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

                                   Form 10-QSB


(Mark One)

|X|   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

                         SECURITIES EXCHANGE ACT OF 1934

        For the quarterly period ended March 31, 2002

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

        For the transition period ended ______________to________________


                        Commission file number 333-35063



                               Baron Capital Trust

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


            Delaware                                             31-1574856

   (State or other jurisdiction                                (IRS Employer
of incorporation or organization)                            Identification No.)

               3570 U.S. Highway 98 North, Lakeland, Florida 33809

                    (Address of principal executive offices)

                                 (863) 853-2882
                           (Issuer's telephone number)

Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

Yes  |X|    No |_|

As of the date of this Report, the Registrant has outstanding 978,747 shares of
beneficial interest ("Common Shares"), its only class of common equity.

<PAGE>

                         PART I - FINANCIAL INFORMATION


Item 1. Financial Statements

        See following pages.


                                       2
<PAGE>

                               BARON CAPITAL TRUST

                      CONSOLIDATED CONDENSED BALANCE SHEETS



<TABLE>
<CAPTION>
                                                                      March 31,     December 31,
                                                                        2002            2001
                                                                    ------------    ------------
                                                                     (Unaudited)
<S>                                                                 <C>             <C>
                                   ASSETS
Rental Apartments:
   Land                                                             $  4,986,900    $  4,986,900
   Rental property held for sale                                       3,144,766       3,171,564
   Depreciable property                                               23,968,683      23,968,683
                                                                    ------------    ------------
                                                                      32,100,349      32,127,147
   Less accumulated depreciation                                       3,465,427       3,228,396
                                                                    ------------    ------------
                                                                      28,634,922      28,898,751

Cash and Cash Equivalents                                              1,050,253       1,426,375
Restricted Cash                                                          471,884         330,279
Receivables from Affiliates                                            5,820,144       5,783,929
Other Property and Equipment                                             102,840         106,321
Other Assets                                                             745,302         875,673
                                                                    ------------    ------------
                                                                    $ 36,825,345    $ 37,421,329
                                                                    ============    ============

                    LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
   Mortgages payable                                                $ 23,067,380    $ 23,161,025
   Accounts payable and accrued liabilities                              684,408       1,100,426
   Notes payable                                                       1,881,490       1,852,136
   Payables to affiliates                                              1,175,822       1,173,240
   Security deposits                                                     232,736         221,911
                                                                    ------------    ------------
         Total liabilities                                            27,041,836      27,508,738
                                                                    ------------    ------------

Shareholders' Equity:
   Common shares of beneficial interest, no par value; 25,000,000
      shares authorized; 978,747 shares issued and outstanding        18,950,773      18,950,773
   Deficit                                                            (8,824,757)     (8,695,675)
   Distributions                                                        (342,507)       (342,507)
                                                                    ------------    ------------
         Total shareholders' equity                                    9,783,509       9,912,591
                                                                    ------------    ------------
                                                                    $ 36,825,345    $ 37,421,329
                                                                    ============    ============
</TABLE>

            See notes to consolidated condensed financial statements.


                                      F-1
<PAGE>

                               BARON CAPITAL TRUST

                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                             Quarter Ended
                                                               March 31,
                                                               ---------
                                                          2002           2001
                                                       -----------    -----------
<S>                                                    <C>            <C>
Revenues:
   Property rental income                              $ 1,362,470    $ 1,569,482
   Interest and other income                               399,208        255,359
                                                       -----------    -----------
                                                         1,761,678      1,824,841

Real Estate Expenses:
   Depreciation                                            263,828        299,244
   Amortization of loan costs                               23,409         18,205
   Interest                                                464,107        522,692
   Repairs and maintenance                                 224,584        165,380
   Personnel                                               178,843        208,207
   Property taxes                                          114,780        140,977
   Property insurance                                       39,285         30,155
   Utilities                                               103,430        153,459
   Other                                                    99,682         27,291
                                                       -----------    -----------
                                                         1,511,948      1,565,610

Administrative Expenses:
   Personnel, including officer's compensation             124,590        155,290
   Professional services                                    46,570         66,083
   Other                                                   242,774        105,972
                                                       -----------    -----------
                                                           413,934        327,345

Loss Before Other Expenses                                (164,204)       (68,114)
                                                       -----------    -----------

Other Income (Expenses):
   Recovery of loan losses                                  35,122             --
   Mortgage prepayment penalties                                --       (534,075)
   Write-off of loan costs on refinanced loans                  --       (148,230)
                                                       -----------    -----------
                                                            35,122       (682,305)

Net Loss                                               $  (129,082)   $  (750,419)
                                                       ===========    ===========

Net Loss Per Share - Basic and Diluted                 $     (0.13)   $     (0.92)
                                                       ===========    ===========

Weighted Average Number of Common Shares Outstanding       970,020        816,316
                                                       ===========    ===========
</TABLE>

           See notes to consolidated condensed financial statements.


