UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB


         (Mark One)

[ X ]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                     SECURITIES EXCHANGE ACT OF 1934

         For the quarterly period ended September 30, 2001


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

         For the transition period ended  ______________to________________
                                                        --

                        Commission file number 333-55753

                         Baron Capital Properties, L.P.

        (Exact name of small business issuer as specified in its charter)



            Delaware                                     31-1584691
   (State or other jurisdiction                        (IRS Employer
of incorporation or organization)                    Identification No.)

                    7800 Cooper Road, Cincinnati, Ohio 45242

                    (Address of principal executive offices)

                                 (513) 936-3408
                           (Issuer's telephone number)

Check  whether the Issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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 [    ]

As of the date of this Report, the Registrant has outstanding 4,034,217 units of
limited partnership interest ("Operating Partnership Units" or "Units").

<PAGE>


                         PART I - FINANCIAL INFORMATION


Item 1.   Financial Statements

          See following pages.


<PAGE>
                         BARON CAPITAL PROPERTIES, L.P.

                          INDEX TO FINANCIAL STATEMENTS


                                                                       PAGE
                                                                       ----

CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

 Balance Sheets                                                         F-1

 Statements of Operations                                               F-2

 Statement of Partners' Capital                                         F-3

 Statements of Cash Flows                                               F-4

 Notes to Financial Statements                                        F-5-F-14



<PAGE>
                         BARON CAPITAL PROPERTIES, L.P.

                      CONSOLIDATED CONDENSED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                 September 30,     December 31,
                                                                                     2001             2000
                                                                                     ----             ----
                                                                                  (Unaudited)
<S>                                                                              <C>               <C>
                                       ASSETS
Rental Apartments:
   Land                                                                          $  5,643,600      $  5,643,600
   Rental property held for sale                                                           --         3,635,000
   Depreciable property                                                            26,211,036        26,091,407
                                                                                 ------------      ------------
                                                                                   31,854,636        35,370,007
   Less accumulated depreciation                                                    3,158,120         2,304,148
                                                                                 ------------      ------------
                                                                                   28,696,516        33,065,859

Cash and Cash Equivalents                                                           1,562,647            20,823
Restricted Cash                                                                       611,325           359,894
Receivables from Affiliates                                                         7,435,188         6,927,109
Other Property and Equipment                                                          102,017           105,960
Other Assets                                                                          746,017           903,287
                                                                                 ------------      ------------
                                                                                 $ 39,153,710      $ 41,382,932
                                                                                 ============      ============

                         LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
   Mortgages payable                                                             $ 23,235,164      $ 23,540,172
   Accounts payable and accrued liabilities                                           980,310         1,670,453
   Notes payable                                                                    2,139,525         2,482,499
   Payables to affiliates                                                             796,339         2,237,761
   Security deposits                                                                  225,348           208,406
                                                                                 ------------      ------------
         Total liabilities                                                         27,376,686        30,139,291
                                                                                 ------------      ------------

Partners' Capital:
   General partner; issued and outstanding, 43,977 partnership units                  (55,841)          (61,175)
   Limited partners; issued and outstanding, 4,034,217 partnership units,
      of which 757,746 units are subject to escrow restrictions                    11,832,864        11,304,816
                                                                                 ------------      ------------
         Total partners' capital                                                   11,777,023        11,243,641
                                                                                 ------------      ------------
                                                                                 $ 39,153,710      $ 41,382,932
                                                                                 ============      ============
</TABLE>


           See notes to consolidated condensed financial statements.



                                      F-1

<PAGE>


                         Baron Capital Properties, L.P.

                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                  Nine Months Ended               Three Months Ended
                                                           September 30,     September 30,   September 30,    September 30,
                                                               2001              2000            2001             2000
                                                               ----              ----            ----             ----
                                                                               RESTATED                         RESTATED
                                                                               --------                         --------
<S>                                                         <C>              <C>              <C>              <C>
Revenues:
   Property:
      Rental                                                $ 4,234,132      $ 3,155,896      $ 1,289,137      $ 1,411,137
      Equity in net loss of unconsolidated partnerships              --         (113,915)              --          (34,921)
   Interest and other income                                  1,086,763          634,476          416,029          266,342
                                                            -----------      -----------      -----------      -----------
                                                              5,320,896        3,676,457        1,705,167        1,642,558
                                                            -----------      -----------      -----------      -----------

Real Estate Expenses:
   Depreciation                                                 853,972          647,491          357,881          306,264
   Amortization of loan costs                                    69,753          110,100           30,667           52,119
   Interest                                                   1,344,748        1,045,039          329,446          489,524
   Repairs and maintenance                                      827,543          502,951          424,804          222,387
   Personnel                                                    614,089          442,644          187,092          177,268
   Property taxes                                               381,152          274,838          117,319          127,020
   Property insurance                                            96,498           68,504           30,943           30,474
   Utilities                                                    409,509          283,151          121,328          138,997
   Other                                                        321,142          160,376          194,632           98,475
                                                            -----------      -----------      -----------      -----------
                                                              4,918,406        3,535,094        1,794,112        1,642,528
                                                            -----------      -----------      -----------      -----------

Administrative Expenses:
   Personnel, including officer's compensation                  438,381          691,864          133,852          156,403
   Professional services                                         59,931          284,056           (9,014)          34,517
   Other                                                        401,809          352,234          155,899          179,210
                                                            -----------      -----------      -----------      -----------
                                                                900,121        1,328,154          280,737          370,130
                                                            -----------      -----------      -----------      -----------

Loss Before Other Expenses and Extraordinary Item              (497,631)      (1,186,791)        (369,683)        (370,100)
                                                            -----------      -----------      -----------      -----------

Other Income/(Expenses):
   Income from loan discount repayment                          400,881               --          400,881               --
   Credit for loan losses                                       465,514                           465,514
   Prepayment penalties                                        (827,013)              --         (292,938)              --
   Write-off of loan costs on refinanced loans                 (176,769)              --          (28,539)              --
   Loss on sale of property                                    (210,854)              --               --               --
                                                            -----------      -----------      -----------      -----------
                                                               (348,241)              --          544,918               --
                                                            -----------      -----------      -----------      -----------

Income (Loss) Before Extraordinary Item                        (845,872)      (1,186,791)         175,235         (370,100)
                                                            -----------      -----------      -----------      -----------

Extraordinary Item - Extinguishment of Debt
   Affiliates                                                 1,267,755               --          135,746               --
   Former Chief Executive Officer                               111,500               --               --               --
                                                            -----------      -----------      -----------      -----------
                                                              1,379,255               --          135,746               --
                                                            -----------      -----------      -----------      -----------

Net Income (Loss)                                           $   533,382      $(1,186,791)     $   310,981      $  (370,100)
                                                            ===========      ===========      ===========      ===========

Income (Loss) Per Partnership Unit :

Before Extraordinary Item                                   $     (0.21)     $     (0.37)     $      0.04      $     (0.11)

Extraordinary Item- Extinguishment of Debt                         0.34               --             0.04               --
                                                            -----------      -----------      -----------      -----------

Net Income (Loss) Per Partnership Unit                      $      0.13      $     (0.37)     $      0.08      $     (0.11)
                                                            ===========      ===========      ===========      ===========

Weighted Average Number of Units Outstanding                  4,034,217        3,216,538        4,034,217        3,404,600
                                                            ===========      ===========      ===========      ===========
</TABLE>


           See notes to consolidated condensed financial statements.



                                      F-2


<PAGE>


                         BARON CAPITAL PROPERTIES, L.P.

             CONSOLIDATED CONDENSED STATEMENTS OF PARTNERS' CAPITAL
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                               General Partner            Limited Partners
                                               ---------------            ----------------
                                              Units      Amount         Units         Amount          Total
                                              -----      ------         -----         ------          -----

<S>                                          <C>        <C>           <C>           <C>             <C>
Partners' Capital, December 31, 2000         43,977     $(61,175)     4,034,217     $11,304,816     $11,243,641

Nine Months Ended September 30, 2001:

   Net Income                                    --        5,334             --         528,048         533,382
                                             ------     --------      ---------     -----------     -----------

Partners' Capital, September 30, 2001        43,977     $(55,841)     4,034,217     $11,832,864     $11,777,023
                                             ======     ========      =========     ===========     ===========
</TABLE>


           See notes to consolidated condensed financial statements.



                                      F-3

<PAGE>


                         BARON CAPITAL PROPERTIES, L.P.

