10KSB/A 1 ka04.htm PALMETTO REAL ESTATE TRUST FORM 10-KSB/A

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-KSB/A
(Amendment No. 1)

Annual Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2004

Commission File Number 0-179

Palmetto Real Estate Trust
(Name of small business issuer in its charter)


South Carolina (State or other jurisdiction of incorporation of organization)	57-0405064 (I.R.S. Employer Identification No.)

45 Liberty Lane, Greenville, South Carolina (Address of principal executive offices)	29607 (Zip Code)

Issuer's telephone number, including area code: (864) 233-6007

Securities registered pursuant to Section 12(b) of the Exchange Act: None.

Securities registered pursuant to Section 12(g) of the Exchange Act:

Shares of Beneficial Interest - $1 Par Value (Title of class)

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X No

(continued)

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Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to the Form 10-KSB [x]

The issuer's revenues for its most recent fiscal year: $2,273,737

The aggregate market value of the voting stock held by non-affiliates of the issuer computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the past 60 days: Not available

The number of shares outstanding of each of the registrant's classes of common equity, as of March 30, 2005: Shares of Beneficial Interest 1,770,006

Documents Incorporated by Reference


1.	Portions of Annual Report to Stockholders for the year ended December 31, 2004 ("Annual Report") in Part II.

2.	Portions of Registrant's Definitive Proxy Statement for the 2004 Annual Meeting of Stockholders in Part III.

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Introductory Note

Palmetto Real Estate Trust is filing this Amendment No. 1 to Form 10-KSB for it fiscal year ended December 31, 2004 to reflect the signature of the independent auditors as required by Rule 2-02 of Regulation S-X on the Report of Independent Registered Public Accounting Firm, Annual Report page 1.

The Exhibits 31 and 32 and the signature page have been updated as of the date of this amendment No. 1 filing.

Except as stated above, no attempt has been made in this Amendment No. 1 to modify or update the disclosures as presented in the original Form 10-KSB, and does not reflect events occurring after the original filing of the Form 10-KSB.

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Part I

Item 1. Business

Palmetto Real Estate Trust (the "Trust"), was organized as a qualified real estate investment trust under the Internal Revenue Code, Section 856, as amended, and the applicable state laws of the State of South Carolina.

The principal office of the Trust is located in Greenville, South Carolina, and the managing agent of the Trust is Ted LeCroy. Prior to its formation in 1972, the Trust was known as Palmetto Industrial Corporation. The ownership of the equitable interest in the Trust is evidenced by shares of beneficial interest. At December 31, 2004, there are 1,770,006 shares of beneficial interest issued and outstanding.

The primary business of the Trust is the ownership, development and rental of various commercial property for restaurants, department stores, convenience food stores, grocery stores, and various other retail establishments. It is the intention of the Trust to continue to invest in profitable commercial properties for suitable tenants.

The Trust derives more than 98 percent of its gross income from rents received on leases with terms ranging up to twenty years with many including renewal options ranging from one to five years.

The leases do not require the Trust to furnish any services to tenants. The Trust has no full-time employees and is engaged in no lines of business other than real estate investments. The Trust does not at present, nor in the future, intend to purchase property primarily for resale. The Trust is not involved in any type of research or development activities, and is not affiliated with any foreign corporation.

Item 2. Properties

All of the leased buildings are suitable and adequate for the purposes for which they were designed and are in a good state of repair. The managing agent makes every effort to ensure that the rent is timely paid by all the tenants, that the taxes and insurance are current on all properties, and that all buildings are being properly maintained and repaired. In management's opinion, all properties are adequately covered by insurance. The following briefly describes each of the properties:


A.	Speedy Cash of SC - 1307 Richland Avenue, Aiken, South Carolina; masonry, brick and block building; 2,344 square feet; adequate parking; construction date--1966; no mortgages or liens; three-year lease expires December 31, 2007. Annual base rent $10,560; property taxes for 2004--$1,902.

B.	Rent Smart, Inc., 405 South Pleasantburg Drive, Greenville, South Carolina; block and masonry building; 3,600 square feet--acquired in 1992; adequate parking; no mortgage or liens; annual base rent of $38,136; three-year lease expires October 31, 2005; property taxes for 2004--$4,685.

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C.	Jones Auto Detail, Reidville Road, Spartanburg, South Carolina; masonry and block building; 1,632 square feet; adequate parking; construction date--1970; no mortgages or liens; month-to-month rental; annual base rent $3,384; property taxes for 2004--$1,352.

D.	Enigma Spinx (retail convenience store and service station), Haywood--Pelham Road, Greenville, South Carolina; two masonry and block buildings; 8,500 square feet; acquired 1993; mortgage balance at December 31, 2004--$521,750; fifteen-year lease expires May 31, 2008; annual lease payments of $112,000; property taxes are paid by tenant.

E.	Venture Park, Rutherford Road, Greenville, South Carolina; three concrete block warehouses; acquired November 14, 1979; 9,200 square feet; no mortgages or liens; property taxes for 2004--$4,035.


	Principal Tenants	Lease Arrangements

	Andy Oxy Company, Inc.	Month-to-month rental. Annual base rent $16,800.

	Jaguar South	One-year lease expires April 30, 2005. Annual base rent $10,800.


F.	Pleasantburg Shopping Center, Laurens Road, Greenville, South Carolina; brick masonry and concrete building; 162,000 square feet; acquired in 1976; mortgage balance at December 31, 2004--$2,105,863; collateral for line of credit balance of $200,000; property taxes for 2004--$71,946.


	Principal Tenants	Lease Arrangements

	Book Rack	Three year lease expires May 31, 2005. Annual base rent $10,080.

	The Open Book	Five-year lease expires September 30, 2005; 16,000 square feet. Annual base rent $78,000.

