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

                                  Form 10-QSB/A


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

                  For the quarterly period ended June 30, 2000

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

        For the transition period ended ______________to________________


                        Commission file number: 333-35063


                               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.)

                    7800 Cooper Road, Cincinnati, Ohio 45242
                    (Address of principal executive offices)

                                 (513) 936-3408
                           (Issuer's telephone number)

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

Yes [X]  No [_]

As of the date of this Report, the Registrant has outstanding 953,131 common
shares of beneficial interest ("Common Shares"), its only class of common
equity.

<PAGE>

                                EXPLANATORY NOTE

As a result of certain adjustments in connection with the Trust's consolidated
financial statements for the year ended December 31, 2000, management determined
to restate its Forms 10-QSB and 10-QSB/A for the quarter ended June 30, 2000 as
previously filed on December 22, 2000 and March 1, 2001, respectively. The
amounts contained in the financial statements included in this Form 10-QSB/A
reflect these changes. See NOTE 1 to the consolidated financial statements under
"Basis of Presentation" for a more detailed explanation as to the restatement.
Certain subsequent events are also reflected in this Form 10-QSB/A.


                         PART I - FINANCIAL INFORMATION

Item 1.   Financial Statements

          See following pages.



                                       2
<PAGE>

                          INDEX TO FINANCIAL STATEMENTS


                                                                         PAGE
                                                                         ----

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

   Balance Sheets                                                        F-2

   Statements of Operations                                              F-3

   Statement of Shareholders' Equity                                     F-4

   Statements of Cash Flows                                              F-5

   Notes to Financial Statements                                      F-6 - F-18



                                      F-1
<PAGE>

                               BARON CAPITAL TRUST
                      CONSOLIDATED CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                              June 30,          December 31,
                                                                                2000                1999
                                                                                ----                ----
                                                                            (Unaudited)
                                                                              RESTATED
                                                                              --------
<S>                                                                        <C>                 <C>
                      ASSETS
Rental Apartments:
  Land                                                                     $     6,632,871     $     1,178,693
  Depreciable property                                                          29,536,314           6,189,095
                                                                           ---------------     ---------------
                                                                                36,169,185           7,367,788
  Less accumulated depreciation                                                 (1,794,404)         (1,453,177)
                                                                           ---------------     ---------------
                                                                                34,374,781           5,914,611

Investment in Partnerships                                                         510,696             930,970

Cash and Cash Equivalents                                                          127,372              33,774
Restricted Cash                                                                    762,969              52,089
Interest Receivable, Affiliates                                                  1,338,565              36,997
Due From Managing Shareholder                                                         --                14,783
Other Receivables                                                                  113,798               3,724
Advances to Affiliates                                                           6,307,011               5,141
Other Property and Equipment                                                       281,221             134,981
Other Assets                                                                       751,846             209,128
                                                                           ---------------     ---------------
                                                                           $    44,568,258     $     7,336,198
                                                                           ===============     ===============

           LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
  Mortgages payable                                                        $    25,203,107     $     4,278,117
  Accounts payable and accrued liabilities                                       2,333,509           1,295,092
  Notes payable                                                                    190,000             100,000
  Notes payable, affiliates                                                      3,778,779              50,000
  Capital lease obligation                                                          40,775              42,369
  Security deposits                                                                227,066              40,308
                                                                           ---------------     ---------------
     Total Liabilities                                                          31,773,236           5,805,886
                                                                           ---------------     ---------------


Shareholders' Equity:
Common Shares of beneficial interest, no par value, 25,000,000 shares
authorized; 826,979 and 675,086 shares issued and outstanding                   18,766,773           6,616,806
Distributions                                                                     (342,507)           (342,507)
Deficit                                                                         (5,629,244)         (4,743,987)
                                                                           ---------------     ---------------
    Total Shareholders' Equity                                                  12,795,022           1,530,312
                                                                           ---------------     ---------------
                                                                           $    44,568,258     $     7,336,198
                                                                           ===============     ===============
</TABLE>

            See notes to consolidated condensed financial statements


                                      F-2
<PAGE>

                               BARON CAPITAL TRUST
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                    UNAUDITED


<TABLE>
<CAPTION>
                                                                  Six              Six            Three             Three
                                                                 Months           Months          Months            Months
                                                                 Ended            Ended           Ended             Ended
                                                                June 30,         June 30,        June 30,          June 30,
                                                                  2000             1999            2000              1999
                                                                  ----             ----            ----              ----
                                                                RESTATED                         RESTATED
                                                                --------                         --------
<S>                                                          <C>              <C>              <C>              <C>
Revenue:

   Rental                                                    $   1,744,759    $     590,505    $   1,477,091    $     317,703
   Equity in net loss of unconsolidated partnership                (78,994)         (29,093)         (41,154)         (25,667)
   Interest and other income                                       368,134            1,037          342,594              654
                                                             -------------    -------------    -------------    -------------
                                                                 2,033,899          562,449        1,778,531          292,690
                                                             -------------    -------------    -------------    -------------

Real Estate Expenses:
  Depreciation                                                     341,227           72,907          306,264           36,454
  Amortization                                                      57,981               --           52,119               --
  Interest                                                         555,515          144,491          470,056           80,526
  Repairs and maintenance                                          280,564           37,727          107,251           18,176
  Personnel                                                        265,376           57,471          262,266           27,814
  Property Taxes                                                   147,818           41,276          127,914           20,680
  Property Insurance                                                38,030           10,718           32,670            3,513
  Utilities                                                        144,154           29,601          130,780           16,714
  Other                                                             89,368          131,570          204,076           86,528
                                                             -------------    -------------    -------------    -------------
                                                                 1,920,034          525,760        1,693,397          290,404
                                                             -------------    -------------    -------------    -------------

Administrative Expenses:
  Personnel, including officer's compensation                      535,461          465,509          375,843          132,711
  Professional services                                            254,039          258,889           92,919          188,187
  Other                                                            209,623          101,734          245,148           38,775
                                                             -------------    -------------    -------------    -------------
                                                                   999,122          826,132          713,909          359,673
                                                             -------------    -------------    -------------    -------------

     Total expenses                                              2,919,156        1,351,892        2,407,306          650,077
                                                             -------------    -------------    -------------    -------------


Net Loss                                                     $    (885,257)   $    (789,443)   $    (628,775)   $    (357,387)
                                                             =============    =============    =============    =============

Net Loss per Share -  Basic and Diluted                      $       (1.28)   $       (1.39)   $       (0.90)   $       (0.58)
                                                             =============    =============    =============    =============
</TABLE>

