<PAGE>

                    U. S. Securities and Exchange Commission

                             Washington, D.C. 20549

                                  Form 10-QSB/A


(Mark One)

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

                  For the quarterly period ended March 31, 1999


[ ]      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.)

                    7826 Cooper Road, Cincinnati, Ohio 45242
                    (Address of principal executive offices)

                                 (513) 984-5001
                           (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 [ ]


<PAGE>


The purpose of this Form 10-QSB/A is to amend in its entirety Part I Financial
Information, Item 1 #1 Financial Statements contained in Form 10-QSB for the
quarterly period ended March 31, 1999 filed by Baron Capital Trust on May 14,
1999 with the Commission under Commission file number 333-35063.



                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                               BARON CAPITAL TRUST
                           Consolidated Balance Sheet
                      December 31, 1998 and March 31, 1999


<TABLE>
<CAPTION>
                                                                           DECEMBER 31, 1998    MARCH 31, 1999
<S>                                                                        <C>                  <C>
                       ASSETS

Rental Apartments:
                   Land                                                       $ 1,178,693         $ 1,178,693
                   Depreciable Property                                         6,189,095           6,189,095
                                                                              -----------         -----------
                                                                                7,367,788           7,367,788
                   Less:  Accumulated Depreciation                             (1,246,627)         (1,283,080)
                                                                              -----------         -----------
                                                                                6,121,161           6,084,708

Investments in Partnerships                                                       709,970           1,381,544

Cash and Cash Equivalents                                                         177,299              10,261
Restricted Cash                                                                    66,199              68,540
Property Management Reimbursements Rec., Affiliates                               155,071             155,071
Other Receivables                                                                  80,112              99,754
Advances to Affiliates                                                             10,750              10,750
Other Property and Equipment                                                      168,982             194,589
Other Assets                                                                      212,761             197,328
                                                                              -----------         -----------

                                                                                  871,174             736,293
                                                                              -----------         -----------

                                                                              $ 7,702,305         $ 8,202,545
                                                                              -----------         -----------
                                                                              -----------         -----------
              LIABILITIES AND SHAREHOLDERS EQUITY

Liabilities:
                   Mortgages Payable                                          $ 4,039,718         $ 4,029,810
                   Note Payable                                                   375,000             375,000
                   Accounts Payable and Accrued Liabilities including
                   $15,573 due to the Managing Shareholder                        388,385             237,922
                   Capital Lease Obligation                                        55,984              55,984
                   Security Deposits                                               38,336              40,865
                                                                              -----------         -----------

Total Liabilities                                                               4,897,423           4,739,581
                                                                              -----------         -----------

Shareholder's Equity:
                   Common Shares of beneficial interest, no par value;
                   2,500,000 shares authorized, 583,650 shares issued
                   and outstanding                                            $ 4,257,101         $ 5,389,503
                   Distribution to Owners                                         (72,159)           (146,341)
                   Deficit                                                     (1,380,060)         (1,780,198)
                                                                              -----------         -----------

Total Shareholder's Equity                                                      2,804,882           3,462,964
                                                                              -----------         -----------

Total Liabilities and Shareholder's Equity                                    $ 7,702,305         $ 8,202,545
                                                                              -----------         -----------
                                                                              -----------         -----------
</TABLE>



<PAGE>


                               BARON CAPITAL TRUST
                          Consolidated Income Statement
            For the Three Months Ended March 31, 1998 and March 31, 1999


<TABLE>
<CAPTION>
                                                                    MARCH 31, 1998   MARCH 31, 1999
<S>                                                                 <C>              <C>
REVENUES:
              Property                                                        0         $ 257,350
              Rental                                                          0             4,844
              Equity in Net Loss of Unconsolidated Partnership                0            (3,426)
              Other                                                           0               383
                                                                      ---------         ---------

Total Revenues                                                                0           259,151
                                                                      ---------         ---------

              Real Estate Expenses:
              Depreciation                                                    0            36,453
              Interest                                                        0            73,186
              Repairs and Maintenance                                         0            17,476
              Personnel                                                       0            29,040
              Property Taxes                                                  0            20,596
              Property Insurance                                              0             7,206
              Utilities                                                       0            11,551
              Other                                                           0             9,214
                                                                      ---------         ---------