	Alpha Beauty School	Five-year lease expires May 31, 2009. Annual base rent $19,878.

	Olan Mills Studio	One-year lease expires April 30, 2005. Annual base rent $8,100.

	Port Royal Bedding Company	One-year lease expires November 30, 2005. Annual base rent $25,020.

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F.	Pleasantburg Shopping Center (continued)


	Principal Tenants	Lease Arrangements
	Pleasantburg Shoe Service	Three-year lease expires January 31, 2006. Annual base rent $5,580.

	SharMari Hair Extraordinaire	Three-year lease expires January 31, 2006. Annual base rent $5,700.

	Simply the Best	Three-year lease expires January 31, 2006. Annual base rent $13,500.

	Gregory's Boutique	Three-year lease expires June 30, 2007. Annual base rent $12,000.

	Fred A. Fuller Appliances	Five-year lease expires February 28, 2008. Annual base rent $17,160.

	Wilson's 5¢ to $1.00	Five-year lease expires January 31, 2005. Annual base rent $39,084.

	Nichole's	Three-year lease expires June 30, 2006. Annual base rent $5,520.

	Novelty Shop	Five-year lease expires March 31, 2008. Annual base rent $32,928.

	POP Enterprises	Five-year lease expires March 31, 2008. Annual base rent $59,100.

	The Great Escape	Five-year lease expires January 31, 2005; 16,000 square feet. Annual base rent $54,000.

	Kutting Room	Month-to-month rental. Annual base rent $5,452.

	Culinary Capers, Inc.	Three-year lease expires January 31, 2007. Annual base rent $10,200.

	B & A Faxtax	Three-year lease expires May 30, 2006. Annual base rent $21,300.

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F.	Pleasantburg Shopping Center (continued)


	Principal Tenants	Lease Arrangements

	JP Trading	Three-year lease expires October 31, 2006. Annual base rent $15,600.

	LeCroy & Company	Two-year lease expires September 30, 2006. Annual base rent $4,200.

	Pleasantburg Barber Shop	One-year lease expires November 30, 2005. Annual base rent $6,000.

	King David Salon	Three-year lease expires July 31, 2006. Annual base rent $6,000.

	Best Upholstering	Three-year lease expires December 31, 2005. Annual base rent $8,460.

	Destiny Music	One-year lease expires January 31, 2005. Annual base rent $52,800.

	Borderlands	Three-year lease expires January 31, 2006. Annual base rent $24,888.

	Half Moon Outfitters	Three-year lease expires May 31, 2005. Annual base rent $32,328.


G.	Willard Oil property, I-85, Spartanburg, South Carolina; block and masonry building; 4,000 square feet; adequate parking; originally constructed and acquired in 1986; no mortgages or liens; annual base rent $27,144; five-year lease expires May 15, 2006. Property taxes are paid by the tenant.

H.	BP Oil Station, I-385 and Roper Mountain Road, Greenville, South Carolina; block and masonry building; 2,000 square feet; adequate parking; constructed in 1985 and acquired in 1986; no mortgages or liens; annual base rent $63,750; five-year lease expires June 30, 2006; property taxes paid by tenant.

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I.	Laurens Road Property, Laurens Road, Greenville, South Carolina; block and masonry building; 3,000 square feet; adequate parking; constructed in 1973 and acquired in 1987; no mortgages or liens; property taxes for 2004--$2,582.


	Principal Tenants	Lease Arrangements

	Family Alteration Shop	Three-year lease expires June 30, 2007. Annual base rent $7,200.

	Before-N-After Salon	Three-year lease expires July 31, 2006. Annual base rent - $7,800.


J.	Transit Drive Property, 216 Transit Drive, Greenville, South Carolina; brick building containing approximately 6,700 square feet on 200 x 250 feet tract of land; acquired in 1991; no mortgages or liens; annual base rent $39,540; three-year lease expires July 14, 2006; property taxes paid by tenant.

K.	Lesco, Inc., Northway Court, Greer, South Carolina; block and masonry building; approximately 6,000 square feet; constructed and acquired in 1994; no mortgages or liens; five-year lease expires April 30, 2006; annual base rent $33,000.

L.	Tireama, Inc., 236 East Blackstock Road, Spartanburg, South Carolina; block and masonry building; approximately 3,000 square feet; acquired in 1994; no mortgages or liens; annual base rent $42,000; five-year lease expires April 30, 2005; property taxes paid by tenant.

M.	Atlas Services, Inc., 90 Sunbelt Boulevard, Columbia, South Carolina; metal building containing approximately 20,000 square feet located on 2 acres; acquired in 1995; no mortgages or liens; annual base rent $81,600; ten-year lease expires January 12, 2005; property taxes paid by tenant.

N.	Atlas Services, Inc., Old Mill Road, Mauldin, South Carolina; brick and metal building containing approximately 17,500 square feet; acquired in 1996; no mortgages or liens; annual base rent $73,800; ten-year lease expires July 31, 2006; property taxes paid by tenant.

O.	TruGreen Chemlawn, 255 Echelon Road, Greenville, South Carolina; brick and metal building containing approximately 17,500 square feet; acquired in 1999; mortgage balance at December 31, 2004 - $639,390; annual base rent - $100,500; eight-year lease expires November 14, 2007; property taxes paid by tenant.

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P.	Taylors Point Shopping Center - Wade Hampton Boulevard, Greenville, South Carolina; brick and masonry building containing 45,922 square feet located on 5.4 acres; acquired in 1995; mortgage balance at December 31, 2004 - $1,643,742; property taxes for 2004--$48,544.


	Principal Tenants	Lease Arrangements

	American General Finance	Five-year lease expires May 31, 2006. Annual base rent $12,000.

	Brenda's Boutique	Month-to-month rental. Annual base rent $11,220.

