10-K 1 form10k.txt FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2003 ----------------------------------------------------- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________________________ to _____________ Commission file number 0-6103 --------------------------------------------------------- Watermark Investors Realty Trust (Exact name of registrant as specified in the charter) Texas 75-1372785 ------------------------------------------------------------ ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 227 West Trade Street, Suite 2320, Charlotte, North Carolina 28202 ------------------------------------------------------------ ------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 704/343-9334 --------------------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None --------------------------- ---------------------------------------------- Securities registered pursuant to Section 12(g) of the Act Shares of Beneficial Interest, $1.00 par value (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 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 . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will not 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-K or any amendment to this Form 10-K. [ ] The aggregate market value of the 178,996 shares of Beneficial Interest (voting securities) held by non-affiliates of the Registrant is not ascertainable since no trading market presently exists for such shares. As of March 30, 2004, there were 542,413 shares of Beneficial Interest of the Registrant. 1 DOCUMENTS INCORPORATED BY REFERENCE. None SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: This Annual Report, on Form 10-K, may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 which are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. Such risks and uncertainties include the following: general economic conditions and conditions specific to the real estate industry including its cyclical nature, and competitive factors, changes in generally accepted accounting principles, changes in federal tax laws regarding Real Estate Investment Trusts, and the risk factors listed from time to time in the Company's Securities and Exchange Commission filings. Accordingly, there can be no assurance that the actual results will conform to the forward-looking statements in the Annual Report. PART I Item 1. Business. Watermark Investors Realty Trust (herein referred to as the "Trust" or "Watermark" or the "Registrant") was originally organized as Ryan Mortgage Investors pursuant to the Texas Real Estate Investment Trust Act under a Declaration of Trust dated October 13, 1971. On March 6, 1984, its name was changed to Arlington Realty Investors pursuant to an Amendment to the Declaration of Trust. On December 5, 1995, the Trust's name was changed to Watermark Investors Realty Trust pursuant to an Amendment to the Declaration of Trust. The Trust has elected to be treated as a Real Estate Investment Trust ("REIT") under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. The Trust has, in the opinion of the Trust's management, qualified for federal taxation as a REIT for each fiscal year subsequent to December 31, 1971. Although not currently active, the Trust's primary business and only industry segment has been investing in equity interests in real estate and related real estate activities. During March 1995, the Trust formed a wholly owned subsidiary, Watermark Texas 1, Inc., a Maryland corporation, and contributed its sole property to such subsidiary. Item 2. Properties. At December 31, 2003, the Trust's only significant asset was its ownership interest in its subsidiary, Watermark Texas 1, Inc., which owns a parcel of unimproved land consisting of approximately 4.5 acres located on Parker Road in Houston, Harris County, Texas. On August 29, 2003, the Trustees voted to sell the Parker Road property, and an sale agreement was executed on October 16, 2003 between Watermark Texas 1, Inc. and The Peterson Group, Inc., to sell the property to the Peterson Group, Inc. for $510,000. The sales contract was filed with Watermark's Form 10-Q for the period ended September 30, 2003, and is incorporated herein by reference. The sale was originally expected to close in the first quarter of 2004. However, The Peterson Group elected in January 2004 to decide to terminate the contract. The Board will meet in the 2nd quarter of 2004 to decide what course of action is appropriate. If the Board should decide to pursue a sale of the Parker Road property, the proceeds of the sale will most likely be used to pay down the Trust's debts. The anticipated carrying costs associated with the Parker Road property are currently limited to property taxes and maintenance. Item 3. Legal Proceedings. At December 31, 2003, and thereafter through the date of this report, the Trust was not a party, nor was any property or assets of the Trust subject, to any material pending legal proceedings. Item 4. Submission of Matters to a Vote of Security Holders. None. 2 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. The Trust's shares of Beneficial Interest (the "Shares") are traded on a sporadic basis. The Trust believes there has been no established independent trading market for the Shares since the Shares were delisted from NASDAQ in 1988. A limited number of Shares are believed to have been traded in privately negotiated transactions. No regular dividends on Shares were paid in 2003 or 2002. As of March 30, 2004, 542,413 Shares were held by approximately 300 holders of record. Item 6. Selected Financial Data. The following table sets forth a summary of certain selected financial data of the Trust. This summary should be read in conjunction with the Notes to Financial Statements included at Item 8.

(dollars in thousands, except per share) For the Years Ended December 31, 2003 2002 2001 2000 1999 ---- ---- ---- ---- ----~~------------------------------------------------------~~ ~~2001 2000 1999 1998 1997~~ Statement of Operations Data Rental Operations, net $- $- $ - $ - $- Real estate sales, net - - - - - Interest Income - - - - - Gain on Sale of Land - - - - - Net earnings (loss) $(3669) $(3844) $(3336) (3138) (3133) Earnings (loss) per share $(.0713) $(.0708) $(.0607) $(.0607) $(.06) Distributions per share $ - $- $- $ - $ - Weighted average shares outstanding 542,413 542,413 542,413 542,413 542,413 ~~outstanding~~ Balance Sheet Data Total assets 11 5 6 9 1 ~~11 1~~ Shareholders' equity (~~256~~deficit) (~~220~~369) (~~182~~ 300) (~~149~~256) (~~118~~220) (~~deficit~~182)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation. Results of Operations Watermark has had no revenues for the three years ended December 31, 2003. Watermark's sole real property consists of the Parker Road property. In February of 1995, Watermark sold a 4,429 square foot strip of the Parker Road property to the City of Houston, Texas, for $3,765. Watermark did not have any rental operations in 2000, 2001, or 2002. 3 Liquidity and Capital Resources Management currently plans for the subsidiary to sell the Parker Road property at the first available opportunity. The anticipated carrying costs associated with the Parker Road property are currently limited to property taxes, insurance and maintenance. There are no other known material demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in Watermark's liquidity increasing or decreasing in any material way. However, in order to meet corporate expenses and the carrying costs of the Parker Road property, Watermark will have to (i) raise additional funds (possibly by selling or leasing the Parker Road property) or (ii) generate additional funds (possibly by selling or leasing the Parker Road property). There are no material commitments for capital expenditures. As of December 31, 2003, Watermark's significant contractual obligations, including payments due by period, were as follows:

