<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q


 (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, 1998

                                       OR

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

    For the transition period from                 to 
                                   ---------------    -------------

                         Commission file number 0-23917


                          Chastain Capital Corporation
       (Exact name of registrant as specified in its governing instrument)

            Georgia                                  58-2354416
(State or Other Jurisdiction of          (I.R.S. Employer Identification No.)
 Incorporation or Organization)             

           3424 Peachtree Road N.E., Suite 800, Atlanta, Georgia 30326
       (Address of principal executive office)                  (Zip Code)

       (Registrant's telephone number, including area code) (404) 848-8850



         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes  X   No
                                              ---     ---

             Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 7,346,778 shares of
common stock outstanding as of November 12, 1998





















<PAGE>   2




                          CHASTAIN CAPITAL CORPORATION

                                    CONTENTS






PART  I - FINANCIAL INFORMATION

            Item 1 - Financial Statements:

                       Consolidated Balance Sheets as of September 30, 1998
                        (Unaudited) and December 31, 1997 (Unaudited)
                       Consolidated Statements of Operations for the three
                        and nine months ended September 30, 1998 (Unaudited)
                       Consolidated Statement of Changes in Shareholders' Equity
                        for the nine months ended September 30, 1998 (Unaudited)
                       Consolidated Statement of Cash Flows for the nine
                        months ended September 30, 1998 (Unaudited)
                       Notes to Consolidated Financial Statements

            Item 2 - Management's Discussion and Analysis of Financial Condition
                             and Results of Operations

            Item 3 - Quantitative and Qualitative Disclosure about Market Risk

PART II - OTHER INFORMATION

            Items 1 through 6
            Signatures
















                                       2
<PAGE>   3



PART I.         FINANCIAL INFORMATION

Item 1.   Financial Statements

                          CHASTAIN CAPITAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                       SEPTEMBER 30, 1998 (Unaudited) AND
                          DECEMBER 31, 1997 (Unaudited)

<TABLE>
<CAPTION>
                                                                            September 30,       December 31,
                                                                                 1998               1997
                                                                            -------------       ------------
<S>                                                                         <C>                 <C>   
ASSETS
Commercial mortgage-backed securities (CMBS)
   available-for-sale, at market value                                      $  96,235,624
Mezzanine loan investments                                                     41,338,164
Mortgage loan investments                                                      28,056,755
Real estate investment, net                                                     7,547,625
Cash and short-term investments                                                 5,115,540           $1,000
Escrow cash                                                                     2,055,404
Accrued interest receivable                                                     1,740,718
Other assets                                                                      662,705
                                                                            -------------           ------

     Total assets                                                           $ 182,752,535           $1,000
                                                                            =============           ======

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:
Short-term borrowings                                                       $  78,930,614
Treasury locks payable                                                         15,671,000
Accrued loan commitments losses                                                 8,406,695
Dividends payable                                                               2,446,969
Accrued management fees                                                           437,598
Accrued interest expense                                                          356,283
Accrued expenses and other liabilities                                          5,878,547
                                                                            -------------
   Total liabilities                                                          112,127,706
                                                                            -------------

SHAREHOLDERS' EQUITY:
Preferred stock, $0.01 par value. Authorized 25,000,000 shares, no
   shares issued
Common stock, $.01 par value.  Authorized 200,000,000 shares,
   7,646,778 and 100 shares issued and 7,646,778 and 100
   outstanding at September 30, 1998 and December 31, 1997,
   respectively                                                                    76,468           $    1
Additional paid-in capital                                                    111,408,730              999
Change in net unrealized gain on securities available-for-sale                    461,265
Distributions in excess of earnings                                           (41,321,634)
                                                                            -------------           ------

   Total shareholders' equity                                                  70,624,829            1,000
                                                                            -------------           ------

     Total liabilities and shareholders' equity                             $ 182,752,535           $1,000
                                                                            =============           ======
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.



                                       3
<PAGE>   4




                          CHASTAIN CAPITAL CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
             FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                   For the Three           For the Nine
                                                                   Months Ended            Months Ended
                                                                   September 30,           September 30,
                                                                        1998                   1998
                                                                   -------------           -------------
<S>                                                                <C>                     <C>         
REVENUE:
Interest income on CMBS                                             $  2,152,698           $  2,469,793
Interest income on mezzanine loan investments                            878,941                890,543
Interest income on mortgage loan investments                             309,622                309,622
Rental income                                                            161,650                169,629
Other income                                                               4,925                  4,925
Other interest income                                                    113,654              1,122,968
                                                                    ------------           ------------

   Total revenue                                                       3,621,490              4,967,480
                                                                    ------------           ------------

OPERATING EXPENSES:
Losses on forward interest rate lock agreements                       15,729,025             15,729,025
Impairment loss on mezzanine and mortgage loan commitments             8,406,695              8,406,695
Impairment loss on CMBS                                                7,219,289              7,219,289
Impairment loss on mezzanine loan investments                          6,800,075              6,800,075
Impairment loss on mortgage loan investments                           1,433,225              1,433,225
Impairment loss on real estate investments                               189,708                189,708
Interest expense                                                         788,658                788,658
Forfeited deposit                                                        500,000                500,000
Management fees                                                          437,572                658,558
General and administrative expense                                       210,292                389,490
Real estate operating expenses                                            54,353                 56,719
Depreciation and amortization                                             21,629                 26,942
Stock compensation to Manager                                                 --                877,917
                                                                    ------------           ------------

   Total operating expenses                                           41,790,521             43,076,301
                                                                    ------------           ------------

LOSS BEFORE GAIN ON SALE                                             (38,169,031)           (38,108,821)

GAIN ON SALE OF CMBS                                                          --                 42,426
                                                                    ------------           ------------

NET LOSS                                                            $(38,169,031)          $(38,066,395)
                                                                    ============           ============

NET LOSS PER COMMON SHARE:
Basic and Diluted                                                   $      (4.46)          $      (4.36)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and Diluted                                                      8,553,648              8,735,178
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.







                                       4
<PAGE>   5




                          CHASTAIN CAPITAL CORPORATION
            CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                             Accumulated  
                    Number of                 Additional        Other      Distributions                      Total
                      Shares       Common      Paid-in      Comprehensive   in Excess of   Comprehensive    Shareholders'
                   Outstanding     Stock       Capital         Income        Earnings       Income/(Loss)      Equity
                   -----------     -------    ----------     -----------   -------------   --------------    -----------
<S>                <C>            <C>        <C>            <C>           <C>             <C>              <C>

Balance at                                                                                                         
beginning of 
period                      100   $      1   $        999                                                  $       1,000

Net proceeds 
from initial 
public offering 
on April
23, 1998              8,977,678     89,777    123,940,142                                                   124,029,919

Shares issued to                                                                                       
Board of  
Directors                 3,000         30         44,970                                                        45,000

Repurchase and 
retirement of 
common stock         (1,334,000)   (13,340)   (13,466,154)                                                 (13,479,494)

Change in net                                                                                                        
unrealized gain 
on securities                                                                                             
available-for-sale                                           $ 461,265                     $    461,265        461,265

Value of stock                                                                                                       
options issued                                   888,773                                                       888,773

Net loss                                                                  $(38,066,395)     (38,066,395)   (38,066,395)

Dividends paid or                                                                                                    
declared ($0.41                                         
per share)                                                                  (3,255,239)                     (3,255,239)
                   ---------------------------------------------------------------------------------------------------

Balance at end of                                                                                                    
period                                                                                                               

                      7,646,778   $ 76,468   $111,408,730    $ 461,265    $(41,321,634)    $(37,605,130)  $ 70,624,829
                   ===================================================================================================
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.




                                       5
<PAGE>   6


                          CHASTAIN CAPITAL CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                         For the Nine
                                                                         Months Ended
                                                                        September 30,
                                                                             1998
<S>                                                                     <C>           
CASH FLOWS FROM OPERATING ACTIVITIES:
------------------------------------
 Net loss                                                               $ (38,066,395)
 Adjustments to reconcile net loss to net cash provided by
   operating activities:
   Impairment loss on investments                                          24,048,992
   Losses on forward interest rate lock agreements                         15,729,025
   Gain on sale of CMBS                                                       (42,426)
   Depreciation and amortization                                               26,942
   Amortization of discount/premium on CMBS available-for-sale               (202,327)
   Amortization of premium on mezzanine loan investment                        71,054
   Amortization of deferred financing costs                                    44,838
   Stock options issued                                                       888,773
   Shares issued for Directors fees                                            45,000
   Net (increase) decrease in assets:
      Accrued interest receivable                                          (1,740,718)
      Other assets                                                           (687,619)
   Net increase (decrease) in liabilities:
      Accrued interest expense                                                356,283
      Accrued management fees                                                 437,598
      Accrued expenses and other liabilities                                2,150,708
                                                                        -------------

         Net cash provided by operating activities                          3,059,728
                                                                        -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------
Purchases of CMBS available-for-sale                                     (106,231,165)
Proceeds from sale of CMBS available-for-sale                               3,477,500
Purchases of mezzanine loan investments                                   (48,227,200)
Purchases of mortgage loan investments                                    (29,525,000)
Purchase of real estate investments                                        (6,854,807)
Capital additions to real estate                                              (18,674)
                                                                        -------------

         Net cash used by investing activities                           (187,379,346)
                                                                        -------------
</TABLE>












                                       6
<PAGE>   7







                          CHASTAIN CAPITAL CORPORATION
               CONSOLIDATED STATEMENT OF CASH FLOWS - (CONTINUED)
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
                                   (Unaudited)


<TABLE>
<S>                                                       <C>   
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on investment borrowings                              57,697
Proceeds from initial public offering                       124,812,244
Deferred financing costs incurred                              (117,633)
Proceeds from sale of other invested assets                      39,000
Proceeds from warehouse loan facilities                      99,541,130
Repayments of warehouse loan facilities                     (20,610,516)
Purchase and retirement of common stock                     (13,479,494)
Dividends paid                                                 (808,270)
                                                          -------------

      Net cash provided by financing activities             189,434,158
                                                          -------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                     5,114,540
Cash and cash equivalents at beginning of period                  1,000
                                                          -------------

Cash and cash equivalents at end of period                $   5,115,540
                                                          =============

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
   Accrued public offering costs                          $     782,325
                                                          =============
   Accrued tenant liabilities                             $     890,794
                                                          =============
   Common stock dividends declared but not paid           $   2,446,969
                                                          =============
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.














