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     Nelson Mullins Riley & Scarborough LLP

     Attorneys and Counselors at Law
     Neil E. Grayson

     104 South Main Street / Ninth Floor / Greenville, South Carolina 29601
     (Admitted in GA, SC & NY)

     Tel: 864.250.2300  Fax: 864.232.2925
     864.250.2235

     www.nelsonmullins.com
     Fax: 864.250.2359

     neil.grayson@nelsonmullins.com

October 31, 2005

Mr. Josh Forgione
United States Securities
and Exchange Commission
Division of Corporation Finance
Washington, DC 20549

        Re:
Palmetto Real Estate Trust
                   Form 10-KSB for the year ended December 31, 2004

                   Form 10-QSB for the quarterly period ended March 31, 2005

                   File No. 000-00179

Dear Mr. Forgione:

        On
behalf of Palmetto Real Estate Trust we are responding to the Staff’s comment letter
dated May 20, 2005 commenting on the filings listed above the Trust’s response dated
May 13, 2005. The paragraphs below respond to the Staff’s numbered comments.

Form 10-KSB for the year
ended December 31, 2004

Financial Statements and Notes

Note 2 – Investment in
Real Property and Gains on Sale of Real Estate, Annual Report pages 8-10

Comment #1

We note your response to our prior
comment #2 wherein you state SFAS 141 does not apply if the net assets acquired do not
constitute a business. Please refer to paragraphs 4-8 for applicability of this standard
to asset purchases. Please tell us how the allocation of acquisition costs to building,
land and intangible assets acquired, including in-place tenant leases and customer
relationships, would be impacted if you applied SFAS 141 to each of your property
acquisitions, as we believe is appropriate.

Response:
We concur that SFAS 141 applies to the transactions in question. We will adopt the
methodology discussed below in allocating the purchase price to land,

Atlanta • Charleston • Charlotte • Columbia •
 Greenville • Myrtle Beach • Raleigh • Winston-Salem • Washington, DC

Mr. Josh Forgione
October 31, 2005

Page 2

building, building improvements and intangibles for the properties purchased by the Trust in 2004
and 2003 as of April 1, 2005 (see concluding paragraph).

Pursuant to SFAS 141, the purchase price of a property is allocated to the property’s assets
based upon estimates of fair value. The determination of the fair value of intangible
assets requires estimates made by the Trust and considers many factors, including
characteristics of the property being acquired. We use a current appraisal in determining
our allocation of purchase price. Other characteristics we look for in properties to
allocate purchase prices include the capitalization rate of a property, the geographic and
physical appearance of the property, the nature of its tenant base, current economic
conditions at the local, state and federal level, the credit quality of the existing
tenants in the property, existing business relationships and expectations of lease
renewals.

The considerations above are used to make our judgments allocating the purchase price of
acquired properties to the physical assets (land, building and building improvements) as
well as to determine the value of any intangible assets including: (i) the value of
in-place leases, (ii) the intangible value of any above or below market leases at the
acquisition date and (iii) any estimated tenant relationship value.

The value of in-place leases will be estimated using judgments of costs avoided in originating
leases comparable to the acquired in-place leases, as well as considering the value
associated with potential lost rental revenue during the assumed lease-up period.
Consideration is also given to the credit quality of the existing leases and lease terms,
as well as lease renewal expectations. The type of property (for example, a shopping
center or stand alone building) is considered as well in determining the fair value of
in-place leases. The value of in-place leases will be amortized over the estimated
weighted-average remaining lease terms.

Above-market and below-market in-place lease values for acquired properties will be based on the
present value of the difference between (i) the contractual amounts to be paid pursuant to
the in-place leases and (ii) our estimates of fair market value lease rates for the
comparable in-place leases. The value of the above-market and below-market leases will be
amortized over the estimated weighted average remaining lease terms. There were no
properties with above-market or below-market leases at the time of the transactions in
question (see further explanation in Comment #3 concerning the Ridgeview Center property).

The value of customer relationships assigned to intangibles, if any, will be based upon on
management’s evaluation of the specific characteristics of each tenant’s lease
and our relationship with the respective tenant. Such characteristics include the
tenant’s credit quality, our expectation of lease renewals and any existing business
relationships.