Total Real Estate Expenses                                                    0           204,722
                                                                      ---------         ---------

Administrative Expenses:
              Personnel                                                  23,600           272,661
              Management, Investment, and Administrative                      0            92,873
              Professional Services                                       9,785            59,710
              Other                                                      13,768           162,457
                                                                      ---------         ---------

Total Administrative Expenses                                            47,153           587,701
                                                                                        ---------

Total Expenses                                                           47,153           792,423
                                                                                        ---------

Less:Reimbursed Expenses                                                      0           133,134

Net Expenses                                                             47,153           659,289
                                                                                        ---------

Loss Before Minority Interest                                           (47,153)         (400,138)

Minority Interest of Unitholders in Net Loss of
Operating Partnership                                                     8,860                 0
                                                                      ---------         ---------

Net Loss                                                              ($ 38,293)        ($400,138)
                                                                      ---------         ---------
                                                                      ---------         ---------
Net Loss Per Common Share                                             $    0.00            -$0.77
                                                                      ---------         ---------
                                                                      ---------         ---------
</TABLE>




<PAGE>

                               BARON CAPITAL TRUST
                      Consolidated Statement of Cash Flows
          For the Three Months Ended March 31, 1998 and March 31, 1999

<TABLE>
<CAPTION>
                                                                                                  MARCH 31, 1998      MARCH 31, 1999
<S>                                                                                               <C>                 <C>
Cash Flows from Operating Activities:
                                           Net Loss                                                   ($38,293)          ($400,138)

Adjustments to Reconcile Net Loss to Net Cash Used by
Operating Activities:
                                           Minority Interest of Unitholders in Net Loss
                                           of Operating Partnership                                     (8,860)                  0
                                           Depreciation and Amortization                                     0              41,267
                                           Equity in Net Loss of Unconsolidated Partnership                  0               3,426
                                       (Increase) decrease in Operating Assets
                                           Other Recievables                                            (2,062)            (19,642)
                                           Other Assets                                                      0              15,433
                                        Increase (decrease) in Operating Liabilities
                                           Accounts Payable and Accrued Liabilities                          0            (150,463)
                                           Security Deposits                                                 0               2,529
                                                                                                   -----------         -----------

                                           Net Cash Used by Operating Activities                       (49,215)           (507,588)
                                                                                                   -----------         -----------

Cash Flows from Investing Activities
                                           Investment in Partnerships                                        0            (675,000)
                                           Other Property and Equipment                                      0             (30,421)
                                                                                                   -----------         -----------

                                           Net Cash Used in Investing Activities                             0            (705,421)
                                                                                                   -----------         -----------

Cash flows from Financing Activities:
                                           Proceeds from the Sale of Common Shares                           0           1,132,402
                                           Distributions Paid                                                0             (74,182)
                                           Initial Capital Contributions                                50,100                   0
                                           Payments on Mortgages Payable                                     0              (9,908)
                                                                                                   -----------         -----------

                                           Net Cash Provided by Financing Activities                    50,100           1,048,312
                                                                                                   -----------         -----------

Net Increase (Decrease) in Cash and Cash Equivalents                                                       885            (164,697)

Cash and Cash Equivalents, Beginning                                                                         0             243,498
                                                                                                   -----------         -----------

Cash and Cash Equivalents, Ending                                                                  $       885         $    78,801
                                                                                                   -----------         -----------
                                                                                                   -----------         -----------
</TABLE>




<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 MARCH 31, 1999


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         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"), 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 Managing Shareholder of the Trust is Baron Advisors, Inc., a
         Delaware corporation which will manage the operations of the Trust and
         the Operating Partnership subject to the supervisory authority of the
         Board of the Trust over the activities of the Trust and the Operating
         Partnership and the Board's prior approval authority in respect of
         certain actions of the Trust and the Operating Partnership specified in
         the Declaration of Trust of the Trust.

         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 Managing Shareholder 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.

