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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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Form 10-QSB

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

For the quarterly period ended June 30, 2003

Commission File Number:

0-25074

PARAGON REAL ESTATE EQUITY AND INVESTMENT TRUST

(Exact name of registrant as specified in its charter)


|                                                                                   |  |                                                   
|---------------------------------------------------------------------------------- |  | --------------------------------------------------
|Maryland
(State or other jurisdiction of incorporation)                            |  | 39-6594066
(I.R.S. Employer Identification Number)
|1240 Huron Road, Suite 301, Cleveland, OH
(Address of principal executive offices) |  | 44115
(Zip code)                                  

Issuers telephone number: 216-430-2700 Fax number: 216-430-2702

Stonehaven Realty Trust, 5620 Smetana Road, Suite 130, Minnetonka, MN 55343
(Former name and former address)

Securities registered under Section 12(b) of the Act: None

Securities registered under Section 12(g) of the Act: Common Shares, $0.01 par value



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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 the filing requirements for the past 90 days. Yes/x/ No/ /

As of August 1, 2003, 31,382,566 shares of the issuers common shares were outstanding.

Transitional Small Business Disclosure Format (Check one): Yes/ / No/x/

This report contains 28 pages. There are five exhibits.



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TABLE OF CONTENTS



|                                        |                                                                    |                                            |  |  |  |  |  | 
|--------------------------------------- | ------------------------------------------------------------------ | ------------------------------------------ |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION          
|                                        |                                                                    | Consolidated Balance Sheet                
|                                        |                                                                    | Consolidated Statements of Operations     
|                                        |                                                                    | Consolidated Statements of Operations     
|                                        |                                                                    | Consolidated Statements of Cash Flows     
|                                        |                                                                    | Notes to Consolidated Financial Statements
|                                        | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
|                                        | ITEM 3. CONTROLS AND PROCEDURES                                   
|PART II. OTHER INFORMATION             
|                                        | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                 
|                                        | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS       
|                                        | ITEM 5. OTHER INFORMATION                                         
|                                        | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                          
|SIGNATURES                             
|EX-3.4 Amended By Laws                 
|EX-10.8 Employment Agreement           
|EX-31.1 Section 302 Certification - CEO
|EX-31.2 Section 302 Certification - CFO
|EX-32.1 Certification - 906 CEO & CFO  



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##### Table of Contents



PARAGON REAL ESTATE EQUITY AND INVESTMENT TRUST AND SUBSIDIARIES
FORM 10-QSB
INDEX

|                              |                                                                                                      |  |         |  | 
|----------------------------- | ---------------------------------------------------------------------------------------------------- |  | ------- |  | 
|PART I. Financial Information |                                                                                                      |  |         | 
|                              | Consolidated Balance SheetJune 30, 2003 (unaudited)                                                 |  | Page 3 
|                              | Consolidated Statements of OperationsSix-months ended
June 30, 2003 and June 30, 2002 (unaudited)   |  | Page 4 
|                              | Consolidated Statements of OperationsThree-months ended
June 30, 2003 and June 30, 2002 (unaudited) |  | Page 5 
|                              | Consolidated Statements of Cash FlowsSix-months ended
June 30, 2003 and June 30, 2002 (unaudited)   |  | Page 6 
|                              | Notes to Consolidated Financial Statements                                                           |  | Page 7 
|                              | Managements
Discussion and Analysis of Financial Condition and
Plan of Operation                    |  | Page 17
|                              | Controls and Procedures                                                                              |  | Page 25
|Part II. Other Information    |                                                                                                      |  |         | 
|                              | Changes in Securities                                                                                |  | Page 26
|                              | Submission of Matters to a Vote of Security Holders                                                  |  | Page 26
|                              | Other Information                                                                                    |  | Page 27
|                              | Exhibits and Reports on Form 8-K                                                                     |  | Page 28
|                              | Signatures                                                                                           |  | Page 28

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PART I. FINANCIAL
INFORMATION




Paragon Real Estate Equity and Investment Trust and Subsidiaries
Consolidated Balance Sheet
June 30, 2003
(unaudited)

|                                                                                                                                                                         |                                           |   |             |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------- | - | ----------- | --------- | -
|ASSETS                                                                                                                                                                   |                                           |   |             |          
|Investments in real estate:                                                                                                                                              |                                           |   |             |          
|                                                                                                                                                                         | Land                                      |   | $           | 1,790,434 |  
|                                                                                                                                                                         | Buildings and improvements                |   |             | 7,224,758 |  
|                                                                                                                                                                         | Furniture, fixtures and equipment         |   |             | 78,172    |  
|                                                                                                                                                                         |                                           |   |             |           |  
|                                                                                                                                                                         |                                           |   | 9,093,364   |          
|                                                                                                                                                                         | Accumulated depreciation and amortization |   |             | (905,514  | )
|                                                                                                                                                                         |                                           |   |             |           |  
|                                                                                                                                                                         | Net investments in real estate            |   |             | 8,187,850 |  
|Cash and cash equivalents                                                                                                                                                |                                           |   | 371,630     |          
|Marketable securities                                                                                                                                                    |                                           |   | 216,000     |          
|Restricted cash                                                                                                                                                          |                                           |   | 280,779     |          
|Other assets, net                                                                                                                                                        |                                           |   | 323,855     |          
|                                                                                                                                                                         |                                           |   |             |           |  
|TOTAL ASSETS                                                                                                                                                             |                                           | $ | 9,380,114   |          
|                                                                                                                                                                         |                                           |   |             |           |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                     |                                           |   |             |          
|Liabilities:                                                                                                                                                             |                                           |   |             |          
|Mortgage loans payable                                                                                                                                                   |                                           | $ | 6,432,041   |          
|Accounts payable and accrued expenses                                                                                                                                    |                                           |   | 697,676     |          
|Security deposits                                                                                                                                                        |                                           |   | 45,000      |          
|                                                                                                                                                                         |                                           |   |             |           |  
|Total liabilities                                                                                                                                                        |                                           |   | 7,174,717   |          
|                                                                                                                                                                         |                                           |   |             |           |  
|Minority interest in consolidated subsidiary                                                                                                                             |                                           |   |            |          
|                                                                                                                                                                        
|COMMITMENTS AND CONTINGENCIES                                                                                                                                            |                                           |   |             |          
|                                                                                                                                                                        
|Shareholders equity:                                                                                                                                                    |                                           |   |             |          
|Preferred Shares  $0.01 par value,
10,000,000 authorized; 280,790 Class A
cumulative convertible shares issued and
outstanding, $10.00 per share liquidation
preference |                                           |   | 2,808       |          
|Common
Shares  $0.01 par value,
100,000,000 authorized; 31,382,566 shares
issued and outstanding                                                                        |                                           |   | 313,826     |          
|Additional paid-in capital                                                                                                                                               |                                           |   | 28,035,362  |          
|Accumulated other comprehensive income, net
unrealized gain on marketable securities                                                                                     |                                           |   | 66,000      |          
|Accumulated deficit                                                                                                                                                      |                                           |   | (23,767,859 | )        
|Treasury stock, at cost                                                                                                                                                  |                                           |   | (39,769     | )        
|Unearned compensation                                                                                                                                                    |                                           |   | (2,404,971  | )        
|                                                                                                                                                                         |                                           |   |             |           |  
|Total shareholders equity                                                                                                                                               |                                           |   | 2,205,397   |          
|                                                                                                                                                                         |                                           |   |             |           |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                               |                                           | $ | 9,380,114   |          
|                                                                                                                                                                         |                                           |   |             |           |  

The accompanying notes are an integral part of the consolidated financial statements.

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Paragon Real Estate Equity and Investment Trust and Subsidiaries
Consolidated Statements of Operations
(unaudited)

|                                                                                                          |                                     |                           |                                   |                                                 |            |                                   |           |         |            |         |          |  
|--------------------------------------------------------------------------------------------------------- | ----------------------------------- | ------------------------- | --------------------------------- | ----------------------------------------------- | ---------- | --------------------------------- | --------- | ------- | ---------- | ------- | -------- | -
|                                                                                                          |                                     |                           |                                   |                                                 |            | For the six months ended June 30,
|                                                                                                          |                                     |                           |                                   |                                                 |            |                                  
|                                                                                                          |                                     |                           |                                   |                                                 |            | 2003                              |           | 2002   
|                                                                                                          |                                     |                           |                                   |                                                 |            |                                   |           |        
|Revenues                                                                                                  |                                     |                           |                                   |                                                 |            |                                   |           |        
|                                                                                                          | Rental revenue                      |                           | $                                 | 440,119                                         |            |                                   | $         | 434,981 |           
|                                                                                                          | Tenant recoveries                   |                           |                                   | 224,430                                         |            |                                   |           | 212,749 |           
|                                                                                                          | Interest and other                  |                           |                                   | 6,433                                           |            |                                   |           | 16,486  |           
|                                                                                                          |                                     |                           |                                   |                                                 |            |                                   |           |         |           
|                                                                                                          | Total revenues                      |                           |                                   | 670,982                                         |            |                                   |           | 664,216 |           
|                                                                                                          |                                     |                           |                                   |                                                 |            |                                   |           |         |           
|Expenses                                                                                                  |                                     |                           |                                   |                                                 |            |                                   |           |        
|                                                                                                          | Property, operating and maintenance |                           |                                   | 104,666                                         |            |                                   |           | 78,175  |           
|                                                                                                          | Property taxes and insurance        |                           |                                   | 172,998                                         |            |                                   |           | 175,628 |           
|                                                                                                          | Depreciation and amortization       |                           |                                   | 110,910                                         |            |                                   |           | 127,136 |           
|                                                                                                          | Interest                            |                           |                                   | 168,282                                         |            |                                   |           | 243,540 |           
|                                                                                                          | General and administrative          |                           |                                   | 886,583                                         |            |                                   |           | 339,471 |           
|                                                                                                          | Management fees                     |                           |                                   | 32,108                                          |            |                                   |           | 31,316  |           
|                                                                                                          | Non-recurring real estate expense   |                           |                                   | 350,000                                         |            |                                   |           |        |           
|                                                                                                          |                                     |                           |                                   |                                                 |            |                                   |           |         |           
|                                                                                                          | Total expenses                      |                           |                                   | 1,825,547                                       |            |                                   |           | 995,266 |           
|                                                                                                          |                                     |                           |                                   |                                                 |            |                                   |           |         |           
|Loss from operations before gain on sale of marketable
securities and loss allocated to minority interest |                                     |                           | (1,154,565                        | )                                               |            |                                   | (331,050  | )      
|Gain on sale of marketable securities                                                                     |                                     |                           |                                  |                                                 |            |                                   | 55,889    |        
|Loss allocated to minority interest                                                                       |                                     |                           | 42,570                            |                                                 |            |                                   | 24,736    |        
|                                                                                                          |                                     |                           |                                   |                                                 |            |                                   |           |         |           
|Loss from continuing operations                                                                           |                                     |                           | (1,111,995                        | )                                               |            |                                   | (250,425  | )      
|Discontinued operations:                                                                                  |                                     |                           |                                   |                                                 |            |                                   |           |        
|                                                                                                          |                                     |                           | Loss from discontinued operations |                                                 |            |                                  |           |         |            | (49,757 | )       
|                                                                                                          |                                     |                           |                                   |                                                 |            |                                   |           |         |           
|Net loss                                                                                                  |                                     |                           | (1,111,995                        | )                                               |            |                                   | (300,182  | )      
|Preferred Share Dividends                                                                                 |                                     |                           |                                  |                                                 |            |                                   | (315,063  | )      
|                                                                                                          |                                     |                           |                                   |                                                 |            |                                   |           |         |           
|Net loss available to Common Shareholders                                                                 |                                     | $                         | (1,111,995                        | )                                               |            | $                                 | (615,245  | )      
|                                                                                                          |                                     |                           |                                   |                                                 |            |                                   |           |         |           
|Net loss available to Common Shareholders per Common
Share: Basic and Diluted                             |                                     | $                         | (0.24                             | )                                               |            | $                                 | (0.14     | )      
|                                                                                                          |                                     |                           |                                   |                                                 |            |                                   |           |         |           
|Weighted average number of Common Shares
outstanding: Basic and Diluted                                   |                                     |                           | 4,665,950                         |                                                 |            |                                   | 4,517,524 |        
|                                                                                                          |                                     |                           |                                   |                                                 |            |                                   |           |         |           
|Comprehensive loss:                                                                                       |                                     |                           |                                   |                                                 |            |                                   |           |        
|                                                                                                          |                                     | Net loss                  |                                   | $                                               | (1,111,995 | )                                 |           | $       | (300,182   | )      
|                                                                                                          |                                     | Other comprehensive loss: |                                   |                                                 |            |                                   |           |         |            |        
|                                                                                                          |                                     |                           |                                   | Unrealized gain (loss) on marketable securities |            |                                   | 38,800    |         |            |         | (987,200 | )
|                                                                                                          |                                     |                           |                                   |                                                 |            |                                   |           |         |           
|                                                                                                          |                                     | Comprehensive loss        |                                   | $                                               | (1,073,195 | )                                 |           | $       | (1,287,382 | )      
|                                                                                                          |                                     |                           |                                   |                                                 |            |                                   |           |         |           