                                       7
<PAGE>   8


                          CHASTAIN CAPITAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998
                                   (Unaudited)

NOTE 1-ORGANIZATION

Chastain Capital Corporation (the "Company") was incorporated in Georgia on
December 16, 1997 and was initially capitalized on such date through the sale of
100 shares of common stock, par value $.01 per share ("Common Stock") for an
aggregate purchase price of $1,000. On April 23, 1998, the Company consummated
an initial public offering ("IPO") of 7,380,000 shares of its Common Stock, with
gross proceeds of $110,700,000 and net proceeds to the Company of $102,951,000.
Additional public offering costs of $1,208,689 were incurred in connection with
the IPO.

The Company also issued, pursuant to two separate private placements, an
aggregate of 897,678 shares of Common Stock to Lend Lease Investments Holdings,
Inc. ("LLIH", formerly ERE Yarmouth Holdings, Inc.), an indirect wholly-owned
subsidiary of Lend Lease Corporation Limited ("Lend Lease"), and 700,000 shares
of Common Stock to FBR Asset Investment Corporation, an affiliate of Friedman,
Billings, Ramsey & Co., Inc., each of which closed concurrently with the closing
of the IPO, at $13.95 per share, with total proceeds to the Company of
$22,287,608.

Pursuant to the Company's Directors Stock Plan, each of the Company's three
independent directors received, as of the consummation of the IPO, $15,000
worth of Common Stock equal to 1,000 shares at the IPO price of $15.00 per share
as part of their annual director's fee.

The Company was organized to originate commercial and multifamily mortgage loans
("Mortgage Loans") for the purpose of issuing collateralized mortgage
obligations ("CMOs") collateralized by its Mortgage Loans and retaining the
Mortgage Loans subject to the CMO debt. The Company also was organized to
acquire subordinated interests in commercial mortgage-backed securities
("CMBS"), originate and acquire investments in real property that are
subordinated to first lien Mortgage Loans ("Mezzanine Investments") and acquire
real property and other real estate related assets.

On October 23, 1998 the Company announced that due to turmoil in the credit
markets, it was necessary to obtain temporary waivers from Morgan Guaranty Trust
and Merrill Lynch to avoid being in default of tangible net worth covenants
under the Company's credit facilities. The Board of Directors decided to
discontinue new investment activity and concluded that the Company needed to be
restructured. On November 13, 1998 the Company announced that it has reached an
agreement with Morgan Guaranty Trust Company of New York and Merrill Lynch
Mortgage Capital Inc. to restructure its credit facilities and to dispose of
certain assets to reduce the size and stabilize the volatility of the overall
portfolio. Proceeds from the asset sales will be used to reduce outstanding
indebtedness on both credit facilities. Through the asset sales and indebtedness
reduction, the Company believes it will satisfy its immediate liquidity needs.
The remaining portfolio will consist primarily of CMBS and mezzanine
investments. The Company is evaluating the strategic alternatives available to
maximize shareholder value and meet debt maturities.

In connection with the credit facility amendments, LLIH agreed to provide the
Company with up to $40 million of unsecured subordinated debt. An initial
advance of $17 million was drawn on November 13, 1998 and the remaining funds
can be drawn from time to time by the Company through maturity at March 31,
1999. The advances incur interest at the rate of 14% per annum through January
31, 1999 and 16% thereafter. The advances are prepayable at any time, subject to
certain notice requirements. The terms of the subordinated debt were reviewed
and approved by a special committee of the Board of Directors consisting of
independent directors not affiliated with Lend Lease. The special committee
obtained the advice of independent financial advisors and legal counsel in
negotiating the terms of the loan.

The amended credit facilities and new subordinated debt agreement provide the
Company with the necessary liquidity in the short term to fund its commitments,
meet margin calls and hold investments. The Merrill Lynch amendment requires the
$19 million in borrowings be repaid on or before January 31, 1999. The Morgan
Guaranty Trust amendment and the LLIH subordinated debt agreement both mature on
March 31, 1999. The company is evaluating the strategic alternatives available
to maximize shareholder value and meet these maturities, including additional
asset sales, refinancing or further restructuring of its capital base.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements of the Company included herein have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, the accompanying unaudited
consolidated financial statements reflect all adjustments, which are of a normal
recurring nature, to present fairly the Company's financial position, results of
operations, changes in shareholders' equity and cash flows at the dates and for
the periods presented. Interim results of operations are not necessarily
indicative of results to be expected for the fiscal year.



                                       8
<PAGE>   9



                          CHASTAIN CAPITAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998
                                   (Unaudited)


Principles of Consolidation

The consolidated financial statements of the Company include the accounts of the
Company and its wholly owned subsidiaries. All material intercompany accounts
have been eliminated in consolidation.

Cash and Short-term Investments

All highly liquid investments with original maturities of three months or less
are considered to be short-term investments.

Income Recognition

Income and expenses are recorded on the accrual basis of accounting.

Comprehensive Income

Comprehensive income is defined as the change in equity of a business during a
period from transactions and other events and circumstances, excluding those
resulting from investments by and distributions to owners. Comprehensive income
includes net income and changes in unrealized gains and losses on securities
classified as available-for-sale.

CMBS

The Company classifies its CMBS as available-for-sale. Available-for-sale
securities are reported at market value with net unrealized gains and losses
reported as a separate component of shareholders' equity. The Company recognizes
income from CMBS under the effective interest method, using the anticipated
yield over the projected life of the investment. Changes in anticipated yields
are generally due to revisions in estimates of future credit losses, actual
losses incurred and actual prepayments. Changes in anticipated yield resulting
from prepayments are recognized over the remaining life of the investment with
recognition of a cumulative catch-up at the date of change from the original
investment date. The Company recognizes impairment on its CMBS whenever it
determines that the current estimate of expected future credit losses exceeds
credit losses as originally projected or when the Company determines that the
decline in the market value of its CMBS below amortized cost is other than
temporary. Impairment losses are determined by comparing the market value of a
CMBS to its current carrying amount, the difference being recognized as a loss.
If future credit loss estimates are increased and the market value of the
related CMBS is in excess of its carrying amount, the yield is adjusted
accordingly on a prospective basis. Reduced estimates of credit losses are
recognized as an adjustment to the estimated yield over the remaining life of
the CMBS. The Company uses specific identification in determining realized
gains/losses on its CMBS investments.

Mezzanine Loan Investments

The Company purchases and originates certain mezzanine loans to be held as
long-term investments. Loans held for investment are recorded at cost at the
date of purchase. Premiums and discounts related to these loans are amortized
over their estimated lives using the effective interest method. Any origination
fee income, application fee income and costs associated with originating or
purchasing mezzanine investments have been deferred and the net amount is added
to the basis of the loans on the balance sheet. The Company recognizes
impairment on the loans when it is probable that the Company will not be able to
collect all amounts due according to the contractual terms of the loan
agreement, or when the fair value of the loans is below amortized cost and the
Company determines that it may not be able to hold the loans until amortized
cost is recovered. It is currently uncertain whether the Company will be able to
hold its mezzanine investments until maturity. At September 30, 1998, mezzanine
loans are recorded at lower of cost or market value. The Company measures
impairment based on the present value of expected future cash flows discounted
at the loan's effective interest rate or the estimated market value of the loan.






                                       9
<PAGE>   10


                          CHASTAIN CAPITAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998
                                   (Unaudited)


Mortgage Loan Investments

The Company originated and has outstanding commitments for certain mortgage
loans that were to be held as long-term investments. Due to the turmoil in the
credit markets, and the Company's revised credit facility terms, the Company has
changed its strategy and is now holding its mortgage loans and commitments for
resale. Loans held for resale are accounted for at the lower of cost or market
value. Market value is determined based upon the Company's estimate of market
value.

