the terms, rights, restrictions, qualifications of the shares of the series, including any preferences, voting powers, dividend rights and redemption, sinking fund and conversion rights. Subject to the express terms of any other series of Preferred Stock outstanding at the time, the Board of Trustees may increase or decrease the number of shares or alter the designation or classify or reclassify any unissued shares of a particular series of preferred stock by fixing or altering in any or more respects from time to time before issuing the shares any terms, rights, restrictions and qualifications of the Shares.

Upon the filing in the Office of the Secretary of State of the Commonwealth of Massachusetts of the Certificate of Amendment of the Second Amended and Restated Declaration of Trust of this Trust whereby Section 6.1 is amended to read as set forth herein, each three (3) issued and outstanding Shares of beneficial interest, par value $1.00 per share, shall thereby and thereupon be combined into one (1) validly issued, fully paid and nonassessable Share of beneficial interest, par value $3.00 per share. Each person at that time holding of record any issued and outstanding Shares of beneficial interest shall receive upon surrender thereof to the Trust’s authorized agency a stock certificate or certificates to evidence and represent the number of post reverse stock split shares of beneficial interest to which he is entitled after the reverse split; provided, however, that the Trust shall not issue fractional Shares of beneficial interest in connection with the reverse stock split, but in lieu thereof, the Trust shall make a cash payment based on the closing price of the Shares of beneficial interest on the American Stock Exchange on the day after this amendment is filed with the Secretary of State of the Commonwealth of Massachusetts or if there is no trading on that date based on the arithmetical mean between the prevailing bid and asked prices on the American Stock Exchange on that day, to holders thereof who would otherwise be entitled to receive fractional shares except for the provisions hereof upon surrender of certificates representing those shares to the authorized agency. The ownership of such fractional interests shall not entitle the holder thereof to any voting, dividend of other right except the right to receive payment therefore as described above. [The aforementioned stock split occurred on or about August 1986 pursuant to the terms of the Certificate of Amendment of the Second Amended and Restated Declaration of Trust.]

Section 6.2 Shares Represent Beneficial Interest or Preferred Interest. It is the intention of the Trustees to create only the relationship of Trustee and beneficiary between the Trustees and each Shareholder from time to time, and to give each Shareholder only such rights and to impose upon him only such obligations as are conferred or imposed upon him as a beneficiary hereunder. It is not the intention of the Trustees to create a general partnership, limited partnership, joint stock association, corporation, bailment or any form of legal relationship other than a business trust.

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Nothing in this Declaration of Trust or in the certificates of Shares shall be construed to make the holders of said certificates, either by themselves or with the Trustees, partners or members of an association other than a business trust.

Section 6.3 Certificates and Transfer. Every Shareholder shall be entitled to receive a certificate, in such form as the Trustees shall from time to time approve, specifying the number of Shares held by such Shareholder. Except as provided by Sections 6.20 and 6.21, such certificates shall be treated as negotiable and title thereto, and to the Shares represented hereby shall be transferred by delivery thereof to the same extent in all respects as stock certificates, and the Shares represented thereby, of a Massachusetts business corporation. Unless otherwise determined by the Trustees and except as provided in Section 3, 6 hereof, such certificates shall be signed by the President and Secretary, and shall be countersigned by a transfer agent, and registered by a registrar, if any. There shall be filed with each transfer agent and registrar, if any, a copy of the authorized form of certificate, certified by the President and Secretary, and such form shall continue to be used unless and until the Trustees approve some other form. Certificates for Shares shall bear the legend required by Section 6.20.

6.4 Issuance of Shares and Fractional Shares. The Trustees, in their discretion, may from time to time without vote of the Shareholders issue Shares, in addition to the then issued and outstanding Shares and Shares held in the treasury, to such party or parties and, except as required in Section 6.1 hereof, for such payment, property or other consideration, at such time or times, and on such terms as the Trustees may deem best, and may in such manner acquire other assets (including the acquisition of assets subject to and in connection with the assumption of liabilities). In connection with any issuance of Shares, the Trustees may issue fractional Shares or may provide for the issuance of scrip for fractions of Shares and determine the terms of such scrip including, without limiting the generality of the foregoing, the time within which any such scrip must be surrendered for exchange into Shares and the rights, if any, of holders of scrip upon the expiration of the time so fixed, the rights, if any, to receive proportional distributions, and the rights, if any, to redeem scrip for cash, or the Trustees may in their discretion, or if they see fit at the option of each holder, provide in lieu of scrip for the adjustment of fractions in cash. The provisions of Section 6.3 and Section 6.20 hereof relative to certificates for Shares shall apply so far as appropriate to such scrip, except that such scrip may in the discretion of the Trustees be signed by a transfer agent alone notwithstanding that there is then a registrar for the Shares.

Section 6.5 Shareholder Register. A register shall be kept by or on behalf of the Trustees, under the direction of the Trustees, which shall contain the names and addresses of the Shareholders; the number of Shares held by each of them; the number of the certificates representing such Shares; and a record of all transfers thereof. Only Shareholders whose certificates are so recorded shall be entitled to vote, receive dividends or distributions, or otherwise to exercise or enjoy the rights of Shareholders. No Shareholder shall be entitled to receive payment of any dividend or distribution, nor to have notice given to him as herein provided, until he has given his address to a transfer agent or such other officer or agent of the Trustees as shall keep the register for entry thereon.

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Section 6.6 Transfer Agents and Registrars. The Trustees shall have power to employ a transfer agent or transfer agents and registrar or registrars. The transfer agent or transfer agents may keep the register provided for in Section 6.5 hereof and record therein the original issues and transfers, if any, of Shares and countersign certificates of Shares issued to the persons entitled to the same. Any such transfer agent or transfer agents and registrar or registrars shall perform the duties usually performed by transfer agents and registrars of certificates of stock in a corporation, except as modified by the Trustees. In accordance with the usual custom of corporations having a transfer agent, signed certificates for Shares in blank may be deposited with any transfer agent of the Trust, to be used by the transfer agent in accordance with the authority conferred upon it as occasion may require, and in doing so the signers of such certificates shall not be responsible for any loss resulting therefrom.