            See notes to consolidated condensed financial statements


                                      F-3
<PAGE>

                               BARON CAPITAL TRUST
            CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
                                    RESTATED


<TABLE>
<CAPTION>
                                                         Common Shares of
                                                        Beneficial Interest
                                                        -------------------
                                                      Shares           Amount      Distributions       Deficit            Total
                                                      ------           ------      -------------       -------            -----
<S>                                                  <C>         <C>              <C>              <C>               <C>
Balance, December 31, 1999                             675,086   $    6,616,806   $     (342,507)  $   (4,743,987)   $    1,530,312

Proceeds from sale of common shares of
    beneficial interest, net of offering costs          26,990          248,308             --               --             248,308

Common Shares issued in connection with
    Exchange Offering                                2,449,525       11,793,159             --               --          11,793,159

Shares issued as commission to broker-dealers
    in connection with Exchange Offering               124,903

Credit for estimated fair value of services
     performed by officer                                 --            108,500             --               --             108,500

Net Loss                                                  --               --               --           (885,257)         (885,257)
                                                --------------   --------------   --------------   --------------    --------------

Balance, June 30, 2000                               3,276,504   $   18,766,773   $     (342,507)  $   (5,629,244)   $   12,795,022
                                                ==============   ==============   ==============   ==============    ==============
</TABLE>

            See notes to consolidated condensed financial statements


                                      F-4
<PAGE>

                               BARON CAPITAL TRUST
                 CONSOLIDATED CONDENSED STATEMENTS OF CASHFLOWS
                                    UNAUDITED


<TABLE>
<CAPTION>
                                                                              Six Months Ended
                                                                         June 30,           June 30,
                                                                           2000               1999
                                                                      -------------      -------------
                                                                        RESTATED
<S>                                                                   <C>                <C>
Cash Flows from Operating Activities:
  Net Loss                                                            $    (885,257)     $    (789,443)
  Adjustments to reconcile net loss to
   net cash used in operating activities:
     Provision for officer's compensation                                   108,500               --
     Equity in net loss of unconsolidated partnership                        78,994             29,093
     Depreciation                                                           341,227             94,721
     Amortization of loan costs                                              57,981               --
     (Increase) decrease in operating assets:
       Property management reimbursements                                      --               38,476
       Other receivables                                                     (2,885)            80,984
       Other assets                                                         (63,667)           (30,894)
     Increase (decrease) in operating liabilities:
       Accounts payable and accrued liabilities                             149,742            (14,178)
       Security Deposits                                                      3,512               (840)
                                                                      -------------      -------------
         Net cash used in operating activities                             (211,853)          (592,081)
                                                                      -------------      -------------

Cash Flows from Investing Activities:
  Additions to rental apartments                                            (78,205)              --
  Investment in partnerships                                                   --             (885,000)
  Cash distribution from partnerships                                         6,082             27,000
  Purchases of other property and equipment                                  (4,979)           (10,073)
  Increase in restricted cash                                               (48,610)              --
                                                                      -------------      -------------
          Net cash used in investing activities                            (125,712)          (868,073)
                                                                      -------------      -------------

Cash Flows from Financing Activities:
  Proceeds from the sale of common shares of beneficial interest            248,308          1,681,653
  Distributions paid                                                           --             (167,596)
  Proceeds from mortgage financing                                             --              273,499
  Proceeds from notes payable                                                90,000               --
  Payments on notes payable                                                    --             (275,000)
  Payments on notes payable, affiliates                                     (90,644)
  Payments on mortgages payable                                             (99,242)           (22,141)
  Payments on capital lease obligation                                       (1,594)              --
  Increase in advances to/from affiliates, net                              284,335             10,750
  Other                                                                        --               20,000
                                                                      -------------      -------------
          Net cash provided by financing activities                         431,163          1,521,165
                                                                      -------------      -------------

Net Increase in Cash and Cash Equivalents                                    93,598             61,011

Cash and Cash Equivalents, Beginning                                         33,774            243,498
                                                                      -------------      -------------

Cash and Cash Equivalents, Ending                                     $     127,372      $     304,509
                                                                      =============      =============

Supplemental Disclosure of Cash Flow Information:
     Cash paid for mortgage and other interest                        $     555,515      $     144,491
                                                                      =============      =============
</TABLE>

            See notes to consolidated condensed financial statements


                                      F-5
<PAGE>

                              BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Basis of Presentation

          The consolidated balance sheet as of June 30, 2000, consolidated
          statements of operations for the six months ended June 30, 2000 and
          1999 and three months ended June 30, 2000 and 1999, the consolidated
          statements of cash flows for the six months ended June 30, 2000 and
          1999, and the consolidated statement of shareholders' equity for the
          six months ended June 30, 2000 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 June 30, 2000 and for the period presented, have been made.
          The results of operations for the three and six months ended June 30,
          2000 are not necessarily indicative of the operating results for the
          full year.

          As a result of certain adjustments in connection with the Trust's
          consolidated financial statements for the year ended December 31,
          2000, management determined to restate its Forms 10-QSB and 10-QSB/A
          for the quarter ended June 30, 2000 as previously filed on December
          22, 2000 and March 1, 2001, respectively. The Trust included in its
          original June 30, 2000 financial statements a provision for property
          impairment of $8,356,638, which was a result of writing off the excess
          of the recorded value of the Exchange Partnerships acquired in the
          Exchange Offering over the estimated current value of the Exchange
          Partnerships. The provision for property impairment was a result of
          calculating the recorded value at the date of the exchange (April 1,
          2000) with incomplete information. As a result, adjustments were made
          to the recorded value based on information not previously available to
          the Trust. Had the Trust been aware of this information at the time of
          filing the June 30, 2000 Forms 10-QSB and 10-QSB/A, the provision for
          property impairment of $8,356,638 would not have been recorded.
          Instead an adjustment of $11,005,924 would have been recorded to the
          consolidated balance sheet as an adjustment to the recorded amounts of
          land, depreciable property, advances to affiliates and shareholders'
          equity to reflect the estimated fair value of such assets. The amounts
          contained in the financial statements included in this Form 10-QSB/A
          reflect those changes. Certain subsequent events are also reflected
          herein.

          Certain information and footnote disclosures normally included in the
          financial statements prepared in accordance with generally accepted
          accounting principles have been condensed or omitted. It is suggested
          that these condensed consolidated financial statements be read in
          conjunction with the Trust's financial statements and notes thereto
          included in the Trust's December 31, 1999 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"), 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 mortgage loans secured by such types of property.

          The Trust's Declaration of Trust (the "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


                                      F-6
<PAGE>

                              BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

          Organization and Capitalization (Continued)

          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.