	Hardee's Restaurant	Five-year lease expires December 30, 2009. Annual base rent $28,563.

	Dixie Family Restaurant II	Four-year lease expires December 31, 2008. Annual base rent $22,200.

	Little Caesar's Pizza	Three-year lease expires May 14, 2006. Annual base rent $19,680.

	Great Wall	Five-year lease expires October 31, 2006. Annual base rent $16,800.

	TCBY Yogurt	Five-year lease expires January 31, 2005. Annual base rent $22,524.

	Annie's Great Place	Five-year lease expires March 31, 2009. Annual base rent $21,600.

	Rims, USA	Six-month lease expires May 31, 2005. Annual base rent $3,600.

	Royal Mortgage	Two-year lease expires January 31, 2005. Annual base rent $10,400.

	Med Four LLC	Three-year lease expires November 30, 2006. Annual base rent $68,640.

	On Deck Circle	Three-year lease expires August 30, 2006. Annual base rent $8,100.

	L & B Discount Tobacco	Two-year lease expires October 31, 2006. Annual base rent $15,000.

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Q.	Potomac Place Shopping Center - 3214 Augusta Road, Greenville, South Carolina; brick and masonry building containing 23,486 square feet located on 2.3 acres; acquired in 1998, mortgage balance at December 31, 2004--$831,115; property taxes for 2004--$26,440.


	Principal Tenants	Lease Arrangements

	Advance Auto	Five-year lease expires December 31, 2004; 6,574 square feet; annual base rent $39,444.

	Ladies & Gents	Three-year lease expires July 31, 2007. 1,700 square feet; annual base rent $18,000.

	Generation Gap	Five-year lease expires February 16, 2007; 1,700 square feet; annual base rent $12,132.

	Goodwill Industries	One-year lease expires March 28, 2005; 3,500 square feet; annual base rent $24,000.

	Aaron Rents	Three-year lease expires August 31, 2007; 7,512 square feet; annual base rent $31,944.

	Sarah's Kitchen	Five-year lease expires January 31, 2009; 2,500 square feet; annual base rent $21,600.

	Bell South	Year-to-year rental; annual base rent $900.


R.	The Sunshine House - 915 Kennerly Road, Irmo, South Carolina; brick veneer building containing approximately 8,750 square feet located on 2.34 acres; acquired in 2001; mortgage balance at December 31, 2004 - $1,026,824; annual base rent - $114,000; fifteen-year lease expires July 31, 2016; property taxes paid by tenant.

S.	FedEx Ground Packaging - 135 FedEx Way, Greenville, South Carolina, 15.8 acres, five per cent undivided interest acquired in 2002; managed by TIC Properties, LLC, rent $24,097 annually.

T.	The Sunshine House - 3300 Targot Lane, Mt. Pleasant South Carolina; brick veneer building containing approximately 8,750 square feet located on 1.58 acres; acquired in 2003; mortgage balance at December 31, 2004 - $1,167,798; annual base rent - $128,713; twenty-year lease expires July 14, 2023; property taxes paid by tenant.

U.	Fred's Inc. - 2554 US Highway 25 South, Greenwood, South Carolina; brick and block building; 20,748 square feet; acquired in 2004; adequate parking; no mortgages or liens; seven- year lease expires September 30, 2010; annual base rent - $82,004; property taxes paid by tenant.

V.	Sawyer Electronics - 1210 Poinsett Highway, Greenville, South Carolina; brick, block and masonry building, 12,227 square feet; acquired in 2004; month-to-month lease; annual base rent - $18,000; property taxes for 2004 - $4,970.

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W.	Nolan Printing Company - 1208 Poinsett Highway, Greenville, South Carolina; concrete and masonry building 3,900 square feet; acquired in 2004; three-year lease expires December 31, 2007; annual base rent - $9,600; property taxes for 2004 - $805.

X.	Ridgeview Center - 913 1/2 Main Street, Laurens, South Carolina; concrete block and masonry building containing approximately 33,395 square feet; mortgage balance as of December 31, 2004 - $1,586,094; property taxes for 2004 - $29,753.


	Principal Tenants	Lease Arrangements

	B C Moore & Sons	Fifteen-year lease expires January 10, 2012. Annual base rent - $81,965.

	Check Into Cash	Five-year lease expires September 30, 2009. Annual base rent - $29,412.

	Dollar Tree Store	Eight-year lease expires July 31, 2005. Annual base rent - $41,513.

	Citi Financial	Ten-year lease expires July 31, 2008. Annual base rent - $21,000.

	Hibbett Sporting Goods	Five-year lease expires January 31, 2008. Annual base rent - $46,000.

	Cato Corporation	Five-year lease expires January 31, 2008. Annual base rent - $29,590.

	Le Nails	Three-year lease expires July 31, 2006. Annual base rent - $17,500.

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Item 3.	Legal Proceedings
	There were no material pending legal proceedings by the Trust or against the Trust or its properties at December 31, 2004.

Item 4.	Submission of Matters to a Vote of Security Holders
	No matters were submitted to a vote of shareholders during the fourth quarter of 2004.

Part II

Item 5.	Market for Common Equity and Related Security Holder Matters
	The information under the caption "Common Stock Information" in the Annual Report is incorporated herein by reference.

Item 6.	Management's Discussion and Analysis of Financial Condition and Results of Operations
	The information contained in the section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Annual Report is incorporated herein by reference.

Item 7.	Financial Statements
	The report of the independent auditors and financial statements contained in the Annual Report which are listed under Item 13 herein are incorporated herein by reference.

Item 8.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure - None.

Item 8a.	Controls and Procedures
	An evaluation as of the end of the period covered by this report was carried out under the supervision and with the participation of the Trust's management, including the Trust's Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Registrant's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Trust's Principal Executive Officer and Principal Financial Officer concluded that those disclosure controls and procedures were effective to ensure that information required to be disclosed by the Trust in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported as specified in the SEC's rules and forms.

