8-K

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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 8-K

                 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934



Date of Report  September 28, 2001

           First Union Real Estate Equity and Mortgage Investments
            (Exact name of Registrant as Specified in Its Charter)

                                                                                   
     Ohio                                                         1-6249                     34-6513657
(State or Other                                          (Commission File Number)         (I.R.S. Employer
Jurisdiction of                                                                          Identification No.)
Incorporation)

         125 Park Avenue, 14th Floor
                 New York, NY                                                                   10017
(Address of Principal Executive Offices)                                                     (Zip Code)


Registrant's Telephone Number, Including Area Code:                                         (212) 949-1373




Former Name or Former Address, if Changed Since Last Report.


Total number of pages in report: 2
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ITEM 5.  OTHER EVENTS

         On September 24, 2001, the Registrant issued a press release announcing
         that it has entered into a letter of intent with Gotham Partners, L.P.
         that outlines a proposed business combination and cash-out merger
         transaction. The proposed transaction is subject to, among others, the
         approval by the Registrant's board of trustees and shareholders of a
         definitive agreement with respect to the proposed transaction.

ITEM 7.  FINANCIAL STATEMENTS AND EXHIBITS

         a.   Financial Statements of Businesses Acquired

              Not Applicable.

         b.   Pro Forma Financial Information

              Not Applicable.

         c.   Exhibits

              99.1  Press release dated September 24, 2001 regarding a letter of
                    intent between the Registrant and Gotham Partners, L.P.

              99.2  Letter of Intent between the Registrant and Gotham
                    Partners, L.P.








                                   SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.


                                                First Union Real Estate Equity
                                                   and Mortgage Investments
                                                         (Registrant)


Date: September 28, 2001                              By: /s/  Neil H. Koenig
      ---------------------                               ----------------------
                                                               Neil H. Koenig
                                                               Interim Chief
                                                               Financial Officer

EX-99.1

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                                                                    EXHIBIT 99.1


               Filed by First Union Real Estate Equity and Mortgage Investments,
                                                           Gotham Partners, L.P.
                                                      Gotham Golf Partners, L.P.
                                Pursuant to Rule 425 under the Securities Act of
                                   1933 and deemed filed pursuant to Rule 14a-12
                                       under the Securities Exchange Act of 1934


        Subject Company: First Union Real Estate Equity and Mortgage Investments
                                                   Commission File No. 001-06249


                                   * * * *

THE FOLLOWING IS A JOINT PRESS RELEASE ISSUED BY FIRST UNION Real Estate
Equity and Mortgage Investments, GOTHAM PARTNERS, L.P. AND GOTHAM GOLF
PARTNERS, L.P. ON SEPTEMBER 24, 2001:

                                   * * * *

                                                               
FOR IMMEDIATE RELEASE                                             CONTACTS:
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS           NEIL H. KOENIG, CHIEF FINANCIAL OFFICER
                                                                  (212) 949-1373

GOTHAM PARTNERS, L.P.                                             WILLIAM A. ACKMAN,
                                                                  (212) 286 0300




FIRST UNION REAL ESTATE ENTERS INTO LETTER OF INTENT WITH GOTHAM PARTNERS



NEW YORK, September 24, 2001 - First Union Real Estate Equity and Mortgage
Investments (NYSE: FUR) and Gotham Partners, L.P. jointly announced today that
they have executed a formal letter of intent which outlines a business
combination and cash-out merger transaction, in which First Union shareholders
will receive (1) cash of $2.20 per share, (2) the option of receiving either a
proportionate share in the continuing assets of First Union or an additional
$0.50 per share in cash (unless First Union's transaction fees exceed $2,000,000
in which case that per share cash amount will be reduced proportionately) and
(3) subscription rights to invest in a new entity, Gotham Golf Corp.

            "We have structured a transaction that generates substantial
liquidity for First Union's shareholders while minimizing valuation
considerations, provides shareholders with the opportunity to either participate
in the ongoing liquidation of the Trust's remaining non-cash
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assets or to receive an additional, immediate cash payment, and gives
shareholders the opportunity to join Gotham Golf Corp. in the future by
investing in the company if they elect to do so," said William A. Ackman,
Chairman of First Union's Board of Trustees, and a principal of Gotham Partners,
L.P., which owns a controlling interest in Gotham Golf Partners, L.P ("GGP").
"We believe this transaction will bring substantial benefits to First Union and
its shareholders, at a time when the market needs some good news."