Section 6.7 Method of Transfer. Shares shall be transferable on the records of the Trust, other than by operation of law, only by the record holder thereof or by his agent thereunto duly authorized in writing, upon delivery to the Trustees or a transfer agent of the Trust of the certificate therefor, properly endorsed or accompanied by a duly executed instrument of transfer, with all transfer taxes affixed, together with such evidence of the genuineness of each such endorsement, execution, and authorization and of other matters as may reasonably be required by the Trust or the transfer agent. Upon such delivery the transfer shall be recorded on the register of the Trust and a new certificate for the Shares so transferred shall be issued to the transferee, and in case of a transfer of only a part of the Shares represented by any certificate, a new certificate for the residue thereof, shall be issued to the transferor. But until such record is made, the Shareholder of record shall be deemed to be the holder of such Shares for all purposes hereof and neither the Trustees nor any transfer agent or registrar nor any officer or agent of the Trust shall be affected by any notice of the proposed transfer. This Section 6.7 is subject in all respects to the provisions of Section 6.20 and 6.21 hereof.

Section 6.8 Transfers by Operation of Law. Any person becoming entitled to any Shares in consequence of the death, bankruptcy or incompetence of any Shareholder, or otherwise by operation of law, shall be recorded as the holder of such Shares and receive a new certificate therefor upon production of the proper evidence thereof and delivery of the existing certificate to the Trustees or a transfer agent of the Trust. But until such record is made, the Shareholder of record shall be deemed to be the holder of such Shares for all purposes hereof and neither the Trustees nor any transfer agent or registrar nor any officer or agent of the Trust shall be affected by any notice of such death, bankruptcy or incompetence, or other event. This Section 6.8 is subject in all respects to the provisions of Sections 6.20 and 6.21 hereof.

Section 6.9 Form of Ownership of Shares. The Trustee may treat two or more Persons holding any Shares as joint tenants of the entire interest unless their ownership is expressly otherwise recorded on the register of the Trust provided for in Section 6.5 hereof, but no entry shall be made in the register or in any certificates that any person is in any other manner entitled to any future. limited, or contingent interest in any Shares; provided, however, that any Person recorded as a holder of any Shares may, subject to the

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provisions hereinafter contained, be described in the register provided for in Section 6.5 hereof or in any certificate as a fiduciary of any kind and any customary words may be added to the description of the holder to identify the nature of such fiduciary relationship.

Section 6.10 Limitation of Trustees’ Duty to Inquire. The Trustees shall not, nor shall the Shareholders, or any officer, transfer agent or other agent of the Trust or of the Trustees, be bound to see to the execution of any trust, express, implied or constructive, or of any charge, pledge or equity to which any of the Shares or any interest therein are subject or to ascertain or inquire whether any sale or transfer of any such Shares or interests therein by any such Shareholder or his personal representatives is authorized by such trust, charge, pledge or equity, or to recognize any person as having any interest therein except for the Persons recorded as such Shareholders. The receipt of the Person in whose name any Share is recorded, or, if such Share is recorded in the names of more than one Person, the receipt of any one of such Persons, or, the receipt of the duly authorized agent of any such Person shall be a sufficient discharge for all dividends and other money and for all shares, notes, debentures, bonds, obligations, scrip, and other property payable. issuable or deliverable in respect of any such Share and from all liability to see to the proper application thereof.

Section 6.11 Replacement of Lost Certificates. If any certificate representing Securities of the Trust shall be lost, stolen, destroyed or mutilated, the Trustees, upon submission of evidence satisfactory to them of such fact, may issue a new certificate representing such Securities and in that connection may require a bond of indemnity satisfactory to them.

Section 6.12 Dividends, Distributions and Retained Earnings. Subject to the rights of the holders of shares of preferred stock the Trustees may from time to time declare and pay to the holders of shares of beneficial interest, in proportion to their respective ownership of shares of beneficial interest, out of the earnings, profits, surplus, capital or assets in the hands of the Trustees, such dividends or other distributions as they see fit. The declaration and payment of such dividends or other distributions and the determination of earnings, profits, surplus and capital available for dividends and other purposes shall lie wholly in the discretion of the Trustees and no Shareholder shall be paid any dividend or receive any distribution, except as determined by the Trustees in the exercise of said discretion. In the event the Trust is being operated as a “real estate investment trust” as described in the REIT Provisions of the Internal Revenue Code, the Trustees shall endeavor from time to time to declare and pay such dividends and distributions as shall be necessary for the Trust to qualify for the tax benefits accorded a real estate investment trust under the REIT Provisions of the Internal Revenue Code. The Trustees may, in addition, from time to time in their discretion, declare and pay as dividends or other distributions such additional amounts, whether or not out of earnings, profits or surplus available therefor, sufficient to enable the Trust to avoid or reduce its liability for Federal income taxes, inasmuch as the computations of net income and gains for Federal income tax purposes may vary from the computations thereof on the books of the Trust. Any or all such dividends or other distributions may be made, in whole or in part, in cash, property or other assets of the Trust, or in senior or subordinated secured or unsecured evidences of indebtedness of the Trust, as the Trustees may in their sole discretion from time to time determine. The Trustees may also distribute to the Shareholders, in proportion to their respective

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ownership of Shares, additional Shares in such manner and on such terms as they may deem proper. The Trustees, except as otherwise required by this Section 6.12, may always retain from the net profits such amounts as they may deem necessary to pay the debts and expenses of the Trust, to meet obligations of the Trust, to establish reserves, or as they may deem desirable to use in the conduct of its affairs or to retain for future requirements or extensions of the business.

Section 6.13 Statement of Source of Distributed Funds. On an annual basis, the Trustees shall furnish Shareholders with a statement in writing, for tax purposes, advising as to the source of any funds distributed to Shareholders so that distributions of ordinary income, return of capital and capital gains income will be clearly distinguished. Such statements shall be forwarded to Shareholders no later than March 31 in each year.

Section 6.14 Shareholders Notices. Any and all notices to which any Shareholder hereunder may be entitled and any and all communications shall be deemed duly served or given if mailed, postage prepaid, addressed to any Shareholder of record at his last known address as recorded on the register provided for in Section 6.5 hereof.

