<PAGE>

                                   FORM 10-Q


                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549


(Mark One)

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

For quarterly period ended June 30, 1999

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

          For the transition period from ________________ to ________________.

                       COMMISSION FILE NUMBER  000-23733
                                               ---------

                            CAPITAL AUTOMOTIVE REIT
            (Exact name of registrant as specified in its charter)

        Maryland                                 54-1870224
  (State of organization)           (I.R.S. Employer Identification Number)

           1420 Spring Hill Road, Suite 525, McLean, Virginia 22102
             (Address of principal executive offices and zip code)

                                (703) 288-3075
             (Registrant's telephone Number, including area code)


     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes   X      No
    -------     --------

Number of common shares of beneficial interest outstanding as of August 10, 1999
was 21,607,415.
<PAGE>

                            CAPITAL AUTOMOTIVE REIT
                                   FORM 10-Q
                                     INDEX
<TABLE>
<CAPTION>
                                                                      Page No.
                                                                      --------
<S>                                                                  <C>
Part I -- Financial Information

     Item 1 -- Financial Statements

       Consolidated Balance Sheets -- June 30, 1999 (unaudited) and
          December 31, 1998.                                               3

       Consolidated Statements of Operations (unaudited) -- three months
        and six months ended June 30, 1999 and June 30, 1998.              4

       Consolidated Statements of Cash Flows (unaudited) -- six months
          ended June 30, 1999 and June 30, 1998.                           5

       Notes to Consolidated Financial Statements (unaudited)            6 - 11

     Item 2 -- Management's Discussion and Analysis of Financial
       Condition and Results of Operations                              12 - 18

     Item 3 -- Quantitative and Qualitative Disclosures About
       Market Risk                                                         19

Part II -- Other Information

     Item 1 -- Legal Proceedings                                           20

     Item 2 -- Changes in Securities                                       20

     Item 3 -- Defaults Upon Senior Securities                             20

     Item 4 -- Submission of Matters to Vote of Security Holders        20 - 21

     Item 5 -- Other Information                                           22

     Item 6 -- Exhibits and Reports on Form 8-K                            22

Signatures                                                                 23
</TABLE>

                                       2
<PAGE>

                        PART I -- FINANCIAL INFORMATION
                        ITEM 1 -- FINANCIAL STATEMENTS
                            CAPITAL AUTOMOTIVE REIT
                          CONSOLIDATED BALANCE SHEETS
                      (in thousands, except share data)

<TABLE>
<CAPTION>
<S>                                                  <C>                   <C>

                                                       June 30,             December 31,
                                                        1999                   1998
                                                     -------------        --------------
                                                      (unaudited)
ASSETS
Real estate:
  Land                                               $     292,686         $     238,970
  Buildings and improvements                               353,771               272,162
  Accumulated depreciation                                 (13,720)               (6,145)
                                                     -------------         -------------
                                                           632,737               504,987

Cash and cash equivalents                                    7,734                72,106

Other assets, net                                            8,579                 6,118
                                                     -------------         -------------
    Total Assets                                     $     649,050         $     583,211
                                                     =============         =============

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage loans                                       $     161,865         $     161,997
Borrowings under credit facility                            62,000                   -
Accounts payable and accrued expenses                        6,675                14,752
Security deposits payable                                    4,668                 3,907
                                                     -------------         -------------
    Total Liabilities                                      235,208               180,656
                                                     -------------         -------------

Minority Interest                                          103,163                93,898

Shareholders' Equity
Preferred shares, $.01 par value; 20,000,000
    shares authorized; none outstanding                       -                      -
Common shares, $.01 par value; 100,000,000 shares
    authorized; 24,792,115 shares issued                       248                   248
Additional paid-in-capital                                 345,716               345,905
Accumulated deficit                                         (1,814)               (4,025)
Less treasury shares at cost, 3,184,700
   common shares                                           (33,471)              (33,471)
                                                     -------------         -------------
     Total shareholders' equity                            310,679               308,657
                                                     -------------         -------------
     Total liabilities and shareholders' equity      $     649,050         $     583,211
                                                     =============         =============
</TABLE>

See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

                            CAPITAL AUTOMOTIVE REIT
                UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (in thousands, except per share data)

<TABLE>
<CAPTION>

                                                    Three Months Ended                 Six Months Ended
                                                        June 30,                            June 30,
                                                 1999             1998              1999             1998
                                             -----------      ------------      ------------     ------------
<S>                                           <C>             <C>                <C>             <C>
Revenue:
Rental                                       $    15,677      $      5,098      $     30,249     $      6,829
Interest and other                                   221             3,447               437            5,037
                                             -----------      ------------      ------------     ------------
    Total revenue                                 15,898             8,545            30,686           11,866
                                             -----------      ------------      ------------     ------------

Expenses:
Depreciation and amortization                      3,834               995             7,679            1,339
General and administrative                         1,733             1,470             3,627            2,362
Interest                                           3,725               127             7,000              168
                                             -----------      ------------      ------------     ------------
    Total expenses                                 9,292             2,592            18,306            3,869
                                             -----------      ------------      ------------     ------------

