SECURITIES AND EXCHANGE COMMISSION
                       Washington, D.C.  20549

                              FORM 10-K

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

             For the fiscal year ended December 31, 1998

                 Commission File Number:  333-42441


                 MID-AMERICA CAPITAL PARTNERS,  L.P.
         (Exact Name of Registrant as Specified in Charter)


               TENNESSEE                            62-1717980
     (State of Incorporation)                   (I.R.S. Employer
                                             Identification Number)


                    6584 POPLAR AVENUE, SUITE 340
                      MEMPHIS, TENNESSEE  38138
              (Address of principal executive offices)

                           (901) 682-6600
         Registrant's telephone number, including area code

    Securities registered pursuant to Section 12 (b) of the Act:


                        Title of Each Class
                        -------------------
   Commercial Mortgage Pass Through Certificates, Series 1998 -1
 Representing Beneficial Ownership in Mid-America Capital Partners,
            L.P.  6.376% First Mortgage Bonds, Due 2003

    Securities registered pursuant to Section 12 (g) of the Act:
                                None


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. [ x ] Yes [ ] No

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in PART III of this Form 10-K or any amendment to this
Form 10-K. [ x ] <PAGE>


               MID-AMERICA CAPITAL PARTNERS, L.P.


                          TABLE OF CONTENTS

  Item                                                          Page
                               PART I                         

  1.   Business                                                     
  2.   Properties                                                   
  3.   Legal Proceedings                                            
  4.   Submission of Matters to Vote of Security Holders            

                              PART II                               

  5.   Market for Registrant's Common Equity and Related            
       Stockholder Matters
  6.   Selected Financial Data                                      
  7.   Management's Discussion and Analysis of Financial            
       Condition and Results of Operations
  7.A. Quantitative and Qualitative Disclosures About Market
       Risk
  8.   Financial Statements and Supplementary Data                  
  9.   Changes in and Disagreements with Accountants on             
       Accounting and Financial Disclosure

                              PART III                              

  10.  Directors and Executive Officers of the Registrant           
  11.  Executive Compensation                                       
  12.  Security Ownership of Certain Beneficial Owners and          
       Management
  13.  Certain Relationships and Related Transactions       
  14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K        

<PAGE>

                                PART I
ITEM 1.  BUSINESS

THE COMPANY

     Mid-America  Capital Partners,  L.P. (the Partnership) is a special purpose
Delaware  limited  partnership.  The Partnership was formed on November 24, 1997
for the sole  purpose of owning and  operating  26  apartment  communities  (the
Mortgaged Properties) and to manage,  renovate,  improve, lease, sell, transfer,
exchange,  mortgage and otherwise deal with the Mortgaged  Properties.  The sole
limited partner of the Partnership is Mid-America Apartments,  L.P., a Tennessee
limited partnership (MAALP), which is a majority owned subsidiary of Mid-America
Apartment  Communities,   Inc.  (MAAC).  MAAC  owns,  directly  or  through  its
subsidiaries,  all of the outstanding units of partnership  interest.  MAAC is a
self-administered  and self-managed  umbrella partnership real estate investment
trust  (REIT).  MAAC conducts a substantial  portion of its  operations  through
MAALP and  subsidiaries of MAALP. The sole general partner of the Partnership is
MAACP, Inc., a Tennessee corporation (MAACP), a wholly-owned subsidiary of MAAC.
The term of the Partnership  shall be until December 31, 2020, unless terminated
earlier as provided in the  Partnership  Agreement or as  otherwise  provided by
law.

     The  Partnership was formed to succeed  substantially  all the interests in
Capital  Properties  Group  (predecessor  to  the  Partnership,  "Predecessor").
Distributions to the Partners relating to operations of the Mortgaged Properties
are to be based  upon net cash flow as  defined  in the  Partnership  Agreement.
Profits  and losses are  allocated  to the  Partners  in  proportion  with their
ownership.

     Subsequent to the Partnership formation,  MAALP contributed its interest in
20 of the  Mortgaged  Properties,  and the right to acquire  the  Reorganization
Properties (as defined  below) to the  Partnership in exchange for a 99% limited
partnership interest in the Partnership.  MAACP contributed cash in exchange for
a 1% general partnership interest in the Partnership.

The  Mortgaged  Properties  consist of (i) 20  properties  contributed  by MAALP
comprising the Predecessor;  (ii) 5 properties  acquired on November 25, 1997 by
the  Partnership in connection  with the  consummation of the merger of Flournoy
Development  Company  (FDC)  with  and  into  MAAC  and the  other  transactions
(collectively,  the Reorganization Properties) as described in the Agreement and
Plan  of   Reorganization   dated  as  of  September   15,  1997  (the  Plan  of
Reorganization)  between FDC, MAAC and MAALP consisting of 4 properties acquired
from  Brown-Flournoy  Equity Income Fund Limited Partnership (the Brown-Flournoy
Properties)  and Willow Creek;  and (iii) one property  (Hermitage at Beechtree)
which was  acquired  November  25,  1997  through  the  merger of  Hermitage  at
Beechtree, L.L.C. with and into the Partnership. The Partnership recorded the 20
properties  comprising the Predecessor at historical cost in a manner similar to
that used in pooling of interests accounting and the five properties acquired in
connection  with  the  Plan of  Reorganization  using  the  purchase  method  of
accounting.

OPERATING PHILOSOPHY

INTENSIVE MANAGEMENT FOCUS. The Partnership strongly emphasizes on-site property
management.  Particular  attention is paid to  opportunities  to increase rents,
raise average  occupancy  rates, and control costs,  with property  managers and
regional  management being given the responsibility for monitoring market trends
and the discretion to react to such trends.
<PAGE>

DEDICATION TO CUSTOMER  SERVICE.  Management's  experience is that maintaining a
consistently high level of customer satisfaction leads to greater demand for the
Partnership's  apartment units, higher occupancy and rental rates, and increased
long-term  profitability.  The  Partnership,  as part of its intense  management
focus, has established  regional  training  facilities to produce highly trained
property managers,  leasing  consultants and service technicians on-site at each
of the  Mortgaged  Properties.  Management  believes  that  this  commitment  to
training and excellence in associates  ultimately  translates to higher customer
satisfaction.  Also,  management  undertakes frequent resident surveys and focus
groups, in order to measure customer satisfaction.

DECENTRALIZED  OPERATIONAL STRUCTURE. The Partnership's operational structure is
organized on a decentralized  basis. The  Partnership's  property  managers have
overall  operating  responsibility  for  their  specific  Mortgaged  Properties.
Property  managers  report to area  managers  or regional  managers.  Management
believes that its  decentralized  operating  structure  capitalizes  on specific
market knowledge,  increases personal  accountability  relative to a centralized
structure and is beneficial in the  acquisition,  redevelopment  and development
process.

GROWTH STRATEGIES

     Management's goal is to maximize its return on investment in each Community
by increasing  rental rates and reducing  operating  expenses while  maintaining
high  occupancy  levels.  The  Partnership  seeks higher net rental  revenues by
enhancing and maintaining the  competitiveness  of the Mortgaged  Properties and
manages  expenses  through  its  system of  detailed  management  reporting  and
accountability  in order to achieve  increases in operating cash flow. The steps
taken to meet these objectives include:

* empowering the Partnership's  property managers to adjust rents in response to
  local market  conditions and to concentrate  resident  turnover in peak rental
  demand months;

* implementing programs to control expenses through investment in
  cost-saving initiatives;

* ensuring that,  through  monthly  inspections  of all Mortgaged  Properties by
  senior  management and prompt  attention to maintenance and recurring  capital
  needs as well as defined preventive  maintenance  programs conducted quarterly
  at each property, the Mortgaged Properties are properly maintained;

* improving  the "curb  appeal" of the Mortgaged  Properties  through  extensive
  landscaping and exterior  improvements and repositioning  Mortgaged Properties
  from time to time to maintain market leadership positions;

* investing heavily in training programs for its property level
  personnel;

* compensating employees through performance-based compensation and
  stock ownership programs; and

* maintaining a hands-on  management style and "flat"  organizational  structure
  that emphasizes  senior  management's  continued close contact with the market
  and employees.