The accompanying notes are an integral part of the consolidated financial statements.

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Paragon Real Estate Equity and Investment Trust and Subsidiaries
Consolidated Statements of Operations
(unaudited)

|                                                                              |                                     |                           |                                   |                                                 |          |                                     |           |         |          |         |          |  
|----------------------------------------------------------------------------- | ----------------------------------- | ------------------------- | --------------------------------- | ----------------------------------------------- | -------- | ----------------------------------- | --------- | ------- | -------- | ------- | -------- | -
|                                                                              |                                     |                           |                                   |                                                 |          | For the three months ended June 30,
|                                                                              |                                     |                           |                                   |                                                 |          |                                    
|                                                                              |                                     |                           |                                   |                                                 |          | 2003                                |           | 2002   
|                                                                              |                                     |                           |                                   |                                                 |          |                                     |           |        
|Revenues                                                                      |                                     |                           |                                   |                                                 |          |                                     |           |        
|                                                                              | Rental revenue                      |                           | $                                 | 221,495                                         |          |                                     | $         | 213,975 |         
|                                                                              | Tenant recoveries                   |                           |                                   | 117,334                                         |          |                                     |           | 132,568 |         
|                                                                              | Interest and other                  |                           |                                   | 1,176                                           |          |                                     |           | 10,082  |         
|                                                                              |                                     |                           |                                   |                                                 |          |                                     |           |         |         
|                                                                              | Total revenues                      |                           |                                   | 340,005                                         |          |                                     |           | 356,625 |         
|                                                                              |                                     |                           |                                   |                                                 |          |                                     |           |         |         
|Expenses                                                                      |                                     |                           |                                   |                                                 |          |                                     |           |        
|                                                                              | Property, operating and maintenance |                           |                                   | 47,218                                          |          |                                     |           | 32,225  |         
|                                                                              | Property taxes and insurance        |                           |                                   | 87,833                                          |          |                                     |           | 87,836  |         
|                                                                              | Depreciation and amortization       |                           |                                   | 54,918                                          |          |                                     |           | 64,471  |         
|                                                                              | Interest                            |                           |                                   | 84,569                                          |          |                                     |           | 121,331 |         
|                                                                              | General and administrative          |                           |                                   | 598,708                                         |          |                                     |           | 142,473 |         
|                                                                              | Management fees                     |                           |                                   | 16,268                                          |          |                                     |           | 16,710  |         
|                                                                              | Non-recurring real estate expenses  |                           |                                   | 350,000                                         |          |                                     |           |        |         
|                                                                              |                                     |                           |                                   |                                                 |          |                                     |           |         |         
|                                                                              | Total expenses                      |                           |                                   | 1,239,514                                       |          |                                     |           | 465,046 |         
|                                                                              |                                     |                           |                                   |                                                 |          |                                     |           |         |         
|Loss from operations before loss allocated to minority
interest               |                                     |                           | (899,509                          | )                                               |          |                                     | (108,421  | )      
|Loss allocated to minority interest                                           |                                     |                           | 32,712                            |                                                 |          |                                     | 17,786    |        
|                                                                              |                                     |                           |                                   |                                                 |          |                                     |           |         |         
|Loss from continuing operations                                               |                                     |                           | (866,797                          | )                                               |          |                                     | (90,635   | )      
|Discontinued operations:                                                      |                                     |                           |                                   |                                                 |          |                                     |           |        
|                                                                              |                                     |                           | Loss from discontinued operations |                                                 |          |                                    |           |         |          | (36,687 | )       
|                                                                              |                                     |                           |                                   |                                                 |          |                                     |           |         |         
|Net loss                                                                      |                                     |                           | (866,797                          | )                                               |          |                                     | (127,322  | )      
|Preferred Share Dividends                                                     |                                     |                           |                                  |                                                 |          |                                     | (315,063  | )      
|                                                                              |                                     |                           |                                   |                                                 |          |                                     |           |         |         
|Net loss available to Common Shareholders                                     |                                     | $                         | (866,797                          | )                                               |          | $                                   | (442,385  | )      
|                                                                              |                                     |                           |                                   |                                                 |          |                                     |           |         |         
|Net loss available to Common Shareholders per Common
Share: Basic and Diluted |                                     | $                         | (0.18                             | )                                               |          | $                                   | (0.10     | )      
|                                                                              |                                     |                           |                                   |                                                 |          |                                     |           |         |         
|Weighted average number of Common Shares
outstanding: Basic and Diluted       |                                     |                           | 4,812,744                         |                                                 |          |                                     | 4,517,524 |        
|                                                                              |                                     |                           |                                   |                                                 |          |                                     |           |         |         
|Comprehensive loss:                                                           |                                     |                           |                                   |                                                 |          |                                     |           |        
|                                                                              |                                     | Net loss                  |                                   | $                                               | (866,797 | )                                   |           | $       | (127,322 | )      
|                                                                              |                                     | Other comprehensive loss: |                                   |                                                 |          |                                     |           |         |          |        
|                                                                              |                                     |                           |                                   | Unrealized gain (loss) on marketable securities |          |                                     | 47,200    |         |          |         | (205,200 | )
|                                                                              |                                     |                           |                                   |                                                 |          |                                     |           |         |         
|                                                                              |                                     | Comprehensive loss        |                                   | $                                               | (819,597 | )                                   |           | $       | (332,522 | )      
|                                                                              |                                     |                           |                                   |                                                 |          |                                     |           |         |         

The accompanying notes are an integral part of the consolidated financial statements.

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Paragon Real Estate Equity and Investment Trust and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)