Net income before minority interest                6,606             5,953            12,380            7,997
Minority interest                                 (1,641)           (1,206)           (3,026)          (1,620)
                                             -----------      ------------      ------------     ------------

Net income                                   $     4,965      $      4,747      $      9,354     $      6,377
                                             ===========      ============      ============     ============


Shares of common stock outstanding used to
  compute basic earnings per share                21,607            24,792            21,607           18,504
                                             ===========      ============      ============     ============

Basic earnings per share                     $      0.23      $       0.19      $       0.43     $       0.34
                                             ===========      ============      ============     ============

Shares of common stock outstanding used to
  compute diluted earnings per share              21,630            24,876            21,619           18,606
                                             ===========      ============      ============     ============

Diluted earnings per share                   $      0.23      $       0.19      $       0.43     $       0.34
                                             ===========      ============      ============     ============
</TABLE>

See accompanying notes to consolidated financial statements.

                                       4
<PAGE>

<TABLE>
<CAPTION>
                                                      CAPITAL AUTOMOTIVE REIT
                                          UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                          (in thousands)

                                                                        Six Months Ended June 30,
                                                                       1999                   1998
                                                                    -----------            ------------
<S>                                                                <C>                  <C>
Cash flows from operating activities:
Net income                                                          $     9,354               $   6,377
Adjustments to reconcile net income to net cash
  provided by operating activities:
Depreciation and amortization                                             7,903                   1,339
Income applicable to minority interest                                    3,026                   1,620
Increase in other assets                                                 (2,735)                   (643)
Increase in accounts payable and accrued expenses                           880                     697
Increase in security deposits payable                                       761                   2,640
                                                                    -----------            ------------
   Net cash provided by operating activities                             19,189                  12,030
                                                                    -----------            ------------

Cash flows from investing activities:
Purchase of furniture and equipment                                         (30)                   (226)
Real estate acquisitions, net of sales                                 (126,971)               (168,822)
                                                                    -----------            ------------
   Net cash used in investing activities                               (127,001)               (169,048)
                                                                    -----------            ------------

Cash flows from financing activities:
Proceeds from bank borrowings                                            62,000                   8,570
Repayment of bank and other borrowings                                        -                  (1,000)
Mortgage principal payments                                                (132)                      -
Proceeds from issuance of initial public offering of
   common shares and underwriters' over-allotment
   option, net of issuance costs                                              -                 317,285
Proceeds from issuance of private placement,
   net of issuance costs                                                      -                  25,000
Payment of cash dividend                                                (14,057)                 (1,884)
Payment of partner distribution                                          (4,278)                   (378)
Other fees                                                                  (93)                      -
                                                                    -----------            ------------
   Net cash provided by financing activities                             43,440                 347,593
                                                                    -----------            ------------

Net increase (decrease) in cash and cash equivalents                    (64,372)                190,575

Cash and cash equivalents at beginning of period                         72,106                      25
                                                                    -----------            ------------
Cash and cash equivalents at end of period                          $     7,734            $    190,600
                                                                    ===========            ============


Supplemental Data:

Real estate acquisitions in exchange for equity issuance            $     8,379            $     95,135
                                                                    ===========            ============
Interest paid during the period                                     $     5,787            $        168
                                                                    ===========            ============


See accompanying notes to consolidated financial statements.
</TABLE>

                                       5
<PAGE>

                            CAPITAL AUTOMOTIVE REIT
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)



1.  ORGANIZATION AND BASIS OF PRESENTATION

Organization

Capital Automotive REIT (the "Company") is a Maryland real estate investment
trust formed in October 1997.  The Company owns its property interests through
Capital Automotive L.P. (the "Operating Partnership") and its subsidiaries.
The Company is the sole general partner of the Operating Partnership. The
Company completed its initial public offering of common shares and began
generating rental income in February 1998.  The term "Capital Automotive
Group" refers to the Company and the Operating Partnership and their
subsidiaries.  In this Quarterly Report on Form 10-Q, the term "subsidiary" of
the Company or the Operating Partnership means a corporation, partnership,
limited liability company or similar entity if the Company or the Operating
Partnership, alone or together, directly or indirectly, own at least a majority
of the equity interests of the entity.  Typically the Operating Partnership
forms a subsidiary limited liability company or limited partnership to own
properties acquired from a given dealership group.  This structure is intended
to facilitate financing and transfers involving such properties.

Capital Automotive Group's primary business purpose is to own and lease real
estate properties (land, buildings and other improvements) to operators of
franchised automobile dealerships, motor vehicle service, repair or parts
businesses and related businesses.  In this Quarterly Report on Form 10-Q,
Capital Automotive Group uses the term "dealerships" to refer to these types
of businesses that are operated on its properties.


Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared
by the Company's management in accordance with generally accepted accounting
principles ("GAAP") for interim financial information and in conformity with the
rules and regulations of the Securities and Exchange Commission.  Accordingly,
they do not include all of the information and footnotes required by GAAP for
complete financial statements.  In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included.  The results of operations for the six months
ended June 30, 1999, are not necessarily indicative of the results that may be
expected for the full year.  These financial statements should be read in
conjunction with the Company's audited consolidated financial statements and
footnotes thereto, included in the Company's Annual Report on Form 10-K.