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                            Nine Months Ended September 30,
                                                                                            -------------------------------
                                                                                                2001               2000
                                                                                                ----               ----
                                                                                                                 RESTATED
                                                                                                                 --------
<S>                                                                                         <C>                <C>
Cash Flows from Operating Activities:
   Net income (loss)                                                                        $   533,382        $(1,186,791)
   Adjustments to reconcile net loss to net cash and cash equivalents
   used in operating activities:
      Credit for estimated fair value of services performed by officer                               --            162,750
      Extinguishment of debt                                                                 (1,483,974)                --
      Depreciation                                                                              853,972            647,491
      Credit for loan losses                                                                   (465,514)                --
      Loss on sale of property                                                                  210,854                 --
      Amortization of loan costs                                                                 69,753            110,100
      Write off of loan costs on refinanced loans                                               176,769                 --
      Equity in net loss of unconsolidated partnership                                               --           (113,915)
      Changes in operating assets and liabilities:
      (Increase) decrease in operating assets:
         Other Receivables                                                                           --             50,970
         Other assets                                                                           (89,253)            (9,450)
       Increase (decrease) in operating liabilities:
         Accounts payable and accrued liabilities                                              (562,617)           (63,627)
         Security deposits                                                                       16,942            (28,092)
                                                                                            -----------        -----------
            Net cash and cash equivalents used in operating activities                         (739,685)          (430,564)
                                                                                            -----------        -----------

Cash Flows from Investing Activities:
   Proceeds from sale of property, net                                                        3,424,146                 --
   Additions to rental apartments                                                              (119,629)          (196,277)
   Investments in partnerships                                                                       --              1,203
   Increase in restricted cash                                                                 (251,431)          (101,990)
   Other                                                                                          3,943             (4,979)
                                                                                            -----------        -----------
            Net cash and cash equivalents provided by (used in) investing activities          3,057,029           (302,043)
                                                                                            -----------        -----------

Cash Flows from Financing Activities:
   Proceeds from mortgage refinancing                                                         8,095,000                 --
   Partners' capital contributions                                                                   --            230,118
   Proceeds from notes payable                                                                       --            315,791
   Payments on notes payable                                                                   (342,973)           (90,000)
   Payments on mortgages payable                                                             (8,400,008)          (157,928)
   Increase (decrease) in loans payable to affiliates, net                                     (127,539)           598,954
                                                                                            -----------        -----------
            Net cash and cash equivalents (used in) provided by financing activities           (775,520)           896,935
                                                                                            -----------        -----------

Net Increase in Cash and Cash Equivalents                                                     1,541,824            164,328

Cash and Cash Equivalents, Beginning                                                             20,823             27,552
                                                                                            -----------        -----------

Cash and Cash Equivalents, Ending                                                           $ 1,562,647        $   191,880
                                                                                            ===========        ===========

Supplemental Disclosure of Cash Flow Information:
   Cash paid for mortgage and other interest                                                $ 1,344,748        $ 1,045,039
                                                                                            ===========        ===========
</TABLE>


           See notes to consolidated condensed financial statements.



                                      F-4

<PAGE>

                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Basis of Presentation

          The unaudited consolidated condensed balance sheet as of September 30,
          2001, and the related unaudited  consolidated  condensed statements of
          operations and cash flows for the nine months ended September 30, 2001
          and 2000  (as  restated),  and the  unaudited  consolidated  condensed
          statements  of partners'  capital for the nine months ended  September
          30,  2001 have been  prepared  by the  Partnership.  In the opinion of
          management,  all  adjustments  (which  include  reclassifications  and
          normal  recurring   adjustments)   necessary  to  present  fairly  the
          financial position,  results of operations and cash flows at September
          30, 2001 and for the periods presented, have been made. The results of
          operations  for the  nine  months  ended  September  30,  2001 are not
          necessarily indicative of the operating results for the full year.

          As  a  result  of  certain   adjustments   in   connection   with  the
          Partnership's  consolidated  financial  statements  for the year ended
          December 31, 2000,  management  determined to restate its Forms 10-QSB
          and 10-QSB/A for the quarter  ended  September  30, 2000 as previously
          filed  on March  1,  2001  and  August  27,  2001,  respectively.  The
          Partnership  included in its  original  September  30, 2000  financial
          statements a provision for property  impairment of  $8,356,638,  which
          was a result of writing  off the excess of the  recorded  value of the
          Exchange  Partnerships  acquired  in the  Exchange  Offering  over the
          estimated  current value of the Exchange  Partnerships.  The provision
          for property impairment was a result of calculating the recorded value
          at  the  date  of  the  exchange   (April  1,  2000)  with  incomplete
          information.  As a result, adjustments were made to the recorded value
          based on information not previously available to the Partnership.  Had
          the Partnership  been aware of this  information at the time of filing
          the September  30, 2000 Forms 10-QSB and  10-QSB/A,  the provision for
          property  impairment  of  $8,356,638  would  not have  been  recorded.
          Instead an adjustment of  $11,005,924  would have been recorded to the
          consolidated balance sheet as an adjustment to the recorded amounts of
          land,  depreciable  property,  advances to  affiliates  and  partners'
          capital to  reflect  the  estimated  fair  value of such  assets.  The
          amounts contained herein reflect those changes.

          Certain information and footnote  disclosures normally included in the
          financial  statements  prepared in accordance with generally  accepted
          accounting  principles have been condensed or omitted. It is suggested
          that these  consolidated  financial  statements be read in conjunction
          with  the  Operating  Partnership's  financial  statements  and  notes
          thereto  included  in its  December  31,  2000  Annual  Report on Form
          10-KSB.

          Organization

          Baron Capital  Properties,  L.P. (the  "Partnership" or the "Operating
          Partnership"),  a  Delaware  limited  partnership,  is  the  operating
          partner of Baron Capital Trust (the "Trust"). Together with the Trust,
          the  Partnership  constitutes  a real  estate  company  which has been
          organized  to  indirectly   acquire   equity   interests  in  existing
          residential  apartment  properties located in the United States and to
          provide or acquire debt  financing  secured by mortgages on such types
          of property.  The Partnership with the Trust intends to acquire,  own,
          operate,  manage and  improve  residential  apartment  properties  for
          long-term  ownership,   and  thereby  seek  to  maximize  current  and
          long-term income and the value of its assets.



                                      F-5
<PAGE>

                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

          Organization (Continued)

          In its completed Exchange  Offering,  the Partnership issued 2,449,492
          units of  limited  partnership  interest  ("Units")  in  exchange  for
          limited partnership interests owned by limited partners in real estate
          limited  partnerships  which owned  direct or indirect  equity or debt
          interests in residential apartment properties. Holders of Units (other
          than the Trust) have the right,  exercisable at any time following the
          offering,  to  exchange  all or a  portion  of  their  Units  into  an
          equivalent  number of  Common  Shares of  beneficial  interest  in the
          Trust.

          The Trust,  as General  Partner of the  Partnership,  is authorized to
          cause  the  Partnership  to  issue  additional   limited   partnership
          interests in the Partnership for any purpose of the Partnership at any
          time to  such  persons  and on such  terms  and  conditions  as may be
          determined  by the Trust in its sole and  absolute  discretion.  Since
          Units are  exchangeable  by Unitholders  into an equivalent  number of
          Common  Shares of the Trust,  the maximum  number of Units that may be
          issued by the  Partnership  is  limited  to the  number of  authorized
          shares of the Trust,  which is  25,000,000,  less shares issued by the
          Trust directly,  excluding  Common Shares issued in exchanges of Units
          for Common Shares.

          The  Partnership  commenced  operations  on February 3, 1998, at which
          time it received an initial limited partnership capital contribution.

NOTE 2.   LIQUIDITY AND PROFITABILITY CONSIDERATIONS

          During the year ended December 31, 2000, the  Partnership  experienced
          certain  cash flow  problems and has,  from time to time,  experienced
          difficulties  meeting  obligations  as they  became due.  However,  as
          reflected  in  the  accompanying   consolidated   condensed  financial
          statements,  during the nine months  ended  September  30,  2001,  the
          Partnership  generated Funds From Operations (Funds from Operations is
          a measure of profitability in the REIT industry,  which is measured as
          net income less depreciation,  amortization,  and other  non-operating
          expenses  and/or income) of  approximately  $321,000  versus  negative
          Funds From  Operations of  approximately  $429,000 for the nine months
          ended September 30, 2000.

          During the first three quarters of 2001, management refinanced four of
          its properties, which generated $1,875,000 of cash to the Partnership.
          This cash was used to reduce accounts  payable owed by the Partnership
          and  establish an escrow for expected  major  repairs to its Riverwalk
          property.

          Management's plans to continue  improving  liquidity and profitability
          encompass the following four strategies:

          o    increase  property cash  collections  through  implementation  of
               utility billings, rent increases and property enhancements;

          o    refinance selected well performing assets;

          o    dispose of assets which do not generate cash  sufficient to cover
               operating costs or whose geographic  location  creates  excessive
               burden; and

          o    reduce corporate overhead.



                                      F-6
<PAGE>

                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 2.   LIQUIDITY AND PROFITABILITY CONSIDERATIONS (Continued)

          In implementing these strategies, management has adopted the following
          action plans:

          o    In many  locations,  the market  for  apartments  has  started to
               include  re-billing  of  property  water  costs to  tenants.  The
               Partnership has initiated billing of tenants for their water used
               at several  locations and intends to continue  implementation  of
               the strategy at other properties as the markets permit.

          o    The  Partnership has identified  certain of its properties  which
               are  performing  well and have loans which are small  relative to
               the value of the properties,  given their excellent  performance.
               Four  properties  were  refinanced in the first three quarters of
               2001 generating sufficient cash for the Partnership to enter into
               negotiations  with  all of the  Exchange  Offering  professionals
               which were owed payment for services performed in connection with
               the  offering,  and still have an amount in reserve.  All four of
               these properties were refinanced at interest rates lower than the
               prior interest rates on the loans. The partnership  received cash
               proceeds of  approximately  $1,875,000 as a result of refinancing
               these four properties. (see Note 6).

          o    The Partnership sold one of its properties that, in the past, had
               required substantial and frequent cash infusions. The sale closed
               on April 30, 2001.  Additional properties are being evaluated for
               potential disposition (see Note 5).

          o    During 2000,  the  Partnership  terminated the services of one of
               its executive  officers and entered into an arrangement  with two
               outside  businesses to allow officers of the  Partnership to work
               for those  businesses.  The salaries of those officers  funded by
               the Partnership  were reduced because of the income they received
               from the outside businesses.