NOTE 2.   LIQUIDITY AND PROFITABILITY CONSIDERATIONS

          The accompanying consolidated financial statements have been prepared
          in conformity with generally accepted accounting principles which
          assume that the Trust will continue on a going concern basis,
          including the realization of assets and liquidation of liabilities in
          the ordinary course of business. For the six months ended June 30,
          2000 and the year ended December 31, 1999 the Trust incurred net
          losses of $885,257 and $3,166,927 and negative cash flows from
          operations of $211,853 and $1,022,587. The auditors' report for the
          year ended December 31, 1999 was qualified to express substantial
          doubt about the Trust's ability to continue as a going concern.

          During the years ended December 31, 2000 and 1999, the Trust
          experienced certain cash flow problems and has, from time to time,
          experienced difficulties meeting obligations as they became due.
          However, as reflected in the consolidated condensed financial
          statements for the first six months ended June 30, 2001 included in
          the Trust's quarterly report on Form 10-QSB for the three-month period
          ended June 30, 2001, the Trust generated Funds From Operations (Funds
          from Operations is a measure of profitability in the REIT industry
          measuring net income less depreciation, amortization, and other
          non-operating expenses and/or income) of approximately $411,000 versus
          negative Funds From Operations of approximately $417,000 for the six
          months ended June 30, 2000.

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

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

               o    refinance selected well performing assets;

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

               o    reduce corporate overhead.


                                      F-7
<PAGE>

                              BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2.   LIQUIDITY AND PROFITABILITY CONSIDERATIONS (Continued)

          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
                    Trust has initiated billing of tenants for their water used
                    at several locations and intends to continue implementation
                    of the strategy at other properties as the markets permit.
                    The Trust has also started a program of enhancing the
                    aesthetics of the properties, which is allowing the Trust to
                    increase rents while still improving occupancy.

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

               o    In April 2001, the Operating Partnership sold its equity
                    interest in one of the Exchange Properties, Glen Lakes
                    Apartments, a 144-unit residential apartment property
                    located in St. Petersburg, Florida. Management of the Trust
                    determined to sell the property based on its lack of
                    performance and its need for substantial and frequent cash
                    infusions. The sale price was approximately $3,900,000 and
                    resulted in a loss of $210,854. Additional properties are
                    being evaluated for potential disposition.

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

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

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


                                      F-8
<PAGE>

                              BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3.   RECENT ACCOUNTING PRONOUNCEMENTS

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

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

          Historically, the 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, 2001
          to affect its financial statements.

NOTE 4.   EXCHANGE OFFERING

          On April 7, 2000, pursuant to a registration statement on Form S-4,
          the Operating Partnership completed the Exchange Offering under which
          it acquired additional interests in residential apartment properties.
          In the Exchange Offering, the Operating Partnership issued 2,449,492
          registered Operating Partnership Units in exchange for substantially
          all outstanding units of limited partnership interest owned by
          individual limited partners ("Exchange Limited Partners") in 23
          limited partnerships (the "Exchange Partnerships"), which directly or
          indirectly owned equity and/or debt interests in one or more of 26
          residential apartment properties located in the southeast and mid-west
          United States. Prior to the completion of the Exchange Offering, the
          Exchange Partnerships were managed by corporate general partners (the
          "Corporate General Partners"), which were controlled by Gregory K.
          McGrath, who is a founder and former Chief Executive Officer of the
          Trust, a founder and principal unit holder of the Operating
          Partnership, and the Chief Executive, sole stockholder and director of
          the Managing Shareholder of the Trust.

          Following the completion of the Exchange Offering, the Exchange
          Partnerships continued to own the same property interests they owned
          prior to the offering; substantially all of the limited partnership
          interests in the 23 Exchange Partnership were owned by the Operating
          Partnership; Mr. McGrath, for nominal consideration, assigned to the
          Trust all of the equity stock in 18 of the Corporate General Partners
          and granted to the Board of the Trust a management proxy coupled with
          an interest to vote the shares of the remaining five Corporate General
          Partners; the Corporate General Partner of each of the Exchange
          Partnerships assigned to the Operating Partnership all of its economic
          interest in the


                                      F-9
<PAGE>

                              BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4.   EXCHANGE OFFERING (continued)

          partnership; and Mr. McGrath caused each Corporate General Partner to
          waive its right to receive from its Exchange Partnership any ongoing
          fees, effective upon completion of the exchange. As a result of the
          foregoing, the Operating Partnership (and indirectly the Trust) owned
          substantially all of the economic interest represented by the equity
          and debt interests owned by the Exchange Partnerships and controlled
          management of such partnerships.

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

          The acquisition of the Exchange Partnerships was accounted for under
          the purchase method of accounting, effective as of April 1, 2000 for
          accounting purposes. The cost of acquisition approximated the fair
          value of the net assets acquired (principally the appraised value
          determined by management based on actual 1998 appraisals of the
          underlying residential apartment properties less related liabilities)
          which amounted to $11,793,159. Therefore, no goodwill was recorded in
          this transaction. The results of operations of the Exchange
          Partnerships are included in the consolidated financial statements as
          of April 1, 2000.

          For financial statement presentation purposes, it is assumed that the
          Units of limited partnership interest in the Operating Partnership
          issued to Exchange Limited Partners in the Exchange Offering have been
          issued as Common Shares of the Trust, since the unit holders (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, so long as the exchange would not cause the exchanging
          party to own in excess of 5% of the then outstanding Common Shares,
          subject to the Trust's right to cash out any unit holder who requests
          an exchange and subject to certain other exceptions.

          The following unaudited pro forma summary presents consolidated
          financial information as if the Exchange Partnerships had been
          acquired effective January 1, 1999. The pro forma amounts include
          adjustments for depreciation as a result of the adjustment to fair
          value of the residential apartment properties and interest associated
          with the related mortgages. The pro forma information does not
          necessarily reflect the actual results that would have occurred nor is
          it necessarily indicative of future results of operations of the
          combined partnerships.