Section 6.15 Purchase of Trust Shares. The Trustees may, on behalf of the Trust, purchase or otherwise acquire outstanding Shares in the Trust from time to time for such consideration and on such terms as they may deem proper. Shares so purchased or acquired by the Trustees on behalf of the Trust shall not, so long as they belong to the Trust, receive dividends or distributions, or be entitled to any voting rights or be deemed outstanding for any purpose hereunder. Such Shares may in the discretion of the Trustees be cancelled and the number of Shares issued thereby reduced, or such Shares may in the discretion of the Trustees be held in the treasury and may be disposed of by the Trustees at such time or times, to such party or parties and for such consideration as the Trustees may determine. Shares cancelled pursuant to this Section 6.15 are restored to the status of authorized but unissued shares.

Section 6.16 Trustees May Purchase or Sell Shares. The Trustees, or any of them, may in their individual capacity purchase and otherwise acquire or sell and otherwise dispose of Shares or other Securities of the Trust and in so doing shall be subject to the same limitations as a director of a Massachusetts corporation.

Section 6.17 Information from Holders of Securities of the Trust. In the event the Trust is being operated as a “real estate investment trust” as described in the REIT Provision of the Internal Revenue Code, holders of Securities of the Trust shall upon demand disclose to the Trustees in writing such information regarding actual and constructive ownership of Securities of the Trust as the Trustees deem reasonably necessary to comply with the REIT Provisions of the Internal Revenue Code or the provisions of any other applicable law.

Section 6.18 Warrants. The Trustees, in their discretion, may from time to time without vote of the Shareholders issue warrants to purchase Shares which shall entitle the holders thereof to subscribe to Shares and/or fractional Shares or scrip at such time or times and on such terms as the Trustees may prescribe including, without limiting the generality of

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the foregoing, the times within which any such warrants must be exercised, any provision for redemption of warrants by the Trust and the consideration to be paid for such Shares. Warrants may be issued to such parties and for such consideration as the Trustees may from time to time determine (including the issuance of detachable or nondetachable warrants as an inducement to persons acquiring or underwriting any Securities of the Trust). The provisions of Section 3.6 hereof relative to certificates for Shares shall apply so far as appropriate to such warrants, except that such warrants may, in the discretion of the Trustees, be signed by the transfer agent or warrant agent only.

Notwithstanding the foregoing, no warrant, option or other similar right to buy Securities of the Trust may be issued at an exercise price less than the fair market value of such Securities at the time of the issuance thereof except as part of a public offering or of a ratable issue to the holders of a class of Securities of the Trust.

Section 6.19 No Pre-emptive Rights. Shareholders shall have no pre-emptive rights with respect to any Shares, warrants, evidences of indebtedness (convertible or otherwise) or other Securities of the Trust sold, offered or issued at any time and no offering of any securities of the Trust need to be made to Shareholders or any of them.

Section 6.20 Redemption and Stop Transfers for Tax Purposes. In the event the Trust is being operated as a “real estate investment trust”‘ as described in the REIT Provisions of the Internal Revenue Code and if the Trustees shall at any time and in good faith be of the opinion that direct or indirect ownership of Equity Securities of the Trust has or may become concentrated to an extent which is contrary to the requirements of the REIT Provisions of the Internal Revenue Code, the Trustees shall have the power, in their sole discretion, to refuse to sell, transfer or deliver Shares to any person, corporation, partnership, trust or any other legal entity, or to call for redemption from the person or entity whose most recent acquisition or purchase of Shares resulted in a concentration of Shares which is believed to be contrary to the REIT Provisions of the Internal Revenue Code, a number of Shares held by such person or entity sufficient in the opinion of the Trustees to bring the direct or indirect ownership of Shares of the Trust into conformity with the requirements of the REIT Provisions of the Code. The redemption price shall be equal to the fair market value of the Shares as reflected in the closing bid price for the Shares on the American Stock Exchange as of the date fixed for redemption. From and after the date fixed for redemption by the Trustees, the holder of any Shares so called for redemption shall cease to be entitled to dividends, voting rights and other benefits with respect to such Shares, except only the right to payment of the redemption price fixed as aforesaid.

Each certificate evidencing Equity Securities shall contain a legend imprinted thereon to the following effect, or such other legends as the Trustees may from time to time adopt:

Provisions Relating to Redemption and Prohibition of Transfer

If necessary to effect compliance by the Trust with certain requirements of the Internal Revenue Code, the Securities represented by this Certificate are subject to redemption by the Trustees of the Trust and the transfer thereof may be prohibited upon

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the terms and conditions set forth in the Declaration of Trust. The Trust will furnish a copy of such terms and conditions to the registered holder of this Certificate upon request and without charge.

Section 6.21 Issuance of Units. Notwithstanding any other provision of this Declaration of Trust, the Trustees may issue from time to time units consisting of different Securities of the Trust. Any Security issued in any such unit shall have the same characteristics and shall entitle the registered holder thereof to the same rights as any identical Securities issued by the Trustees, except that the Trustees may provide (and may cause a notation to be placed on the certificate representing such unit or Securities of the Trust issued in any such unit) that for a specified period not to exceed one year after issuance, Securities of the Trust issued in any such unit may be transferred upon the books of Trust only in such unit.

ARTICLE VII

RIGHTS OF SHAREHOLDERS

Section 7.1 Limits of Shareholder Interest. The ownership of the Trust Property of every description and the right to conduct any business hereinbefore described are vested exclusively in the Trustees, and the Shareholders shall have no interest therein other than the interest conferred by their Shares, and they shall have no right to call for any partition or division of any property, profits, rights or interests of the Trust nor can they be called upon to share or assume any losses of the Trust or suffer an assessment of any kind by virtue of their ownership of Shares. The Shares shall be personal property giving only the rights in this Declaration of Trust and in the certificates for Shares specifically set forth. Notwithstanding any other provisions hereof, all real estate at any time forming part of the Trust Property shall be held upon trust subject to sale and conversion into personal estate at such time or times and in such manner and upon such terms as the Trustees shall approve, but the Trustees shall have power, until the termination of this Trust, to postpone such conversion so long as they in their uncontrolled discretion shall think fit, and for the purpose of determining the nature of the interest of the Shareholders therein, all such real estate shall at all times be considered as personal estate; and the real estate and personal property comprising the trust estate shall constitute a single fund.

