Forward-Looking Statements

With the exception of historical information, this report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended. We intend such forward-looking statements to be covered by the safe harbor provision for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words "may", "will", "believe", "expect", "intend", "anticipate", "estimate", "project", or similar expressions or variations thereof. Forward-looking statements involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could materially affect actual results, performance or achievements. Investors are cautioned not to place undue reliance on any forward-looking statements and are urged to read "item 1A Risk Factors" in our Annual Report on Form 10-K for the year ended September 30, 2012.

Overview

We are a real estate investment trust, also known as a REIT. We operate in three business segments: real estate lending, ownership and operation of multi-family properties, and ownership and operation of other real estate assets.

Our lending activities involve originating and holding for investment senior mortgage loans secured by commercial and multi-family real estate property in the United States. Revenues are generated from the interest income (i.e., the interest borrowers pay on our loans) and to a lesser extent, loan fee income generated on the origination and extension of loans and investment income from securities transactions.

Our multi-family activities derive revenues primarily from tenant rental payments. We commenced these activities in 2012 as we identified a demand for equity capital in this sector. Generally, these activities involve our investment of 80% of the equity in a joint venture that acquires a multi-family property. Our multi-family property activities are complementary to our loan origination activities in that we address the funding needs of multi-family real estate investors by providing them with access to both equity capital and debt financing.

Our ownership and operation of other real estate assets is comprised principally of the activities of the Newark Joint Venture and to a lesser extent, the ownership and operations of various real estate assets located in New York and Florida. The Newark Joint Venture is engaged in the development of properties in downtown Newark, NJ. The properties are to be developed for educational, commercial, retail and residential use. The Newark Joint Venture is currently developing a project known as "Teachers Village"-the project currently involves five buildings, in various stages of construction and pre-construction, which are to be used for charter schools, retail space and residential units. The venture is currently unprofitable and it is anticipated that the activities will continue to be unprofitable at least until the Teacher's Village is constructed and reasonable occupancy levels achieved. The venture requires substantial third party funding (including tax credits and financing provided by governmental authorities) for its development activities-no assurance can be given that sufficient funding will be available and even if sufficient funding is obtained and construction completed, that such development activities will ever by profitable to us.

The following table sets forth (i) the impact of these lines of business on our total revenues and net income attributable to common shareholders for the periods indicated and (ii) our total assets applicable to each segment for the periods indicated (dollars in thousands):

                                        Three Months Ended December 31,
                                       2012                          2011
                                           Net Income                   Net Income
                                             (Loss)                       (Loss)
                                          Attributable                 Attributable      Segment Assets at
                             Total         to Common        Total        to Common         December 31,
                            Revenues      Shareholders     Revenues    Shareholders      2012        2011
Loan and investment        $    2,321    $          493   $    2,386   $       3,633   $ 102,252   $ 129,867
Multi-family real estate        4,950            (1,238 )          -               -     183,485           -
Other real estate                 980              (559 )        768             241     146,603      68,435

Net income attributable to common shareholders decreased by $5.2 million or 133.7% from $3.9 million in the three months ended December 31, 2011 to a loss of $1.3 million in the three months ended December 31, 2012. The decrease is due primarily to the inclusion (i) in the quarter ended December 31, 2011 of a $3.2 million gain on the sale of a loan in our loan and investment segment and a $490,000 gain on the sale of a property in our other real estate segment and
(ii) in the quarter ended December 31, 2012, a $1.24 million loss sustained in our multi- family property segment.

Contributing to the net loss sustained in our multi-family activities were, among other things, property acquisition costs of $878,000 with respect to the three multi-family properties acquired in the current fiscal quarter and a fourth property which has not yet closed and $1.1 million of non-cash depreciation and amortization expense. Depreciation and amortization expense will continue to negatively impact the operating results of our multi-family property segment.

The following highlights our activities during the three months ended December 31, 2012 and our financial condition as of such date:

† we acquired three multi-family properties with an aggregate of 884 units for an aggregate purchase price of $57.4 million (excluding acquisition costs of $830,000 and including an aggregate of $45.5 million of mortgage debt);

† we originated $42.8 million of mortgage loans in the first three months of fiscal 2013 compared to $25.5 million in the first three months of fiscal 2012;

† at December 31, 2012, our net loan portfolio totaled $70.2 million - all of the loans in the portfolio are performing; and

† at December 31, 2012 we had cash and cash equivalents and available-for-sale securities of $33.8 million.

