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

                                  Form 10-QSB/A


(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, 2000


    [_]     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 3,822,683 units of
limited partnership interest ("Operating Partnership Units").

<PAGE>


                                EXPLANATORY NOTE

     As a result of certain  adjustments  in  connection  with the  consolidated
financial  statements of Baron Capital  Properties,  L.P. (the "Registrant," the
"Partnership,"  or the "Operating  Partnership") for the year ended December 31,
2000,  management  determined  to restate its Form 10-QSB for the quarter  ended
September 30, 2000 as previously  filed on March 1, 2001. The amounts  contained
in the  financial  statements  included  in this  Form  10-QSB/A  reflect  these
changes.  See NOTE 1 to the  consolidated  financial  statements under "Basis of
Presentation"  for a more detailed  explanation as to the  restatement.  Certain
subsequent events are also reflected in this Form 10-QSB/A.


                         PART I - FINANCIAL INFORMATION

Item 1.   Financial Statements

          See following pages.


                                       2
<PAGE>


                          INDEX TO FINANCIAL STATEMENTS


                                                                         PAGE
                                                                         ----
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

   Balance Sheets                                                        F-2

   Statements of Operations                                              F-3

   Statement of Partners' Capital                                        F-4

   Statements of Cash Flows                                              F-5

   Notes to Financial Statements                                      F-6 - F-18


                                      F-1
<PAGE>


                         BARON CAPITAL PROPERTIES, L.P.

                      CONSOLIDATED CONDENSED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                              September 30,     December 31,
                                                                                  2000              1999
                                                                              ------------      -----------
                                                                              (Unaudited)
                                                                                RESTATED
<S>                                                                           <C>               <C>
                                     ASSETS
Land                                                                          $  6,632,871      $ 1,178,693
Depreciable property                                                            29,654,386        6,189,095
                                                                              ------------      -----------
                                                                                36,287,257        7,367,788
Less accumulated depreciation                                                   (2,100,668)      (1,453,177)
                                                                              ------------      -----------
                                                                                34,186,589        5,914,611

Investment In Partnerships                                                         475,775          930,970

Cash and Cash Equivalents                                                          191,880           27,552
Restricted Cash                                                                    864,959           52,089
Reimbursed Administrative Expenses Receivable, Affiliates                        1,325,169           36,997
Other Receivables                                                                   79,103            3,724
Due from Baron Capital Trust                                                       296,010          296,010
Advances to Affiliates                                                           6,117,643            5,141
Other Property and Equipment                                                       272,720          134,981
Other Assets                                                                       786,483          188,692
                                                                              ------------      -----------
                                                                                 9,933,967          745,186
                                                                              ------------      -----------
                                                                              $ 44,596,330      $ 7,590,767
                                                                              ============      ===========

                       LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
  Mortgages payable                                                           $ 25,117,572      $ 4,278,117
  Accounts payable and accrued liabilities                                       2,313,352        1,078,353
  Note payable                                                                     115,000          100,000
  Notes payable, affiliates                                                      3,813,313           50,000
  Capital lease obligation                                                          40,775           42,369
  Security deposits                                                                195,462           40,308
                                                                              ------------      -----------
      Total liabilities                                                         31,595,474        5,589,147
                                                                              ------------      -----------

Partners' Capital:
  General Partner; issued and outstanding, 39,488 and 18,962 as of                 (43,602)         (33,362)
    September 30, 2000 and December 31, 1999 respectively,
    partnership units
  Limited Partners; issued and outstanding, 3,909,347 and 1,877,246 as
    of September 30, 2000 and December 31, 1999 respectively,
    partnership units of which 757,746 are subject to escrow restrictions       13,044,458        2,034,982
                                                                              ------------      -----------
      Total partners' capital                                                   13,000,856        2,001,620
                                                                              ------------      -----------
                                                                              $ 44,596,330      $ 7,590,767
                                                                              ============      ===========
</TABLE>


           See notes to consolidated condensed financial statements.


                                      F-2
<PAGE>

                         BARON CAPITAL PROPERTIES, L.P.

                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                    UNAUDITED


<TABLE>
<CAPTION>
                                                             Nine             Nine           Three            Three
                                                            Months           Months          Months           Months
                                                            Ended            Ended           Ended            Ended
                                                        September 30,     September 30,   September 30,    September 30,
                                                             2000             1999            2000             1999
                                                         -----------      -----------      -----------      -----------
                                                           RESTATED                         RESTATED
<S>                                                      <C>              <C>              <C>              <C>
Revenue:
  Property:
    Rental                                               $ 3,155,896      $   871,001      $ 1,411,137      $   280,496
    Equity in net loss of unconsolidated partnership        (113,915)            --            (34,921)          29,093
  Interest and other income                                  634,476             --            266,342             --
                                                         -----------      -----------      -----------      -----------
                                                           3,676,457          871,001        1,642,558          309,589
                                                         -----------      -----------      -----------      -----------
Real Estate Expenses:
  Depreciation                                               647,491          107,361          306,264           34,454
  Amortization                                               110,100             --             52,119
  Interest                                                 1,045,039          230,534          489,524           86,043
  Repairs and maintenance                                    502,951           61,092          222,387           23,365
  Personnel                                                  442,644           89,576          177,268           32,105
  Property Taxes                                             274,838           61,484          127,020           20,208
  Property Insurance                                          68,504           15,418           30,474            4,700
  Utilities                                                  283,151           50,621          138,997           21,020
  Other                                                      160,376          143,948           98,475           12,378
                                                         -----------      -----------      -----------      -----------
                                                           3,535,094          760,034        1,642,528          234,273
                                                         -----------      -----------      -----------      -----------
Administrative Expenses:
  Personnel, including officers' compensation                691,864          642,633          156,403          143,215
  Professional services                                      284,056          253,208           34,517           80,188
  Other                                                      352,234           27,575          179,210            3,242
                                                         -----------      -----------      -----------      -----------
                                                           1,328,154          923,416          370,130          226,645
                                                         -----------      -----------      -----------      -----------
     Total expenses                                        4,863,248        1,683,450        2,012,658          460,918
                                                         -----------      -----------      -----------      -----------

Net Loss                                                 $(1,186,791)     $  (812,449)     $  (370,100)     $  (151,329)
                                                         ===========      ===========      ===========      ===========

Basic Net Loss per unit                                  $     (0.37)     $     (0.45)     $     (0.11)     $     (0.08)
                                                         ===========      ===========      ===========      ===========

Weighted Average Partnership Units                         3,216,538        1,793,060        3,404,600        1,819,187
                                                         ===========      ===========      ===========      ===========
</TABLE>


           See notes to consolidated condensed financial statements.