Interest Rate Protection Agreements

The Company acquired interest rate protection agreements, in the form of forward
Treasury locks, to reduce its exposure to interest rate risk. At the time the
Treasury locks were acquired it was anticipated that they would hedge the
Company's exposure to future financing costs and thus qualify for hedge
accounting. Under hedge accounting, any gain or loss on the Treasury lock
settlements would be amortized over the term of the anticipated financing
agreement. To qualify for hedge accounting, these interest rate protection
agreement must meet certain criteria including: (1) the debt to be hedged
exposes the Company to interest rate risk, (2) the interest rate protection
agreement reduces the Company's exposure to interest rate risk, and (3) it is
probable that the anticipated financing will occur. In the event these interest
rate protection agreements do not qualify as hedges, such agreements are
reclassified to be investments accounted for at fair value, with any gain or
loss included as a component of income.

As a result of the recent turmoil in the credit markets the Company has
determined that its ability to obtain long-term, fixed-rate financing is not
probable. The turmoil also created uncertainty as to the Company's ability to
hold the investments and thus the Treasury locks no longer qualify for hedge
accounting. On October 23, 1998 the Company terminated all of its Treasury locks
and incurred a realized loss of $13.4 million, which will result in a gain of
$2.3 million being recognized in the fourth quarter of 1998.

On July 13, 1998 the Company entered into a LIBOR collar in the notional amount
of $89 million to mature on July 1, 1999 in order to hedge against rising short
term borrowing costs. The collar contract effectively locks in the Company's
LIBOR base rate between a floor of 5.51% and a ceiling of 5.80% during the 
term.

Income Taxes

The Company plans to make an election to be taxed as a real estate investment
trust ("REIT") under Sections 856-860 of the Internal Revenue Code of 1986, as
amended. As a REIT, the Company must distribute to its shareholders at least 95%
of its taxable income and the Company is not subject to federal income tax to
the extent income is distributed.

Earnings Per Share

Basic earnings per share is computed on the basis of the weighted average number
of shares outstanding for the period. Diluted earnings per share is computed on
the basis of the weighted average number of shares and dilutive common
equivalent shares outstanding for the period. The nine month computation assumes
the period began on April 23, 1998, when the Company commenced operations. For
purposes of diluted earnings per share, the computation of the weighted average
number of shares outstanding includes the impact of the assumed exercise of the
outstanding dilutive options to purchase Common Stock and assumes that the
proceeds from such issuance are used to repurchase shares of Common Stock at the
average market price of the Company's Common Stock for the period. For the three
and nine months ending September 30, 1998, all outstanding options to purchase
Common Stock of $1,246,253 were anti-dilutive.





                                       10
<PAGE>   11


                          CHASTAIN CAPITAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998
                                   (Unaudited)

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles ("GAAP") requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income, expenses and unrealized gains
(losses) during the reporting period. Actual results could differ from those
estimates.

New Accounting Pronouncements

In June 1997, FASB issued SFAS 131 "Disclosures about Segments of an Enterprise
and Related Information" ("FAS 131"). FAS 131 establishes standards for the way
that public business enterprises to report information about operating segments
and related disclosures about products and services, geographical areas and
major customers. FAS 131 is effective for the Company's year ending December 31,
1998.

In June 1998, FASB issued SFAS 133 "Accounting for Derivative Instruments and
for Hedging Activities" ("FAS 133"). FAS 133 establishes accounting and
reporting standards for derivative investments and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. If certain conditions are met, a derivative may be specifically
designated as a hedge. The accounting for changes in the fair value of a
derivative depends on the intended use of the derivative and the resulting
designation. FAS 133 is effective for the Company beginning January 1, 2000. The
Company is evaluating its eventual impact on its financial statements.

















                                       11
<PAGE>   12


                          CHASTAIN CAPITAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998
                                   (Unaudited)

NOTE 3 - MANAGEMENT FEES

The Company entered into a Management Agreement (the "Management Agreement")
with ERE Yarmouth, Inc., an indirect wholly-owned subsidiary of Lend Lease
Corporation Limited, under which ERE Yarmouth, Inc. advises the Company on
various facets of its business and manages its day-to-day operations, subject to
the supervision of the Company's Board of Directors. On July 13, 1998, the name
of ERE Yarmouth, Inc. was changed to Lend Lease Real Estate Investments, Inc.
("Lend Lease" or the "Manager"). Lend Lease continues as the advisor to the
Company.

Pursuant to the Management Agreement, the Company will pay the Manager a
quarterly base management fee equal to the following:

<TABLE>
     <S>                                        <C>
     For the first four fiscal quarters
          commencing with the fiscal
          quarter ended June 30, 1998.....      1.00% per annum of the Average
                                                Invested Assets (1) of the Company

     During each fiscal quarter
          thereafter......................      0.85% per annum of the Average
                                                Invested Assets up to $1 billion

                                                0.75% per annum of the Average
                                                Invested Assets from $1 billion
                                                to $1.25 billion

                                                0.50% per annum of the Average
                                                Invested Assets in excess of
                                                $1.25 billion
</TABLE>

The Management Agreement also provides for a quarterly incentive management fee
equal to the product of (A) 25% of the dollar amount by which (1) (a) Funds From
Operations (2) (before the incentive fee) of the Company for the applicable
quarter per weighted average number of shares of Common Stock outstanding plus
(b) gains (or minus losses) from debt restructuring or sales of assets not
included in Funds From Operations of the Company for such quarter per weighted
average number of shares of Common Stock outstanding, exceed (2) an amount equal
to (a) the weighted average of the price per share at initial offering and the
prices per share at any secondary offerings by the Company multiplied by (b) 25%
of the sum of the Ten-Year U.S. Treasury Rate plus four percent, and (B) the
weighted average number of shares of Common Stock outstanding.

In addition, the Management Agreement provides for a termination fee equal to
the sum of the base management fee and incentive management fee, if any, earned
during the immediately preceding four fiscal quarters.














------------
(1) The term "Average Invested Assets" for any period means the average of the
aggregate book value of the assets of the Company, including a proportionate
amount of the assets of all of its direct and indirect subsidiaries, before
reserves for depreciation or bad debts or other similar noncash reserves less
(i) uninvested cash balances and (ii) the book value of the Company's CMO
liabilities, computed by dividing (a) the sum of such values for each of the
three months during such quarter (based on the book value of such assets as of
the last day of each month) by (b) three.

(2) The term "Funds From Operations" as defined by the National Association of
Real Estate Investment Trusts, Inc. means net income (computed in accordance
with GAAP) excluding gains (or losses) from debt restructuring, sales of
property and any unusual or non-recurring transactions, plus depreciation and
amortization on real estate assets, and after deduction of preferred stock
dividends, if any, and similar adjustments for unconsolidated partnerships and
joint ventures. Funds From Operations does not represent cash generated from
operating activities in accordance with GAAP and should not be considered as an
alternative to net income as an indication of the Company's performance or to
cash flows as a measure of liquidity or ability to make distributions.



                                       12
<PAGE>   13


                          CHASTAIN CAPITAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998
                                   (Unaudited)

NOTE 4 - INVESTMENT SECURITIES AVAILABLE-FOR-SALE

The amortized cost and estimated fair value of investments available-for-sale at
September 30, 1998 are summarized below. The par value of investment securities
available-for-sale was $123,077,975 at September 30, 1998.

<TABLE>
<CAPTION>
                                      Gross                      Gross       Estimated
                       Amortized    Realized  Amortized Cost   Unrealized       Fair
  Security Rating         Cost        Loss       Adjusted         Gain         Value
-------------------- ------------- ---------- --------------   ----------   -----------
<S>                  <C>           <C>         <C>              <C>         <C>        
CMBS:
     BBB-            $ 24,443,465              $24,443,465      $461,265    $24,904,730
     BB+               15,825,389  $  701,489   15,123,900                   15,123,900
     BB                20,630,506     987,768   19,642,738                   19,642,738
     BB-                4,351,742     517,203    3,834,539                    3,834,539
     B                 32,170,042   3,665,355   28,504,687                   28,504,687
     B-                 2,787,829     482,000    2,305,829                    2,305,829
     Unrated            2,784,675     865,474    1,919,201                    1,919,201
                     ------------  ----------  -----------      --------    -----------

 Total               $102,993,648  $7,219,289  $95,774,359      $461,265    $96,235,624
                     ============  ==========  ===========      ========    ===========
</TABLE>

The fair value of the CMBS investments is based on either (i) the price obtained
from the investment banking institutions, which sold the CMBS to the Company, or
(ii) an average of at least three quotes received on similarly structured and
rated CMBS. The use of different market assumptions, valuation methodologies,
changing interest rates, widening interest rate spreads and the timing and
magnitude of credit losses may have a material effect on the estimates of fair
value. The fair value estimates presented herein are based on pertinent
information available as of September 30, 1998.

The CMBS tranches owned by the Company provide credit support to the more senior
tranches of the related commercial securitization. Cash flow from the underlying
mortgages is generally allocated first to the senior tranches, with the most
senior tranches having a priority right to cash flow. Then, any remaining cash
flow is generally allocated among the other tranches based on their seniority.
To the extent there are defaults and unrecoverable losses on the underlying
mortgages, resulting in reduced cash flows, the subordinate tranche will bear
this loss first. To the extent there are losses in excess of the most
subordinate tranches stated right to principal and interest, the remaining
tranches will bear such losses in order of their relative subordination.