|                                                                           |                                                                              |                                                                          |                                       |                                           |         |                                   |          |           |         |          |           |  
|-------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------------------------------------------------------------ | ------------------------------------- | ----------------------------------------- | ------- | --------------------------------- | -------- | --------- | ------- | -------- | --------- | -
|                                                                           |                                                                              |                                                                          |                                       |                                           |         | For the six months ended June 30,
|                                                                           |                                                                              |                                                                          |                                       |                                           |         |                                  
|                                                                           |                                                                              |                                                                          |                                       |                                           |         | 2003                              |          | 2002     
|                                                                           |                                                                              |                                                                          |                                       |                                           |         |                                   |          |          
|Cash flows from operating activities:                                      |                                                                              |                                                                          |                                       |                                           |         |                                   |          |          
|                                                                           | Net loss                                                                     |                                                                          | $                                     | (1,111,995                                | )       |                                   | $        | (300,182  | )      
|                                                                           | Adjustments to reconcile net loss to net cash
used in continuing operations: |                                                                          |                                       |                                           |         |                                   |          |           |        
|                                                                           |                                                                              | Discontinued operations, net of tax                                      |                                       |                                           |        |                                   |          |           | 49,757  |         
|                                                                           |                                                                              | Compensation costs paid through the issuance
of Class A Preferred Shares |                                       |                                           | 300,000 |                                   |          |           |        |         
|                                                                           |                                                                              | Depreciation and amortization                                            |                                       |                                           | 110,910 |                                   |          |           | 127,136 |         
|                                                                           |                                                                              | Loss allocated to minority interest                                      |                                       |                                           | (42,570 | )                                 |          |           | (24,736 | )       
|                                                                           |                                                                              | Gain on sale of marketable securities                                    |                                       |                                           |        |                                   |          |           | (55,889 | )       
|                                                                           | Net change in assets and liabilities:                                        |                                                                          |                                       |                                           |         |                                   |          |           |        
|                                                                           |                                                                              |                                                                          | Restricted cash                       |                                           |         | (3,853                            | )        |           |         | (6,101   | )        
|                                                                           |                                                                              |                                                                          | Other assets, net                     |                                           |         | (158,168                          | )        |           |         | (18,785  | )        
|                                                                           |                                                                              |                                                                          | Income taxes payable                  |                                           |         |                                  |          |           |         | (16,765  | )        
|                                                                           |                                                                              |                                                                          | Accounts payable and accrued expenses |                                           |         | 291,723                           |          |           |         | (118,732 | )        
|                                                                           |                                                                              |                                                                          | Security deposits                     |                                           |         |                                  |          |           |         | 10,000   |          
|                                                                           |                                                                              |                                                                          |                                       |                                           |         |                                   |          |           |        
|                                                                           |                                                                              |                                                                          |                                       | Net cash used in continuing operations    |         |                                   | (613,953 | )         |         |          | (354,297  | )
|                                                                           |                                                                              |                                                                          |                                       |                                           |         |                                   |          |           |        
|Cash flows from investing activities:                                      |                                                                              |                                                                          |                                       |                                           |         |                                   |          |          
|                                                                           | Additions to real estate properties                                          |                                                                          |                                       |                                          |         |                                   |          | (19,711   | )      
|                                                                           | Acquisition of computer hardware, software and
other fixed assets            |                                                                          |                                       |                                          |         |                                   |          | (8,250    | )      
|                                                                           | Cash proceeds from sale of marketable securities                             |                                                                          |                                       |                                          |         |                                   |          | 1,253,489 |        
|                                                                           | Additions to leasing costs                                                   |                                                                          |                                       |                                          |         |                                   |          | (31,184   | )      
|                                                                           |                                                                              |                                                                          |                                       |                                           |         |                                   |          |           |        
|                                                                           |                                                                              |                                                                          |                                       | Net cash provided by investing activities |         |                                   |         |           |         |          | 1,194,344 |  
|                                                                           |                                                                              |                                                                          |                                       |                                           |         |                                   |          |           |        
|Cash flows from financing activities:                                      |                                                                              |                                                                          |                                       |                                           |         |                                   |          |          
|                                                                           | Payments on mortgage loans and notes payable                                 |                                                                          |                                       | (16,433                                   | )       |                                   |          | (56,624   | )      
|                                                                           | Dividends/distributions paid                                                 |                                                                          |                                       |                                          |         |                                   |          | (315,063  | )      
|                                                                           |                                                                              |                                                                          |                                       |                                           |         |                                   |          |           |        
|                                                                           |                                                                              |                                                                          |                                       | Net cash used in financing activities     |         |                                   | (16,433  | )         |         |          | (371,687  | )
|                                                                           |                                                                              |                                                                          |                                       |                                           |         |                                   |          |           |        
|Net cash used in discontinued operations                                   |                                                                              |                                                                          | (27,249                               | )                                         |         |                                   | (73,167  | )        
|                                                                           |                                                                              |                                                                          |                                       |                                           |         |                                   |          |           |        
|Net increase (decrease) in cash and cash equivalents                       |                                                                              |                                                                          | (657,635                              | )                                         |         |                                   | 395,193  |          
|Cash and cash equivalents                                                  |                                                                              |                                                                          |                                       |                                           |         |                                   |          |          
|                                                                           | Beginning of period                                                          |                                                                          |                                       | 1,029,265                                 |         |                                   |          | 1,540,766 |        
|                                                                           |                                                                              |                                                                          |                                       |                                           |         |                                   |          |           |        
|                                                                           | End of period                                                                |                                                                          | $                                     | 371,630                                   |         |                                   | $        | 1,935,959 |        
|                                                                           |                                                                              |                                                                          |                                       |                                           |         |                                   |          |           |        
|Supplemental information to Consolidated Statements of Cash Flows          |                                                                              |                                                                          |                                       |                                           |         |                                   |          |          
|                                                                           | Interest paid                                                                |                                                                          | $                                     | 168,282                                   |         |                                   | $        | 243,541   |        
|                                                                           |                                                                              |                                                                          |                                       |                                           |         |                                   |          |           |        
|Supplemental non-cash information to Consolidated Statements of Cash Flows |                                                                              |                                                                          |                                       |                                           |         |                                   |          |          
|                                                                           | Accrued financing costs                                                      |                                                                          | $                                     | 23,465                                    |         |                                   | $        |          |        
|                                                                           |                                                                              |                                                                          |                                       |                                           |         |                                   |          |           |        

The accompanying notes are an integral part of the consolidated financial statements.

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Paragon Real Estate Equity and Investment Trust and Subsidiaries

Notes to Consolidated Financial Statements

Note 1 - Organization

Paragon Real Estate Equity and Investment Trust, formerly Stonehaven Realty
Trust (the Company, Paragon, we, our, or us), is a real estate
company, which acquires, owns and operates commercial real estate. As of June
30, 2003, we owned four commercial industrial properties that aggregate
approximately 129,000 rentable square feet. We own our real estate investments
through our operating partnership, Wellington Properties Investments, L.P.
(Operating Partnership), of which we are the sole general partner and own an
approximate 92.9% interest.

On June 30, 2003, our shareholders approved the following:



| |  |  | The contribution of apartment buildings (Richton Trail) by
Hampton Court Associates, LP (Hampton), an affiliate of Paragon Real
Estate Development, LLC (Paragon Development), to a newly-established
operating partnership of the Company to be called Paragon Real Estate,
LP (UPREIT) in exchange for 813,938 restricted units in the UPREIT.
This contribution occurred on July 1, 2003. After four years from the
date of contribution, Hampton may redeem, in whole or in part, its
UPREIT restricted units for cash or, at our option we may elect to
convert the restricted units into our common shares of beneficial
interest of the Company (Common Shares). The conversion ratio would
be 22.881 Common Shares for each restricted unit, or 18,623,715 Common
Shares.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The issuance of 696,078 Class A Preferred Shares (Preferred
Shares) pursuant to separate restricted share agreements to James C.
Mastandrea and John J. Dee. Under the restricted share agreements, the
restricted shares vest upon the later of the following dates:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

| |  |   |  |                                                                                                                                                             
| |  | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  |  | the date our gross assets exceed $50.0 million, or                                                                                                          
| |  |   |  |                                                                                                                                                             
| |  |  |  | 348,038 restricted shares will vest on March 4, 2004; 174,020
shares will vest on March 4, 2005 and the remaining 174,020 shares
will vest on March 4, 2006.



| |  |  | Issuance of additional Common Shares to Messrs. Mastandrea and Dee
if they locate and close on our behalf future acquisition, development
or re-development transactions. Any of these transactions would be

subject to approval by our Board. The Common Shares they receive under
the additional contribution agreement will be restricted until we
achieve specified increases in net operating income and funds from
operations for the additional contribution agreement and will vest
immediately upon any shift in ownership, as defined in the agreement.                                                      
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The issuance of 22.881 Common Shares for each Preferred Share
tendered in accordance with the terms of our exchange offer to the
Preferred Shareholders. As a result, effective June 30, 2003,
Preferred Shareholders exchanged 1,174,120 of the Preferred Shares, or
nearly 81%, for 26,865,042 Common Shares. Messrs. Mastandrea and Dee
retained 161,410 Preferred Shares after the exchange offer, or 51% of
the total outstanding Preferred Shares and warrants to issue Preferred
Shares. Messrs. Mastandrea and Dee retain the right to convert each of
their remaining Preferred Shares into 22.881 Common Shares.
|
| |  |  | The change of our name to Paragon Real Estate Equity and
Investment Trust.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  |  | The amendment to the terms of our Preferred Shares to eliminate all
required dividends, the right of the Preferred Shareholders to elect a
majority of our Board in the event of two                                                                                                                                                                                                                                                                                                                                                                                                                                      

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| |   |  | consecutive dividend defaults, and a restriction on our ability to redeem
the Preferred Shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The election of James C. Mastandrea, John J. Dee, Daniel G. DeVos,
Michael T. Oliver and Daryl J. Carter to the Board of Trustees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  |  | The sale of our general partnership interest in our existing
Operating Partnership, which results in the sale of all the property we
currently own. Our existing Operating Partnership Agreement was
amended whereby the Company granted two of the limited partners, which
are controlled by Duane H. Lund, our former Chief Executive Officer and
a former member of our Board of Trustees, and Steven B. Hoyt, our
former Chairman of the Board, an exclusive option to purchase all of
the units in the Operating Partnership held by the Company. Our units
represent 92.9% of the outstanding interests in the partnership. This
option, to be exercised as of October 1, 2003, will result in the sale
of all our existing Minnesota properties. The proceeds from the sale
of the Minnesota properties, net of closing costs and the mortgage
balances assumed by the buyer, are expected to be approximately
$1,660,000. The proceeds from the sale will be paid in a combination
of approximately $830,000 in cash and our Common Shares at an average
closing price for the 30 calendar days prior to June 27, 2003 or $0.28.

Pursuant to the Supplemental Closing Agreement (Supplemental Agreement) dated
June 27, 2003 modifying Amendment No. 1 to the Agreement of Limited Partnership
of Wellington Properties Investments, LP (Amendment No. 1), the option was
exercised effective June 27, 2003 and the sale of the Minnesota properties is
scheduled to close on October 1, 2003. Further, the purchase price payable in
a combination of cash and our Common Shares was adjusted for the average
closing price of our Common Shares for the 30 calendar days prior to June 27,
2003 or $0.28.

The American Stock Exchange notified us that the outstanding Preferred Shares
held by investors not affiliated with Paragon had an aggregate market value
below $1 million and therefore no longer met the minimum requirement for
listing on the exchange. We do not intend to seek another trading market for
the Preferred Shares. Non-affiliated holders of 119,380 Preferred Shares
retain the right to convert each of their shares for 3.448 Common Shares.
Messrs. Mastandrea and Dee hold 161,410 Preferred Shares, which are convertible
for 22.881 Common Shares.

As a result of our name change to Paragon Real Estate Equity and Investment
Trust, our Common Shares trade under the new symbol PRG on the American
Stock Exchange.

Note 2 - Basis of Presentation

We have prepared the consolidated financial statements without audit pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations.
However, we believe that the included disclosures are adequate to make the
information presented not misleading. In our opinion, all adjustments
(consisting solely of normal recurring items, except for non-recurring real
estate expense and the discontinued operations of our technology segment)
necessary for a fair presentation of the financial position of the Company as
of June 30, 2003, the results of their operations for the six months ended June
30, 2003 and 2002, the results of their operations for the three months ended
June 30, 2003 and 2002, and of their cash flows for the six month periods ended
June 30, 2003 and 2002, have been included. The results of operations for such
interim periods are not necessarily indicative of the results for a full year.
For further information, refer to our consolidated financial statements and
footnotes included in the Annual Report of Form 10-KSB/A for the year ended
December 31, 2002.

