The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements of United Capital Corp. (the "Company") and related notes thereto.

Results of Operations: Three and Nine Months Ended September 30, 2008 and 2007

Total revenues for the nine months ended September 30, 2008 were $56,444, an increase of $2,891 or 5% from the comparable 2007 period, primarily due to the acquisition of a hotel in May 2007. Net loss for the first nine months of 2008 was ($1,833) or ($.22) per basic share. Included in these results are $16,226 in impairment charges and $11,844 in unrealized losses on the Company's marketable security portfolio resulting from the sudden decline in the stock market and collapse of certain financial institutions in which the Company held an interest. The impairment charges are included as a component of Other Income And (Expense), Net in the Condensed Consolidated Statement of Operations, while the unrealized losses are recorded, net of tax, in Accumulated Other Comprehensive Loss in the accompanying Condensed Consolidated Balance Sheets. Net income for the nine months ended September 30, 2007 was $24,093 or $2.91 per basic share. The prior year results include $10,002 in gains on the sale of real estate, on a net of tax basis. The Company did not sell any real estate properties during the first nine months of 2008. In addition, the results of 2007 include $5,208 more from litigation awards in connection with a property condemned by the City of New York in 2001.

For the quarter ended September 30, 2008, total revenues were $18,548, a decrease of $597 or 3%, compared to the comparable 2007 period. Net loss for the three months ended September 30, 2008 was ($7,033), or ($.83) per basic share, which includes impairment charges of $15,777 on the Company's marketable security portfolio as noted above. For the quarter ended September 30, 2007, net income was $12,665 or $1.53 which includes $8,950 in gains on the sale of real estate, net of tax.

The growing weakness in the economy, exacerbated by recent credit market turmoil, together with higher year-over-year raw material, energy, freight and other costs, has pressured results in most of the Company's business segments. These factors are expected to continue to impact the Company in the fourth quarter and into the next year. The Company has implemented various price increases to help offset higher costs and is working to further streamline operations, control expenses and maximize cash flow from operations. While the success of these efforts and the depth and duration of the current negative economic environment and its impact on the Company are uncertain, management believes the Company's strong balance sheet and diverse mix of businesses leave it well positioned to weather the downturn.

Real Estate Operations

The Company's real estate operations consist of the real estate investment and
management and hotel operations segments. The operating results for these
segments are as follows:

                                          Three Months Ended                                   Nine Months Ended
                                          September 30, 2008                                   September 30, 2008
                              Real
                             Estate        Hotel Operations        Total        Real Estate       Hotel Operations        Total
Revenues                    $   4,956     $            4,483     $   9,439     $      15,423     $           12,393     $  27,816
Mortgage interest expense          63                    475           538               178                  1,410         1,588
Depreciation expense              627                    330           957             1,799                  1,059         2,858
Other operating expenses        1,596                  3,017         4,613             4,448                  9,052        13,500
Income from operations      $   2,670     $              661     $   3,331     $       8,998     $              872     $   9,870

                                          Three Months Ended                                   Nine Months Ended
                                          September 30, 2007                                   September 30, 2007
                              Real
                             Estate        Hotel Operations        Total        Real Estate       Hotel Operations        Total
Revenues                    $   4,927     $            4,886     $   9,813     $      14,614     $           10,020     $  24,634
Mortgage interest expense          62                    204           266               188                    473           661
Depreciation expense              480                    357           837             1,361                    904         2,265
Other operating expenses        1,238                  3,194         4,432             4,043                  7,160        11,203
Income from operations      $   3,147     $            1,131     $   4,278     $       9,022     $            1,483     $  10,505

Revenues from the real estate investment and management segment were $4,956 for the three months ended September 30, 2008, an increase of less than 1% compared to the corresponding period of 2007. For the nine months ended September 30, 2008, revenues from this segment increased $809 or 5.5% to $15,423, compared to the corresponding nine month period of 2007. These increases are primarily due to additional revenues ($269 and $777 for the three and nine month periods, respectively) from two properties purchased in January 2008, partially offset by a non-recurring transaction ($200) during the third quarter of 2007. Revenues from the Company's real estate portfolio are generally derived from properties with single tenant, long-term leases. Therefore, rental revenues recognized under GAAP do not fluctuate significantly, but are affected by future lease renewals or terminations and by the purchase or sale of additional properties.