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements have been prepared in
accordance with GAAP and include the accounts of Capital Automotive Group. All
intercompany balances and transactions have been eliminated in consolidation.

                                       6
<PAGE>

Real Estate and Depreciation

Real estate assets are recorded at cost.  External acquisition costs directly
related to each property are capitalized as a cost of the respective property.
The cost of real estate properties acquired is allocated between land and
buildings based upon estimated market values at the time of acquisition.
Depreciation is computed using the straight-line method over an estimated useful
life of 20 to 30 years for the buildings and improvements.


Cash and Cash Equivalents

Cash and cash equivalents are comprised of highly liquid instruments purchased
with original maturities of three months or less.


Income Taxes

The Company is qualified as a real estate investment trust under the provisions
of the Internal Revenue Code of 1986, as amended.  As a real estate investment
trust, the Company is generally not subject to federal income tax to the extent
that it distributes annually at least 95% of its taxable income to its
shareholders and complies with certain other requirements.


Rental Revenue Recognition

The Company leases its real estate under long-term triple-net leases which
require the lessees to pay substantially all expenses associated with the
operations, including taxes, utilities, insurance, repairs, maintenance and
other expenses.  All leases are accounted for as operating leases.


Use of Estimates

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


3.  ACQUISITION OF PROPERTIES

During the three months ended June 30, 1999, Capital Automotive Group acquired
13 dealership properties, representing 37 automotive franchises, for an
aggregate purchase price of $50.5 million.  Consideration for the properties
consisted of approximately $46.5 million in cash and $4.0 million in Operating
Partnership units ("Units").  The properties were acquired from various dealer
groups or their affiliates, including Auffenberg Enterprises of Illinois, Inc.,
Hoz de Vila Automotive, Kelley Automotive Group, Lithia Motors, Momentum
Motorcars and Orr Automotive.  The properties total approximately 428,000 square
feet of buildings and improvements on 66.9 acres of land and are located in five
states (Illinois, Indiana, New Jersey, Oregon and Texas).  These properties have
initial lease terms ranging from 12 to 15 years, with an average initial term of
13.9 years, and have renewal options (generally ranging from a total of 20 years
to 40 years) exercisable by the tenant.

As of June 30, 1999, Capital Automotive Group had invested approximately $646
million in properties.  Capital Automotive Group's portfolio consisted of 154
properties, representing 246

                                       7
<PAGE>

automotive franchises in 22 states. These properties total approximately 5.4
million square feet of buildings and improvements on 853 acres of land. The
properties are leased on long-term, triple-net leases with an average initial
lease term of 13.2 years.


4.   EARNINGS PER SHARE

Basic earnings per share is computed as net income divided by the weighted
average common shares outstanding for the period. Diluted earnings per share is
computed as net income divided by the weighted average common shares outstanding
for the period plus the effect of dilutive common equivalent shares outstanding
for the period, based on the treasury stock method. Dilutive common equivalent
shares include restricted shares, options and warrants. For the three-months
and six-months ended June 30, 1999, there was 22,000 and 11,000 dilutive common
equivalent shares outstanding, respectively. For the three-months and six-months
ended June 30, 1998, there were 84,000 and 102,000 dilutive common equivalent
shares outstanding, respectively.


5. MORTGAGE LOANS

As of June 30, 1999, Capital Automotive Group had mortgage indebtedness totaling
$162 million secured by 64 dealership properties owned by subsidiaries of the
Operating Partnership. The $162 million consisted of the following:


 .  A $150 million, non-recourse loan ("Permanent Loan") with Global Alliance
   Finance Company, L.L.C. (the "Lender"), evidenced by four notes, that closed
   in November 1998. The original terms of the Permanent Loan require
   consecutive monthly payments of interest only for two years. Thereafter,
   monthly payments of principal and interest will be required in an amount
   sufficient to amortize the Permanent Loan over a 25-year term. The term of
   the Permanent Loan is ten years and bears interest at a coupon rate of 7.67%
   per annum until maturity on December 1, 2008. The Permanent Loan is secured
   by mortgages on the approximately 60 properties financed. The Operating
   Partnership has provided a limited $35 million guaranty of the Permanent
   Loan, which guaranty is contingent upon the occurrence of certain
   circumstances. A majority of the loan proceeds was used to finance
   acquisitions. During the first quarter of 1999, Capital Automotive Group and
   the Lender modified the terms of one of the notes (approximately $38 million
   of the Permanent Loan) in order for the Lender to have more flexibility in
   structuring a commercial mortgage backed security execution. The interest
   rate on this note was reduced to 7.59% per annum, the monthly interest-only
   payments were reduced to approximately one year and the amortization period
   was reduced to approximately 17 years. As of June 30, 1999, the principal
   amount outstanding on the Permanent Loan was $150 million. At maturity on
   December 1, 2008, a final payment of approximately $121.4 million will be
   required.


 .  A $12 million mortgage note with a financial institution assumed by Capital
   Automotive Group in November 1998 as partial consideration for the
   acquisition of four dealership properties. The note is secured by the
   properties acquired. The mortgage note bears interest at 7.50% per annum
   until maturity. Principal and interest are payable monthly. At June 30, 1999,
   the principal amount outstanding was approximately $11.9 million. At maturity
   on January 1, 2003, a final payment of approximately $10.8 million will be
   required.

