Financing, Acquisition and Disposition Activities

Litigation Settlement

The CBS Corporation (“CBS”) lease term with respect to the Trust’s property located in Churchill, Pennsylvania expired on December 31, 2010. CBS elected not to renew the lease and, in anticipation of this lease termination and surrender of the property, a review of the condition of the property was performed by the Trust. In the Trust’s view, the property was in need of substantial repairs and refurbishing in order for the tenant to comply with the surrender conditions. The Trust advised CBS of these issues and no resolution was reached with CBS after numerous discussions. Accordingly, in May 2010 the Trust brought an action in Pennsylvania State Court, Alleghany County against CBS seeking damages for, among other things, CBS’ failure to restore the property to the condition necessary to comply with its surrender obligations.

On September 30, 2011 the Trust entered into a settlement agreement, subject to certain conditions, with respect to the pending lawsuit which provides for the dismissal of the lawsuit, payment to the Trust of $6,500,000, the conveyance to the Trust of approximately 148 acres of land and the waiver of all ground lease payments by the Trust for 2011. As a result of the conditional terms of the agreement being settled subsequent to September 30, 2011, the Trust anticipates recognition of litigation settlement income during the fourth quarter of 2011.

The Trust also entered into a new net lease with Westinghouse Electric Company LLC (“Westinghouse”) for approximately 57,000 square feet of space at the Churchill property. The lease has a term of 12 years and requires annual rent of $750,000 per year, increasing annually by 3%. Westinghouse is responsible for all costs associated with the leased space and can terminate the lease at any time after the fifth anniversary by making a termination payment of $4,400,000 which decreases each year thereafter. The lease requires the Trust to make certain improvements and utility upgrades with an anticipated cost of approximately $1,000,000.

Under the terms of the settlement agreement, the Trust has agreed to market for sale both the portion of the property leased to Westinghouse and the remaining portion of the property. As such, the operations of the Churchill property are anticipated to be included in discontinued operations in the Trust’s financial statements commencing with the quarter ended December 31, 2011. Upon completion of the marketing, the Trust has agreed to pay CBS 50% of the sales proceeds received from the sale, or if not sold, 50% of the value as determined by the bids for the property received, in excess of $6,500,000.

The Trust conducted an impairment analysis of the Churchill property at September 30, 2011. Due to the Trust not holding title to the land until October 2011, the Trust has determined that this property should continue to be classified in continuing operations at September 30, 2011. Anticipated undiscounted cash flows, inclusive of the expected settlement payment, indicate that the carrying value is fully recoverable at September 30, 2011. The Trust believes that the conditions of the settlement should be satisfied and this property should qualify for held for sale treatment in the fourth quarter of 2011. Accordingly, the Trust expects to record an impairment change in the fourth quarter equal to the difference between the property’s carrying value and the fair value less costs to sell.

Financing Activities

Sealy Northwest Atlanta Loan - On June 23, 2011 the Trust made a $20,641,000 bridge loan to its Sealy Northwest Atlanta joint venture. The Trust’s bridge loan enabled the joint venture to satisfy its $28,750,000 first mortgage loan at a discounted payoff amount of $20,500,000. On September 29, 2011, the joint venture obtained replacement financing in the amount of $14,000,000 bearing interest at Libor + 5.35% and maturing on September 29, 2015. In connection with the financing, the joint venture purchased an interest rate cap which caps Libor at 1% through October 1, 2013. Net proceeds from the new loan plus additional capital contributions of $4,650,000 from the Trust and of $3,100,000 from Sealy were utilized to pay off the bridge loan due to the Trust.

Loan Satisfaction — On July 13, 2011, the Trust satisfied its $23,773,000 first mortgage loan on its wholly owned Lisle, Illinois properties for a discounted payoff of $14,500,000 plus reserves held by the lender of approximately $736,000. The Trust recognized gain on the extinguishment of debt in the amount of $8,514,000. As part of the restructuring, the Trust re-evaluated its business plan and holding periods for these properties which resulted in the recognition of impairment charges totaling $3,000,000 as discussed in Note 3.

Disposition Activity

Marc Realty — On June 1, 2011 the Trust sold to its partner, Marc Realty, for $18,544,000 its equity interest in three properties in its Marc Realty Portfolio (8 South Michigan, 11 East Adams and 29 East Madison). The purchase price was paid $6,000,000 in cash and $12,544,000 in aggregate secured promissory notes which each bear interest at 8% per annum, require payments of interest only and mature on May 31, 2016. Pursuant to the accounting guidance for sales of real estate, the Trust deferred recognition of the gain of $385,000.

During the quarter ended September 30, 2011, Marc Realty made payments in full satisfaction of its $4,910,000 8 South Michigan loan and $2,265,000 11 East Adams loan. In addition, Marc Realty made $1,369,000 in payments on its 29 East Madison loan. As of September 30, 2011, the 29 East Madison loan had a balance of $4,000,000. The Trust recognized $207,000 in gain related to the full repayment of the two loans.

Acquisitions

Vintage Housing — During the quarter ended September 30, 2011, the Trust invested an additional $7,000,000 in its Vintage Housing venture, which holds interests in multifamily and senior housing properties located primarily in California and the Pacific Northwest. Of this contribution, $4,300,000 was invested for the venture’s acquisition of non-controlling general partner interests in seven of the existing investments. The remaining $2,700,000 contributed was used by the venture for investment in three new properties.

Loan Asset Repayments

Beverly Hills Hilton — On September 15, 2011, the Trust’s B-Note receivable was paid off at par. The Trust received repayment of $10,000,000 on the loan which was originally acquired on December 9, 2009 for $5,250,000.