<PAGE>

COMPETITION

     All of the  Partnership's  Mortgaged  Properties  are located in areas that
include other apartment communities.  Occupancy and rental rates are affected by
the number of  competitive  apartment  communities  in a  particular  area.  The
Partnership's properties compete with numerous other multifamily properties, the
owners  of which  may have  greater  resources  than the  Partnership  and whose
management may have more experience than the Partnership's management. Moreover,
single-family rental housing, manufactured housing, condominiums and the new and
existing home markets  provide housing  alternatives  to potential  residents of
apartment communities.

ITEM 2.  PROPERTIES

     The  following  table  sets  forth  certain  historical  information  on an
historical basis for the 26 Mortgaged Properties owned at December 31, 1998:

The following table presents  information  concerning the properties at December
31, 1998:

<TABLE>   
                                                                                                        Average     Average      
                                                                              Approximate Average       Rent per   Occupancy
                                                                        Number Rentable     Unit        Unit at      % at   
                                                   Year     Management    of    Area        Size       December 31, December 31,
Property (1)              Location               Completed  Commenced   Units (Square Ft.)(Square Ft.)      1998     1998
------------              --------               ---------  ---------   ------ ----------- ----------       ----     ----
<S>                      <C>                     <C>        <C>         <C>    <C>         <C>              <C>     <C>

Belmere                   Tampa, FL                 1984        1994     210    202,440      964            $624     97.14%
Crosswinds                Jackson, MS             1988/1989     1996     360    443,200    1,231            $612     88.06%
Fairways at Royal Oak     Cincinnati, OH            1988        1994     214    214,477    1,002            $601     90.19%
Hermitage at Beechtree    Cary, NC                  1988        1997     194    169,776      875            $671     95.36%
Hidden Lake II            Union City, GA            1987        1997     160    154,000      963            $649     94.06%
High Ridge                Athens, GA                1987        1997     160    186,608    1,166            $756     98.13%
Howell Commons            Greenville, SC           1986/88      1997     348    292,840      841            $505     92.82%
Kirby Station             Memphis, TN               1978        1994     371    310,173      836            $571     96.23%
Lakepointe                Lexington, KY             1986        1994     118     90,614      768            $539     93.22%
Lakeside                  Jacksonville, FL          1985        1996     416    344,192      827            $580     94.47%
Marsh Oaks                Atlantic Beach, FL        1986        1995     120     93,280      777            $544     100.00%
Napa Valley               Little Rock, AR           1984        1996     240    183,216      763            $550     87.50%
Park Haywood              Greenville, SC            1983        1993     208    156,776      754            $500     91.35%
Park Place                Spartanburg, SC           1987        1997     184    195,312    1,061            $594     92.93%
Pear Orchard              Jackson, MS               1985        1994     389    338,400      870            $568     90.49%
Savannah Creek            Memphis, TN               1989        1996     205    237,200    1,162            $606     96.10%
Shenandoah Ridge          Augusta, GA             1975/1984     1994     272    222,800      819            $457     94.12%
Somerset Place            Jackson, MS               1981        1995     144    126,848      881            $504     93.06%
Southland Station I       Warner Robins, GA         1987        1997     160    186,704    1,167            $622     97.69%
Steeplechase              Chattanooga, TN           1986        1991     108     98,602      913            $550     94.44%
Sutton Place              Memphis, TN               1991        1996     253    267,600    1,062            $593     93.28%
Tiffany Oaks              Altamonte Springs, FL     1985        1996     288    234,224      813            $589     97.92%
Village, The              Lexington, KY             1989        1994     252    182,716      725            $583     92.06%
Westside Creek I          Little Rock, AR           1984        1997     142    148,030    1,042            $609     91.23%
Williamsburg Village      Jackson, TN               1987        1994     148    121,412      820            $539     93.92%
Willow Creek              Columbus, GA             1968-78      1997     285    246,668      866            $485     91.23%

                                                                      ======================================================
  Total Properties                                                     5,949  5,448,108      916            $574     93.40%
                                                                      ======================================================
</TABLE>


(1) All 26 of these  communities  are  encumbered  by the Bonds of $142  million
which mature on March 3, 2003 and have an interest rate of 6.376%.


<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

     The Partnership is not presently subject to any material litigation nor, to
the Partnership's  knowledge,  is any material litigation threatened against the
Partnership,  other than routine  litigation  arising in the ordinary  course of
business,  some of which is expected to be covered by  liability  insurance  and
none of which is expected  to have a material  adverse  effect on the  financial
condition of the Partnership taken as a whole.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          None.

                               PART II.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        None.                               

ITEM 6.  SELECTED FINANCIAL DATA

     The following  table sets forth  selected  financial  data on an historical
basis for the  Partnership.  This data  should be read in  conjunction  with the
financial statements and notes thereto and "Management's Discussion and Analysis
of Financial  Condition and Results of  Operations"  included  elsewhere in this
Annual Report on Form 10-K.

<TABLE>

                                  Mid-America Capital Partners, L.P.
                                         (a limited partnership)
                                         Selected Financial Data
                              (Dollars in thousands except per share data)

                                                                         Year Ended December 31,
                                                    --------------------------------------------------------
                                                    --------------------------------------------------------
                                                                           (Predecessor)
                                                1998          1997         1996         1995           1994
<S>                                         <C>           <C>          <C>         <C>              <C>    

Operating Data:
Total revenues                              $ 38,742      $ 30,949     $ 20,251     $ 14,497        $ 4,753
Expenses:
    Property expenses                         14,207        10,985        7,207        5,306          1,688
    General and administrative                 1,515         1,238          810          580            190
    Interest                                   9,162         1,671        2,169        2,225            925
    Depreciation and amortization              8,324         6,389        4,000        2,614            755
    Amortization of deferred financing 
     costs                                     1,026           152           58           48             37
                                       ---------------------------------------------------------------------
                                       ---------------------------------------------------------------------
Income before extraordinary item               4,508        10,514        6,007        3,724          1,158
Extraordinary item                               (86)          (16)           -            -              -
                                       ---------------------------------------------------------------------
                                      
Net income                                   $ 4,422      $ 10,498      $ 6,007      $ 3,724        $ 1,158
                                       =====================================================================
                                      

Balance Sheet Data:
Real estate owned, at cost                 $ 233,164     $ 227,608    $ 158,285     $ 87,240       $ 73,521
Real estate owned, net                     $ 210,855     $ 213,623    $ 150,699     $ 83,653       $ 72,548
Total assets                               $ 224,324     $ 219,363    $ 151,257     $ 84,216       $ 73,499
Total debt                                 $ 142,000     $ 140,000     $ 16,461     $ 22,830       $ 23,110
Partners' Capital                           $ 78,211      $ 73,789    $ 131,951     $ 59,978       $ 48,938
Other Data (at end of period):
Number of properties owned                        26            26           18           12             10
Number of apartment units owned                5,949         5,948        4,314        2,554          2,290
</TABLE>





<PAGE>

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS

OVERVIEW

     The  following is a discussion  of the  financial  condition and results of
operations of the  Partnership  and its Predecessor for the years ended December
31, 1998, 1997 and 1996. This discussion  should be read in conjunction with the
financial statements included in this report.

     The total number of apartment units owned at December 31, 1998 was 5,949 in
26 apartment  communities,  compared to 5,948 in 26 communities at December,  31
1997 and 4,314 in 18 communities at December 31, 1996.


RESULTS OF OPERATIONS


COMPARISON OF THE  PARTNERSHIP'S  YEAR ENDED DECEMBER 31, 1998 TO THE YEAR ENDED
                               DECEMBER 31, 1997

     Total revenues for 1998 increased by $7,793,000 due to $7,217,000
from the communities  acquired in 1997 and $576,000 from the  communities  owned
throughout both periods.

     Property  operating  expenses  include  costs for  personnel,  repairs  and
maintenance, real estate taxes and insurance,  utilities,  landscaping and other
operating costs.  Property  operating  expenses for 1998 increased by $3,222,000
due to $2,735,000 from the  communities  acquired in 1997 and $487,000
from the communities owned throughout both periods.