	There have been no significant changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation described above, including any corrective actions with regard to significant deficiencies and material weaknesses.

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Part III

Item 9.	Trustees and Executive Officers of the Registrant

Item 10.	Executive Compensation

Item 11.	Security Ownership of Certain Beneficial Owners and Management

Item 12.	Certain Relationships and Related Transactions
	The information called for by Items 9, 10, 11 and 12 is hereby incorporated by reference from registrant's definitive proxy statement.

Item 13.	Exhibits
	13 Annual report to stockholders

	31 Sarbanes-Oxley Section 302(a) Certification

	32 Certification of Chief Executive Officer and Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002

Item 14.	Principal Accountant Fees and Services
	The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant under the various categories are as follows:

Fees	2004	2003

Audit Fees (1)	$24,300	$22,450

Audit - Related Fees	$ -	$3,050

Tax Fees (2)	$9,100	$7,100

All of these fees were approved by the Trust's audit committee and all services were performed by the principal accountants' full-time, permanent employees.


(1)	"Audit Fees" consist of fees billed for professional services rendered in connection with the audit of our annual financial statements, the review of our interim financial statements included in quarterly reports, and the audit in connection with regulatory filings.

(2)	"Tax Fees" consist of fees billed for professional services rendered for tax compliance and tax advice. These services include assistance regarding federal and state tax compliance.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	PALMETTO REAL ESTATE TRUST

Date: May 12, 2005	by: /s/ James A. Boling, Sr. James A. Boling, Sr. Chairman of the Board of Trustees

Pursuant to the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


SIGNATURES	TITLE	DATE

/s/ William J. Ables William J. Ables	President	May 12, 2005

/s/ Hunter Howard, Sr. Hunter Howard, Sr.	Vice- President	May 12, 2005

/s/ Melvin K. Younts Melvin K. Younts	Secretary	May 12, 2005

/s/ B. A. Franks B. A. Franks	Treasurer	May 12, 2005

/s/ Laney Younts Laney Younts	Trustee	May 12, 2005

/s/ Billy B. Huskey Billy B. Huskey	Trustee	May 12, 2005

/s/ Hunter Howard, Jr. Hunter Howard, Jr.	Trustee	May 12, 2005

/s/ R. Riggie Ridgeway R. Riggie Ridgeway	Trustee	May 12, 2005

/s/ Rudy Ables Rudy Ables	Trustee	May 12, 2005

/s/ James A. Boling, Jr. James A. Boling, Jr.	Trustee	May 12, 2005

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Exhibit 31

Sarbanes-Oxley Section 302(a) Certification

I, James A. Boling, Sr., certify that;


1.	I have reviewed this annual report on Form 10-KSB of the Palmetto Real Estate Trust.

2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:


a.	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within the entity, particularly during the period in which this report is being prepared;
b.	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c.	disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):


a.	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


6	The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date: May 12, 2005	/s/ James A. Boling, Sr. James A. Boling, Sr. Principal Executive Officer

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Exhibit 31

Sarbanes-Oxley Section 302(a) Certification

I, Bill A. Franks, certify that;


1.	I have reviewed this annual report on Form 10-KSB of the Palmetto Real Estate Trust.

2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:


a.	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within the entity, particularly during the period in which this report is being prepared;
b.	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c.	disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):


a.	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


6	The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date: May 12, 2005	/s/ Bill A. Franks Bill A. Franks Principal Financial Officer

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Exhibit 32

Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to
18 U.S.C. Section 1350
as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

I, James A. Boling, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Palmetto Real Estate Trust on Form 10-KSB for the fiscal year ended December 31, 2004 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-KSB fairly presents in all material respects the financial condition and results of operations of Palmetto Real Estate Trust.


By: Name: Title:	/s/ James A. Boling, Sr. James A. Boling, Sr. Principal Executive Officer

I, Bill A. Franks, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Palmetto Real Estate Trust on Form 10-KSB for the fiscal year ended December 31, 2004 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-KSB fairly presents in all material respects the financial condition and results of operations of Palmetto Real Estate Trust.

By:
Name:
Title:

/s/ Bill A. Franks
Bill A. Franks
Principal Financial Officer

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Palmetto Real Estate Trust
45 Liberty Lane
Greenville, South Carolina 29607
(864) 233-6007

PALMETTO REAL ESTATE TRUST

Annual Report

December 31, 2004

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PALMETTO REAL ESTATE TRUST

Annual Report

December 31, 2004

Contents


Report of Independent Registered Public Accounting Firm		1

Audited Financial Statements

Balance Sheet		2

Statements of Income		3

Statements of Shareholders' Equity		4

Statements of Cash Flows		5

Notes to Financial Statements		6 - 13

Common Stock Information		14

Management's Discussion and Analysis of Financial Condition and Results of Operations		15 - 16

Trustees and Officers		17

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders
Palmetto Real Estate Trust

We have audited the accompanying balance sheet of Palmetto Real Estate Trust as of December 31, 2004, and the related statements of income, shareholders' equity and cash flows for each of the two years in the period ended December 31, 2004. These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Palmetto Real Estate Trust as of December 31, 2004, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America.