~~WATERMARK~~Contractual ~~INVESTORS~~Obligations ~~REALTY~~Payments ~~TRUST~~due ~~AND~~by ~~SUBSIDIARY~~period ~~CONSOLIDATED~~Total ~~BALANCE SHEETS December 31, 2001 and 2000 ASSETS 2001 2000 Real estate 168,588 $168,588~~ Less ~~allowance~~than ~~for possible losses (168,588) (168,588)~~ 1---3 ~~---~~years ~~Cash 6,314 9,031 Total assets $6,314 $9,031 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Liabilities Note payable~~ 3-5 ~~related~~More ~~party~~than ~~155,100~~5 ~~$140,100 Accounts payable and accrued liabilities 18,006 17,161 Accounts payable - related party 2,000~~ 1~~,000~~ ~~Accrued~~year ~~interest~~years ~~payable~~years [Long-Term ~~related~~Debt] ~~party 66,866 50,101 Unclaimed dividends 20,174 20,174 Total liabilities 262,146 228,536 Shareholders' Equity (Deficit) Preferred shares of beneficial interest;~~ $~~.01 par value; authorized~~225, ~~--- --- 10,~~000~~,000~~ ~~shares; -0- shares issued and outstanding at December 31, 2001 and 2000 Common shares of beneficial interest;~~ $~~1.00 par value; authorized~~225, ~~196,235 196,235 10,~~000~~,000~~ ~~shares;~~[Capital ~~542,413~~Lease ~~shares~~Obligations] ~~issued~~[Operating ~~and~~Leases] ~~outstanding~~[Purchase atObligations] ~~December~~[Other ~~31, 2001 and 2000 Additional paid~~Long-inTerm ~~capital~~Liabilities ~~44,205~~Reflected ~~44,205~~on ~~Accumulated~~the ~~deficit (496,272) (459,945) Total shareholders~~Registrant's ~~equity~~Balance ~~(deficit)~~Sheet ~~(255,832)~~under ~~(219,505)~~GAAP] Total ~~liabilities and shareholders' equity (deficit)~~ $6225,~~314~~000 $9225,~~031 The accompanying notes are an integral part of these statements.~~000

Inflationary Factors In recent years, inflation has neither increased Watermark's revenues from operating assets nor beneficially affected the current value of its remaining real estate assets to any significant degree. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Management does not believe the Company has any exposure to market risk other than the risks commonly associated with ownership of real property. Item 8. Financial Statements and Supplementary Data. 4 INDEX TO FINANCIAL STATEMENTS Page Report of Farmer, Fuqua, & Huff, P.C. Independent Auditors..............................................6 Consolidated Balance Sheets as of December 31, 2003 and 2002..................7 Consolidated Statements of Operations for the years ended December 31, 2003, 2002 and 2001..............................................8 Consolidated Statements of Shareholders' Equity (Deficit) for the years ended December 31, 2003, 2002 and 2001.........................9 Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001..............................................10 Notes to Consolidated Financial Statements....................................11 Schedule III - Real Estate Investments and Accumulated Depreciation...........14 All other schedules are omitted since they are not required, are not applicable, or the financial information required is included in the financial statements or the notes thereto. 5 INDEPENDENT AUDITORS' REPORT To Board of Trustees and Shareholders Watermark Investors Realty Trust We have audited the accompanying consolidated balance sheets of Watermark Investors Realty Trust and subsidiary as of December 31, 2003 and 2002, and the related consolidated statements of operations, shareholders' equity (deficit) and cash flows for the years ended December 31, 2003, 2002 and 2001. These consolidated financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Watermark Investors Realty Trust and subsidiary as of December 31, 2003 and 2002 and the results of their operations and their cash flows for each of the years ended December 31, 2003, 2002 and 2001, in conformity with U.S. generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming that the Trust will continue as a going concern. As discussed in Note 9 to the consolidated financial statements, the Trust has no operating assets or revenues, and is dependent upon the financial support of its shareholders. These matters raise substantial doubt about the Trust's ability to continue as a going concern. Management's plans in regard to these matters are also discussed in Note 9. These consolidated financial statements do not include any adjustments that might result from this uncertainty. As more fully described in Note 2, Watermark Investors Realty Trust was operating under a Plan of Complete Liquidation and Termination until June 30, 1994. The consolidated financial statements include adjustments to reflect assets at their net realizable value as determined by the Trust's management. The ultimate value of the assets will be determined at the time of sale and may differ significantly from the value as determined by the Trust's management. Our audits were made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. Schedule III is presented for the purpose of complying with the Securities and Exchange Commission's rules and is not a required part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, in our opinion, fairly states, in all material respects, the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. FARMER, FUQUA, & HUFF, P.C. Plano, Texas March 27, 2004 6 WATERMARK INVESTORS REALTY TRUST AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS December 31, 2003 and 2002