            "The proposed transaction would provide First Union common
shareholders with a combination of liquidity and the opportunity for equity
participation," said Dan Altobello, a member of First Union's Board of Trustees,
and Chairman of the Special Committee charged with evaluating and negotiating
the proposed transaction. "We're ready to move forward with this process
expeditiously."

            The proposed transaction will require First Union common shareholder
approval, which will be solicited pursuant to a proxy statement-prospectus. The
proposed transaction will be part of an integrated plan that will be consummated
at a single closing. As part of the transaction, First Union will merge with and
into a newly formed company, which will be named Gotham Golf Corp. following the
merger. Concurrently, in exchange for newly issued common stock of Gotham Golf
Corp., Gotham Partners, L.P. and certain of its affiliates will contribute to
Gotham Golf Corp. their equity interests in GGP and related assets.

            In connection with the merger, in exchange for their beneficial
interests, First Union's common shareholders will receive cash in the amount of
First Union's per common share net asset value, which will be $2.20 per share of
common stock. In addition, First Union common shareholders will receive
transferable rights to subscribe for stock in Gotham Golf Corp., in proportion
to their ownership of common shares immediately preceding the merger, for up to
an aggregate of $40 million in Gotham Golf Corp. equity.

            In addition to the foregoing, First Union will distribute all of its
non-cash assets and certain amounts of cash to a newly formed company, First
Union Asset Company, or FAC. First Union's common shareholders will have the
option to receive (i) a pro rata distribution of FAC units, or (ii) cash of
$0.50 per unit (unless First Union's transaction fees exceed $2,000,000 in which
case the per share cash amount will be reduced proportionately), in lieu of
their pro rata
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distribution of FAC units. First Union will receive cash of $0.50 per unit
(subject to reduction based on First Union's transaction fees, as described
above) from Gotham Partners, L.P., which has agreed to purchase from First Union
those FAC units declined by First Union shareholders. FAC will assume all
existing and contingent liabilities of First Union other than (1) the $12.5
million of 8.875% Senior Notes due September 15, 2003, (2) the approximately
$24.6 million of 8.4% Series A Cumulative Convertible Redeemable Preferred
Shares of preferred stock (including any accrued but unpaid interest and
dividends on such debt and preferred stock) and (3) certain other specific
liabilities, all of which will remain obligations of First Union or its
successor, Gotham Golf Corp. FAC will also provide First Union with a blanket
indemnity against claims for liabilities related to the distributed assets or
the proposed transaction. Gotham Golf Corp. will provide or cause to be provided
up to approximately $6 million of secured working capital financing to support
FAC's requirements. FAC will be managed by a management team to be determined by
the parties.

            The proposed transaction will be effected pursuant to a combination
agreement in form and substance customary for comparable transactions, which
would be entered into only following (i) approval and recommendation by the
unaffiliated members of First Union's Board of Trustees in connection with the
consideration of the proposed transaction, and (ii) receipt by First Union of an
opinion from its independent financial advisor as to the fairness from a
financial point of view of the proposed transaction to First Union's common
shareholders unaffiliated with Gotham Partners, L. P. The obligation of First
Union and Gotham Partners, L.P. to consummate the proposed transaction will be
conditioned upon the satisfaction of certain customary closing conditions,
including, among other things, approval by no less than a majority of First
Union's common shareholders.

            GGP is a golf course ownership, acquisition, and operating company
headquartered in Hershey, PA formed in 1997. Since 1997, GGP has acquired and
continues to own and operate 26 golf courses, 21 of which are located within
approximately 200 miles of GGP's headquarters. Prior to the consummation of the
transaction, the management of GGP will meet with shareholders and other
investors in an investor road show presentation that should enable shareholders
to make an informed decision about whether to exercise their right to
participate in an investment in GGP.
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            In connection with the proposed transaction Gotham Partners, L.P.
and certain of its affiliates have filed an amended Schedule 13D with the
Securities and Exchange Commission in respect of their beneficial interests in
First Union, including the full text of the letter of intent which more fully
sets forth the understanding among the parties. Shareholders and other
interested parties are urged to review that filing as well as the definitive
joint proxy statement/prospectus when it becomes available.