     Depreciation  and  amortization   expense  increased  $2,809,000  for  1998
compared  to  1997  due to (i)  depreciation  expense  of  $1,427,000  from  the
communities  acquired in 1997,  (ii)  depreciation  expense of $508,000 from the
communities  owned  throughout  both periods,  and (iii)  $874,000 of additional
amortization  expense for the deferred  financing costs incurred on the March 6,
1998 issuance of Bonds.

     Interest  expense  increased  $7,491,000 in 1998 as compared to 1997 due to
the issuance of the Bonds.  The total  borrowing  cost of the Bonds was 6.62% at
December 31, 1998.

<PAGE>

COMPARISON  OF  THE   PARTNERSHIP'S   YEAR  ENDED   DECEMBER  31,  1997  TO  THE
                   PREDECESSOR'S YEAR ENDED DECEMBER 31, 1996

     Total revenues for the 1997  increased by $10,698,000  due to (i)
$6,760,000  from the  communities  acquired in 1996,  (ii)  $3,474,000  from the
communities  acquired in 1997,  and (iii)  $464,000 from the  communities  owned
throughout both periods.

     Property  operating  expenses  include  costs for  personnel,  repairs  and
maintenance, real estate taxes and insurance,  utilities,  landscaping and other
operating  costs.   Property  operating  expenses  for  the  1997  increased  by
$3,778,000  due primarily to (i)  $2,298,000  from the  communities  acquired in
1996, (iii) $1,239,000 from the communities acquired in 1997, and (iii) $241,000
from the communities owned throughout both periods.

     Depreciation  and  amortization   expense  for  1997  increased  $2,483,000
compared to the same period a year  earlier  primarily  due to (i)  depreciation
expense of $1,493,000 from the communities  acquired in 1996, (ii) $694,000 from
the communities  acquired in 1997, and (iii) $202,000 from the communities owned
throughout both periods.

     Interest expense decreased $498,000 during 1997 compared to the same period
a year  earlier,  mainly  because there was no debt  outstanding  related to the
properties for a portion of 1997.

LIQUIDITY AND CAPITAL RESOURCES

     Net cash provided by operating  activities decreased by $6,709,000 for 1998
as compared to 1997. The decrease was primarily due to a decrease in net income,
mainly  related  to the  additional  interest  costs  of the  Bonds,  which  was
partially  offset by an increase in earnings  and cash flow from the  additional
properties acquired.

     Net cash flow used in investing activities decreased by $32,675,000 in 1998
as compared to 1997.  This  decrease is mainly due to the  purchase  real estate
during 1997 totaling  $33,280,000.  There were no property  acquisitions  during
1998.

     Net cash flow  provided  by (used in)  financing  activities  decreased  by
$28,972,000  in 1998 as  compared  to  1997.  The  principal  uses of cash  from
financing  activities  were  primarily  from  $140,000,000  for repayment of the
bridge  notes  payable,  $7,349,000  in  advances to the  limited  partner,  and
$3,617,000 for additional  deferred  financing  costs related to the issuance of
$142,000,000  Bonds  payable.  During  1997  the  Partnership  received  capital
contributions totaling $26,630,000 and made distributions totaling $104,270,000.
There were no capital contributions during 1998.

     The  Partnership  believes that cash provided by operations is adequate and
anticipates that it will continue to be adequate in both the short and long-term
to meet operating requirements  (including recurring capital expenditures at the
Mortgaged Properties).

<PAGE>


INSURANCE

     In the opinion of management,  property and casualty  insurance is in place
which  provides  adequate  coverage  for  financial  protection  against  normal
insurable risks such that it believes that any loss experienced would not have a
significant  impact  on the  Partnership's  liquidity,  financial  position,  or
results of operations.

INFLATION

     Substantially all of the resident leases at the Mortgaged Properties allow,
at the time of renewal, for adjustments in the rent payable thereunder, and thus
may enable the Partnership to seek rent increases.  The substantial  majority of
these  leases are for one year or less.  The  short-term  nature of these leases
generally serves to reduce the risk to the Partnership of the adverse effects of
inflation.

YEAR 2000

     In older computer programs, to conserve storage space, only two digits were
used to identify the year. This set up has created a date sequence problem.  The
computer may not know that 00 comes after 99,  moreover it may not know if 00 is
1900 or 2000("Y2K").  The business risk of this problem is that  calculations or
processes  that are date  dependent may not yield the correct  answer or work at
all.

     Software vendors have certified all of the mission  critical  applications;
these  vendors  provide  the  software  used for  financial,  network,  property
management and telephone  systems used by the Partnership.  The Partnership does
not own any in- house development  programs that require replacing or re-writing
of code.

     The  Partnership  has  performed  a  thorough  assessment  of its  personal
computers  and desktop  software.  All mission  critical  desktop  hardware  and
software are believed to be compliant. Remediation of non-compliant hardware and
software (none of which is mission-critical) is expected to be completed by June
1999.

     The  Partnership  estimates that the total Y2K project cost is nominal,  as
systems have been upgraded and become Y2K compliant as part of its normal course
of business.  The Partnership  believes that its Y2K initiatives are adequate to
address reasonably likely Y2K issues.

     Management  believes that hardware and software upgrades made over the last
few years  will  reduce  the  possibility  of  interruptions  to the  operation.
However, the Partnership is dependent on the utilities infrastructure within the
United States. The most likely worst case scenario would be that the Partnership
might  experience  disruption  in its  operations  if  any  of  the  third-party
suppliers reported a system failure.

     The Y2K contingency plan is the final phase of the project. The Partnership
maintains  contingency  plans in the normal  course of  business  designed to be
deployed in the event of various potential business interruptions.  Although the
Partnership  believes that its contingency plans and Y2K project will reduce the
risk of significant operations  disruption,  due to general uncertainty over Y2K
readiness of the Partnership's  third-party suppliers, the Partnership is unable
to determine at this time whether the  consequences  of the Y2K system  failures
will have a material impact.

<PAGE>

RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS

     The Management's Discussion and Analysis of Financial Condition and Results
of Operations contains certain forward-looking  statements within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to be covered by
the safe  harbors  created  thereby.  These  statements  include  the  plans and
objectives of management for future  operations,  including plans and objectives
relating  to capital  expenditures  and  rehabilitation  costs on the  Mortgaged
Properties.  The forward-looking statements included herein are based on current
expectations  that  involve  numerous  risks  and  uncertainties.  Although  the
Partnership  believes  that  the  assumptions   underlying  the  forward-looking
statements  are  reasonable,  any of the  assumptions  could be inaccurate  and,
therefore,  there  can  be no  assurance  that  the  forward-looking  statements
included in this report will prove to be accurate.  In light of the  significant
uncertainties  inherent in the  forward-looking  statements included herein, the
inclusion of such information  should not be regarded as a representation by the
Partnership or any other person that the objectives and plans of the Partnership
will be achieved.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The  Partnership's  primary  market risk exposure is to changes in interest
rates obtainable on the Bonds. The Partnership's interest rate risk objective is
to limit the impact of interest rate fluctuations on earnings and cash flows and
to lower its overall borrowing costs. To achieve this objective, the Partnership
manages its exposure to fluctuations in market interest rates for its borrowings
through the use of fixed rate debt  instruments  to the extent  that  reasonably
favorable  rates are  obtainable  with  such  arrangements  and may  enter  into
derivative financial  instruments such as interest rate swaps, caps and treasury
locks to mitigate its interest rate risk on a related financial instrument or to
effectively  lock the  interest  rate on a portion  of its  variable  debt.  The
Partnership  does not enter into  derivative or interest rate  transactions  for
speculative  purposes.  The Bonds  outstanding at December 31, 1998 have a fixed
interest  rate of 6.376%  and  mature in 2003.  As of  December  31,  1998,  the
interest rate on the Bonds  reasonably  approximated  the rate attainable by the
Partnership on debt  instruments  with similar terms.  The Partnership  does not
have any other material market-sensitive financial instruments.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The Independent  Auditors' Report,  Consolidated  Financial  Statements and
Selected Quarterly Financial  Information are set forth in Item 14. herein.