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Note 3 - Summary of Significant Accounting Policies

Use of Estimates in the Preparation of Financial Statements

In order to conform with generally accepted accounting principles, management,
in preparation of our consolidated financial statements, is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of June 30,
2003, and the reported amounts of revenues and expenses for the six-months and
three-months ended June 30, 2003 and 2002. Actual results could differ from
those estimates. Significant estimates include the valuation of investments in
real estate, marketable securities and deferred taxes, and these significant
estimates, as well as other estimates and assumptions, which may change in the
near term.

Investments in Real Estate

Our investments in real estate assets are reported at the lower of cost or
estimated net realizable value.

We periodically review our properties for impairment and provide for a
provision if impairments are determined. First, to determine if impairment may
exist, we review our properties and identify those, if any, which have had
either an event of change or event of circumstances warranting further
assessment of recoverability. Then, we estimate the fair value of those
properties on an individual basis by capitalizing the expected net operating
income, among various other factors. Such amounts are then compared to the
propertys depreciated cost to determine whether an impairment exists.

In accordance with Financial Accounting Standard No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, impairment of investments in real
estate exists when the carrying amount of the investments exceeds its fair
value and is non-recoverable. Fair value of these assets is the amount an
asset could be bought or sold in a current transaction between willing parties.

During the quarter ended June 30, 2003, we recorded non-recurring real estate
expense in the amount of $350,000. This expense represented $280,000 of tenant
improvements, $31,000 of leasing commissions and $39,000 of professional
expense incurred on the Minnesota properties. The sale of the Minnesota
properties is scheduled to close on October 1, 2003 and the amount of proceeds
to be received from the sale will not be increased as a result of these
expenditures.

Depreciation expense is computed using the straight-line method based on the
following useful lives:

|                                  |  |       |     | 
|--------------------------------- |  | ----- | --- | 
|                                  |  | Years
|                                  |  |      
|Building and improvements         |  |       | 40  | 
|Furniture, fixtures and equipment |  |       | 3-5 | 

Expenditures for ordinary maintenance and repairs are expensed to operations as
incurred and significant renovations and improvements that improve or extend
the useful life of the asset are capitalized and depreciated over their
estimated useful life.

When a property is sold or retired, the costs and related accumulated
depreciation are removed from the accounts and the resulting gain or loss is
reflected in the statement of operations.

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Other Assets

As of June 30, 2003, other assets include deferred financing costs incurred to
obtain and secure mortgage debt financing, deferred leasing costs incurred in
connection with commercial tenant leases, and deferred costs associated with
the acquisition and disposition of real estate assets. Other assets are
carried at cost, less accumulated amortization.

The deferred financing costs are being amortized over the life of the
respective loans on a straight-line basis. Accumulated amortization related to
deferred financing costs as of June 30, 2003 was approximately $30,000.

The deferred leasing costs are being amortized over the life of the respective
lease term on a straight-line basis. Accumulated amortization related to
deferred leasing costs as of June 30, 2003 was approximately $9,000.

As of June 30, 2003, deferred costs related to the acquisition and disposition
of real estate assets are approximately $138,000. Approximately $84,000 will
be added to our basis in Richton Trail and depreciated on a straight-line basis
over the properties useful life and approximately $54,000 will be added to our
basis in the Minnesota properties and used in calculating our gain/loss on the
sale of those properties in October 2003.

Revenue Recognition

Rental revenue from tenants is recognized on a straight-line basis over the
term of the lease agreements regardless of when payments are due. Tenant
recoveries include payments from commercial property tenants for reimbursement
of the tenants share of real estate taxes and certain common area maintenance
costs. Such recoveries are recognized as revenue in the period the costs are
incurred.

Stock Based Compensation

At June 30, 2003, we have one stock-based employee compensation plan, which is
described more fully in our Annual Report of Form 10-KSB/A for the year ended
December 31, 2002. During the six-month period ended June 30, 2002, the
Company issued options as to 250,000 Common Shares under this plan. The Company
accounted for those plans under the recognition and measurement principles of
APB Opinion No. 25, Accounting for Stock Issued to Employees, and related
Interpretations. No stock-based employee compensation cost is reflected in net
loss, as all options granted under those plans had an exercise price equal to
the market value of the underlying common stock on the date of grant. The
following table illustrates the effect on net loss and loss per share if the
Company had applied the fair value recognition provisions of FASB Statement No.
123, Accounting for Stock-Based Compensation, as amended, to stock based
employee compensation.

|                                                                                                                                            |  |                                   |            |      |  |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | ---------- | ---- |  | - | -------- | -
|                                                                                                                                            |  | For the six months ended June 30,
|                                                                                                                                            |  |                                  
|                                                                                                                                            |  | 2003                              |            | 2002
|                                                                                                                                            |  |                                   |            |     
|Net loss available to Common Shareholders                                                                                                   |  | $                                 | (1,111,995 | )    |  | $ | (615,245 | )
|Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects |  |                                   |           |      |  |   | 44,000   |  
|                                                                                                                                            |  |                                   |            |      |  |   |          |  
|Pro forma net loss available to Common Shareholders                                                                                         |  | $                                 | (1,111,995 | )    |  | $ | (659,245 | )
|                                                                                                                                            |  |                                   |            |      |  |   |          |  
|Net loss available to Common Shareholders per
Common Share:                                                                                 |  |                                   |            |      |  |   |          |  
|Basic and Diluted  as reported                                                                                                             |  | $                                 | (0.24      | )    |  | $ | (0.14    | )
|                                                                                                                                            |  |                                   |            |      |  |   |          |  
|Basic and Diluted  pro forma                                                                                                               |  | $                                 | (0.24      | )    |  | $ | (0.13    | )
|                                                                                                                                            |  |                                   |            |      |  |   |          |  

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Income Taxes

Because we are no longer a REIT for federal income tax purposes, we now account
for income taxes using the liability method under which deferred tax assets and
liabilities are determined based on differences between the financial reporting
and tax bases of assets and liabilities using enacted tax rates in effect for
the period in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. We will be eligible to re-elect
REIT status on January 1, 2005.

At June 30, 2003, we have net operating losses. As of December 31, 2002, our
net operating losses were approximately $4,163,000. While these losses created
a deferred tax asset, a valuation allowance was applied against the asset
because of the uncertainty of whether or not we will be able to use these loss
carry forwards, which will expire in varying amounts through the year 2021.

We are also subject to certain state and local income, excise and franchise
taxes. The provision for such state and local taxes has been reflected in
general and administrative expense in the consolidated statements of operations
and has not been separately stated due to its insignificance.

Segment Disclosure

In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, Disclosures about Segments of an Enterprise and Related Information.
This statement requires that a public company report financial and descriptive
information about its reportable operating segments. Generally, financial
information is required to be reported on the basis that it is used internally
for evaluating segment performance and deciding how to allocate resources to
segments. Management views the Company as a single segment, which acquires,
owns and operates commercial and residential real estate. During 2002 we
discontinued operations of our technology segment.

Reclassification

As a result of reporting our technology segment as discontinued operations,
certain amounts in the June 30, 2002 financial statements have been
reclassified to conform to the June 30, 2003 presentation. These
reclassifications had no effect on net loss or shareholders equity as
previously reported.

Note 4 - Marketable Securities

Our investments in marketable securities are available-for-sale and, as of June
30, 2003, represent 40,000 shares of Stellent common stock (Stellent). The
shares were acquired in connection with the sale of certain assets of
Stonehaven Technologies on July 10, 2001 and were recorded at $29.94 per share
based on the NASDAQ closing quote of Stellent on July 9, 2001. The shares were
unregistered when acquired and Stellent subsequently registered the shares with
the Securities and Exchange Commission effective September 7, 2001.

As of June 30, 2003, the fair market value of these marketable securities
aggregated approximately $216,000 (based upon the NASDAQ closing quote of $5.40
per share of Stellent on June 30, 2003). As of June 30, 2002, we recorded an
unrealized loss on marketable securities of $987,200 (based upon the NASDAQ
closing quote of $4.50 per share of Stellent on June 28, 2002). Based on the
aggregate fair market value of our marketable securities as of June 30, 2003 as
compared to the aggregate fair market value as of December 31, 2002 of
$177,200, we have recorded an unrealized gain on marketable securities of
$38,800.

Subsequent to June 30, 2003, we sold 15,000 shares of Stellent at an average
price of $7.85 per share and recognized a gain on the sale of these shares
totaling approximately $61,000.

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During the month of January 2002, the Company sold 40,000 Stellent Shares at an
average price of $31.34 per share and recognized a gain on the sale of these
shares totaling approximately $56,000. The Company recognizes gain or loss on
the sale of marketable securities based upon the first-in-first-out method.

The NASDAQ closing quote on August 1, 2003 was $7.17 per share of Stellent.

Note 5 - Mortgage Loans Payable

The mortgage loans payable relating to the Plymouth I, II & III properties of
approximately $4.2 million matured on June 30, 2003 and have been extended
through June 30, 2004. Payments are required monthly in the amount of
approximately $23,000, which represents principal and interest at 4.25%.

Note 6 - Equity/Distributions

Effective April 7, 2003, we issued 95,541 Preferred Shares to Duane H. Lund in
connection with his resignation as Chief Executive Officer in accordance with
the terms of his employment agreement dated March 4, 2003 and recorded
compensation expense of $300,000 as a result of the issuance and employment
termination.

Effective June 30, 2003, we issued 696,078 Preferred Shares to Messrs.
Mastandrea and Dee pursuant to separate restricted share agreements. Under
each restricted share agreement, the restricted shares vest upon the later of
the following dates:



| |  |  | the date our gross assets exceed $50.0 million, or                                                                                                          
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 348,038 restricted shares will vest on March 4, 2004; 174,020
shares will vest on March 4, 2005 and the remaining 174,020 shares will
vest on March 4, 2006.

On June 30, 2003, the holders of our Preferred Shares consented to waive the
dividend that would otherwise have been payable in May 2003 and to eliminate
any future dividends that would have been payable under the terms of our
Preferred Shares. The waiver was sought in connection with a one-time
incentive exchange offer under which we offered to exchange each of our
Preferred Shares for 22.881 Common Shares.

On June 30, 2003, Preferred Shareholders exchanged 1,174,120, or nearly 81%, of
the Preferred Shares, in the one-time incentive exchange offer, for
approximately 26,865,000 Common Shares at a conversion rate of 22.881 Common
Shares for each of our Preferred Shares.