         BASIS OF PRESENTATION

         The accompanying consolidated financial statements include the
         consolidated accounts of the Trust and the Operating Partnership. The
         Trust is the general partner of the Operating Partnership and owns
         approximately 81% of the limited partner units of the Operating
         Partnership. The consolidated accounts of the Operating Partnership
         include the accounts of three limited partnerships in which the
         Operating Partnership is the controlling limited partner, by virtue of
         its right to remove the general partner due to its ownership percent of
         the total partnership interest in those limited partnerships.



                                       3
<PAGE>

         All significant inter-company transactions and balances have been
         eliminated in consolidation.


         BASIS OF PRESENTATION (CONTINUED)

         The minority interest of unitholders in the Operating Partnership
         represents the 1,202,160 limited partnership units owned by the
         Original Investors of the Operating Partnership, and is stated at the
         amount of the capital contribution by them to the Operating Partnership
         ($100,000), reduced by their proportionate share of the net loss of the
         Operating Partnership. As of December 31, 1998, the 1,202,160 Operating
         Partnership limited partnership units issued to the Original Investors
         are subject to escrow restrictions and 108,757 units are convertible
         into common shares of the Trust.

         CONCENTRATIONS OF CREDIT RISK

         Financial instruments that potentially subject the Trust to
         concentrations of credit risk are comprised of cash and receivables.

             CASH

         At various times during the year the Trust had deposits in financial
         institutions in excess of the federally insured limits. The Trust
         maintains its cash with high quality financial institutions, which the
         Trust believes limits these risks.

             PROPERTY MANAGEMENT REIMBURSEMENTS AND OTHER RECEIVABLES

         Receivables are comprised mainly of property management reimbursements
         due to the Operating Partnership from various properties it manages and
         monthly rents due. The Operating Partnership monitors exposure to
         credit losses and does not maintain an allowance for these receivables,
         as it believes that these receivables are fully collectible.

         REAL ESTATE RENTAL PROPERTIES AND DEPRECIATION

         Real estate rental properties are stated at cost less accumulated
         depreciation. Ordinary repairs and maintenance are expensed as
         incurred; replacements having an estimated useful life of at least one
         year and improvements are capitalized and depreciated over their
         estimated useful lives.

         Depreciation is computed on a straight-line basis over the estimated
         useful lives of the properties as follows:

<TABLE>
<CAPTION>
                                                     Estimated Useful
                                                      Lives (Years)
                                                      -------------
              <S>                                    <C>
              Building                                      30
              Leasehold improvements                        10
</TABLE>



                                       4
<PAGE>

<TABLE>
              <S>                                    <C>
              Furniture and fixtures                        7
              Computer equipment and software              3-5
</TABLE>

         REAL ESTATE RENTAL PROPERTIES AND DEPRECIATION (CONTINUED)

         Losses in carrying values of investment assets are provided by
         management when the losses become apparent and the investment asset is
         considered impaired in accordance with Statement of Financial
         Accounting Standards No. 121, "Accounting for the Impairment of
         Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
         Management evaluates its investment properties annually to assess
         whether any impairment indications are present. If any investment asset
         is considered impaired, a loss is provided to reduce the carrying value
         of the property to its estimated fair value. No such losses have been
         required or provided in the accompanying consolidated financial
         statements.

         REVENUE RECOGNITION

         Apartment units are leased under operating leases with terms of
         generally one year or less. Rental income is recognized when due from
         tenants.

         CASH AND CASH EQUIVALENTS

         For purposes of the statement of cash flows, the Trust considers all
         investments purchased with an original maturity of three months or less
         to be cash equivalents.

         INVESTMENTS IN PARTNERSHIPS

         The Trust, through the Operating Partnership, accounts for its
         investments in limited Partnerships in which it is deemed not to have
         the controlling interest, but has more than a minor limited partnership
         interest, utilizing the equity method of accounting. The Operating
         Partnership's investment in Alexandria Development, L.P., which
         represents a 12.3% interest at December 31, 1998, is accounted for
         using the equity method.

