[Form of Proxy Card-Front]

                                 HRE PROPERTIES

                    PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
                          to be held on March 12, 1997


The undersigned  hereby constitutes and appoints Charles J. Urstadt and James R.
Moore,  and each of them,  as  Proxies  of the  undersigned,  with full power to
appoint his or her substitute, and authorizes each of them to represent and vote
all shares of beneficial interest of HRE Properties (the "Trust") held of record
as of the close of  business  on January  27,  1997,  at the  Annual  Meeting of
Shareholders  of the  Trust  (the  "Annual  Meeting")  to be held  at the  Doral
Arrowwood  Conference  Center,  Anderson  Hill  Road,  Rye Brook,  New York,  on
Wednesday March 12, 1997, and at any adjournments or postponements thereof.

When properly  executed,  this proxy will be voted in the manner directed herein
by the undersigned shareholder(s).  If no direction is given, this proxy will be
voted  FOR (i) the  approval  of the  proposed  Plan  of  Reorganization,  which
provides for the reorganization of the Trust from a Massachusetts business trust
into a  Maryland  corporation  by the means of the  merger of the Trust with and
into HRE  Properties,  Inc., a newly  organized  Maryland  corporation  which is
wholly owned by the Trust (the "Corporation"),  as set forth in Proposal 1, (ii)
the election of three  Trustees to serve for the ensuing  three years or, if the
Plan  of  Reorganization  is  approved  and  consummated,  as  Directors  of the
Corporation,  as set forth in Proposal 2, (iii) the  approval of the  Restricted
Stock  Award Plan  providing  for the grant of  restricted  stock  awards to key
management  personnel of the Trust or, if the Plan of Reorganization is approved
and consummated,  key management  personnel of the Corporation,  as set forth in
Proposal 3, and (iv) the  ratification of the appointment of Arthur Andersen LLP
as the  independent  financial  auditors  or, if the Plan of  Reorganization  is
approved and consummated,  the Corporation,  for the ensuing fiscal year, as set
forth in Proposal 4. In their  discretion,  the Proxies are each  authorized  to
vote upon such other business as may properly come before the Annual Meeting and
any  adjournments or  postponements  thereof.  A shareholder  wishing to vote in
accordance with the Board of Trustees'  recommendations  need only sign and date
this proxy and return it in the enclosed envelope.

The  undersigned  hereby  acknowledge(s)  receipt of a copy of the  accompanying
Notice of Annual Meeting of Shareholders, the Proxy Statement/Prospectus and the
Trust's Annual Report to shareholders  and hereby revoke(s) any proxy or proxies
heretofore  given.  This proxy may be revoked at any time before it is exercised
by filing a notice of such  revocation,  by filing a later  dated proxy with the
Secretary of the Trust or by voting in person at the Annual Meeting.

               THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF
                                 HRE PROPERTIES

                Please vote and sign on the other side and return
                    promptly in the enclosed envelope. Do not
                           forget to date your proxy.

Please sign name  exactly as shown.  Where  there is more than one holder,  each
should sign.  When signing as an attorney,  administrator,  guardian or trustee,
please add your title as such. If executed by a corporation or partnership,  the
proxy should be signed by a duly authorized person,  stating his or her title or
authority.





                         [Form of Proxy Card - Reverse]

         Please check appropriate box

         Proposal 1.  Proposal to approve the  proposed  Plan of  Reorganization
which provides for the reorganization of the Trust from a Massachusetts business
trust into a Maryland  corporation  by the means of the merger of the Trust with
and into HRE Properties,  Inc., a newly organized Maryland  corporation which is
wholly owned by the Trust.

       FOR        |_|             AGAINST    |_|            ABSTAIN     |_|
                    PROPOSAL 1                   PROPOSAL 1
   
         Proposal 2.  Proposal to elect three  Trustees to serve for the ensuing
three years or, if the Plan of  Reorganization  is approved and consummated,  as
Directors of the Corporation.

 FOR all nominees  |_|     WITHHOLD AUTHORITY to vote    |_|     EXCEPTIONS  |_|
  listed below             for all nominees listed below

Nominees:  Robert  R.  Douglass,  George  H.C.  Lawrence,   Charles  J.  Urstadt
(INSTRUCTIONS:  To withhold authority to vote for any individual  nominee,  mark
the "Exceptions" box and write that nominee's name in the space provided below.)

Exceptions:_______________________________________________________
    
        Proposal 3. Proposal to approve a Restricted Stock Award Plan providing
for the grant of  restricted  stock  awards to key  management  personnel of the
Trust  or,  if the Plan of  Reorganization  is  approved  and  consummated,  key
management personnel of the Corporation.

      FOR        |_|             AGAINST    |_|            ABSTAIN     |_|
   PROPOSAL 3                     PROPOSAL 3

         Proposal 4. Proposal to ratify the  appointment of Arthur  Andersen LLP
as the  independent  financial  auditors  or, if the Plan of  Reorganization  is
approved and consummated, the Corporation, for the ensuing fiscal year.

     FOR        |_|             AGAINST    |_|            ABSTAIN     |_|
  PROPOSAL 4                     PROPOSAL 4

         THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" EACH OF THESE PROPOSALS.



                              Please be sure to sign and date this proxy

                              Date:        ______________________________

                              Signature(s):______________________________

                                           ______________________________