/s/ Dixon Hughes PLLC

Greenville, South Carolina
January 12, 2005

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PALMETTO REAL ESTATE TRUST

Balance Sheet

December 31, 2004

Assets

Real estate investments, at cost:
	Rental property, net of accumulated depreciation	$	14,336,849
	Timberlands		24,864
	Total real estate investments		14,361,713

Other assets:
	Cash		340,817
	Rent receivable		11,050
	Note receivable		159,705
	Prepaid expense		11,138
	Deferred loan expense, net of accumulated amortization		38,968
	Total other assets		561,678

	Total assets	$	14,923,391


Liabilities and Shareholders' Equity

Liabilities:
	Line of credit	$	200,000
	Mortgage notes payable		9,522,576
	Accounts payable and accrued expenses		127,762
	Total liabilities		9,850,338

Shareholders' equity:
	Shares of beneficial interest, $1 stated value; 5,000,000 shares
	authorized; 1,770,006 shares issued and outstanding		1,770,006
	Capital surplus		498,734
	Undistributed earnings		2,804,313
	Total shareholders' equity		5,073,053

	Total liabilities and shareholders' equity	$	14,923,391

See accompanying notes to financial statements.

<PAGE>

PALMETTO REAL ESTATE TRUST

Statements of Income

Years Ended December 31, 2004 and 2003

			2004		2003
Income:
Rental income		$	2,241,411	$	2,096,463
Other income			32,326		41,836

	Total income		2,273,737		2,138,299

Expenses:
Depreciation and amortization			406,773		340,446
Interest			560,632		490,413
Repairs and maintenance			128,186		104,693
Property taxes			206,852		216,401
General and administrative			251,828		230,832

	Total expenses		1,554,271		1,382,785

Income from operations			719,466		755,514

Gains on sale of real estate, net			607,348		1,093,874

Income before income taxes			1,326,814		1,849,388

Income tax expense			18,500		15,300

Net income		$	1,308,314	$	1,834,088

Basic earnings per share of beneficial interest		$	0.74	$	1.04

Dividend declared		$	0.40	$	0.41

See accompanying notes to financial statements.

<PAGE>

PALMETTO REAL ESTATE TRUST

Statements of Shareholders' Equity

Years Ended December 31, 2004 and 2003



	Shares of
	Beneficial Interest
	$1 Par Value				Capital		Undistributed
	Shares		Amount		Surplus		Earnings		Total

Balance at
December 31, 2002	1,770,006	$	1,770,006	$	498,734	$	1,099,783	$	3,368,523

Net income	-		-		-		1,834,088		1,834,088

Dividends declared	-		-		-		(725,701)		(725,701)

Balance at
December 31, 2003	1,770,006		1,770,006		498,734		2,208,170		4,476,910

Net income	-		-		-		1,308,314		1,308,314

Dividends declared	-		-		-		(712,171)		(712,171)

Balance at
December 31, 2004	1,770,006	$	1,770,006	$	498,734	$	2,804,313	$	5,073,053

See accompanying notes to financial statements.

<PAGE>

PALMETTO REAL ESTATE TRUST

Statements of Cash Flows

Years Ended December 31, 2004 and 2003

		2004		2003
Cash from operating activities:
Net income	$	1,308,314	$	1,834,088
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense		386,113		325,890
Amortization of deferred loan expense		20,660		14,556
Gains on sale of real estate		(607,348)		(1,093,874)
Net change in operating assets and liabilities:
Rent receivable		(8,660)		9,273
Prepaid expense		(4,406)		(6,732)
Accounts payable and accrued expenses		(7,641)		(8,694)
Net cash provided by operating activities		1,087,032		1,074,507

Cash from investing activities:
Property additions and improvements		(3,581,438)		(1,615,809)
Restricted cash		1,143,457		(1,143,457)
Proceeds from sale of property		607,348		1,543,821
Collections on mortgage notes receivable		4,964		155,422
Net cash used in investing activities		(1,825,669)		(1,060,023)

Cash from financing activities:
Net advances (repayments) from line of credit		200,000		(75,000)
Deferred loan costs		(8,629)		(51,229)
Principal payments on mortgage notes		(300,408)		(2,351,273)
Proceeds from mortgage notes		1,600,000		3,350,000
Payment of dividends		(712,171)		(725,701)
Net cash provided by financing activities		778,792		146,797

Net increase in cash		40,155		161,281

Cash at beginning of year		300,662		139,381

Cash at end of year	$	340,817	$	300,662

Supplemental disclosures of cash flow information:

Cash paid during the year:
Interest	$	556,141	$	482,386
Income taxes	$	18,920	$	32,670

See accompanying notes to financial statements.

<PAGE>

PALMETTO REAL ESTATE TRUST

Notes to Financial Statements

December 31, 2004 and 2003

1. Summary of Significant Accounting Policies

Organization - Palmetto Real Estate Trust ("the Trust") has been organized as a qualified real estate investment trust under the Internal Revenue Code and the applicable state laws. The primary business of the Trust is the ownership, development and rental of various properties throughout South Carolina. A substantial percentage of revenue is derived from tenants in one shopping center. The Trust generally does not require collateral for its receivables.

Investments in Rental Property - Investments in rental property are recorded at cost. Depreciation is computed using straight-line methods for financial reporting and straight-line and accelerated methods for income tax purposes. Estimated useful lives of assets range from five to forty years.

The Trust reviews the carrying value of long-lived assets if the facts and circumstances suggest that its recoverability may have been impaired. The Trust believes that no impairment of rental property exists at December 31, 2004.

Deferred Loan Expense - Costs associated with obtaining financing are amortized over the lives of the respective loans. Net deferred loan costs at December 31, 2004 amounted to:


Deferred loan costs	$ 72,188
Accumulated amortization	(33,220)
	$ 38,968

Earnings Per Share - The Company computes its basic and diluted earnings per share amounts in accordance with Statement of Financial Accounting Standards No. 128. Basic earnings per share were computed by dividing earnings available to shareholders by the weighted average number of shares outstanding during each year, or 1,770,006 shares for 2004 and 2003. There were no dilutive securities outstanding in 2004 or 2003.