                                      F-10
<PAGE>

                              BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4.   EXCHANGE OFFERING (Continued)

                                                        Six Months Ended
                                                            June 30,
                                                       2000           1999
                                                   -----------    -----------
               Total revenues                      $ 3,640,000    $ 2,921,000
               Cost and expenses                     4,390,000      4,523,000
                                                   -----------    -----------
               Net loss                            $  (750,000)   $(1,602,000)
                                                   ===========    ===========

               Weighted average number of shares       690,306        567,840
                                                   ===========    ===========

               Net loss per share                  $     (1.09)   $     (2.82)
                                                   ===========    ===========

NOTE 5.   COMMITMENTS AND CONTINGENCIES

          Contract to Purchase Additional Properties

          In September 1998, the Trust entered into an agreement with three real
          estate development companies (Brentwood at Southgate, Ltd., Burlington
          Residential, Ltd. and The Shoppes at Burlington, Ltd.) to acquire, at
          the Trust's option, two luxury residential apartment properties in the
          development stage upon the completion of construction. The three
          development companies are controlled by one of the Trust's founders
          and former Chief Executive Officer. One of the residential properties
          has been sold to a third party with the Trust's consent. The remaining
          residential property is scheduled to have a total of 396 units,
          comprised of one, two and three bedroom/one or two bathroom
          apartments. Construction of the property (the "Burgundy Hills
          Property"), located in Florence, Kentucky (part of the Cincinnati
          metropolitan area), is expected to be completed by the end of the
          first quarter of 2004. The Trust has a right of first negotiation to
          purchase the property from the development company upon completion and
          a right of first refusal to purchase the property on the same terms
          offered by a third party. The purchase price is expected to be
          approximately $30,000,000. It is contemplated that a significant
          portion of that amount would be covered by first mortgage financing.
          At the current time the Trust does not have adequate resources to
          close on the transaction even if it were interested in doing so and it
          is uncertain whether the Trust will have adequate resources to
          complete the transaction upon completion of construction.

          In connection with the transaction, the Trust (along with its former
          Chief Executive Officer) agreed to co-guarantee long-term first
          mortgage construction financing provided by KeyBank National
          Association ("KeyBank") to Burlington Residential, Ltd. ("Borrower"),
          the owner of the Burgundy Hills Property. As of August 1, 2001,
          approximately $6,478,000 of the construction loan had been drawn down.
          The interest rate on the construction loan is KeyBank's prime rate
          (currently 6.75%) or the LIBOR rate plus 2%. The Trust also agreed
          that, if the Borrower failed to comply with the repayment and other
          obligations under the loan documents, KeyBank would require the Trust
          to buy out the bank's position on the entire amount of the
          construction loan.

          In September 2000, the Trust received notice from counsel to KeyBank
          that the Borrower had defaulted on its loan for failure to pay current
          interest due and meet certain equity requirements and covenants under
          the loan agreement, adverse changes in the financial conditions of the
          Borrower and the Trust, and the Trust's failure to meet certain
          tangible net worth tests set forth in


                                      F-11
<PAGE>

                              BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5.   COMMITMENTS AND CONTINGENCIES (Continued)

          Contract to Purchase Additional Properties (Continued)

          the loan agreements. KeyBank indicated that it was exercising its
          right to accelerate the loan. According to the former Chief Executive
          Officer, KeyBank agreed to forego further action for at least 60 days
          while the parties attempted to reach an arrangement. The extension
          expired in November 2000 and, according to the former Chief Executive
          Officer, is currently being extended on a month-to-month basis. The
          Borrower paid down the outstanding accrued interest and a portion of
          the principal and is currently seeking a new long-term construction
          facility with another institutional lender to replace the KeyBank loan
          (and the BankOne loan described below).

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

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

          Officers' Compensation

          Gregory K. McGrath, a founder of the Trust and the Operating
          Partnership, formerly served as Chief Executive Officer of the Trust.
          He agreed to serve as Chief Executive Officer of the Trust for the
          first year in exchange for compensation in the form of Common Shares
          or Units in an amount not to exceed 25,000 shares or units, as
          applicable, to be determined by the Executive Compensation Committee
          of the Board of the Trust based upon his performance, in addition to
          benefits and eligibility for participation in any option plan and
          bonus incentive compensation plan which may be implemented by the
          Trust. During 1998 and 1999 and the first two quarters of 2000, no
          Common Shares or Units were issued to Mr. McGrath as compensation.
          However, in order to reflect all appropriate administrative expenses
          of the Operating Partnership, a provision of $108,500 has been made in
          the accompanying financial statements for the estimated fair value of
          the services rendered by Mr. McGrath as Chief Executive Officer for
          the first two quarters of 2000. This amount has been charged to
          compensation expense, with corresponding credits to partners' capital.
          This estimate of the fair value of such services was determined by
          management based upon an analysis of compensation paid to chief
          executive officers of a number of comparable real estate investment
          trusts. Compensation and benefits for the Chief Executive Officer are
          determined annually by the Executive Compensation Committee of the
          Board of the Trust. Effective December 31, 2000, no compensation
          expense will be charged for the services provided by the former Chief
          Executive Officer, as these services are minimal to the Trust's
          operations. In May 2001, Robert L. Astorino replaced Mr. McGrath as
          Chief Executive Officer.


                                      F-12
<PAGE>

                              BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5.   COMMITMENTS AND CONTINGENCIES (Continued)

          Officers' Compensation (Continued)

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

          On August 28, 2000, the Trust entered into employment agreements with
          the President and Chief Operating Officer (COO) and with the Chief
          Financial Officer (CFO) through December 31, 2001. Under the terms of
          the agreement, the Trust through the Operating Partnership will pay
          the COO and the CFO $175,000 and $110,000 per annum, respectively. In
          addition, the COO and the CFO will receive $90,000 and $60,000,
          respectively, if they are involuntarily terminated for any reason
          other than gross misconduct.

          Underwriting Agreement

          In connection with the Cash Offering which terminated on May 31, 2000
          (see "Note 7. Shareholders'Equity") and pursuant to an Underwriting
          Agreement, the Trust issued to Sigma Financial Corporation (the
          "Underwriter"), warrants to purchase Common Shares in an amount equal
          to 8.5% of the number of Common Shares sold on a best efforts basis by
          the Underwriter and participating broker-dealers selected by the
          Underwriter and the Trust. The warrants may be exercised at any time
          and from time to time through May 15, 2003 at an exercise price of
          $13.00 per warrant share. The Trust has reserved 59,676 Common Shares
          under the Underwriting Agreement, which is equivalent to 8.5% of the
          702,076 Common Shares sold in the Cash Offering.

          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.

          In early May 2001, MarCap Corporation filed an action in the United
          States District Court for the Northern District of Illinois against
          Wakul, Inc. (a telecommunications company controlled by the former
          Chief Executive Officer of the Trust), the former Chief Executive
          Officer of the Trust, and Alexandria Development, L.P., a Delaware
          limited partnership controlled by the former Chief Executive Officer
          of which the Operating Partnership owns a 40% limited partnership
          interest (the "Alexandria Partnership"), among other parties, seeking
          repayment of approximately $407,000 of indebtedness (plus unspecified
          interest, attorney's fees and collection costs) under a
          telecommunication equipment leasing agreement. Certain of the
          equipment was installed at the Alexandria Apartments property, a
          residential apartment property under construction that is owned


                                      F-13
<PAGE>

                              BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5.   COMMITMENTS AND CONTINGENCIES (Continued)

          Pending Litigation (continued)

          by the Alexandria Partnership. The Alexandria Partnership guaranteed
          Wakul, Inc.'s lease payments under the leasing agreement.