                                      F-2
<PAGE>

                               BARON CAPITAL TRUST

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                  Quarter Ended
                                                                                    March 31,
                                                                                    ---------
                                                                               2002           2001
                                                                            -----------    -----------
<S>                                                                         <C>            <C>
Cash Flows from Operating Activities:
   Net loss                                                                 $  (129,082)   $  (750,419)
   Adjustments to reconcile net loss to net cash and cash
      equivalents used in operating activities:
         Recovery for loan losses                                               (35,122)            --
         Depreciation                                                           263,828        307,743
         Amortization of loan costs                                              23,409         18,205
         Amortization of loan costs                                                  --        148,230
         Decrease in operating assets:
            Other assets                                                        106,962        132,105
         Increase (decrease) in operating liabilities:
            Accounts payable and accrued liabilities                           (416,019)      (704,611)
            Accrued interest on related party debt                               29,354             --
            Security deposits                                                    10,825          5,970
                                                                            -----------    -----------
               Net cash and cash equivalents used in operating activities      (145,845)      (842,777)
                                                                            -----------    -----------

Cash Flows from Investing Activities:
   Purchases of other property and equipment                                      3,481             --
   Increase in restricted cash                                                 (141,604)       (63,148)
                                                                            -----------    -----------
               Net cash and cash equivalents used in investing activities      (138,123)       (63,148)
                                                                            -----------    -----------

Cash Flows from Financing Activities:
   Payments on mortgages payable                                                (93,645)      (107,799)
   Proceeds from mortgage refinancing                                                --      2,166,237
   Payments on notes payable                                                         --       (396,025)
   Increase (decrease) in loans payable to affiliates, net                        1,491       (287,942)
                                                                            -----------    -----------
               Net cash and cash equivalents (used in) provided
                  by financing activities                                       (92,154)     1,374,471
                                                                            -----------    -----------

Net Increase (Decrease) in Cash and Cash Equivalents                           (376,122)       468,546

Cash and Cash Equivalents, Beginning                                          1,426,375         20,908
                                                                            -----------    -----------

Cash and Cash Equivalents, Ending                                           $ 1,050,253    $   489,454
                                                                            ===========    ===========

Supplemental Disclosure of Cash Flow Information:
   Cash paid for mortgage and other interest                                $   464,107    $   522,692
                                                                            ===========    ===========
</TABLE>

           See notes to consolidated condensed financial statements.


                                      F-3
<PAGE>

                               BARON CAPITAL TRUST

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Basis of Presentation

      The unaudited consolidated condensed balance sheet as of March 31, 2002,
      and the related unaudited consolidated condensed statements of operations
      and cash flows for the three months ended March 31, 2002 and 2001, and the
      unaudited consolidated condensed statements of shareholders' equity for
      the three months ended March 31, 2002 have been prepared by the Trust. In
      the opinion of management, all adjustments (which include
      reclassifications and normal recurring adjustments) necessary to present
      fairly the financial position, results of operations and cash flows at
      March 31, 2002 and for the periods presented, have been made. The results
      of operations for the three months ended March 31, 2002 are not
      necessarily indicative of the operating results for the full year.

      Certain information and footnote disclosures normally included in the
      financial statements prepared in accordance with generally accepted
      accounting principles have been condensed or omitted. It is suggested that
      these consolidated financial statements be read in conjunction with the
      Trust's financial statements and notes thereto included in the Trust's
      December 31, 2001 Annual Report on Form 10-KSB.

      Organization and Capitalization

      Baron Capital Trust (the "Trust") was organized as a business trust in
      Delaware on July 31, 1997. The Trust and its affiliate, Baron Capital
      Properties, L.P. (the "Operating Partnership" or the "Partnership"), a
      Delaware limited partnership, have been organized to acquire equity
      interests in residential apartment properties located in the United States
      and to provide or acquire debt mortgage loans secured by such types of
      property.

      The Trust's Declaration authorizes it to issue up to 25,000,000 shares of
      beneficial interest, no par value per share, consisting of common shares
      and of preferred shares of such classes with such preferences, conversion
      or other rights, voting powers, restrictions, limitations as to dividends,
      qualifications, or terms or conditions of redemption as the Board of
      Trustees of the Trust may create and authorize from time to time in
      accordance with Delaware law and the Declaration.

      The Trust commenced operations on February 3, 1998, at which time it
      received its initial capital contribution.