All of the above June 30, 2003 transactions are reflected as if they happened
on June 30, 2003 immediately after being approved by our Shareholders.

The American Stock Exchange notified us that the outstanding Preferred Shares
held by investors not affiliated with Paragon had an aggregate market value
below $1 million and therefore no longer met the minimum requirement for
listing on the exchange. We do not intend to seek another trading market for
the Preferred Shares. Non-affiliated holders of 119,380 Preferred Shares
retain the right to convert each of their shares for 3.448 Common Shares.
Messrs. Mastandrea and Dee hold 161,410 Preferred Shares, which are convertible
for 22.881 Common Shares.

As a result our name change to Paragon Real Estate Equity and Investment
Trust, our Common Shares trade under the new symbol PRG on the American
Stock Exchange.

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Note 7 - Discontinued Operations

Losses from discontinued operations relating to Stonehaven Technologies, Inc.
for the six-month periods ended June 30, 2003 and June 30, 2002 were
approximately $0 and $50,000, respectively.

Note 8 - Loss Per Share

The Company has adopted the Statement of Financial Accounting Standards No.
128, Earnings Per Share (EPS) for all periods presented herein. Net loss
per weighted average Common Share outstandingbasic and net loss per weighted
average Common Share outstandingdiluted are computed based on the weighted
average number of Common Shares outstanding for the period. The weighted
average number of Common Shares outstanding for the six months ended June 30,
2003 and June 30, 2002 were 4,665,950 and 4,517,524, respectively. Common share
equivalents of approximately 31.8 million and 2.9 million as of June 30, 2003
and June 30, 2002, respectively, include outstanding convertible Preferred
Shares, warrants, stock options and Common Units, and are not included in net
loss per weighted average Common Share outstandingdiluted as they would be
anti-dilutive.

|                                                                                             |                   |                                     |            |                                   |   |      |          |           |         |  
|-------------------------------------------------------------------------------------------- | ----------------- | ----------------------------------- | ---------- | --------------------------------- | - | ---- | -------- | --------- | ------- | -
|                                                                                             |                   |                                     |            | For the six months ended June 30,
|                                                                                             |                   |                                     |            |                                  
|                                                                                             |                   |                                     |            | 2003                              |   | 2002
|                                                                                             |                   |                                     |            |                                   |   |     
|Numerator                                                                                    |                   |                                     |            |                                   |   |      |          |          
|Net loss from continuing operations                                                          |                   | $                                   | (1,111,995 | )                                 |   | $    | (250,425 | )        
|Discontinued operations:                                                                     |                   |                                     |            |                                   |   |      |          |          
|                                                                                             |                   | Discontinued operations, net of tax |            |                                   |  |      |          |           | (49,757 | )
|                                                                                             |                   |                                     |            |                                   |   |      |          |          
|Net loss                                                                                     |                   |                                     | (1,111,995 | )                                 |   |      | (300,182 | )        
|Preferred Share Dividends                                                                    |                   |                                     |           |                                   |   |      | (315,063 | )        
|                                                                                             |                   |                                     |            |                                   |   |      |          |          
|Net loss available to Common Shareholders                                                    |                   | $                                   | (1,111,995 | )                                 |   | $    | (615,245 | )        
|                                                                                             |                   |                                     |            |                                   |   |      |          |          
|Denominator                                                                                  |                   |                                     |            |                                   |   |      |          |          
|Weighted average Common Shares
outstanding at June 30, 2003 and June
30, 2002, respectively: |                   |                                     |            |                                   |   |      |          |          
|                                                                                             | Basic and Diluted |                                     |            | 4,665,950                         |   |      |          | 4,517,524 |        
|                                                                                             |                   |                                     |            |                                   |   |      |          |          
|Basis and Diluted EPS                                                                        |                   |                                     |            |                                   |   |      |          |          
|Net loss from continuing operations                                                          |                   | $                                   | (0.24      | )                                 |   | $    | (0.06    | )        
|Discontinued operations:                                                                     |                   |                                     |            |                                   |   |      |          |          
|                                                                                             |                   | Discontinued operations, net of tax |            |                                   |  |      |          |           | (0.01   | )
|                                                                                             |                   |                                     |            |                                   |   |      |          |          
|Net loss                                                                                     |                   |                                     | (0.24      | )                                 |   |      | (0.07    | )        
|Preferred Share Dividends                                                                    |                   |                                     |           |                                   |   |      | (0.07    | )        
|                                                                                             |                   |                                     |            |                                   |   |      |          |          
|Net loss available to Common
Shareholders - Basic and Diluted                                |                   | $                                   | (0.24      | )                                 |   | $    | (0.14    | )        
|                                                                                             |                   |                                     |            |                                   |   |      |          |          

Note 9 - Commitments and Contingencies

Liquidity

As of June 30, 2003, our unrestricted cash resources were $372,000 and our
marketable securities available for sale were approximately $216,000. Our
marketable securities represented 40,000 shares of Stellent. The NASDAQ
closing quote on August 1, 2003 was $7.17 per share of Stellent.

Subsequent to June 30, 2003, we sold 15,000 shares of Stellent at an average
price of $7.85 per share and recognized a gain on the sale of these shares
totaling approximately $61,000. Net proceeds from these sales were
approximately $117,000.

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On March 4, 2003, we hired two executives and on June 30, 2003 the Common and
Preferred Shareholders elected five new Trustees. Our new management intends
to implement a business strategy that will involve nationwide real estate
acquisition, development and re-development transactions. This strategy will
be dependent on external sources of capital. Failure to obtain this capital
will materially and adversely affect the strategy and will materially and
adversely affect our operations, liquidity and financial results.

On June 30, 2003, the holders of our Preferred Shares consented to waive the
dividend that would otherwise have been payable in May 2003 and to eliminate
any future dividends that would have been payable under the terms of our
Preferred Shares. The waiver was sought in connection with a one-time
incentive exchange offer under which we will offer to exchange each of our
Preferred Shares for 22.881 Common Shares.

We recognize that the cash flow from our properties is not expected to fully
fund our future liquidity requirements. In this case, we intend to pursue
available alternatives to preserve our cash to allow the Company to meet its
ongoing obligations. Such alternatives include, among others, to pursue
additional or alternate financing or to sell our properties. There can be no
assurance that any of the alternatives will be adopted, or if adopted, will be
successful.

Pursuant to the Supplemental Closing Agreement (Supplemental Agreement) dated
June 27, 2003 modifying Amendment No. 1 to the Agreement of Limited Partnership
of Wellington Properties Investments, LP (Amendment No. 1), the option was
exercised effective June 27, 2003 and the sale of the Minnesota properties is
scheduled to close on October 1, 2003. Proceeds from the sale of the Minnesota
properties, net of closing costs and the mortgage balances assumed by the
buyer, are expected to be approximately $1,660,000. The proceeds from the sale
will be paid in a combination of approximately $830,000 in cash and our Common
Shares at an average closing price for the 30 calendar days prior to June 27,
2003 or $0.28. We will also receive as a result of the sale cash in the amount
of approximately $350,000 representing cash and cash equivalents and the
restricted cash of the Minnesota properties.

Employment Agreements

Effective as of March 4, 2003, the Compensation Committee approved three new
employment agreements. The employment agreement with Mr. Lund provided for an
annual salary of $150,000 to be paid to Mr. Lund for his services as Chief
Executive Officer through five days after the filing of the Companys December
31, 2002 Form 10-KSB/A. In connection with the severance provision of this
agreement, on April 7, 2003, Mr. Lund relinquished his position as Chief
Executive Officer and, in consideration for his resignation, received 95,541
Preferred Shares in lieu of receiving a $300,000 severance payment. The number
of shares issued was based on two times his annual salary with the price of the
Preferred Shares based on the average closing price for the 30 calendar days
prior to March 1, 2003. Mr. Lund received an annual salary of $60,000 for his
services from April 7, 2003 until June 15, 2003.

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The employment agreements with James C. Mastandrea and John J. Dee provide for
an annual salary of $60,000 each effective as of March 4, 2003 and in
connection therewith, Mr. Mastandrea was appointed as Chief Executive Officer
and Mr. Dee was appointed as Chief Financial Officer on April 7, 2003. The
initial terms of Messrs. Mastandrea and Dees employment are for two years and
may be extended for terms of one year through their 70th birthday. Messrs.
Mastandrea and Dees base annual salaries may be adjusted from time to time,
except that the adjustment may not be lower than the preceding years base
salary. The employment agreements provide that Messrs. Mastandrea and Dee will
be entitled to base salary and bonus at the rate in effect before any
termination for a period of three years in the event that their employment is
terminated without cause by us or for good reason by either Messrs. Mastandrea
or Dee.

The employment agreement with Steven M. Edelman provides for an annual salary
of $60,000 effective as of May 16, 2003 and in connection therewith, Mr.
Edelman was appointed as Senior Vice President and Chief Investment Officer.
The initial term of Mr. Edelmans employment is for two years and may be
extended for terms of one year through his 70th birthday. Mr. Edelmans base
annual salary may be adjusted from time to time, except that the adjustment may
not be lower than the preceding years base salary. The employment agreement
provides that Mr. Edelman will be entitled to base salary and bonus at the rate
in effect before any termination for a period of three years in the event that
his employment is terminated without cause by us or for good reason by Mr.
Edelman.

Income Tax Audit

Our Operating Partnerships income tax returns are currently under audit by the
Internal Revenue Service for the tax periods ended December 31, 1998, 1999 and
2000. We believe the tax returns as filed appropriately state the taxable
income/loss for each year. However, there can be no assurance that changes
will not result to the taxable income/loss as originally filed. We believe
that changes proposed, if any, may affect the net operating loss carry forward
amounts of the Company but would not have any substantial effect on our cash
resources.

Note 10 - Related Party Transactions

Management Fees

We maintain a property management agreement with Hoyt Properties, Inc.
(Hoyt), an entity controlled by Steven B. Hoyt, our former Chairman of the
Board, to serve as Property Manager of the commercial properties owned by us.
In connection with the agreement, Hoyt manages the day-to-day operations of
properties owned by us and receives a management fee for this service.
Management fees paid to Hoyt were approximately $32,000 and $31,000 for the
six-months ended June 30, 2003 and June 30, 2002, respectively.

Leasing Commissions

During the six-month period ended June 30, 2003, we paid a leasing commission
of approximately $18,000 to Hoyt in connection with two new leases for a total
of approximately 21,000 square feet.