                                       8
<PAGE>

6.  SHORT-TERM REVOLVING CREDIT FACILITY

As of June 30, 1999, Capital Automotive Group had commitments from four
financial institutions for a syndicated short-term revolving credit facility in
the aggregate amount of $115 million.  As of June 30, 1999, Capital Automotive
Group had short-term revolving credit facilities from two financial institutions
participating in the syndicated credit facility, under which $62 million (of a
total of $70 million available under these facilities) was outstanding.  As of
June 30, 1999, the blended interest rate on the amount outstanding was 7.13% per
annum.  Upon closing of the syndicated credit facility, expected to occur in the
third quarter of 1999, any amounts outstanding under the existing credit
facilities will be rolled into the syndicated credit facility.  The syndicated
credit facility will have a three-year term and borrowings will bear interest at
a rate currently equal to the one-month LIBOR plus 175 basis points. The
syndicated credit facility will provide funds for the acquisition of dealership
properties and for general corporate purposes.


7.  NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities."  This statement was originally
effective for all fiscal quarters of fiscal years beginning after June 15, 1999;
however, during the second quarter of 1999 the FASB deferred the effective date
until June 15, 2000.  SFAS No. 133 does not require restatement of financial
statements from prior periods.  SFAS No. 133 requires an entity to recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value.  The Company believes that
the adoption of SFAS 133 will not have a significant impact on the Company's
consolidated financial position, results of operations or cash flows.


8.  MINORITY INTEREST

Minority Interest is calculated at approximately 24.9 percent of the Operating
Partnership's partners' capital and net income.  The ownership of the Operating
Partnership as of June 30, 1999 is as follows (Units in thousands):

                           Units      Percent
                        -----------  ----------

Partners' capital:
   Limited Partners         7,175       24.9%
   The Company             21,607       75.1%
                           ------      -----

     Total                 28,782      100.0%
                           ======      =====


9.  401(K) PLAN

During 1998, the Company adopted the Capital Automotive L.P. Employee 401 (k)
Plan.  Employees who are at least 21 years of age are eligible to participate in
the plan after three months of service.  Participants may contribute up to 20%
of their earnings, on a pre-tax basis, subject to annual limitations imposed by
the Internal Revenue Code.  The Company may make matching or discretionary
contributions to the plan at the discretion of management.  Employer
contributions

                                       9
<PAGE>

generally vest over five years. No matching or discretionary contributions have
been paid or declared for the six months ended June 30, 1999.


10.  COMMITMENTS

Debt Financing Commitment as of June 30, 1999
---------------------------------------------

During April 1999, Capital Automotive Group executed a $100 million mortgage
loan commitment from Ford Motor Credit Company, which was subsequently closed
during July 1999.  The mortgage loan is secured by approximately 48 dealership
properties owned by the Operating Partnership and certain subsidiaries of the
Operating Partnership. The term of the financing is 12 years with principal
amortization based on a 25-year amortization schedule.  The interest rate was
fixed at the 10-year US Treasury rate plus 250 basis points or 7.54% per annum
until maturity.  Principal and interest will be payable quarterly. The proceeds
will be used to fund future property acquisitions, to repay short-term
borrowings under the Company's revolving credit facility and for general
corporate purposes.


MMR Holdings, L.L.C. ("MMR") Definitive Purchase Agreement As of June 30, 1999
-------------------------------------------------------------------------------

On June 30, 1999, Capital Automotive Group signed a definitive purchase
agreement to acquire MMR, an affiliate of Sonic Automotive, Inc. ("Sonic").  MMR
and its subsidiaries own, or by closing expect to own, 58 dealership properties
valued at approximately $206 million.  The 58 properties are located in ten
states (Alabama, Florida, Georgia, Maryland, North Carolina, Ohio, South
Carolina, Tennessee, Texas and Virginia).  These properties contain 75
franchises including Ford, BMW, Chrysler and Toyota.  Sonic will guarantee the
leases on all but approximately eight of the properties, which are leased to
other dealer groups, including United Auto Group. Affiliates of Sonic will enter
into new leases with lease provisions substantially consistent with Capital
Automotive Groups' portfolio. Initial lease terms will be approximately ten
years; however, Sonic has agreed to renew at least 75% of the portfolio rental
stream for an additional 5-year period. In addition, Capital Automotive Group
has agreed that, during the term of the leases, Sonic may substitute replacement
properties for leased properties with an aggregate original purchase price and
allocated costs of up to an aggregate of $51 million. Any substituted property
must have a value approximately equal to the purchase price and allocated costs
of the original property. Sonic must provide a guarantee relating to the lease
of the replacement property, and rent for the replacement property may not be
less than the rent for the original property at the time of substitution. The
substituted property must also satisfy the requirements of Ford Motor Credit
Company (see below) for a replacement property. Subject to satisfactory
completion of due diligence, it is anticipated that the transaction will close
during the third quarter of 1999. Capital Automotive Group has also issued a
firm commitment to Sonic to purchase up to $75 million in additional dealership
properties, through the end of 1999, in conjunction with future acquisitions of
dealership operations by Sonic.