At September 30, 1998, the amortized cost of the Company's investments in CMBS
exceeded market value by $6,758,024. Due to uncertainty of the Company's
ability to hold its CMBS investments until the cost of the CMBS is recovered,
the Company determined that the decline in the fair value of its CMBS below
amortized cost at September 30, 1998 was other than temporary. Accordingly, the
Company wrote down its investment in CMBS to fair value at September 30, 1998
and recognized an impairment loss of $7,219,289. The Company's ability to hold
its CMBS has been negatively affected by the recent turmoil in the financial
markets and its effect on the value of CMBS securities along with the
restructuring of the Company's debt agreements (see Note 8). Subsequent to
September 30, 1998, the Company sold certain of its investment in BBB- CMBS
securities for $13,826,912 and recognized an additional loss of approximately
$1,555,980. Also, subsequent to September 30, 1998 and through November 13,
1998, the fair value of the Company's remaining CMBS securities has
declined an additional $14,111,259.










                                       13
<PAGE>   14
                          CHASTAIN CAPITAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998
                                   (Unaudited)


NOTE 5 - MEZZANINE LOAN INVESTMENTS

As of September 30, 1998, the Company's investment in mezzanine loans consisted
of the following:

<TABLE>
<CAPTION>
                                                                                                        Estimated
   Underlying     Interest         Face      Principal   Unamortized      Realized       Carrying        Fair
    Security        Rate          Value      Payments      Premium          Loss          Value          Value
    --------     ----------    -----------   ---------  -------------    ----------    ------------    ---------
<S>               <C>           <C>            <C>       <C>              <C>           <C>            <C>        
Commercial real estate:
Office                9.20%     $21,000,000                $3,708,946     $4,260,059     $20,448,887   $20,448,887
Hotel                 9.55%      19,647,200                                2,052,710      17,594,490    17,594,490
Multi-family         12.00%       2,800,000     $13,183                      340,613       2,446,204     2,446,204
Other                11.82%       1,000,000       4,724                      146,693         848,583       848,583
                                -----------     -------    ---------      ----------     -----------   -----------

   Total                        $44,447,200     $17,907    $3,708,946     $6,800,075     $41,338,164   $41,338,164
                                ===========     =======   ===========     ==========     ===========   ===========
</TABLE>

At September 30, 1998, the amortized cost of the Company's investments in
mezzanine loans exceeded market value by $6,800,075. Due to the uncertainty of
the Company's ability to hold the mezzanine loans until the cost of the loans
could be recovered, the Company determined that the decline in the fair value of
the loans below amortized cost at September 30, 1998 was other than temporary.
Accordingly, the Company wrote down its investments in mezzanine loans to fair
value at September 30, 1998, and recognized an impairment loss of $6,800,075. In
addition, as of September 30, 1998 estimated losses on the Company's contractual
commitments to originate mezzanine loans in the amount $4,571,000 were $377,832.
The Company's ability to hold its mezzanine loans has been negatively affected
by the recent turmoil in the financial markets and its effect on the value of
the loans, along with the restructuring of its debt agreements (See Note 8).

The Company's $19,647,200 mezzanine loan investment includes foreign currency
transactions. The Company purchased the investment for 11.98 million in British
Sterling with an interest rate that floats over Sterling LIBOR ("Base Rate")
plus 4.00%. The exchange rate at the date of investment was 1.64. In order to
reduce the risk of foreign currency exchange rate fluctuations, the Company
entered into a foreign currency swap arrangement with Merrill Lynch Capital
Services, Inc. The swap agreement will provide the Company with an exchange rate
of 1.64 on the return of its principal regardless of exchange rate fluctuation.
The swap agreement also converts the Base Rate to US$ LIBOR minus 0.06%
regardless of movements in the Sterling LIBOR. The Company is subject to foreign
currency risk on the spread portion (4.00%) of the quarterly interest payments.

NOTE 6 - MORTGAGE LOAN INVESTMENTS

As of September 30, 1998, the Company's investment in mortgage loans consisted
of the following:

<TABLE>
<CAPTION>
                                                                                                           Estimated
                             Interest     Face            Principal       Realized        Carrying           Fair
    Underlying Security        Rate       Value           Payments          Loss            Value            Value
    -------------------      -------   -----------      -----------     -----------      ------------     ------------
<S>                          <C>       <C>              <C>             <C>              <C>              <C>        
Commercial real estate:
Office                         7.11%   $16,000,000      $   12,833      $   678,354      $15,308,813      $15,308,813
Retail                         7.00%     7,650,000                          509,827        7,140,173        7,140,173
Hotel                          7.16%     5,875,000          22,187          245,044        5,607,769        5,607,769
                                       -----------      ----------      -----------      -----------      -----------

   Total                               $29,525,000      $   35,020      $ 1,433,225      $28,056,755      $28,056,755
                                       ===========      ==========      ===========      ===========      ===========
</TABLE>

At September 30, 1998, the amortized cost of the Company's investments in
mortgage loans exceeded market value by $1,433,225. In addition, as of September
30, 1998 estimated losses on the Company's contractual commitments to originate
mortgage loans in the amount of $119,900,000 were $8,028,864. Due to the
uncertainty of the Company's ability to hold the mortgage loans until the cost
of the loans are recovered, the Company has changed its strategy and is now
holding its mortgage loans and commitments for resale. Loans held for resale are
accounted for at the lower of cost or market value. Market value is determined
based upon the Company's estimate of market value. The Company recognized
impairment losses on its mortgage loans and commitments of $1,433,225 and
$8,028,864, respectively as of September 30, 1998.

Of the $119,900,000 of commitments outstanding at September 30, 1998,
$15,885,000 have been closed and $57,155,000 have been terminated through
negotiations with borrowers through November 13, 1998. The Company incurred
expenses of approximately $1.1 million associated with the termination of these
contractual commitments. These expenses were provided for in the impairment loss
of $8,406,695 recognized at September 30, 1998. Additionally, subsequent to
September 30, 1998 and through November 13, 1998 the Company estimates that it
has incurred additional impairment losses on its mortgage loans and commitments
of approximately $952,000. 


                                       14
<PAGE>   15

                          CHASTAIN CAPITAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998
                                   (Unaudited)



NOTE 7 - REAL ESTATE INVESTMENTS

As of September 30, 1998, the Company's investments in real estate consisted of 
the following:

<TABLE>
<CAPTION>

Date Acquired    Property          Location       Square Feet    Property Type    Occupancy      Anchor
-------------    --------          --------       -----------    -------------    ---------      ------
<S>              <C>               <C>            <C>            <C>              <C>            <C>

6/26/98          Lakeside Plaza    Stockton, CA      73,000          Retail           86%        Marshall's
9/24/98          Bryarwood 85      Atlanta, GA       51,388          Office          100%        Bell South

</TABLE>

At September 30, 1998, the cost of the Company's investments in real estate
exceeded market value by $189,708. Due to the uncertainty of the Company's
ability to hold the real estate investments long-term, the Company determined
that the decline in the market value of the real estate below book value at
September 30, 1998 was other than temporary. Accordingly, the Company wrote down
its investments in real estate to market value at September 30, 1998, and
recognized an impairment loss of $189,708. The Company's ability to hold its
real estate investments has been negatively affected by the recent turmoil in
the financial markets and its effect on the value of the property, along with
the restructuring of its debt agreements (See Note 8).

NOTE 8 - BORROWING ARRANGEMENTS

On May 15, 1998, the Company entered into two Master Loan and Security
Agreements, to provide financing for the Company's investments. The facilities
require assets to be pledged as collateral. The first loan agreement (the
"Morgan Stanley Agreement"), which was with Morgan Stanley Mortgage Capital,
Inc. permitted the Company to borrow up to $250,000,000 and was scheduled to
terminate on May 14, 1999. The facility was intended to finance first-mortgage
loans originated by the Company. As of September 30, 1998, there were no
borrowings outstanding under the Morgan Stanley Agreement. On October 26, 1998,
the Company terminated the agreement with Morgan Stanley at no cost to the
Company. The second agreement, which is with Morgan Guaranty Trust Company of
New York (the "Morgan Guaranty Agreement"), permitted the Company to borrow up
to $450,000,000 and was scheduled to terminate on May 14, 1999. As discussed
below, this agreement has been amended and will terminate on March 31, 1999. As
of September 30, 1998, there were $40,367,788 in borrowings outstanding under
the Morgan Guaranty Agreement, secured by the Company's investments.

On August 21, 1998, the Company entered into a Master Assignment Agreement with
Merrill Lynch Mortgage Capital, Inc. and Merrill Lynch Capital Services, Inc.
(the "Merrill Lynch Agreement"), to provide financing for the Company's
investments. The facility requires assets to be pledged as collateral. The
Merrill Lynch Agreement permitted the Company to borrow up to $35,000,000 and
was scheduled to terminate on August 20, 1999. As discussed below, this
agreement has been amended and will terminate on January 31, 1999. Outstanding
borrowings against this line of credit bear interest based on the LIBOR rate
plus 1.25%. The Merrill Lynch Agreement allows the lender to establish a margin
requirement on each borrowing, and to request payments from the Company, at any
time, if the market value of the collateral falls below the applicable margin
requirement. As of September 30, 1998, borrowings outstanding under the Merrill
Lynch Agreement were $20,995,826.