                                   * * * *

These materials contain forward-looking statements within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These statements are based on First Union management's, Gotham Partners,
L.P.'s and Gotham Golf Partners' current expectations and beliefs and are
subject to a number of factors and uncertainties that could cause actual results
to differ materially from those described in the forward-looking statements. The
forward-looking statements contained in this release include statements about
future financial and operating results and the proposed First Union/Gotham Golf
Partners business combination.

The following factors, among others, could cause actual results to differ
materially from those described in the forward-looking statements: the risk that
material adverse events will preclude consummation of the proposed transaction;
costs related to the proposed transaction; failure of the First Union
shareholders to approve the merger; and other economic, business, competitive
and/or regulatory factors affecting First Union's and Gotham Golf Partner's
businesses generally, including, without limitation, in the case of First Union,
those risks identified in First Union's annual report on Form 10-K, for the year
ended December 31, 2000, as amended, and the proxy statement filed with the SEC
on February 10, 2001, and in the case of Gotham Golf Partners, risks associated
with governmental regulation (including, among others, environmental regulations
and potential associated liabilities), general or local economic conditions, a
decrease in the number of people playing golf, adverse weather conditions
(including, among others, drought or shortage of water), financial leverage,
increased competition, seasonality, uninsured losses, real estate investments
generally (including, among others, the illiquidity of real estate investments,
the possibility that golf courses and associated properties will generate
revenues or yield returns lower than those anticipated) and the risk that golf
courses and associated properties will not generate income sufficient to meet
expenses including, among others, lease obligations and existing capital
requirements and planned capital expenditures. First Union, Gotham Partners,
L.P. and Gotham Golf Partners are under no obligation to (and expressly disclaim
any such obligation to) update or alter their forward-looking statements whether
as a result of new information, future events or otherwise.

INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS REGARDING THE BUSINESS COMBINATION TRANSACTION REFERENCED
IN THE FOREGOING INFORMATION WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN
IMPORTANT INFORMATION. The joint proxy statement/prospectus will be filed with
the Securities and Exchange Commission by First Union, Gotham Partners, L.P. and
Gotham Golf Partners. Investors and security holders
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may obtain a free copy of the joint proxy statement/prospectus (when it becomes
available) and other documents filed by First Union, Gotham Partners, L.P. and
Gotham Golf Partners with the Securities and Exchange Commission at the
Commission's web site at www.sec.gov. The joint proxy statement/prospectus and
these other documents may also be obtained for free from First Union. READ THE
DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS CAREFULLY BEFORE MAKING A DECISION
CONCERNING THE PROPOSED TRANSACTION.

First Union, Gotham Partners, L.P. and Gotham Golf Partners, their respective
trustees, directors, partners, executive officers and certain other related
persons and employees may be soliciting proxies or deemed to be soliciting
from First Union shareholders in favor of the proposed transaction.  Such
persons may include the following:  Talton R. Embry, Jeffrey B. Citrin, Bruce
R. Berkowitz, Daniel J. Altobello, Brent Baird, Anne N. Zahner, William A.
Ackman, David P. Berkowitz, Gregory Lyss, Michael S. Weiss, R. D. Mays, John
Caporaletti, Stephen J. Garchik and William Leahy.

Collectively, as of August 31, 2001, the trustees and executive officers of
First Union may be deemed to beneficially own approximately 39.80% of the
outstanding common shares of First Union common stock. Collectively as of
September 24, 2001, Gotham Partners, L.P. and its affiliates may be deemed to
beneficially own approximately 16.75% of the outstanding common shares of First
Union common stock. Shareholders of First Union may obtain additional
information regarding the interests of the participants and additional
information by reading the joint proxy statement/prospectus when it becomes
available.

EX-99.2

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                                                                    EXHIBIT 99.2






                              GOTHAM PARTNERS, L.P.
                              110 EAST 42ND STREET
                            NEW YORK, NEW YORK 10017


                                                              September 19, 2001


Special Committee of the Board of Directors of
First Union Real Estate Equity and Mortgage Investments

              Re:  Letter of Intent

Gentlemen:

         Reference is made to that certain letter, dated July 3, 2001, which set
forth the general outline of the current transaction we are proposing (the
"Proposed Transaction") between First Union Real Estate Equity and Mortgage
Investments ("First Union") and Gotham Partners, L.P. and certain of its
affiliates ("Gotham"). In connection with the foregoing, this letter of intent
(the "Agreement") sets forth the principles and commitments of the parties in
furtherance of the negotiations and definitive agreements to be entered into in
respect of the Proposed Transaction.