NOTE 6.   RELATED PARTY TRANSACTIONS

          Trust Management Agreement

          Under a Trust Management Agreement entered into with the Trust, Baron
          Advisors, Inc. (the "Managing Shareholder") previously provided
          management, administrative and investment advisory services to the
          Trust. The services included, among other things, communicating with
          and reporting to investors, administering accounts, providing the
          Trust office space, equipment and facilities and other services
          necessary for the Trust's operation, and representing the Trust in its
          relations with custodians, depositories, accountants, attorneys,
          brokers and dealers, corporate fiduciaries, insurers, banks and
          others, as required. The Managing Shareholder was also responsible for
          determining which real estate investments and non-real estate
          investments the Trust made (including the temporary investment of the
          Trust's available funds prior to their commitment to particular real
          estate investments) and for making divestment decisions, subject to
          the provisions of the Declaration. The Trust Management Agreement had
          an initial term of one year, and was renewed for one additional
          one-year period. The agreement was terminated as of December 31, 2000
          by the mutual agreement of the Trust and the Managing Shareholder.

          Under the Trust Management Agreement, the Trust was obligated to
          reimburse the Managing Shareholder, on a monthly basis during the term
          of the agreement, for its operating expenses relating to the business
          of the Trust and the Operating Partnership in an amount up to the sum
          of 1% of the gross proceeds from the sale by the Trust of Common
          Shares in the Cash Offering, and 1% of the initial assigned value of
          each Unit in the Operating Partnership issued in connection with the
          Exchange Offering.

          Receivables/Payables, Affiliates

          Certain of the Exchange Partnerships acquired by the Operating
          Partnership in the Exchange Offering hold subordinated notes, lines of
          credits, and advances due from/to limited partnerships controlled by
          Mr. McGrath. See "Note 7. Shareholders' Equity." These debt
          instruments have varying interest rates and the interest is accrued
          and/or paid on a monthly basis. As of June 30, 2000, the Trust was due
          $ 6,307,011 from affiliates with $1,338,565 of accrued interest. The
          Trust also owes $3,778,779 to affiliates including accrued interest as
          of June 30, 2000.


                                      F-14
<PAGE>

                              BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7.   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 $10.00
          per Common Share (the "Cash Offering"). The Cash Offering, as amended,
          was terminated May 31, 2000. The Trust sold 702,076 Common Shares in
          the offering for an aggregate offering price of $7,020,763. All of the
          Common Shares issued by the Trust in the offering are tradable without
          restriction under the Securities Act of 1933, as amended (the
          "Securities Act"), but are 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 Common Shares
          are not listed for trading on any stock exchange, and no market
          currently exists for the Common Shares.

          Exchange Offering

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

          These units were offered in the Exchange Offering in exchange for
          units of limited partnership interest in 23 limited partnerships (the
          "Exchange Partnerships"), which directly or indirectly owned equity
          and/or mortgage interests in one or more residential apartment
          properties. The Exchange Partnerships were managed by corporate
          general partners who are affiliated with one of the founders of the
          Trust and the Operating Partnership, who is also the former Chief
          Executive Officer of the Trust and the sole stockholder and director
          of the Managing Shareholder of the Trust. The registration statement
          was declared effective on November 9, 1999, and the Exchange Offering
          commenced shortly thereafter.

          The number of Units offered in exchange for the limited partnership
          interests in the Exchange Partnerships was based on appraisals
          prepared by qualified and licensed independent appraisal firms for
          each underlying residential apartment property. For purposes of the
          Exchange Offering, each Unit was arbitrarily assigned an initial value
          of $10.00, which corresponds to the offering price of each Trust
          Common Share that was being offered to the public pursuant to the Cash
          Offering. The value of each Unit and Common Share outstanding was
          substantially identical since Unit holders (other than the Trust),
          including recipients of Units in the Exchange Offering, are entitled
          to exchange all or a portion of their Units at any time and from time
          to time for an equivalent number of Trust Common Shares, so long as
          the exchange would not cause the exchanging party to own (taking into
          account certain ownership attribution rules) in excess of 5% of the
          then outstanding shares in the Trust, subject to the Trust's right to
          cash out any holder of Units who requests an exchange and subject to
          certain other exceptions. To facilitate such exchanges of Units into
          Common Shares, 2,500,000 Common Shares (in addition to the 2,500,000
          Common Shares offered by the Trust in the Cash Offering) have been
          registered with the Commission.


                                      F-15
<PAGE>

                              BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7.   SHAREHOLDERS' EQUITY (Continued)

          Exchange Offering (Continued)

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

          In connection with the Exchange Offering, 124,903 Trust Common Shares
          were issued as a commission to broker-dealers who assisted the
          Operating Partnership in consummating the Exchange Offering. The
          shares were issued at a value of $10.00 per share and are reflected at
          a net zero value in the accompanying Statement of Shareholders'
          Equity.

          Operating Partnership Limited Partnership Units

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

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


                                      F-16
<PAGE>

                              BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7.   SHAREHOLDERS' EQUITY (Continued)

          Operating Partnership Limited Partnership Units (Continued)

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

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

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

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

          Distributions

          In 1999, the Board of Trustees authorized the payment of three
          distributions aggregating $270,348 ($.16 per Common Share of
          beneficial interest) from the surplus of the Trust. This amount is
          presented in the accompanying consolidated financial statements as a
          deduction from shareholders' equity under the caption "Distributions".
          There were no distributions paid during the six months ended June 30,
          2000.


                                      F-17
<PAGE>

                              BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8.   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 Share equivalents in
          the weighted average shares outstanding has not been presented, as it
          is anti-dilutive for both the three and six months ended June 30, 2000
          and 1999.