Rental Expense

During the six-months ended June 30, 2003 and June 30, 2002, we recognized
rental expense of approximately $8,000 and $12,000, respectively, related to
office space leased from Hoyt.

Rental Income

On January 7, 2003, one of our tenants vacated their noncontiguous space of
31,219 square feet and moved into contiguous space in a building owned by an
affiliate of Steven B. Hoyt, our former Chairman of the Board. In connection
with this move, the tenant has indicated that it intends to

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continue to pay rent until the earlier of the expiration date of its lease of
March 31, 2004 or until the space is re-leased. As of June 30, 2003, we have
entered into two new leases on this vacated space. The first lease was
effective March 1, 2003 for 9,154 square feet and the second lease was
effective June 1, 2003 for 12,200 square feet.

Note 11 - Subsequent Event

We closed the acquisition of Richton Trail Apartments, a residential apartment
complex located near Chicago, Illinois, effective as of July 1, 2003, following
approval by our shareholders of the transaction on June 30, 2003. Our
newly-established operating partnership, Paragon Real Estate, LP, acquired the
Richton Trail Apartments along with the associated mortgage from Hampton Court
Associates, LP, a partnership controlled by James C. Mastandrea, its general
partner and our Chairman and Chief Executive Officer. In consideration for
transferring Richton Trail, Hampton received 813,938 limited partnership units
of Paragon Real Estate, LP. Each unit is redeemable after four years for cash,
or, at our option, 22.881 of our Common Shares. We are the general partner of
Paragon Real Estate, LP.

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto appearing elsewhere herein.

This report on Form 10-QSB contains forward-looking statements for the
purposes of the Securities Act of 1933 and the Securities Exchange Act of 1934
and such may involve known and unknown risks, uncertainties and other factors
that may cause the actual results, performance, and achievements of the Company
to be materially different from results, performance or achievements expressed
or implied by such forward-looking statements. Although the Company believes
that the expectations reflected in such forward-looking statements are based
upon reasonable assumptions, there can be no assurance that these expectations
will be realized. The Company assumes no obligation to update or supplement
forward-looking statements that become untrue because of subsequent events.
Factors that could cause actual results to differ materially from managements
current expectations include, but are not limited to, changes in general
economic conditions, changes in local real estate conditions (including rental
rates and competing properties), changes in the economic conditions affecting
industries in which the Companys principal tenants compete, the Companys
failure to lease unoccupied space in accordance with the Companys projections,
the failure of the Company to re-lease occupied space upon expiration of
leases, the bankruptcy of major tenants, changes in prevailing interest rates,
the unavailability of equity and debt financing, unanticipated costs associated
with the acquisition and integration of the Companys acquisitions, the
Companys ability to obtain adequate insurance for terrorist acts, demand for
tenant services beyond those traditionally provided by landlords, potential
liability under environmental or other laws and the other risks identified in
the Companys Annual Report on Form 10-KSB/A for the year ended December 31,
2002.

Overview

Paragon Real Estate Equity and Investment Trust, formerly Stonehaven Realty
Trust (the Company, Paragon, we, our, or us), is a real estate
company, which acquires, owns and operates commercial real estate. As of June
30, 2003, we owned four commercial industrial properties that aggregate
approximately 129,000 rentable square feet.



| |  |  | A 26,186 square-foot light industrial facility in Plymouth, Minnesota  
| | - |  | -----------------------------------------------------------------------
|
| |  |  | A 26,186 square-foot light industrial facility in Plymouth, Minnesota  
|
| |  |  | A 26,186 square-foot light industrial facility in Plymouth, Minnesota  
|
| |  |  | A 50,291 square-foot light industrial facility in Burnsville, Minnesota

As of June 30, 2003, our properties were 84.8% leased. We own our real estate
investments through our operating partnership, Wellington Properties
Investments, L.P. (Operating Partnership), of which we are the sole general
partner and own an approximate 92.9% interest.

On June 30, 2003, our shareholders approved the following:



| |  |  | The contribution of apartment buildings (Richton Trail) by
Hampton Court Associates, LP (Hampton), an affiliate of Paragon Real
Estate Development, LLC (Paragon Development), to a newly-established
operating partnership of the Company to be called Paragon Real Estate,
LP (UPREIT) in exchange for 813,938 restricted units in the UPREIT.
This contribution occurred on July 1, 2003. After four years from the
date of contribution, Hampton may redeem, in whole or in part, its
UPREIT restricted units for cash or, at our option we may elect to
convert the restricted units into our common shares of beneficial
interest of the Company (Common
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |   |  | Shares). The conversion ratio would
be 22.881 Common Shares for each restricted unit, or 18,623,715 Common
Shares.                                                                                                                                                    
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The issuance of 696,078 Class A Preferred Shares (Preferred
Shares) pursuant to separate restricted share agreements to James C.
Mastandrea and John J. Dee. Under the restricted share agreements, the
restricted shares vest upon the later of the following dates:

| |  |   |  |                                                                                                                                                             
| |  | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  |  | the date our gross assets exceed $50.0 million, or                                                                                                          
| |  |   |  |                                                                                                                                                             
| |  |  |  | 348,038 restricted shares will vest on March 4, 2004; 174,020
shares will vest on March 4, 2005 and the remaining 174,020 shares
will vest on March 4, 2006.



| |  |  | Issuance of additional Common Shares to Messrs. Mastandrea and Dee
if they locate and close on our behalf future acquisition, development
or re-development transactions. Any of these transactions would be
subject to approval by our Board. The Common Shares they receive under
the additional contribution agreement will be restricted until we
achieve specified increases in net operating income and funds from
operations for the additional contribution agreement and will vest
immediately upon any shift in ownership, as defined in the agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The issuance of 22.881 Common Shares for each Preferred Share
tendered in accordance with the terms of our exchange offer to the
Preferred Shareholders. As a result, effective June 30, 2003,
Preferred Shareholders exchanged 1,174,120 of the Preferred Shares, or
nearly 81%, for 26,865,042 Common Shares. Messrs. Mastandrea and Dee
retained 161,410 Preferred Shares after the exchange offer, or 51% of
the total outstanding Preferred Shares and warrants to issue Preferred
Shares. Messrs. Mastandrea and Dee retain the right to convert each of
their remaining Preferred Shares into 22.881 Common Shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  |  | The change of our name to Paragon Real Estate Equity and
Investment Trust.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  |  | The amendment to the terms of our Preferred Shares to eliminate all
required dividends, the right of the Preferred Shareholders to elect a
majority of our Board in the event of two consecutive dividend
defaults, and a restriction on our ability to redeem the Preferred
Shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  |  | The election of James C. Mastandrea, John J. Dee, Daniel G. DeVos,
Michael T. Oliver and Daryl J. Carter to the Board of Trustees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  |  | The sale of our general partnership interest in our existing
Operating Partnership, which results in the sale of all the property we
currently own. Our existing Operating Partnership Agreement was
amended whereby the Company granted two of the limited partners, which
are controlled by Duane H. Lund, our former Chief Executive Officer and
a former member of our Board of Trustees, and Steven B. Hoyt, our
former Chairman of the Board, an exclusive option to purchase all of
the units in the Operating Partnership held by the Company. Our units
represent 92.9% of the outstanding interests in the partnership. This
option, to be exercised as of October 1, 2003, will result in the sale
of all our existing
Minnesota properties. The proceeds from the sale of the Minnesota
properties, net of closing costs and the mortgage balances assumed by the
buyer, are expected to be approximately $1,660,000. The proceeds from
the sale will be paid in a combination of approximately $830,000 in cash
and our Common Shares at an average closing price for the 30 calendar
days prior to June 27, 2003 or $0.28.

Pursuant to the Supplemental Closing Agreement (Supplemental Agreement) dated
June 27, 2003 modifying Amendment No. 1 to the Agreement of Limited Partnership
of Wellington Properties Investments, LP (Amendment No. 1), the option was
exercised effective June 27, 2003 and the sale
- 18 -Table of Contents

of the Minnesota properties is
scheduled to close on October 1, 2003. Further, the purchase price payable in
a combination of cash and our Common Shares was adjusted for the average
closing price of our Common Shares for the 30 calendar days prior to June 27,
2003 or $0.28.

The American Stock Exchange notified us that the outstanding Preferred Shares
held by investors not affiliated with Paragon had an aggregate market value
below $1 million and therefore no longer met the minimum requirement for
listing on the exchange. We do not intend to seek another trading market for
the Preferred Shares. Non-affiliated holders of 119,380 Preferred Shares
retain the right to convert each of their shares for 3.448 Common Shares.
Messrs. Mastandrea and Dee hold 161,410 Preferred Shares, which are convertible
for 22.881 Common Shares.

As a result of our name change to Paragon Real Estate Equity and Investment
Trust, our Common Shares trade under the new symbol PRG on the American
Stock Exchange.

Results of Operations

Comparison of the Six-Month Period Ended June 30, 2003 and 2002

Revenues from Continuing Operations

Rental revenue remained relatively constant for the six-month period ended June
30, 2003 compared to the six-month period ended June 30, 2002 as average
occupancy remained relatively constant: 85.8% for the six-month period ended
June 30, 2003 as compared to 84.8% for the six-month period ended June 30,
2002.

Tenant recoveries increased by approximately $12,000 or 5.5% for the six-month
period ended June 30, 2003 compared to the six-month period ended June 30,
2002. The increased tenant recoveries were primarily a result of a
reimbursement to tenants for their overpayment of their pro-rata share of
operating expenses during the six-month period ended June 30, 2002, offset by,
a decrease in monthly estimated billing for the tenants pro-rata share of
operating expenses.

Interest income and other income decreased by approximately $10,000 or 61.0%

for the six-month period ended June 30, 2003 compared to the six-month period
ended June 30, 2002. The decrease is primarily due to the decrease in cash and
cash equivalents.

Expenses from Continuing Operations

Total expenses increased from approximately $995,000 for the six-month period
ended June 30, 2002 to $1,826,000 for the six-month period ended June 30, 2003,
a net increase of $831,000 described below.

Property, operating and maintenance increased approximately by $26,000 or 33.9%
for the six-month period ended June 30, 2003 compared to the six-month period
ended June 30, 2002 primarily a result of general building maintenance.

Property taxes and insurance remained relatively constant for the six-month
period ended June 30, 2003 compared to the six-month period ended June 30,
2002.

Depreciation and amortization decreased by approximately $16,000 or 12.8% for
the six-month period ended June 30, 2003 compared to the six-month period ended
June 30, 2002 primarily as a result of the write down of our real estate
investments during the second half of 2002.