Section 7.2 Death of Shareholder. The death of a Shareholder during the continuance of this Trust shall not terminate the Trust nor give his legal representatives a right to an accounting or to take any action in the courts or otherwise against other Shareholders or the Trustees or the property held hereunder, but shall simply entitle the legal representatives of the deceased Shareholder to demand and receive, pursuant to Section 6.8 hereof, a new certificate for Shares in place and upon surrender of the certificate held by the deceased Shareholder, and upon the acceptance of such new certificate such legal representatives shall succeed to all the rights of the deceased Shareholder under this Trust.

Section 7.3 Meetings of Shareholders.

(a) Annual Meetings. Annual meetings of the Shareholders shall be held on such date at such place within or without the Commonwealth of Massachusetts on such day and at such time as the Trustees shall designate. The business transacted at such meeting shall include the election of Trustees and may include the transaction of such other business as Shareholders may be entitled to vote upon as hereinafter provided in this Article or as the Trustees may determine. The holders of

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a majority of outstanding Shares entitled to vote present in person or by proxy shall constitute a quorum at any annual or special meeting. Failure to hold the Annual Meeting shall not work forfeiture or affect the existence of the Trust, nor shall such failure affect valid acts of the Trust. The first Annual Meeting of Shareholders shall be held within six months after the end of the first full fiscal year of the Trust. In the event that an Annual Meeting is not held in a year as above provided in this Section 7.3, a Special Meeting of Shareholders may be held in lieu thereof with all the force and effect of an Annual Meeting.

(b) Special Meetings. Special meetings of the Shareholders may be called at any time by the President or a majority of the Trustees and shall be called by the Secretary of the Trust upon written request of Shareholders holding in the aggregate not less than 20% of the outstanding Shares having voting rights, such request specifying the purpose or purposes for which such meeting is to be called. Any such meeting shall be held within or without the Commonwealth of Massachusetts on such day and at such time as the Trustees shall designate. In case none of the officers is able and willing to call a special meeting, Shareholders holding in the aggregate not less than 20% of the outstanding Shares having voting rights may bring an action in the appropriate court in the Commonwealth of Massachusetts to authorize one or more of such Shareholders to call a meeting by giving such notice as is required by law.

(c) Shareholder Action by Written Consent. Any action required herein to be taken by Shareholders at a meeting may be taken without a meeting if a majority of the Shareholders entitled to vote on the matter (or such larger portion thereof as shall be required by any express provision of this Declaration of Trust) consent to the action in writing and the written consents are filed with the records of the meeting of Shareholders. Such consent shall be treated for all purposes as a vote taken at a meeting of Shareholders.

Section 7.4 Notice of Meetings. Notice of all meetings of the Shareholders stating the time, place and purpose of such meeting shall be mailed or delivered by a Trustee or Trustees or an officer or agent of the Trust to each Shareholder at his registered address at least ten (10) days and not more than sixty (60) days before the meeting. No business shall be transacted at any Special Meeting of Shareholders unless notice of such business has been given in the notice of the meeting. An adjourned meeting may be held as adjourned without further notice.

Section 7.5 Majority for Quorum. The presence in person or by proxy of the holders of a majority of the Shares issued, outstanding and entitled to vote, shall be necessary to constitute a quorum at all Shareholders’ meetings for the transaction of business. If a quorum shall not be present, a majority of the Shareholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn from time to time the meeting until a quorum shall be present or represented. At any adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified.

Section 7.6 Voting Rights of Shareholders. At all meetings of Shareholders each holder of Beneficial Shares shall be entitled to cast one vote for each Share of beneficial interest owned upon each Matter presented for vote. At all meetings of Shareholders each share of Preferred Stock shall have such vote, if any, as shall be determined by the Board of Trustees in accordance with Section 6.1 hereof. The Shareholders shall be entitled to vote only upon the following matters: (a) election of Trustees as provided in Section 2.2 hereof; (b) removal and election of Trustees as provided in Sections 2.3 hereof; (c) amendment of this Declaration of Trust or termination of this Trust as provided in Section 8.1 hereof; (d) any merger or consolidation of the Trust or the sale, lease or exchange of all or substantially all of the property and assets of the Trust, including its good will, as provided in Section 8.2; (e) termination as provided in

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Section 3.26 hereof of any agreement entered into pursuant thereto; and (f) to the same extent as the shareholders of a Massachusetts business corporation, on the question of whether or not a court action, proceeding or claim should be brought or maintained derivatively or as a class action on behalf of the Trust or its Shareholders. Except as otherwise expressly provided herein, each such matter shall require the affirmative vote of the holders of not less than a majority of the Shares then outstanding and entitled to vote. Except with respect to the foregoing matters specified in this Section 7.6 which the specified Shareholders’ vote shall determine the Trustees’ action, no action taken by the Shareholders at any meeting shall in any way bind the Trustees.

Section 7.7 Record Date for Meetings. For the purpose of determining the Shareholders who are entitled to vote or act at any meeting or any adjournment thereof, or who are entitled to participate in any dividend or distribution, or for the purpose of any other action, the Trustees may from time to time close the transfer books for such period, not exceeding 30 days, as the Trustees may determine; or without closing the transfer books the Trustees may fix a date not more than 60 days prior to the date of any meeting of Shareholders or dividend payment or other action as a record date for the determination of Shareholders entitled to vote at such meeting or any adjournment thereof or to receive such dividend or to be treated as Shareholders of record for purposes of such other action, and any Shareholder who was a Shareholder at the time so fixed shall be entitled to vote at such meeting or any adjournment thereof or to receive such dividend, even though he has since that date disposed of his Shares, and no Shareholder becoming such after that date shall be so entitled to vote at such meeting or any adjournment thereof or to receive such dividend or to be treated as a Shareholder of record for purposes of such other action.

Section 7.8 Proxies. At any meeting of the Shareholders, any Shareholder entitled to vote therefore may vote by proxy, provided, however that no proxy shall be voted at any meeting unless it shall have been filed with the Secretary of the Trust before the time set for the commencement of the meeting, or at such time prior to the commencement of the meeting as may be fixed by the By-Laws of the Trust as the Secretary may direct. Neither fractional Shares nor scrip shall be entitled to any vote. When any full Share is held jointly by several persons, any one of them may vote at any meeting in person or by proxy in respect of such Share, but if more than one of them shall be present at such meeting in person or by proxy in respect of such Share, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Share. If the holder of any such Share is a minor or a person of unsound mind and subject to guardianship or to the legal control of any other person as regards the charge or management of such Share, he may vote by his guardian or such other person appointed or having such control, and such vote may be given in person or by proxy. A proxy purporting to be executed by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest upon the challenger.