Debt Financing Commitments Subsequent to June 30, 1999
------------------------------------------------------

During July 1999, Capital Automotive Group executed several commitments with
financial institutions to fund the MMR acquisition, future property acquisitions
and general corporate purposes.  Details of these executed commitments include
the following:

 .  A $150 million mortgage loan assumption commitment from Ford Motor Credit
   Company to finance the majority of the MMR acquisition. The mortgage loan
   will be secured by substantially all of the properties acquired in the MMR
   acquisition. The mortgage loan will be assumed and

                                       10
<PAGE>

   amended. During July 1999, Capital Automotive Group locked the interest rate
   for the mortgage loan at the 10-year US Treasury rate plus 229 basis points
   or 8.03% per annum commencing on September 30, 1999 until maturity. The
   mortgage loan will have a 12-year term, with two years interest only followed
   by principal amortization based on a 25-year amortization schedule.

 .  A $55 million bridge loan commitment with a financial institution to fund the
   difference between the assumed $150 million mortgage loan commitment and the
   MMR acquisition price. The bridge loan will require interest only payments
   made monthly at a rate equal to the one month LIBOR plus 200 basis points.
   The bridge loan will mature on the earlier of (a) 90 days following the
   closing date and (b) the closing date of an $85 million permanent mortgage
   loan commitment ("Committed Permanent Loan") with the same financial
   institution.


  The Committed Permanent Loan is expected to have a term of 15 years from the
  date of closing, an amortization period of 15 years and an interest rate equal
  to the 10-year US Treasury rate plus 222 basis points.  The Committed
  Permanent Loan will be secured by various properties owned by subsidiaries of
  the Operating Partnership.  Upon closing the Committed Permanent Loan, the
  interest rate on approximately $112 million of the Permanent Loan that closed
  during 1998 will be adjusted downwards by 3.5 basis points (from 7.67% to
  7.635%).  In addition, the maturity date and amortization period on this
  portion of the Permanent Loan will be modified to conform to the terms of the
  Committed Permanent Loan.


11.  SUBSEQUENT EVENTS

Declaration of Dividend
-----------------------

On July 26, 1999, the Company declared a dividend of $0.34 per share, which will
be paid on August 20, 1999 to shareholders of record as of August 10, 1999.

                                       11
<PAGE>

                            CAPITAL AUTOMOTIVE REIT
          ITEM II - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--THREE MONTHS AND SIX MONTHS ENDED JUNE 30,
                            1999 AND JUNE 30, 1998


The following discussion should be read in conjunction with the accompanying
unaudited consolidated financial statements and notes thereto.

OVERVIEW

Capital Automotive REIT (the "Company") is a Maryland real estate investment
trust formed in October 1997.  The Company owns its property interests through
Capital Automotive L.P. (the "Operating Partnership") and its subsidiaries.
The Company is the sole general partner of the Operating Partnership. The
Company completed its initial public offering of common shares and began
generating rental income in February 1998.  The term "Capital Automotive
Group" refers to the Company and the Operating Partnership and their
subsidiaries.  In this Quarterly Report on Form 10-Q, the term "subsidiary" of
the Company or the Operating Partnership means a corporation, partnership,
limited liability company or similar entity if the Company or the Operating
Partnership, alone or together, directly or indirectly, own at least a majority
of the equity interests of the entity.  Typically the Operating Partnership
forms a subsidiary limited liability company or limited partnership to own
properties acquired from a given dealership group.  This structure is intended
to facilitate financing and transfers involving such properties.

Capital Automotive Group's primary business purpose is to own and lease real
estate properties (land, buildings and other improvements) to operators of
franchised automobile dealerships, motor vehicle service, repair or parts
businesses and related businesses.  In this Quarterly Report on Form 10-Q,
Capital Automotive Group uses the term "dealerships" to refer to these types
of businesses that are operated on its properties.  Capital Automotive Group's
strategy focuses on acquiring real estate used by multi-site, multi-franchised
dealerships located predominately in major metropolitan areas throughout the
United States.

All properties are leased under triple-net leases, under which the lessees
typically pay substantially all operating expenses of a property, including, but
not limited to, all taxes, assessments and other government charges, insurance,
utilities, service, repairs and maintenance.  The leases are generally for a
period of ten to 20 years, with options to renew upon the same terms and
conditions for one or more additional periods of five to ten years exercisable
at the option of the lessee.

Substantially all of Capital Automotive Group's revenues are derived from (1)
rents received under long-term, triple-net leases; and (2) interest earned from
the temporary investment of funds in short-term investments.

Capital Automotive Group incurs general and administrative expenses including
principally, compensation expense for its executive officers and other
employees, professional fees and various expenses incurred in the process of
acquiring additional properties.  Capital Automotive Group is self-administered
and managed by its trustees, executive officers and staff.  The primary non-cash
expense of Capital Automotive Group is the depreciation of its properties.
Capital Automotive Group depreciates buildings and improvements on the
properties currently owned by it over a 40-year period for tax purposes and a
20-year to 30-year period for financial reporting purposes.  Capital Automotive
Group does not own or lease any significant personal property, furniture or
equipment at any property currently owned by it.