          As a result of the refinancing of the four properties  discussed above
          and the  refinancing  of two  underlying  assets on  certain  Exchange
          Partnerships  in the first three quarters of 2001, the Partnership had
          approximately $1,563,000 in available cash at September 30, 2001.

          Management  believes  that the  actions  presently  being taken by the
          Partnership,  including the cash realized  upon  refinancing  the four
          properties  previously  mentioned  and its cash on hand,  provide  the
          opportunity   for   the   Partnership   to   improve   liquidity   and
          profitability.

NOTE 3.   EXCHANGE OFFERING

          On April 7, 2000,  pursuant to a  registration  statement on Form S-4,
          the  Partnership  completed  the  Exchange  Offering  under  which  it
          acquired additional interests in residential apartment properties.  In
          the Exchange  Offering,  the Partnership  issued 2,449,492  registered
          Partnership  Units in exchange for substantially all outstanding units
          of limited  partnership  interest owned by individual limited partners
          ("Exchange  Limited   Partners")  in  23  limited   partnerships  (the
          "Exchange  Partnerships"),  which directly or indirectly  owned equity
          and/or  debt  interests  in one or  more of 26  residential  apartment
          properties located in the southeast and mid-west United States.



                                      F-7
<PAGE>

                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 3.   EXCHANGE OFFERING (Continued)


          The acquisition of the Exchange  Partnerships  was accounted for under
          the purchase  method of accounting,  effective as of April 1, 2000 for
          accounting  purposes.  The cost of acquisition  approximated  the fair
          value of the net assets  acquired  (principally  the  appraised  value
          determined  by  management  based on  actual  1998  appraisals  of the
          underlying  residential apartment properties less related liabilities)
          which amounted to $11,793,159.  Therefore, no goodwill was recorded in
          this transaction.

          For financial statement  presentation purposes, it is assumed that the
          Units of limited  partnership  interest in the  Partnership  issued to
          Exchange Limited Partners in the Exchange Offering have been issued as
          Common  Shares of the Trust,  since the unit  holders  (other than the
          Trust) are entitled to exchange all or a portion of their Units at any
          time and from time to time for an equivalent  number of Common Shares,
          so long as the exchange would not cause the exchanging party to own in
          excess of 5% of the then  outstanding  Common  Shares,  subject to the
          Trust's right to cash out any unit holder who requests an exchange and
          subject to certain other exceptions.

          The  following  unaudited  pro  forma  summary  presents  consolidated
          financial  information  as  if  the  Exchange  Partnerships  had  been
          acquired  effective  January 1, 2000.  The pro forma  amounts  include
          adjustments  for  depreciation  as a result of the  adjustment to fair
          value of the residential  apartment properties and interest associated
          with  the  related  mortgages.  The pro  forma  information  does  not
          necessarily reflect the actual results that would have occurred nor is
          it  necessarily  indicative  of future  results of  operations  of the
          combined partnerships.

<TABLE>
<CAPTION>
                                                                    Nine Months Ended
                                                                      September 30,
                                                                  2001            2000
                                                                  ----            ----

          <S>                                                  <C>            <C>
          Total Revenues                                       $ 5,300,000    $ 5,300,000
          Cost and Expenses                                      5,900,000      6,400,000
                                                               -----------    -----------
          Loss before Other Expenses and Extraordinary Item       (600,000)    (1,100,000)
          Other Expenses                                          (300,000)            --
                                                               -----------    -----------
          Loss Before Extraordinary Item                          (900,000)    (1,100,000)
          Extraordinary Item- Extinguishment of Debt             1,400,000             --
                                                               -----------    -----------
          Net Income (Loss)                                    $   500,000    $(1,100,000)
                                                               ===========    ===========

          Income (Loss) Per Partnership Unit:
          Before Extraordinary Items                           $     (0.24)   $     (0.34)
                                                               ===========    ===========
          Extraordinary Item                                   $      0.37    $     (0.00)
                                                               ===========    ===========
          Net Income (Loss)                                    $      0.13    $     (0.34)
                                                               ===========    ===========

          Weighted Average Number of Partnership Units           4,034,217      3,216,538
                                                               ===========    ===========
</TABLE>



                                      F-8
<PAGE>

                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 4.   RECENT ACCOUNTING PRONOUNCEMENTS

          In August 2001, the FASB issued Statement No. 144,  Accounting for the
          Impairment  or  Disposal  of  Long-Lived   Assets  (SFAS  144),  which
          addresses  financial  accounting  and reporting for the  impairment or
          disposal of long-lived assets. SFAS 144 supersedes  Statement No. 121,
          Accounting for the Impairment of Long-Lived  Assets and for Long-Lived
          Assets to Be Disposed Of, and the accounting and reporting  provisions
          of APB Opinion No. 30, Reporting the Results of Operations - Reporting
          the Effects of Disposal of a Segment of a Business, and Extraordinary,
          Unusual and Infrequently  Occurring Events and  Transactions,  for the
          disposal of a segment of a business.  SFAS 144 retains the requirement
          in Opinion No. 30 to report  separately  discontinued  operations  and
          extends  that  reporting  to a component  of an entity that either has
          been disposed of or is classified as held for sale. The Partnership is
          required and plans to adopt the provisions of SFAS 144 for the quarter
          ending March 31, 2002. The  Partnership  has not determined the impact
          that SFAS 144 will have on its financial statements

          In June 2001, the Financial  Accounting  Standards Board (FASB) issued
          Statement  of   Financial   Accounting   Standards   (SFAS)  No.  143,
          "Accounting  for  Asset  Retirement  Obligations".  SFAS 143  requires
          entities  to  record  the  fair  value  of a  liability  for an  asset
          retirement  obligation  in the  period  in which it is  incurred.  The
          statement  requires  that  the  amount  recorded  as  a  liability  be
          capitalized  by  increasing   the  carrying   amount  of  the  related
          long-lived asset. Subsequent to initial measurement,  the liability is
          accreted to the ultimate  amount  anticipated  to be paid, and is also
          adjusted  for  revisions  to the  timing or amount of  estimated  cash
          flows. The capitalized cost is depreciated over the useful life of the
          related  asset.  Upon  settlement of the  liability,  an entity either
          settles the  obligation  for its  recorded  amount or incurs a gain or
          loss upon settlement. SFAS 143 will be effective for the Partnership's
          financial   statements   beginning   January  1,  2002,  with  earlier
          application encouraged.  The Partnership believes that the adoption of
          this  statement  will not have a significant  impact on the results of
          operations or financial position of the Partnership.

          In July 2001, the FASB issued SFAS No. 141,  "Business  Combinations",
          and SFAS No. 142, "Goodwill and Other Intangible Assets" which replace
          Accounting  Principles Board Opinion Nos. 16, "Business  Combinations"
          and 17, "Intangible Assets", respectively.  SFAS No. 141 requires that
          the  purchase   method  of   accounting   be  used  for  all  business
          combinations  initiated  after June 30, 2001,  and that the use of the
          pooling-of-interests  method be  prohibited.  SFAS No. 142 changes the
          accounting   for   goodwill   from  an   amortization   method  to  an
          impairment-only method.  Amortization of goodwill,  including goodwill
          recorded in past  business  combinations,  will cease upon adoption of
          SFAS No.  142,  which the  Partnership  will be  required  to adopt on
          January 1, 2002. After December 31, 2001, goodwill can only be written
          down upon impairment discovered during annual tests for fair value, or
          discovered  during tests taken when certain  triggering  events occur.
          The Partnership  believes that the adoption of this statement will not
          have a  significant  impact on the results of  operations or financial
          position of the Partnership.

          In July 2001,  the  Securities  and Exchange  Commission  (SEC) issued
          Staff  Accounting  Bulletin  No. 102,  "Selected  Loan Loss  Allowance
          Methodology  and  Documentation  Issues" (SAB 102). SAB 102 summarizes
          certain  of the SEC's  views on the  development,  documentation,  and
          application  of a  systematic  methodology  as required  by  Financial
          Reporting Release No. 28 for determining allowances for loan and lease
          losses in accordance



                                      F-9
<PAGE>

                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 4.   RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

          with generally accepted accounting principles. SAB 102 is effective as
          of  the  issuance  date.  The  Partnership  believes  that  it  is  in
          compliance with the guidelines set forth in SAB 102.

NOTE 5.   SALE OF PROPERTY

          On December 7, 2000, the Independent Trustees of the Trust accepted an
          offer to sell  Glen Lake  Arms  Apartments  (Glen  Lake),  a  144-unit
          apartment   building   located   in  St.   Petersburg,   Florida   for
          approximately $3,900,000.  The decision to sell Glen Lake was based on
          the property's lack of performance and its continuing need for cash to
          operate.  On April 30, 2001, the  Partnership  consummated the sale of
          Glen Lake resulting in a loss on the sale of $210,843.