Section 7.9 Reports. The Trustees shall cause to be prepared at least annually a report of operations containing a balance sheet and statement of income and undistributed income of the Trust prepared in conformity with generally accepted accounting principles and an opinion of an independent certified public accountant or independent public accountant on the financial statements based on an examination of the books and records of the Trust, and made in accordance with generally accepted auditing standards. A signed copy of such report and opinion shall be filed with the Trustees within 90 days after the close of the period covered thereby, and with any state securities or “Blue Sky” administrator or other similar authority who requests that such report be filed. Copies of such reports shall be mailed to all Shareholders of record within 120 days of the period covered by the report, and in any event within a reasonable period preceding the annual meeting of Shareholders. The Trustees shall, in addition, furnish to the Shareholders, promptly after the end of each of the first three quarterly periods of every fiscal year, an interim report

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containing an unaudited balance sheet of the Trust as at the end of such quarterly period and a statement of income and surplus for the period from the beginning of the current fiscal year to the end of such quarterly period. The Trustees shall also file with any state securities or “Blue Sky” administrator or similar authority who requests it, a copy of said interim report.

Section 7.10 Inspection of Records. The records of the Trust shall be open to inspection by Shareholders to the same extent as is permitted shareholders of a Massachusetts business corporation. Any federal or state securities or “Blue Sky” administrator or other similar authority shall have the right, at reasonable times during business hours and for proper purposes, to inspect the books of account of the Trust and the records of the meetings of Shareholders and Trustees.

ARTICLE VIII

AMENDMENT OR TERMINATION OF TRUST

Section 8.1 Amendment or Termination. The provisions of this Declaration of Trust may be amended or altered (except as to the limitations of personal liability of the Shareholders and Trustees, the requirement of an exculpatory recital contained in Section 5.6 hereof and the prohibition of assessments upon Shareholders), or the Trust may be terminated at any meeting of Shareholders called for the purpose, by the affirmative vote of the holders of not less than a majority of the Shares then outstanding and entitled to vote, or by an instrument or instruments in writing, without a meeting, signed by a majority of the Trustees and the holders of not less than a majority of the Trustees and the holders of not less than a majority of such Shares; provided, however, that, with the advice of counsel, the Trustees may, from time to time by a two-thirds vote of the Trustees, amend or alter the provisions of this Declaration of Trust (except as to the limitations of personal liability of the Shareholders and Trustees, the requirement of an exculpatory recital contained in Section 5.6 hereof and the prohibition of assessments upon Shareholders), without the vote or assent of the Shareholders, in the event the Trust is being operated as a “real estate investment” as described in the REIT Provisions of the Internal Revenue Code, to the extent deemed by the Trustees in good faith to be necessary to meet the requirements for qualification as a real estate investment trust under the REIT Provisions of the Internal Revenue Code or any interpretation thereof by a Court or other governmental agency of competent jurisdiction. Notwithstanding the foregoing, no amendment may be made pursuant to this Section 8.1 which would change any rights with respect to any outstanding shares of the Trust by reducing the amount payable thereon upon liquidation of the Trust or by diminishing or eliminating any voting rights pertaining thereto, except with the vote or written consent of the holders of two-thirds of the outstanding Shares entitled to vote thereon. Notice of any amendment to the Trust effected otherwise than by Shareholder vote shall be given to all Shareholders within 15 days after the date such amendment becomes effective.

At the next meeting of Shareholders after the Trustees shall have notified the Shareholders that an amendment to the Declaration of Trust has been effected otherwise than by Shareholder vote, there shall be submitted to the Shareholders for their approval or disapproval by the affirmative vote of the holders of not less than a majority of the Shares then outstanding and entitled to vote the question as to whether such amendment should be rescinded.

Upon the termination of the Trust pursuant to this Section 8.1:

(a) The Trust shall carry on no business except for the purpose of winding up its affairs.

(b) The Trustees shall proceed to wind up the affairs of the Trust and all of the powers of the

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Trustees under this Declaration of Trust shall continue until the affairs of the Trust shall have been wound up, including the power to fulfill or discharge the contracts of the Trust, collect its assets, sell, convey, assign, exchange, transfer or otherwise dispose of all or any part of the remaining Trust Property to one or more persons at public or private sale for consideration which may consist in whole or in part of cash, securities or other property of any kind, discharge or pay its liabilities, and do all other acts appropriate to liquidate its business; provided, however that any sale, conveyance, assignment, exchange, transfer or other disposition of all or substantially all of the Trust Property shall require approval of the principal terms of the transaction and the nature and amount of the consideration by affirmative vote of not less than a majority of all outstanding Shares entitled to vote.

(c) After paying or adequately providing for the payment of all liabilities, and upon receipt of such releases, indemnities and refunding agreements as they deem necessary for their protection, the Trustees may distribute the remaining Trust Property, in cash or in kind or partly each, among the Shareholders according to their respective rights.

Upon termination of the Trust as provided in this Section 8.1, a majority of the Trustees shall execute and lodge among the records of the Trust and with the Secretary of the Commonwealth of Massachusetts an instrument in writing setting forth the fact of such termination, and the Trustees shall thereupon be discharged from all further liabilities and duties hereunder, and the right, title and interest of all Shareholders shall cease and be cancelled and discharged.

Section 8.2 Power to Effect Reorganization. The Trustees, after receiving an affirmative vote of not less than a majority of the Shares then outstanding and entitled to vote may select or direct the organization of a corporation, association, trust or other organization with which the Trust may merge, or which shall take over the Trust property and carry on the affairs of the Trust. The Trustees may effect such merger or may sell, convey and transfer the Trust Property to any such corporation, association, trust or organization in exchange for shares or securities thereof, or beneficial interest therein with the assumption by such transferee of the liabilities of the Trust; and thereupon the Trustees shall terminate the Trust and deliver such shares, securities or beneficial interest ratably among the Shareholders of this Trust in redemption of their Shares.