         You should understand that the Proposed Transaction has been submitted
to you on a preliminary basis and, consequently, this Agreement does not
represent a binding commitment by any party to undertake the Proposed
Transaction. Furthermore, subject to the provisions hereof, each party reserves
the right to discontinue discussions with respect to the Proposed Transaction at
any time, and for any or no reason. Notwithstanding the foregoing, this
Agreement represents a binding commitment on the part of First Union with
respect to the exclusivity and expense reimbursement provisions contained
herein.

         In consideration of the premises, covenants and agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are acknowledged and agreed, the parties hereto agree as follows:

1.    Transaction Outline.  The Proposed Transaction will require First Union
      common shareholder approval, which will be solicited pursuant to a single
      proxy statement-prospectus. The Proposed Transaction will be part of an
      integrated plan which will be consummated at a single closing occurring
      after the effective time of the merger described below. The Proposed
      Transaction will consist of the following steps:

         (a)   First Union will contribute all of its existing assets other than
               the Retained Assets (as defined herein) (the "Distributed
               Assets") to a newly formed publicly traded company, First Union
               Asset Company ("FAC"), in exchange for
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First Union Real Estate Equity and Mortgage Investments
September 19, 2001
Page 2


               units ("Units") representing all of the equity interests in FAC.
               The "Retained Assets" will consist of cash and cash equivalents
               in an amount equal to the sum of (x) $114.25 million and (y) an
               amount equal to accumulated but unpaid dividends and interest on
               debt and preferred stock of First Union (whether or not then due
               or payable, but instead calculated on a pro rata basis with
               respect to the time since the last payment of dividends or
               interest).

         (b)   The legal form of FAC has not been finally determined but will,
               in any event, have limited liability to the Unit holders. FAC's
               organizational documents will provide for an orderly sale and/or
               distribution of the Distributed Assets, including the Park Plaza
               Mall, Circle Tower, HQ Global preferred stock and warrants,
               Ventek, the Peach Tree Mall legal claim, and non-cash working
               capital. FAC will assume all existing and contingent liabilities
               of First Union other than (1) the $12.5 million of 8.875% Senior
               Notes due September 15, 2003, (2) the $24.7 million of 8.4%
               convertible preferred stock (including any accrued but unpaid
               interest and dividends on this debt and preferred stock) and (3)
               certain specific liabilities to be scheduled, which will remain
               obligations of First Union (or its successor, as described
               below).

         (c)   FAC will provide First Union with a blanket indemnity against any
               and all claims of whatever kind or nature including but not
               limited to environmental claims relating to the use, ownership,
               lease, operation or maintenance of the Distributed Assets and for
               any or all liabilities, obligations, claims, causes of action or
               any other liabilities arising or related to the Distributed
               Assets or the Proposed Transaction.

         (d)   First Union will agree to provide or cause to be provided up to
               $6 million of secured working capital financing to support FAC's
               requirements. The working capital facility will have the
               following terms, and such other terms as are customary for
               similar facilities: 2% per annum facility fee on undrawn
               available amounts; 12.75% interest on drawn amounts; 2 year term;
               secured by all the assets of FAC; all net proceeds of asset sales
               and other extraordinary receipts will be used to repay any
               amounts drawn under the facility (and such prepayments, as well
               as any other prepayments, will reduce the available amount under
               the facility for the remaining term thereof; in the event of what
               would otherwise be a required repayment event at a time when
               there is no amount drawn under the facility, or when the amount
               that would otherwise be required to be repaid is in excess of the
               amount then drawn, the amount of such otherwise required or
               excess repayment will permanently reduce the availability under
               the facility). FAC will be managed by a management team to be
               determined by the parties.
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September 19, 2001
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         (e)   First Union will merge with and into a newly formed company,
               Newco, a Delaware corporation. Concurrently, Gotham will
               contribute its equity interests in Gotham Golf Partners, L.P. and
               related assets ("GGP") to Newco in exchange for newly issued
               common stock of Newco. Immediately following the consummation of
               the merger, Newco shall be renamed Gotham Golf Corp.