On August 25, 1998, the Company entered into a Master Repurchase Agreement with
Deutsche Bank Securities, Inc. (the "Deutsche Bank Agreement"), which provides
financing for the Company's investments. The facility provides that all
transactions are intended to be treated as sales and purchases rather than
loans, and requires assets to be transferred. The Deutsche Bank Agreement
permits the Company to enter into an unlimited number of transactions, subject
to the approval of both Deutsche Bank and the Company. The Deutsche Bank
Agreement is a 30-day revolving facility, which may be terminated by either
party upon giving written notice to the other, except that the agreement shall
remain applicable to any transactions then outstanding. Transactions bear
interest at a rate negotiated between Deutsche Bank and the Company at the
inception of a transaction. The Deutsche Bank Agreement allows Deutsche Bank to
establish a margin requirement on each transaction, and to request payment from
the Company at any time, if the market value of the underlying assets or
securities falls below the applicable margin requirement however the agreement
had no financial covenants and thus did not require amendment along with the
Morgan Guaranty Trust and Merrill Lynch agreements. As of September 30, 1998,
transactions outstanding under the Deutsche Bank Agreement were $17,567,000 and
principal payments due and accrued totaled $302,625. These transactions were
collateralized by two CMBS investments valued at $18,171,250 at September 30,
1998. 

The annualized rate of interest on the Company's borrowings for the three and
nine months ended September 30, 1998 was 6.46%.

The Company has experienced significant losses in its investment portfolio due
to spread widening on its investments, which has adversely affected the value of
the Company's portfolio. As a result of these losses, on October 23, 1998 the
Company announced it was necessary to obtain temporary waivers from Morgan
Guaranty Trust and Merrill Lynch to avoid being in default of tangible net
worth covenants under the Company's credit facilities. On November 13, 1998 the
Company reached an agreement with Morgan Guaranty Trust Company of New York and
Merrill Lynch Mortgage Capital, Inc. to restructure its credit facilities and
terminated the Morgan Stanley Mortgage Capital Facility.

Under its amended agreement with Morgan Guaranty Trust, the Company's credit
facility has been reduced to $90 million, $30 million of which is currently
available to fund the Company's outstanding mortgage loan commitments. The
facility reduces to $50 million on January 31, 1999. The interest rate is LIBOR
plus 1.5% from November 13, 1998 to December 31, 1998 and LIBOR plus 2.0% from
January 1, 1999 until the facility matures on March 31, 1999. As part of the
amended agreement, the Company has agreed to sell $19.6 million of whole
mortgage loans to Morgan Guaranty Trust and has paid an amendment fee of
$800,000.


                                       15
<PAGE>   16

                          CHASTAIN CAPITAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998
                                   (Unaudited)


Under the amended agreement with Merrill Lynch Mortgage Capital, the Company
agreed to pay down the outstanding borrowings to $19 million, and further agreed
that no additional borrowings would be permitted and that the facility matures
on January 31, 1999. The amended agreements with Morgan Guaranty Trust and
Merrill Lynch Mortgage Capital contain covenants that appropriately reflect the
reduced size of the Company's portfolio.

In connection with the credit facility amendments, on November 13, 1998 LLIH
agreed to provide the Company with up to $40 million of unsecured subordinated
indebtedness. An initial advance of $17 million was drawn on November 13, 1998
and the remaining funds can be drawn from time to time by the Company through
maturity at March 31, 1999. The advances incur interest at the rate of 14% per
annum through January 31, 1999 and 16% thereafter. The advances are prepayable
at any time subject to certain notice requirements.


NOTE 9 - STOCK OPTION PLAN

The Company adopted a stock option plan to provide incentive compensation for
the Company's executive officers and the Manager, whereby at the closing of the
IPO the Manager was granted a fully vested option to purchase 1,166,667 shares
of Common Stock of the Company exercisable at the IPO price. One-fourth of the
Manager's options will become exercisable on each of the first four
anniversaries of the closing date of the IPO. The fair value of the option
granted to the Manager was $877,917, which has been recognized as expense in the
quarter ended June 30, 1998.

The underwriters sold 79,586 shares of Common Stock that were purchased in the
IPO to directors and officers of the Company and the Manager for $15.00 per
share. Pursuant to the Company's Directed Share Program, such individuals were
granted an option to purchase one share of Common Stock for each share of Common
Stock purchased in the IPO. One-fifth of the options became exercisable
immediately, and one-fifth of the options will become exercisable on each of the
first four anniversaries of the closing date of the IPO. The fair value of the
options granted under the Company's Directed Share Program was $54,279.
One-fifth of this value, $10,856, has been recognized as expense for the period
ended September 30, 1998.

NOTE 10 - INTEREST RATE PROTECTION AGREEMENTS

In order to help mitigate the risk of a material change in interest rates that
would affect the Company's borrowing rate on its lines of credit and on
anticipated future long-term borrowings secured by the Company's investments,
the Company has entered into forward Treasury lock agreements, an interest rate
collar and an interest rate cap. None of these agreements were held for trading
purposes. The Treasury locks allowed the Company to lock in a rate for
anticipated financings that were expected to close in 1999. The settlement of a
Treasury lock at maturity will create a gain or loss equal to the change in
present value of the Treasury rate lock from the date purchased to the maturity
date. Any gains or losses are included with the related financing and amortized
under the effective interest method. The Company's policy was to purchase a
forward Treasury lock whenever a fixed rate mortgage loan closed or when a
borrower requested a rate lock under an executed loan application. Depending on
the size of fixed rate mortgage loans, the Company in some cases aggregated
loans and purchased a single Treasury lock for a pool of small loans. The 
Company also entered into forward Treasury locks in anticipation of long-term 
financing of its CMBS and mezzanine investments that were expected to close in 
1999.

As a result of the recent turmoil in the credit market, and the Company's
failure to comply with its debt agreements, the Company determined that its
ability to obtain long-term, fixed-rate financing was not probable at September
30, 1998. The turmoil also created uncertainty as to the Company's ability to
hold the investments, and thus the Treasury locks no longer qualified for hedge
accounting. As of September 30, 1998, the Company discontinued hedge accounting
and has reclassified the Treasury looks to investments accounted for at market
value, and a loss of $15,729,025 (including transaction costs) was recognized 
as a component of income. On October 23, 1998 the Company terminated all of its
Treasury locks and incurred a realized loss of $13.5 million.







                                       16
<PAGE>   17




                          CHASTAIN CAPITAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998
                                   (Unaudited)




Below is a summary of the Company's interest rate protection agreements, which 
included Treasury locks and an interest rate collar at September 30, 1998.


Treasury Locks
--------------
<TABLE>
<CAPTION>
                                                Reference
Contract Date    Maturity      Forward Rate      Treasury      Notional Amount           Fair Value
-------------    --------      ------------      --------      ---------------           ----------
<C>              <C>           <C>              <C>           <C>                       <C>          
5/20/98          4/30/99          5.69%          10 year        $ 13,539,250            $ (1,328,000)
6/18/98          4/30/99          5.58%          10 year        $ 11,898,031            $ (1,062,000)
6/30/98          4/30/99          5.54%          10 year        $ 12,908,997            $ (1,110,000)
7/08/98          7/01/99          5.49%          10 year        $ 44,275,490            $ (3,616,000)
7/09/98          7/01/99          5.47%          10 year        $ 33,279,044            $ (2,666,000)
7/10/98          7/01/99          5.43%           5 year        $ 23,710,586            $ (1,256,000)
8/06/98          4/30/99          5.50%          10 year        $ 20,468,381            $ (1,701,000)
8/12/98          4/30/99          5.48%          10 year        $  8,817,961            $   (708,000) 
8/24/98          4/30/99          5.35%          10 year        $ 18,000,000            $ (1,281,000)
8/26/98          4/30/99          5.27%          10 year        $ 14,547,000            $   (943,000)
                                                                ------------            -----------

                                                Total             $201,444,740          $(15,671,000)
</TABLE>

Collar
------
<TABLE>
<CAPTION>
                         Notional         Floating
Purchase   Maturity       Amount           Index         Strike     Fair Value
--------   --------      ------            -----         ------     ----------
<C>        <C>          <C>             <C>            <C>          <C>       
7/13/98    7/01/99      $89,131,070     1 mo. LIBOR    5.8%-5.51%   $(294,000)
</TABLE>

















                                       17
<PAGE>   18




                          CHASTAIN CAPITAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998
                                   (Unaudited)


NOTE 11 - SUBSEQUENT EVENTS

Through November 5, 1998, the Company sold two of its BBB- bonds for 
$13,826,912. The sales resulted in an additional loss of $1,555,980 since 
September 30, 1998.

