HIGH RIVER LIMITED PARTNERSHIP
                           c/o Icahn Associates Corp.
                                767 Fifth Avenue
                             New York New York 10153



VIA FACSIMILE and FEDERAL EXPRESS

Board of Directors
Hallwood Realty LLC
3710 Rawlins, Suite 1500
Dallas, Texas 75219-4998

July 2, 2003

RE:  Hallwood Realty Partners, L.P.

Gentlemen:

     Yesterday  we  received a letter  from Mr.  Guzzetti  dated  June 30,  2003
concerning our tender offer (the "Offer") for any and all of the limited partner
units in Hallwood Realty Partners,  L.P. (the  "Partnership") for $100 per unit.
At the time we  commenced  the Offer,  we  requested  that you redeem the rights
under the Partnership's  Rights Plan or otherwise make the Offer exempt from the
Rights  Plan,  so that unit  holders can decide for  themselves  if they wish to
sell.  We continue to believe that unit holders  should be permitted to exercise
that right.

     Previously,  and in Mr.  Guzzetti's  letter,  Hallwood  has referred to our
offer as "inadequate". The Offer represents a premium of 40% over the unaffected
market price prior to our purchase. As Vice-Chancellor  Strine noted at the June
24, 2003  hearing,  unit holders "have been offered the best price by far that's
ever been available in the history of" the Partnership.  Moreover, as was stated
at the  hearing,  your own  financial  advisor  is of the view that it is highly
unlikely that,  without the Offer, the units will trade at this level given your
unwillingness to make fundamental structural changes to the Partnership. We note
that in both  absolute  dollars and as compared to market  value,  the  purchase
price in our Offer is  substantially  more  beneficial  to unit holders than the
price paid in your 1995 transaction.

     We are once again  reaching  out to you to  initiate  a dialogue  about our
Offer.  We  believe  that we have  made a fair  offer and that  individual  unit
holders  should be permitted to decide for themselves if they wish to accept it.
Given the beneficial  nature of our current  proposal,  both as regards the $100
price and the  structural  components  of an any and all offer  with no  minimum
condition,  we do not desire to simply "bid  against  ourselves"  by raising our
Offer. As our prior efforts to communicate  with you indicate,  we have been and
remain willing to meet and negotiate  regarding the Offer.  In addition,  if you
believe there are strategic  alternatives or other changes that may be available
to the  Partnership  that would allow it to achieve  greater  value for all unit
holders, we would also be willing to discuss any of those matters. To the extent
that you are concerned  about any second step  transaction or other matters,  we
welcome the  opportunity  to discuss those  concerns with you. In this regard we
note that, as our Offer is for any and all of the units,  we would be willing to
discuss  acquisition  of  the  Partnership,   for  example,   through  a  merger
transaction,  if that would  help to address  the  concerns  referred  to in Mr.
Guzzetti's letter.

     Mr.  Guzzetti  seemed to indicate in his letter that we would have to raise
our  Offer as the  "price  of  admission"  for the  Board to even talk to us. We
consider that statement to be inappropriate  and not productive and hope that it
does not  reflect  the view of the  Board of the  General  Partner,  which  owes
fiduciary duties to all unit holders.

     We look  forward  to  meeting  with you.  Please  feel free to  contact  my
assistant at 212-702-4309 to arrange that meeting.

                                  Very truly yours,

                                  High River Limited Partnership
                                  By:  Barberry Corp., its General Partner


                                  By: /s/ Carl C. Icahn
                                           Carl C. Icahn