~~WATERMARK~~ASSETS ~~INVESTORS~~2003 ~~REALTY~~2002 ~~TRUST~~---- ~~AND~~---- ~~SUBSIDIARY~~Real ~~CONSOLIDATED~~estate ~~STATEMENTS OF OPERATIONS Years Ended December 31~~$168,588 ~~2001~~$168,588 ~~2000~~Less ~~and~~allowance ~~1999~~for ~~2001~~possible ~~2000~~losses ~~1999~~(168,588) ~~Revenues~~(168,588) $ --------- $ --------- $ --- --- Cash 10,538 4,740 ------ ----- ~~Expenses~~Total ~~Interest~~assets $10,538 $4,740 ======= ====== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Liabilities Note payable - related party 16$225,~~766~~000 18$180,~~372~~100 ~~11,377~~Accounts ~~Property~~payable ~~expenses~~and ~~5,543~~accrued 5liabilities 18,~~636~~417 514,~~542~~423 ~~Legal~~Accounts ~~and~~payable ~~professional~~- ~~14,018~~related 13party 4,~~534~~000 153,~~709~~000 ~~Total~~Accrued ~~expenses~~interest ~~36,327~~payable 37- related party 112,~~542~~151 3286,~~628~~978 ~~NET~~Unclaimed ~~LOSS~~dividends ~~$(36~~20,~~327)~~174 ~~$(37~~20,~~542)~~174 ~~$(32,628)~~------ ~~Loss~~------ ~~per~~Total ~~share~~liabilities $379,742 ~~(.07)~~304,675 $Shareholders' Equity (~~.07~~Deficit) $Preferredshares (of beneficial interest; $.~~06)~~01 ~~Distributions~~par ~~per~~value; ~~share~~authorized, $10,000,000 shares; -0-- $shares issued and outstanding at December 31, 2003 and 2002 --- $ --- ~~Weighted~~Common ~~average~~ shares of beneficial interest; ~~used~~$1.00 inpar ~~542~~value; authorized,~~413~~ ~~542~~10,~~413~~000,000 shares; 542,413 ~~computing~~shares ~~loss~~issued ~~per~~and ~~share~~outstanding at December 31, 2003 and 2002 196,235 196,235 Additional paid-in capital 44,205 44,205 Accumulated deficit (609,644) (540,375) --------- --------- Total shareholders' equity (deficit) (369,204) (299,935) --------- --------- Total liabilities and shareholders' equity (deficit) $10,538 $4,740 ======= ====== The accompanying notes are an integral part of these statements.

7 WATERMARK INVESTORS REALTY TRUST AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31, 2003, 2002 and 2001

~~WATERMARK~~2003 ~~INVESTORS~~2002 ~~REALTY~~2001 ~~TRUST~~---- ~~AND~~---- ~~SUBSIDIARY~~---- ~~CONSOLIDATED~~Revenues ~~STATEMENTS~~$ OF--- ~~SHAREHOLDERS'~~$ ~~EQUITY~~--- ~~(DEFICIT)~~$ ~~Years~~--- ~~Ended~~--------- ~~December~~--------- ~~31,~~-------- ~~2001,~~--- ~~2000~~--- ~~and~~$ ~~1999~~--- ~~Shares~~--------- of--------- ~~Additional Accumulated Total Beneficial Paid~~-in------- ~~Deficit~~Expenses Interest ~~Capital~~- ~~Balance~~related atparty ~~January~~25,173 120,112 ~~1999 $196~~16,~~235~~766 $Property 44expenses 3,~~205~~592 ~~$(389~~5,~~775)~~585 ~~$(149~~5,~~335)~~543 ~~Net~~Legal ~~loss~~and ~~for~~professional ~~the~~40,504 ~~year~~18,406 14,018 ------ ------ ~~(32,628)~~------ ~~(32,628)~~Total ~~Balance~~expenses ~~at December 31~~69,269 ~~1999 $196,235 $~~ 44,~~205~~103 ~~$(422~~36,~~403)~~327 ~~$(181,963)~~------ ~~Net loss for the year~~ ------ ------ NET LOSS $(3769,~~542~~269) $(3744,~~542~~103) ~~Balance~~$(36,327) at========= ~~December~~========= ~~31,~~========= ~~2000~~Loss ~~$196,235~~per share $ ~~44,205~~(.13) $ (~~459,945~~.08) $ (~~219,505~~.07) ~~Net~~========= ~~loss~~========= ~~for~~========= ~~the~~Distributions ~~year~~per share $ --- $ --- $~~(36,237)~~ ~~$(36,237)~~--- ~~Balance~~========= at========= ~~December~~========= ~~31,~~Weighted ~~2001~~average ~~$196,235~~shares ~~$44,205~~of ~~$(496,272)~~beneficial ~~$(255,832)~~interest ~~The~~used ~~accompanying~~in ~~notes~~computing ~~are~~loss anper ~~integral~~share ~~part~~542,413 of542,413 ~~these~~542,413 ~~statements.~~======= ======= =======

The accompanying notes are an integral part of these statements. 8 WATERMARK INVESTORS REALTY TRUST AND SUBSIDIARY CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) Years Ended December 31, 2003, 2002 and 2001