                                      F-3
<PAGE>


                         BARON CAPITAL PROPERTIES, L. P.

                   CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
                       RESTATED


<TABLE>
<CAPTION>
                                                      General Partner              Limited Partners
                                                  ----------------------      --------------------------
                                                   Units         Amount         Units          Amount             Total
                                                  -------      ---------      ---------     ------------      ------------
<S>                                                <C>         <C>            <C>           <C>               <C>
Partners' Capital, December 31, 1999               18,962      $ (33,362)     1,877,246     $  2,034,982      $  2,001,620

  Capital Contributions - Trust                       273           --           26,990          230,118           230,118
  Exchange offering contributions                  24,742           --        2,449,525       11,793,159        11,793,159
  Initial limited partners reduction               (4,489)                     (444,414)
  Net loss                                           --          (11,868)          --         (1,174,923)       (1,186,791)
  Credit for estimated fair value of services
     performed by officer                            --            1,628           --            161,122           162,750
                                                  -------      ---------      ---------     ------------      ------------
Partners' Capital, June 30, 2000 (Unaudited)       39,488      $ (43,602)     3,909,347     $ 13,044,458      $ 13,000,856
                                                  =======      =========      =========     ============      ============
</TABLE>


           See notes to consolidated condensed financial statements.


                                      F-4
<PAGE>

                         BARON CAPITAL PROPERTIES, L.P.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    UNAUDITED


<TABLE>
<CAPTION>
                                                                Nine Months Ended
                                                                  September 30,
                                                          ----------------------------
                                                              2000             1999
                                                          -----------      -----------
                                                           RESTATED
<S>                                                       <C>              <C>
Cash Flows from Operating Activities:
  Net loss                                                $(1,186,791)     $  (812,449)
  Adjustments to reconcile net loss to net cash
      used by operating activities:
     Provision for officer's compensation                     162,750             --
     Depreciation                                             647,491          116,384
     Amortization of loan costs                               110,100
     Equity in net loss of unconsolidated partnership        (113,915)            --
     (Increase) Decrease in operating assets:
       Other receivables                                       37,579           12,195
       Reimbursed administrative expenses receivable           13,394          (36,216)
       Other assets                                            (9,450)         (39,295)
     Increase (Decrease) in operating liabilities:
       Accounts payable and accrued liabilities               (63,630)          95,449
       Security deposits                                      (28,092)           3,560
                                                          -----------      -----------
         Net cash used by operating activities               (430,564)        (660,372)
                                                          -----------      -----------

Cash Flows from Investing Activities:
  Additions to rental apartments                             (196,277)            --
  Investment in partnerships                                    1,203         (820,121)
  Purchases of other property and equipment                    (4,979)           6,311
  Increase in Restricted Cash                                (101,990)        (118,773)
                                                          -----------      -----------
         Net cash used by investing activities               (302,043)        (932,583)
                                                          -----------      -----------

Cash Flows from Financing Activities:
  Partners' capital contributions                             230,118        1,845,666
  Distributions paid                                             --           (269,947)
  Proceeds from mortgage financing                               --            236,273
  Proceeds from notes payable affiliates                      210,791             --
  Proceeds from note payable                                  105,000             --
  Payments on notes payable                                   (90,000)        (256,000)
  Payments on notes payable, affiliates                       (90,644)            --
  Payments on mortgages payable                              (157,928)            --
  Payments on capital lease obligation                         (4,980)         (20,325)
  Increase in advances to/from affiliates, net                694,578           10,750
                                                          -----------      -----------
         Net cash provided by financing activities            896,935        1,546,417
                                                          -----------      -----------

Net Increase (Decrease) in Cash and Cash Equivalents          164,328          (46,538)

Cash and Cash Equivalents, Beginning                           27,552          169,479
                                                          -----------      -----------

Cash and Cash Equivalents, Ending                         $   191,880      $   122,941
                                                          ===========      ===========

Supplemental Disclosure of Cash Flow Information:
  Cash paid for mortgage and other interest               $ 1,045,039      $   230,534
                                                          ===========      ===========
</TABLE>


           See notes to consolidated condensed financial statements.


                                      F-5
<PAGE>


                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of Presentation

     The  consolidated  balance sheet as of September 30, 2000, the consolidated
     statements of operations for the nine and three months ended  September 30,
     2000 and 1999, the statement of partners' capital for the nine months ended
     September 30, 2000, and the  consolidated  statements of cash flows for the
     nine months  ended  September  30, 2000 and 1999 have been  prepared by the
     management of Baron Capital Properties,  L.P. (the "Operating  Partnership"
     or 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, 2000 and for the period  presented,  have been made.  The
     results of  operations  for the three and nine months ended  September  30,
     2000 are not necessarily  indicative of the operating  results for the full
     year.

     As a result  of  certain  adjustments  in  connection  with  the  Operating
     Partnership's consolidated financial statements for the year ended December
     31, 2000,  management determined to restate its Form 10-QSB for the quarter
     ended  September  30,  2000 as  previously  filed  on March  1,  2001.  The
     Operating 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 Operating Partnership. Had the Operating Partnership been aware of this
     information  at the time of filing the September 30, 2000 Form 10-QSB,  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 in
     the  financial  statements  included in this Form  10-QSB/A  reflect  those
     changes. Certain subsequent events are also reflected herein.

     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
     Partnership's  financial  statements  and  notes  thereto  included  in the
     Partnership's December 31, 1999 Form 10-KSB.

     Organization

     Baron  Capital  Properties,  L.P.  (the  "Partnership"  or  the  "Operating
     Partnership"), a Delaware limited partnership, is the operating partnership
     of  Baron  Capital  Trust  (the  "Trust").  Together  with the  Trust,  the
     Operating  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


                                      F-6
<PAGE>


                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Organization (Continued)

     of property. The Operating 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.