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

                                                            Weighted      Loss
                                                             Average       Per
                                               Net Loss      Shares       Share
                                               --------      ------       -----

          Three Months Ended June 30, 2000    ($628,775)     698,947     ($0.90)
          Three Months Ended June 30, 1999    ($357,387)     614,813     ($0.58)
          Six Months Ended June 30, 2000      ($885,257)     690,306     ($1.28)
          Six Months Ended June 30, 1999      ($789,443)     567,840     ($1.39)

NOTE 9.   SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

          In April 2000, in connection with the completion of the Exchange
          Offering, the Operating Partnership acquired indirect equity interests
          in 16 rental properties and subordinated mortgage interests in 10
          additional properties through the acquisition of substantially all
          partnership interests in the Exchange Partnerships which own land and
          depreciable property, accrued interest, advances, other assets,
          mortgages and notes payable, as follows:

          Land and Depreciable Property                       $28,723,196
          Mortgage Notes Receivable, Affiliates                 3,292,677
          Receivables and Accrued Interest, Affiliates          3,262,522
          Other Assets                                            848,813
                                                              -----------

          Total Assets                                         36,127,208
                                                              -----------

          Mortgage Payable                                     19,766,015
          Notes Payable and Accrued Interest                    2,320,586
          Payables and Accrued Interest, Affiliates             1,435,548
          Accounts Payable                                        644,266
          Security Deposits                                       167,634
                                                              -----------

          Total Liabilities                                    24,334,049
                                                              -----------

          Equity                                              $11,793,159
                                                              ===========


                                      F-18
<PAGE>

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

          The following discussion should be read in conjunction with the
          Condensed Consolidated Financial Statements of Baron Capital Trust
          (the "Registrant" or the "Trust") and the Notes thereto. (See ITEM 1 -
          FINANCIAL STATEMENTS.)

          Forward-looking Statements

          This Management's Discussion and Analysis or Plan of Operation and
          other sections of this Report contain certain forward-looking
          statements within the meaning of the Securities Litigation Reform Act
          of 1995 that are based on current expectations, estimates and
          projections about the 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
          this Management's Discussion and Analysis or Plan of Operation section
          of this Report, as well as those discussed elsewhere in this Report
          and from time to time in the 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.

          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/or to provide or acquire mortgage loans secured by
          such types of property. The Operating Partnership conducts all of the
          Trust's real estate operations and holds all direct or indirect
          property interests acquired.

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

          As described below in this Report, in May 1998, the Trust commenced an
          offering (the "Cash Offering") of up to 2,500,000 common shares of
          beneficial interest ("Common Shares") in the Trust at a purchase price
          of $10.00 per share (maximum


                                       3
<PAGE>

          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 issuance 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 August 1, 2001, the Trust owned 825,528 Operating Partnership
          Units, representing approximately 21.6% of the then outstanding Units.
          Such Units are comprised of the Units acquired by the Trust with the
          net proceeds of the Cash Offering and the Units that holders of Units
          have elected to exchange into Common Shares in the manner described
          below in this section. Since the Units owned 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
          substantially all the beneficial interests in 16 residential apartment
          properties, including the Heatherwood I Apartments (67 studio, one
          bedroom and two bedroom units located in Kissimmee, Florida) in June
          1998; Crystal Court II Apartments (80 studio, one bedroom and two
          bedroom units located in Lakeland, Florida) in July 1998; Riverwalk
          Apartments (50 two bedroom units located in New Smyrna, Florida) in
          September 1998; and 13 properties acquired as part of the Exchange
          Offering in April 2000 (discussed below). In July 1998 the Operating
          Partnership also acquired a minority limited partnership interest in
          13 real estate limited partnerships then managed by affiliates of
          Gregory K. McGrath (a founder and former Chief Executive Officer of
          the Trust, a founder and principal unitholder of the Operating
          Partnership, and sole director of Baron Advisors, Inc., a Delaware
          corporation that serves as the Managing Shareholder and a trustee of
          the Board of the Trust), including certain of the Exchange
          Partnerships which participated in the Exchange Offering and which are
          now managed by the Trust. On February 7, 2001, the Independent
          Trustees of the Trust and the Managing Shareholder agreed to terminate
          the Trust Management Agreement effective December 31, 2000.

          During 1998 and 1999, the Operating Partnership acquired a total of
          40% of the limited partnership interests in Alexandria Development,
          L.P., (the "Alexandria Partnership"), a Delaware limited partnership
          controlled by Mr. McGrath. The Alexandria Partnership owns Alexandria
          Apartments, a 168-unit residential apartment property (the "Alexandria
          Property") under construction in Alexandria, Kentucky. As of August 1,
          2001, 112 of the 168 residential units (approximately 67%) had been
          completed and were in the rent-up stage. Of the completed units, 93
          units have been rented.

          In early May 2001, MarCap Corporation filed an action in the United
          States District Court for the Northern District of Illinois against
          WaKul, Inc. (a telecommunications company controlled by Gregory K.
          McGrath, the former Chief Executive Officer of the Trust), Mr.
          McGrath, and the Alexandria Partnership, among other parties, seeking
          repayment of approximately $407,000 of indebtedness (plus unspecified


                                       4
<PAGE>

          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.

          Due to recurring losses incurred by the Alexandria Property, a
          partners' deficiency and a recent appraisal that valued the Alexandria
          Property at an amount less than the liabilities owed, management of
          the Trust determined to write off the Trust's investment in the
          Alexandria Property, resulting in a charge to operations in 2000 of
          approximately $355,000.

          In September 1998, the Trust entered into an agreement with three real
          estate development companies (Brentwood at Southgate, Ltd., Burlington
          Residential, Ltd. and The Shoppes at Burlington, Ltd.) to acquire two
          luxury residential apartment properties in the development stage upon
          the completion of construction. The three development companies are
          controlled by Mr. McGrath. One of the residential apartment properties
          has been sold to a third party with the Trust's consent. The remaining
          property is scheduled to have a total of 396 units, comprised of one,
          two and three bedroom/one or two bathroom apartments. Construction of
          the property (the "Burgundy Hills Property"), located in Florence,
          Kentucky (part of the Cincinnati metropolitan area), is expected to be
          completed by the end of the first quarter of 2004. The Trust has a
          right of first negotiation to purchase the property from the
          development company upon completion and a right of first refusal to
          purchase the property on the same terms offered by a third party. The
          purchase price is expected to be approximately $30,000,000. It is
          contemplated that a significant portion of that amount would be
          covered by first mortgage financing. At the current time the Trust
          does not have adequate resources to close on the transaction even if
          it were interested in doing so and it is uncertain whether the Trust
          will have adequate resources to complete the transaction upon
          completion of construction.