Section 8.3 Compliance with Internal Revenue Code. (a) In the event the Trust is being operated as a “real estate investment trust” as described in the REIT Provisions of the Internal Revenue Code, the provisions of this Declaration of Trust giving the Shareholders the right to elect Trustees and the right to amend and terminate the Trust shall be subject to the requirements of the Internal Revenue Code. If any provision granting or limiting such Shareholders’ rights shall conflict with the requirements of Sections 856, 857 or 858 of the Internal Revenue Code, such provision shall be deemed to be void and without any force or effect ab initio, but any action taken pursuant to any such provision shall have been validly taken upon the vote of the Trustees required hereunder. In the event that the provision relating to the election of Trustees by the Shareholders of the Trust shall be deemed to be without force or effect, the Trustees then in office shall be deemed to be the acting Trustees until such time as the successor Trustees have been named and accepted their appointments. At the next meeting of Shareholders after the Trustees shall have notified the Shareholders that any or all of the Shareholders’ rights hereunder created such a conflict and, therefore, are without force and effect, there shall be submitted to the Shareholders for their approval or disapproval by the affirmative vote of the holders of not less than a majority of the Shares then outstanding and entitled to vote the question as to whether such Shareholders’ right or rights should be restored. If the Shareholders vote to restore such right or rights, the Trustees, without the necessity of further Shareholder action, shall promptly take all action necessary to effect any amendments to the Declaration of Trust necessary to restore such right or rights.

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(b) If any provisions of this Declaration of Trust shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach only to such provision in such jurisdiction and shall not in any manner affect or render invalid or unenforceable such provision in any other jurisdiction or any other provision of this Declaration of Trust in any jurisdiction.

Section 8.4 Trustees May Terminate Prior to Effective Date. Notwithstanding any other provision hereof, until such time as a Registration Statement under the Securities Act of 1933, as amended, covering the first public offering of Securities of the Trust shall have become effective, this Declaration of Trust may be terminated or amended in any respect by the affirmative vote of a majority of the Trustees or by an instrument signed by a majority of the Trustees.

ARTICLE IX

MISCELLANEOUS

Section 9.1 Recording. This Declaration of Trust is executed by the Trustees and is delivered in the Commonwealth of Massachusetts and with reference to the laws thereof, and the rights of all parties and the construction and effect of every provision hereof shall be subject to and construed according to the laws of said Commonwealth. As soon as reasonably practicable after its execution, this Declaration of Trust and any amendment hereto shall be filed with the Secretary of the Commonwealth of Massachusetts and shall be recorded with the Clerk of the City of Boston, Massachusetts, and in all other offices in which such recording may be required from time to time by the laws of the Commonwealth of Massachusetts to qualify the Trust as a Business Trust under the provisions of Chapter 182 of the Massachusetts General Laws, and in the office of the county recorder of any county where land and/or improvements thereon owned by the Trust are located. The Trustees shall also cause to be filed with the Secretary of the Commonwealth appropriate instruments disclosing changes in the persons who are Trustees of the Trust, but such filing shall not be deemed a condition to the effectiveness of, and the failure to so file shall not be deemed to invalidate, any election or appointment of any person as a Trustee or the resignation or removal of a Trustee.

Each amendment filed to this Declaration of Trust shall be accompanied by a certificate signed and acknowledged by a Trustee stating that such action was duly taken in a manner provided herein; and unless such amendment or such certificate filed with the Secretary of the Commonwealth of Massachusetts sets forth some earlier or later time for the effectiveness of such amendment, such amendment shall be effective upon its filing with the Secretary of said Commonwealth. A restated Declaration, containing the original Declaration and all amendments theretofore made, may be executed any time or from time to time by a majority of the Trustees and shall, upon filing with the Secretary of the Commonwealth of Massachusetts, be conclusive-evidence of all amendments contained therein and may thereafter be referred to in lieu of the original Declaration and the various amendments thereto.

Section 9.2 Counterparts. This Declaration of Trust and any amendment hereof may be simultaneously executed in several counterparts, each of which so executed shall be deemed to be an original, and such counterparts together shall constitute one and the same instrument, which shall be sufficiently evidenced by any such counterpart.

Section 9.3 Reliance by Third Parties. Any certificate executed by a person who, according to the records of the Trust or according to the records of the Secretary of the Commonwealth of Massachusetts, appears to be a Trustee hereunder, certifying to: (a) the number or identity of

37

Trustees or Shareholders, (b) the due authorization of the execution of any instrument or writing or the due authorization of any action taken or to be taken by any Trustee, officer, agent or employee of the Trust, (c) the form of any vote passed at a meeting of Trustees or Shareholders, (d) the fact that the number of Trustees or Shareholders present at any meeting or executing any written instrument satisfies the requirements of this Declaration of Trust, (e) the form of any By-Law adopted by or the identity of any officers elected by the Trustees, or (f) the existence of any fact or facts which in any manner relate to the affairs of the Trust, shall be conclusive evidence as to the matters so certified in favor of any person dealing with the Trustees or any of them and the successors of such person.

Section 9.4 Governing Law. This Declaration of Trust is executed by the Trustees and delivered in the Commonwealth of Massachusetts and with reference to the laws thereof, and the rights of all parties and the validity, construction and effect of every provision hereof shall be subject to and construed according to the laws of said Commonwealth.

Section 9.5 Construction of Trust Instrument. In the construction of this Declaration of Trust, whether or not so expressed, words used in the singular or in the plural respectively include both the plural and singular, words denoting males include females and words denoting persons include individuals, firms, associations, companies (joint stock or otherwise), trusts and corporations, unless a contrary intention is to be inferred from or required by the subject matter or context. The cover, title, headings of different parts hereof, the table of contents, the index of definitions and the marginal notes, if any, are inserted only for convenience of reference and are not to be taken to be any part hereof or to control or affect the meaning, construction, interpretation or effect hereof.