     The Trust, as General Partner of the Operating  Partnership,  is authorized
     to cause the Operating  Partnership  to issue  additional  units of limited
     partnership  interests  ("Units")  in the  Operating  Partnership  for  any
     purpose of the  Operating  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 unit holders (other
     than the Trust) into an  equivalent  number of common  shares of beneficial
     interest  ("Common  Shares") in the Trust, the maximum number of Units that
     may be issued by the  Operating  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.

     As described  below,  in exchange for a cash capital  contribution in 1998,
     each of the  founders,  Gregory  K.  McGrath  and  Robert  S.  Geiger  (the
     "Original  Investors"),  has been issued 378,873  Units,  all of which have
     been deposited into an institutional  escrow account for six to nine years,
     subject to earlier release under certain conditions.

     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

     The accompanying  consolidated  financial  statements have been prepared in
     conformity with generally accepted accounting  principles which assume that
     the Operating Partnership will continue on a going concern basis, including
     the  realization  of assets and  liquidation of liabilities in the ordinary
     course of business.  For nine months ended  September 30, 2000 and the year
     ended December 31, 1999 the  Partnership  incurred net losses of $1,186,791
     and  $2,641,250  and negative  cash flows from  operations  of $430,564 and
     $555,711.  The  auditors'  report for the year ended  December 31, 1999 was
     qualified to express  substantial  doubt as to the Operating  Partnership's
     ability to continue as a going concern.

     During  the  years  ended   December  31,  2000  and  1999,  the  Operating
     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 consolidated  condensed  financial  statements
     for the first six months  ended June 30,  2001  included  in the  Operating
     Partnership's  quarterly  report on Form 10-QSB for the three-month  period
     ended  June 30,  2001,  the  Operating  Partnership  generated  Funds  From
     Operations (Funds from Operations is a measure of profitability in the REIT
     industry  measuring net income less depreciation,  amortization,  and other
     non-operating  expenses  and/or income) of  approximately  $407,000  versus
     negative Funds From Operations of approximately $417,000 for the six months
     ended June 30, 2000.


                                      F-7
<PAGE>


                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2.   LIQUIDITY AND PROFITABILITY CONSIDERATIONS (Continued)

     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.

          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  Operating
          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.  The  Operating
          Partnership  has also started a program of enhancing the aesthetics of
          the  properties,  which is allowing  it to increase  rents while still
          improving occupancy.

     o    The Operating  Partnership  has  identified  certain of its properties
          which are  performing  well and have loans which are small relative to
          the value of the property,  given their excellent performance.  During
          the first quarter of 2001, the Operating Partnership  refinanced three
          of its properties, which generated $1,632,000 of cash to the Operating
          Partnership.  The cash was used to reduce accounts payable owed by the
          Operating  Partnership to Exchange  Offering  professionals  for their
          services in connection  with the offering,  advance funds for a second
          round of  refinancings,  and establish an escrow  account for expected
          major  repairs  to  its  Riverwalk  property.   All  three  refinanced
          properties  were  refinanced at interest rates lower than the interest
          rate on their old loan.  Subsequent  to June 30, 2001,  the  Operating
          Partnership refinanced three additional properties,  which resulted in
          cash proceeds of approximately $1,408,000.

     o    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  Operating  Partnership  determined  to  sell  the
          property based on its lack of performance and its need for substantial
          and  frequent  cash  infusions.   The  sale  price  was  approximately
          $3,900,000 and resulted in a loss of $210,854.  Additional  properties
          are being evaluated for potential disposition.

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


                                      F-8
<PAGE>


                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2.   LIQUIDITY AND PROFITABILITY CONSIDERATIONS (Continued)

     As a result of the  re-financing  of the  three  properties  in the  second
     quarter  of  2001  as  discussed  above,  the  Operating   Partnership  had
     approximately $265,000 in available cash.

     Management believes that the actions presently being taken by the Operating
     Partnership,  including  the  cash  realized  upon  refinancing  the  three
     additional  properties as described above and its cash on hand, provide the
     opportunity  for  the  Operating   Partnership  to  improve  liquidity  and
     profitability.

NOTE 3.   RECENT ACCOUNTING PRONOUNCEMENTS

     In September  2000,  Statement of Financial  Accounting  Standards No. 140,
     Accounting   for   Transfers   and   Servicing  of  Financial   Assets  and
     Extinguishments  of  Liabilities  (SFAS 140) was issued.  SFAS 140 provides
     accounting and reporting standards for transfers and servicing of financial
     assets  and  extinguishments  of  liabilities.  SFAS 140 is  effective  for
     recognition and reclassification of collateral and for disclosures relating
     to securitization transactions and collateral for fiscal years ending after
     December 15, 2000 and is effective for transfers and servicing of financial
     assets and  extinguishments of liabilities  occurring after March 31, 2001.
     The Partnership  anticipates  that the adoption of SFAS 140 will not have a
     material effect on its financial position or results of operations.

     In December 1999, the Securities and Exchange Commission (SEC) issued Staff
     Accounting  Bulletin No. 101, Revenue  Recognition in Financial  Statements
     (SAB  101).  SAB 101  summarizes  certain  of the SEC's  views in  applying
     generally  accepted   accounting   principles  to  revenue  recognition  in
     financial statements. SAB 101 is effective for the fourth quarter of fiscal
     years  beginning  after  December  1999.  The Trust  believes that it is in
     compliance with the guidelines set forth in SAB 101.

     In  June  1998,  the  FASB  issued  SFAS  133,  Accounting  for  Derivative
     Instruments  and Hedging  Activities,  which has been deferred by SFAS 137,
     Accounting for Derivative  Instruments and Hedging Activities - Deferral of
     the Effective  Date of FASB  Statement No. 133, and amended by the issuance
     in June 2000 of SFAS 138, Accounting for Certain Derivative Instruments and
     Certain  Hedging  Activities,  an amendment of FASB Statement No. 133. SFAS
     133 requires  that every  derivative  instrument be recorded on the balance
     sheet as an asset or liability  measured at its fair value and that changes
     in the fair value of  derivative  instruments  be  recognized  currently in
     earnings  unless  specific hedge  accounting  criteria are met. SFAS 133 is
     effective for fiscal years beginning after June 15, 2000.

     Historically,  the Operating  Partnership has not entered into  derivatives
     contracts to hedge existing risks or for speculative purposes. Accordingly,
     the Operating  Partnership  does not expect adoption of the new standard on
     January 1, 2001 to affect its financial statements.