Mortgage interest expense increased slightly in the third quarter of 2008 due to a mortgage obtained in connection with the purchase of a commercial property in July. The mortgage ($500) bears interest at 6.73% per annum, is payable monthly based on a 25-year amortization and matures in July 2013. In the nine month period ended September 30, 2008, mortgage interest declined $10 from that of the same 2007 period as a result of continuing mortgage amortization, partially offset by interest from the new obligation.

Depreciation expense associated with real properties held for rental increased $147 for the quarter ended September 30, 2008 and $438 for the first nine months of 2008, compared to the corresponding periods of 2007. These increases are the result of additions to real estate assets over the past twelve months. During this time the Company purchased three commercial properties for approximately $14,300 and incurred approximately $3,500 in capital improvements adding $159 and $400 to the third quarter and year-to-date 2008 depreciation expense.

Other operating expenses associated with the management of real properties increased $358 for the quarter and $405 for the nine months ended September 30, 2008, compared to the corresponding periods of 2007. These increases are the result of higher property maintenance expenses ($212 and $134, respectively) and professional fees ($80 and $207, respectively) which were incurred as a result of the timing of necessary repairs, tenant turnover and legal matters which occurred in the period. Future expenses may vary as a result of property age, location and vacancies.

Hotel revenues decreased $403 or 8.2% to $4,483 for the third quarter of 2008, compared to the corresponding quarter of 2007, primarily as a result of the continued rise in transportation costs and the overall weakness in the U.S. economy which has resulted in a reduction in both consumer and business travel. As a result, the Company expects lodging demand to continue to decline through the remainder of 2008 and into 2009. For the nine months ended September 30, 2008, hotel revenues increased $2,373 or 23.7% to $12,393, compared to the same nine month period of 2007, primarily due to the additional hotel revenues ($3,175) received as a result of the May 2007 acquisition of a hotel located in Utica, New York (the "Utica Hotel"). This increase is partially offset by the decline in revenues due to the weakening economic conditions previously mentioned.

As a result of mortgages secured on two of the Company's hotels during 2007, mortgage interest expense related to the Company's hotel properties increased $271 and $937 for the current quarter and first nine months of 2008, respectively, compared to the corresponding periods of 2007. As a result of these additional mortgages, interest expense for the full year of 2008 will be higher than that of 2007.

Depreciation expense associated with the Company's hotel operations decreased $27 for the third quarter of 2008, compared to the corresponding 2007 period, primarily due to a non-recurring adjustment ($37). For the first nine months of 2008, depreciation expenses from this segment increased $155, compared to the first nine months of 2007, primarily attributable to depreciation expense ($248) related to the Utica Hotel acquired in May 2007. Depreciation expense of the Company's hotel operations for the full year of 2008 should be higher than that reported in 2007 due to this acquisition. Depreciation expense for 2009 should be more comparable to that of 2008, unless the Company acquires additional hotel properties or experiences significant expenditures for capital improvements.

Other operating expenses related to the management of the Company's hotels decreased $177 to $3,017 for the three months ended September 30, 2008, compared to the corresponding quarter of 2007, primarily as a result of the lower revenues, noted above. For the nine months ended September 30, 2008, other operating expenses increased $1,892 to $9,052, compared to the corresponding period of 2007, primarily due to the additional operating expenses of the Utica Hotel ($2,411). This increase is partially offset by decreases in hotel operating expenses as a result of the lower revenues.

The growing weakness in the economy, exacerbated by recent credit market turmoil, has pressured results in the Company's hotel operations. This condition is expected to continue to impact this segment in the fourth quarter and into the next year. The Company is working to streamline operations, control expenses and maximize cash flow from operations. The success of these efforts and the depth and duration of the current negative economic environment and its impact on future hotel operations are uncertain.