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ARTICLE X

DURATION OF TRUST

Section 10.1 Duration. Subject to possible termination in accordance with the provisions of Article VIII hereof, the Trust created hereby shall continue until the expiration of 20 years after the death of the last survivor of the initial Trustees named herein and the following named persons:

Name	Birthday	Parents’ Name	Address
Kory Lewis Berg	May 5, 1960	Kenneth & Mildred E. Berg	8 Fairway Drive Edison, New Jersey 08817
Robert Eric Berg	Dec. 9, 1962	Kenneth & Mildred E. Berg	8 Fairway Drive Edison, New Jersey 08817
Lee Steven Berg	January 6, 1958	Leonard & Thelma G. Berg	6 Moraine Road Edison, New Jersey 08817
Lon Thomas Berg	Nov. 9, 1960	Leonard & Thelma G. Berg	6 Moraine Road Edison, New Jersey 08817
Lori Marlane Berg	Aug. 21, 1965	Leonard & Thelma G. Berg	6 Moraine Road Edison, New Jersey 08817
Linda Louise Berg	Aug. 21, 1965	Leonard & Thelma G. Berg	6 Moraine Road Edison, New Jersey 08817
Jeffrey Michael Beck	Dec. 24, 1953	Felix M. & Doris Beck	70 Springbrook Road Livingston, New Jersey 07039
Bruce David Beck	Sept. 18, 1956	Felix M. & Doris Beck	70 Springbrook Road Livingston, New Jersey
Steven Paul Beck	Oct. 21, 1960	Felix M. & Doris Beck	70 Springbrook Road Livingston, New Jersey 07039
Tracey Jill Watson	July 26, 1958	Robert E. & Ann Watson	290 N. Wyoming Avenue, South Orange, New Jersey
Todd David Watson	March 1, 1962	Robert E. & Ann Watson	290 N. Wyoming Avenue, South Orange, New Jersey
Elizabeth Marmora	April 28, 1964	Joseph J. & Virginia Marmora	907 Darlene Avenue Wanamassa, New Jersey
Paul Marmora	Mar. 23, 1966	Joseph J. & Virginia Marmora	907 Darlene Avenue Wanarnassa, New Jersey
Jeffery Keith Weiner	Mar.16, 1961	David & Eileen Weiner	10 Fairview Drive Middletown, New Jersey
Joanna Beth Weiner	Aug.19, 1967	David & Eileen Weiner	10 Fairview Drive Middletown, New Jersey
Erik Helistrom Freund	Jan. 8, 1966	James C. & Barbra Freund	277 West End Avenue New York, New York 10023

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Name	Birthday	Parents’ Name	Address
Thomas Hagstrom Freund	Aug. 28, 1968	James C. & Barbra Freund	277 West End Avenue New York, New York 10023
Daniel Phillip Weiner	March 7, 1956	Samuel & Eva Weiner	2 River Lane Westport, Conn. 06880
David Michel Weiner	Jan. 4, 1958	Samuel & Eva Weiner	2 River Lane Westport, Conn. 06880
Sara Michelle Weiner	Feb. 18, 1960	Samuel & Eva Weiner	2 River Lane Westport, Conn. 06880
Louis Howard Kozloff	Jan. 13, 1971	David M. & Jeraldine D. Kozloff	1507 Garfield Ave. Wyoming, Penna. 19610

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EX-5.1

EXHIBIT 5.1

RICH MAY

A PROFESSIONAL CORPORATION

176 FEDERAL STREET

BOSTON, MASSACHUSETTS 02110-2223

TELEPHONE (617) 482-1360

FAX (617) 556-3889

October 18, 2005

BRT Realty Trust

60 Cutter Mill Road

Great Neck, NY 11021

Ladies and Gentlemen:

In our capacity as special Massachusetts counsel to BRT Realty Trust, a Massachusetts business trust (the “Company”), we have been requested to furnish this opinion in connection with the Company’s Registration Statement on Form S-3 as originally filed with the U.S Securities and Exchange Commission on September 21, 2005, File No. 333-128458 (the “Registration Statement”) pursuant to the Securities Act of 1933, as amended (the “Securities Act”), relating to (i) an indeterminate amount of the Company’s Shares of beneficial interest, par value $3.00 per share, (ii) an indeterminate amount of the Company’s Shares of Preferred Stock, par value $1.00 per share, and (iii) an indeterminate amount of warrants to purchase the Company’s Shares of beneficial interest or the Company’s Shares of Preferred Stock, with an aggregate public offering price of up to $100,000,000 (collectively, the “Securities”). The Registration Statement provides that the Securities may be offered in amounts, at prices and on terms to be set forth in one or more prospectus supplements (each a “Prospectus Supplement”) to the Prospectus contained in the Registration Statement.

In furnishing this opinion, we have examined the Company’s Third Amended and Restated Declaration of Trust, as certified by the Secretary of the Commonwealth of Massachusetts, the Company’s By-Laws, and originals or copies, certified or otherwise, of such other documents and corporate and public records as we deem necessary as a basis for the opinion hereafter expressed. With respect to such examination, we have assumed the genuineness of all signatures appearing on all documents presented to us as originals or copies, and the conformity to the originals of all documents presented to us as conformed or reproduced copies. Where factual matters relevant to such opinion were not independently established, we have relied upon certificates of appropriate state and local officials, and upon certificates of executive officers and employees and agents of the Company.

Based upon and subject to the foregoing, we are of the opinion that:

1. The Company is duly organized and existing under the laws of the Commonwealth of Massachusetts.

2. When specifically and properly authorized for issuance by the Company’s Trustees (the “Trustees’ Authorization”) and when issued as described in the Registration Statement and a Prospectus Supplement that is consistent with the Trustees’ Authorization, and upon receipt by the Company of the consideration provided for in the Trustees’ Authorization (which consideration per Share is not less than the par value per Share), the Securities covered by the Registration Statement will be legally issued, fully paid and nonassessable.

The foregoing assumes that all requisite steps will be taken to comply with the requirements of the Securities Act and applicable requirements of state laws regulating the offer and sale of securities.

We hereby consent to being named as counsel to the Company in the Registration Statement, to the reference therein to our firm under the caption “Legal Matters” and to the inclusion of this opinion as an exhibit to the Registration Statement. In giving this consent, we do not thereby concede that we come within the categories of persons whose consent is required by the Securities Act or the General Rules and Regulations promulgated thereunder.

Very truly yours,

/s/ Rich May, a Professional Corporation

Rich May, a Professional Corporation

Page 2

EX-8.1

Exhibit 8.1

McCarter & English, LLP

Four Gateway Center

100 Mulberry Street

Newark, NJ 07102-4056

Tel.: 973.622.4444

October 18, 2005

BRT Realty Trust

60 Cutter Mill Road

Great Neck, NY 11021

Ladies and Gentlemen:

This opinion is furnished in connection with the registration on Form S-3 (Registration No. 333-128458) (the “Registration Statement”) pursuant to the Securities Act of 1933, as amended, of the public offering and sale from time to time in one or more offerings of up to an aggregate public offering price of $100,000,000 of (a) shares of beneficial interest, par value $3.00 per share, (b) shares of preferred stock, par value $1.00 per share, and (c) warrants to purchase shares of beneficial interest and shares of preferred stock of BRT Realty Trust (the “Company”). This opinion relates solely to the Company’s qualification for federal income tax purposes as a real estate investment trust within the meaning of Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”).