On October 23, 1998 the Company obtained temporary waivers from its lenders to
avoid being in default of tangible net worth covenants under the Company's
credit facilities. On November 13, 1998 the Company reached an agreement with
Morgan Guaranty Trust and Merrill Lynch Mortgage Capital to restructure its
credit facilities. On October 26, 1998, the Company terminated the Morgan
Stanley Mortgage Capital facility. As part of the amended agreements, the
Company agreed to sell $19.6 million of whole mortgage loans to Morgan Guaranty
Trust and paid an amendment fee of $800,000. Additional restructuring costs
including independent financial advisor and legal fees, will be approximately
$900,000 for a total of $1.7 million. (Note 8)

On November 13, 1998 LLIH agreed to provide the Company with up to $40 million 
of unsecured subordinated indebtedness and funded an initial advance of $17 
million. (Note 8)

Through November 13, 1998, the Company closed on mortgage loans totaling
$15,885,000, and terminated loan commitments totaling $57,155,000. The Company
incurred expenses of approximately $1.1 million associated with the termination
of these contractual commitments. These expenses were provided for in the
impairment loss of $8,406,695 recognized at September 30, 1998.

On November 16, 1998, the Company intends to sell $19.6 million in mortgage
loans that cost $21.7 million to Morgan Guaranty Trust.


                                       18
<PAGE>   19









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

GENERAL

The Company was incorporated in Georgia on December 16, 1997 by Lend Lease Real
Estate Investments, Inc., formerly ERE Yarmouth, Inc., for the purpose of
investing in multifamily and commercial mortgage loans, CMBS interests,
mezzanine investments and real property. The Company expects to generate income
for distribution to its shareholders primarily from the net income derived from
its investments in real estate related assets. The Company intends to operate in
a manner that permits it to elect, and it intends to elect, to be subject to tax
as a REIT for federal income tax purposes. On April 23, 1998, the Company
commenced its operation upon consummation of a public offering of 7,380,000
shares of its Common Stock.

As of September 30, 1998, the Company closed on total transactions amounting to
$188,293,892. The transactions included CMBS interests, mezzanine loans,
mortgage loans and direct real estate purchases. During the third quarter, the
Company repurchased 1,334,000 outstanding shares of common stock at a price of
$13,479,494. These shares have been retired and accounted for as a reduction of
common stock of $13,340 and a reduction of additional paid-in capital of
$13,466,154.

The following discussion of the Company's consolidated financial condition,
results from operations, and capital resources and liquidity should be read in
conjunction with the Financial Statements and related Notes included in Item 1.


RECENT DEVELOPMENTS

On October 23, 1998 the Company announced that due to turmoil in the credit
markets, it was necessary to obtain temporary waivers from its lenders to avoid
being in default of tangible net worth covenants under the Company's credit
facilities. The Board of Directors decided to discontinue new investment
activity and concluded that the Company needed to be restructured. On November
13, 1998 the Company announced that it has reached an agreement with Morgan
Guaranty Trust and Merrill Lynch Mortgage Capital to restructure its credit
facilities and to dispose of certain assets to reduce the size and stabilize the
volatility of the overall portfolio. Proceeds from the asset sales will be used
to reduce outstanding indebtedness on both credit facilities. As a result of the
asset sales and indebtedness reduction, the Company believes it will satisfy its
immediate liquidity needs and will hold a portfolio consisting primarily of CMBS
and mezzanine investments.

In connection with the credit facility amendments, LLIH agreed to provide the
Company with up to $40 million of unsecured subordinated indebtedness. An
initial advance of $17 million was drawn on November 13, 1998 and the remaining
funds can be drawn from time to time by the Company through maturity at March
31, 1999. The advances incur interest at the rate of 14% per annum through
January 31, 1999 and 16% thereafter. The advances are prepayable at any time,
subject to certain notice provisions. The terms of the subordinated indebtedness
were reviewed and approved by a special committee of the Board of Directors
consisting of independent directors not affiliated with Lend Lease.

Under its amended agreement with Morgan Guaranty Trust, the Company's credit
facility has been reduced to $90 million, $30 million of which is currently
available to fund the Company's outstanding whole loan commitments. The facility
reduces to $50 million on January 31, 1999. As part of the amended agreement,
the Company has agreed to sell $19.6 million of whole mortgage loans to Morgan
Guaranty Trust and has paid an amendment fee of $800,000.

 Under the amended agreement with Merrill Lynch Mortgage Capital, the Company
agreed to pay down the outstanding borrowings to $19 million, and further agreed
that no additional borrowings would be permitted and that the facility matures
on January 31, 1999. The amended agreements with Morgan Guaranty Trust and
Merrill Lynch Mortgage Capital contain covenants that appropriately reflect the
reduced size of the Company's portfolio.

FUNDS FROM OPERATIONS

Funds from operations ("FFO") is considered by many industry analysts to be a
useful supplement to reviewing the operating performance of a REIT. The numbers
are not, however, in accordance with GAAP and should be used accordingly. The
following table reconciles FFO and net income:

<TABLE>
<CAPTION>
                                               For the Three Months      For the Nine Months
                                            ended September 30, 1998    ended September 30,1998
                                                (in thousands except for per share data)

<S>                                         <C>                         <C>      
Net (loss) before gain on sale                       $(38,169)                   $(38,109)
Add: Real estate related depreciation                      22                          27
     Stock compensation to Manager                                                    878 
                                                     --------                   ---------
FFO                                                  $(38,147)                   $(37,204)
                                                     ========                   =========

Diluted weighted average shares outstanding             8,554                       8,735

FFO per diluted weighted average shares outstanding  $ (4.46)                   $   (4.36)
</TABLE>

FFO does not represent cash generated from operating activities in accordance
with GAAP and is not necessarily indicative of cash available to fund the
Company's operations, which is disclosed in the Consolidated Statement of Cash
Flows for the applicable periods. FFO should not be considered as an alternative
to net income as an indicator of the Company's operating performance, nor as an
alternative to the Statement of Cash Flows as a measure of liquidity. FFO, as
defined by the National Association of Real Estate Investment Trusts, represents
net income (computed in accordance with GAAP) applicable to common shares
excluding gains or losses from debt restructuring, sales of property and any
unusual or non-recurring transactions, plus depreciation and amortization, and
after such adjustments from unconsolidated partnerships and joint ventures.

RESULTS OF OPERATIONS

Revenue. Revenue totaled $3,621,490 and $4,967,480, respectively for the three
and nine months ended September 30, 1998. Revenue is comprised primarily from
interest income on CMBS investments, mezzanine loans, mortgage loans and from
the cash proceeds from the IPO before they were fully invested. The IPO proceeds
were fully invested on July 8, 1998. At September 30, 1998, rental income
consisted of two real estate investments. The real estate investments include
one retail property located in Stockton, California and one office building
located in Atlanta, Georgia.



                                       19
<PAGE>   20
Operating Expenses. Operating expenses consist of expenses incurred in operating
the Company and property and investment operations and totaled $41,790,521 and
$43,076,301 respectively for the three and nine months ended September 30, 1998.
Included in the amounts were impairment losses totaling $39,778,017. These
losses are due to recent financial market conditions and the widening of credit
spreads, as well as losses associated with interest rate Treasury locks. During
the second quarter the Company recorded a one-time charge of $877,917 for stock
options issued to the Manager as part of the IPO. Management fees were
calculated at 1% per annum of the Average Invested Assets per quarter and
totaled $437,572 and $658,558 for the three and nine months ended September 30,
1998, respectively. The Company also recorded general and administrative
expenses of $210,292 and $389,490, respectively, fort the three and nine months
ended September 30, 1998. These costs consist of professional fees, insurance
costs and other miscellaneous expenses.

Gain on Sale of CMBS. The $42,426 gain on the sale of CMBS for the nine months
ended September 30, 1998, was due to a change in interest rates during the
period between the date the Company agreed to purchase a CMBS investment and the
actual settlement date. During the period, the Company decided to sell a portion
of the original investment resulting in the gain.

CHANGES IN FINANCIAL POSITION

Securities available-for-sale. The Company purchased CMBS with a par value of
$33,183,997 and $123,077,975 for the three and nine months ended September 30,
1998 for $29,230,127 and $106,231,165, respectively. At September 30, 1998, the
amortized cost of the Company's investments in CMBS exceeded market value by
$6,758,024. Due to uncertainty of the Company's ability to hold its CMBS
investments until the cost of the CMBS is recovered, the Company determined that
the decline in the market value of its CMBS below amortized cost was other than
temporary. Accordingly, the Company wrote down its investment in CMBS to market
value at September 30, 1998 and recognized an impairment loss of $7,219,289. The
Company's ability to hold its CMBS has been negatively affected by the recent
turmoil in the financial markets and its effect on the value of CMBS securities
along with the restructuring of the Company's debt agreements (see Note 8).
Subsequent to September 30, 1998, the Company sold certain of its investment in
BBB- CMBS securities for $13,826,912 and recognized an additional loss of
$1,555,980. Also, subsequent to September 30, 1998 and through November 13,
1998, the market value of the Company's remaining CMBS securities has
approximately declined an additional $14,111,259.