      The Trust is the general partner of the Operating Partnership and owns
      approximately 24% of the limited partner units of the Operating
      Partnership. The consolidated accounts of the Operating Partnership
      include the accounts of 25 controlled limited partnerships that at March
      31, 2002 had an indirect equity and/or debt interest in 27 apartment
      communities.

      All significant intercompany transactions and balances have been
      eliminated in consolidation.


NOTE 2. ADOPTION OF ACCOUNTING PRONOUNCEMENTS

      In August 2001, the FASB issued Statement No. 144, "Accounting for the
      Impairment or Disposal of Long-Lived Assets" (SFAS 144), which addresses
      financial accounting and reporting for the impairment or disposal of
      long-lived assets. SFAS 144 supersedes Statement No. 121,


                                      F-4
<PAGE>

                               BARON CAPITAL TRUST

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



NOTE 2. ADOPTION OF ACCOUNTING PRONOUNCEMENTS (Continued)

      "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
      Assets to Be Disposed Of", and the accounting and reporting provisions of
      APB Opinion No. 30, "Reporting the Results of Operations - Reporting the
      Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
      and Infrequently Occurring Events and Transactions", for the disposal of a
      segment of a business. SFAS 144 retains the requirement in Opinion No. 30
      to report separately discontinued operations and extends that reporting to
      a component of an entity that either has been disposed of or is classified
      as held for sale. The Trust adopted the provisions of SFAS 144 for the
      quarter ending March 31, 2002. The adoption of SFAS 144 did not have a
      material effect on the financial position or results of operations of the
      Trust.

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


NOTE 3. COMMITMENTS AND CONTINGENCIES

      Contract to Purchase Additional Properties

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

      In connection with the transaction, the Trust obtained a right of first
      negotiation to purchase the property from its owner, Burlington
      Residential, Ltd., upon completion and a right of first refusal to
      purchase the property on the same terms offered by a third party. The
      purchase price is expected to be approximately $30,000,000. It is
      contemplated that a significant portion of that amount would be covered by
      first mortgage financing. At the current time the


                                      F-5
<PAGE>

                               BARON CAPITAL TRUST

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



NOTE 3. COMMITMENTS AND CONTINGENCIES (Continued)

      Contract to Purchase Additional Properties (Continued)

      Trust does not have adequate resources to close on the transaction even if
      it were interested in doing so and it is uncertain whether the Trust will
      have adequate resources to complete the transaction upon completion of
      construction. In addition, as described below, because the owner of the
      first mortgage on the property has assumed control of the management of
      the Borrower and the development of the property, the exercisability of
      the Trust's rights is currently uncertain.

      In connection with the transaction, the Trust (along with Mr. McGrath)
      agreed to co-guarantee long-term first mortgage construction financing
      provided by KeyBank National Association ("KeyBank") to Burlington
      Residential, Ltd. ("Borrower"), the owner of the Burgundy Hills Property.
      As of February 14, 2002, approximately $6,478,000 of the first mortgage
      loan had been drawn down. The interest rate on the first mortgage loan is
      KeyBank's prime rate (currently 4.75%) or the LIBOR rate plus 2%. The
      Trust also agreed that, if the Borrower failed to comply with the
      repayment and other obligations under the loan documents, KeyBank could
      require the Trust to buy out the bank's position on the entire amount of
      the loan.

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

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

      The BankOne affiliate recently sold the two loans to Burgundy-Boone, LLC,
      an Illinois limited liability company, according to the latter's counsel.
      According to its counsel, Burgundy-Boone, LLC has assumed control of
      management of the Borrower and of the development of the Burgundy Hills
      Property and has foreclosed on the property. The Trust has not been able
      to verify whether Burgundy-Boone, LLC has foreclosed on the property.

      The Trust, as guarantor of the first mortgage loan, currently has a
      contingent liability for its full outstanding amount. Due to the
      uncertainty as to the status of the first mortgage loan and the


                                      F-6
<PAGE>

                               BARON CAPITAL TRUST

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



NOTE 3. COMMITMENTS AND CONTINGENCIES (Continued)

      Contract to Purchase Additional Properties (Continued)

      actions and intentions of Burgundy-Boone, LLC, the Trust's exposure on the
      guaranty is currently uncertain.

      According to its principal, in December 2001 Century Construction Inc.,
      the general contractor which performed construction services on the
      Burgundy Hills Property and held a mechanic's lien on the property in the
      amount of approximately $1,300,000, settled its claims with
      Burgundy-Boone, LLC, acting on behalf of the Borrower. Burgundy-Boone, LLC
      has completed construction on the last building in the first phase of the
      development.

