First Union Announces Receipt of Court Decision On Flood Case.

CLEVELAND--(BUSINESS WIRE)--Aug. 24, 1999--

First Union Real Estate Investments (NYSE:FUR) announced today that the California Court of Appeals issued a decision in the State of California's appeal of the 1991 trial court's decision finding the State liable for property damage which resulted from failure of a levee during a 1986 flood in Yuba county.

The decision of the Court of Appeals reversed the trial court's finding of liability against the State and remanded the case to the trial court for retrial.

In February 1986, the failure of an earthen levee on the Yuba River, near First Union's Sutter Buttes Office Center (formerly, Peach Tree Mall) in Marysville, CA, caused severe flooding. First Union is one of an estimated 3,000 plaintiffs, mostly homeowners, that suffered property damage from the flood. First Union's potential claim for property damage is believed to be the largest of the plaintiffs' claims. In 1991 after a six-month trial, a lower court decided in favor of First Union and the other plaintiffs on the liability portion of the suit and for certain sample plaintiffs with respect to damages. The lower court concluded that the State of California was liable for the flood damages sustained by area residents and businesses under the doctrine of inverse condemnation. The State appealed that decision to the California Court of Appeals and the appeal process has taken approximately eight years. First Union sold the property in April 1999 but retained the right to pursue its legal claim for flood damages. The Company, along with the other plaintiffs damaged by the flood, is currently considering its alternatives with respect to this case.

First Union Real Estate Equity and Mortgage Investments is a NYSE-listed stapled-stock real estate investment trust (REIT) headquartered in Cleveland, Ohio.