Mr. Josh Forgione
October
31, 2005
Page 3

We acquired three properties in 2004 and one property in 2003. The table below reflects the
allocation of the purchase price as originally recorded and reported on the balance sheet
of our 10-KSB for the year ended December 31, 2004 and the revised amounts using our
revised accounting method:

     AS ORIGINALLY REPORTED

     Acquisition (Yearof Transaction)
     Land
     Building
     Total

     Fred's Inc. (2004)

     $    100,000

     $    636,652

     $    736,652

     Poinsett Highway (2004)
     $     50,000

     $    325,000

     $    375,000

     Ridgeview Center (2004)
     $    250,000

     $  2,157,174

     $  2,407,174

     Sunshine House (2003)
     $    187,500

     $  1,312,500

     $  1,500,000

The table below is the allocation of the purchase price based upon our revised accounting:

     REVISED

     Intangible

     related to

     Acquisition
     Land
     Building
     in-place leases
     Total

     Fred's Inc.

     $     95,000

     $    604,819

     $     36,833

     $    736,652

     Poinsett Highway
     $     50,000

     $    325,000

     $       --

     $    375,000

     Ridgeview Center
     $    237,500

     $  2,049,316

     $    120,358

     $  2,407,174

     Sunshine House
     $    173,437

     $  1,214,063

     $    112,500

     $  1,500,000

The table below illustrates the aggregate impact on the Trust’s Statement of Income for
the year ended December 31, 2004 and 2003:

Mr. Josh Forgione

October 31, 2005
Page 4

     Statement of Income

     Increase / (Decrease)

     2004
     2003

     Net Income, as reported

      $1,308,314

     $1,834,088

     Earnings per share, as reported
      $   0.74
      $   1.04

     Amortization of intangibles, net of the

     related change in depreciation expense
      (24,828)
      (2,125)

     Net Income, revised
      $1,283,486
      $1,831,963

     Earnings per share, revised
      $   0.73
      $   1.04

The impact of applying SFAS 141 on the Trust’s Statement of Income would be a decrease to
net income of $24,828 and $2,125 for the years ending December 31, 2004 and 2003,
respectively. We do not believe that this has a material impact on net income for the
years in question. See concluding paragraph for aggregation of impact of all corrections
to financial statements.

– Fred’s Inc.: The property was acquired in 2004 for $736,652, and we allocated
$95,000 to land, $604,819 to building and building Improvements and $36,833 to intangible
assets related to the value of in-place leases (this property had one long term lease at
acquisition). We will amortize the intangible asset over the remaining seven year lease
term for this property.

– Poinsett Highway: The property was acquired in 2004. At the time of acquisition,
there were two month-to-month leases in place and no long term tenants. These leases
represent market value since they were month-to-month. We allocated $50,000 to land and
$325,000 to buildings for this property and we have concluded that there was no intangible
asset.

– Ridgeview Center: The property was acquired in 2004 for $2,407,174. The property is
located in Laurens, SC and is a shopping center with one anchor tenant and numerous other
smaller tenants. We allocated $237,500 to land, $2,049,316 to building and building
improvements and $120,358 to intangibles for the estimated value of in-place leases. We
will amortize the intangible assets over the estimated weighted-average remaining lease
lives of 3 ½ years.

– Sunshine House: The property was acquired in 2003 for $1,500,000, and we allocated
$173,437 to land, $1,214,063 to building and building improvements and $112,500 to
intangible assets related to the value of in-place leases (this property had one long term
lease at acquisition). The Trust will amortize the intangible asset over the remaining
lease term of 21 years.

Mr. Josh Forgione
October
31, 2005
Page 5

Comment #2

We note the acquisitions of
Sunshine House and Ridgeview Center appear to exceed 10% of total assets as of the date of
the last audited balance sheet at the time of acquisition. In the future, please file the
financial statements required by Rule 3-14 of Regulation S-X and Item 2.01 of Form 8-K.
Please note the purchase of real estate companies engaged in real estate activities is not
considered to be an acquisition in the ordinary course of business.

Response: The Trust will file the financial statements as required by Rule 3-14 of Regulation S-X
and Item 2.01 of Form 8-K for future transactions.

Comment #3

It appears Ridgeview Center had
several in-place tenant leases at the time of acquisition. Please provide us with the
above and below market values of the in-place leases which you did not deem significant.
Additionally, please tell us the fair value of the building determined on an “as
if” vacant basis, and the related value of acquired leases.

Response: Ridgeview Center had several in-place leases at the time of acquisition in May 2004.
This is a shopping center located in Laurens, SC, which is primarily a rural community. At
the time of acquisition, there were no above-market or below-market leases due to the
following circumstances:

BC Moore & Sons: This is the Trust’s anchor tenant at the shopping center and
occupies approximately 16,900 square feet. The lease term is for 15 years and leases for
approximately $5 per square foot. This rent is market value given the size of space the
tenant occupies, the quality of the tenant and the community in which the shopping center
is located.