      Warrants

      The Trust has outstanding warrants to purchase 59,676 common shares in the
      Trust at an exercise price of $13.00 per share. The warrants may be
      exercised at anytime and from time to time through May 15, 2003.

      Pending Litigation

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


NOTE 4. NET LOSS PER SHARE

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

      Basic net income (loss) per share equals net loss divided by the weighted
      average shares outstanding during the period. The computation of diluted
      net loss per share that includes dilutive common share equivalents in the
      weighted average shares outstanding has not been presented, as it is
      anti-dilutive for the three months ended March 31, 2002 and 2001.

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

                                                          Weighted      Net
                                                 Net       Average      Loss
                                                 Loss      Shares    Per Share
      For the three months ended March 31:
         2002                                 $(129,082)   970,020    $(0.13)
                                               ========    =======     =====
         2001                                 $(750,419)   816,316    $(0.92)
                                               ========    =======     =====


                                      F-7
<PAGE>

                               BARON CAPITAL TRUST

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



NOTE 5. CERTAIN TRANSACTIONS

      In February 2002, the Board of Trustees of the Trust received the
      preliminary findings of a report prepared by an independent auditing firm
      in which the firm opined that certain transactions of the Trust and the
      Operating Partnership (including the Alexandria and Riverwalk property
      investments) entered into by prior management involved improper conduct.
      The Board has used the preliminary findings for discussions with the
      former Managing Shareholder of the Trust concerning the transactions and
      to investigate the rights and obligations of the Trust and the Operating
      Partnership in connection therewith. The ultimate results of the
      preliminary findings and discussions will be reported at such time as they
      become definitive.


NOTE 6. SUBSEQUENT EVENT

      On April 25, 2002, Barcap Realty Services Group, Inc. (the Corporate
      Trustee of the Trust), Baron Advisors, Inc. (the former managing
      shareholder of the Trust), and the Board of Trustees (the "Board") of the
      Trust executed the Amended and Restated Declaration of Trust (the "Amended
      Declaration") of the Trust. The Declaration of Trust is the agreement that
      governs the operation and management of the Trust and the relationship
      among, and rights and obligations of, the Shareholders and Trustees of the
      Trust. The Amended Declaration amended and restated the prior version of
      the Declaration of Trust of the Trust dated August 11, 1998 (the "Prior
      Declaration") to (i) reflect the resignation of Baron Advisors, Inc.
      (controlled by Gregory K. McGrath, a founder and former Chief Executive
      Officer of the Trust) as the managing shareholder of the Trust, (ii)
      provide for the elimination of the role of Baron Advisors, Inc. as the
      managing shareholder of the Trust, (iii) provide for the Board to assume
      the obligations of the former managing shareholder in the management of
      the Trust, (iv) eliminate all provisions of the Prior Declaration that
      related to the Exchange Offering of Baron Capital Properties, L.P. (of
      which the Trust is the general partner and a limited partner) and the Cash
      Offering of the Trust which were completed in April 2000 and May 2000,
      respectively, and (v) correct certain typographical errors and other
      inconsistencies that are immaterial to the operation of the Trust and
      Baron Capital Properties, L.P. and to the rights of the Shareholders and
      Trustees of the Trust.


                                      F-8
<PAGE>

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

      The following discussion should be read in conjunction with the Trust's
      Consolidated Financial Statements and Notes thereto. (See ITEM 1 -
      FINANCIAL STATEMENTS.)

      Forward-looking Statements

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

      Results of Operations

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

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

      As described below in this Report, in May 1998, the Trust commenced an
      offering (the "Cash Offering") of up to 2,500,000 common shares of
      beneficial interest


                                       3
<PAGE>

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

      As of March 31, 2002, the Trust owned 978,747 Operating Partnership Units,
      representing approximately 24% of the then outstanding Units. Such Units
      are comprised of the Units acquired by the Trust from the Operating
      Partnership with the net proceeds of the Cash Offering and the Units that
      holders of Units have elected to exchange into Common Shares in the manner
      described below. Since the Units held by the Trust comprise substantially
      all of its assets, the operating results of the Trust are primarily
      dependent upon the operating results of the Operating Partnership.

      Through the Operating Partnership, the Trust has acquired all or
      substantially all the beneficial interests in 16 residential apartment
      properties, including the Heatherwood I Apartments (67 studio, one bedroom
      and two bedroom units located in Kissimmee, Florida) in June 1998; Crystal
      Court II Apartments (80 studio, one bedroom and two bedroom units located
      in Lakeland, Florida) in July 1998; Riverwalk Apartments (50 two bedroom
      units located in New Smyrna, Florida) in September 1998; and 13 properties
      acquired as part of the Exchange Offering in April 2000 (described below).
      In the Exchange Offering, the Operating Partnership also acquired
      subordinated mortgage and other debt interests in 10 properties.

