SCHEDULE 14A

                               (RULE 14A-101)
                  INFORMATION REQUIRED IN PROXY STATEMENT
                          SCHEDULE 14A INFORMATION
        PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
                   EXCHANGE ACT OF 1934 (Amendment No. )

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          First Union Real Estate Equity and Mortgage Investments
          -------------------------------------------------------
              (Name of Registrant as Specified in Its Charter)

                           Gotham Partners, L.P.
          -------------------------------------------------------
                  (Name of Person Filing Proxy Statement)

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                           GOTHAM PARTNERS, L.P.
                       110 East 42nd Street, 18th Fl.
                             New York, NY 10017
                               (212) 286-0300

                                                                May 8, 1998

Dear Shareholder:

     Ever since Gotham presented its shareholder  proposals to First Union,
the Board of Trustees and the Company's  management have stopped at nothing
to prevent  shareholders  from  considering  our  proposals at the upcoming
special meeting.

 .    Management and the Board of Trustees have attempted  unsuccessfully to
     deny you the right to vote for an alternative  board slate by bringing
     State and Federal litigation against Gotham.

 .    Management   and  the  Board  of  Trustees   have  presided  over  the
     destruction   of   shareholder   value   and  have   missed   enormous
     opportunities  because of their stubborn  unwillingness  to consider a
     sale or  merger  of the  Company  until  the  value  of the  Company's
     paired-share structure was rendered worthless.

 .    Management  and the Board of Trustees'  actions have led to a dramatic
     decline in the Company's fundamental economic performance.

 .    Management and the Board of Trustees, realizing that their time at the
     helm was  likely  to come to an end,  put in force  golden  parachutes
     which will award millions of dollars to senior management in the event
     Gotham is successful and the Board does not approve Gotham's nominees.

IS THIS  THE  MANAGEMENT  TEAM  AND  BOARD  OF  TRUSTEES  THAT  YOU WANT TO
REPRESENT YOUR INTERESTS?

     We believe First Union  shareholders  deserve  better.  By signing and
returning the enclosed  White and Blue proxy card,  you can help Gotham and
its nominees bring dynamic leadership and a brighter future to First Union.

                        MANAGEMENT'S RECORD TO DATE

1.   Five Years of Woeful Performance

     First and foremost is the woeful performance of the Company's existing
management,  led  by  the  current  Chairman,   President  and  CEO,  James
Mastandrea.  First Union's stock price is actually  lower today ($10 3/8 at
the  close on  5/7/98)  than it was on the day Mr.  Mastandrea  signed  his
extremely lucrative  employment contract ($10 1/2 at the close on 7/19/93).
By  comparison,  the S&P 500 Index has more than  doubled (up 145%)  during
this  period.  Even  more  glaring  is  the  outperformance  of  the  other
paired-share REITs during this period. The stock price of Starwood Hotels &
Resorts has risen 544%. The stock price of Patriot American Hospitality has
risen 362%.  Don't think Mr.  Mastandrea has made up for this lack of stock
price  performance  through  dividend  growth - the Company's  dividend has
actually declined 39% during Mr. Mastandrea's tenure.

2.   Current Management Never Took Advantage of the Company's  Paired-Share
Structure.  The Cost to Shareholders is Potentially Hundreds of Millions of
Dollars.

     The Board of Directors  of every other  paired-share  REIT,  when they
became aware of the potential value of the paired-share structure,  did the
right  thing.  They  hired  a  well-regarded  investment  bank  and  sought
proposals from potential  merger  partners,  creating  tremendous value for
shareholders.   To  give  you  one  example,  Santa  Anita  Realty  Company
shareholders  received a more than $200 million premium to the value of the
company's net assets for their paired-share structure. Before First Union's
three  dilutive  equity  offerings,  that $200 million  would have meant an
$11.00  premium to  shareholders  on top of the  Company's net asset value,
which at the time we estimated to be approximately $10 per share.

     Today  legislation  was  approved in the Senate that if enacted  would
substantially limit the utility of the paired-share structure. As a result,
it is probably too late to realize  significant  value from the  structure.
Gotham is incredulous that this opportunity has slipped through the fingers
of the  Company's  leadership,  and  believes  that the  current  board and
management must be held accountable.

3.   Recently  Announced  1st  Qtr.  Results  Show a  Continuation of  Poor
Performance

     The Company's First Quarter 1998 Funds From Operations  (FFO) declined
50% when  compared  with the same period last year.  Management  blamed the
decline on the proxy fight with  Gotham.  Even  excluding  the proxy costs,
however,  FFO declined 35% when comparing the quarterly results. We believe
it is unlikely for this trend to improve with Mr. Mastandrea in charge.

     One notable  issue made public in First  Union's  results was that the
manufacturing  division of the  Company's  parking  subsidiary  lost nearly
$1,000,000  in the first  quarter.  For a  business  that had  revenues  of
approximately  $5,000,000  last  year,  this  is an  extraordinarily  large
number.  When  questioned  about this loss on a recent  Company  conference
call,  management  acknowledged  that they know  little  about  managing an
equipment  business.  The Company later was forced to disclose that the CEO
of the  manufacturing  subsidiary  was  Russell  Gifford,  a Trustee of the
Company and head of the  Company's  "independent  special  committee."  Mr.
Gifford  was  forced to step down from this role when his  involvement  was
publicly disclosed.