                                       12
<PAGE>

ACQUISITIONS

During the three months ended June 30, 1999, Capital Automotive Group acquired
13 dealership properties, representing 37 automotive franchises, for an
aggregate purchase price of $50.5 million.  Consideration for the properties
consisted of approximately $46.5 million in cash and $4.0 million in Operating
Partnership units ("Units").  The properties were acquired from various dealer
groups or their affiliates, including Auffenberg Enterprises of Illinois, Inc.,
Hoz de Vila Automotive, Kelley Automotive Group, Lithia Motors, Momentum
Motorcars and Orr Automotive.  The properties total approximately 428,000 square
feet of buildings and improvements on 66.9 acres of land and are located in five
states (Illinois, Indiana, New Jersey, Oregon and Texas).  These properties have
initial lease terms ranging from 12 to 15 years, with an average initial term of
13.9 years, and have renewal options (generally ranging from a total of 20 years
to 40 years) exercisable by the tenant.

As of June 30, 1999, Capital Automotive Group had invested approximately $646
million in properties.  Capital Automotive Group's portfolio consisted of 154
properties, representing 246 automotive franchises in 22 states.  These
properties total approximately 5.4 million square feet of buildings and
improvements on 853 acres of land.  The properties are leased on long-term,
triple-net leases with an average initial lease term of 13.2 years.  The
Company's portfolio weighted average initial cap rate at June 30, 1999 was
10.6%, which is calculated as the percentage of the initial annual base rent
over the purchase price paid to the sellers for the related properties.

MMR HOLDINGS, L.L.C. ("MMR") DEFINITIVE PURCHASE AGREEMENT

On June 30, 1999, Capital Automotive Group signed a definitive purchase
agreement to acquire MMR, an affiliate of Sonic Automotive, Inc. ("Sonic").  MMR
and its subsidiaries own, or by closing expect to own, 58 dealership properties
valued at approximately $206 million.  The 58 properties are located in ten
states (Alabama, Florida, Georgia, Maryland, North Carolina, Ohio, South
Carolina, Tennessee, Texas and Virginia).  These properties contain 75
franchises including Ford, BMW, Chrysler and Toyota.  Sonic will guarantee the
leases on all but approximately eight of the properties, which are leased to
other dealer groups, including United Auto Group. Affiliates of Sonic will enter
into new leases with lease provisions substantially consistent with Capital
Automotive Groups' portfolio. Initial lease terms will be approximately ten
years; however, Sonic has agreed to renew at least 75% of the portfolio rental
stream for an additional 5-year period. In addition, Capital Automotive Group
has agreed that, during the term of the leases, Sonic may substitute replacement
properties for leased properties with an aggregate original purchase price and
allocated costs of up to an aggregate of $51 million. Any substituted property
must have a value approximately equal to the purchase price and allocated costs
of the original property. Sonic must provide a guarantee relating to the lease
of the replacement property, and rent for the replacement property may not be
less than the rent for the original property at the time of substitution. The
substituted property must also satisfy the requirements of Ford Motor Credit
Company (see below) for a replacement property. Subject to satisfactory
completion of due diligence, it is anticipated that the transaction will close
during the third quarter of 1999. Capital Automotive Group has also issued a
firm commitment to Sonic to purchase up to $75 million in additional dealership
properties, through the end of 1999, in conjunction with future acquisitions of
dealership operations by Sonic.

                                       13
<PAGE>

RESULTS OF OPERATIONS

Although the Company was formed prior to January 1, 1998, it did not complete
its initial public offering ("IPO") until February 19, 1998, at which time
Capital Automotive Group purchased its initial properties and began generating
rental income.

Rental revenue for the second quarter of 1999 rose 208% to $15.7 million from
$5.1 million in the same quarter of 1998.  Rental revenue for the six months
ended June 30, 1999 rose 343% to $30.2 million from $6.8 million for the same
period of 1998.  The increase was attributable to the growth of Capital
Automotive Group's real estate portfolio (154 properties as of June 30, 1999
versus 64 properties as of June 30, 1998), from which Capital Automotive Group
generates its rental income.

Interest and other income for the second quarter decreased 94% to $221,000 from
$3.4 million in the same quarter of 1998.  Interest and other income for the six
months ended June 30, 1999 decreased 91% to $437,000 from $5.0 million for the
same period of 1998.  Interest and other income during the six months ended June
30, 1998 was primarily generated from the investment of the excess of the net
proceeds of a private placement offering and the Company's IPO including the
exercise of the underwriters' over-allotment option (both of which were
completed during the first quarter of 1998).  These net proceeds were fully
invested during 1998 and therefore did not generate interest income during the
quarter and six months ended June 30, 1999.  Offsetting the decrease during the
second quarter was a gain on the sale of property of $164,000 and interest
income generated from the investment of the excess of debt issuance proceeds
over the amount invested in properties.

Depreciation and amortization for the second quarter of 1999 increased 285% to
$3.8 million from $995,000 in the same quarter of 1998.  Depreciation and
amortization for the six months ended June 30, 1999 increased 473% to $7.7
million from $1.3 million for the same period of 1998 and consisted primarily of
depreciation on buildings and improvements owned during those periods.  The
increase is attributable to the growth of Capital Automotive Group's real estate
portfolio.