ITEM  9.   CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON
ACCOUNTING AND FINANCIAL DISCLOSURE

     There  have  been  no  disagreements  with  the  Partnership's  independent
accountants  on any matter of  accounting  principles  or practices or financial
statement disclosure.

<PAGE>

                               PART III.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Incorporated  herein by reference to the  Registrant's  filing on Form S- 3
relating to the issuance of the Bonds,  filed with the  Securities  and Exchange
Commission December 17,1997.

ITEM 11.  EXECUTIVE COMPENSATION

     Incorporated  herein by reference to the  Registrant's  filing on Form S- 3
relating to the issuance of the Bonds,  filed with the  Securities  and Exchange
Commission December 17,1997.

ITEM  12.   SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL  OWNERS   AND
MANAGEMENT

     Incorporated  herein by reference to the  Registrant's  filing on Form S- 3
relating to the issuance of the Bonds,  filed with the  Securities  and Exchange
Commission December 17,1997.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The  Partnership  is managed from a corporate  headquarters  owned by MAAC,
indirectly  through its ownership of MAALP, which was acquired on July 23, 1997,
for  $2,912,000.  In  connection  with the  acquisition,  MAAC  formed a special
committee  of external  directors  to negotiate  the  transaction  on its behalf
because certain executive officers of MAAC were also partners in the partnership
which owned the building.  The consideration  consisted of $862,000 cash, 22,246
UPREIT  units  valued at  $634,000  ($28.50 per unit) and the  assumption  of an
existing  loan.  Certain  executive  officers  of  MAAC  were  partners  in  the
partnership who owned the building and received 5,831 UPREIT units in connection
with the exchange.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)    The  following  documents are filed as part of this Annual Report on Form
       10-K:
1.  Independent Auditors' Report                       
    Balance Sheets of the Partnership as of December   
      31, 1998 and 1997
    Statements of Operations of the Partnership and    
      Combined Statement of      Operations of the     
      Predecessor for the years ended                  
      December 31, 1998, 1997 and 1996
    Statements of Partners' Capital of the Partnership  
      and Combined Statement of Partners' Capital of   
      the Predecessor for the years ended              
      December 31, 1998, 1997  and 1996
    Statement of Cash Flows of the Partnership and     
      Combined Statement of Cash Flows of the          
      Predecessor for the years ended                  
      December 31, 1998, 1997  and 1996
    Notes to Financial Statements for the years ended  
      December 31, 1998, 1997 and 1996                 

2.  Financial  Statement Schedule required to be filed by item 8 and Paragraph
    (d)  of  this  item  14:  Schedule  III  -  Real  Estate  Investments  and
    Accumulated Depreciation as of December 31, 1998


3.  The exhibits  required by Item 601 of  Regulation  S- K, except as otherwise
    noted,  have been filed with  previous  reports  by the  registrant  and are
    herein incorporated by reference.


<PAGE>

Exhibit
Numbers   Exhibit Description
-------   -------------------
1.1*      Underwriting Agreement
3.1*      Certificate  of Limited Partnership of Mid-America  Capital
          Partners, L.P.
3.2*      Limited  Partnership  Agreement between MAAC, Inc., as General Partner
          and Mid-America  Apartments,  L.P., a limited partner  relating to the
          formation of Mid-America  Capital  Partners,  L.P., a Delaware limited
          partnership
3.3*      Certificate of Incorporation of MAACP, Inc.
3.4*      Bylaws of MAACP, Inc.
3.5*      Certificate of Incorporation of Mid-America Finance, Inc.
3.6*      Bylaws of Mid-America Finance, Inc.
4.1*      Form of Amended and Restated Indenture among Mid-America
          Capital Partners, L.P. and Mid-America Apartments, as issuer
          and La Salle National Bank, as Trustee
4.2*      Form of Trust Agreement between Mid-America
          Finance, Inc. as depositor and La Salle National Bank, as
          Trustee
4.3*      Form of Certificate
4.4*      Form of Bond
5.1*      Opinion of Baker, Donelson, Bearman & Caldwell, a
          professional corporation
10.1*     Cash Collateral Account Security, Pledge and Assignment
          Agreement among Mid-America Capital Partners, L.P. and Mid-
          America Apartments, L.P. and First Union Bank, and Morgan
          Stanley Mortgage Capital, Inc., and La Salle National Bank
          dated November 21, 1997
10.2*     Form of Deed of Trust, Assignment of Leases and Rents and
          Security Agreement
25.1*     Statement of Eligibility and Qualification of Indenture
          Trustee on Form T-1
----------------------------------------
* Previously filed as exhibits to the  Partnership's  Registration  Statement on
Form S-3, filed with the Commission on December 17, 1997 under  Commission  File
No. 333-42441.



(b)  Reports on Form 8-K
     The  following  report was filed on Form 8-K by the  registrant  during the
     fourth quarter of 1998:
                                                       Date of
     Form                Events Reported               Report
     ----                ---------------               ------

     None.                                             



(c) Exhibits: See Item 14(a)(3) above.
(d) Financial Statement Schedules: See Item 14(a)(2) above.

<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) 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.


                                  MID-AMERICA CAPITAL PARTNERS, L.P.


Date: 3/30/99                     /S/ Simon R.C. Wadsworth                     
     ---------------             ----------------------------------------  
                                   Simon R.C. Wadsworth
                                   President
                                  (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been  signed by the  following  persons in the  capacities  and on the dates
indicated.



Date: 3/30/99                    /s/ Simon R.C. Wadsworth
     ---------------             ---------------------------------------- 
                                   Simon R. C. Wadsworth
                                   President
                                  (Principal Executive Officer)


Date: 3/30/99                    /s/ Mark S. Martini
     ---------------             ----------------------------------------   
                                   Mark S. Martini
                                  (Principal Financial and Accounting Officer)


Date: 3/30/99                    /s/ George E. Cates
     ---------------             ----------------------------------------
                                   George E. Cates
                                   Director


Date: 3/30/99                    /s/ H. Eric Bolton
     ---------------             ----------------------------------------
                                   H. Eric Bolton, Jr.
                                   Director

Date: 3/30/99                    /s/ Stephen M. Carpenter
     ---------------             ----------------------------------------
                                   Stephen M. Carpenter
                                   Director


<PAGE>



                     Independent Auditors' Report


The Partners
Mid-America Capital Partners, L.P.:


     We have audited the  accompanying  balance  sheets of  Mid-America  Capital
Partners,  L.P. (the  "Partnership")  as of December 31, 1998 and 1997,  and the
related  statements of operations,  partners' capital and cash flows for each of
the years in the two-year period ended December 31, 1998 for the Partnership and
the related combined statements of operations,  partners' capital and cash flows
for the  year  ended  December  31,  1996  for  Capital  Properties  Group  (the
"Predecessor").  In connection  with our audits of the  financial  statements we
also have audited the financial  statement  schedule III, Real Estate Investment
and  Accumulated  Depreciation.  These  financial  statements  and the financial
statement  schedule are the  responsibility of the management of the Partnership
and the  Predecessor.  Our  responsibility  is to  express  an  opinion on these
financial statements and financial statement schedule based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all  material  respects,  the  financial  position of the  Partnership  as of
December 31, 1998 and 1997,  and the results of operations and cash flows of the
Partnership and Predecessor for each of the years in the three-year period ended
December 31, 1998, in conformity with generally accepted accounting  principles.
Also, in our opinion, the related financial statement schedule,  when considered
in relation to the financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.