<PAGE>


PALMETTO REAL ESTATE TRUST		Notes to Financial Statements (continued)

Income Taxes - The Trust files its tax returns under Sections 856-858 of the Internal Revenue Code and the applicable state laws as a real estate investment trust, and makes distributions to its shareholders of its real estate trust taxable income. As a qualified real estate investment trust, distribution of the Trust's taxable income and capital gains are taxed at the shareholder level. The Trust is required to distribute at least 85% of its taxable income other than capital gains to maintain its tax status. To avoid additional excise tax, an amount equal to the sum of 85% of ordinary income and 95% of capital gains must be distributed in the year it is earned. Differences in income for financial reporting and tax reporting result from utilization of different methods of calculating depreciation and differences in reporting gains on the sale of real estate.

Estimates - The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents - The Trust includes cash equivalents, defined as all highly liquid instruments purchased with a maturity of three months or less, when reporting cash and cash flows. At times, cash balances may exceed federally insured amounts. The Trust has not experienced any losses on such accounts and management does not believe the Trust is exposed to any significant credit risk on cash and cash equivalents.

Revenue Recognition - Minimum rental income is recognized on a straight-line basis over the term of each lease. Unpaid rents are included in accounts receivable. Certain lease agreements contain provisions which provide reimbursement of real estate taxes and insurance. All rent and other receivables from tenants are due from commercial building tenants located in the properties.

<PAGE>


PALMETTO REAL ESTATE TRUST		Notes to Financial Statements (continued)

2. Investment in Rental Property and Gains on Sale of Real Estate


				Initial Cost to Company				Costs Capitalized Subsequent to Acquisition
Description		Encumbrances		Land		Building and Improvements		Improvements
Aiken, SC	$	-	$	24,500	$	33,123	$	11,354
Reidville Road Brake and Car
Wash--Spartanburg, SC		-		10,000		39,820		5,964
Enigma Spinx--Greenville, SC		521,750		350,000		670,000		-
Venture Park--Greenville, SC		-		11,000		81,017		12,140
Pleasantburg Shopping Center--
Greenville, SC		2,305,863		714,459		1,305,970		1,176,001
Willard Oil Property--
Spartanburg, SC		-		55,984		79,140		-
BP Oil--Greenville, SC		-		100,000		328,736		-
Laurens Road Property--
Greenville, SC		-		16,235		82,261		14,980
Transit Drive--Greenville, SC		-		50,000		175,000		19,213
Ace TV Rentals--Greenville, SC		-		50,000		160,000		-
Lesco--Greer, SC		-		30,000		200,000		-
Tireama--Spartanburg, SC		-		26,000		234,000		-
Atlas Services--Columbia, SC		-		75,000		670,000		-
Taylors Point Shopping Center--
Greenville, SC		1,643,742		500,000		2,300,000		43,239
Atlas Services--Mauldin, SC				50,000		621,000		-
Potomac Place Shopping
Center--Greenville, SC		831,115		150,000		850,350		-
Truegreen-Chemlawn--
Greenville, SC		639,390		100,000		845,000		-
Sunshine House--Irmo, SC		1,026,824		100,000		1,175,000		-
Sunshine House--Mt. Pleasant, SC		1,167,798		187,500		1,312,500		-
Federal Express Building		-		40,000		248,070		-
Fred's-Greenwood, SC		-		100,000		636,652		-
Poinsett Highway-Greenville, SC		-		50,000		325,000		-
Ridgeview Center-Laurens, SC		1,586,094		250,000		2,157,174		-
Other		-		-		-		136,805
	$	9,722,576	$	3,040,678	$	14,529,813	$	1,419,696

* Construction date unavailable

<PAGE>


PALMETTO REAL ESTATE TRUST		Notes to Financial Statements (continued)


Gross Amount at Which Carried at Close of Period										Life on Which Depreciation in Latest Income
	Land		Building and Improvements		Total		Accumulated Depreciation	Date of Construction	Date Acquired	Statement is Computed
$	24,500	$	44,477	$	68,977	$	35,074	1966	1965	33

	10,000		45,784		55,784		39,820	1970	1970	25
	350,000		670,000		1,020,000		476,939	*	1993	31/15
	11,000		93,157		104,157		70,714	1977	1979	25

	714,459		2,481,971		3,196,430		1,965,642	1965	1976	31


	55,984		79,140		135,124		61,114	1993	1986	15
	100,000		328,736		428,736		303,069	1985	1986	25

	16,235		97,241		113,476		53,350	1973	1988	31
	50,000		194,213		244,213		86,229	*	1991	31
	50,000		160,000		210,000		64,339	*	1992	31
	30,000		200,000		230,000		52,917	1994	1994	39
	26,000		234,000		260,000		60,434	*	1994	39
	75,000		670,000		745,000		154,937	1995	1995	40

	500,000		2,343,239		2,843,239		528,356	1990	1995	40
	50,000		621,000		671,000		129,375	1996	1996	40

	150,000		850,350		1,000,350		132,949	-	1998	40

	100,000		845,000		945,000		109,146	1999	1999	40
	100,000		1,175,000		1,275,000		100,365	2001	2001	40
	187,500		1,312,500		1,500,000		58,894	2003	2003	39
	40,000		248,070		288,070		14,471	2003	2003	40
	100,000		636,652		736,652		12,243	1997	2004	39
	50,000		325,000		375,000		2,778	1985	2004	39
	250,000		2,157,174		2,407,174		36,875	1996	2004	30
	-		136,805		136,805		103,308	-	Various	7
$	3,040,678	$	15,949,509	$	18,990,187	$	4,653,338

<PAGE>


PALMETTO REAL ESTATE TRUST		Notes to Financial Statements (continued)

The aggregate cost and accumulated depreciation for federal income tax purposes is $17,308,307 and $4,850,777 at December 31, 2004, respectively.