4.   More of the Same Tired Plans for the Future

     What is current  management's plan? It seems from the Company's public
statements that current  management  believes it can keep on purchasing and
managing parking lots despite the tax law change.  Management has indicated
that it  expects it can get a "carve  out" from  Congress,  allowing  First
Union to continue to make parking  asset and  management  acquisitions.  We
believe  it is  unlikely  that  First  Union  will  get  any  such  special
exemption.  While we believe that the selected purchase of parking lots and
parking companies can be good  acquisitions for a properly  structured REIT
and management company working together,  First Union management's  history
of  overpayment  and  poor  execution  is  likely  only to lead to  further
shareholder value destruction.

5.   Management Will Stop at Nothing to Preserve Their Lucrative Employment

     Management  has made  clear  that it will do  everything  possible  to
maintain  their  employment  regardless of the cost to  shareholders.  In a
lawsuit brought against Gotham in Ohio state court,  the Company  attempted
to take away Gotham's  right to make a shareholder  proposal,  its right to
receive  dividends,  and its right to vote its  shares.  If First Union had
been  successful  in their  litigation,  you would have no  alternative  to
management's slate and proposals.

     Even the Ohio  court,  which  denied the  Company's  attempt to enjoin
Gotham from  presenting its proposal and  nominations to the  shareholders,
recognized that senior  management's  efforts against Gotham were primarily
motivated  by a desire  to keep  their  jobs.  In the  ruling  against  the
Company, the court made the following statement:

     . . . the efforts of First Union's management  following Gotham's
     July 14,  1997  letter were  primarily  motivated  by a desire to
     derail  Gotham's  efforts  to change  the  Company's  course  and
     replace top  management.  First Union's  management's  efforts to
     disenfranchise  Gotham do not  appear to be  designed  to protect
     First Union's REIT status but rather management.

And,  just in case the  litigation  did not  work,  senior  management  has
obtained  lucrative  compensation  agreements or  modifications to existing
agreements.  For instance, changes to Mr. Mastandrea's compensation package
enacted  approximately  one week before the trial  court  issued its ruling
against First Union could potentially cost the Company,  in the event it is
sold, an additional $8 Million.

                    GOTHAM HAS PROPOSED A BUSINESS PLAN
                CAREFULLY DESIGNED TO REVITALIZE THE COMPANY

     We have presented in our proxy statement a detailed business plan for
the Company that we believe will maximize value for all shareholders. Some
of the highlights of our plan are as follows:

 .    Replace  current  senior  management  with capable,  intelligent,  and
     entrepreneurial  managers with substantial real estate  investment and
     operating experience as well as an extensive background in the capital
     markets, including public and private equity investing.

 .    Create a compensation system that aligns management with shareholders.
     Senior-level   management   will  be   compensated   based   on  their
     contribution  to  improvements  in the  Company's  per-share  economic
     performance in contrast to the current  system which gives  management
     incentives  to increase  the total  number of shares  outstanding  and
     total FFO without regard to the dilution caused to shareholders.

 .    Change the Company's  corporate  structure to permit  shareholders  to
     participate  in the purchase of real estate and  operating  businesses
     even if the proposed paired-share legislation becomes law.

 .    Acquire  private  family real  estate  businesses  at sensible  prices
     through carefully structured acquisitions which offer sellers tax-free
     execution,  employment for members of their existing  management team,
     and the benefits  associated with share ownership in a Company run for
     the benefit of its owners.

 .    Partner   with    entrepreneurs    who   control   real   estate   and
     real-estate-intensive  operating businesses.  Acquire their assets for
     UPREIT  or  stock  consideration  and  form  exclusive  joint  venture
     arrangements to pursue future business  opportunities taking advantage
     of these entrepreneurs' skills and local market knowledge.

Our plan,  which is more fully presented in our Proxy  Statement,  contains
other  details on pages four to eight.  We encourage  you to read our proxy
statement for a more complete description of our proposal.

VOTE TODAY FOR GOTHAM AND AGAINST THE CURRENT BOARD BY COMPLETING,  SIGNING
AND  DATING  THE  ENCLOSED  WHITE  AND BLUE  PROXY  CARD.  VOTE IN FAVOR OF
GOTHAM'S PROPOSAL AND NOMINEES AND VOTE AGAINST THE COMPANY'S PROPOSAL.

     Above,  we have  expressed  our  views  regarding  Management  and the
Board's  performance  and  our  plans  for  the  future.  If you  have  any
questions,  please  feel  free to call us at (212)  286-0300.  Ask for Bill
Ackman or David Berkowitz.  If you have any questions  regarding the voting
of your proxies, please call our proxy solicitor,  Beacon Hill Partners, at
(800) 755-5001.

                                   Sincerely,

                                   GOTHAM PARTNERS, L.P.