Interest decreased by approximately $75,000 or 30.9% for the six-month period
ended June 30, 2003 compared to the six-month period ended June 30, 2002
primarily as a result of a reduced interest rate on the mortgages associated
with the Plymouth Properties.

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General and administrative increased approximately by $547,000 or 161.2% for
the six-month period ended June 30, 2003 compared to the six-month period ended
June 30, 2002 primarily as a result of increased costs associated with our
exploration of alternatives for growth of the Company, coupled with, $300,000
severance expense recorded in connection with the employment contract of Duane
H. Lund, our former Chief Executive Officer. Mr. Lund received 95,541
Preferred Shares in lieu of a cash payment as a means to preserve cash. The
number of shares issued was based on two times his annual salary with the price
of the Preferred Shares based on the average closing price for the 30 calendar
days prior to March 1, 2003.

Management fees remained relatively constant for the six-month period ended
June 30, 2003 compared to the six-month period ended June 30, 2002.

Non-recurring real estate expense of approximately $350,000 for the six-month
period ended June 30, 2003 represented $280,000 of tenant improvements, $31,000
of leasing commissions and $39,000 of professional expense incurred on the
Minnesota properties. The sale of the Minnesota properties is scheduled to
close on October 1, 2003 and the amount of proceeds to be received from the
sale will not be increased as a result of these expenditures.

Loss from operations before gain on sale of marketable securities and loss
allocated to minority interest

As a result of the above, loss from operations before gain on sale of
marketable securities and loss allocated to minority interest increased from
approximately $331,000 for the six-month period ended June 30, 2002 to
approximately $1,155,000 for the six-month period ended June 30, 2003.

Gain on sale of marketable securities

The gain on sale of marketable securities of approximately $56,000 for the
six-month period ended June 30, 2002, was a result of our sale of 40,000 shares
of Stellent common stock at an average price of $31.34 per share. Our Stellent
stock was acquired in connection with the disposition of our technology segment
on July 10, 2001 and was valued at $29.94 per share based on the NASDAQ closing
quote per share on July 9, 2001.

Loss allocated to minority interest

Loss allocated to minority interest increased from approximately $25,000 for
the six-month period ended June 30, 2002 to approximately $43,000 for the
six-month period ended June 30, 2003.

Loss from continuing operations

Loss from continuing operations increased from approximately $250,000 for the
six-month period ended June 30, 2002 to approximately $1,112,000 for the
six-month period ended June 30, 2003.

Discontinued operations

Loss from discontinued operations, net of tax of approximately $0 and
$50,000 for the six-month periods ended June 30, 2003 and 2002, respectively,
were a result of the Companys discontinued operations of its technology
segment.

Preferred Share Dividends

Preferred Share dividends decreased from approximately $315,000 for the
six-month period ended June 30, 2002 to $0 for the six-month period ended June
30, 2003. The Preferred Shareholders were offered a one-time incentive to
exchange each Preferred Share for 22.881 Common Shares. The Preferred and
Common Shareholders approved a proxy proposal in June 2003 to eliminate the
dividend requirement of the Preferred Shares.

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Net loss available to Common Shareholders

Based on the above, the net loss available to Common Shareholders increased
from approximately $615,000 for the six-month period ended June 30, 2002 to
$1,112,000 for the six-month period ended June 30, 2003.

Comparison of the Three-Month Period Ended June 30, 2003 and 2002

Revenues from Continuing Operations

Rental revenue remained relatively constant for the three-month period ended
June 30, 2003 compared to the three-month period ended June 30, 2002 as average
occupancy remained relatively constant: 87.4% for the three-month period ended
June 30, 2003 as compared to 90.5% for the three-month period ended June 30,
2002.

Tenant recoveries decreased by approximately $15,000 or 11.5% for the
three-month period ended June 30, 2003 compared to the three-month period ended
June 30, 2002. The decrease was primarily a result of decreased occupancy,
coupled with, a decrease in monthly estimated billing for the tenants pro-rata
share of operating expenses.

Interest income and other income decreased by approximately $9,000 or 88.3% for
the three-month period ended June 30, 2003 compared to the three-month period
ended June 30, 2002. The decrease is primarily due to the decrease in cash and
cash equivalents.

Expenses from Continuing Operations

Total expenses increased from approximately $465,000 for the three-month period
ended June 30, 2002 to $1,240,000 for the three-month period ended June 30,
2003, a net increase of $775,000 described below.

Property, operating and maintenance increased approximately by $15,000 or 46.5%
for the three-month period ended June 30, 2003 compared to the three-month
period ended June 30, 2002 primarily a result of general building maintenance.

Property taxes and insurance remained relatively constant for the three-month
period ended June 30, 2002 compared to the three-month period ended June 30,
2003.

Depreciation and amortization decreased by approximately $10,000 or 14.8% for
the three-month period ended June 30, 2003 compared to the three-month period
ended June 30, 2002 primarily as a result of the write down of our real estate
investments during the second half of 2002.

Interest decreased by approximately $37,000 or 30.3% for the three-month period
ended June 30, 2003 compared to the three-month period ended June 30, 2002
primarily as a result of a reduced interest rate on the mortgages associated
with the Plymouth Properties.

General and administrative increased approximately by $456,000 or 320.2% for
the three-month period ended June 30, 2003 compared to the three-month period
ended June 30, 2002 primarily as a result of increased costs associated with
our exploration of alternatives for growth of the Company, coupled with,
$300,000 severance expense recorded in connection with the employment contract
of Duane H. Lund, our former Chief Executive Officer. Mr. Lund received 95,541
Preferred Shares in lieu of a cash payment as a means to preserve cash. The
number of shares issued was based on two times his annual salary with the price
of the Preferred Shares based on the average closing price for the 30 calendar
days prior to March 1, 2003.

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Management fees remained relatively constant for the three-month period ended
June 30, 2003 compared to the three-month period ended June 30, 2002.

Non-recurring real estate expense of approximately $350,000 for the three-month
period ended June 30, 2003 represented $280,000 of tenant improvements, $31,000
of leasing commissions and $39,000 of professional expense incurred on the
Minnesota properties. The sale of the Minnesota properties is scheduled to
close on October 1, 2003 and the amount of proceeds to be received from the
sale will not be increased as a result of these expenditures.

Loss from operations before loss allocated to minority interest

As a result of the above, loss from operations before loss allocated to
minority interest increased from approximately $108,000 for the three-month
period ended June 30, 2002 to approximately $900,000 for the three-month period
ended June 30, 2003.

Loss allocated to minority interest

Loss allocated to minority interest increased from approximately $18,000 for
the three-month period ended June 30, 2002 to approximately $33,000 for the
three-month period ended June 30, 2003.

Loss from continuing operations

Loss from continuing operations increased from approximately $91,000 for the
three-month period ended June 30, 2002 to approximately $867,000 for the
three-month period ended June 30, 2003.

Discontinued operations

Loss from discontinued operations, net of tax of approximately $0 and
$37,000 for the three-month periods ended June 30, 2003 and 2002, respectively,
were a result of the Companys discontinued operations of its technology
segment.

Preferred Share Dividends

Preferred Share dividends decreased from approximately $315,000 for the
three-month period ended June 30, 2002 to $0 for the three-month period ended
June 30, 2003. The Preferred Shareholders were offered a one-time incentive to
exchange each Preferred Share for 22.881 Common Shares. The Preferred and
Common Shareholders approved in June 2003 a proxy proposal to eliminate the
dividend requirement of the Preferred Shares.

Net loss available to Common Shareholders

Based on the above, the net loss available to Common Shareholders increased
from approximately $442,000 for the three-month period ended June 30, 2002 to
$867,000 for the three-month period ended June 30, 2002.

Liquidity and Capital Resources

Short Term and Long Term Liquidity

Cash provided by operations, equity transactions, and borrowings from
affiliates and lending institutions have generally provided the primary sources
of liquidity to the Company. Historically, the Company has used these sources
to fund operating expenses, satisfy its debt service obligations and fund
distributions to shareholders. For the six months ended June 30, 2003 and June
30, 2002, our net cash used in operating activities totaled approximately
$614,000 and $354,000, respectively.

As of June 30, 2003, our unrestricted cash resources were $372,000 and our
marketable securities

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available for sale were approximately $216,000. Our marketable securities
represented 40,000 shares of Stellent. The NASDAQ closing quote on August 1,
2003 was $7.17 per share of Stellent.

Subsequent to June 30, 2003, we sold 15,000 shares of Stellent at an average
price of $7.85 per share and recognized a gain on the sale of these shares
totaling approximately $61,000. Net proceeds from these sales were
approximately $117,000.

On March 4, 2003, we hired two executives and on June 30, 2003 the Common and
Preferred Shareholders elected five new Trustees. Our new management intends
to implement a business strategy that will involve nationwide real estate
acquisition, development and re-development transactions. This strategy will
be dependent on external sources of capital. Failure to obtain this capital
will materially and adversely affect the strategy and will materially and
adversely affect our operations, liquidity and financial results.

On June 30, 2003, the holders of our Preferred Shares consented to waive the
dividend that would otherwise have been payable in May 2003 and to eliminate
any future dividends that would have been payable under the terms of our
Preferred Shares. The waiver was sought in connection with a one-time
incentive exchange offer under which we offered to exchange each of our
Preferred Shares for 22.881 Common Shares.

The American Stock Exchange notified us that the outstanding Preferred Shares
held by investors not affiliated with Paragon had an aggregate market value
below $1 million and therefore no longer met the minimum requirement for
listing on the exchange. We do not intend to seek another trading market for
the Preferred Shares. Non-affiliated holders of 119,380 Preferred Shares
retain the right to convert each of their shares for 3.448 Common Shares.
Messrs. Mastandrea and Dee hold 161,410 Preferred Shares, which are convertible
for 22.881 Common Shares.

As a result our name change to Paragon Real Estate Equity and Investment
Trust, our Common Shares trade under the new symbol PRG on the American
Stock Exchange.

We recognize that the cash flow from our properties is not expected to fully
fund our future liquidity requirements. In this case, we intend to pursue
available alternatives to preserve our cash to allow the Company to meet its
ongoing obligations. Such alternatives include, among others, to pursue
additional or alternate financing or to sell our properties. There can be no
assurance that any of the alternatives will be adopted, or if adopted, will be
successful.