                                      F-9
<PAGE>


                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4.   EXCHANGE OFFERING

     On April 7, 2000,  pursuant to a  registration  statement  on Form S-4, the
     Operating  Partnership  completed  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 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.  Prior to the completion of the
     Exchange  Offering,  the  Exchange  Partnerships  were managed by corporate
     general partners (the "Corporate General Partners"),  which were controlled
     by Gregory K. McGrath,  who is a founder and former Chief Executive Officer
     of the  Trust,  a  founder  and  principal  unit  holder  of the  Operating
     Partnership,  and the Chief Executive, sole stockholder and director of the
     Managing Shareholder of the Trust.

     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  Partnership were owned by the Operating  Partnership;  Mr.
     McGrath, for nominal consideration, assigned to the Trust all of the equity
     stock in 18 of the 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
     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.

     The  Exchange  Offering  expired on April 7,  2000.  Under the terms of the
     Exchange  Offering,  Exchange  Limited  Partners in a  particular  Exchange
     Partnership  were entitled to  participate  in the offering only if limited
     partners holding at least 90% of the units of limited partnership  interest
     in that partnership affirmatively elected to accept the offering.  Exchange
     Limited Partners holding  approximately  97.4% of the outstanding  units of
     limited partnership in such partnerships accepted the offering, and each of
     the  Exchange  Partnerships  exceeded  the 90%  requirement.  As a  result,
     following the completion of the Exchange Offering,  the limited partnership
     interests  of  nine  Exchange  Partnerships  were  owned  entirely  by  the
     Operating  Partnership  (in the case of nine Exchange  Partnership in which
     all Exchange Limited Partners  accepted the offering) and substantially all
     of the limited partnership  interests in the other 14 Exchange Partnerships
     were  owned  by the  Operating  Partnership,  with  the  remaining  limited
     partnership  interests  being  retained by Exchange  Limited  Partners  who
     elected not to accept the offering or failed to respond to the offering.

     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


                                      F-10
<PAGE>


                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4.   EXCHANGE OFFERING (Continued)

     recorded in this  transaction.  The results of  operations  of the Exchange
     Partnerships  are included in the consolidated  financial  statements as of
     April 1, 2000.

     The following unaudited pro forma summary presents  consolidated  financial
     information  as if the Exchange  Partnerships  had been acquired  effective
     January 1, 1999. 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.

                                                For the Nine Months Ended
                                                       September 30
                                               ---------------------------
                                                   2000            1999
                                               -----------     -----------
     Total Revenues                            $ 5,100,000     $ 4,400,000
     Cost and expenses                          (6,400,000)     (6,400,000)
                                               -----------     -----------
     Net Loss                                  $(1,300,000)    $(2,000,000)
                                               ===========     ===========

     Weighted average number of units            3,216,538       1,793,060
                                               ===========     ===========

     Net loss per unit                         ($     0.40)    ($     1.12)
                                               ===========     ===========

NOTE 5.   COMMITMENTS AND CONTINGENCIES

     Contract to Purchase Additional Properties

     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 are controlled
     by Mr. McGrath. One of the residential  properties has been sold to a third
     party with the Trust's consent. The remaining 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. The Trust has a right of first negotiation to purchase the
     property from the development  company 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 connection with the transaction,  the Trust (along with 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


                                      F-11
<PAGE>


                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5.   COMMITMENTS AND CONTINGENCIES (Continued)

     Contract to Purchase Additional Properties (Continued)

     Burgundy Hills Property. As of August 1, 2001,  approximately $6,478,000 of
     the  construction  loan had  been  drawn  down.  The  interest  rate on the
     construction  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 agreements, KeyBank
     would require the Trust to buy out the bank's position on the entire amount
     of the construction 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 the former Chief  Executive
     Officer, KeyBank agreed to forego further action for at least 60 days while
     the  parties  attempt to reach an  arrangement.  The  extension  expired in
     November  2000 and,  according to the former Chief  Executive  Officer,  is
     currently being extended on a month-to-month  basis. The Borrower paid down
     the  outstanding  accrued  interest and a portion of the  principal  and is
     currently  seeking  a new  long-term  construction  facility  with  another
     institutional  lender to replace the KeyBank  first  mortgage loan (and the
     BankOne loan described below).

     In December 2000, 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  first mortgage  loan.  Earlier,  Bank One provided
     additional institutional financing in the principal amount of $1,576,000 to
     the  Borrower.  The loan is secured by a security  interest in  partnership
     interests  in the  Borrower.  Due to a default in payment of interest  due,
     BankOne has been  assigned  rental  payments and has taken over  day-to-day
     management of the  property.  This loan is expected to be paid off with the
     proposed new first mortgage financing referenced above.

     There  can be no  assurance  that  refinancing  of the  two  loans  will be
     available or will be  available  on  commercially  reasonable  terms,  that
     BankOne will not seek to enforce its right to accelerate the first mortgage
     loan and begin foreclosure  proceedings against the Burgundy Hills Property
     in respect of the first  mortgage loan or elect to require the Trust to buy
     out its  position on the entire  outstanding  amount of the first  mortgage
     loan,  or that  BankOne  will not seek to enforce its right under the other
     loan to take over control of the Borrower.

     Officers' Compensation

     Gregory K. McGrath,  a founder of the Trust and the Operating  Partnership,
     formerly served as Chief Executive Officer of the Trust. He agreed to serve
     as Chief Executive  Officer of the Trust for the initial year of operations
     in exchange for  compensation  in the form of Common  Shares or Units in an
     amount not to exceed 25,000 Common Shares or Units,  as  applicable,  to be
     determined  by the  Executive  Compensation  Committee  of the Board of the
     Trust based upon his  performance,  in addition to benefits and eligibility
     for participation in any option plan and bonus


                                      F-12
<PAGE>


                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5.   COMMITMENTS AND CONTINGENCIES (Continued)

     Officers' Compensation (continued)

     incentive  compensation  plan which may be implemented by the  Partnership.
     During 1998 and 1999 and the first three  quarters of 2000 no Common Shares
     of the Trust or Units of the  Partnership  were  issued to Mr.  McGrath  as
     compensation.  However, in order to reflect all appropriate  administrative
     expenses of the  Partnership,  a provision of $162,750 has been made in the
     accompanying  financial  statements  for the  estimated  fair  value of the
     services  rendered by Mr.  McGrath as the Chief  Executive  Officer for the
     first  three  quarters  of  2000.  This  amount  has  been  charged  to the
     compensation  expense,  with a corresponding  credit to partners'  capital.
     These  estimates  of the fair value of such  services  were  determined  by
     management  based upon an analysis of compensation  paid to chief executive
     officers  of  a  number  of  comparable  real  estate  investment   trusts.
     Compensation  and benefits for the Chief  Executive  Officer are determined
     annually by the Executive Compensation Committee of the Board of the Trust.
     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  Operating  Partnership's  operations.  In May
     2001,  Robert L.  Astorino  replaced  Mr.  McGrath  as the Chief  Executive
     Officer.