Mezzanine Loan Portfolio. The Company purchased mezzanine loans with a par value
of $22,447,200 and $44,447,200 for the three and nine months ended September 30,
1998 for $22,839,838 and $48,227,200, respectively. At September 30, 1998, the
amortized cost of the Company's investments in mezzanine loans exceeded market
value by $6,800,075. Due to the uncertainty of the Company's ability to hold the
mezzanine loans until the cost of the loans could be recovered, the Company
determined that the decline in the market value of the loans below amortized
cost at September 30, 1998 was other than temporary. Accordingly, the Company
wrote down its investments in mezzanine loans to market value at September 30,
1998, and recognized an impairment loss of $6,800,075. The Company's ability to
hold its mezzanine loans has been negatively affected by the recent turmoil in
the financial markets and its effect on the value of the loans, along with the
restructuring of its debt agreements (See Note 8). In addition, as of September
30, 1998, estimated losses on the Company's contractual commitments to originate
mezzanine loans in the amount of $4,571,000 were $377,832.

Mortgage Loan Portfolio. The Company originated $29,525,000 of commercial
mortgage loans for the three and nine months ended September 30, 1998. At
September 30, 1998, the amortized cost of the Company's investments in mortgage
loans exceeded market value by $1,433,225. In addition, as of September 30,
1998, estimated losses on Company's contractual commitments to originate
mortgage loans in the amount of $119,900,000 were $8,028,864. Due to the
uncertainty of the Company's ability to hold the mortgage loans until the cost
of the loans are recovered, the Company has changed its strategy and is now
holding its mortgage loans and commitments for resale. The Company recognized
impairment losses on its mortgage loans and commitments of $1,433,225 and
$8,028,864, respectively as of September 30, 1998.

Of the $119,900,000 of commitments outstanding at September 30, 1998,
$15,885,000 have been closed and $57,155,000 have been terminated through
negotiations with borrowers through November 13, 1998. The Company incurred
expenses of approximately $1.2 million associated with the termination of these
contractual commitments. These expenses were provided for in the impairment loss
of $8,406,695 recognized at September 30, 1998. Additionally, subsequent to
September 30, 1998, and through November 13, 1998, the Company estimates that it
incurred additional impairment losses on its mortgage loans and commitments of
approximately $952,000.

Real Estate Investments. The Company purchased Bryarwood 85, a wholly-owned
office building, on September 24, 1998 for $4,100,000. At September 30, 1998,
the cost of the Company's investments in real estate exceeded market value
by $189,708. Due to the uncertainty of the Company's ability to hold the real
estate investments long-term, the Company determined that the decline in the
market value of the real estate below book value at September 30, 1998 was other
than temporary. Accordingly, the Company wrote down its investments in real
estate to market value at September 30, 1998, and recognized an impairment loss
of $189,708. The Company's ability to hold its real estate investments has been
negatively affected by the recent turmoil in the financial markets and its
effect on the value of the property, along with the restructuring of its debt
agreements (See Note 8).

Short-term borrowings. The Company began borrowing on its short-term borrowing
facilities during the quarter ended September 30, 1998. The Company used its
short-term borrowing arrangements to finance its investments in certain CMBS and
mortgage and mezzanine loans. As of September 30, 1998, the Company had short-
term borrowings totaling $78,930,614. The total amount is comprised of:



Loan Facility     Amount Borrowed   Assets Pledged
---------------   ---------------   --------------
Morgan Guaranty   $40,367,788       Bear Stearns, GSMS 1998-GLII G, ASC 1996-MD6
                                      B1 bonds
Merrill Lynch     $20,995,826       Savoy mezzanine loan; CMAC 1997-ML1 F1 bond
Deutsche Bank     $17,567,000       GMAC 1998-C1 F, ASC 1997-D4 A8 bonds

On October 23, 1998 the Company announced that due to turmoil in the credit
markets, it was necessary to obtain temporary waivers under its credit
facilities with Morgan Guaranty Trust and Merrill Lynch to avoid being in
default of tangible net worth covenants. The Company subsequently restructured
its credit facilities with these lenders and obtained additional financing from
LLIH as further discussed in Liquidity and Capital Resources and in the
footnotes to the Company's unaudited financial statements as of September 30,
1998.

Treasury locks payable. As a result of the recent turmoil in the credit market
and the Company's failure to comply with its debt agreements, the Company
determined that its ability to obtain long-term fixed rate financing was not
probable at September 30, 1998. The turmoil also created uncertainty as to the
Company's ability to hold its investments. Accordingly, the Company discontinued
hedge accounting for the Treasury locks and recognized a $15.7 million loss on
this agreement at September 30, 1998. On October 23, 1998 the Company terminated
all of its Treasury locks and incurred a loss of $13,345,708 million.

Accrued loan commitment losses. As of September 30, 1998, the market value of
the Company's contractual commitments to originate mortgage loans exceeded the
Company's committed purchase price of $119,900,000 by $8,028,864. Due to the
uncertainty of the Company's ability to hold the mortgage loans until the cost
of the loans are recovered, the Company has changed its strategy and is now
holding its mortgage loans and commitments for resale. Loans held for resale are
accounted for at the lower of cost or market value. The Company recognized
impairment losses on its mortgage loan commitments of $8,406,695 as of 
September 30, 1998. In addition, as of September 30, 1998, estimated losses on 
the Company's contractual commitments to originate mezzanine loans in the 
amount of $4,571,000 were $377,832.

                                       20
<PAGE>   21

Shareholders' Equity. Shareholders' equity increased $70,623,829 to $70,624,829
at September 30, 1998 from $1,000 at December 31, 1997. Shareholders' equity
increased by $124,029,919 as a result of the IPO on April 23, 1998. The increase
is primarily offset by common stock purchased by the company and retired during
the third quarter totaling $(13,479,494) and net losses of $ (38,066,395). Also
included in the change was a net unrealized gain on securities
available-for-sale of $461,265, $888,773 for the value of stock options issued
and dividends declared of $ (3,255,239).


CAPITAL RESOURCES AND LIQUIDITY

Liquidity is the ability for the Company to meet its cash requirements including
any ongoing commitments, borrowings, shareholder distributions, lending and
general business activities. The Company's source of liquidity during the period
ended September 30, 1998 consisted of net proceeds from the IPO, Master Loan and
Security agreement with Morgan Stanley Mortgage Capital, Master Loan and
Security agreement with Morgan Guaranty Trust Company of New York, Master Loan
and Security agreement with Merrill Lynch Mortgage Capital, Inc. and repurchase
financing from Deutsche Bank Securities, Inc. The net proceeds from the IPO were
$124,029,419. From the date of the IPO until the funds were invested in real
estate assets, the IPO proceeds were held in a short-term investment account
earning an annualized yield of 6.15%. Once the IPO proceeds were fully invested,
the Company began to utilize the Master Loan and Security Agreement that was
established with Morgan Guaranty Trust Company of New York in the amount of
$450,000,000, the Merrill Lynch Agreement in the amount of $35,000,000 and the
Deutsche Bank Agreement with unlimited transactions, subject to the approval of
both Deutsche Bank and the Company. As of September 30, 1998, the Company had
short-term borrowings totaling $78,930,614. The total amount is comprised of:

<TABLE>
<CAPTION>
Loan Facility     Amount Borrowed   Assets Pledged
-------------     ---------------   --------------

<S>                <C>              <C>       
Morgan Guaranty    $ 40,367,788     Bear Stearns, GSMS 1998-GLII G, ASC 1996-MD6 B1 bonds
Merrill Lynch      $ 20,995,826     Savoy mezzanine loan; CMAC 1997-ML1 F1 bond
Deutsche Bank      $ 17,567,000     GMAC 1998-C1 F, ASC 1997-D4 A8 bonds
</TABLE>

As of September 30, 1998, no borrowings had been made against the Morgan Stanley
Master Loan and Security Agreement. On October 26, 1998, the agreement was
terminated at no cost to the Company.

On October 23, 1998, the Company obtained temporary waivers from Morgan 
Guaranty Trust and Merrill Lynch to avoid being in default of tangible net 
worth covenants under the Company's credit facilities. At the time, the Company 
had $110,900,000 million of mortgage loan commitments that it needed 
significant capital to fund. Through November 13, 1998 the Company closed 
$6,885,000 of the mortgage loans and $57,155,000 have been terminated through 
negotiations with borrowers. The Company incurred expenses of approximately 
$1.1 million associated with the termination of these contractual commitments.

On November 13, 1998 the Company reached an agreement with Morgan Guaranty 
Trust and Merrill Lynch Mortgage Capital to restructure its credit facilities. 
In connection with the credit facility amendments, LLIH agreed to provide the 
Company with up to $40 million of unsecured subordinated indebtedness. The 
Morgan Guaranty Trust amendment provides additional financing of up to $30 
million. The amendment also includes an agreement to sell mortgage loans to 
Morgan Guaranty Trust for proceeds of $19.6 million. The proceeds from selling 
mortgage loans and the additional financing available from Morgan Guaranty 
Trust and LLIH should provide sufficient liquidity to close the Company's 
remaining mortgage loan commitments and meet any additional margin calls from 
lenders. The Company also intends to dispose of the remaining mortgage loans in 
the near term.