Pursuant to the Supplemental Closing Agreement (Supplemental Agreement) dated
June 27, 2003 modifying Amendment No. 1 to the Agreement of Limited Partnership
of Wellington Properties Investments, LP (Amendment No. 1), the option was
exercised effective June 27, 2003 and the sale of the Minnesota properties is
scheduled to close on October 1, 2003. Proceeds from the sale of the Minnesota
properties, net of closing costs and the mortgage balances assumed by the
buyer, are expected to be approximately $1,660,000. The proceeds from the sale
will be paid in a combination of approximately $830,000 in cash and our Common
Shares at an average closing price for the 30 calendar days prior to June 27,
2003 or $0.28. We will also receive as a result of the sale cash in the amount
of approximately $350,000 representing cash and cash equivalents and the
restricted cash of the Minnesota properties.

Cash Flows

During the six-month period ended June 30, 2003, cash flows were used primarily
for (i) cash used in operating activities of approximately $614,000; (ii) cash
used in discontinued operations of approximately $27,000 primarily a result of
the settlement of outstanding liabilities; and (iii) payments on mortgage loans
and notes payable of approximately $17,000. As a result, the Companys cash
balance decreased by approximately $658,000 from approximately $1,029,000 at
December 31, 2002 to approximately $372,000 at June 30, 2003.

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Business Objectives and Operating Strategies

Our business plan focuses on growth by capitalizing on real estate
opportunities across the United States. These opportunities may involve the
acquisition, development, re-development, leasing or management of properties,
portfolios and real estate companies. We will seek opportunities that we
believe will provide substantial value to Paragon.

Current Tax Status

At June 30, 2003, we have net operating losses. As of December 31, 2002, our
net operating losses were approximately $4,163,000. While these losses created
a deferred tax asset, a valuation allowance was applied against the asset
because of the uncertainty of whether or not we will be able to use these loss
carry forwards, which will expire in varying amounts through the year 2021.

We, and certain of our subsidiaries, are also subject to certain state and
local income, excise and franchise taxes. The provision for such state and
local taxes has been reflected in general and administrative expense in the
consolidated statements of operations and has not been separately stated due to
its insignificance.

The Operating Partnerships income tax returns are currently under audit by the
Internal Revenue Service for the tax periods ended December 31, 1998, 1999 and
2000. Management believes the tax returns as filed appropriately state the
taxable income/loss for each year. However, there can be no assurance that
changes will not result to the taxable income/loss as originally filed.
Management believes that changes proposed, if any, may affect the net operating
loss carry forward amounts of the Company but would not have any substantial
effect on our cash resources.

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ITEM 3. CONTROLS AND PROCEDURES

As of June 30, 2003, the date of this report, James M. Mastandrea, our Chief
Executive Officer and John J. Dee, our Chief Financial Officer, evaluated the
effectiveness of the design and operation of the Companys disclosure controls
and procedures pursuant to Rule 13a-15(b) under the Securities Exchange Act of
1934. Based upon this evaluation, Messrs. Mastandrea and Dee concluded that, as
of June 30, 2003, our disclosure controls and procedures are effective to
ensure that material information relating to the Company and our consolidated
subsidiaries is recorded, processed, summarized and reported in a timely
manner.

Further, there were no significant changes in the internal controls or, to our
knowledge, in other factors that could significantly affect such controls
subsequent to June 30, 2003.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None




ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

a.          On June 30, 2003, the holders of our Preferred Shares consented to
waive the dividend that would otherwise have been payable in May 2003 and to
eliminate any future dividends that would have been payable under the terms of
our Preferred Shares. The waiver was sought in connection with a one-time
incentive exchange offer under which we offered to exchange each of our
Preferred Shares for 22.881 Common Shares. See Managements Discussion and
Analysis of Financial Condition and Plan of Operation-Overview.

b.          None

c.          Effective June 30, 2003, Preferred Shareholders exchanged 1,174,120
of the Preferred Shares, or nearly 81%, for approximately 26,865,000 Common
Shares. We believe this issuance to be exempt from registration under Section
3(a)(9) of the Securities Act.

Effective April 7, 2003, we issued 95,541 Preferred Shares to Duane H.
Lund in connection with his resignation as Chief Executive Office in accordance
with the terms of his employment agreement dated March 4, 2003. The Company
believes this issuance to be exempt from registration under Section 4(2) of the
Securities Act.

Effective June 30, 2003, we issued a total of 696,078 Preferred Shares to
James C. Mastandrea and John J. Dee pursuant to separate restricted share
agreements. The Company believes this issuance to be exempt from registration
under Section 4(2) of the Securities Act.

d.          None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None




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

The following matters were submitted to a vote of security holders on June 30,
2003:

|                                                |  |                                                                                            
|----------------------------------------------- |  | -------------------------------------------------------------------------------------------
|Meeting type and date:                          |  | Annual Meeting of Shareholders, June 30, 2003                                              
|                                                |  |                                                                                            
|Proposal 1                                      |  | Asset Contribution Agreement and Related
Transactions; Issuance of Additional Common Shares
|                                                |  |                                                                                            
|Proposal 2                                      |  | Sale of our Existing Properties                                                            
|                                                |  |                                                                                            
|Proposal 3                                      |  | Amendment to the Declaration of Trust to Change our
Name                                   
|                                                |  |                                                                                            
|Proposal 4                                      |  | Amendment to the Terms of the Class A Preferred Shares                                     
|                                                |  |                                                                                            
|Proposal 5                                      |  | Election of the following Trustees:                                                        
|                                                |  | James C. Mastandrea, John J. Dee, Daryl J. Carter,                                         
|                                                |  | Daniel G. DeVos, Michael T. Oliver                                                         
|                                                |  |                                                                                            
|Description of each
matter voted on at
meeting: |  |                                                                                            

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|                 |                |                                  |  |          |           | 
|---------------- | -------------- | -------------------------------- |  | -------- | --------- | 
|                 |                |                                  |  | Combined
|                 |                |                                  |  |         
|Results of vote: |                |                                  |  |         
|                 | Proposal 1 (1) |                                  |  |          |          
|                 |                | For                              |  |          | 4,562,188 | 
|                 |                | Against or withheld              |  |          | 84,342    | 
|                 |                | Abstentions and broker non-votes |  |          | 2,502,747 | 

|               |                                  |  |          |           | 
|-------------- | -------------------------------- |  | -------- | --------- | 
|               |                                  |  | Combined
|               |                                  |  |         
|Proposal 2 (1) |                                  |  |          |          
|               | For                              |  |          | 4,585,575 | 
|               | Against or withheld              |  |          | 60,264    | 
|               | Abstentions and broker non-votes |  |          | 2,503,438 | 

|               |                                  |  |          |           | 
|-------------- | -------------------------------- |  | -------- | --------- | 
|               |                                  |  | Combined
|               |                                  |  |         
|Proposal 3 (1) |                                  |  |          |          
|               | For                              |  |          | 6,616,886 | 
|               | Against or withheld              |  |          | 72,803    | 
|               | Abstentions and broker non-votes |  |          | 459,588   | 

|               |                                  |  |        |           |           |  |  |         | 
|-------------- | -------------------------------- |  | ------ | --------- | --------- |  |  | ------- | 
|               |                                  |  | Common |           | Preferred
|               |                                  |  |        |           |          
|Proposal 4 (2) |                                  |  |        |           |           |  |  |        
|               | For                              |  |        | 2,882,106 |           |  |  | 477,750 | 
|               | Against or withheld              |  |        | 79,487    |           |  |  | 10,420  | 
|               | Abstentions and broker non-votes |  |        | 1,571,231 |           |  |  | 270,662 | 

|                   |                                  |  |          |           | 
|------------------ | -------------------------------- |  | -------- | --------- | 
|                   |                                  |  | Combined
|                   |                                  |  |         
|Proposal 5 (1) (3) |                                  |  |          |          
|                   | For                              |  |          | 6,618,704 | 
|                   | Against or withheld              |  |          | 70,987    | 
|                   | Abstentions and broker non-votes |  |          | 459,586   | 



|(1) |  | Results of vote are based on combined basis of Common and Preferred
Shares.                                                             
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Results of vote are based on separate tabulations for Common and
for Preferred Shares.                                                  
|   
|(3) |  | James C. Mastandrea, John J. Dee, Daryl J. Carter, Daniel G. DeVos
and Michael T. Oliver all received the same number of combined votes.




ITEM 5. OTHER INFORMATION

Effective June 30, 2003, we changed our name to Paragon Real Estate Equity and
Investment Trust from Stonehaven Realty Trust. As a result of the name
change our Common Shares trade under the new symbol PRG on the American Stock
Exchange.

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##### Table of Contents






ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

|        |  |                                                                                           
|------- |  | ------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                           
|Number  |  | Exhibit Description                                                                       
|        |  |                                                                                           
|3.4     |  | Amended Bylaws                                                                            
|        |  |                                                                                           
|10.8    |  | Employment Agreement of Steven M. Edelman                                                 
|        |  |                                                                                           
|31.1    |  | Section 302 Certification pursuant to the Sarbanes-Oxley Act of 2002  James C.
Mastandrea
|        |  |                                                                                           
|31.2    |  | Section 302 Certification pursuant to the Sarbanes-Oxley Act of 2002  John J. Dee        
|        |  |                                                                                           
|32.1    |  | CEO/CFO Certification under Section 906 of Sarbanes-Oxley Act of 2002.                    

(b)  Reports On Form 8-K

On July 15, 2003, we filed with the Securities and Exchange Commission a
Current Report on Form 8-K dated July 1, 2003 reporting our acquisition of
Richton Trail Apartments. No other Form 8-Ks were filed during the six-month
period ended June 30, 2003 and through August 5, 2003.




SIGNATURES

In accordance with the requirements of the Exchange Act of 1934, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

|                     |  |                                                 |  |                        
|-------------------- |  | ----------------------------------------------- |  | -----------------------
|                     |  | PARAGON REAL ESTATE EQUITY AND INVESTMENT TRUST
|                     |  | By:                                             |  | /s/ James C. Mastandrea
|                     |  |                                                 |  |                        
|Date: August 5, 2003 |  |                                                 |  | James C. Mastandrea    
|                     |  |                                                 |  | Chief Executive Officer
|                     |  |                                                 |  |                        
|                     |  | PARAGON REAL ESTATE EQUITY AND INVESTMENT TRUST
|                     |  | By:                                             |  | /s/ John J. Dee        
|                     |  |                                                 |  |                        
|Date: August 5, 2003 |  |                                                 |  | John J. Dee            
|                     |  |                                                 |  | Chief Financial Officer

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