Results of Operations - Three months ended December 31, 2012 compared to the three months ended December 31, 2011

Revenues



The following table compares our revenues for the periods indicated:



                                        Three Months Ended
                                           December 31,             Increase          %
(Dollars in thousands):                2012           2011         (Decrease)      Change
Interest and fees on real estate
loans                               $     1,879    $     2,252    $       (373 )       16.6 %
Rental and other revenue from
real estate properties                    5,640            768           4,872        634.9 %
Recovery of previously provided
allowances                                  422              7             415          N/A
Other income                                310            127             183        145.4 %
Total revenues                      $     8,251    $     3,154    $      5,097        161.5 %

Interest and fees on real estate loans. The decrease is due to a $20.2 million decrease in the weighted average balance of earning loans outstanding which resulted in a decline of $631,000 in interest income. Though we originated in excess of $42 million of new loans in the first quarter of 2013, the average weighted balance of our loan portfolio declined primarily because such loans were originated towards the end of the quarter. The decrease was partially offset by a $179,000 increase in interest income resulting from an increase in the weighted average interest rate on the portfolio from 11.46% to 12.67% and a $78,000 net increase in loan fee income. The increase in the interest rate on the portfolio was due to the payoff of a lower interest rate loan. Loan fees increased due to amortization of loan fees resulting from a larger loan portfolio and fees recognized on expired commitments; the loan fee increase was partially offset by a decline in extension and other fees.

Rental and other revenue from real estate properties. The increase is primarily due to the inclusion of $3.68 million of rental revenue from five multi-family residential properties we acquired in fiscal 2012 and $1.27 million of rental revenue from three multi-family properties acquired in the first quarter of fiscal 2013. The increase was partially offset by an approximate $68,000 decline in rental revenue from reduced occupancy at our Newark Joint Venture properties. These are developments sites and accordingly, leasing space at such properties is difficult.

Recovery of previously provided allowances. The increase is due to the inclusion of $419,000 recovery relating to a loan charged off in a prior period.

Other income. The increase is the result of a U.S. Treasury subsidy which covers approximately 90% of the interest payments with respect to qualified school construction bonds ("QSCB's") with a principal amount of approximately $22.7 million issued by the Newark Joint Venture. We anticipate this subsidy, in the annual amount of approximately $1.2 million, will continue until at least 2018.

Expenses



The following table compares our expenses for the periods indicated:



                                     Three Months Ended
                                        December 31,             Increase          %
(Dollars in thousands)               2012           2011        (Decrease)      Change
Interest expense                  $     2,946    $      467    $      2,479        530.6 %
Advisor's fees, related party             374           171             203        118.4 %
General and administrative              1,863         1,674             189         11.2 %
Property acquisition costs                878             -             878          N/A
Operating expenses relating to
real estate properties                  3,146           786           2,360        300.3 %
Depreciation and amortization           1,287           184           1,103        601.2 %
Total expenses                    $    10,494    $    3,282    $      7,212        219.7 %

Interest expense. The increase is primarily attributable to the following factors: (i) $1.0 million is due to mortgages on the five multi-family residential properties acquired in fiscal 2012 and $297,000 on three properties acquired in the first quarter of fiscal 2013; (ii) $918,000 is due to the Newark Joint Venture's financing transactions; and (iii) $178,000 is due to the increase in August 2012 of the interest rate on the junior subordinated notes from 3% to 4.9%. We estimate that interest expense in fiscal 2013 attributable to our eight multi-family properties, the Newark Joint Venture's 2012 financings and the junior subordinated notes, will be approximately $12.2 million. Capitalized interest was $604,000 and $311,000 for the periods ended December 31, 2012 and 2011, respectively.

Advisor's fees, related party. The fee is calculated based on invested assets which increased primarily due to the purchase of eight multi-family properties over the last twelve months.

Property acquisition costs. The costs are primarily associated with the purchase of three multi-family properties in the quarter ended December 31, 2012. Such costs included acquisition fees to our joint venture partners, brokerage fees, and legal, due diligence and other transactional costs and expenses.

General and administrative. The increase is due primarily to increased professional fees associated with recent joint venture activities, litigation relating to the recovery of funds on a loan that was charged off in a prior fiscal year and to the inclusion of the $50,000 fee payable quarterly to the chairman of our board of trustees.

Operating expenses relating to real estate properties. The increase is due primarily to the acquisition, in the previous twelve months, of eight multi-family residential properties.

Depreciation and amortization. The increase is due primarily to the acquisition in the previous twelve months.

Other revenue and expense items

Equity in earnings (loss) of unconsolidated ventures. The increase is due primarily to the inclusion of a loss in the quarter ended December 31, 2011 from the write off of capitalized costs related to a joint venture that ceased operations in November 2011.

Gain on sale of loan. In October 2011, pursuant to a federal bankruptcy court approved plan of reorganization, we and our loan participant sold the rights to a loan, for net proceeds of approximately $23.5 million. We recognized a $3.2 million gain on the sale, representing our 50% interest in this loan.

Discontinued operations

In the three months ended September 30, 2011, discontinued operations consisted of gain on the sale of one vacant cooperative apartment in New York City. There were no discontinued operations in the quarter ended December 31, 2012.

