First Union Real Estate Names Chief Executive Officer and Two Executive Vice Presidents.

CLEVELAND--(BUSINESS WIRE)--Nov. 3, 1998--First Union Real Estate Investments (NYSE:FUR) today announced that it has hired Daniel P. Friedman as its Chief Executive Officer, and David Schonberger and Anne Zahner as Executive Vice Presidents of the Trust. Mr. Friedman will join the Board of Trustees effective immediately. Mr. Friedman, Mr. Schonberger, and Ms. Zahner were previously employed by Enterprise Asset Management Inc., a New York City-based real estate investment firm started in 1969 by Mike Steinberg and Robert James.

Mr. Friedman, age 41, has served as President and Chief Operating Officer for Enterprise since 1991 and directed its opportunistic investment program which included the acquisition of Class B enclosed malls, Class B office buildings, tax-exempt financed apartments, non-performing loans, public and private real estate and real estate related securities, various development opportunities, and numerous co-venture investments in a number of early- and later-stage real estate investment programs. At Enterprise, Mr. Friedman was also responsible for the day-to-day asset management of the firm's $500 million real estate portfolio and for sourcing equity capital for co-investment opportunities from university endowments, investment banks, and various opportunity funds. Mr. Friedman received an MBA from the Harvard Business School and a BS in Chemistry from Stanford University.

As Executive Vice President of Enterprise, Ms. Zahner, age 42, was responsible for asset management and new business development. Prior to joining Enterprise, Ms. Zahner was a regional director of real estate asset management and vice president of investment management and recovery for the Travelers Insurance Company, where she managed the workout of a $750 million loan and property portfolio. Prior to the Travelers, Ms. Zahner was a real estate investment officer at Riverbank America and the ADCO Group. Ms. Zahner received an MBA from the Harvard Business School and a BA in Political Economy from the University of California at Berkeley.

As Vice President of Development at Enterprise, Mr. Schonberger, age 44, was responsible for all development activities including major sub-division, pre-development planning, and construction of leased and build-to-suit properties. For 15 years, Mr. Schonberger has acted as a private developer of major retail and commercial properties in the New York metropolitan area. He also founded, managed, and later sold a property management and leasing company specializing in the third party management of institutional office properties. Mr. Schonberger received a BA in Life Sciences from Connecticut College.

Principal Terms of Employment

Mr. Friedman, Zahner, and Schonberger have entered into a four-year employment agreement and will receive total cash compensation of $340,000, $200,000, and $200,000 per annum (increasing 5% per year), respectively, as well as a four-year upfront grant of options on 1,080,000, 360,000, and 360,000 shares respectively. The options will become exercisable ratably over four years. Options for 50% of the shares have a strike price of $6.50 and the remaining 50% are at $8.50. The options have a cost of capital feature. Beginning 18 months from today, the strike price of the options will increase by 10% compounded per annum less the amount of per share dividends or other distributions to shareholders. In order for the options to have value at expiration in ten years, the total return to shareholders from yesterday's closing price of $5.93 must exceed 151% for the $6.50 grant and 228% for the $8.50 grant.

As part of the transaction, Enterprise Asset Management Inc. will receive ten-year warrants on 500,000 shares with a strike price of $10.00 per share and a one-time consulting fee and expense reimbursement of $750,000 for Enterprise's valuable assistance to the Trust over the past six months.

William Ackman, Chairman of the Trust, stated, "I am excited to have Dan, Anne, and David join the Trust. These are people of superb character who possess great talent and experience. They will be of tremendous assistance to the company in maximizing the proceeds we receive from upcoming asset sales and redeploying that capital in newly-sourced investment opportunities. In the event we are unable to sell certain assets at prices we deem attractive, we have the in-house talent to maximize the value of any asset we choose to retain. Dan, Anne, and David are extraordinary in that they possess superb investment skills in addition to hands-on asset management, development, and operational experience. I am also delighted to have Mike Steinberg, Bob James, and their families as equity owners in the Trust. Their counsel will be of great value to shareholders."

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