      In July 1998, the Operating Partnership also acquired a small minority
      limited partnership interest in 13 real estate limited partnerships then
      managed by affiliates of Gregory K. McGrath (a founder and former Chief
      Executive Officer of the Trust and the Operating Partnership), including
      certain of the Exchange Partnerships which participated in the Exchange
      Offering and are now controlled and managed by the Trust.

      During 1998 and 1999, the Operating Partnership also acquired a 40%
      limited partnership interest in Alexandria Development, L.P. (the
      "Alexandria Partnership"), a Delaware limited partnership which owns
      Alexandria Apartments, a 168-unit residential apartment property (the
      "Alexandria Property") under development in Alexandria, Kentucky. As of
      March 31, 2002, 112 of the 168 planned residential units (approximately
      67%) had been completed and were in the rent-up stage. Of the completed
      units, 72 units had been rented as of March 31, 2002. The aggregate
      purchase price of the Operating Partnership's interest was $1,285,000, and
      it received an option to acquire the remaining limited partnership
      interests at the same price per percentage interest (for an additional
      option exercise price of approximately $1,950,000). The purchase price was
      based on an independent appraisal of the property less all liabilities,
      and was approved by the Board of the Trust. During 2000,


                                       4
<PAGE>

      the Operating Partnership purchased no additional units and the option
      expired in October 2000.

      An affiliate of Mr. McGrath previously controlled the Alexandria
      Partnership. It sold the 40% limited partnership interest in the
      Alexandria Partnership to the Operating Partnership. In September 2001,
      Mr. McGrath's affiliate assigned the remaining 60% limited partnership
      interest in the Alexandria Partnership to Sigma Renaissance Corporation (a
      Michigan corporation controlled by Jerome S. Rydell, a member of the Board
      of Trustees of the Trust), which also became the managing general partner
      of the Alexandria Partnership.

      In early May 2001, MarCap Corporation filed an action in the United States
      District Court for the Northern District of Illinois against WaKul, Inc.
      (a telecommunications company controlled by Mr. McGrath), Mr. McGrath, and
      the Alexandria Partnership, among other parties, seeking repayment of
      approximately $407,000 of indebtedness (plus unspecified interest,
      attorney's fees and collection costs) under a telecommunication equipment
      leasing agreement. Certain of the equipment was installed at the
      Alexandria Property. The Alexandria Partnership guaranteed WaKul, Inc.'s
      lease payments under the leasing agreement. The telecommunication
      equipment installed on the property is not essential to the operation of
      the property.

      The Alexandria Property is subject to first mortgage construction
      financing with a principal balance as of December 31, 2001 of
      approximately $8,525,000. The first mortgage is held by Fifth Third Bank.
      The Alexandria Partnership defaulted on the first mortgage construction
      loan when it matured in December 2000, and the lender has exercised its
      right to accelerate payment of the loan. In December 2001, a Kentucky
      court appointed a receiver to manage the property. The construction
      contractor is also owed approximately $890,000 for construction costs,
      penalties and interest. Sigma Renaissance Corporation, acting as the
      managing general partner of the Alexandria Partnership, recently caused
      the partnership to file for bankruptcy protection. The lender, however,
      was successful in lifting the automatic stay in the bankruptcy proceeding.
      As a result, it is currently anticipated that the bankruptcy proceeding
      will be dismissed and that the lender will begin foreclosure proceedings
      on the property.

      In 2000, the Operating Partnership reduced to zero on its records the
      value of its investment in the Alexandria Partnership due to the defaults
      on indebtedness, recurring losses incurred by the Alexandria Property, a
      partners' deficiency, and an updated appraisal that valued the property at
      an amount less than the total liabilities owed.

      In September 1998, the Trust entered into an agreement with three real
      estate development companies (Brentwood at Southgate, Ltd., Burlington
      Residential, Ltd. and The Shoppes at Burlington, Ltd.) to acquire, at the
      Trust's option, two luxury residential apartment properties in the
      development stage upon the completion of construction. The three
      development companies were previously controlled by Mr. McGrath. In
      September 2001, Mr. McGrath assigned all of the outstanding


                                       5
<PAGE>

      partnership interests in the three partnerships to Sigma Renaissance
      Corporation. One of the residential apartment properties has been sold to
      a third party with the Trust's consent. The remaining residential property
      (the "Burgundy Hills Property"), located in Florence, Kentucky (part of
      the Cincinnati metropolitan area), is scheduled to have a total of 396
      units, comprised of one, two and three bedroom/one or two bathroom
      apartments. Due to events described below, the anticipated date of
      completion of construction of the Burgundy Hills Property is uncertain.