Liquidity and Capital Resources

We require funds to acquire properties, fund loan originations, repay borrowings, pay operating expenses, and with respect to the Newark Joint Venture, to fund operating losses and a third development phase. Our current sources of liquidity consist primarily of our cash and up to $10 million that we may borrow on an unsecured basis for up to 90 days pursuant to our credit facility. At December 31, 2012, our liquidity (excluding $49.6 million in restricted cash-construction holdback which is to be used by the Newark Joint Venture) was approximately $42.6 million. At January 31, 2012 our liquidity was approximately $31 million, which consisted of $21 million of cash and $10 million available on the credit facility.

Multi-Family Residential Properties

We anticipate that the debt service that becomes payable during 2013 through 2015 for our eight multi-family properties and the operating expenses of these properties will be funded from the rental revenues generated therefrom. The mortgage debt with respect to these properties is non-recourse to (i) the joint venture that owns the property, subject to standard carve-outs and (ii) us and our subsidiary holding our interest in the joint venture.

Newark Joint Venture

The Newark Joint's Venture's current capital resource and liquidity requirements through September 2015 are primarily construction and related costs and debt service associated with the first and second phases of the Teacher's Village project which contemplate the construction of five buildings. We anticipate that the construction and associated costs for these phases of the Teachers Village project will be funded by the $49.6 million reflected as restricted cash-construction holdback on our consolidated balance sheet, which funds are to be released to the venture from time to time upon satisfaction of specified construction and permitting related conditions.

We anticipate that the debt service payable from 2013 through 2015 and the estimated operating expenses for such years for the first and second phase of the Teacher's Village project, will be paid from existing interest reserves, a US Treasury interest subsidy on the qualified school construction bonds, New Jersey tax credits, the refinancing of approximately $ 3.6 million of short term debt, funds generated from the operations of such properties and capital contributions from the members of the Newark Joint Venture. After giving effect to the $2.4 million of rental revenues to be generated from the in-place lease agreements with the three charter schools and a day-care center, the Newark Joint Venture estimates that it will require at least an additional $7 million in rental payments from retail tenants and residential tenants at the Teachers Village buildings to cover debt service and operating expenses for 2014 and 2015. While the Newark Joint Venture has commenced marketing the retail space at these buildings, there is no assurance that the venture will be able to lease such space and that if leased, the rental payments therefrom and from rental revenues from the residential units (for which marketing has not commenced) will be sufficient to cover debt service and operating expenses.

The Newark Joint Venture is currently seeking up to $30 million in financing from public and private sources to fund the third phase of the Teachers Village project. This third phase contemplates the construction of up to three additional buildings containing a mix of residential and retail space. No assurance can be given that the Newark Joint Venture will obtain the necessary financing on acceptable terms or if such financing is obtained, that such project will be profitable for us.

We believe we have sufficient funds to meet our operating expenses in 2013 and to fund any capital contributions required by the general operations of Newark Joint Venture and our multi-family properties. We also have funds available to engage in our lending business and to make property acquisitions. The extent of our ability to engage such activities is limited by our available cash and, in the case of loan origination activities, by our (i) ability to sell participating interests in such loans and (ii) ability or willingness to use our credit facility, and in the case of our multi-family property activities, the availability of mortgage debt to finance such acquisitions

Credit Facility

A subsidiary of ours is able, pursuant to a senior secured revolving credit facility, to borrow up to an aggregate of $25 million to originate loans. The subsidiary may borrow (i) on an unsecured basis, $10 million for up to 90 days and (ii) on a secured basis, up to the lesser of $25 million and the borrowing base. The borrowing base is generally equal to 40% to 65% (depending on, among other things, the type of property secured by eligible mortgage receivables acceptable to the lender as collateral and the operating income of the related property) of such receivables. Interest accrues on the outstanding balance at the greater of (i) 4% plus LIBOR and (ii) 5.50%. The facility matures June 21, 2014 and, subject to the satisfaction of specified conditions, the outstanding balance may be converted at our option into an 18 month term loan. We have guaranteed the payment and performance of our subsidiary's obligations under the facility. The credit facility, among other things, requires us to maintain specified net worth and liquidity levels, requires the subsidiary to maintain specified debt service coverage and collateral coverage ratios, and limits our and our subsidiary's ability to incur debt.

At each of December 31, 2012 and January 31, 2013, no amount was outstanding under the facility and the maximum amount we could borrow was $10 million for 90 days.

Cash Distribution Policy

At December 31, 2012, we had approximately $56 million of net operating loss carry forwards available to offset future income. It therefore is highly unlikely that we will pay or, to maintain our REIT status, be required to pay any dividend in 2013 and for several years thereafter.

Off Balance Sheet Arrangements

None.