         Investments in partnerships in which the Operating Partnership's
         interest is so minor that the Partnership has virtually no influence
         over partnership operating and financial policies are accounted for
         utilizing the cost method. These investments generally represent less
         than 5% of the partnership interest. The investments in certain other
         limited partnerships as of December 31, 1998, which represent less than
         a 4% partnership interest in each case, are accounted for on the cost
         method. The Trust periodically assesses the estimated realizable value
         of these investments in order to ascertain that there has been no
         impairment in their recorded value.



                                       5
<PAGE>


         CAPITAL RESERVE

         In connection with the acquisition of the investment properties, as
         required by the lending institutions, the Trust has established a
         capital reserve account, which is to be used for significant
         improvements to the property.

         LOAN COSTS

         The Trust has capitalized those costs incurred with obtaining financing
         on the investment properties. Such costs (included with other assets)
         are being amortized over six years, the remaining term of the
         financing.

         USE OF ESTIMATES

         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amounts of assets and
         liabilities and disclosure of contingent assets and liabilities at the
         date of the financial statements and the reported amounts of revenues
         and expenses during the reporting period. Actual results could differ
         from those estimates.

         INCOME TAXES

         The Trust has not provided for federal income taxes because the Trust
         believes it qualifies as a real estate investment trust (REIT) under
         Section 856 to 860 of the Internal Revenue Code. A REIT will generally
         not be subject to federal income taxation on that portion of its income
         that qualifies a REIT taxable income to the extent that it distributes
         substantially all of its taxable income to its stockholders and
         complies with certain other requirements. The Trust made an REIT
         election for the year ended December 31, 1998.

         FAIR VALUE OF FINANCIAL INSTRUMENTS

         The respective carrying value of certain on-balance-sheet financial
         instruments approximated their fair value. These instruments include
         cash, receivables, accounts payable and accrued liabilities. Fair
         values were assumed to approximate carrying values for these financial
         instruments since they are short-term in nature and their carrying
         amounts approximate fair values or they are receivable or payable on
         demand.

         The fair value of debt instruments has been estimated by using
         discounted cash flow models incorporating discount rates based on
         current market interest rates for similar types of instruments. At
         December 31, 1998, the differences between estimated fair value and the
         carrying value of debt instruments were not material.



                                       6
<PAGE>

         RECENT ACCOUNTING PRONOUNCEMENTS

         In June 1997, the Financial Accounting Standards Board issued SFAS No.
         130, "Reporting Comprehensive Income" and No. 131, "Disclosures about
         Segments of an Enterprise and Related Information." SFAS No. 130
         establishes standards for reporting and displaying comprehensive
         income, its components, and accumulated balances. SFAS No. 131
         establishes standards for the way that public companies report
         information about operating segments in annual financial statements and
         requires reporting of selected information about operating segments in
         interim financial statements issued to the public. Both SFAS No. 130
         and SFAS No. 131 are effective for periods beginning after December 15,
         1997. The Trust adopted these new accounting standards in 1998, and
         their adoption had no effect on the Trust's financial statements and
         disclosures.

         In June 1998, the Financial Accounting Standards Board issued SFAS No.
         133, "Accounting for Derivative Instruments and Hedging Activities."
         SFAS No. 133 requires companies to recognize all derivatives contracts
         as either assets or liabilities in the balance sheet and to measure
         them at fair value. If certain conditions are met, a derivative may be
         specifically designated as a hedge, the objective of which is to match
         the timing of the gain or loss recognition of the hedging derivative
         with the recognition of (i) the changes in the fair value of the hedged
         asset or liability that are attributable to the hedged risk or (ii) the
         earnings effect of the hedged forecasted transaction. For a derivative
         not designated as a hedging instrument, the gain or loss is recognized
         in income in the period of change. SFAS No. 133 is effective for all
         fiscal quarters of fiscal years beginning after June 15, 1999.
         Historically, the Trust has not entered into derivatives contracts to
         hedge existing risks or for speculative purposes. Accordingly, the
         Trust does not expect adoption of the new standard on January 1, 2000
         to affect its financial statements.