     Robert S. Geiger, the other founder of the Trust and Operating Partnership,
     formerly  served  as the  Chief  Operating  Officer  of the  Trust  and the
     Operating  Partnership.  His initial annual salary was set at $100,000,  in
     addition to benefits, and eligibility for participation in any Common Share
     option plan and bonus incentive compensation plan implemented by the Trust.
     Mr. Geiger's employment has been terminated and since August 1, 2000 he has
     received no compensation.

     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 Operating  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.

     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 the former Chief Executive Officer
     of the  Trust),  the former  Chief  Executive  Officer  of the  Trust,  and
     Alexandria Development,  L.P., a Delaware limited partnership controlled by
     the former Chief Executive Officer of which the Operating  Partnership owns
     a 40% limited partnership interest


                                      F-13
<PAGE>


                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5.   COMMITMENTS AND CONTINGENCIES (Continued)

     Pending Litigation (continued)

     (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
     Apartments  property,  a residential  apartment property under construction
     that is owned by the Alexandria  Partnership.  The  Alexandria  Partnership
     guaranteed Wakul, Inc.'s lease payments under the leasing agreement.

NOTE 6.   RELATED PARTY TRANSACTIONS

     Accrued Interest Receivable, Affiliates

     Certain of the Exchange  Partnerships acquired by the Operating Partnership
     in the Exchange Offering hold  subordinated  notes,  lines of credits,  and
     advances due from/to limited partnerships controlled by Gregory K. McGrath,
     the Trust's former Chief Executive  Officer.  These debt  instruments  have
     varying interest rates and the interest is accrued and/or paid on a monthly
     basis.  As of September 30, 2000, the  Partnership was due $ 6,117,643 from
     affiliates with $1,325,169 of accrued  interest.  The Partnership also owes
     $3,813,313 to  affiliates  including  accrued  interest as of September 30,
     2000.

NOTE 7.   PARTNERS' CAPITAL

     Partners' Capital Contributions

     During the nine months ended September 30, 2000, the Operating  Partnership
     issued 26,990 Units of limited  partner  interest to the Trust at $8.53 per
     unit based upon net proceeds of $230,118.

     In addition,  the Operating  Partnership issued to the Trust 25,015 general
     partner  Units  during  the nine  months  ended  September  30,  2000 as an
     allocation  to  adjust  the  general  partner  interest  to 1% of the total
     outstanding  Operating Partnership Units. This issuance has been treated as
     an allocation of the capital  contributions  by the Trust, and no value has
     been ascribed to these general partner Units for accounting purposes.

     Exchange Offering

     The Operating  Partnership filed a registration  statement on Form S-4 with
     the Securities and Exchange  Commission (the  "Commission")  covering up to
     2,500,000 units of limited partnership  interest ("Units") to be registered
     under the Act.  These  Units were  offered  (the  "Exchange  Offering")  in
     exchange  for  units  of  limited   partnership   interest  in  23  limited
     partnerships  (the "Exchange  Partnerships"),  which directly or indirectly
     owned equity and/or mortgage interests in one or more residential apartment
     properties.  The Exchange  Partnerships  were managed by corporate  general
     partners who are affiliated with one of the founders of the Trust and the


                                      F-14
<PAGE>


                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7.   PARTNERS' CAPITAL (Continued)

     Exchange Offering (Continued)

     Operating  Partnership,  who is also former Chief Executive  Officer of the
     Trust, and the sole stockholder and director of the Managing Shareholder of
     the Trust. The registration statement was declared effective on November 9,
     1999, and the Exchange Offering commenced shortly thereafter.

     The  number  of Units  offered  in  exchange  for the  limited  partnership
     interests in the Exchange  Partnerships was based on appraisals prepared by
     qualified  and licensed  independent  appraisal  firms for each  underlying
     residential apartment property. For purposes of the Exchange Offering, each
     Unit was arbitrarily assigned an initial value of $10.00, which corresponds
     to the offering  price of each Trust Common Share that was being offered to
     the public pursuant to the Cash Offering. The value of each Unit and Common
     Share  outstanding  was  substantially  identical since Unit holders (other
     than the Trust),  including  recipients of Units in the Exchange  Offering,
     are  entitled to  exchange  all or a portion of their Units at any time and
     from time to time for an equivalent  number of Trust Common Shares, 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  shares in the Trust,  subject to the Trust's right to cash out
     any holder of Units who requests an exchange  and subject to certain  other
     exceptions.  To  facilitate  such  exchanges  of Units into Common  Shares,
     2,500,000 Common Shares (in addition to the 2,500,000 Common Shares offered
     by  the  Trust  in  the  Cash  Offering)  have  been  registered  with  the
     Commission.

     By  virtue  of the  completion  of the  Exchange  Offering,  the  Operating
     Partnership  acquired equity and/or  subordinated  mortgage interests in 26
     properties (the "Exchange  Properties") directly or indirectly owned by the
     23 Exchange  Partnerships.  (As described  above in "NOTE 2 - Liquidity and
     Profitability  Considerations,"  the Operating  Partnership sold one of the
     Exchange  Properties  in April 2001.) The  Operating  Partnership  acquired
     interests  in a particular  property  and/or  mortgages  by acquiring  from
     limited  partners  their  units  of  limited  partnership  interest  in the
     respective  Exchange   Partnership.   Each  of  the  Exchange  Partnerships
     currently  controlled by the Operating  Partnership  directly or indirectly
     owned equity and/or mortgage  interests in one or more properties.  Certain
     of such Exchange  Partnerships  directly or indirectly own equity interests
     in 15 properties,  which consist of an aggregate of 868  residential  units
     (comprised of studio,  one, two, three and four bedroom units).  Certain of
     such Exchange Partnerships directly or indirectly own mortgage interests in
     10  properties,  which consist of an aggregate of 813 existing  residential
     units  (studio and one and two bedroom  units) and 168 units (two and three
     bedroom units) under  development.  Of the 25 Exchange  Properties in which
     the Operating  Partnership  continues to own an interest, 20 properties are
     located in  Florida,  three  properties  in Ohio and one  property  each in
     Georgia and Indiana.  See Note 4 regarding  the  completion of the Exchange
     Offering on April 7, 2000.