          In connection with the transaction, the Trust (along with Mr. McGrath,
          its former Chief Executive Officer) agreed to co-guarantee long-term
          first mortgage construction financing provided by KeyBank National
          Association ("KeyBank") to Burlington Residential, Ltd. ("Borrower"),
          the owner of the Burgundy Hills Property. As of August 1, 2001,
          approximately $6,478,000 of the construction loan had been drawn down.
          The interest rate on the construction loan is KeyBank's prime rate
          (currently 6.75%) or the LIBOR rate plus 2%. The Trust also agreed
          that, if the Borrower failed to comply with the repayment and other
          obligations under the loan documents, KeyBank would require the Trust
          to buy out the bank's position on the entire amount of the
          construction loan.

          In September 2000, the Trust received notice from counsel to KeyBank
          that the Borrower had defaulted on its loan for failure to pay current
          interest due and meet certain equity requirements and covenants under
          the loan agreement, adverse changes in the financial conditions of the
          Borrower and the Trust, and the Trust's failure to meet certain
          tangible net worth tests set forth in the loan agreements. KeyBank
          indicated that it was exercising its right to accelerate the loan.
          According to Mr.


                                       5
<PAGE>

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

          In December, 2000, BankOne acquired KeyBank's position in the Burgundy
          Hills first mortgage loan. The BankOne loan is subject to the same
          terms and conditions as that of the original KeyBank loan. Earlier,
          BankOne 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, BankOne has been assigned rental
          payments and has taken over day-to-day management of the property.
          This loan is expected to be paid off with the proposed new first
          mortgage financing referenced above.

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

          In April 2000, pursuant to a registration statement on Form S-4, the
          Operating Partnership completed an exchange offering (the "Exchange
          Offering") under which it acquired additional interests in residential
          apartment properties. In the Exchange Offering, the Operating
          Partnership issued 2,449,492 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 26 residential
          apartment properties (the "Exchange Properties") located in the
          southeast and mid-west United States. (See NOTE 4 "Exchange Offering"
          in the accompanying notes to the consolidated condensed financial
          statements.)

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


                                       6
<PAGE>

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

          Following the completion of the Exchange Offering, the Exchange
          Partnerships continued to own the same property interests they owned
          prior to the offering; substantially all of the limited partnership
          interests in the 23 Exchange Partnerships were owned by the Operating
          Partnership; Mr. McGrath, for nominal consideration, assigned to an
          affiliate of 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
          (and indirectly the Trust) owned substantially all of the economic
          interest represented by the equity and debt interests owned by the
          Exchange Partnerships and controlled management of such partnerships.

          In April 2001, the Operating Partnership sold its equity interest in
          one of the Exchange Properties, Glen Lakes Apartments, a 144-unit
          residential apartment property located in St. Petersburg, Florida.
          Management of the Trust determined to sell the property based on its
          lack of performance and its need for substantial and frequent cash
          infusions. (See Note 2 "Liquidity and Profitability Considerations
          -Subsequent Transactions" in the accompanying notes to the
          consolidated condensed financial statements.)

          Certain of the Exchange Partnerships currently controlled by the
          Operating Partnership own direct or indirect equity interests in 15
          Exchange Properties which consist of an aggregate of 868 residential
          units (comprised of studio and one, two, three and four-bedroom
          units). Certain of the Exchange Partnerships controlled by the
          Operating Partnership own direct or indirect mortgage interests in 10
          Exchange Properties, which consist of an aggregate of 813 existing
          residential units (studio and one and two bedroom) and 168 units (two
          and three bedroom) under development. Of the 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 June 30, 2000 Compared  to
          December 31, 1999

          Due to the completion of the Exchange Offering, the balance sheet for
          the Trust reflects large increases in assets, liabilities and
          shareholders' equity. During the six months ended June 30, 2000, total
          assets increased to $44.6 million while liabilities increased to $31.8
          million. As described above, the Exchange Offering increased the
          number of properties in which the Operating Partnership indirectly
          owned an equity


                                       7
<PAGE>

          and/or mortgage interest by adding 26 Exchange Properties. The
          Operating Partnership now has rental apartment assets of approximately
          $36.2 million, which are subject to $25.2 million in first mortgage
          debt.

          Shareholders' equity increased to $12.8 million due to the issuance in
          the Exchange Offering of more than 2,449,525 Operating Partnership
          Units (each such Unit exchangeable into one Common Share of the Trust
          at the election of holders thereof) with an exchange value of $11.8
          million less a net loss of $885,257 for the six months ended June 30,
          2000.

          Operations for the Six Months Ended June 30, 2000 Compared to Six
          Months Ended June 30, 1999

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

          Liquidity and Capital Resources

          Net cash used in operating activities in the six months ended June 30,
          2000 was  $211,853  compared to $592,081 in the six months  ended June
          30, 1999. The decrease in cash used in operating activities was mainly
          due to an increase in  depreciation  for the six months ended June 30,
          2000 over the six months ended June 30, 1999.

          Net cash used in investing activities in the six months ended June 30,
          2000 was $125,712 compared to $868,073 in the six months ended June
          30, 1999. The decrease in cash used in investing activities for 2000
          was primarily due to a decrease in investments in partnerships.

          Net cash provided by financing activities in the six months ended June
          30, 2000 was $431,163 compared to $1,521,165 for the six months ended
          June 30, 1999. The decrease in cash was due to a decrease in the sale
          of Trust Common Shares in the Cash Offering, which expired in May
          2000.

          Because of the net loss of $3,166,927 incurred by the Trust in the
          period ended December 31, 1999 and the $1,123,000 in accounts payable
          owed to professionals in connection with the Exchange Offering as of
          December 31, 1999, and its limited liquid resources as of December 31,
          1999, the Trust's independent auditors qualified their auditors'
          report to reflect a going concern contingency.

          The completion in April 2000 of the Exchange Offering described above
          has completed the first effort, in the opinion of management, to
          provide the critical mass necessary for profitable operations. The
          Company is negotiating with the firms which are owed accounts payable
          in order to extend payment terms and, where possible, reduce the
          amounts due. Distributions will be made by the Trust as cash


                                       8
<PAGE>

          flow allows, but will be negatively impacted until the open accounts
          payable are reduced. Management does not anticipate that the Trust
          will make distributions to its shareholders for the next several
          quarters.

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

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

          The target metropolitan markets and sub-markets have benefited in
          recent periods from demographic trends (including population and job
          growth) which increase the demand for residential apartment units,
          while financing constraints (specifically, reduced availability of
          development capital) have limited new construction to levels
          significantly below construction activity in prior years.
          Consequently, rental rates for residential apartment units have
          increased at or above the inflation rate for the last two years and
          are expected to continue to experience such increases for the next 18
          months based on market statistics made available to management of the
          Trust in terms of occupancy rates, supply, demographic factors, job
          growth rates and recent rental trends. Expense levels also influence
          operating results, and rental expenses (other than real estate taxes)
          for residential apartment properties have generally increased at
          approximately the rate of inflation for the past three years and are
          expected to increase at the rate of inflation for the next 18 months.
          Changes in interest rates are not expected to materially impact
          operations, because the majority of the real estate mortgages have
          fixed interest rates, as do all of the inter-company loans.