         (f)   In connection with the merger described in subsection 1(e) above,
               First Union common shareholders (other than Gotham with respect
               to the shares to be concurrently issued to it in respect of the
               contribution of GGP) will receive cash in the amount of the per
               share net asset value, subject to certain adjustments (but not to
               be adjusted below $2.20 per share of common stock), of First
               Union at closing (which will be funded out of First Union's
               existing cash on hand) in exchange for their shares of First
               Union common stock.

         (g)   In addition to the foregoing, concurrently with the consummation
               of the merger, each former shareholder of First Union common
               stock will receive rights to subscribe for stock in Gotham Golf
               Corp. in proportion to such shareholder's ownership of common
               stock immediately preceding the merger, for up to $40 million in
               Gotham Golf Corp. equity with GGP having an equity valuation of
               $50 million prior to the subscription offering. If and to the
               extent that any such holders of common stock decline to exercise
               such rights, the remaining holders of such rights shall be
               permitted to subscribe for the remaining Gotham Golf Corp. stock
               available in the subscription offering. The parties will endeavor
               to encourage a when-issued market in the rights prior to the
               close of the subscription offering.

         (h)   In connection with the matters described in subsection 1(a)
               above, First Union common shareholders will have the option (the
               "FAC Election") of electing to receive (i) a pro rata
               distribution of FAC Units, or (ii) cash of $0.50 per Unit
               (subject to possible adjustment as described in the next
               sentence, the "FAC Cash Amount") in lieu of their pro rata
               distribution of FAC Units. The aggregate FAC Cash Amount will be
               subject to reduction on a dollar-for-dollar basis by the amount
               by which transaction costs (other than fees and expenses of any
               investment banker or legal counsel to GGP retained by GGP in
               connection with the $40 million equity offering, and other than
               SEC filing fees, reasonable printing costs and any fees and
               expenses (including, without limitation, fees for accountants,
               lawyers, financial advisors and consultants) incurred by Gotham
               for its own account in connection with the Proposed Transaction)
               payable by First Union or FAC exceed $2 million, with such
               reduction to be applied pro rata on a per Unit basis.
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September 19, 2001
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         (i)   If and to the extent common shareholders fail to make an election
               in connection with the FAC Election, such shareholders shall be
               deemed to have elected to receive FAC Units.

         (j)   In exchange for Gotham paying cash to First Union in an amount
               equal to the FAC Cash Amount, First Union will sell and Gotham
               will purchase a number of Units equal to the number of Units in
               lieu of which First Union common shareholders elected to receive
               cash (as described above).

         (k)   Prior to the consummation of the Proposed Transaction shares of
               First Union convertible preferred stock will continue to have the
               right to convert into shares of First Union common stock, in
               accordance with their existing terms. In connection with the
               Proposed Transaction, each current holder of such shares will
               receive shares of convertible preferred stock of Gotham Golf
               Corp., which will have identical terms to the shares of First
               Union convertible preferred stock.

         (l)   The Proposed Transaction will be effected pursuant to a
               combination agreement in form and substance customary for
               transactions of this sort, which would be entered into only
               following (i) approval and recommendation by a the unaffiliated
               members of the First Union Board of Directors in connection with
               the consideration of the Proposed Transaction, and (ii) receipt
               by First Union of an opinion from its independent financial
               advisor as to the fairness from a financial point of view of the
               Proposed Transaction to the common shareholders of First Union
               unaffiliated with Gotham. The Board of First Union will not be
               required to make a recommendation with respect to the
               shareholders' election to receive cash in lieu of FAC Units. The
               Board of First Union will not be required to make a
               recommendation with respect to the exercise of the subscription
               rights for Gotham Golf Corp.

2.    Conditions.  The obligation of First Union and Gotham to consummate the
      Proposed Transaction will be conditioned upon, among other items to be
      mutually agreed, the satisfaction of the following:

         (a)   Completion of the definitive documentation of the transactions
               described herein on terms and conditions satisfactory to both
               parties.

         (b)   Receipt of all necessary consents to the transactions
               contemplated hereby (including the consent of any third parties).