                                      F-15
<PAGE>


                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7.   PARTNERS' CAPITAL (Continued)

     Operating Partnership Limited Partnership Units

     In   connection   with  the  formation  of  the  Trust  and  the  Operating
     Partnership,  the founders,  Gregory K. McGrath and Robert S. Geiger,  each
     subscribed for 601,080 limited partnership units ("Units") of the Operating
     Partnership (a total of 1,202,160  Units).  In consideration  for the Units
     subscribed for by them, the founders made a $100,000  capital  contribution
     to the Operating  Partnership.  The number of Units  subscribed for by them
     represented  19%  of  the  maximum  Common  Shares  that  would  have  been
     outstanding after completion of the Cash Offering and the Exchange Offering
     assuming  that the Trust had sold all  Common  Shares  offered  in the Cash
     Offering and that the Operating  Partnership  had issued the maximum number
     of Units  (2,500,000)  offered in the Exchange  Offering,  calculated  on a
     fully diluted basis assuming all then  outstanding  units (other than those
     acquired  by the Trust) had been  exchanged  into an  equivalent  number of
     Common Shares.

     The subscription  agreement  entered into by the founders provided that if,
     as of May 31, 2000, the number of Units  subscribed for by them represented
     a  percentage  greater  than  19% of the  then  outstanding  Common  Shares
     calculated  on a fully  diluted  basis,  each founder  would be required to
     return any excess  Units to the  Operating  Partnership  for  cancellation.
     Therefore, as of May 31, 2000, an adjustment,  reducing the number of Units
     held in escrow by  444,414,  was made to  accurately  reflect the number of
     Units held by the founders.  The founders have deposited  Units  subscribed
     for by them into a security  escrow account for six to nine years,  subject
     to earlier release under certain conditions.

     The fair value of the Units  issued to the  founders  amounted to $100,000,
     based upon a determination made by the Independent Trustees of the Trust as
     of the date of  subscription  for  these  Units  (February  3,  1998).  The
     determination of the fair value took into consideration that at the time of
     the  subscription  for the Units,  the Trust and the Operating  Partnership
     were  development  stage  companies,  with  no cash  or  other  significant
     tangible  assets,   operating  history  or  revenue  and  no  certainty  of
     successful  offerings or future operations;  the founders had at risk their
     initial capital contributions plus certain additional unreimbursed advances
     to cover  certain  offering  and  operating  expenses;  the  founders  have
     significant  experience and developed  know-how  critical to the success of
     the  Trust  and the  Operating  Partnership;  and the  founders'  Units are
     subject to significant transfer restrictions. The Operating Partnership has
     accounted  for the Units as being  issued and  outstanding,  but subject to
     escrow restrictions, in the accompanying consolidated financial statements,
     and has  included  the Units as  outstanding  in  determining  the weighted
     average  partnership units outstanding for purposes of calculating net loss
     per partnership unit in the accompanying consolidated financial statements.
     Because  the  release of the Units from  escrow is not  dependent  upon the
     achievement  of any  specified  level of profits,  the release of the Units
     from escrow is not  considered  to be  compensatory  and,  accordingly,  no
     accounting  measurement  will be given to the  release  of the  Units  from
     escrow.

     Under the  subscription  agreement,  the  founders  agreed to waive  future
     administrative  fees for managing Exchange  Partnerships which participated
     in the Exchange Offering, agreed to assign to the Operating Partnership the
     right to receive all residual economic rights attributable to the


                                      F-16
<PAGE>


                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7.   PARTNERS' CAPITAL (Continued)

     Operating Partnership Limited Partnership Units (Continued)

     general partner interests in Exchange Partnerships; and, in order to permit
     management of the Exchange Properties by the Operating Partnership,  caused
     the  Exchange  Partnerships  to cancel  the  partnerships'  prior  property
     management  agreements  and  agreed to forego  the right to have a property
     management firm  controlled by the founders assume the property  management
     role  in  respect  of  properties  in  which  the  Trust  or the  Operating
     Partnership invest.

     Following the Exchange Offering,  the Operating Partnership  controlled the
     Exchange  Partnerships by virtue of its ownership of  substantially  all of
     the limited  partnership  interests  therein,  which provided the Operating
     Partnership  the ability to remove the general partner under the provisions
     of  the  limited  partnership   agreements   pertaining  to  each  Exchange
     Partnership  that  authorize  limited  partners  holding  over 50% of total
     partnership interest to remove the general partner.

     Since  holders of Units (other than the Trust) may elect to exchange  these
     for Common Shares in the Trust on a one for one basis,  the founders  would
     be entitled to exchange their limited partnership units for a net amount of
     757,746 Common Shares.

NOTE 8.   NET LOSS PER 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 loss per Unit  equals net loss  divided by the  weighted  average
     Units outstanding  during the year. The computation of diluted net 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 both the three and nine months ended  September 30, 2000
     and 1999.

     The components used in calculating basic net loss per Unit are as follows:

                                                            Weighted
                                                             Average      Loss
                                               Net Loss       Units     Per Unit
                                             -----------    ---------   --------
     Three Months Ended September 30, 2000     ($370,100)   3,404,600   ($0.11)
     Three Months Ended September 30, 1999     ($151,329)   1,819,187   ($0.08)
     Nine Months Ended September 30, 2000    ($1,186,791)   3,216,538   ($0.37)
     Nine Months Ended September 30, 1999      ($812,449)   1,793,060   ($0.45)


                                      F-17
<PAGE>


                         BARON CAPITAL PROPERTIES, L.P.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 9.      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 16 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-18
<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" 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 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,  pursuant to a registration
     statement  on Form  SB-2,  the Trust  commenced  a public  offering  ("Cash
     Offering") of 2,500,000 common shares of beneficial interest ("Trust Common
     Shares"  or


                                       3
<PAGE>


     "Common Shares") at an offering price of $10.00 per share (maximum proceeds
     of $25,000,000).  In the Cash Offering,  which expired on May 31, 2000, the
     Trust sold 702,076  Common  Shares,  for total cash proceeds of $7,020,763.
     The Trust  contributed to the Operating  Partnership  the net cash proceeds
     ($5,467,858)  from  the  issuance  of  Common  Shares  in  exchange  for an
     equivalent number of units of limited partnership interest in the Operating
     Partnership ("Operating Partnership Units" or "Units").