Checks into Cash, Dollar Tree Store: These leases were renewed subsequent to our acquisition
with a 4% increase in the base rent (note: Ridgeview Center was acquired in May 2004 and
subsequent renewal of this lease occurred in September 2004). Given that the increases in
the base rent were modest, in our judgment, the leases were at market value at the time of
acquisition of the property.

Citi Financial: This lease was renewed in 2002 at a price per square foot comparable to the
existing lease and with leases with tenants occupying the same space at the shopping
center. As such and with no identified changes noted in the market place, we concluded the
lease agreement was at market at the time of acquisition.

Hibbett Sporting, Cato Corporation, Le Nails: These leases were renewed during 2003, just
months before the Trust purchased the property. The leases were at market value in our
judgment and they were renewed for an additional term with a 4% increase in the base rent.

Mr. Josh Forgione
October
31, 2005
Page 6

We estimated the fair value of the building to be $2,049,316 and the value on the intangible
asset related to estimated value of in-place leases to be $120,358. There were no
above-market or below-market value leases at Ridgeview Center at the time of acquisition.

Comment #4

Please explain the circumstances
resulting in a zero basis for the assets that were sold. Additionally, please tell us how
you determined the historical basis of Timberlands on your balance sheet at December 31,
2004 did not relate to the timber sales in 2004.

Response: The non-income producing properties that were sold during 2004 had a basis of
approximately $10,000. This basis should have been offset against the sale of the property
at the time of the disposition. The $10,000 of basis did not materially impact the
Trust’s Statement of Income for the year ending December 31, 2004. See concluding
paragraph for aggregation of impact of all corrections to financial statements.

Comment #5

In future filings, please disclose
your policies for purchase accounting, disposals and impairment.

        Response:
The Trust will disclose its policies for purchase accounting, disposals and impairment in
its future filings.

Form 10-QSB For the
Quarterly Period Ended March 31, 2005

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations –
For the three months ended March 31, 2005 compared to the three months ended March 31,
2004, page 5

Comment #6

Please tell us the facts and
circumstances for the correction of lease payments of $82,000, which represents more than
10% of revenue for the period.

Mr. Josh Forgione
October
31, 2005
Page 7

Response:  The tenant of the Trust’s Haywood-Pelham Road property (Engima Spinx, which is a
retail convenience store and service station) did not increase their rent payments as
stipulated in the lease agreement. The lease agreement calls for an escalation of rent
every five years, but we did not adjust the billings to the tenant in accordance with the
lease agreement. This began in June of 1998. While the error was discovered in the first
quarter of 2005, after discussing this with the tenant, the tenant was billed for the
difference in the rent that was paid and the actual rent per the lease agreement. The
tenant agreed and paid additional rent of $82,000 during the three month period ending
March 31, 2005. We also have not been accounting for this lease on a straight-line basis
as required by FTB 85-3. If the lease had been recorded on a straight-line basis since its
inception and the Trust had billed the escalation as required by the lease agreement, the
Trust would record approximately $10,267 in rental income on a monthly basis and we would
have an asset related to deferred rent $38,253 as of December 31, 2004. The following
table provides a summary of the calculation:

         Monthly

       Monthly
         FTB

       Rent, per
         85-3

       Lease
         S/L
     Monthly
     Aggregate

                     Year
       Agreement
        Rent
     Difference
     Difference
          Asset

       June 1993 - May 1998

         $9,334

        $10,267

           $933

        $55,980

        $55,980

       June 1998 - May 2003
        $10,267

        $10,267

          -

          -

        $55,980

       June - December 2003
        $11,200

        $10,267

       ($   933
        )
       ($ 6,531
        )
        $49,449

     January - December 2004
        $11,200

        $10,267

       ($933
        )
       ($11,196
        )
        $38,253

       January - June 2005
        $11,200

        $10,267

       ($933
        )
       ($5,598
        )
        $32,655

We
believe that the rental income in question does not have a material impact on the
Trust’s financial statements from 1998-2004. We plan to account for this lease as
required by FTB 85-3 in the second quarter of 2005 and we will record the related net
asset $32,655 as of June 30, 2005.

We reviewed all of the Trust’s leases to determine if there were other missed rent
escalations and we found none.

Based
on responses provided in Comments 1, 4 and 6, we have calculated the effect of correcting
errors to our financial statement for the years ended December 31, 2004 and 2003.