                                   KPMG LLP

Memphis, Tennessee
February 26, 1999

<PAGE>

                       Mid-America Capital Partners, L.P.
                             (a limited partnership)

                                 Balance Sheets
                           December 31, 1998 and 1997
                             (Dollars in thousands)

                                                          1998            1997
Assets:

Real estate assets:
      Land .......................................     $  21,305      $  21,016
      Buildings and improvements .................       204,886        201,499
      Furniture, fixtures and equipment ..........         4,603          3,354
      Construction in progress ...................         2,370          1,739
--------------------------------------------------------------------------------
                                                         233,164        227,608
      Less accumulated depreciation ..............       (22,309)       (13,985)
--------------------------------------------------------------------------------

           Real estate assets, net ...............       210,855        213,623

      Cash .......................................          --            1,570
      Restricted cash ............................           406            932
      Deferred financing costs, net ..............         4,248          1,743
      Due from limited partner ...................         8,613          1,264
      Other assets ...............................           202            231
--------------------------------------------------------------------------------
         Total assets ............................     $ 224,324      $ 219,363
================================================================================

Liabilities and Partners' Capital

Liabilities:
      Bonds payable ..............................     $ 142,000      $    --
      Bridge notes payable .......................          --          140,000
      Bank overdraft .............................           667           --
      Accounts payable ...........................           438            390
      Accrued expenses and other liabilities .....         1,828          2,875
      Due to affiliate ...........................           474          1,596
      Security deposits ..........................           706            713
--------------------------------------------------------------------------------
         Total liabilities .......................       146,113        145,574

Partners' Capital:
      General Partner ............................         2,407          2,363
      Limited Partner ............................        75,804         71,426
--------------------------------------------------------------------------------
         Total partners' capital .................        78,211         73,789
--------------------------------------------------------------------------------
         Total liabilities and
          partners' capital ......................     $ 224,324      $ 219,363
================================================================================

                 See accompanying notes to financial statements.

<PAGE>

              Mid-America Capital Partners, L.P.
                    (a limited partnership)
        Statements of Operations of the Partnership and
              Combined Statement of Operations of the Predecessor
         Years ended December 31, 1998, 1997 and 1996



                                                                   (Predecessor)
(Dollars in thousands)                            1998        1997        1996
                                                  ----        ----        ----
Revenues:
      Rental ...............................     $38,316     $30,691     $20,056
      Other ................................         426         258         195
--------------------------------------------------------------------------------
      Total revenues .......................      38,742      30,949      20,251
--------------------------------------------------------------------------------

Expenses:
      Personnel ............................       4,251       3,148       1,996
      Building repairs and maintenance .....       2,053       1,519         917
      Real estate taxes and insurance ......       3,826       2,985       1,942
      Utilities ............................       1,554       1,173         930
      Landscaping ..........................         978         869         502
      Other operating ......................       1,545       1,291         920
      Depreciation and amortization
       real estate assets ..................       8,284       6,360       3,981
      Depreciation and amortization
       non-real estate assets ..............          40          29          19
      General and administrative ...........       1,515       1,238         810
      Interest .............................       9,162       1,671       2,169
      Amortization of deferred
       financing costs .....................       1,026         152          58
--------------------------------------------------------------------------------

      Total expenses .......................      34,234      20,435      14,244
--------------------------------------------------------------------------------

Income before extraordinary item ...........       4,508      10,514       6,007
--------------------------------------------------------------------------------
Extraordinary item:
      Loss on debt extinguishment ..........          86          16        --
--------------------------------------------------------------------------------

Net income .................................     $ 4,422     $10,498     $ 6,007
================================================================================


        See accompanying notes to financial statements.

<PAGE>

                       Mid-America Capital Partners, L.P.
                             (a limited partnership)
             Statements of Partners' Capital of the Partnership and
           Combined Statement of Partners' Capital of the Predecessor
                  Years ended December 31, 1998, 1997 and 1996

                             (Dollars in thousands)

                                                                CPG
                                                              Partners'
                                                              Capital    Total
                                          General  Limited    (Prede-  Partners'
                                          Partner  Partner    (cessor)  Capital
                                          -------  -------    --------  ------- 

Balance December 31, 1995 .............. $   --  $      --  $  59,978  $ 59,978 
      Capital contributions, net .......     --         --     65,966    65,966
      Net income .......................     --         --      6,007     6,007
--------------------------------------------------------------------------------
Balance December 31, 1996 ..............     --         --    131,951   131,951
      December 31, 1996
      Capital contributions, net
        (prior to Partnership formation)     --         --     24,359    24,359
      Formation contribution ...........  2,271    166,630   (166,630)    2,271
      Merger with Hermitage ............     90      8,890         --     8,980
         at Beechtree, LLC
      Capital distributions, net .......     --   (104,270)        --  (104,270)
      Net income .......................      2        176     10,320    10,498
--------------------------------------------------------------------------------
Balance December 31, 1997 ..............  2,363     71,426         --    73,789 
      Net income .......................     44      4,378         --     4,422
--------------------------------------------------------------------------------

Balance December 31, 1998 .............. $2,407  $  75,804  $      --   $ 78,211
================================================================================

  See accompanying notes to financial statements.


<PAGE>
                       Mid-America Capital Partners, L.P.
                             (a limited partnership)
                 Statements of Cash Flows of the Partnership and
               Combined Statement of Cash Flows of the Predecessor
                  Years ended December 31, 1998, 1997 and 1996
                             (Dollars in thousands)

                                                                  (Predecessor)
                                                   1998     1997       1996
                                                   ----     ----       ----
Cash flows from operating activities:
      Net income ...............................$ 4,422 $  10,498  $  6,007
      Adjustments to reconcile net income
          to net cash provided by operating 
          activities:
             Depreciation and amortization .....  9,350    6,541     4,058
             Extraordinary item ................     86       --        --
             Changes in assets and liabilities:
                 Restricted cash ...............    526     (654)      (29)
                 Due to affiliate .............. (1,122)   1,596        --
                 Other assets ..................     29     (120)      (52)
                 Accounts payable ..............     48     (197)      485
                 Accrued expenses and other 
                   liabilities                   (1,047)   1,166       712
                 Security deposits .............     (7)     164       240
--------------------------------------------------------------------------------
             Net cash provided by operating 
                activities                        12,285   18,994    11,421
Cash flows from investing activities:
             Purchases of real estate assets ...     --  (33,280)   (66,226)
             Improvements to properties ........ (5,556)  (4,951)    (4,819)
--------------------------------------------------------------------------------
             Net cash used in investing 
               activities .....                  (5,556) (38,231)   (71,045)
Cash flows from financing activities:
             Proceeds from notes payable .......142,000  140,000        --
             Principal payments on bridge
               notes payable                   (140,000)      --        --
             Principal payments on notes 
               payable .......                       --  (38,573)   (6,370)
             Deferred financing costs .......... (3,617)  (1,850)       --
             Due from limited partner .......... (7,349)  (1,264)       --
             Capital contributions, net
               (Predecessor) ..                      --   24,359    65,966
             Formation contribution ............     --    2,271        --
             Capital distributions  ............     -- (104,270)       --
             Bank overdrafts ...................    667       --        --
--------------------------------------------------------------------------------
             Net cash provided by (used in)
               financing activities ............ (8,299)  20,673    59,596
--------------------------------------------------------------------------------
             Net increase (decrease) in cash
               and cash equivalents ............ (1,570)   1,436       (28)
--------------------------------------------------------------------------------
Cash, beginning of period ......................  1,570      134       162
--------------------------------------------------------------------------------
Cash, end of period ............................ $   -- $  1,570  $    134
================================================================================
Supplemental disclosure of cash flow information:
   Interest paid ............................... $9,247 $    947  $  2,170
--------------------------------------------------------------------------------
Supplemental disclosure of noncash
  investing activities-
  Assumption of debt related to 
     property acquisitions ..                    $   -  $ 22,112  $    --
--------------------------------------------------------------------------------

     See accompanying notes to financial statements.