For purposes of delivering this opinion, we have examined the Third Amended and Restated Declaration of Trust of the Company (the “Declaration of Trust”), the Registration Statement and such other records, certificates and documents as we have deemed necessary or appropriate for purposes of rendering the opinion set forth herein. We have relied upon the representations of certain duly appointed officers of the Company contained in a certificate dated as of this date (the “Officers’ Certificate”) regarding various factual matters, including the manner in which the Company has been and will continue to be operated. We have assumed that each representation in the Officers’ Certificate is and will be true, correct and complete and that all representations that (a) address future matters or conditions, (b) address the intentions of, or (c) are given to the best of the belief and/or knowledge of any person(s) or party(ies) are and will be true, correct and complete at all relevant times as if made without such qualification. We assume that the Company will be operated in accordance with all applicable laws and the terms and conditions of the Declaration of Trust and all other applicable documents. In addition, we have relied upon certain additional facts and assumptions described below.

BRT Realty Trust

October 18, 2005

Page 2

In rendering the opinion set forth herein, we have assumed (i) the genuineness of all signatures on documents we have examined, (ii) the authenticity of all documents submitted to us as originals, (iii) the conformity to the original documents of all documents submitted to us as copies, (iv) the conformity of final documents to all documents submitted to us as drafts, (v) the authority and capacity of the individual or individuals who executed any such documents on behalf of any person, (vi) the accuracy and completeness of all records made available to us, and (vii) the factual accuracy of all representations, warranties and other statements made in the Registration Statement. In addition, we have assumed that for the remainder of 2005 and in subsequent taxable years, the Company will operate in a manner that will make the representations contained in the Officers’ Certificate true for all such years, and that the Company will not make any amendments to its organizational documents (or to those of its incorporated and/or unincorporated subsidiaries) after the date of this opinion that would affect the Company’s qualification as a real estate investment trust for federal tax purposes in any taxable year.

The opinion set forth below is based upon the documents, facts, representations and assumptions referred to herein. Any material amendments to such documents, changes in any significant facts or inaccuracy of such representations or assumptions could adversely affect the opinion set forth below. Except for certain inquires made and investigations performed by us as we have deemed necessary or appropriate to fulfill our professional responsibilities as counsel for purposes of rendering the opinion set forth below, we have made no independent investigation of the factual matters contained in the documents set forth above or that we reviewed, or in the representations set forth in the Officers’ Certificate and/or the Registration Statement. No facts have come to our attention, however, that would cause us to question the accuracy and completeness of such facts or factual representations in a material way.

The opinion set forth below is based upon the Code, the Income Tax Regulations and Procedure and Administration Regulations promulgated thereunder and administrative and judicial interpretations thereof, in each case as they currently exist and all of which are subject to change, and the opinion below is rendered as of the date hereof, and we disclaim any obligation to advise you of any change in any of the foregoing sources of law or subsequent developments in law or changes in facts or circumstances which might affect any matters or opinion set forth herein. No assurance can be given that the federal income tax consequences described below will not be altered in the future as a result of future changes in the law.

Based on the documents and assumptions set forth above and the representations set forth in the Officers’ Certificate, and provided that the Company continues to meet the applicable asset composition, source of income, shareholder diversification, distribution, and other requirements of the Code necessary to qualify as a real estate investment trust, we are of the opinion that:

BRT Realty Trust

October 18, 2005

Page 3

(1) Commencing with the Company’s taxable year ended December 31, 2001, the Company has been organized and operated in conformity with the requirements for qualification as a “real estate investment trust” under the Code, and its method of operation will enable it to continue to meet the requirements for qualification as a “real estate investment trust” under the Code, and

(2) The information in the Registration Statement under the caption “Certain Federal Income Tax Considerations,” to the extent that it constitutes matters of law or legal conclusions, has been reviewed by us and is correct in all material respects, and our opinion set forth in such discussion is confirmed.

The ability of the Company to continue to meet the requirements for qualification and taxation as a real estate investment trust will be dependent upon the Company’s ability to continue to meet in each year the applicable asset composition, source of income, shareholder diversification, distribution, and other requirements of the Code necessary to qualify as a real estate investment trust. We will not review, on a continuing basis, the Company’s compliance with the documents or assumptions set forth above, or the representations set forth in the Officers’ Certificate. Accordingly, no assurance can be given that the actual results of the Company’s operations for any given taxable year will satisfy the requirements for qualification and taxation as a real estate investment trust under the Code.

The foregoing opinion is limited to the federal income tax matters addressed herein, and no other opinion is rendered with respect to other federal tax matters or to any issues arising out of the tax laws of any state or locality or other jurisdiction. Our opinion is limited in all respects to the federal income tax laws of the United States, and we assume no responsibility as to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction. We express no opinion with respect to the matters described herein other than those expressly set forth herein. You should recognize that our opinion is not binding on the Internal Revenue Service and that the Internal Revenue Service may disagree with the opinion contained herein. Although we believe that our opinion will be sustained if challenged, there is no guarantee that this will be the case. Except as specifically discussed above, the opinion expressed herein is based upon the laws that currently exist. Consequently, future changes in the law may cause the federal income tax treatment of the Company to be materially and adversely different from that described above.

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the caption “Certain Federal Income Tax Considerations” in the Registration Statement. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder.

Very truly yours,

/S/    MCCARTER & ENGLISH, LLP

McCarter & English, LLP

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

We consent to the reference to our firm under the caption “Experts” in the Pre-effective Amendment No. 1 to the Registration Statement (Form S-3) and related Prospectus of BRT Realty Trust for the registration of $100.0 million of its common stock, preferred stock and warrants and to the incorporation by reference therein of our report dated December 8, 2004, with respect to the consolidated financial statements and schedules of BRT Realty Trust included in its Annual Report (Form 10-K) for the year ended September 30, 2004, filed with the Securities and Exchange Commission.

/s/ Ernst & Young LLP

New York, New York

October 17, 2005