          The results of operations of Glen Lake for the four months ended April
          30, 2001 were as follows:

          Rental and other income                                       $328,816
          Expenses                                                       294,300
                                                                         -------
            Excess of income over expenses                              $34,516
                                                                         =======

NOTE 6.  MORTGAGE REFINANCING

             On February 5, and July 31, 2001 the Partnership refinanced the
first mortgages on four rental properties. The new information pertaining to the
mortgages is as follows:

<TABLE>
<CAPTION>
                                                    Interest       Term           Maturity           Monthly
         Property                    Mortgage         Rate       (Years)            Date            Payments
          -------                    --------         ----       -------            ----            --------
<S>                                 <C>               <C>          <C>        <C>                    <C>
         Pineview                   $2,700,000        7.51%         25        February 5, 2011       $19,970
         Heatherwood                $1,900,000        7.51%         30        February 5, 2011       $13,298
         Eagle Lake                 $1,900,000        7.51%         25        February 5, 2011       $14,053
         Crystal Court I            $1,595,000        7.26%         30         July 30, 2011         $10,892
</TABLE>

          The Partnership received approximately $1,875,000 in proceeds from the
          refinancing   of  the  first   mortgages.   In  connection   with  the
          refinancings,  the Partnership paid one-time  prepayment  penalties of
          approximately  $827,000,  which is included  in other  expenses in the
          accompanying statement of operations.

NOTE 7.   COMMITMENTS AND CONTINGENCIES

          Contracts to Purchase Additional Properties

          The following  description of the Trust's  involvement in the Burgundy
          Hills  Property   represents  an  update  of  information   previously
          disclosed in periodic reports (Form 10-QSB quarterly  reports and Form
          10-KSB  annual  reports)  of the Trust and the  Operating  Partnership
          previously filed with the Securities and Exchange Commission.

          In September 1998, the Trust entered into an agreement with three real
          estate development companies (Brentwood at Southgate, Ltd., Burlington
          Residential,  Ltd. and The Shoppes at Burlington, Ltd.) to acquire two
          luxury residential  apartment properties in the development stage upon
          the completion of construction.  The three development  companies were
          previously  controlled by Gregory K. McGrath, a founder and the former
          Chief Executive  Officer of the Trust. (In September 2001, Mr. McGrath
          assigned  all of the  outstanding  partnership  interests in the three
          partnerships to Sigma Renaissance Corporation,  a Michigan corporation
          controlled  by Jerome S. Rydell,  a member of the Board of Trustees of
          the Trust.) One of the residential  apartment properties has been sold
          to a third party with the Trust's consent.  The remaining  residential
          property is scheduled to have a total of 396 units,  comprised of one,
          two and three bedroom/one or two bathroom apartments.  Construction of
          the property (the  "Burgundy  Hills  Property"),  located in Florence,
          Kentucky (part of the Cincinnati metropolitan area), is expected to be
          completed by the end of the first quarter of 2004.



                                      F-10
<PAGE>

                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 7.   COMMITMENTS AND CONTINGENCIES (Continued)

          Contracts to Purchase Additional Properties (Continued)

          In  connection  with the  transaction,  the Trust  obtained a right of
          first  negotiation  to purchase  the property  from the Borrower  upon
          completion  and a right of first  refusal to purchase  the property on
          the  same  terms  offered  by a third  party.  The  purchase  price is
          expected to be approximately  $30,000,000.  It is contemplated  that a
          significant  portion of that amount would be covered by first mortgage
          financing.  At the  current  time the  Trust  does  not have  adequate
          resources to close on the  transaction  even if it were  interested in
          doing so and it is  uncertain  whether  the Trust  will have  adequate
          resources to complete the transaction upon completion of construction.
          In  addition,  as  described  below,  because  the  owner of the first
          mortgage on the property has assumed  control of the management of the
          Borrower and the development of the property,  the  exercisability  of
          the Trust's rights is currently uncertain.

          In connection with the transaction, the Trust (along with Mr. McGrath,
          its former Chief Executive  Officer) agreed to co-guarantee  long-term
          first mortgage  construction  financing  provided by KeyBank  National
          Association ("KeyBank") to Burlington Residential,  Ltd. ("Borrower"),
          the owner of the  Burgundy  Hills  Property.  As of  October  1, 2001,
          approximately  $6,478,000  of the first  mortgage  loan had been drawn
          down. The interest rate on the first mortgage loan is KeyBank's  prime
          rate  (currently  6.75%) or the LIBOR  rate  plus 2%.  The Trust  also
          agreed that,  if the Borrower  failed to comply with the repayment and
          other obligations under the loan documents,  KeyBank could require the
          Trust to buy out the bank's position on the entire amount of the loan.

          In September  2000, the Trust received  notice from counsel to KeyBank
          that the Borrower had defaulted on its loan for failure to pay current
          interest due and meet certain equity  requirements and covenants under
          the loan agreement, adverse changes in the financial conditions of the
          Borrower  and the  Trust,  and the  Trust's  failure  to meet  certain
          tangible  net worth  tests set forth in the loan  agreements.  KeyBank
          indicated  that it was  exercising  its right to accelerate  the loan.
          According to Mr. McGrath,  KeyBank agreed to forego further action for
          at least 60 days while the parties  attempted to reach an arrangement.
          The extension expired in November 2000 and,  according to Mr. McGrath,
          has been extended on a  month-to-month  basis.  The Borrower paid down
          the  outstanding  accrued  interest and a portion of the principal and
          intends to seek a new  long-term  construction  facility  with another
          institutional  lender  to  replace  the first  mortgage  loan (and the
          BankOne  affiliate  loan described  below).  There can be no assurance
          that such financing will be available on satisfactory terms.

          In December, 2000, an affiliate of BankOne acquired KeyBank's position
          in the Burgundy  Hills first mortgage loan. The loan is subject to the
          same  terms  and  conditions  as that of the  original  KeyBank  loan.
          Earlier,  the BankOne affiliate had provided additional  institutional
          financing in the principal amount of $1,576,000 to the Borrower.  That
          loan is secured by a security interest in partnership interests in the
          Borrower.  Due to a default in payment of  interest  due,  the BankOne
          affiliate  was  assigned  rental  payments  from  the  Burgundy  Hills
          Property and took over day-to-day management of the property.

          The BankOne affiliate  recently sold the two loans to  Burgundy-Boone,
          LLC, an Illinois limited liability company,  according to the latter's
          counsel.  As a result,  Burgundy-Boone,  LLC has  assumed  control  of
          management  of the  Borrower  and of the  development  of the Burgundy
          Hills Property.



                                      F-11
<PAGE>

                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 7.   COMMITMENTS AND CONTINGENCIES

          Contracts to Purchase Additional Properties (Continued)

          The Trust,  as guarantor of the first mortgage  loan,  currently has a
          contingent  liability for its full  outstanding  amount.  According to
          counsel for  Burgundy-Boone,  LLC,  principal and interest payments on
          the  first  mortgage  loan  are  current.  However,  there  can  be no
          assurance that the first mortgage loan will not again go into default,
          in which event Burgundy-Boone, LLC could begin foreclosure proceedings
          against the Burgundy  Hills  Property in respect of the first mortgage
          loan.

          Century  Construction  Inc., the general  contractor  which  performed
          construction  services on the Burgundy Hills Property,  recently filed
          an action against the Borrower and Mr. McGrath to enforce a mechanic's
          lien on the property in the amount of  approximately  $1,300,000.  The
          contractor also named KeyBank and the BankOne affiliate in the action,
          seeking damages against them on allegations of lender's liability.

          Officers' Compensation

          Prior to January 1, 2001,  a founder of the Trust and the  Partnership
          had  agreed  to serve as  Chief  Executive  Officer  in  exchange  for
          compensation   in  the  form  of  Trust  common  shares  or  Operating
          Partnership  units in an amount not to exceed  25,000 common shares or
          units, as applicable,  to be determined by the Executive  Compensation
          Committee  based upon his  performance.  As of December 31,  2000,  no
          Trust common shares or Operating  Partnership units had been issued to
          the former Chief Executive Officer as compensation.  However, in order
          to reflect all appropriate administrative expenses of the Partnership,
          a provision of $217,000 was made in the financial  statements  for the
          estimated  fair value of the  services  rendered  by the former  Chief
          Executive   Officer  for  2000.   Effective   December  31,  2000,  no
          compensation  expense will be charged for the services provided by the
          former Chief Executive  Officer,  as these services are minimal to the
          Partnership's operations.

          On August 28, 2000, the Trust entered into employment  agreements with
          the  President  and Chief  Operating  Officer (COO) and with the Chief
          Financial  Officer (CFO) through December 31, 2001. Under the terms of
          the agreement,  the Trust through the Partnership will pay the COO and
          the CFO $175,000 and  $110,000 per annum,  respectively.  In addition,
          the COO and the CFO will receive $90,000 and $60,000, respectively, if
          they are  involuntarily  terminated  for any  reason  other than gross
          misconduct.

          Pending Litigation

          The Partnership is a party to various legal actions resulting from its
          operating  activities.   These  actions  are  routine  litigation  and
          administrative proceedings arising in the ordinary course of business,
          some of which are covered by  liability  insurance,  and none of which
          are  expected to have a material  adverse  effect on the  consolidated
          financial  condition or results of operations of the Partnership taken
          as a whole.



                                      F-12
<PAGE>

                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 8.   EXTINGUISHMENT OF INDEBTEDNESS TO FORMER CHIEF EXECUTIVE
          OFFICER AND AFFILIATES

          In  connection  with the sale of the Glen Lake  property  described in
          Note 5,  the  Partnership  extinguished  approximately  $1,268,000  of
          payables  due to  affiliates  and  $111,500  due to the  Partnership's
          former Chief Executive Officer. These liabilities were owed by Florida
          Capital Income Fund IV, Ltd.  (former owner of the Glen Lake property)
          (one of the Exchange  Partnerships) to certain affiliates,  which were
          owned or controlled by Gregory K.  McGrath,  the Trust's  former Chief
          Executive Officer. These amounts are reported as an extraordinary item
          in the accompanying consolidated condensed statement of operations.