<PAGE>


                  MID-AMERICA CAPITAL PARTNERS, L.P.
                        (a limited partnership)

                     Notes to Financial Statements

                   December 31, 1998, 1997 and 1996



(1)  Organization and Summary of Significant Accounting Policies

     Organization

     Mid-America  Capital Partners,  L.P. (the Partnership) is a special purpose
     Delaware  limited  partnership.  The Partnership was formed on November 24,
     1997 for the sole purpose of owning and operating 26 apartment  communities
     (the Mortgaged Properties) and to manage,  renovate,  improve, lease, sell,
     transfer,   exchange,  mortgage  and  otherwise  deal  with  the  Mortgaged
     Properties.  The sole limited  partner of the  Partnership  is  Mid-America
     Apartments,  L.P.,  a Tennessee  limited  partnership  (MAALP),  which is a
     majority  owned  subsidiary  of  Mid-America  Apartment  Communities,  Inc.
     (MAAC).  MAAC  owns,  directly  or  through  its  subsidiaries,  all of the
     outstanding units of partnership interest. MAAC is a self- administered and
     self-managed umbrella partnership real estate investment trust (REIT). MAAC
     conducts  a  substantial   portion  of  its  operation  through  MAALP  and
     subsidiaries  of MAALP.  The sole  general  partner of the  Partnership  is
     MAACP, Inc., a Tennessee corporation (MAACP), a wholly-owned  subsidiary of
     MAAC.  The term of the  Partnership  shall be to December 31, 2020,  unless
     terminated earlier as provided in the Partnership Agreement or as otherwise
     provided by law.

          The Partnership was formed to succeed  substantially all the interests
     in   Capital    Properties   Group   (predecessor   to   the   Partnership,
     "Predecessor"). Distributions to the Partners relating to operations of the
     Mortgaged  Properties  will be based  upon net cash flow as  defined in the
     Partnership Agreement.  Profits and losses are allocated to the Partners in
     proportion with their  ownership.  Earnings per  Partnership  unit is not a
     meaning  presentation  because the Partnership is indirectly a wholly-owned
     subsidiary of MAAC.

     Subsequent to the Partnership formation,  MAALP contributed its interest in
     20 of the Mortgaged Properties, and the right to acquire the Reorganization
     Properties  (as  defined  below) to the  Partnership  in  exchange  for 99%
     limited partnership interest in the Partnership.  MAACP contributed cash in
     exchange for a 1% general partnership interest in the Partnership.

     The Mortgaged Properties consist of (i) 20 properties  contributed by MAALP
     comprising the Predecessor; (ii) 5 properties acquired on November 25, 1997
     by the  Partnership in connection  with the  consummation  of the merger of
     Flournoy  Development  Partnership  (FDC)  with and into MAAC and the other
     transactions (collectively, the ReorganizationProperties)

<PAGE>

     as  described  in the  Agreement  and  Plan of  Reorganization  dated as of
     September 15, 1997 (the Plan of Reorganization) between FDC, MAAC and MAALP
     consisting of 4 properties acquired from Brown-Flournoy  Equity Income Fund
     Limited Partnership (the  Brown-Flournoy  Properties) and Willow Creek; and
     (iii) one property (Hermitage at Beechtree) which was acquired November 25,
     1997 through the merger of Hermitage at Beechtree, L.L.C. with and into the
     Partnership.  The  Partnership  recorded  the five  properties  acquired in
     connection  with the Plan of  Reorganization  using the purchase  method of
     accounting.

     Basis of Presentation

     The  accompanying  1997  financial  statements  include the accounts of the
     Partnership from November 24, 1997 (the Partnership Formation Date) through
     December 31, 1997 and the accounts of the  Predecessor  for the period from
     January  1,  1997  through  the  Partnership   Formation  Date.   Financial
     statements for 1996 included the combined  accounts of the Predecessor.  As
     part  of the  Partnership  formation,  the  contribution  of all  Mortgaged
     Property  interests was reflected at historical cost in a manner similar to
     that used in pooling of interests accounting.

     The accompanying combined financial statements of the Predecessor have been
     presented on a combined basis because of their common ownership and because
     the Mortgaged Properties were contributed to the Partnership.  The accounts
     of each of the Mortgaged Properties comprising the Predecessor are combined
     in the financial  statements.  All  significant  inter-entity  accounts and
     transactions  have been eliminated in combination.  The combined  financial
     statements include the assets and liabilities, as well as the operations of
     the Predecessor,  from the date that each Property was acquired by MAALP or
     MAAC.

     The accompanying  combined  financial  statements  include the revenues and
     direct operating expenses of the Mortgaged Properties.  Certain general and
     administrative  expenses  and other  costs  which are  incurred by MAALP on
     behalf of the  Predecessor  are not included in the  financial  statements.
     Instead, the accompanying combined Predecessor financial statements reflect
     a management  fee  (calculated  as 4% of  revenues) to MAALP for  providing
     these  services.  In addition,  MAALP incurred debt to fund the acquisition
     and improvement of certain of the Properties. The debt and related interest
     expenses are not included in the accompanying financial statements.
<PAGE>

     Revenue Recognition

     The Partnership leases  residential  apartments under operating leases with
     terms  generally one year or less.  Rental and other  revenues are recorded
     when earned.

     Rental Operations

     The  Partnership  owns and  operates  apartment  units  which are leased to
     tenants on terms of one year or less, with monthly payments due in advance.
     In  management's  opinion,  due to the  number  of  tenants,  the  type and
     diversity of submarkets in which the Mortgaged  Properties operate, and the
     collection terms, there is no concentration of credit risk.

     Restricted Cash

     Restricted  cash  consists of escrow  deposits held by lenders for property
     taxes,  insurance,  debt  service  and  replacement  reserves.  The  escrow
     deposits are designated for certain operating expense payments.

     Real Estate Assets and Depreciation

     Real  estate  assets are  carried at the lower of  depreciated  cost or net
     realizable  value.  Interest,  property taxes and other  development  costs
     incurred during construction are capitalized until completion.  Repairs and
     maintenance costs are expensed as incurred while significant  improvements,
     renovations  and  replacements  are  capitalized.   The  cost  of  interior
     painting, vinyl flooring and blinds are expensed as incurred.

     In conjunction with acquisitions of properties, the Partnership's policy is
     to  provide in its  acquisition  budgets  adequate  funds to  complete  any
     deferred  maintenance  items  to  bring  the  properties  to  the  required
     standards,  including the cost of replacement appliances,  carpet, interior
     painting, vinyl flooring and blinds. These costs are capitalized.

     Depreciation is computed on a straight-line basis over the estimated useful
     lives of the  related  assets  which  range  from 8 to 40 years  for  land,
     buildings  and  improvements  and  5  years  for  furniture,  fixtures  and
     equipment.

     Deferred Financing Costs

     Deferred  financing  costs are amortized over the terms of the related debt
     using a method which approximates the interest method.

     Due from Limited Partner

     The  Partnership  periodically  makes payments to the Limited Partner based
     upon  the  excess  cash  flows  of the  Mortgaged  Properties  from  rental
     operations  or  receives  cash from the  limited  partner  to fund  capital
     improvements on the Mortgaged  Properties.  These payments and receipts are
     recorded on the balance sheet of the Partnership as a receivable or payable
     to the Limited Partner.

<PAGE>

     Due to Affiliate

     The  Partnership  may make  payments or receive  cash from MAAC in a manner
     similar to that of the  Partnership and Limited  Partner  described  above.
     These  payments  and  receipts  are  recorded on the  balance  sheet of the
     Partnership as a receivable or payable to an affiliate, MAAC.

     Capital Contributions, Net

     MAALP  provided  cash  management  and vendor  remittance  services for the
     Predecessor.  Net cash flows  resulting  from these services are treated as
     capital contributions or distributions. In addition, MAALP provided funding
     for the Predecessor's property acquisition and improvement projects and for
     debt  service  related to the notes  payable  included  in the  Predecessor
     combined  financial  statements.  The amount of these funded activities are
     contributed by MAALP to the Predecessor as capital  contributions.  Capital
     contributions,  net for  the  years  ended  December  31,  1997  and  1996,
     consisted of funds utilized (provided) by (dollars in thousands):

                                                         1997     1996
                                                         ----     ----
       Acquisitions and improvements of properties     $19,064  $71,045
       Principal payments on notes payable              16,461    6,370
       Intercompany remittances, net                   (11,166) (11,449)
                                                       -------  ------- 
                                                       $24,359   65,966
                                                       =======   ======

     Income Taxes

     No provision  for federal  income  taxes has been made in the  accompanying
     combined  financial  statements.  Each partner is responsible for reporting
     his share of taxable income or loss from the real estate investments.