Activity in the Trust's investment in real estate for the two years in the period ended December 31, 2004 is summarized as follows:

	Years Ended December 31
	2004	2003
Investment in Real Estate

Balance at beginning of year	$ 15,408,749	$ 15,012,501

Acquisitions	3,581,438	1,615,809

Disposals	-	(1,219,561)

Balance at end of year	$ 18,990,187	$ 15,408,749

Accumulated Depreciation

Balance at beginning of year	$ 4,267,225	$ 4,710,949

Depreciation expense	386,113	325,890

Disposals	-	(769,614)

Balance at end of year	$ 4,653,338	$ 4,267,225

3. Mortgage Notes Receivable

The Trust has a mortgage note receivable which bears interest at 6.75% and is payable in monthly installments of $1,277, including interest through January 2008. The carrying amount of the mortgage note receivable was $159,705 at December 31, 2004. The note was paid in full in January 2005.

<PAGE>


PALMETTO REAL ESTATE TRUST		Notes to Financial Statements (continued)

4. Mortgage Notes Payable

Mortgage notes payable at December 31, 2004 consists of the following:

Term note payable in monthly payments of $2,400
plus interest through March 2006 at 6.15%; final
balloon payment due April 2006; collateralized
by rental property located on Echelon Road in
Greenville, SC.		$639,390

Term note payable in monthly payments of
$3,000 plus interest through March 2006 at
6.15%; final balloon payment due April 2006;
collateralized by rental property located on
Augusta Road in Greenville, SC.		831,115

Term note payable in monthly payments of $2,275
plus interest through March 2006 at 6.15%; final
balloon payment due April 2006; collateralized by
rental property located on Haywood Road in
Greenville, SC.		521,750

Term note payable in monthly payments of $13,306
including interest at 5.50% through November
2005 and monthly payments of $14,887 including
interest at 5.50% through September 2008. The
final balloon payment is due October 2008; the
note is collateralized by rental property located
Pleasantburg Drive in Greenville, SC.		2,105,863

Term note payable in monthly payments of $7,000 plus
interest through March 2006 at 6.15%; final balloon
payment due April 2006; collateralized by rental
property located on Wade Hampton Boulevard in
Greenville, SC.		1,643,742

Term note payable in monthly payments of $9,264
including interest at a fixed rate of 6.15% through
July 2006; final balloon payment due August 2006;
collateralized by rental properties located on
Kennerly Drive in Irmo, SC and on Old Mill Road
in Mauldin, SC.		1,026,824

Term note payable in monthly payments of $7,606
including interest at 5.75% through July 2006; final
balloon payment due August 2006; collateralized by
rental property located at Park West in
Mt. Pleasant, SC.		1,167,798

Term note payable in monthly payments of $10,146
including interest at 5.75% through April 2009; final
balloon payment due July 2009; collateralized by
rental property located at Ridgeview Center in
Laurens, SC.		1,586,094

Total mortgage notes payable		$ 9,522,576

<PAGE>


PALMETTO REAL ESTATE TRUST		Notes to Financial Statements (continued)

Future maturities of debt at December 31, 2004 are as follows:

2005		$329,051
2006		5,679,994
2007		106,151
2008		1,958,104
2009		1,449,276

		$ 9,522,576

5. Line of Credit

The Trust has an agreement with a bank that permits the Trust to borrow a maximum of $250,000 under a revolving line of credit. The Trust must make monthly interest-only payments beginning December 2004 at the bank's prime rate. The line of credit is secured by a mortgage on the Pleasantburg Shopping Center. At December 31, 2004, the outstanding balance on the line of credit was $200,000. The line expires in November 2005.

6. Financial Instruments

Accounting principles generally accepted in the United States of America require disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Instruments such as rent receivable, accounts payable, accrued expenses, notes receivable or payable that are currently due, and cash equivalents are of a short-term nature and carrying value approximates fair value. The estimated fair value of mortgage notes payable is based on discounting amounts at contractual rates using current market rates for similar instruments. The carrying value for the notes payable approximates fair value.

7. Long-Term Rental Leases

The Trust holds noncancelable long-term leases on certain of its rental properties. The minimum long-term rentals are summarized below:

Year		Annual Base

2005		$ 1,820,280
2006		1,364,810
2007		1,089,760
2008		703,740
2009		522,140
Thereafter		2,867,470

		$ 8,368,200

Leases with renewal options generally contain escalation clauses.

8. Dividends to Shareholders

Cash dividends of $712,171 and $725,701 were paid during the years ended December 31, 2004 and 2003, respectively. All dividends are distributions of earnings and not a return of capital.

<PAGE>


PALMETTO REAL ESTATE TRUST		Notes to Financial Statements (continued)

9. Related Party Transactions

During the years ended December 31, 2004 and 2003, the Trust participated in transactions with several related parties that include primarily expenditures for legal services, management services, maintenance on the Trust's rental properties and rental of real estate.

The following summarizes transactions with affiliates for the years ended December 31:

	2004	2003

Rental income	$4,200	$4,200
Repairs and maintenance	3,436	-
General and administrative expenses	31,044	28,350

10. Income Taxes

A summary of income tax expenses for the years ended December 31 follows:

	Federal	State	Total
2004
Current	$14,000	$4,500	$18,500

2003
Current	$11,300	$4,000	$15,300

The difference between income before income taxes and taxable income is as follows:

	2004	2003

Income before income taxes	$1,326,814	$1,849,388
Differences:
Gain on sale of real estate	(607,348)	(1,093,874)
Depreciation	11,725	11,073
Dividends paid deduction	(654,592)	(685,877)
Capital gain deduction	-	(492)
Other	(3,867)	(4,009)

Taxable income	$ 72,732	$ 76,209

The differences between actual income tax expense and the amount computed by applying the federal statutory income tax rate of 34% to income before income taxes are reconciled as follows:

	2004	2003

Income taxes at the statutory rate	$451,000	$628,000
State taxes net of federal benefit	3,000	2,600
Surtax exemption	(11,500)	(12,000)
Nontaxable gain on sale of real estate	(207,100)	(372,000)
Dividend paid deduction	(216,900)	(231,300)

	$ 18,500	$ 15,300

<PAGE>

Common Stock Information

The Trust's shares of beneficial interest are not traded on an exchange. The approximate number of holders of shares of beneficial interest at December 31, 2004 was 1,030.