          The   Partnership   also  wrote  off  accrued   interest   payable  of
          approximately  $113,000  relating to the extinguished  payables due to
          related parties and approximately  $23,000 of accounts payable.  These
          amounts  were  recorded as  reductions  to interest  expense and other
          administrative  expenses in the  accompanying  consolidated  condensed
          statement of operations.

          During the three months ended  September  30,  2001,  the  Partnership
          entered into a settlement  with  parties who  provided  legal  counsel
          during  the  Exchange  Offering.   This  settlement  resulted  in  the
          extinguishment  of  approximately  $105,000 in  obligations  that were
          previously included in accounts payable.  This amount is recorded as a
          reduction of professional  services in the  accompanying  consolidated
          condensed statement of operations.

NOTE 9.   NET INCOME (LOSS) PER PARTNERSHIP UNIT

          The Partnership computes per unit data in accordance with Statement of
          Financial  Accounting  Standards  No. 128 (SFAS  128),  "Earnings  Per
          Share".  SFAS 128  requires  dual  presentation  of basic and  diluted
          earnings per share on the face of the income statement.

          Basic net income (loss) per unit equals net income  (loss)  divided by
          the  weighted   average  units   outstanding   during  the  year.  The
          computation  of  diluted  net  income  (loss)  per unit that  includes
          dilutive limited  partnership unit equivalents in the weighted average
          units  outstanding has not been presented,  as it is anti-dilutive for
          the nine and three months ended September 30, 2001 and 2000.

         The components used in calculating basic net income (loss) per unit are
as follows:

<TABLE>
<CAPTION>
                                                                          Net            Weighted       Income(Loss)
                                                                     Income(Loss)     Average Units       Per Unit
                                                                     ------------     -------------     -------------
          <S>                                                         <C>                 <C>             <C>
          For the nine months ended September 30:
            2001                                                     $   533,383        4,034,217           $0.13
                                                                     ===========       ==========           =====
            2000                                                     $(1,186,791)       3,216,538           $(0.37)
                                                                     ===========       ==========           =====

          For the three months ended September 30:
            2001                                                     $   310,981        4,034,217           $0.08
                                                                     ===========       ==========           =====
            2000                                                    $  (370,100)       3,404,600           $(0.11)
                                                                     ===========       ==========           =====
</TABLE>

<PAGE>

                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 10.     SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
             AND FINANCING ACTIVITIES

         In April 2000, in connection with the completion of the Exchange
         Offering, the Operating Partnership acquired indirect equity interests
         in 13 rental properties and subordinated mortgage interests in 10
         additional properties through the acquisition of substantially all
         partnership interests in the Exchange Partnerships, which own land and
         depreciable property, accrued interest, advances, other assets,
         mortgages and notes payable, as follows:

          Land and Depreciable Property                              $28,723,196
          Mortgage Notes Receivable, Affiliates                        3,292,677
          Receivables and Accrued Interest, Affiliates                 3,262,522
          Other Assets                                                   848,813
                                                                     -----------

          Total Assets                                                36,127,208
                                                                     -----------

          Mortgage Payable                                            19,766,015
          Notes Payable and Accrued Interest                           2,320,586
          Payables and Accrued Interest, Affiliates                    1,435,548
          Accounts Payable                                               644,266
          Security Deposits                                              167,634
                                                                     -----------

          Total Liabilities                                           24,334,049
                                                                     -----------

          Partners' Capital                                          $11,793,159
                                                                     ===========



                                      F-13
<PAGE>

Item 2.   Management's Discussion and Analysis or Plan of Operation

          The  following  discussion  should  be read in  conjunction  with  the
          Condensed   Consolidated   Financial   Statements   of  Baron  Capital
          Properties,   L.P.  (the   "Registrant,"   the  "Partnership"  or  the
          "Operating  Partnership")  and  the  Notes  thereto.  (See  ITEM  1  -
          FINANCIAL STATEMENTS.)

          Forward-looking Statements

          This  Management's  Discussion  and Analysis or Plan of Operation  and
          other  sections  of  this  Report  contain   certain   forward-looking
          statements  within the  meaning of the Private  Securities  Litigation
          Reform Act of 1995 that are based on current  expectations,  estimates
          and projections about the Registrant's business,  management's beliefs
          and  assumptions   made  by  management.   Words  such  as  "expects",
          "anticipates",  "intends", "plans", "believes",  "seeks", "estimates",
          and variations of such words and similar  expressions  are intended to
          identify such  forward-looking  statements.  These  statements are not
          guarantees  of  future   performance   and  involve   certain   risks,
          uncertainties   and   assumptions   that  are  difficult  to  predict.
          Therefore, actual outcomes and results may differ materially from what
          is expressed or forecasted in such  forward-looking  statements due to
          numerous  factors,  including,  but not limited to those  discussed in
          this Management's Discussion and Analysis or Plan of Operation section
          of this Report,  as well as those  discussed  elsewhere in this Report
          and  from  time to  time  in the  Registrant's  other  Securities  and
          Exchange Commission filings and reports. In addition,  such statements
          could be  affected  by general  domestic  and  international  economic
          conditions.  The forward-looking  statements  contained in this Report
          speak only as of the date on which they are made,  and the  Registrant
          does not  undertake  any  obligation  to  update  any  forward-looking
          statement to reflect  events or  circumstances  after the date of this
          Report.

          Results of Operations

          The Operating  Partnership  commenced  operations in the first half of
          1998. The Operating Partnership and its affiliate, Baron Capital Trust
          (the "Trust"),  a Delaware  business  trust,  constitute an affiliated
          real  estate  company  which  has been  organized  to  acquire  equity
          interests in residential  apartment  properties  located in the United
          States  and/or to provide or acquire  mortgage  loans  secured by such
          types of  property.  The  Operating  Partnership  conducts  all of the
          Trust's  real  estate  operations  and  holds all  direct or  indirect
          property interests acquired.

          The Trust is the sole general  partner of the  Operating  Partnership,
          and,  in such  capacity,  the Trust  controls  the  activities  of the
          Operating  Partnership.  The Trust has  elected  to be taxed as a real
          estate investment trust for federal income tax purposes.

          As described below in this Report, in May 1998, the Trust commenced an
          offering  (the "Cash  Offering")  of up to 2,500,000  common shares of
          beneficial interest ("Common Shares") in the Trust at a purchase price
          of $10.00 per share  (maximum



                                       3
<PAGE>

          proceeds of $25,000,000).  In the Cash Offering,  which expired on May
          31,  2000,  the Trust sold  702,076  Common  Shares  for an  aggregate
          purchase  price of  $7,020,763.  The  Trust  contributed  the net cash
          proceeds  from the  issuance  of Common  Shares  in the Cash  Offering
          ($5,467,858)   to  the  Operating   Partnership  in  exchange  for  an
          equivalent number of units ("Units" or "Operating  Partnership Units")
          of limited partnership interest in the Operating Partnership.

          As of October 1, 2001, the Trust owned 961,006  Operating  Partnership
          Units, representing approximately 23.8% of the then outstanding Units.
          Such Units are  comprised of the Units  acquired by the Trust with the
          net proceeds of the Cash  Offering and the Units that holders of Units
          have elected to exchange  into Common  Shares in the manner  described
          below in this section.  Since such Units comprise substantially all of
          the  assets  of the  Trust,  the  operating  results  of the Trust are
          primarily  dependent  upon  the  operating  results  of the  Operating
          Partnership.

          The  Operating   Partnership  has  acquired   substantially   all  the
          beneficial interests in 16 residential apartment properties, including
          the  Heatherwood I Apartments (67 studio,  one bedroom and two bedroom
          units  located in Kissimmee,  Florida) in June 1998;  Crystal Court II
          Apartments  (80 studio,  one bedroom and two bedroom  units located in
          Lakeland,  Florida) in July 1998; Riverwalk Apartments (50 two bedroom
          units  located in New  Smyrna,  Florida)  in  September  1998;  and 13
          properties  acquired  as part of the  Exchange  Offering in April 2000
          (discussed  below).  In July,  1998  the  Operating  Partnership  also
          acquired a minority  limited  partnership  interest  in 13 real estate
          limited  partnerships then managed by affiliates of Gregory K. McGrath
          (a founder and former Chief Executive  Officer of the Trust, a founder
          and  principal  unitholder  of  the  Operating  Partnership,  and  the
          President, sole shareholder and sole director of Baron Advisors, Inc.,
          a  Delaware   corporation  that  previously  served  as  the  Managing
          Shareholder  and as a trustee  of the Board of the  Trust),  including
          certain  of  the  Exchange  Partnerships  which  participated  in  the
          Exchange Offering and which are now managed by the Trust.

          During 1998 and 1999,  the Operating  Partnership  acquired a total of
          40% of the limited  partnership  interests in Alexandria  Development,
          L.P. (the "Alexandria  Partnership"),  a Delaware limited  partnership
          previously  controlled by Mr. McGrath. (In September 2001, Mr. McGrath
          assigned all of the outstanding partnership interest in the Alexandria
          Partnership to Sigma Renaissance  Corporation,  a Michigan corporation
          controlled  by Jerome S. Rydell,  a member of the Board of Trustees of
          the Trust.) The Alexandria Partnership owns Alexandria  Apartments,  a
          168-unit  residential  apartment property (the "Alexandria  Property")
          under construction in Alexandria, Kentucky. As of October 1, 2001, 112
          of the 168 residential  units  (approximately  67%) had been completed
          and  were  in the  rent-up  stage.  Of the  completed  units,  92 were
          occupied at October 1, 2001.