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

      In connection with the transaction, the Trust (along with Mr. McGrath)
      agreed to co-guarantee long-term first mortgage construction financing
      provided by KeyBank National Association ("KeyBank") to Burlington
      Residential, Ltd. ("Borrower"), the owner of the Burgundy Hills Property.
      As of February 14, 2002, approximately $6,478,000 of the first mortgage
      loan had been drawn down. The interest rate on the first mortgage loan is
      KeyBank's prime rate (currently 4.75%) or the LIBOR rate plus 2%. The
      Trust also agreed that, if the Borrower failed to comply with the
      repayment and other obligations under the loan documents, KeyBank could
      require the Trust to buy out the bank's position on the entire amount of
      the construction loan.

      In September 2000, the Trust received notice from counsel to KeyBank that
      the Borrower had defaulted on its loan for failure to pay current interest
      due and meet certain equity requirements and covenants under the loan
      agreement, adverse changes in the financial conditions of the Borrower and
      the Trust, and the Trust's failure to meet certain tangible net worth
      tests set forth in the loan agreements. KeyBank indicated that it was
      exercising its right to accelerate the loan. According to Mr. McGrath,
      KeyBank agreed to forego further action for at least 60 days while the
      parties attempted to reach an arrangement. The extension expired in
      November 2000 and, according to Mr. McGrath, has been extended on a
      month-to-month basis. The Borrower paid down the outstanding accrued
      interest and a portion of the principal and is currently seeking a new
      long-term construction facility with another institutional lender to
      replace the first mortgage loan (and the other subordinated financing
      described below).


                                       6
<PAGE>

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

      The BankOne affiliate recently sold the two loans to Burgundy-Boone, LLC,
      an Illinois limited liability company, according to the latter's counsel.
      According to its counsel, Burgundy-Boone, LLC has assumed control of
      management of the Borrower and of the development of the Burgundy Hills
      Property and has foreclosed on the property. The Trust has been unable to
      verify whether Burgundy-Boone, LLC has foreclosed on the property.

      The Trust, as guarantor of the first mortgage loan, currently has a
      contingent liability for its full outstanding amount. Due to the
      uncertainty as to the status of the first mortgage loan and the actions
      and intentions of Burgundy-Boone, LLC, the Trust's exposure on the
      guaranty is currently uncertain.

      According to its principal, in December 2001 Century Construction Inc.,
      the general contractor which performed construction services on the
      Burgundy Hills Property and held a mechanic's lien on the property in the
      amount of approximately $1,300,000, settled its claims with
      Burgundy-Boone, LLC, acting on behalf of the Borrower. Burgundy-Boone, LLC
      has completed construction on the last building in the first phase of the
      development.

      In April 2000, pursuant to a registration statement on Form S-4, the
      Operating Partnership completed its Exchange Offering under which it
      acquired additional interests in residential apartment properties and one
      condominium apartment property. In the Exchange Offering, the Operating
      Partnership issued 2,449,492 registered Operating Partnership Units in
      exchange for substantially all outstanding units of limited partnership
      interest owned by individual limited partners ("Exchange Limited
      Partners") in 23 limited partnerships (the "Exchange Partnerships"). The
      Exchange Partnerships directly or indirectly owned equity and/or debt
      interests in one or more of 25 residential apartment properties and one
      condominium apartment property (the "Exchange Properties") located in the
      southeast and mid-west United States.

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


                                       7
<PAGE>

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

      In April 2001, the Operating Partnership sold its equity interest in one
      of the Exchange Properties, Glen Lake Apartments, a 144-unit residential
      apartment property located in St. Petersburg, Florida. Management of the
      Trust determined to sell the property based on its lack of performance and
      its need for substantial and frequent cash infusions.

      Certain of the Exchange Partnerships in which the Operating Partnership
      holds an interest own direct or indirect equity interests in 15 Exchange
      Properties which consist of an aggregate of 868 residential apartment
      units (comprised of studio, one, two, three and four-bedroom units).
      Certain of the Exchange Partnerships in which the Operating Partnership
      holds an interest directly or indirectly own subordinated mortgage and
      other debt interests in 10 Exchange Properties, which consist of an
      aggregate of 590 existing residential apartment units (studio and one and
      two bedroom units) and 152 condominium apartment units (two and three
      bedroom units) under development. Of the Exchange Properties in which the
      Operating Partnership continues to own an interest, 20 properties are
      located in Florida, three properties in Ohio and one property each in
      Georgia and Indiana.