     As of August 1, 2001, the Trust owned 825,528 Operating  Partnership Units,
     representing  approximately 21.6% 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.

     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
     sole director of Baron Advisors,  Inc., a Delaware  corporation that serves
     as the Managing Shareholder and a trustee of the Trust),  including certain
     of the Exchange  Partnerships  which  participated in the Exchange Offering
     and  which  are  now  managed  by the  Trust.  On  February  7,  2001,  the
     Independent  Trustees of the Trust and the Managing  Shareholder  agreed to
     terminate the Trust Management Agreement effective December 31, 2000.

     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 controlled by Mr.
     McGrath. The Alexandria Partnership owns Alexandria Apartments,  a 168-unit
     residential   apartment   property  (the   "Alexandria   Property")   under
     construction in Alexandria,  Kentucky. As of August 1, 2001, 112 of the 168
     residential  units  (approximately  67%) had been completed and were in the
     rent-up stage. Of the completed units, 93 units have been rented.

     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 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


                                       4
<PAGE>

     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 Trust determined
     to write off the Trust's investment in the Alexandria  Property,  resulting
     in a charge to operations in 2000 of approximately $355,000.

     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 are controlled
     by Mr. McGrath. One of the residential  properties has been sold to a third
     party with the Trust's consent. The remaining 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. The Trust has a right of first negotiation to purchase the
     property from the development  company 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 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 August 1, 2001,  approximately $6,478,000 of
     the  construction  loan had  been  drawn  down.  The  interest  rate on the
     construction  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
     would require the Trust to buy out the bank's position on the entire amount
     of the construction 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


                                       5
<PAGE>

     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,  is
     currently being extended on a month-to-month  basis. The Borrower paid down
     the  outstanding  accrued  interest and a portion of the  principal  and is
     currently  seeking  a new  long-term  construction  facility  with  another
     institutional  lender to replace the KeyBank  first  mortgage loan (and the
     BankOne loan described below).

     In December 2000, BankOne acquired KeyBank's position in the Burgundy Hills
     first  mortgage  loan.  The  BankOne  loan is subject to the same terms and
     conditions as that of the original KeyBank loan. Earlier,  BankOne provided
     additional institutional financing in the principal amount of $1,576,000 to
     the  Borrower.  The loan is secured by a security  interest in  partnership
     interests  in the  Borrower.  Due to a default in payment of interest  due,
     BankOne has been  assigned  rental  payments and has taken over  day-to-day
     management of the  property.  This loan is expected to be paid off with the
     proposed new first mortgage financing referenced above.

     There  can be no  assurance  that  refinancing  of the  two  loans  will be
     available or will be  available  on  commercially  reasonable  terms,  that
     BankOne will not seek to enforce its right to accelerate the first mortgage
     loan and begin foreclosure  proceedings against the Burgundy Hills Property
     in respect of the first  mortgage loan or elect to require the Trust to buy
     out its  position on the entire  outstanding  amount of the first  mortgage
     loan,  or that BankOne will not seek to enforce its right under the loan to
     take over control of the Borrower.

     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  2,449,525  registered  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").  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 4 "Exchange  Offering" in
     the accompanying notes to the 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.


                                       6
<PAGE>


     Prior to the completion of the Exchange Offering, the Exchange Partnerships
     were  managed  by  corporate  general  partners  (the  "Corporate   General
     Partners"), which were controlled by Mr. McGrath.

     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 the Trust all of the equity
     stock in 18 of the 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  2
     "Liquidity and Profitability  Considerations  -Subsequent  Transactions" 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   currently  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 25 Exchange  Properties  in which the Operating
     Partnership  continues to own an  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, 2000 Compared to December
     31, 1999

     Due to the  completion  of the Exchange  Offering the balance sheet for the
     Operating  Partnership reflects large increases in assets,  liabilities and
     partners'  capital.  During the nine months ended September 30, 2000, total
     assets  increased to $44.6  million  while  liabilities  increased to $31.6
     million. As described above the Exchange


                                       7
<PAGE>

     Offering  increased  the  number  of  properties  in  which  the  Operating
     Partnership indirectly owns an equity and/or mortgage interest by adding 26
     Exchange  Properties.  The Operating  Partnership now has rental  apartment
     assets in excess of $36.2  million,  which are subject to $25.1  million in
     first mortgage debt.

     Partners'  capital  increased  to $13.0  million due to the issuance in the
     Exchange  Offering  of  2,449,525  Units  with an  exchange  value of $11.8
     million less a net loss of $1,186,791  for the nine months ended  September
     30, 2000.

     Operations  for the Nine Months Ended  September  30, 2000 Compared to Nine
     Months Ended September 30, 1999

     Revenues,  real estate expenses and  administrative  expenses all increased
     substantially for the nine months ended September 30, 2000 in comparison to
     the nine  months  ended  September  30, 1999 due to the  completion  of the
     Exchange  Offering  described  above and the  addition  of the 26  Exchange
     Properties and their related operating costs.

     Liquidity and Capital Resources

     Net cash used in operating  activities for the nine months ended  September
     30,  2000 was  $430,564  compared to  $660,372  for the nine  months  ended
     September 30, 1999.  The decrease was mainly due to increased  depreciation
     expense,  amortization  expense and provision  for  officer's  compensation
     offset  by an  increase  in  the  net  loss  and  equity  in  net  loss  of
     unconsolidated  partnership  for the nine months ended  September  30, 2000
     compared to the nine months ended September 30, 1999. Increases were mainly
     due to the completion of the Exchange Offering in April 2000.