Capital Automotive Group had general and administrative expenses of $1.7 million
for the second quarter of 1999 compared to $1.5 million for the second quarter
of 1998, representing an increase of 18%.  General and administrative expenses
for the six months ended June 30, 1999 increased 54% to $3.6 million from $2.4
million for the same period of 1998.  The increase in the six month period ended
June 30, 1999, compared to the same period of 1998, was due primarily to
increased payroll and related benefits attributable to personnel additions in
1998, and severance payments relating to the elimination of four employees
during the first quarter of 1999, or approximately 15% of Capital Automotive
Group's total staff.  Also contributing to the increase was increased marketing
expenses as well as increased professional fees and other administrative costs
associated with public reporting requirements.  These increases were partially
offset by the reduction in payroll and related expenses as a result of staffing
reductions as well as the closing of the Chicago office during the second
quarter of 1999.

Interest expense for the second quarter of 1999 increased to $3.7 million from
$127,000 for the same quarter of 1998.  Interest expense for the six-month
period ended June 30, 1999 increased to $7.0 million compared to $168,000 for
the same period of 1998.  The increase was due to interest charged on Capital
Automotive Group's outstanding debt (including mortgage debt and borrowings
under its credit facility) issued in the third and fourth quarters of 1998 and
the first and second quarters of 1999.

                                       14
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents were $7.7 million and $72.1 million at June 30, 1999
and December 31, 1998, respectively.  The changes in cash and cash equivalents
during the six months ended June 30, 1999 were attributable to operating,
investing and financing activities, as described below.

Cash flow from operating activities for the six months ended June 30, 1999 and
1998 was $19.2 million and $12.0 million, respectively, and represents cash
received from rental income plus interest and other income less normal recurring
general and administrative expenses and interest payments on debt outstanding.
The Company's net cash used in investing activities for the six months ended
June 30, 1999 and 1998 was $127.0 million and $169.0 million, respectively and
primarily reflects the acquisition of dealership properties during those
periods.  Cash flow from financing activities for the six months ended June 30,
1999 and 1998 was $43.4 million and $347.6 million, respectively.  Cash flow
from financing activities for the six months ended June 30, 1999, primarily
reflects the proceeds from bank borrowings partially offset by distributions
made to the Company's shareholders and the Operating Partnership's limited
partners. Cash flow from financing activities for the six months ended June 30,
1998, primarily reflects the proceeds of a private placement offering and the
Company's IPO including the exercise of the underwriters' over-allotment option,
partially offset by distributions made to the Company's shareholders and the
Operating Partnership's limited partners.

As of June 30, 1999, Capital Automotive Group had commitments from four
financial institutions for a syndicated short-term revolving credit facility in
the aggregate amount of $115 million.  As of June 30, 1999, Capital Automotive
Group had short-term revolving credit facilities from two financial institutions
participating in the syndicated credit facility, under which $62 million (of a
total of $70 million available under these facilities) was outstanding. As of
June 30, 1999, the blended interest rate on the amount outstanding was 7.13% per
annum. Upon closing of the syndicated credit facility, expected to occur in the
third quarter of 1999, any amounts outstanding under the existing credit
facilities will be rolled into the syndicated credit facility. The syndicated
credit facility will have a three-year term and borrowings will bear interest at
a rate currently equal to the one-month LIBOR plus 175 basis points. The
syndicated credit facility will provide funds for the acquisition of dealership
properties and for general corporate purposes.

During April 1999, Capital Automotive Group executed a $100 million mortgage
loan commitment from Ford Motor Credit Company, which was subsequently closed
during July 1999.  The mortgage loan is secured by approximately 48 dealership
properties owned by the Operating Partnership and certain subsidiaries of the
Operating Partnership. The term of the financing is 12 years with principal
amortization based on a 25-year amortization schedule.  The interest rate was
fixed at the 10-year US Treasury rate plus 250 basis points or 7.54% per annum
until maturity.  Principal and interest will be payable quarterly. The proceeds
will be used to fund future property acquisitions, to repay short-term
borrowings under the Company's revolving credit facility and for general
corporate purposes.

During July 1999, Capital Automotive Group executed several commitments with
financial institutions to fund the MMR acquisition, future property acquisitions
and general corporate purposes.  Details of these executed commitments include
the following:

 .  A $150 million mortgage loan assumption commitment from Ford Motor Credit
   Company to finance the majority of the MMR acquisition. The mortgage loan
   will be secured by substantially all of the properties acquired in the MMR
   acquisition. The mortgage loan will be assumed and amended. During July 1999,
   Capital Automotive Group locked the interest rate for the mortgage loan at
   the 10-year US Treasury rate plus 229 basis points or 8.03% per annum
   commencing on

                                       15
<PAGE>

   September 30, 1999 until maturity. The mortgage loan will have a 12-year
   term, with two years interest only followed by principal amortization based
   on a 25-year amortization schedule.

 .  A $55 million bridge loan commitment with a financial institution to fund the
   difference between the assumed $150 million mortgage loan commitment and the
   MMR acquisition price. The bridge loan will require interest only payments
   made monthly at a rate equal to the one month LIBOR plus 200 basis points.
   The bridge loan will mature on the earlier of (a) 90 days following the
   closing date and (b) the closing date of an $85 million permanent mortgage
   loan commitment ("Committed Permanent Loan") with the same financial
   institution.