~~WATERMARK~~Shares ~~INVESTORS~~of ~~REALTY~~Additional ~~TRUST~~Accumulated ~~AND~~Total ~~SUBSIDIARY~~Beneficial ~~CONSOLIDATED~~Paid-in ~~STATEMENTS~~Deficit OFInterest ~~CASH~~Capital ~~FLOWS~~Balance ~~Years~~at ~~Ended~~January ~~December 31~~1, 2001 $196,235 ~~2000~~$ ~~and 1999 2001 2000 1999 Cash flows from operating activities Net loss (36~~44,~~327)~~205 $(37459,~~542~~945) $(32219,~~628~~505) ~~Adjustments~~======== to======== ~~reconcile~~========== ~~net~~========== Net loss tofor ~~net~~the ~~cash~~year ~~used~~--- ~~for~~--- ~~operating~~$(36,237) ~~activities~~$(36,237) ~~Increase~~-------- in-------- ~~accounts~~--------- ~~payable~~--------- ~~and~~Balance ~~accrued~~at ~~18,610~~December 2031,~~742~~ 122001 $196,~~745~~235 ~~liabilities~~$ ~~Net cash used for operating activities (17~~44,~~717)~~205 $(16496,~~800~~272) $(19255,~~883~~832) ~~Cash~~======== ~~flows~~======== ~~from~~========== ~~financing~~========== ~~activities 15,000 25,000 10,000 Proceeds from loans~~ Net ~~cash~~loss ~~provided~~for bythe ~~financing~~year ~~activities~~--- ~~15,000~~--- ~~25,000 10,000 Increase~~ $(~~decrease~~44,103) ~~in cash~~ $(244,~~717~~103) ~~8,200~~-------- ~~(9,883)~~-------- ~~Cash~~--------- at--------- ~~beginning~~Balance ofat ~~year~~December 931,~~031~~ ~~831~~2002 10$196,~~714~~235 ~~Cash at end of year 6~~$44,~~314~~205 $9(540,~~031~~375) $(299,935) ~~831~~======== ~~Supplemental~~======== ~~cash~~========== ~~flow~~========== ~~information~~Net ~~Cash~~loss ~~paid~~ for ~~interest~~the $year --- $ --- $(69,269) $(69,269) -------- ~~Cash paid for taxes $~~ -------- $ --------- $ --------- ~~The~~Balance ~~accompanying~~at ~~notes~~December ~~are~~31, an2003 ~~integral~~$196,235 ~~part~~$44,205 of$(609,644) ~~these~~$(369,204) ~~statements.~~======== ======== ========== ==========

The accompanying notes are an integral part of these statements. 9 WATERMARK INVESTORS REALTY TRUST AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2003, 2002 and 2001

2003 2002 2001 ~~2000~~---- ~~Note~~---- ~~payable~~---- Cash flows from operating activities Net loss $ (69,269) $ (44,103) $ (36,327) Adjustments to ~~Abbestate~~reconcile ~~Holding~~net loss to net cash used for operating activities Gain on sale of real estate --- --- --- Increase (decrease) in accounts payable and accrued liabilities 30,167 ~~Inc.~~17,529 a18,610 ~~related~~------ ~~party~~------ ~~that~~------ ~~has~~Net acash ~~common~~used for operating activities (39,102) (26,574) (17,717) Cash flows from financing activities 44,900 25,000 15,000 Proceeds from loans ______ ______ _____ Net cash provided by financing activities $44,900 ~~155~~$25,~~100~~000 $~~140~~15,~~100~~000 ~~shareholder~~Increase ~~with~~(decrease) ~~Watermark~~in cash 5,798 ~~with~~(1,574) an(2,717) ~~interest~~Cash ~~rate~~at beginning of ~~12%~~year 4,470 ~~uncollateralized~~6,314 ~~with~~9,031 ~~interest~~----- ~~and~~----- ~~principal~~----- ~~due~~Cash ~~August~~at 1end of year $10,538 ~~2003.~~$4,470 $6,314 ======= ====== ====== Supplemental cash flow information Cash paid for interest $ --- $ --- $ --- ------- -------- ---------- Cash paid for taxes $ --- $ --- $ --- ------- -------- ----------

The accompanying notes are an integral part of these statements. 10 WATERMARK INVESTORS REALTY TRUST AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003, 2002 and 2001 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Operations Watermark was originally organized as Ryan Mortgage Investors pursuant to the Texas Real Estate Investment Trust Act under a Declaration of Trust dated October 13, 1971. On March 6, 1984, its name was changed to Arlington Realty Investors pursuant to an Amendment to the Declaration of Trust. On December 5, 1995, the Trust's name was changed to Watermark Investors Realty Trust pursuant to an Amendment to the Declaration of Trust. The Trust has elected to be treated as a REIT under Sections 856 through 860 of the Internal Revenue Code. The Trust has, in the opinion of the Trust's management, qualified for federal taxation as a REIT for each fiscal year subsequent to December 31, 1971. Although not currently active, the Trust's primary business and only industry segment has been investing in equity interests in real estate and related real estate activities. Under the Trust's Declaration of Trust and Bylaws, the Trustees, at their option, may terminate the Trust's status as a REIT for federal income tax purposes. During March 1995, the Trust formed a wholly-owned subsidiary, Watermark Texas 1, Inc., a Maryland corporation, and contributed its sole property to such subsidiary. Principles of Consolidation The consolidated financial statements include the accounts of Watermark, and its wholly-owned subsidiary, Watermark Texas 1, Inc. All significant intercompany transactions and accounts have been eliminated. Real Estate Watermark carries real estate at the lower of cost or estimated net realizable value. Allowance for Possible Losses Watermark provides for possible losses on real estate when such amounts are considered necessary after making periodic reviews of the estimated net realizable values of the real estate. Earnings (Loss) Per Share Earnings (loss) per share (EPS) are calculated in accordance with Statement of Financial Accounting Standards No. 128, Earnings per Share (SFAS 128) which was adopted in 1997 for all years presented. Basic EPS is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS does not apply to Watermark due to the absence of dilutive potential common shares. The adoption of SFAS 128 had no effect on previously reported EPS. Consolidated Statements of Cash Flows Watermark does not consider any of its assets to meet the definition of a cash equivalent. 11 WATERMARK INVESTORS REALTY TRUST AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued December 31, 2003, 2002 and 2001 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles 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. Legal and Other Expenses Legal and other expenses incurred for 2003, 2002 and 2001 include legal expenses of approximately $27,000, $5,000 and $4,500 respectively. Income Taxes Watermark is qualified as a REIT. To retain its REIT qualification, Watermark must restrict its investments principally to rental properties or notes secured by real estate, and must not realize more than 30% of its gross income from gain on the sale of real estate assets held for less than four years. In addition, Watermark must pay out at least 95% of its taxable income, excluding capital gains, as dividends, provided that Watermark pays tax at corporate rates on capital gains not distributed. No distributions were required in 2003, 2002 or 2001, due to net operating losses. NOTE 2 - PLAN OF LIQUIDATION AND TERMINATION Watermark operated under a Plan of Complete Liquidation and Termination approved by the shareholders in 1985 until June 30, 1994. NOTE 3 - REAL ESTATE At December 31, 2003 and 2002, Watermark's only real estate asset was a parcel of unimproved land consisting of approximately 4.5 acres located on Parker Road in Houston, Harris County, Texas. During 1992, a provision was made to reduce the Parker Road land to its estimated net realizable value, which was determined to be zero at December 31, 1992. During March 1995, the Trust formed a wholly owned subsidiary and contributed the Parker Road property to such subsidiary. At December 31, 2003 and 2002, the Trust's only significant asset was its ownership interest in such subsidiary. NOTE 4 - NOTE PAYABLE