     Net cash used by investing  activities for the nine months ended  September
     30, 2000 was $302,043 compared to net cash used in investing  activities of
     $932,583 for the nine months ended September 30, 1999. The decrease in cash
     used  for  2000  was  due  primarily  to  a  decrease  in   investments  in
     partnerships.

     Net  cash  provided  by  financing  activities  for the nine  months  ended
     September 30, 2000 was $896,935  compared to $1,546,417 for the nine months
     ended  September  30,  1999.  The  decrease in cash  provided  was due to a
     decrease in partners' capital contributions with the expiration of the Cash
     Offering in May 2000.

     The  Operating  Partnership  paid  $1,045,039  towards  mortgage  and other
     interest  during the nine  months  ended  September  30,  2000  compared to
     $230,534 in the nine months ended September 30, 1999 due to the addition of
     the Exchange Properties and increase in mortgage debt.

     Since inception, the Trust has contributed to the Operating Partnership net
     cash proceeds of $5,467,858  from the issuance of Common Shares in the Cash
     Offering in  exchange  for a number of Units in the  Operating  Partnership
     equivalent to the number


                                       8
<PAGE>


     of Common Shares sold in the Cash Offering.  Approximately $230,000 of such
     amount was  contributed  in the first nine months of 2000. The Trust is the
     sole  general  partner of the  Operating  Partnership  and, as of August 1,
     2001, owned 825,528 Operating Partnership Units, representing approximately
     21.6% of the then outstanding Units.

     Because of the net loss of $2,641,250 incurred by the Operating Partnership
     in the period ended December 31, 1999, and the $975,305 in accounts payable
     owed to  professionals  in  connection  with the  Exchange  Offering  as of
     December  31,  1999,  and its limited  liquid  resources as of December 31,
     1999, the Operating  Partnership's  independent  auditors  qualified  their
     auditors' report to reflect a going concern contingency.

     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. The Trust is negotiating
     with the firms which are owed accounts  payable in order to extend  payment
     terms and, where possible,  reduce the amounts due.  Distributions  will be
     made  by the  Operating  Partnership  as  cash  flow  allows,  but  will be
     negatively impacted until the open accounts payable are reduced. Management
     does not anticipate that the Operating  Partnership will make distributions
     to its unit holders for the next several quarters.

     The Trust and the  Operating  Partnership  intend to use  securities of the
     Trust and the Operating  Partnership  (including  Common Shares and Units),
     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 Trust and the  Operating  Partnership  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 Trust and the  Operating  Partnership  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


                                       9
<PAGE>


     residential  apartment  units have increased at or above the inflation rate
     for the last two years and are  expected  to continue  to  experience  such
     increases for the next 18 months based on market  statistics made available
     to  management of the Operating  Partnership  in terms of occupancy  rates,
     supply,  demographic  factors,  job growth rates and recent rental  trends.
     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
     and are  expected  to  increase  at the rate of  inflation  for the next 18
     months.  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  that will or are reasonably  likely to affect the short-term
     and long-term  liquidity and current and future  prospects of the Trust and
     the Operating  Partnership  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 Trust and the Operating
     Partnership as a whole,  some of the reasonably  anticipated  effects might
     include downward pressure on rental rates and occupancy levels.

     Generally,  there are no seasonal aspects of the operations of the Trust or
     the  Operating  Partnership  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 Trust and
     the  Operating   Partnership   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 ongoing operations of the Operating Partnership,  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  Trust 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 its Common Shares on a recognized  securities
     exchange.  Additional  size would also give the Operating  Partnership  the
     operating margin necessary to support its valuable  management team that is
     believed necessary for its long-term growth.


                                       10
<PAGE>


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

     During  the  years  ended   December  31,  2000  and  1999,  the  Operating
     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 consolidated  condensed  financial  statements
     for the first six months  ended June 30,  2001  included  in the  Operating
     Partnership's  quarterly  report on Form 10-QSB for the three-month  period
     ended  June 30,  2001,  the  Operating  Partnership  generated  Funds  From
     Operations (Funds from Operations is a measure of profitability in the REIT
     industry  measuring net income less depreciation,  amortization,  and other
     non-operating  expenses  and/or income) of  approximately  $407,000  versus
     negative Funds From Operations of approximately $417,000 for the six months
     ended June 30, 2000.

     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.

     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  Operating
          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.  The  Operating
          Partnership  has also started a program of enhancing the aesthetics of
          the  properties,  which  is  allowing  the  Operating  Partnership  to
          increase rents while still improving occupancy.

     o    The Operating  Partnership  has  identified  certain of its properties
          which are  performing  well and have loans which are small relative to
          the value of the property,  given their excellent performance.  During
          the first quarter of 2001, the Operating Partnership  refinanced three
          of its  properties,  generating  $1,632,000  of cash for the Operating
          Partnership. The cash was used to reduce amounts owed by the Operating
          Partnership to Exchange  Offering  professionals for their services in
          connection  with the  offering,  advance  funds for a second  round of
          refinancings,  and  establish  an escrow  account for  expected  major
          repairs to the Operating  Partnership's  Riverwalk property. All three
          refinanced properties were refinanced at interest rates lower than the
          interest  rate on their old loan.  Subsequent  to June 30,  2001,  the
          Operating


                                       11
<PAGE>


          Partnership refinanced three additional properties,  which resulted in
          cash proceeds of approximately $1,408,000.

     o    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  Operating  Partnership  determined  to  sell  the
          property based on its lack of performance and its need for substantial
          and  frequent  cash  infusions.   The  sale  price  was  approximately
          $3,900,000 and resulted in a loss of $210,854.  Additional  properties
          are being evaluated for potential disposition.

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

     As a result of the  re-financing  of the  three  properties  in the  second
     quarter  of  2001  as  discussed  above,  the  Operating   Partnership  had
     approximately $265,000 in available cash.

     Management believes that the actions presently being taken by the Operating
     Partnership,  including  the  cash  realized  upon  refinancing  the  three
     additional  properties as described above and its cash on hand, provide the
     opportunity  for  the  Operating   Partnership  to  improve  liquidity  and
     profitability.


                                       12
<PAGE>


                           PART II - OTHER INFORMATION


Item 1.   Legal Proceedings

     The Operating Partnership is a claimant in the Georgia Pacific class action
     lawsuit.  It is also 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).

     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)).


                                       13
<PAGE>


     (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.


August 27, 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


                                       14