          In early May 2001,  MarCap  Corporation  filed an action in the United
          States  District Court for the Northern  District of Illinois  against
          WaKul,  Inc. (a  telecommunications  company  controlled by Gregory K.
          McGrath,  the  former  Chief  Executive  Officer  of



                                       4
<PAGE>

          the Trust), Mr. McGrath, and the Alexandria  Partnership,  among other
          parties,  seeking repayment of approximately  $407,000 of indebtedness
          (plus  unspecified  interest,  attorney's  fees and collection  costs)
          under a telecommunication equipment leasing agreement.  Certain of the
          equipment was installed at the  Alexandria  Property.  The  Alexandria
          Partnership  guaranteed WaKul, Inc.'s lease payments under the leasing
          agreement.

          Due to  recurring  losses  incurred  by  the  Alexandria  Property,  a
          partners' deficiency and a recent appraisal that valued the Alexandria
          Property at an amount less than the  liabilities  owed,  management of
          the Operating  Partnership  determined to write off its  investment in
          the Alexandria  Property,  resulting in a charge to operations in 2000
          of approximately $355,000.

          The following  description of the Trust's  involvement in the Burgundy
          Hills  Property   represents  an  update  of  information   previously
          disclosed in periodic reports (Form 10-QSB quarterly  reports and Form
          10-KSB  annual  reports)  of the Trust and the  Operating  Partnership
          previously filed with the Securities and Exchange Commission.

          In September 1998, the Trust entered into an agreement with three real
          estate development companies (Brentwood at Southgate, Ltd., Burlington
          Residential,  Ltd. and The Shoppes at Burlington, Ltd.) to acquire two
          luxury residential  apartment properties in the development stage upon
          the completion of construction.  The three development  companies were
          previously  controlled by Gregory K. McGrath, a founder and the former
          Chief Executive  Officer of the Trust. (In September 2001, Mr. McGrath
          assigned  all of the  outstanding  partnership  interests in the three
          partnerships to Sigma Renaissance Corporation,  a Michigan corporation
          controlled  by Jerome S. Rydell,  a member of the Board of Trustees of
          the Trust.) One of the residential  apartment properties has been sold
          to a third party with the Trust's consent.  The remaining  residential
          property is scheduled to have a total of 396 units,  comprised of one,
          two and three bedroom/one or two bathroom apartments.  Construction of
          the property (the  "Burgundy  Hills  Property"),  located in Florence,
          Kentucky (part of the Cincinnati metropolitan area), is expected to be
          completed by the end of the first quarter of 2004.

          In  connection  with the  transaction,  the Trust  obtained a right of
          first  negotiation  to purchase  the property  from the Borrower  upon
          completion  and a right of first  refusal to purchase  the property on
          the  same  terms  offered  by a third  party.  The  purchase  price is
          expected to be approximately  $30,000,000.  It is contemplated  that a
          significant  portion of that amount would be covered by first mortgage
          financing.  At the  current  time the  Trust  does  not have  adequate
          resources to close on the  transaction  even if it were  interested in
          doing so and it is  uncertain  whether  the Trust  will have  adequate
          resources to complete the transaction upon completion of construction.
          In  addition,  as  described  below,  because  the  owner of the first
          mortgage on the property has assumed  control of the management of the
          Borrower and the development of the property,  the  exercisability  of
          the Trust's rights is currently uncertain.



                                       5
<PAGE>


          In connection with the transaction, the Trust (along with Mr. McGrath,
          its former Chief Executive  Officer) agreed to co-guarantee  long-term
          first mortgage  construction  financing  provided by KeyBank  National
          Association ("KeyBank") to Burlington Residential,  Ltd. ("Borrower"),
          the owner of the  Burgundy  Hills  Property.  As of  October  1, 2001,
          approximately  $6,478,000  of the first  mortgage  loan had been drawn
          down. The interest rate on the first mortgage loan is KeyBank's  prime
          rate  (currently  6.75%) or the LIBOR  rate  plus 2%.  The Trust  also
          agreed that,  if the Borrower  failed to comply with the repayment and
          other obligations under the loan documents,  KeyBank could require the
          Trust to buy out the bank's position on the entire amount of the loan.

          In September  2000, the Trust received  notice from counsel to KeyBank
          that the Borrower had defaulted on its loan for failure to pay current
          interest due and meet certain equity  requirements and covenants under
          the loan agreement, adverse changes in the financial conditions of the
          Borrower  and the  Trust,  and the  Trust's  failure  to meet  certain
          tangible  net worth  tests set forth in the loan  agreements.  KeyBank
          indicated  that it was  exercising  its right to accelerate  the loan.
          According to Mr. McGrath,  KeyBank agreed to forego further action for
          at least 60 days while the parties  attempted to reach an arrangement.
          The extension expired in November 2000 and,  according to Mr. McGrath,
          has been extended on a  month-to-month  basis.  The Borrower paid down
          the  outstanding  accrued  interest and a portion of the principal and
          intends to seek a new  long-term  construction  facility  with another
          institutional  lender  to  replace  the first  mortgage  loan (and the
          BankOne  affiliate  loan described  below).  There can be no assurance
          that such financing will be available on satisfactory terms.

          In December, 2000, an affiliate of BankOne acquired KeyBank's position
          in the Burgundy  Hills first mortgage loan. The loan is subject to the
          same  terms  and  conditions  as that of the  original  KeyBank  loan.
          Earlier,  the BankOne affiliate had provided additional  institutional
          financing in the principal amount of $1,576,000 to the Borrower.  That
          loan is secured by a security interest in partnership interests in the
          Borrower.  Due to a default in payment of  interest  due,  the BankOne
          affiliate  was  assigned  rental  payments  from  the  Burgundy  Hills
          Property and took over day-to-day management of the property.

          The BankOne affiliate  recently sold the two loans to  Burgundy-Boone,
          LLC, an Illinois limited liability company,  according to the latter's
          counsel.  As a result,  Burgundy-Boone,  LLC has  assumed  control  of
          management  of the  Borrower  and of the  development  of the Burgundy
          Hills Property.

          The Trust,  as guarantor of the first mortgage  loan,  currently has a
          contingent  liability for its full  outstanding  amount.  According to
          counsel for  Burgundy-Boone,  LLC,  principal and interest payments on
          the  first  mortgage  loan  are  current.  However,  there  can  be no
          assurance that the first mortgage loan will not again go into default,
          in which event Burgundy-Boone, LLC could begin foreclosure proceedings
          against the Burgundy  Hills  Property in respect of the first mortgage
          loan.

          Century  Construction  Inc., the general  contractor  which  performed
          construction  services on the Burgundy Hills Property,  recently filed
          an action against the Borrower and Mr. McGrath to enforce a mechanic's
          lien on the property in the amount of  approximately  $1,300,000.  The
          contractor also named KeyBank and the BankOne affiliate in the action,
          seeking damages against them on allegations of lender's liability.

          In April 2000,  pursuant to a registration  statement on Form S-4, the
          Operating  Partnership  completed an exchange  offering (the "Exchange
          Offering") under which it acquired additional interests in residential
          apartment  properties.   In  the  Exchange  Offering,   the  Operating
          Partnership issued 2,449,492 registered Operating Partnership Units in
          exchange  for   substantially   all   outstanding   units  of  limited
          partnership  interest



                                       6
<PAGE>

          owned by individual limited partners  ("Exchange Limited Partners") in
          23 limited  partnerships (the "Exchange  Partnerships").  The Exchange
          Partnerships directly or indirectly owned equity and/or debt interests
          in one or more of 26 residential  apartment  properties (the "Exchange
          Properties") located in the southeast and mid-west United States. (See
          Note 3 "Exchange  Offering" in the accompanying  notes to consolidated
          condensed financial statements.)

          Holders of  Operating  Partnership  Units  (other  than the Trust) are
          entitled to  exchange  all or a portion of their Units at any time and
          from time to time for an  equivalent  number  of Common  Shares of the
          Trust, so long as the exchange would not cause the exchanging party to
          own (taking  into  account  certain  ownership  attribution  rules) in
          excess of 5% of the then  outstanding  Common  Shares,  subject to the
          Trust's right to cash out any holder of Units who requests an exchange
          and subject to certain other exceptions.

          Following  the  completion  of the  Exchange  Offering,  the  Exchange
          Partnerships  continued to own the same property  interests they owned
          prior to the offering;  substantially  all of the limited  partnership
          interests in the 23 Exchange  Partnerships were owned by the Operating
          Partnership;  Mr. McGrath, for nominal  consideration,  assigned to an
          affiliate of the Trust all of the equity stock in 18 of the  corporate
          general  partners of the  Exchange  Partnerships  ("Corporate  General
          Partners")  and granted to the Board of the Trust a  management  proxy
          coupled  with an  interest  to vote the shares of the  remaining  five
          Corporate General  Partners;  the Corporate General Partner of each of
          the Exchange Partnerships assigned to the Operating Partnership all of
          its economic interest in the partnership;  and Mr. McGrath caused each
          Corporate  General  Partner  to waive  its right to  receive  from its
          Exchange  Partnership  any ongoing fees,  effective upon completion of
          the exchange. As a result of the foregoing,  the Operating Partnership
          (and  indirectly  the Trust) owned  substantially  all of the economic
          interest  represented  by the equity and debt  interests  owned by the
          Exchange Partnerships and controlled management of such partnerships.