~~2001~~2003 ~~2000~~2002 ~~Carrying~~---- ~~Fair~~---- ~~Carrying~~Note ~~Fair~~payable ~~amount~~to ~~value~~Abbestate ~~amount~~Holding, ~~value~~Inc., ~~Cash~~a $related ~~6,314~~party $that ~~6,314~~has $a 9common $225,~~031~~000 $180,100 9shareholder with Watermark,~~031~~ ~~Note~~with ~~payable-related~~an ~~party~~interest ~~155,100~~rate ~~155~~of 12%,~~100~~ ~~140~~uncollateralized,~~100~~ ~~140~~with ======== ======== interest and principal due August 1,~~100~~ 2005.

12 WATERMARK INVESTORS REALTY TRUST AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued December 31, 2003, 2002 and 2001 NOTE 5 - FEDERAL INCOME TAXES No Federal income taxes have been provided for financial statement purposes because, as a REIT with no operating income, Watermark has no tax liability. At December 31, 2003 net operating loss carryforwards of approximately $712,000 were available for tax purposes which, if not utilized, will expire at various dates through 2023. Any deferred tax asset that would be associated with the net operating loss carryforward has been reduced to $-0- due to recurring net losses, no factors indicating that the trend of net losses will reverse and the fact that if the trend did reverse, the net income from a REIT is not taxable as long as specific REIT requirements have been met. NOTE 6 - RELATED PARTY TRANSACTIONS HPI Capital, LLC provides administrative and accounting services to the Trust under supervision of the Trust's officers (two of whom are also officers of HPI Capital, LLC). HPI Capital, LLC has not been compensated by the Trust for any services rendered to the Trust until January 2001, when HPI Capital, LLC began charging the Trust $1,000 per year for administrative and accounting services. This amount has been accrued and is shown on the face of the balance sheet as A/P- related party. NOTE 7 - FINANCIAL INSTRUMENTS The estimated fair values of Watermark's financial instruments at December 31, 2003 and 2002 follow: 2003 2002 ---- ---- Carrying Fair Carrying Fair Amount value Amount value ------ ----- ------ ----- $ Cash $ 10,538 $ 10,538 $ 4,740 4,740 Note payable-related party 225,000 225,000 180,100 180,100 The fair value amounts for each of the financial instruments listed above approximate carrying amounts due to the short maturities of these instruments. NOTE 8 - LIQUIDATING DISTRIBUTION The recorded par value of the outstanding common shares of beneficial interest has been reduced by $346,178, which represents the amount of a 1993 liquidating distribution in excess of additional paid-in capital. NOTE 9 - GOING CONCERN The Trust has no operating assets or revenues. Its continuation as a going concern is dependent upon the Trust's ability to raise additional capital from its shareholders or from third parties. The shareholders are anticipated to continue to provide such financial support to the Trust. However, there can be no assurances that the shareholders will continue to provide such support or that the Trust will be successful in raising additional capital from other sources. Further, there can be no assurance, assuming the Trust successfully obtains such support, that the Trust will achieve profitability or positive cash flow. 13 SCHEDULE III WATERMARK INVESTORS REALTY TRUST AND SUBSIDIARY REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION December 31, 2003, 2002 and 2001

~~WATERMARK INVESTORS REALTY TRUST AND SUBSIDIARY REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION December 31, 2001, 2000 and 1999~~ Description Initial Cost Gross Amount Valuation Accumulated Date Depreciable Cost to Capitalized at which Allowance Depreciation Acquired Life (years) Watermark Subsequent Carried at to December 31, Acquisition ~~2001~~2003 Undeveloped land Houston, TX $162,729 $5,859 $168,588 $(168,588) --- Various --- ~~land~~======== ~~Houston,~~====== TX======== ========== ==========