Dividends - The dividends declared quarterly in 2004 and 2003 are as follows:


2004	Total	Per Share
First Quarter	$ 212,401	.12
Second Quarter	159,300	.09
Third Quarter	159,300	.09
Fourth Quarter	181,170	.10
	$ 712,171	.40

2003	Total	Per Share
First Quarter	$ 247,801	.14
Second Quarter	159,300	.09
Third Quarter	159,300	.09
Fourth Quarter	159,300	.09
	$ 725,701	.41

Dividends of $.10 per share, totaling $177,000 for the fourth quarter of 2004, were declared in January 2005.

The Trust expects to continue its policy of paying regular quarterly cash dividends, although there is no assurance as to future dividend amounts since they are dependent on future earnings and the financial condition of the Trust.

Market - There is no active market for the trading of the Trust's shares of beneficial interest besides the trading between shareholders and repurchase of shares by the Trust.

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of Operations

Comparing the fiscal year ended December 31, 2004 to the fiscal year ended December 31, 2003:

(amounts in thousands)	December 31, 2004	December 31, 2003	Change	% of Change

Rental income	$2,241	$2,096	$145	7%
Other income	32	42	(10)	(24)%
Depreciation and amortization	407	340	67	20%
Interest	561	490	71	14%
Repairs and maintenance	128	105	23	22%
Property taxes	207	216	(9)
General and administrative	252	231	21	9%
Gains on sales of real estate	607	1,094	(487)	(45)%
Income before income taxes	1,325	1,850	(522)	(28)%
Income tax expense	19	15	4	20%
Net income	1,306	1,835	(526)	(29)%

The discussion and analysis that follows addresses the financial condition, changes in financial condition, and results of operations, as detailed above.

Financial Condition

The Trust's net assets increased by $2.1 million during 2004. Rental properties increased $3.2 million while mortgage notes payable increased $1.3 million.

The Trust used approximately $1.7 million of funds escrowed from the sale of properties in the fourth quarter of 2003 and first and third quarters of 2004 to purchase three properties. Approximately $700,000 was used to purchase a Fred's retail store located in Greenwood, SC on April 30, 2004. Approximately $800,000 was used, in conjunction with $1.6 million in mortgage debt, to purchase the Ridgeview Shopping Center in Laurens, SC on May 20, 2004. The remaining escrow balance of $176,000 was used in conjunction with $200,000 in short-term debt to purchase commercial property on Poinsett Highway in Greenville, SC on September 23, 2004.

Results of Operations

Net income decreased by approximately $526,000, primarily as a result of the decrease in gains on sale of real estate. In 2003, the Trust had gains on the sale of real estate of approximately $1.1 million. In 2004, properties sold netted approximately $607,000. Rental income increased approximately $145,000, with the addition of three properties in 2004. Depreciation expense increased approximately $60,000 as a result of the new property acquisitions. Repairs and maintenance expense increased $23,000 and general and administrative expenses increased $21,000.

<PAGE>

Interest expense increased by approximately $71,000 as a result of the Trust obtaining an additional note payable of $1,600,000 for the purchase of land and building for the Ridgeview shopping center, as well as drawing $200,000 on its line of credit for the purchase of the Poinsett Highway property.

Liquidity and Capital Resources

The primary liquid asset of the Trust is cash. Cash provided by operating activities was approximately $1,087,000 in 2004 and $1,074,500 in 2003. The cash provided by operating activities was used for the repayment of debt and payment of dividends. The Trust showed a net increase in cash of $40,155 in 2004 and $161,281 in 2003.

Because it holds noncancelable leases with most of its tenants, the Trust is reasonably assured of receiving the minimum funds necessary to operate effectively. Leases that are expiring within the next year are being negotiated and management does not expect a significant negative impact on liquidity. At this time, there are no significant vacant properties. Known future commitments of the Trust include the repayment of its debt and certain noncancelable tenant leases, both of which are described in the financial statements filed as part of this annual report. Past capital acquisitions and improvements have been financed through funds provided from operations and proceeds from long-term debt. Future capital expenditures are contingent upon the availability of funds as determined by the board of trustees. Dividend payments to shareholders are discretionary and require the boards of trustees' approval. Future dividend payments are contingent upon the available funds and may be increased or decreased as is necessary.

As with all businesses, inflation has an effect on the operations of the Trust, particularly with maintenance costs and property taxes. The Trust is attempting to offset the effects of inflation by requiring tenants to pay for any increases in costs over their base year rentals.

<PAGE>

PALMETTO REAL ESTATE TRUST

BOARD OF TRUSTEES

December 31, 2004

OFFICERS

James A. Boling, Sr. Chairman of the Board of Trustees	C. Laney Younts Trustee

William J. Ables President	Billy B. Huskey Trustee

Hunter Howard, Sr. Vice President	Hunter Howard, Jr. Trustee

Melvin K. Younts Secretary	R. Riggie Ridgeway Trustee

Bill A. Franks Treasurer	Rudy Ables Trustee

James A. Boling, Jr. Trustee


INDEPENDENT AUDITORS

Dixon Hughes PLLC

GENERAL COUNSEL

Younts, Alford, Brown & Goodson

<PAGE>