     Use of Estimates

     Management  of  the  Partnership  and  Predecessor  has  made a  number  of
     estimates  and  assumptions   relating  to  the  reporting  of  assets  and
     liabilities  and the  disclosure of contingent  assets and  liabilities  to
     prepare these financial  statements in conformity  with generally  accepted
     accounting principles. Actual results could differ from those estimates.


     Recent Accounting Pronouncements

     In June 1998,  SFAS No. 133,  "Accounting  for Derivative  Instruments  and
     Hedging  Activity," was issued effective for years beginning after June 15,
     1999.  The  Partnerships  has  only  limited  involvement  with  derivative
     financial instruments and does not use them for trading purposes.  This new
     accounting  statement  is not  expected  to have a  material  impact on the
     Partnership's consolidated financial statements.

<PAGE>

(2)  Bridge Notes and Bonds Payable

     On  November  24,  1997  the  Mortgaged  Properties  were  acquired  by the
     Partnership  and were  pledged to secure a $140  million  loan (the "Bridge
     Notes") received from Morgan Stanley Mortgage Capital Inc. A portion of the
     proceeds  from the  Bridge  Notes  were  utilized  in  connection  with the
     acquisition  of certain of the  Reorganization  Properties,  the funding of
     deferred financing costs, the establishment of replacement reserves and the
     remainder being distributed to MAALP.

     A portion of the  Bridge  Notes  proceeds  was used to repay  certain  debt
     attributable to Willow Creek, resulting in an extraordinary loss of $16,000
     in 1997.

     On March 6, 1998, the Partnership  issued $142 million aggregate  principal
     amount of 6.376% Bonds due 2003 (the  "Bonds").  The Bonds are secured by a
     first  priority deed of trust,  security  agreement and assignment of rents
     and leases in respect of the 26 mortgaged properties. The net proceeds from
     the sale of the Bonds were applied to the Bridge Notes and utilized to fund
     costs of the issuance.

     In anticipation  of the March 6, 1998 Bond issuance  discussed  above,  the
     Partnership entered four separate interest rate swaps in 1997 with notional
     amounts  aggregating  $140  million,  the  effect  of which was to lock the
     interest rate on $140 million of the Bonds at an average rate of 6.62%.  On
     March 6, 1998 the Company realized a $1.4 million loss on the interest rate
     contracts.  The realized loss resulting from the change in the market value
     of these contracts is being  amortized into interest  expense over the life
     of the related debt issuance.


(3)  Fair Value Disclosure of Financial Instruments

     Cash,  accounts  payable and accrued  expenses  and other  liabilities  and
     security deposits are carried at amounts which reasonably approximate their
     fair value.

     The fixed rate  Bonds had a carrying  value at  December  31,  1998 of $142
     million which reasonably  estimated their fair value (excluding  prepayment
     penalties)  based upon  interest  rates  available for the issuance of debt
     with similar terms and remaining  maturities as of December 31, 1998. These
     notes are subject to prepayment penalties which would be required to retire
     these notes prior to maturity.

     The carrying  value of the variable  rate Bridge Notes at December 31, 1997
     was $140 million and reasonably approximated its fair value.

     The  fair  value  estimates  presented  herein  are  based  on  information
     available  to  management  as of  December  31,  1998  and  1997.  Although
     management is not aware of any factors that would significantly  affect the
     estimated  fair value amounts,  such amounts have not been  comprehensively
     revalued for purposes of these  financial  statements  since that date, and
     current estimates of fair value may differ  significantly  from the amounts
     presented herein.


(5)  Commitments and Contingencies

     The Partnership is not presently subject to any material litigation nor, to
     the Partnership's  knowledge, is any material litigation threatened against
     the  Partnership  or any of the  Mortgaged  Properties,  other than routine
     litigation  arising in the ordinary  course of  business,  some of which is
     expected to be covered by liability insurance and none of which is expected
     to  have a  material  adverse  effect  on the  financial  condition  of the
     Partnership taken as a whole.
<PAGE>

(6)  Employee Benefit Plans

     MAALP employees at the Mortgaged Properties participate in employee benefit
     plans sponsored by MAAC.  
     

(7)  Related Party Transactions

     The  accompanying  financial  statements  include the  revenues and certain
     direct operating expenses of the Mortgaged  Properties.  MAALP provides the
     Mortgaged  Properties  management  and other services  (including  employee
     benefits)  at  a  4%  management  fee  and  also  provides  funds  for  the
     improvement of the Mortgaged  Properties.  Management  fees incurred by the
     Partnership under the terms of the agreement with MAALP were  approximately
     $1,530,000,  $1,228,000,  and $800,000  for the years ended 1998,  1997 and
     1996, respectively.

(8)  Financial Instruments with Off-Balance Sheet Risk

     The Partnership  has only limited  involvement  with  derivative  financial
     instruments  and does not use them for trading  purposes.  The  Partnership
     occasionally   utilizes  derivative  financial  instruments  as  hedges  in
     anticipation of future debt  transactions to manage  well-defined  interest
     rate risk.


(9)  Segment Information

     The  Partnership  adopted SFAS No. 131,  "Disclosures  About Segments of an
     Enterprise  and Related  Information",  in 1998. At December 31, 1998,  the
     Partnership  owned and operated 26 multifamily  apartment  communities from
     which it derives all  significant  sources of earnings and  operating  cash
     flows.  The   Partnership's   operational   structure  is  organized  on  a
     decentralized  basis,  with  individual  property  managers  having overall
     responsibility  and authority  regarding the operations of their respective
     properties.  Each property  manager  individually  monitors  local and area
     trends  in  rental  rates,  occupancy  percentages,  and  operating  costs.
     Property  managers are given the on-site  responsibility  and discretion to
     react  to  such  trends  in  the  best  interest  of the  Partnership.  The
     Partnership's  chief operating  decision maker evaluates the performance of
     each individual  property based on its contribution to net operating income
     in order to  ensure  that the  individual  property  continues  to meet the
     Partnership's   return  criteria  and  long  term  investment   goals.  The
     Partnership  defines each of its  multifamily  communities as an individual
     operating segment.  It has also determined that all of its communities have
     similar  economic  characteristics  and also meet the other  criteria which
     permit the communities to be aggregated into one reportable segment,  which
     is acquisition,  development,  and operation of the multifamily communities
     owned.
<PAGE>

     The  revenues,  net  operating  income,  assets and real estate  investment
     capital expenditures for the aggregated  multifamily segment are summarized
     as follows for the years ended December 31, 1998, 1997 and 1996 (in 000's):


                                                1998       1997         1996
                                                ----       ----         ----


Multifamily rental revenues                   $ 38,742   $ 30,949    $ 20,251
                                          ============= ========== ===========


Multifamily net operating income                24,535     19,964      13,044
Reconciling items to net income:
  Interest expense                              (9,162)    (1,671)     (2,169)
  General and administrative expenses           (1,515)    (1,238)       (810)
  Depreciation and amortization                 (8,324)    (6,389)     (4,000)
  Amortization of deferred financing costs      (1,026)      (152)        (58)
  Extraordinary items, net                         (86)       (16)          -

                                          ============= ========== ===========
    Net income                                 $ 4,422   $ 10,498     $ 6,007
                                          ============= ========== ===========


Assets                                         1998         1997
------                                         ----         ----

Multifamily real estate assets             $ 233,164    $ 227,608
Accumulated depreciation - 
   multifamily assets                        (22,309)     (13,985)
                                        -------------- -----------
   Total multifamily real estate 
     assets, net                             210,855      213,623
Cash and restricted cash                         406        2,502
Other assets                                  13,063        3,238
                                      ============== ===========
    Total assets                           $ 224,324    $ 219,363
                                      ============== ===========


                                              1998          1997        1996
                                              ----          ----        ----

Total expenditures for
    property additions                      $ 5,556      $ 4,951      $ 4,819
                                      ============== ===========  ===========



<PAGE>

(10)  Selected Quarterly Financial Information (Unaudited)

                       Mid America Capital Partners, L.P.
                      Quarterly Financial Data (Unaudited)

(Dollars in thousands)

                                        Year Ended December 31, 1998
                                        ----------------------------
                                    First     Second      Third      Fourth
                                    -----     ------      -----      ------
Total revenues                    $ 9,706    $ 9,567    $ 9,819    $ 9,650
Income before extraordinary item  $ 1,213    $ 1,157    $ 1,100    $ 1,038
Extraordinary item                  $ (86)       $ -        $ -
Net income                        $ 1,127    $ 1,157    $ 1,100    $ 1,038

                                         Year Ended December 31, 1997
                                         ----------------------------
                                    First     Second     Third      Fourth
                                    -----     ------     -----      ------
Total revenues                    $ 7,121    $ 7,550    $ 7,749    $ 8,589
Income before extraordinary item  $ 2,541    $ 2,622    $ 3,060    $ 2,291
Extraordinary item                    $ -        $ -        $ -        $16
Net income                        $ 2,541    $ 2,622    $ 3,060    $ 2,275
<PAGE>




                  MID AMERICA CAPITAL PARTNERS, L.P.