Engineered Products

The operating results of the engineered products segment are as follows:

                                                  Three Months Ended            Nine Months Ended
                                                     September 30,                September 30,
                                                  2008           2007           2008          2007
Net sales                                      $    9,109      $   9,332     $   28,628     $  28,919
Cost of sales                                       7,201          7,241         22,382        21,996
Selling, general and administrative expenses        1,839          1,698          5,444         5,138
Operating income                               $       69      $     393     $      802     $   1,785

Net sales of the engineered products segment decreased $223 or 2.4% for the three months ended September 30, 2008 and $291 or 1.0% for the nine months ended September 30, 2008, compared with the results of the corresponding 2007 periods. These decreases are primarily related to a decrease in demand for the Company's automotive products line, partially offset by increases in demand for the Company's engineered products and transformer product lines. The decline in sales of the Company's automotive products primarily resulted from the significant reduction in North American automotive production and the general slowdown in the global vehicle market. As this decline is continuing through the remainder of the year, the Company expects 2008 sales of its automotive product line to be less than such sales in 2007.

Cost of sales as a percentage of net sales increased 1.5% and 2.1% in the three and nine months ended September 30, 2008, respectively, compared to the corresponding periods in 2007. These increases are primarily related to an increase in operating costs ($165 and $497 for the quarter and nine month periods, respectively) which primarily includes certain salaried positions which were vacant during 2007.

Selling, general and administrative expenses of the engineered products segment increased $141 or 8.3% for the three month period ended September 30, 2008 and $306 or 6.0% for the nine month period ended September 30, 2008, compared to the corresponding periods of 2007. These increases for the quarter and nine month periods are primarily due to increases in payroll and payroll related expenses ($100 and $239, respectively) which primarily relate to certain salaried positions which were vacant during 2007.

General and Administrative Expenses

General and administrative expenses not associated with the manufacturing operations increased $73 for the third quarter of 2008 and $304 for the first nine months of 2008, compared to such expenses incurred for the comparable 2007 periods, which are primarily related to non-recurring transactions ($77 and $257, respectively) in 2007.

Other Income and Expense, Net

The components of other income and (expense), net in the Condensed Consolidated
Statements of Operations are as follows:

                                               Three Months Ended            Nine Months Ended
                                                 September 30,                 September 30,
                                               2008           2007           2008          2007
Net loss on available-for-sale
securities                                 $    (15,671 )   $    (970 )   $  (16,088 )   $    (316 )
Litigation award from prior condemnation            457             -            457         5,665
Net realized and unrealized gain (loss)
on derivative instruments                           216           (14 )          438           149
Other, net                                           16           (10 )            -            (8 )
                                           $    (14,982 )   $    (994 )   $  (15,193 )   $   5,490

Included in the results for the nine months ended September 30, 2008 are $16,226 in impairment charges and $11,844 in unrealized losses on the Company's marketable security portfolio resulting from the sudden decline in the stock market and collapse of certain financial institutions in which the Company held an interest. The impairment charges are included in net loss on available-for-sale securities, above, while the unrealized losses are recorded, net of tax, in Accumulated Other Comprehensive Loss in the accompanying Condensed Consolidated Balance Sheet.

Included in other income and expense, net are amounts received in connection with a litigation award from a property condemned by the City of New York in 2001.

Discontinued Operations

Income from operations on properties sold and accounted for as discontinued operations was $41 and $108, on a net of tax basis, for the three and nine months ended September 30, 2008, respectively, versus $26 and $86 for the comparable 2007 periods. Net gains on the disposal of real estate assets accounted for as discontinued operations were $8,950 and $10,002, on a net of tax basis, for the three and nine months ended September 30, 2007, respectively (see Note 7 of Notes to Condensed Consolidated Financial Statements). Prior year amounts have been reclassified to reflect results of operations of real properties held for sale as of September 30, 2008 or sold during 2007 as discontinued operations. As of September 30, 2008, the Company classified one property as held for sale, which had a net book value of approximately $1,500, and was sold during the fourth quarter of 2008. Proceeds from the sale, amounting to approximately $12,500, were placed in escrow with a third-party to facilitate a Section 1031 tax-deferred exchange, if a qualified acquisition property can be identified. No properties have been sold during the nine months ended September 30, 2008.