A summary of activity in real estate and accumulated depreciation for the three years in the period ended December 31, 2003 is as follows: REAL ESTATE 2003 2002 2001 ----------- ---- ---- ---- Balance at beginning of year $168,588 $168,588 $168,588 Sales --- --- --- Foreclosure additions --- --- --- Improvements --- --- --- -------- -------- -------- Balance at end of year $168,588 $168,588 $168,588 ======== ======== ======== ACCUMULATED DEPRECIATION Balance at beginning of year $ --- $ --- $ --- Sales --- --- --- Depreciation --- --- --- -------- -------- -------- Balance at end of year $ --- $ --- $ --- ======== ======== ======== Item 9. Changes and Disagreements with Accountants on Accounting and Financial Disclosure. None. Item 9A. Controls and Procedures. Watermark's principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this report, Watermark's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended) were effective, based on the evaluation of these controls and procedures required by Rule 13a-15(b) or 15d-15(b) of the Securities Exchange Act of 1934, as amended. PART III Item 10. Directors and Executive Officers of the Registrant. The business affairs of the Trust are managed by, or under the direction of, the Board of Trustees. The Trustees are responsible for the general investment policies of the Trust and for such general supervision of the business of the Trust conducted by officers, agents, employees, investment advisors or independent contractors of the Trust as may be necessary to insure that such business conforms to the provisions of the Declaration of 14 Trust. Pursuant to Article II, Section 2.1 of the Declaration of Trust, as amended, of the Trust, there shall not be less than two (2), nor more than fifteen (15), Trustees of the Trust. The number of Trustees shall be determined from time to time by resolution of the Trustees and the current number of Trustees is set at three (3). Trustees may succeed themselves in office and are required to be individuals at least 21 years old not under legal disability and at least a majority must be natural persons. Commencing with the 1996 annual meeting of shareholders, the Board of Trustees of the Trust has been divided into three classes, each class consists as nearly as possible of one-third of the Trustees. The term of office of one class of Trustees expires each year. The Trustees of the class elected at each annual meeting of shareholders hold office for a term of three years. The current Trustees of the Trust (two of whom are also the executive officers) are listed below, together with their ages, all positions and offices with the Trust and their principal occupations, business experience and directorships with other companies during the last five years or more. David S. Givner, 60, has been Trustee, President and Treasurer of the Trust since December 5, 1995, and is also the President/Managing Director of HPI Capital, LLC. Since 1992, Mr. Givner has been President and Chief Operating Officer of various affiliates of HPI Capital, LLC. From 1987 until 1992, he was Senior Vice President/Director of Leasing and Consulting Services for Williams Real Estate Company based in New York, New York. Mr. Givner is also the sole shareholder and the President of DAGI Corporation, a Delaware corporation and the general partner of DAGI Limited Partnership, a Delaware limited partnership. Mr. Givner beneficially owns 59,655 Shares through DAGI Limited Partnership. Simon Mizrachi, 55, has been Trustee of the Trust since December 5, 1995 and is also the President of Midatlantic Agency, Inc. a Florida corporation and financial consulting company. Mr. Mizrachi has served as President of Midatlantic Agency, Inc. since 1992. Mr. Mizrachi and Midatlantic Agency, Inc. are the sole partners of MIZ Investors Associates, a Delaware general partnership. Mr. Mizrachi has been a director and officer of PAZ Securities, Inc., an NASD broker/dealer firm, since 1978. Mr. Mizrachi is an officer with PAK Investors, Inc., Pudgie's Chicken, Inc., Topaz Securities, Inc., Topaz, Inc., Cal-Mar, Inc., TMT Hanes, Inc., and TMT Sales, Inc. Mr. Mizrachi is also an officer of various affiliates of MIZ Investors Associates and Midatlantic Agency, Inc. Mr. Mizrachi beneficially owns 59,655 Shares through MIZ Investors Associates. Michael S. Verruto, 43, has been Trustee, Vice President and Secretary of the Trust since December 5, 1995 and is also the Vice President/Managing Director of HPI Capital, LLC, a North Carolina limited liability company that develops real estate. Since January 1990, Mr. Verruto has held various positions with various affiliates of HPI Capital, LLC, all of which are active in real estate development and management. Mr. Verruto is also the sole shareholder and the President and Treasurer of Fletcher Napolitano Styles and Verruto Holding Company, Inc., a Delaware corporation and the general partner of Fletcher Napolitano Styles and Verruto Family Property Partners, L.P., a Delaware limited partnership. Mr. Verruto beneficially owns 59,655 Shares through Fletcher Napolitano Styles and Verruto Family Property Partners, L.P. Meetings and Committees of Trustees The business affairs of the Trust are managed by, or under the direction of, the Board of Trustees. During the fiscal year ended December 31, 2003, the Board of Trustees held no formal meetings and no matters were handled by unanimous written consent. Since Watermark is currently inactive (please see discussion in Items 1 and 2 above), the Board of Trustees has determined that there is no need for Watermark to have a standing audit, nominating or compensation committee, and thus no such committees are in existence. Compliance with Section 16(a) of the Securities Exchange Act of 1934 Under the securities laws of the United States, the Trust's trustees, executive officers, and any persons holding more than ten percent of the Trust's Shares are required to report their ownership of the Shares and any changes in that ownership to the Securities and Exchange Commission (the "Commission"). Specific due dates for these reports have been established under applicable law and the Trust is required to report any failure to file by these 15 dates during 2003. To the best knowledge of the current officers of the Trust, all of these filing requirements were satisfied by its trustees and executive officers and ten percent holders. Code of Ethics Since, as discussed above, Watermark is currently inactive, and thus it's directors and officers are not presently conducting ongoing operations for Watermark, Watermark has not adopted a code of ethics. Audit Committee Financial Expert Since Watermark does not have an audit committee, it does not have a financial expert on any such committee. Item 11. Executive Compensation. Neither the trustees nor the officers of the Trust received salaries or other cash compensation from the Trust for acting in such capacities during the year ended December 31, 2003. The Trust has no retirement, annuity or pension plans covering its trustees or officers. Based upon the Trust's current operations, the Board of Trustees does not believe compensation will be paid or given in the near future. Item 12. Security Ownership of Certain Beneficial Owners and Management. Security Ownership of Certain Beneficial Owner According to the Share transfer records of the Trust and other information available to the Trust, the following persons were known to be the beneficial owners, as of March 30, 2004, of more than five percent (5%) of the outstanding Shares of the Trust:

~~REAL~~Name ~~ESTATE~~and ~~2001~~Address ~~2000~~Amount ~~1999~~of ~~Balance~~Percent atof ~~beginning~~Shares of ~~year~~Beneficial ~~$168,588~~Owner ~~$168~~Beneficial Ownership Outstanding(1) Fletcher Napolitano Styles and 59,~~588~~665(2) ~~$168~~11.0(2) Verruto Family Property Partners,~~588~~ ~~Sales~~L.P.(3) ~~---~~Shares ~~---~~100 ~~---~~N. ~~Foreclosure~~Tryon ~~additions~~Street ~~---~~Suite ~~---~~5500 ~~---~~Charlotte, ~~Improvements~~NC ~~---~~28202 ~~---~~Attn: ~~---~~Michael ~~Balance~~S. atVerruto ~~end~~MIZ ofInvestors ~~year~~Associates(4) ~~$168~~59,~~588~~665(2) ~~$168~~11.0(2) 6971 N. Federal Highway Shares Suite 203 Boca Raton,~~588~~ ~~$168~~FL 33487 Attn: Simon and Joseph Mizrachi DAGI Limited Partnership(5) 59,~~588~~665(2) ~~ACCUMULATED~~11.0(2) ~~DEPRECIATION~~100 ~~Balance~~N. atTryon ~~beginning~~Street ofShares ~~year~~Suite $5500 ~~---~~Charlotte, $NC ~~---~~28202 $Attn: ~~---~~David ~~Sales~~S. ~~---~~Givner ~~---~~Antapolis ~~---~~N.V. ~~Depreciation~~184,422(2) ~~---~~34.0(2) ~~---~~c/o ~~---~~MeesPierson ~~Balance~~Trust atShares ~~end~~(Curacao) ofN.V. ~~year~~Number $6 ~~---~~Curacao $Netherlands ~~---~~Antilles $Attn: ~~---~~John B. Goisiraweg