                             SCHEDULE III

         REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION

             Years ended December 31, 1998, 1997 and 1996



     A  summary  of  activity  for  real  estate   investments  and  accumulated
depreciation is as follows:

<TABLE>
                                                                                       Costs Capitalized
                                                                                          Subsequent to
                                                                      Initial Cost         Acquisition
                                                                      ------------         -----------

                                                                            Building              Building
                                                                              and                   and
Property Name                          Location          Encumbrance  Land  Fixtures      Land    Fixtures
-------------                          --------          -----------  ----  --------      ----    --------
<S>                                    <C>               <C>           <C>    <C>          <C>    <C>

Belmere ............................   Tampa, FL               -(1)     851     7,667       --        1,036
Crosswinds .........................   Jackson, MS             -(1)   1,535    13,826       --          935
Fairways @ Royal Oak                   Cincinnati, OH          -(1)     814     7,335       --          796
Hermitage at Beechtree                 Cary, NC                -(1)     900     8,099       --          539
Hidden Lake II .....................   Union City, GA          -(1)     621     5,587       --          154
High Ridge .........................   Athens, GA              -(1)     884     7,958       --          170
Howell Commons .....................   Greenville, SC          -(1)   1,304    11,740       --          508
Kirby Station ......................   Memphis, TN             -(1)   1,148    10,337       --        1,994
Lakepointe .........................   Lexington, KY           -(1)     411     3,699       --          622
Lakeside ...........................   Jacksonville, FL        -(1)   1,431    12,883        288      2,287
Marsh Oaks .........................   Atlantic Beach, FL      -(1)     244     2,829       --          557
Napa Valley ........................   Little Rock, AR         -(1)     960     8,642       --          579
Park Haywood .......................   Greenville, SC          -(1)     325     2,925         35      2,459
Park Place .........................   Spartanburg, SC         -(1)     723     6,504       --          482
Pear Orchard .......................   Jackson, MS             -(1)   1,352    12,168       --        1,228
Savannah Creek .....................   Southaven, MS           -(1)     778     7,013       --          499
Shenandoah Ridge ...................   Augusta, GA             -(1)     650     5,850       --        1,820
Somerset ...........................   Jackson, MS             -(1)     477     4,294       --          606
Southland Station I ................   Warner Robins, GA       -(1)     777     6,992       --          383
Steeplechase .......................   Hixson, TN              -(1)     217     1,957       --        1,174
Sutton Place .......................   HornLake, MS            -(1)     894     8,053       --          678
The Village ........................   Lexington, KY           -(1)     900     8,097       --          908
Tiffany Oaks .......................   Altamonte Springs, FL   -(1)   1,024     9,219       --          692
Westside Creek I ...................   Little Rock, AR         -(1)     616     5,559       --          392
Williamsburg Village                   Jackson, TN             -(1)     523     4,711       --          501
Willow Creek .......................   Columbus, GA            -(1)     623     5,523       --          393
-----------------------------------------------------------------------------------------------------------

Total Real Estate Assets ...........                      $142,000  $20,982  $189,467        323    $22,392
===========================================================================================================


                                       Gross Amount                                                           
                                       Carried at                                                             Life Used
                                      December 31, 1998                                                       To Compute
                                                                                                             Depreciation
                                                  Building                                                    in latest
                                                     and                   Accumulated            Date of      Income
Property Name                             Land    Fixtures        Total   Depreciation      Net Construction  Statement
-------------                             ----    --------        -----   ------------      ----------------  ---------
<S>                                      <C>      <C>            <C>          <C>         <C>      <C>         <C>

Belmere ............................        851      8,703        9,554       (1,314)      8,240        1984   5 - 40
Crosswinds .........................      1,535     14,761       16,296       (1,319)     14,977   1988/1990   5 - 40
Fairways @ Royal Oak................        814      8,131        8,945       (1,207)      7,738        1988   5 - 40
Hermitage at Beechtree..............        900      8,638        9,538         (339)      9,199        1988   5 - 40
Hidden Lake II .....................        621      5,741        6,362         (218)      6,144        1987   5 - 40
High Ridge .........................        884      8,128        9,012         (306)      8,706        1987   5 - 40
Howell Commons .....................      1,304     12,248       13,552         (828)     12,724   1986/1988   5 - 40
Kirby Station ......................      1,148     12,331       13,479       (1,893)     11,586        1978   5 - 40
Lakepointe .........................        411      4,321        4,732         (694)      4,038        1986   5 - 40
Lakeside ...........................      1,719     15,170       16,889       (1,708)     15,181        1985   5 - 40
Marsh Oaks .........................        244      3,386        3,630         (468)      3,162        1986   5 - 40
Napa Valley ........................        960      9,221       10,181         (722)      9,459        1984   5 - 40
Park Haywood .......................        360      5,384        5,744         (789)      4,955        1983   5 - 40
Park Place .........................        723      6,986        7,709         (259)      7,450        1987   5 - 40
Pear Orchard .......................      1,352     13,396       14,748       (2,252)     12,496        1985   5 - 40
Savannah Creek .....................        778      7,512        8,290         (665)      7,625        1989   5 - 40
Shenandoah Ridge ...................        650      7,670        8,320       (1,276)      7,044        1982   5 - 40
Somerset ...........................        477      4,900        5,377         (750)      4,627        1981   5 - 40
Southland Station I ................        777      7,375        8,152         (275)      7,877        1987   5 - 40
Steeplechase .......................        217      3,131        3,348         (693)      2,655        1986   5 - 40
Sutton Place .......................        894      8,731        9,625         (782)      8,843        1991   5 - 40
The Village ........................        900      9,005        9,905       (1,442)      8,463        1989   5 - 40
Tiffany Oaks .......................      1,024      9,911       10,935         (724)     10,211        1985   5 - 40
Westside Creek I ...................        616      5,951        6,567         (372)      6,195        1984   5 - 40
Williamsburg Village................        523      5,212        5,735         (793)      4,942        1987   5 - 40
Willow Creek .......................        623      5,916        6,539         (221)      6,318   1971/1977   5 - 40

                                   ----------------------------------------------------------------
Total Real Estate Assets ...........     21,305  $ 211,859      $233,164   ($ 22,309)   $210,855

                                   ================================================================
</TABLE>






(1) These 26  communities  are encumbered by the $142 million Bonds which mature
on March 3, 2003 and have an interest rate of 6.376%.

<PAGE>


                      Mid - America Capital Partners, L.P.
                             (a limited partnership)
              Real Estate Investments and Accumulated Depreciation
                             (Dollars in thousands)

                                        1998         1997          1996
                                        ----         ----          ----
Real estate investments:
      Balance at beginning of year   $ 227,608    $ 158,285      $ 87,240
      Acquisitions                           -       64,372        66,226
      Improvements                       5,556        4,951         4,819

                                   ------------- ----------- -------------

      Balance at end of year         $ 233,164    $ 227,608     $ 158,285
                                   ============= =========== =============

Accumulated depreciation:
      Balance at beginning of year    $ 13,985      $ 7,596       $ 3,596
      Depreciation                       8,324        6,389         4,000

                                   ------------- ----------- -------------

      Balance at end of year          $ 22,309     $ 13,985       $ 7,596
                                   ============= =========== =============


                 See accompanying notes to financial statements.