         (c)   Receipt of all necessary and advisable governmental approvals,
               satisfactory to both parties, of the transactions described
               herein.
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September 19, 2001
Page 5


         (d)   Approval by no less than a majority of First Union's existing
               common shareholders and approval by no less than 70% of the Board
               of First Union of the Proposed Transaction. At the time that a
               definitive agreement is entered into in respect of the Proposed
               Transaction, shareholders represented on the Board will enter
               into agreements to vote in favor of the Proposed Transaction.

         (e)   From the date of execution of the definitive documentation until
               the consummation of the transactions described herein and subject
               to the operation of First Union's business in accordance with
               ordinary course past practices (excluding changes caused (x) by
               the announcement of the transaction and (y) economic events
               generally related to the U.S. economy or securities markets), and
               further subject to the satisfaction or waiver on or prior to the
               closing, on the part of Gotham, the absence of any material
               adverse change in First Union's businesses and assets including,
               without limitation, (A) the commencement of voluntary or
               involuntary bankruptcy proceedings, the acceleration of or any
               material default under any existing material loan agreement (if
               not waived by the relevant creditors or debt holders (but
               excluding any waiver that is for a period of time not extending
               beyond the end of the immediately following fiscal quarter)), a
               general assignment for the benefit of creditors, or the
               appointment or motion for the appointment of a trustee, receiver,
               or liquidator for all or a substantial part of the assets or
               properties with respect to HQ Global or any other material
               portion of the Distributed Assets (or any determination or public
               announcement to take any such action or any public announcement
               that any such action is under consideration); or (B) receipt of a
               draw notice with respect to the Ventek performance guarantees.
               The parties agree that the following shall not constitute a
               "material adverse change": (i) the commencement of construction
               of a mall or similar shopping facility in a location that
               competes with the Park Plaza Mall and (ii) the insolvency of HQ
               Global or Ventek, unless the conditions in (A) above are met.
               Subject to their mutual agreement, the parties will also include
               in the definitive documentation any further exceptions to the
               notion of a "material adverse change."

3.    Exclusivity.  During the Exclusivity Period (as defined herein), Gotham
      shall have the exclusive right to conduct due diligence, evaluate
      Confidential Information (as such term is defined in that certain
      letter agreement, dated August 9, 2001, by and between the parties
      hereto, hereafter the "Confidentiality Agreement") and to conduct
      discussions and negotiations with First Union relating to the Proposed
      Transaction.  The period from the acceptance of this Agreement through
      the earlier of (i) November 15, 2001 or (ii) the date Gotham receives
      written notice from First Union that it has received a Superior
      Proposal (as defined herein) and that First Union believes in good
      faith based upon the advice of counsel that its fiduciary duties
      require it to terminate discussions relating to the Pro-
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      posed Transaction as a result of and to pursue such Superior Proposal is
      hereinafter referred to as the "Exclusivity Period." During the
      Exclusivity Period, neither First Union nor its Representatives (as such
      term is defined in the Confidentiality Agreement) shall, directly or
      indirectly, (i) solicit, initiate or encourage any inquiry or proposal,
      except from Gotham, that constitutes, or may be reasonably expected to
      lead to, a proposal or offer to acquire any interest in, dispose of or
      otherwise result in a change of control of First Union or any of its
      assets (any of the foregoing inquiries or proposals being referred to in
      this Agreement as an "Acquisition Proposal"); (ii) engage in negotiations
      or discussions concerning, or provide any information to any person or
      entity relating to, an Acquisition Proposal; or (iii) agree to, approve or
      recommend any Acquisition Proposal. A "Superior Proposal" is a bona fide
      proposal made by a third party to acquire, for consideration consisting of
      cash or publicly-traded securities, more than 90% of the common shares of
      First Union or all or substantially all of the assets of First Union, on
      terms that the Board of Directors of First Union determines in good faith
      (based on the advice of a financial advisor of nationally recognized
      reputation) to be more favorable to its stockholders than the Proposed
      Transaction and for which financing, to the extent required, is then
      committed or which, in the good faith judgment of the Board of Directors
      of First Union, is reasonably capable of being obtained.