          In April 2001, the Operating  Partnership  sold its equity interest in
          one of the  Exchange  Properties,  Glen Lakes  Apartments,  a 144-unit
          residential  apartment  property located in St.  Petersburg,  Florida.
          Management of the Trust  determined to sell the property  based on its
          lack of  performance  and its need for  substantial  and frequent cash
          infusions. (See Note 5 "Sale of Property" in the accompanying notes to
          the consolidated condensed financial statements.)

          Certain  of the  Exchange  Partnerships  currently  controlled  by the
          Operating  Partnership own direct or indirect  equity  interests in 15
          Exchange  Properties  which consist of an aggregate of 868 residential
          units  (comprised  of studio  and one,  two,  three  and  four-bedroom
          units).  Certain  of  the  Exchange  Partnerships  controlled  by  the
          Operating  Partnership own direct or indirect mortgage interests in 10
          Exchange  Properties,  which  consist of an  aggregate of 813 existing
          residential  units (studio and one and two bedroom) and 168 units (two
          and three bedroom) under  development.  Of the Exchange  Properties in
          which the  Operating  Partnership  continues  to own an



                                       7
<PAGE>

          interest,  20 properties are located in Florida,  three  properties in
          Ohio and one property each in Georgia and Indiana.

          Consolidated  Balance  Sheet as of  September  30,  2001  Compared  to
          December 31, 2000

          During  the  nine  months  ended  September  30,  2001,  total  assets
          decreased   approximately   $2.2  million  to  $39.2   million   while
          liabilities decreased approximately $2.7 million to $27.4 million. The
          decrease  in  assets  was  mainly  due to the  sale of the  Glen  Lake
          property  as  described  in  Note  5  of  the  consolidated  condensed
          financial statements. The decrease in liabilities was primarily due to
          the  payoff  of the first  mortgage  on the sale of Glen Lake and debt
          extinguishment of approximately $1.5 million as described in Note 8 of
          the consolidated condensed financial statements.

          Partners'  capital  increased to approximately  $11.8 million with net
          income for the nine months ended  September 30, 2001 of  approximately
          $530,000.

          Operations  for the Nine and Three  Months  Ended  September  30, 2001
          Compared to Nine and Three Months Ended September 30, 2000

          Revenues:

          Revenues  increased by approximately  $1.6 million for the nine months
          ended  September 30, 2001 to  approximately  $5.3 million  compared to
          $3.7  million for the nine  months  ended  September  30,  2000.  This
          increase is  attributable  to a full nine months of  operations of the
          Exchange  Properties  acquired in the  Exchange  Offering for the nine
          months  ended  September  30,  2001  compared  to only six  months  of
          operations for such properties for the nine months ended September 30,
          2000 as the Exchange  Offering was completed in April 1, 2000.  Rental
          revenues  decreased  by  approximately  $100,000  for the three months
          ended  September 30, 2001 compared to the three months ended September
          30, 2000 due to the sale of the Glen Lake apartment on April 30, 2001.

          Real Estate Expenses:

          Real estate expenses  increased by approximately  $1.4 million for the
          nine months ended September 30, 2001 compared to the nine months ended
          September  30,  2000.  This  increase is  attributable  to a full nine
          months  of  operations  of the  Exchange  Properties  acquired  in the
          Exchange  Offering  for the  nine  months  ended  September  30,  2001
          compared to only six months of operations of such  properties  for the
          nine months  ended  September  30, 2000 as the  Exchange  Offering was
          completed in April 1, 2000.  Total real estate  expenses for the three
          months  ended  September  30, 2001  compared to the three months ended
          September 30, 2000 increased by $150,000 with the largest  increase in
          repairs and maintenance for repairs to the Exchange Properties.



                                       8
<PAGE>

          Administrative Expenses:

          Administrative  expenses  decreased by approximately  $428,000 for the
          nine months ended September 30, 2001 compared to the nine months ended
          September 30, 2000, due to the fact that  effective  December 31, 2000
          no compensation  expense has been charged for the services provided by
          the former Chief  Executive  Officer as these  services are minimal to
          the  Partnership's  operations.  Also,  during 2000,  the  Partnership
          entered  into an  arrangement  with two  outside  businesses  to allow
          officers of the Partnership to work for those businesses. The salaries
          of those officers  funded by the  Partnership  were reduced because of
          the income they received from the outside  businesses.  Administrative
          expenses  for the  three  months  ended  September  30,  2001 and 2000
          remained consistent.

          During the three  months  ended  September  30,  2001 the  Partnership
          entered into a settlement  with  parties who  provided  legal  counsel
          during  the  Exchange  Offering.   This  settlement  resulted  in  the
          extinguishment  of  approximately  $105,000  in  obligations  that was
          previously included in accounts payable.  This amount is recorded as a
          reduction of professional  services in the  accompanying  consolidated
          condensed statement of operations.

          Other Income/(Expenses):

          Other  Income/(Expenses) for the nine and three months ended September
          30, 2001 of  ($348,241)  and  $544,918,  respectively,  related to the
          refinancing  of four  properties  completed  in the  first  and  third
          quarters  of 2001 and the loss on the sale of the Glen  Lake  property
          recorded in the second quarter. There were no other  income/(expenses)
          for the nine and three months  ended  September  30, 2000.  During the
          third  quarter there was a recognition  of  approximately  $400,000 of
          loan  discounts  on  repayments  of  loans  held by  certain  Exchange
          Partnerships  which was partially  offset by  prepayment  penalties of
          approximately $293,000 and a credit for a portion of the provision for
          loan losses recognized at December 31, 2000 totaling $465,514.

          Extraordinary Item- Extinguishment of Debt:

          In connection with the sale of the Glen Lake property, the Partnership
          extinguished  approximately  $1,268,000  of payables due to affiliates
          and $111,500 due to the Partnership's  former Chief Executive Officer.
          These  liabilities  were owed by Florida  Capital Income Fund IV, Ltd.
          (former  owner  of the  Glen  Lake  property)  (one  of  the  Exchange
          Partnerships) to affiliates, which were owned or controlled by Gregory
          K. McGrath, the Trust's former Chief Executive Officer.

          Liquidity and Capital Resources

          Net  cash  used in  operating  activities  for the nine  months  ended
          September  30, 2001 was  $739,685  compared  to $430,564  for the nine
          months  ended  September  30,  2000.



                                       9
<PAGE>

          The increase in cash used by operating activities was primarily due to
          the  extinguishment  of debt,  the credit for the  provision  for loan
          losses, and payoff of accounts payables partially offset by charges on
          the loss of the Glen Lake  property,  the  write off of loan  costs on
          refinanced loans, and depreciation.

          Net cash  provided by investing  activities  for the nine months ended
          September  30, 2001 was  $3,057,029  compared to cash used of $302,043
          for the nine months ended  September  30,  2000.  The increase in cash
          provided  for  the  nine  months  ended  September  30,  2001  was due
          primarily to proceeds from the sale of the Glen Lake property.

          Net  cash  used in  financing  activities  for the nine  months  ended
          September 30, 2001 was $775,520  compared to cash provided of $896,935
          for the nine months ended  September 30, 2000.  Cash used in financing
          activities  increased  mainly due to the payoff of the Glen Lake first
          mortgage as well as notes  payable  paid off with the  proceeds of the
          Glen Lake sale.

          During the year ended December 31, 2000, the  Partnership  experienced
          certain  cash flow  problems and has,  from time to time,  experienced
          difficulties  meeting  obligations  as they  became due.  However,  as
          reflected  in  the  accompanying   consolidated   condensed  financial
          statements,  during the nine months  ended  September  30,  2001,  the
          Partnership  generated Funds From Operations (Funds from Operations is
          a measure of profitability in the REIT industry, which is measured as,
          net income less depreciation,  amortization,  and other  non-operating
          expenses  and/or income) of  approximately  $321,000  versus  negative
          Funds From  Operations of  approximately  $429,000 for the nine months
          ended September 30, 2000.

          During the first three quarters of 2001, management refinanced four of
          its properties, which generated $1,875,000 of cash to the Partnership.
          This cash was used to reduce accounts payable owed by the Partnership,
          advance  funds for a second  round of  refinancing,  and  establish an
          escrow  for  expected   major  repairs  to  its  Riverwalk   property.
          Additionally,  two underlying assets of certain Exchange  Partnerships
          were  refinanced in the third quarter  generating  $1,165,000 in cash.
          This  cash was  used to pay down  mortgage  notes  receivables  of the
          Exchange Partnerships.

          Management's plans to continue  improving  liquidity and profitability
          encompass the following four strategies:

          o    increase  property cash  collections  through  implementation  of
               utility billings, rent increases and property enhancements;

          o    refinance selected well performing assets;

          o    dispose of assets which do not generate cash  sufficient to cover
               operating costs or whose geographic  location  creates  excessive
               burden; and

          o    reduce corporate overhead.