      Consolidated Balance Sheet as of March 31,2002 Compared to December 31,
      2001

      During the three months ended March 31, 2002, total assets decreased by
      $595,984 to $36,825,345 while liabilities decreased by $466,902 to
      $27,041,836. The decrease in assets was mainly due to a reduction in cash
      used to pay down the accounts payable liability. The decrease in
      liabilities was primarily due to that payoff of accounts payable.


                                       8
<PAGE>

      Operations for the Three Months Ended March 31, 2002 Compared to the Three
      Months Ended March 31, 2001

      Revenues decreased by $63,163 from $1,824,841 for the three months ended
      March 31, 2001 to $1,761,678 for the three months ended March 31, 2002.
      Real Estate Expenses for the properties owned by the Operating Partnership
      decreased from $1,565,610 for the three months ended March 31, 2001 to
      $1,511,948 for the three months ended March 31, 2002. The decrease in
      Revenues is the result of the sale of Glen Lakes and the loss of income
      generated by that property. The reduction in Real Estate Expenses was
      principally due to a reduction in interest expense resulting from the
      refinancing activity in 2001. Administrative Expenses increased by $86,589
      from $327,345 for the three months ended March 31, 2001 to $413,934 for
      the three months ended March 31, 2002, primarily due to expenses incurred
      in connection with the relocation of the corporate offices. Other Income
      (Expenses) for the three months ended March 31, 2002 were $35,122. This
      income is the result of an adjustment to recover previously recognized
      loan losses on mortgage notes receivable. The Trust's Net Loss for the
      three months ended March 31, 2002 was $129,082 compared to a loss of
      $750,419 for the three months ended March 31, 2001.

      Liquidity and Capital Resources

      Net Cash Used in Operating Activities decreased by $696,932 from $842,777
      cash used in the three months ended March 31, 2001 to $145,845 cash used
      in the three months ended March 31, 2002. The decrease in Net Cash Used in
      Operating Activities was principally due to the reduced net loss for the
      period. Net Cash Used in Investing Activities increased $74,975 from
      $63,148 cash used for the three months ended March 31, 2001 to $138,123
      cash used for the three months ended March 31, 2002. The increase was
      principally due to an increase in restricted cash. Cash Flow Used in
      Financing Activities decreased by $1,466,625 from $1,374,471 cash provided
      in the three months ended March 31, 2001 to $92,154 cash used in the three
      months ended March 31, 2002. The cash proceeds of the refinancings in the
      first quarter of 2001 provided substantial cash from Financing Activities.
      There was no such activity in the first quarter of 2002 resulting in the
      increase in cash used.

      During the first three months of 2002, the Trust generated Funds From
      Operations (Funds from Operations is a measure of profitability in the
      REIT industry, which is measured as net income less depreciation,
      amortization, and other non-operating expenses and/or income) of $123,033
      versus negative Funds From Operations of $249,335 during the first three
      months of 2001.

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

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


                                       9
<PAGE>

      o     Refinance selected well performing assets;

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

      o     Reduce corporate overhead.

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

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

      o     In the second quarter of 2001, the Operating Partnership sold one of
            its properties (Glen Lake Apartments) that, in the past, required
            substantial and frequent cash infusions. Additional properties are
            being evaluated for potential disposition.

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

      Management believes that the actions presently being taken by the
      Operating Partnership and the Trust provide the opportunity for them to
      improve liquidity and profitability. The completion in April 2000 of the
      Exchange Offering has, in the opinion of management, provided the critical
      mass necessary for profitable operations. The Operating Partnership and
      the Trust will make distributions to their Unitholders and Shareholders of
      net income, if any, generated from investments in property interests as
      cash flow allows.

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


                                       10
<PAGE>

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

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

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

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


                                       11
<PAGE>

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

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

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

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

      In February 2002, the Board of Trustees of the Trust received the
      preliminary findings of a report prepared by an independent auditing firm
      in which the firm opined that certain transactions of the Trust and the
      Operating Partnership (including the Alexandria and Riverwalk property
      investments) entered into by prior management involved improper conduct.
      The Board has used the preliminary findings for discussions with the
      former Managing Shareholder of the Trust concerning the transactions and
      to investigate the rights and obligations of the Trust and the Operating
      Partnership in connection therewith. The ultimate results of the
      preliminary findings and discussions will be reported at such time as they
      become definitive.


                                       12
<PAGE>

                           PART II - OTHER INFORMATION


Item 1. Legal Proceedings

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

Item 2. Changes in Securities and Use of Proceeds


      Not Applicable.

Item 3. Defaults upon Senior Securities

      There were no defaults upon senior securities of the Trust in the first
      quarter of 2002.