16 (1) Based on 542,413 Shares outstanding on March 30, 2004. (2) Does not include shares owned by others in group that filed a Schedule 13D dated November 10, 1994. The group consists solely of the four entities listed above, which collectively own 363,417 Shares or 67.0% of the issued and outstanding Shares. (3) Through his control of Fletcher Napolitano Styles and Verruto Family Property Partners, L.P., Michael S. Verruto is deemed the beneficial owner of 59,665 shares. (4) Through their control of MIZ Investors Associates, Simon and Joseph Mizrachi are deemed to share beneficial ownership of 59,665 shares. (5) Through his control of DAGI Limited Partnership, David S. Givner is deemed the beneficial owner of 59,665 shares. Security Ownership of Management According to the Share transfer records of the Trust and other information available to the Trust, as of March 30, 2004, the current trustees and executive officers of the trust beneficially owned the following Shares: Name and Offices of Beneficial Amount of Percent of Class(1) Owner Beneficial Ownership David S. Givner, Trustee,(3) 59,665(2) 11.0(2) President and Treasurer Simon Mizrachi, Trustee(4) 59,665(2) 11.0(2) Michael S. Verruto, Trustee,(5) 59,665(2) 11.0(2) Vice President and Secretary All trustees and executive 178,995(2) 33.0(2) officers as a group (1) Based on 542,413 Shares outstanding on March 30, 2004. (2) Does not include shares owned by others in group that filed a Schedule 13D dated November 10, 1994. The group consists solely of the four entities listed above, which collectively own 363,417 Shares or 67.0% of the issued and outstanding Shares. (3) Through his control of DAGI Limited Partnership, David S. Givner is deemed the beneficial owner of 59,665 shares. (4) Through their control of MIZ Investors Associates, Simon and Joseph Mizrachi are deemed to share beneficial ownership of 59,665 shares. (5) Through his control of Fletcher Napolitano Styles and Verruto Family Property Partners, L.P., Michael S. Verruto is deemed the beneficial owner of 59,665 shares. Item 13. Certain Relationships and Related Transactions. Since December 5, 1995, HPI Capital, LLC has provided administrative and accounting services to the Trust under the supervision of the Trust's officers (two of whom are also officers of HPI Capital, LLC). HPI Capital, LLC has not been compensated by the Trust for any services rendered to the Trust until January 2001, when HPI Capital, LLC began charging the Trust $1,000 per year for administrative and accounting services. This amount has been accrued and is shown on the face of the balance sheet as A/P- related party. 17 Item 14. Principal Accounting Fees and Services. Audit Fees The aggregate fees billed, for each of the last two fiscal years, for professional services rendered by Watermark's principal accountant for the audit of Watermark's annual financial statements and review of financial statements included in Watermark's Form 10-Q or for services that are normally provided by Watermark's accountant in connection with statutory and regulatory filings or engagements for those fiscal years, are as follows: 2003 2002 $4,250 $4,250 Audit-Related Fees The aggregate fees billed in each of the last two fiscal years for assurance and related services by Watermark's principal accountant that are reasonably related to the performance of the audit or review of Watermark's financial statements are as follows: 2003 2002 $0 $0 Tax Fees The aggregate fees billed in each of the last two fiscal years for professional services rendered by Watermark's principal accountant for tax compliance, tax advice, and tax planning are as follows: 2003 2002 $750 $750 Preparation of Federal Income Tax Return All Other Fees All other aggregate fees billed in each of the last two fiscal years for products and services provided by Watermark's principal accountant are as follows: 2003 2002 $0 $0 Since Watermark does not have an audit committee, there are no audit committee pre-approval policies and procedures in existence. 18 PART IV Item 15. Exhibits, Financial Statements, Schedules and Reports on Form 8-K. (a) The following documents are filed as part of this report: 1. Consolidated Financial Statements: Balance Sheets as of December 31, 2003 and 2002. Statements of Operations for the years ended December 31, 2003, 2002 and 2001. Statements of Shareholders' Equity for the years ended December 31, 2003, 2002 and 2001. Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001. Notes to Financial Statements. 2. Schedules: Schedule III - Real Estate Investments and Accumulated Depreciation. All other schedules are omitted since they are not required, are not applicable, or the information required is included in the financial statements or the notes thereto. 3. Exhibits: The following documents are filed as exhibits to this report: Exhibit Number Description 3.1 Declaration of Trust, as amended (Incorporated by reference to Exhibit 3.1 to Registrant's Form 10-K for the year ended December 31, 1995). 3.2 By-laws, as amended (Incorporated by reference to Exhibit 3.1 to Registrant's Form 10-K for the year ended December 31, 1995). 10.1 Contract of Sale and Purchase of Real Property, by and between Watermark Texas One, Inc. and The Peterson Group, Inc., dated as of October 16, 2003, incorporated by reference to Exhibit 10.1 of Watermark's Form 10-Q for the quarterly period ended September 30, 2003, filed on November 14, 2003. 21 List of Subsidiaries. (Incorporated by reference to Exhibit 21 to Registrant's Form 10-K for the year ended December 31, 1996). 31(a) Certification of the Principal Executive Officer of Watermark Investors Realty Trust, pursuant to Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 19 31(b) Certification of the Principal Financial Officer of Watermark Investors Realty Trust pursuant to Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 32(a) Certification of the Principal Executive Officer of Watermark Investors Realty Trust furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). 32(b) Certification of the Principal Financial Officer of Watermark Investors Realty Trust furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). (b) Reports on Form 8-K. During the last quarter of the period covered by this report, no reports on Form 8-K were filed. 20 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, on this the 8th day of April, 2004. WATERMARK INVESTORS REALTY TRUST By: /s/ David S. Givner ------------------- David S. Givner Trustee, President and Treasurer Pursuant to the requirements of 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 date indicated. Signature Title Date /s/ David S. Givner Trustee, President and Treasurer April 8, 2004 ------------------- David S. Givner (Principal Executive Officer and Principal Financial and Accounting Officer) /s/ Michael S. Verruto Trustee, Vice President and Secretary April 8, 2004 ----------------------- Michael S. Verruto 21 Exhibit 31(a) CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, David S. Givner, certify that: 1. I have reviewed this annual report on Form 10-K of Watermark Investors Realty Trust; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 report; 4. The registrant's other certifying officer(s) 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, including its consolidated subsidiaries, is made known to us by others within those entities, 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 (the registrant's fourth fiscal quarter in the case of an annual report) 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(s) 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 the 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 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. Date: April 8, 2004 /s/ David S. Givner ------------------- David S. Givner Principal Executive Officer 22 Exhibit 31(b) CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, David S. Givner, certify that: 1. I have reviewed this annual report on Form 10-K of Watermark Investors Realty Trust; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 report; 4. The registrant's other certifying officer(s) 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, including its consolidated subsidiaries, is made known to us by others within those entities, 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 (the registrant's fourth fiscal quarter in the case of an annual report) 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(s) 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 the 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 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. Date: April 8, 2004 /s/ David S. Givner ------------------- David S. Givner Principal Financial Officer 23 Exhibit 32(a) CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Watermark Investors Realty Trust (the "Company") on Form 10-K for the year ending December 31, 2003 as filed with the Securities and Exchange Commission (the "SEC") on or about the date hereof (the "Report"), I, David S. Givner, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request. Date: April 8, 2004 /s/ David S. Givner ------------------- David S. Givner Principal Executive Officer 24 Exhibit 32(b) CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Watermark Investors Realty Trust (the "Company") on Form 10-K for the year ending December 31, 2003 as filed with the Securities and Exchange Commission (the "SEC") on or about the date hereof (the "Report"), I, David S. Givner, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request. Date: April 8, 2004 /s/ David S. Givner ------------------- David S. Givner Principal Financial Officer 25

Name and Address Amount of Percent of Shares of Beneficial Owner Beneficial Ownership Outstanding(1) Fletcher Napolitano Styles and 59,665(2) 11.0(2) Verruto Family Property Partners, L.P.(3) Shares 227 W. Trade Street Suite 2320 Charlotte, NC 28202 Attn: Michael S. Verruto MIZ Investors Associates(4) 59,665(2) 11.0(2) 6971 N. Federal Highway Shares Suite 203 Boca Raton, FL 33487 Attn: Simon and Joseph Mizrachi DAGI Limited Partnership(5) 59,665(2) 11.0(2) 227 W. Trade Street Shares Suite 2320 Charlotte, NC 28202 Attn: David S. Givner Antapolis N.V. 184,422(2) 34.0(2) c/o MeesPierson Trust Shares (Curacao) N.V. Number 6 Curacao Netherlands Antilles Attn: John B. Goisiraweg

Name and Offices of Beneficial Amount of Percent of Class(1) Owner Beneficial Ownership David S. Givner, Trustee,(3) 59,665(2) 11.0(2) President and Treasurer Simon Mizrachi, Trustee(4) 59,665(2) 11.0(2) Michael S. Verruto, Trustee,(5) 59,665(2) 11.0(2) Vice President and Secretary All trustees and executive 178,995(2) 33.0(2) officers as a group

Signature Title Date /s/ David S. Givner ----------------------------- Trustee, President and Treasurer March 20, 2002 David S. Givner (Principal Executive Officer and Principal Financial and Accounting Officer) /s/ Michael S. Verruto ----------------------------- Trustee, Vice President and Secretary March 20, 2002 Michael S. Verruto

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