                                       10
<PAGE>

          In implementing these strategies, management has adopted the following
          action plans:

          o    In many  locations,  the market  for  apartments  has  started to
               include  re-billing  of  property  water  costs to  tenants.  The
               Partnership has initiated billing of tenants for their water used
               at several  locations and intends to continue  implementation  of
               the strategy at other properties as the markets permit.

          o    The Partnership has identified  certain of its properties,  which
               are  performing  well and have loans which are small  relative to
               the value of the properties,  given their excellent  performance.
               Four  properties  were  refinanced in the first three quarters of
               2001 generating sufficient cash for the Partnership to enter into
               negotiations  with  all of the  Exchange  Offering  professionals
               which were owed payment for services performed in connection with
               the  offering,  and still have an amount in reserve.  All four of
               these properties were refinanced at interest rates lower than the
               prior interest rates on the loans. The partnership  received cash
               proceeds of  approximately  $1,875,000 as a result of refinancing
               these four properties.

          o    The Partnership sold one of its properties that, in the past, had
               required substantial and frequent cash infusions. The sale closed
               on April 30, 2001.  Additional properties are being evaluated for
               potential disposition.

          o    During 2000,  the  Partnership  terminated the services of one of
               its executive  officers and entered into an arrangement  with two
               outside  businesses to allow officers of the  Partnership to work
               for those  businesses.  The salaries of those officers  funded by
               the Partnership  were reduced because of the income they received
               from the outside businesses.

          As a result of the refinancing of the four properties  discussed above
          and the  refinancing  of two  underlying  assets on  certain  Exchange
          Partnerships  in the first three quarters of 2001, the Partnership had
          approximately $1,563,000 in available cash at September 30, 2001.

          Management  believes  that the  actions  presently  being taken by the
          Operating  Partnership,  including the cash realized upon  refinancing
          the four properties previously mentioned and its cash on hand, provide
          the opportunity for the Operating Partnership to improve liquidity and
          profitability.

          The completion in April 2000 of the Exchange Offering  described above
          has  completed  the first  effort,  in the opinion of  management,  to
          provide the critical mass  necessary  for  profitable  operations.  As
          described above, the Operating Partnership has entered into agreements
          with certain  professional  firms  involved in the  Exchange  Offering
          which were owed for their services to receive  extended  payment terms
          and reductions of the amounts due, where possible.  Distributions will
          be made  by the  Operating  Partnership  and the  Trust  as cash  flow
          allows,  but will be negatively



                                       11
<PAGE>

          impacted as the open accounts payable are reduced. Management does not
          anticipate  that the  Operating  Partnership  or the  Trust  will make
          distributions  to its unitholders or shareholders,  respectively,  for
          the next several quarters.

          The Operating  Partnership  and the Trust intend to use  securities of
          the Operating  Partnership and the Trust  (including  Units and Common
          Shares), proceeds from future sales of such securities,  and available
          operating  cash flow and  financing  from  other  sources  to  acquire
          interests in additional  residential apartment properties or interests
          in other  partnerships  substantially  all of whose assets  consist of
          residential  apartment property  interests,  and payment of applicable
          fees and expenses.

          The operating results of the Operating  Partnership and the Trust will
          depend primarily upon income from the residential apartment properties
          in which they directly or indirectly  own or acquire an equity or debt
          interest.  Operating  results in respect of equity  interests  will be
          substantially  influenced by the demand for and supply of  residential
          apartment units in their primary market and sub-markets, and operating
          expense  levels.  Operating  results in respect of mortgage  and other
          debt interests will depend upon interest income, including, in certain
          cases,  participation  interest,  whose  payment  will depend upon the
          operating   performance,   sale  or   refinancing  of  the  underlying
          properties. The operating results of the Operating Partnership and the
          Trust  will  also  depend  upon the pace and  price at which  they can
          acquire and improve additional property interests.

          The target  metropolitan  markets and  sub-markets  have  benefited in
          recent periods from demographic  trends (including  population and job
          growth) which  increase the demand for  residential  apartment  units,
          while financing  constraints  (specifically,  reduced  availability of
          development   capital)  have  limited  new   construction   to  levels
          significantly   below   construction    activity   in   prior   years.
          Consequently,  rental  rates  for  residential  apartment  units  have
          increased  at or above  the  inflation  rate  for the last two  years.
          Expense levels also influence  operating results,  and rental expenses
          (other than real estate taxes) for  residential  apartment  properties
          have generally  increased at  approximately  the rate of inflation for
          the past three  years.  Changes in interest  rates are not expected to
          materially impact operations,  because the majority of the real estate
          mortgages have fixed interest  rates,  as do all of the  inter-company
          loans.

          The  Operating  Partnership  believes  that  known  trends,  events or
          uncertainties  which  will or are  reasonably  likely  to  affect  the
          short-term and long-term liquidity and current and future prospects of
          the Operating Partnership and the Trust include the performance of the
          economy and the building of new  apartment  communities.  Although the
          Operating  Partnership  cannot  reliably  predict the effects of these
          trends,  events and  uncertainties on the property  investments of the
          Operating Partnership and the Trust as a whole, some of the reasonably
          anticipated  effects might include  downward  pressure on rental rates
          and occupancy levels.



                                       12
<PAGE>

          Two  recent   developments   could  have  a  material  impact  on  the
          performance of the  Partnership.  First is the general downturn in the
          U.S.  economy due in large part to the  collapse of the  technological
          sector.  This  has  translated  into  a  significantly  softer  summer
          apartment  rental market,  particularly  in Florida.  Occupancies  and
          collections  have been  negatively  impacted for the last five months,
          and management  does not anticipate any  improvement in the near term.
          The second  development arises out of the horrible events of September
          11,  2001.  While  management  believes  it  is  still  too  early  to
          understand  how  deeply  this  event will  impact  the  confidence  of
          Americans and their way of life, it is likely to result in a more cash
          conscientious  consumer,  which could  result in downward  pressure on
          rental rates.

          Generally,  there are no  seasonal  aspects of the  operations  of the
          Operating  Partnership or the Trust that might have a material  effect
          on their financial  conditions or results of operation.  However,  for
          the last 36 months,  one 60-unit student housing property owned by one
          of the Exchange Partnerships involved in the Exchange Offering has had
          an average  occupancy  rate of 55% for nine months of the year and 30%
          for the remaining three months of the year.

          Subject to the  foregoing  discussion,  management  believes  that the
          Operating  Partnership and the Trust have the ability to satisfy their
          cash requirements for the foreseeable future.  However,  management of
          the Operating  Partnership believes that it will be necessary to raise
          additional  capital during the next 12 months to make acquisitions and
          to meet management's revenue and cash flow goals.

          As part of the Operating Partnership's ongoing operations,  management
          is reviewing  the entire  portfolio  of  properties  to determine  the
          potential for  restructuring  or  refinancing  various first  mortgage
          loans.   Additionally,   properties   whose  recent   performance  has
          materially negatively impacted the Operating  Partnership's  operating
          results  are being  evaluated  for  possible  sale.  Certain  of these
          properties  have been listed for sale.  The Operating  Partnership  is
          also in  discussions  with other  apartment  owners,  and is exploring
          business  combinations  that will bring it  economies of scale and the
          size it needs for listing the Trust's  Common  Shares on a  recognized
          securities  exchange.  Additional  size would also give the  Operating
          Partnership  and the Trust the operating  margin  necessary to support
          its  valuable  management  team  that is  believed  necessary  for its
          long-term growth.

          The Operating  Partnership  and the Trust expect no material change in
          the number of employees over the next 12 months.



                                       13
<PAGE>

PART II - OTHER INFORMATION


Item 1.   Legal Proceedings

          The  Operating  Partnership  is  a  party  to  various  legal  actions
          resulting  from its  operating  activities.  These actions are routine
          litigation  and  administrative  proceedings  arising in the  ordinary
          course of business,  some of which are covered by liability insurance,
          and none of which are  expected to have a material  adverse  effect on
          the consolidated  financial  condition or results of operations of the
          Operating Partnership taken as a whole.


Item 2.   Changes in Securities and Use of Proceeds


          Not Applicable

Item 3.   Defaults upon Senior Securities

          None

Item 4.   Submission of Matters to a Vote of Security Holders

          None

Item 5.   Other Information

          None

Item 6.   Exhibits and Reports on Form 8-K

          (a)

          Exhibit
          Number               Description


          3.1       Certificate   of  Limited   Partnership  of  the  Registrant
                    (incorporated herein by reference to Exhibit 3.1 to the Form
                    S-4 Registration  Statement of the Registrant filed with the
                    Securities and Exchange Commission on June 2, 1998).



                                       14
<PAGE>

          3.2       Agreement   of   Limited   Partnership   of  Baron   Capital
                    Properties,  L.P.  dated  as of May 15,  1998  (incorporated
                    herein by reference  to Exhibit  10.6 to Amendment  No. 3 to
                    the Form SB-2 Registration  Statement of Baron Capital Trust
                    filed with the Securities and Exchange Commission on May 15,
                    1998 (Registration No. 333-35063)).


          (b)  The  Registrant  did not file  any  Current  Reports  on Form 8-K
               during the quarter for which this Report is filed.


     In accordance  with the  requirements  of the Exchange Act, the  Registrant
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.

November 14, 2001

                                   BARON CAPITAL PROPERTIES, L.P.

                                   By:      Baron Capital Trust, General Partner

                                   By:        /s/  Robert L. Astorino
                                              -----------------------------
                                            Robert L. Astorino
                                            Chief Executive Officer

                                   By:        /s/  Mark L. Wilson
                                              -------------------
                                            Mark L. Wilson
                                            Chief Financial Officer

                                       15