NOTE 2.  MATERIAL SUBSEQUENT EVENTS  AND CONTINGENCIES

         ALEXANDRIA APARTMENTS

         On October 14, 1998, the Operating Partnership acquired an approximate
         12.3% limited partnership interest in Alexandria Development, L.P. (the
         "Alexandria Property"), a Delaware limited partnership which is the
         owner and developer of a 168-unit residential apartment property under
         construction in Alexandria, Kentucky. The Operating Partnership paid
         $400,000 for eight (8) units of limited partnership interest out of a
         total of sixty-five (65) units and retains an option to acquire the
         remaining fifty-seven (57) units of limited partnership interests for
         $50,000 per unit or approximately $2,850,000. The option is exercisable
         as additional apartments are completed and rented and expires on
         October 15, 1999. An affiliate of the Trust, affiliated through common
         ownership, sold the partnership interest in the Alexandria Property to
         the Operating Partnership and also serves as the managing general
         partner of the Alexandria Property. During the



                                       7
<PAGE>

         construction stage of the apartment property, the Operating
         Partnership's limited partnership interest in the Alexandria Property
         is entitled to an annual 12% preferential


         ALEXANDRIA APARTMENTS (CONTINUED)

         return, which is senior to the other limited partnership interests and
         the general partner's nominal 1% interest.

         As of March 31, 1999 the Operating Partnership owned twenty-one and
         seven tenths (21.7) units of limited partnership interest for which it
         paid $1,085,000. Subsequent to March 31, 1999, the Operating
         Partnership exercised its option to purchase an additional two and one
         half (2.5) units of limited partnership interest for $125,000.

         CONTRACT TO PURCHASE ADDITIONAL PROPERTIES

         In September 1998, the Trust entered in an agreement with three real
         estate development companies to acquire two luxury residential
         apartment properties in the development stage upon the completion of
         construction. The development companies (Brentwood at Southgate, Ltd.,
         Burlington Residential, Ltd. and The Shoppes at Burlington, Ltd.) are
         controlled by one of the Trust's founders and chief executive officer.
         The properties are scheduled to have a total of 652 units, comprised of
         one, two and three bedroom/one or two bathroom apartments. Construction
         of one of the properties, located in Louisville, Kentucky, is expected
         to be completed prior to the end of 2000, and construction of the other
         property, located in Burlington, Kentucky (part of the Cincinnati
         metropolitan area), is expected to be completed by the end of 2001. The
         aggregate purchase price for the two properties is in the range of
         approximately $41,000,000 to $43,000,000. The closing of each
         acquisition, which is expected to occur shortly following the
         completion of construction, is conditioned on, among other things, the
         completion of the respective apartment property, the availability of
         first mortgage financing and the Trust's raising the balance of the
         funds necessary for the acquisition in its ongoing Cash Offering or
         otherwise have funds available to make the acquisition.

         In connection with the transaction and in exchange for certain benefits
         described below, the Trust agreed to co-guarantee (along with the chief
         executive officer), up to 35% (or approximately $12,500,000) of the
         development portion of long-term construction loans with an aggregate
         principal amount of up to $36,000,000 to be provided by a bank to the
         development companies. As of March 31, 1999, approximately $4,850,000
         of such loans had been drawn down, resulting in outstanding guarantees
         of approximately $1,700,000. Subject to the fulfillment of certain
         closing and funding conditions, the construction loans will be made to
         the development companies in connection with the development and
         construction of the two apartment properties and of an 111,000 square
         foot shopping center being developed in Burlington, Kentucky. The
         interest rates on the construction loans range from 7.36% to 7.52%. The
         Trust also agreed that, if the loans are not repaid prior to the
         expiration of the guarantee, it will either buy out the bank's position
         on the entire



                                       8
<PAGE>

         amount of the construction loans or arrange for a third party to do so.
         The construction loans are expected to be replaced by a long-term
         credit facility.


         CONTRACT TO PURCHASE ADDITIONAL PROPERTIES (CONTINUED)

         The Trust expects to receive significant benefits from the transaction
         in addition to the acquisition of two large luxury apartment properties
         located in attractive communities. In exchange for the guarantee of the
         development portion of the construction loans, the Trust will receive a
         discount of approximately $212,500 (representing a one-half of one
         percent reduction) on the purchase price of the properties. The Trust
         and the development companies are negotiating a further price reduction
         which would apply if the development portion of the loans is not repaid
         prior to the expiration of the guarantee period and the Trust is
         required to buy out or arrange for the buyout of the lender's position
         on the loans.