Liquidity and Capital Resources

Net cash provided by operating activities was $9,686 and $10,822 for the nine months ended September 30, 2008 and 2007, respectively. The decrease in operating cash flows results principally from decreases in operating income before depreciation ($1,342) and interest and dividend income ($1,291) as well as changes in working capital ($848). These decreases are partially offset by the effect of current and deferred income taxes ($1,534) and the contribution to the Company's defined benefit pension plan in 2007 ($700).

Net cash used in investing activities was $23,969 for the nine months ended September 30, 2008 versus net cash provided by investing activities of $34,526 for the same period in 2007. This change primarily results from the timing of the purchase or sale of available-for-sale securities ($66,210) and a litigation award received from a property condemnation ($5,208), partially offset by the use of proceeds received on sale of real estate assets, including those deferred in connection with tax deferred exchanges.

Net cash used in financing activities was $1,505 for the nine months ended September 30, 2008, compared to net cash provided by financing activities of $4,801 for the same period of 2007. This decrease primarily results from additional proceeds from mortgages obtained during 2007 in excess of that obtained during 2008 ($11,500) and additional tax benefits related to the exercise of stock options ($1,114) recorded in the prior year. These decreases were partially offset by increases from the exercise of stock options ($4,288) and a decrease in the purchase and retirement of common stock ($2,356) during the current year, as compared to 2007.

Previous purchases of the Company's common stock have reduced the Company's additional paid-in capital to zero and have also reduced retained earnings by amounts in excess of par value. Any future purchases in excess of par value will also reduce retained earnings. Repurchases of the Company's common stock may be made from time to time in the open market at prevailing market prices and may be made in privately negotiated transactions, subject to available resources. Future proceeds from the issuance of common stock in excess of par value will be credited to retained earnings until such time that previously recorded reductions have been recovered.

At September 30, 2008, the Company's cash and marketable securities totaled $140.1 million and working capital was $148.3 million compared to cash and marketable securities of $156.2 million and working capital of $172.5 million at December 31, 2007. Included in the results of the nine months ended September 30, 2008 are $16,226 in impairment charges and $11,844 in unrealized losses on the Company's marketable security portfolio resulting from the sudden decline in the stock market and collapse of certain financial institutions in which the Company held an interest. The impairment charges are included as a component of Other Income And (Expense), Net in the Condensed Consolidated Statement of Operations, while the unrealized losses are recorded, net of tax, in Accumulated Other Comprehensive Loss in the accompanying Condensed Consolidated Balance Sheet. Management does not believe that the unrealized losses are other-than-temporary given recent conditions and the Company's ability to hold such securities in order to allow sufficient time for recovery, however, continuing market declines may cause this position to be reexamined.

Management continues to believe that while there has been a decline in the value of certain real estate properties, the overall real estate market in the United States continues to be overvalued and accordingly acquisitions have been limited to those select properties that meet the Company's stringent financial requirements. Management believes that the available working capital puts the Company in an opportune position to fund acquisitions and grow its portfolio, if and when attractive long-term opportunities become available.

The equity method of accounting is used for investments in 20% to 50% owned joint ventures in which the Company has the ability to exercise significant influence, but not control. These investments are recorded initially at cost and subsequently adjusted for equity in earnings and cash contributions and distributions. The debt of the joint venture in which the Company currently has an ownership interest is a non-recourse obligation and is collateralized by the entity's real property. The Company believes that the value of the underlying property and its operating cash flows are sufficient to satisfy its obligations. The Company is not obligated for the debts of the joint venture, but could decide to satisfy them in order to protect its investment. In such event, the Company's capital resources and financial condition would be reduced and, in certain instances, the carrying value of the Company's investment and its results of operations would be negatively impacted.