The Company believes that it has the capital resources necessary to hold a core 
portfolio of mezzanine and CMBS assets until March 31, 1999. During that time 
the Company will be reviewing the strategic alternatives available to maximize 
shareholder value and meet the March 31, 1999 maturity dates on the Morgan 
Guaranty Trust and LLIH financing arrangements.

                                       21
<PAGE>   22

REIT STATUS

The Company plans to make an election to be taxed as a REIT under sections 856
through 860 of the Code, commencing with its first REIT taxable year ending on
December 31, 1998. If the Company qualifies under Sections 856 through 860 of
the Code for taxation as a REIT, it generally will not be subject to federal
corporate income tax on its net income that is distributed currently to its
shareholders. That treatment substantially eliminates the "double taxation"
(i.e., taxation at both the corporate and shareholder levels) that generally
results from an investment in a corporation. In order to satisfy the
requirements, the Company must meet certain criteria, including certain
requirements regarding the Company's record keeping, ownership, assets, income
and distributions of taxable income.

YEAR 2000 DISCLOSURES


The inability of computers, software and other equipment to recognize and
properly process data fields containing a two-digit year is commonly referred to
as the Year 2000 compliance issue ("Y2K"). As the year 2000 approaches, such
systems may be unable to accurately process certain date-based information.

Y2K exposures of the Company are currently being assessed. Potential critical
exposures include reliance on third party vendors and building systems that are
not Y2K compliant. The Company has begun to communicate with our third party
service vendors such as the Manager and property managers in an effort to assess
their Y2K compliance status and the adequacy of their Y2K efforts.

The Manager has made Y2K compliance a high priority for replacement applications
and is in the process of updating and replacing other applications that are not
Y2K compliant. The Manager expects to complete the updating of its critical
systems no later than March 31, 1999, which will allow for nine months of
systems testing to resolve any remaining Y2K compliance issues. However, if any
of the vendors of the Manager's Y2K compliant software fail to perform pursuant
to their contracts with the Manager, the Manager's Y2K compliance could be
jeopardized, and could materially adversely affect the Company. The Manager does
not believe that the costs to remediate any Y2K issues will materially affect
its business, operations or financial condition, or will have an adverse affect
on its clients, including the Company.

Each property owned by the Company is being individually assessed in an effort
to identify critical Y2K issues specific to each property. Required remediation
strategies will depend on the outcome of the assessments and therefore will not
be developed until the property assessments are complete. The Manager expects 
the majority of critical property assessments to be completed and remediation
efforts to be underway by the end of the first quarter of 1999.

The Company has not incurred any material costs to date relating to Y2K. Total
property assessment costs to the Company are expected to total approximately
$4,300. These costs were not incurred and therefore not accrued as of 
September 30, 1998. Remediation efforts may vary significantly from one building
to the next. Therefore remediation costs can not be reasonably estimated until
the assessments are complete and remediation strategies determined.

The failure to adequately address the Year 2000 issue may result in the closure
of buildings owned by the Company. In order to reduce the potential impact on
the operations of the Company, contingency plans will be developed once Y2K
exposures have been assessed.

Building contingency plans will be developed on a property by property basis
once assessments have been completed. This will allow the efficient development
of contingency plans that take into account individual circumstances surrounding
each property. Contingency plans may involve the engagement of additional
security services, implementation of temporary systems modifications, and the
identification and engagement of alternate service vendors. Additional
contingency plans may be developed as circumstances warrant.



                                       22
<PAGE>   23
FORWARD LOOKING STATEMENTS

Certain statements contained herein are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities Act of
1934, as amended. These forward-looking statements may be identified by
reference to a future period(s) or by the use of forward-looking terminology,
such as "may", "will", "intend", "should", "expect", "anticipate", "estimate",
or "continue" or the negatives thereof or other comparable terminology. The
Company's actual results could differ materially from those anticipated in such
forward-looking statements due to a variety of factors, including, but not
limited to, changes in national, regional or local economic environments,
competitive products and pricing, government fiscal and monetary policies,
changes in prevailing interest rates, the course of negotiations, the
fulfillment of contractual conditions, factors inherent to the valuation and
pricing of interests in commercial mortgage-backed securities, credit risk
management, asset/liability management, the financial and securities markets,
the availability of and costs associated with the sources of liquidity, other
factors generally understood to affect the real estate acquisition, mortgage and
leasing markets and security investments, and other risks detailed in the
Company's registration statement on Form S-11, as amended, filed with the SEC,
the Company's quarterly report on Form 10-Q filed with the SEC, and other
filings made by the Company with the SEC. The Company does not undertake, and
specifically disclaims any obligation, to publicly release the results of any
revisions which may be made to any forward-looking statements to reflect the
occurrence of anticipated or unanticipated events or circumstances after the
date of such statements.

Item 3.          Quantitative and Qualitative Disclosure about Market Risk

                 Not applicable.
























                                       23
<PAGE>   24

PART II: OTHER INFORMATION

Item 1.       Legal Proceedings

              None

Item 2.       Changes in Securities and Use of Proceeds

On April 23, 1998, the Securities and Exchange Commission (the "Commission")
declared effective the Company's Registration Statement on Form S-11 (File No.
333-42629) (the "Registration Statement") relating to the initial public
offering of 7,380,000 shares of its Common Stock at an initial public offering
price of $15.00 per share. In addition to the Company's initial public offering,
897,687 shares of the Company's Common Stock were sold to Lend Lease Investments
Holdings, Inc. (formerly ERE Yarmouth Holdings, Inc.) and 700,000 shares of the
Company's Common Stock were sold to FBR Asset Investment Corporation, in each
case for $13.95 per share in sales exempt from registration under the Securities
Act of 1933, as amended (the "Act"), pursuant to Section 4(2) of the Act. Both
Lend Lease Investments Holdings, Inc. and FBR Asset Investment Corporation are
"accredited investors" as that term is defined in Rule 501(a) promulgated by the
Commission under the Act. On April 28, 1998, the Company completed (i) the
offering of 7,380,000 shares of Common Stock, with gross proceeds of
$110,700,000 and net proceeds (after subtracting underwriting discounts and
commissions) to the Company of $102,951,000; (ii) the sale of 897,687 shares of
Common Stock to Lend Lease Investments Holdings, Inc. with net proceeds to the
Company of $12,522,608; and (iii) the sale of 700,000 shares of Common Stock to
FBR Asset Investment Corporation with net proceeds to the Company of $9,765,000.
The managing underwriters of the initial public offering were Friedman,
Billings, Ramsey & Co., Inc. and EVEREN Securities, Inc.

Item 3.       Default 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)  Exhibits

      10.1    Subordinated Loan Agreement dated as of November 13, 1998
              between Chastain Capital Corporation, as Borrower and 
              Lend Lease Investments Holdings, Inc., as Subordinated Lender.

      10.2    Amendment and Agreement, dated as of November 13, 1998,
              to and in respect of the Master Loan and Security Agreement, 
              dated as of May 15, 1998, between Chastain Capital Corporation,
              a Georgia corporation, as Borrower, and Morgan Guaranty Trust
              Company of New York, a New York Banking Corporation, as Lender.

      10.3    Master Assignment Agreement among Chastain Capital Corporation,
              Merrill Lynch Mortgage Capital, Inc., and Merrill Lynch Capital
              Services, Inc.

      10.4    Amendment No. 1 to Master Assignment Agreement among
              Chastain Capital Corporation, Merrill Lynch Mortgage Capital, 
              Inc., and Merrill Lynch Capital Services, Inc., dated as of
              October 23, 1998.

      27.1    Financial Data Schedule (for SEC filing purposes only)

              b)  Reports

                  None














                                       24
<PAGE>   25


                                   SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                          Chastain Capital Corporation




                                          By:    /s/ Steve Grubenhoff
                                                ---------------------
                                                Steve Grubenhoff         
                                                Chief Financial Officer


Date:  November 16, 1998












                                       25
<PAGE>   26



                                  EXHIBIT INDEX



<TABLE>
<CAPTION>
Exhibit No.                         Description
-----------                         -----------                      
<S>           <C>    
   10.1       Subordinated Loan Agreement dated as of November 13, 1998 between 
              Chastain Capital Corporation as Borrower and Lend Lease 
              Investments Holdings, Inc., as Subordinated Lender.

   10.2       Amendment and Agreement, dated as of November 13, 1998, to and in 
              respect of the Master Loan and Security Agreement, dated as of 
              May 15, 1998, between Chastain Capital Corporation, a Georgia 
              corporation, as Borrower, and Morgan Guaranty Trust Company of 
              New York, a New York Banking Corporation, as Lender.

   10.3       Master Assignment Agreement among Chastain Capital Corporation,
              Merrill Lynch Mortgage Capital, Inc., and Merrill Lynch Capital
              Services, Inc.

   10.4       Amendment No. 1 to Master Assignment Agreement among Chastain 
              Capital Corporation, Merrill Lynch Mortgage Capital, Inc., and 
              Merrill Lynch Capital Services, Inc., dated as of October 23, 
              1998.

   27.1       Financial Data Schedule (for SEC filing purposes only)
</TABLE>































                                       26