NOTE 3.  SHAREHOLDERS' EQUITY

         CASH OFFERING

         On May 15, 1998, pursuant to a registration statement on Form SB-2, the
         Trust commenced an initial public offering of a maximum of 2,500,000
         common shares of beneficial interest in the Trust at $10 per common
         share, which is payable in full upon subscription, for proposed total
         gross proceeds of $25,000,000 (the Cash Offering). All of the common
         shares to be issued or sold by the Trust in the offering will be
         tradable without restriction under the Securities Act, but will be
         subject to certain restrictions designed to permit the Trust to qualify
         and maintain its status as a Real Estate Investment Trust under the
         Internal Revenue Code. The Cash Offering will terminate no later than
         November 30, 1999.

         EXCHANGE OFFERING

         The Operating Partnership has filed a registration statement on Form
         S-4 with the Securities and Exchange Commission covering up to
         2,500,000 units of limited partnership interest ("Units") to be
         registered under the Securities Act of 1933, as amended (the "Act")
         ("Exchange Offering").

         It is proposed that these units would be exchanged for units of limited
         partnership interest in 23 limited partnerships (the "Exchange
         Partnerships"), which directly or indirectly own equity and/or mortgage
         interests in one or more residential apartment properties. The Exchange
         Partnerships are managed by corporate general partners which are
         affiliated with one of the founders of the Operating Partnership, who
         is the sole stockholder and director of the Managing Shareholder of the
         Trust. This registration statement has not yet become effective.



                                       9
<PAGE>

         The number of Units being offered in exchange for the limited
         partnership interests in the Exchange Partnerships will be based on
         appraisals prepared by qualified and licensed independent appraisal
         firms for each underlying residential apartment property. For purposes
         of the Exchange Offering, each Unit has been arbitrarily assigned an
         initial value of $10, which corresponds to the offering price of each
         Trust Common Share

         EXHANGE OFFERING (CONTINUED)

         currently being offered to the public pursuant to the Cash Offering.
         The value of each Unit and Common Share outstanding will be
         substantially identical since Unit holders, including recipients of
         Units in the Exchange Offering, will be entitled to exchange all or a
         portion of their Units at any time and from time to time for an
         equivalent number of Trust Common Shares, so long as the exchange would
         not cause the exchanging party to own (taking into account certain
         ownership attribution rules) in excess of 5% of the then outstanding
         shares in the Trust, subject to the Trust's right to cash out any
         holder of Units who requests an exchange and subject to certain other
         exceptions. To facilitate such exchanges of Units into Common Shares,
         2,500,000 Common Shares (in addition to the 2,500,000 Common Shares
         being offered by the Trust in the Cash Offering) have been registered
         with the Commission. As its initial investment targets in the Exchange
         Offering, the Operating Partnership is offering to acquire equity
         and/or subordinated mortgage interests in 26 properties (the "Exchange
         Properties") directly or indirectly owned by the 23 Exchange
         Partnerships. The Operating Partnership will acquire interests in a
         particular property and/or mortgages by acquiring from limited partners
         their units of limited partnership interest in the respective Exchange
         Partnership. Each of the Exchange Partnerships directly or indirectly
         owns equity and/or mortgage interests in one or more properties.
         Certain of the Exchange Partnerships directly or indirectly own equity
         interests in 16 properties which consist of an aggregate of 1,012
         residential units (comprised of studio, one, two, three and four
         bedroom units). Certain of the Exchange Partnerships directly or
         indirectly own mortgage interests in 10 properties, which consist of an
         aggregate of 813 existing residential units (studio and one and two
         bedroom units) and 168 units (two and three bedroom units) under
         development. Of the Exchange Properties, 21 properties are located in
         Florida , three properties in Ohio and one property each in Georgia and
         Indiana.