4.    Expenses.  Except as provided in the following two sentences, each
      party shall bear its own expenses with respect to the Proposed
      Transaction, including, without limitation, fees for accountants,
      lawyers, financial advisors and consultants.  Notwithstanding the
      foregoing, First Union shall reimburse Gotham and its affiliates
      (including GGP) for their reasonable and documented out-of-pocket
      expenses incurred in connection with the Proposed Transaction in the
      event that (A) during the Exclusivity Period, First Union terminates
      discussions with Gotham relating to the Proposed Transaction if such
      termination is in connection with an alternative Acquisition Proposal
      or Superior Proposal, or (B) within 9 months from and after the end of
      the Exclusivity Period , either (x) a transaction that would constitute
      an alternative Acquisition Proposal or Superior Proposal is otherwise
      consummated or recommended by First Union or its Board of Directors, or
      any definitive agreement with respect to such a transaction is entered
      into, or (y) First Union enters into discussions or negotiations with
      respect to any such agreement or transaction, which subsequently lead
      to any of the events or circumstances set forth in the foregoing clause
      (x).  Furthermore, notwithstanding the first sentence of this Section
      4, in the event that the Proposed Transaction is consummated, the
      transaction costs related thereto (including, without limitation, fees
      and expenses, but excluding fees and expenses of any investment banker
      or legal counsel to GGP retained by GGP in connection with the $40
      million equity offering, and the SEC filing fees related to such
      offering, all of which will be borne by First Union and its successor
      Gotham Golf Corp.) will be borne by FAC, and accordingly FAC will
      promptly reimburse the parties' and their affiliates' reasonable
      expenses incurred in connection with the Proposed Transaction,
      including, without limitation, fees for accountants, lawyers, financial
      advisors and consultants.
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5.    Enforcement.  First Union and Gotham expressly acknowledge that any
      breach of any term of this Agreement could severely impact the other
      party's business, assets and/or operations.  The parties agree that
      monetary damages are an insufficient remedy for any actual or anticipatory
      breach of this Agreement, and that injunctive relief is an appropriate
      remedy to prevent any breach of any term hereof.  Such remedy shall not be
      deemed the exclusive remedy for any breach of this Agreement but shall be
      in addition to all other rights and remedies available at law or in
      equity.

6.    Governing Law.  This Agreement shall be governed and construed in
      accordance with the laws of the State of New York without regard to its
      choice of law provisions.

7.    Entire Agreement. This Agreement and any agreements and the understandings
      related hereto (whether in writing or otherwise) embody the entire
      agreement and understanding of the parties hereto; there are no
      restrictions, promises, representations, warranties, covenants or
      undertakings, other than those expressly set forth or referred to herein;
      and all prior agreements and understandings between the parties with
      respect to the subject matter hereof and thereof are superseded.

8.    Counterparts.  This Agreement may be executed in two or more
      counterparts, all of which shall be deemed to be an original, but all
      of which together shall constitute one and the same instrument.
      Facsimile signatures on this Agreement shall be deemed to be original
      signatures for all purposes.

9.    Interpretation.  The section headings contained in this Agreement are
      for convenience of reference only, are not part of the agreement of the
      parties and shall not affect in any way the meaning or interpretation
      of this Agreement.

10.   No Partnership or Similar Endeavor. Nothing herein shall be construed (i)
      as creating any partnership, joint venture, or similar relationship
      between Gotham, First Union or their respective affiliates or (ii) as
      creating any obligation on either Gotham and First Union to perform any
      work or to enter into any agreement or business arrangement.
   8
First Union Real Estate Equity and Mortgage Investments
September 19, 2001
Page 8


         If the foregoing is acceptable, please so signify by executing and
returning to the undersigned a copy of this Agreement.

                                          Very truly yours,

                                          BY AND ON BEHALF OF

                                          GOTHAM PARTNERS, L.P.

                                          By:  Section H Partners, L.P.,
                                          its general partner

                                          By:  Karenina Corporation,
                                          a general partner of Section H
                                          Partners, L.P.



                                          By:/s/ William A. Ackman
                                             ----------------------------------
                                             Name:  William A. Ackman
                                             Title:    Principal


BY AND ON BEHALF OF

FIRST UNION REAL ESTATE EQUITY
AND MORTGAGE INVESTMENTS



By:  /s/ Daniel J. Altobello
     ------------------------------------------
     Name:  Daniel J. Altobello
     Title: Chairman of the Special Committee
            of the Board of Trustees


cc.   Thomas H. McCormick, Esq., Shaw Pittman LLP