          The 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 Trust and the
          Operating Partnership 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 Trust and the Operating Partnership
          as a whole, some of


                                       9
<PAGE>

          the reasonably anticipated effects might include downward pressure on
          rental rates and occupancy levels.

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

          Subject to the foregoing discussion, management believes that the
          Trust and the Operating Partnership have the ability to satisfy their
          cash requirements for the foreseeable future. However, management of
          the 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 its Common Shares on a
          recognized securities exchange. Additional size would also give the
          Company the operating margin necessary to support its valuable
          management team that is believed necessary for its long-term growth.

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

          During the years ended December 31, 2000 and 1999, the Trust
          experienced certain cash flow problems and has, from time to time,
          experienced difficulties meeting obligations as they became due.
          However, as reflected in the consolidated condensed financial
          statements for the first six months ended June 30, 2001 included in
          the Trust's quarterly report on Form 10-QSB for the three-month period
          ended June 30, 2001, the Trust generated Funds From Operations (Funds
          from Operations is a measure of profitability in the REIT industry
          measuring net income less depreciation, amortization, and other
          non-operating expenses and/or income) of approximately $411,000 versus
          negative Funds From Operations of approximately $417,000 for the six
          months ended June 30, 2000.

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

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

          o    refinance selected well performing assets;


                                       10
<PAGE>

          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 Trust
               has initiated billing of tenants for their water used at several
               locations and intends to continue implementation of the strategy
               at other properties as the markets permit. The Trust has also
               started a program of enhancing the aesthetics of the properties,
               which is allowing the Trust to increase rents while still
               improving occupancy.

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

          o    In April 2001, the Operating Partnership sold its equity interest
               in one of the Exchange Properties, Glen Lakes Apartments, a
               144-unit residential apartment property located in St.
               Petersburg, Florida. Management of the Trust determined to sell
               the property based on its lack of performance and its need for
               substantial and frequent cash infusions. The sale price was
               approximately $3,900,000 and resulted in a loss of $210,854.
               Additional properties are being evaluated for potential
               disposition.

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

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

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


                                       11
<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

          The Trust's Form SB-2 Registration Statement (the "Registration
          Statement") (Commission file number 333-35063) was declared effective
          by the Commission on May 15, 1998. On May 18, 1998, the Trust
          commenced its public offering (the "Cash Offering") of common shares
          of beneficial interest in the Trust ("Common Shares"), the class of
          securities registered. On June 2, 1999, the Trust filed Post-Effective
          Amendment No. 1 (the "Amendment") to the Registration Statement, which
          the Commission declared effective on June 11, 1999. The Cash Offering
          expired on May 31, 2000.

          The managing underwriter of the Cash Offering was Sigma Financial
          Corporation. The amount of Common Shares registered was 2,500,000
          shares. The offering price per Common Share was $10.00, and the
          aggregate price of the offering amount registered was $25,000,000. The
          Trust sold 702,076 Common Shares in the Cash Offering, for an
          aggregate offering price of $7,020,763.

          From the effective date of the Registration Statement through June 30,
          2000, the following expenses have been incurred for the Trust's
          account in connection with the issuance and distribution of the
          registered Common Shares:

          Underwriting discounts and commissions:       $565,557 (plus five-year
                                                        warrants to acquire
                                                        59,676 Common Shares at
                                                        an exercise price of
                                                        $13.00 per share)

          Finder's Fees:                                $0

          Expenses Paid to or for Underwriter:          $0

          Other Expenses (reimbursement for advisory
          and investment expenses):                     $521,008

                    Total Expenses:                     $1,086,565

          Of such expense payments, $471,472 were made directly to Baron
          Advisors, Inc., the Managing Shareholder of the Trust. The remaining
          payments of $615,093 were made


                                       12
<PAGE>

          directly or indirectly to others. The net offering proceeds to the
          Trust after deducting the foregoing total expenses were $5,934,198.

          From the effective date of the Registration Statement through June 30,
          2000, the net offering proceeds to the Trust were used for the
          following purposes:

          Improvements to buildings and facilities:                 $0

          Purchase and installation of equipment:                   $0

          Repayment of indebtedness:                                $0

          Working capital:                                          $466,340

          Temporary investments:                                    $0

          Investment in Baron Capital Properties, L.P.
          (the Operating Partnership)                               $5,467,858

          Other purposes for which 5% or more of net
          offering proceeds or $100,000 (whichever is
          less) have been used:                                     $0

          Of such net proceeds, $5,467,858 was directly contributed to the
          Operating Partnership in exchange for Units of limited partnership
          interest therein. The Operating Partnership conducts all of the real
          estate operations of the Trust and holds all of its real property
          assets. Thus, the operating results of the Trust are primarily
          dependent upon the operating results of the Operating Partnership.

Item 3.   Defaults upon Senior Securities

          There were no defaults upon senior securities of the Trust in the
          second quarter of 2000.

          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 August 1, 2001, approximately
          $6,478,000 of the construction loan had been drawn down. The Borrower
          is controlled by Gregory K. McGrath, a founder and the former Chief
          Executive Officer of the Trust. The interest rate on the construction
          loan is KeyBank's prime rate (currently 6.75%) or the LIBOR rate plus
          2%. The Trust also agreed that, if the Borrower failed to comply with
          the repayment and other obligations under the loan documents, KeyBank
          would require the Trust to buy out the bank's position on the entire
          amount of the construction loan.


                                       13
<PAGE>

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

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

          There can be no assurance that refinancing of the two loans will be
          available or will be available on commercially reasonable terms, that
          BankOne will not seek to enforce its right to accelerate the first
          mortgage loan and begin foreclosure proceedings against the Burgundy
          Hills Property in respect of the first mortgage loan or elect to
          require the Trust to buy out its position on the entire outstanding
          amount of the first mortgage loan, or that BankOne will not seek to
          enforce its right under the other loan to take over control 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 August 11, 1998 (incorporated
                        herein by reference to Exhibit 10.2 to Amendment No. 1
                        to the Form S-4 Registration Statement of Baron Capital
                        Properties, L.P. filed with the Securities and Exchange
                        Commission on September 22, 1998 (Registration No.
                        333-55753)).

              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).

              27        Financial Data Schedule

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

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

August 27, 2001

                                            BARON CAPITAL TRUST

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

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


                                       15