      In connection with a transaction described above at "Part I - Item 2.
      Management's Discussion and Analysis or Plan of Operations - Results of
      Operations," the Trust (along with its former Chief Executive Officer)
      agreed to co-guarantee long-term first mortgage construction financing
      provided by KeyBank National Association ("KeyBank") to Burlington
      Residential, Ltd. ("Borrower"), the owner of a residential apartment
      property (the "Burgundy Hills Property") under development in Boone
      County, Kentucky. As of February 14, 2002, approximately $6,478,000 of the
      construction loan had been drawn down. The Borrower was previously
      controlled by Gregory K. McGrath, a founder and the former Chief Executive
      Officer of the Trust. In September 2001, Mr. McGrath assigned all of the
      outstanding partnership interest in the Borrower to Sigma Renaissance
      Corporation, a Michigan corporation controlled by Jerome S. Rydell, a
      member of the Board of Trustees of the Trust. The interest rate on the
      construction loan is KeyBank's prime rate (currently 4.75%) or the LIBOR
      rate plus 2%. The Trust also agreed that, if the Borrower failed to comply
      with the repayment and other obligations under the loan documents, KeyBank
      could require the Trust to buy out the bank's position on the entire
      amount of the construction loan.

      In September 2000, the Trust received notice from counsel to KeyBank that
      the Borrower had defaulted on its loan for failure to pay current interest
      due and meet certain equity requirements and covenants under the loan
      agreement, adverse changes in the financial conditions of the Borrower and
      the Trust, and the Trust's failure to meet certain tangible net worth
      tests set forth in the loan agreements. KeyBank indicated that since the
      default had not been cured within applicable grace periods under the loan
      agreement, it was exercising its right to accelerate the loan and demanded
      payment of the outstanding principal balance of the loan, together with
      all interest due thereon and amounts owed to KeyBank for charges, fees and
      expenses, in the aggregate amount of $5,633,135, and that it was relieved
      of any commitment to


                                       13
<PAGE>

      loan any additional funds to the Borrower for the existing phase and
      additional phases of the construction project.

      According to Mr. McGrath, KeyBank agreed to forego further action for at
      least 60 days while the parties attempted to reach an arrangement. The
      extension expired in November 2000 and, according to Mr. McGrath, has been
      extended on a month-to-month basis. The Borrower paid down the outstanding
      accrued interest and a portion of the principal and is currently seeking a
      new long-term construction facility with another institutional lender to
      replace the first mortgage loan (and the other subordinated financing
      described below).

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

      The BankOne affiliate recently sold the two loans to Burgundy-Boone, LLC,
      an Illinois limited liability company, according to the latter's counsel.
      According to its counsel, Burgundy-Boone, LLC has assumed control of
      management of the Borrower and of the development of the Burgundy Hills
      Property and has foreclosed on the property. The Trust has not been able
      to verify whether Burgundy-Boone, LLC has foreclosed on the property.

      The Trust, as guarantor of the first mortgage loan, currently has a
      contingent liability for its full outstanding amount. Due to the
      uncertainty as to the status of the first mortgage loan and the actions
      and intentions of Burgundy-Boone, LLC, the Trust's exposure on the
      guaranty is currently uncertain.

      According to its principal, in December 2001 Century Construction Inc.,
      the general contractor which performed construction services on the
      Burgundy Hills Property and held a mechanic's lien on the property in the
      amount of approximately $1,300,000, settled its claims with
      Burgundy-Boone, LLC, acting on behalf of the Borrower.


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

      None.


                                       14
<PAGE>

Item 5. Other Information

      None

Item 6. Exhibits and Reports on Form 8-K

      (a)


      Exhibit
      Number      Description
      ------      -----------

         3.1      Certificate of Business Trust Registration of the Registrant
                  (incorporated herein by reference to Exhibit 3.1 to the Form
                  SB-2 Registration Statement of Baron Capital Trust filed with
                  the Securities and Exchange Commission on September 5, 1997).

         3.2      Amended and Restated Declaration of Trust for the Registrant
                  made as of April 25, 2002 (incorporated herein by reference to
                  Exhibit 3.1 to the Current Report on Form 8-K of Baron Capital
                  Trust filed with the Securities and Exchange Commission on May
                  6, 2002).

         3.3      Form of by-laws of the Registrant (incorporated herein by
                  reference to Exhibit 3.3 to Amendment No. 3 to the Form SB-2
                  Registration Statement of Baron Capital Trust filed with the
                  Securities and Exchange Commission on May 15, 1998).


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


                                       15
<PAGE>

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


May 15, 2002

                                        BARON CAPITAL TRUST

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

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


                                       16