The cash needs of the Company have been satisfied from funds generated by current operations. It is expected that future operational cash needs will also be satisfied from existing cash balances, marketable securities, ongoing operations or borrowings. The primary source of capital to fund additional real estate acquisitions and to make additional high-yield mortgage loans may come from existing funds, the sale, financing and refinancing of the Company's properties and from third party mortgages and purchase money notes obtained in connection with specific acquisitions.

In addition to the acquisition of properties for consideration consisting of cash and mortgage financing proceeds, the Company may acquire real properties in exchange for the issuance of the Company's equity securities. The Company may also finance acquisitions of other companies in the future with borrowings from institutional lenders and/or the public or private offerings of debt or equity securities. The Company currently has no agreements, commitments or understandings with respect to the acquisition of real properties or other companies in exchange for its equity or debt securities.

Funds of the Company in excess of that needed for working capital, purchasing real estate and arranging financing for real estate acquisitions are invested by the Company in corporate equity securities, corporate notes, certificates of deposit, government securities and other financial instruments. Changes in U.S. interest rates affect the interest earned on the Company's cash and cash equivalent balances and other interest bearing investments. Given the level of cash and other interest bearing investments held by the Company, declines in U.S. interest rates have adversely impacted the Company's earnings in 2008.

In strategies designed to hedge overall market risk, the Company may sell common stock short and participate in put and/or call options. These instruments do not qualify for hedge accounting and therefore changes in such derivatives fair value are recognized in earnings. These derivatives are recorded as a component of accounts payable and accrued liabilities in the Condensed Consolidated Balance Sheets.

The Company manufactures its products in the United States and Mexico and sells its products in those markets as well as in Europe, South America and Asia. As a result, the Company's operating results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which the Company distributes its products. Most of the Company's sales are denominated in U.S. dollars. Net sales of the Company's engineered products segment denominated in Euros were 7.9% and 8.7% for the three and nine months ended September 30, 2008 and 7.3% and 8.5% for the three and nine months ended September 30, 2007, respectively. As such, a portion of the Company's receivables are exposed to fluctuations with the U.S. dollar. However, the Company does not believe this risk to be material to its overall financial position as the Company's historical results have not been significantly impacted by foreign exchange gains or losses. Accordingly, the Company has not entered into forward exchange contracts to hedge this exposure. If such exposure increased in the future, the Company may reexamine this practice to minimize the associated risks.

The growing weakness in the economy, exacerbated by recent credit market turmoil, together with higher year-over-year raw material, energy, freight and other costs, has pressured results in most of the Company's business segments. These factors are expected to continue to impact the Company in the fourth quarter and into the next year. The Company has implemented various price increases to help offset higher costs and is working to further streamline operations, control expenses and maximize cash flow from operations. While the success of these efforts and the depth and duration of the current negative economic environment and its impact on the Company are uncertain, management believes the Company's strong balance sheet and diverse mix of businesses leave it well positioned to weather the downturn.

The Company has undertaken the completion of environmental studies and/or remedial action at its' two New Jersey facilities and has recorded a liability for the estimated investigation, remediation and administrative costs associated therewith. See Note 13 of Notes to Condensed Consolidated Financial Statements for further discussion of this matter.

The Company is subject to various other litigation, legal and regulatory matters that arise in the ordinary course of business activities. When management believes it is probable that liabilities have been incurred and such amounts are reasonably estimable, the Company provides for amounts that include judgments and penalties that may be assessed. These liabilities are usually included in accounts payable and accrued liabilities or other long-term liabilities in the Condensed Consolidated Financial Statements, depending on the anticipated payment date. Based on the facts presently available, the Company does not believe that the disposition of matters that are pending or asserted will have a material adverse effect on the Company's consolidated financial position or results of operations. However, new or additional facts or an adverse judgment by a court, arbitrator or a settlement could adversely impact the Company's results of operations in any given period.

Critical Accounting Policies and Management Estimates

The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to use judgment in making estimates and assumptions that . . .