         OPERATING PARTNERSHIP LIMITED PARTNERSHIP UNITS

         In connection with the formation of the Trust and the Operating
         Partnership, the Original Investors each subscribed for 601,080 limited
         partnership units of the Operating Partnership (a total of 1,202,160
         units). In consideration for the units subscribed for by them, the
         Original Investors made a $100,000 capital contribution to the
         Operating Partnership. If the Cash Offering and the Exchange Offering
         are fully subscribed, those Units would represent 19% of the total
         Common Shares outstanding after completion of the Cash Offering and
         exchange by the Operating Partnership of 2,500,000 of its Units for
         units of limited partnership interest in real estate limited
         partnerships (including any exchange pursuant to the Exchange
         Offering), calculated on a fully diluted basis assuming all then
         outstanding Units (other than those acquired by the Trust) have been



                                       10
<PAGE>

         exchanged into an equivalent number of Common Shares. If, however, as
         of November 30, 1999, the Cash Offering and/or the Exchange Offering
         has been completed and the number of Units subscribed for by each
         Original Investment represents a percentage greater than 19% of the
         then outstanding Common Shares, calculated on a fully diluted basis
         assuming that all then outstanding Units (other than those acquired by
         the Trust)

         OPERATING PARTNERSHIP LIMITED PARTNERSHIP UNITS (CONTINUED)

         have been exchanged into an equivalent number of Common Shares, each
         Original Investor has agreed to return any excess Units to the
         Operating Partnership for cancellation. The Original Investors have
         deposited Units subscribed for by them into a security escrow account
         for six to nine years, subject to earlier release under certain
         conditions.

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

         Under the subscription agreement, the Original Investors agreed to
         waive future administrative fees for managing Participating Exchange
         Partnerships; agreed to assign to the Operating Partnership the right
         to receive all residual economic rights attributable to the general
         partner interests in Participating Exchange Partnerships; and, in order
         to permit management of the Exchange Properties by the Operating
         Partnership, caused the Exchange Partnerships to cancel the
         partnerships' prior property management agreements and agreed to forego
         the right to have a property management firm controlled by the Original
         Investors assume the property management role in respect of properties
         in which the Trust or the Operating Partnership invest.

         After the exchange with the limited partners and assignment of economic
         rights of the general partner, the Operating Partnership will control
         the Participating Exchange Partnerships by virtue of its ownership of
         at least 90% of the limited partnership interests, which will provide
         the Operating Partnership the ability to remove the general partner



                                       11
<PAGE>

         under the provisions of the limited partnership agreements that limited
         partners holding over 50% of total partnership interest have the right
         to remove the general partner.

         Based upon the total Common Shares outstanding as of March 31, 1999,
         the Original Investors would be entitled to exchange their limited
         partnership units for a net amount of

         OPERATING PARTNERSHIP LIMITED PARTNERSHIP UNITS (CONTINUED)

         122,561 Common Shares. These equivalent common shares have been taken
         into consideration in the calculation of net loss per share on an
         as-converted basis (see Note 4).

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 loss per share equals net loss divided by the weighted
         average shares outstanding during the year. The computation of diluted
         net loss per share that includes dilutive common stock equivalents in
         the weighted average shares outstanding has not been presented as it is
         anti-dilutive for the three months ended March 31, 1999.

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

<TABLE>
<CAPTION>
                                                          Weighted
                                                           Average            Loss
                                         Net Loss          Shares           Per Share
                                         --------          ------           ---------
          <S>                           <C>                <C>              <C>
          Three months ended
          March 31, 1999                $(400,138)         522,495            $(0.77)
                                        ---------          -------            ------
                                        ---------          -------            ------
</TABLE>


         Assuming that the Original Investors had exchanged their limited
         partnership units for an equivalent net amount of 122,561 Common
         Shares, the net loss per share on an as-converted basis would have been
         .62 per share.


                                       12
<PAGE>


August 12, 1999                         BARON CAPITAL TRUST


                                        By:      /s/  Gregory K. McGrath
                                            ----------------------------------
                                                 Gregory K. McGrath
                                                 Chief Executive Officer

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



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