   The Committed Permanent Loan is expected to have a term of 15 years from the
   date of closing, an amortization period of 15 years and an interest rate
   equal to the 10-year US Treasury rate plus 222 basis points. The Committed
   Permanent Loan will be secured by various properties owned by subsidiaries of
   the Operating Partnership. Upon closing the Committed Permanent Loan, the
   interest rate on approximately $112 million of the Permanent Loan that closed
   during 1998 will be adjusted downwards by 3.5 basis points (from 7.67% to
   7.635%). In addition, the maturity date and amortization period on this
   portion of the Permanent Loan will be modified to conform to the terms of the
   Committed Permanent Loan.

Short-term liquidity requirements consist primarily of normal recurring
operating expenses, regular debt service requirements (including debt service
relating to additional and replacement debt), recurring capital expenditures,
distributions to shareholders and unitholders, and amounts required for
additional property acquisitions and renovations or expansion of properties.
The Company expects to meet these requirements (other than amounts required for
additional property acquisitions and renovations or expansion of properties)
through cash flow provided by operating activities.  The Company anticipates
that any additional acquisition of properties, and renovation and expansion of
properties, during the next 12 months will be funded with additional amounts
available under Capital Automotive Group's committed syndicated revolving credit
facility and existing and future long-term secured and unsecured debt.
Acquisitions will be made subject to the investment objectives and policies of
the Company to maximize both current income and long-term growth in income.

As of June 30, 1999, long-term liquidity requirements consisted primarily of
maturities under Capital Automotive Group's long-term debt.  The Company
anticipates that long-term liquidity requirements will also include amounts
required for acquisition of properties, and renovation and expansion of
properties. The Company expects to meet long-term liquidity requirements through
long-term secured and unsecured borrowings and other debt and equity financing
alternatives.  The availability and terms of any such financing will depend upon
market and other conditions.

The Company's liquidity requirements with respect to future acquisitions may be
reduced to the extent the Company uses Units as consideration for such
purchases.

During the second quarter of 1999, the Company's Board of Trustees approved a
resolution providing that the policy of the Company shall be to operate with a
debt to asset ratio of not more than approximately 65%.  This policy may be
changed by the Company's Board of Trustees at any time without shareholder
approval.  As of June 30, 1999, the Company had a debt to asset ratio of
approximately 34%.

As a result of the change in policy to operate with a debt to asset ratio of not
more than approximately 65%, the Company anticipates that it will be able to
obtain additional financing for its long-term capital needs. However, there can
be no assurance that additional financing or capital will be available, or that

                                       16
<PAGE>

the terms will be acceptable or advantageous to the Company.


YEAR 2000 READINESS DISCLOSURE

Management of Capital Automotive Group has adopted a plan to confront year 2000
issues. Under the plan, management is assessing the potential material effect of
year 2000 issues on the Company's business, results of operations, and financial
condition and is determining ways to mitigate those issues.

Capital Automotive Group has completed discussions with a sample of its tenants
regarding their year 2000 compliance.  In addition, each of Capital Automotive
Group's tenants were sent questionnaires in the fourth quarter of 1998 and
during 1999, regarding the year 2000 compliance of their financial data and
operating systems. Capital Automotive Group is presently obtaining and reviewing
the questionnaires and to date has found no instances where a tenant is not
materially year 2000 compliant. Capital Automotive Group is currently not aware
of any tenants who are not materially year 2000 compliant and does not feel a
need for a contingency plan to mitigate year 2000 issues.

Overall, Capital Automotive Group believes that it will not incur significant
costs in modifying its existing software applications, replacing hardware or
hiring consultants in resolving year 2000 issues both internally and externally.
Although Capital Automotive Group has not incurred any material expenditures
relating to year 2000 issues as of June 30, 1999, there can be no assurance as
to the magnitude of future costs until Capital Automotive Group's assessment is
complete.

Failure to correct material year 2000 issues may result in the interruption, or
failure of, certain normal business activities or operations and may adversely
affect the Company's results of operations, liquidity and financial condition.
Management of Capital Automotive Group believes that continued progress in
implementing the year 2000 plan will significantly reduce Capital Automotive
Group's potential of a year 2000 operational interruption.  As of June 30, 1999,
management of Capital Automotive Group had no knowledge of a year 2000 event or
uncertainty that is likely to materially affect Capital Automotive Group.

FUNDS FROM OPERATIONS

Funds From Operations ("FFO") is defined under the revised definition adopted by
the National Association of Real Estate Investment Trusts (NAREIT) as net income
(loss) (computed in accordance with generally accepted accounting principles)
excluding gains (or losses) from debt restructuring or sales of property plus
depreciation/amortization of assets unique to the real estate industry.
Depreciation/amortization of assets not unique to the industry, such as
amortization of deferred financing costs and non-real estate assets, is not
added back.  FFO does not represent cash flows from operating activities in
accordance with generally accepted accounting principles (which, unlike FFO,
generally reflects all cash effects of transactions and other events in the
determination of net income) and should not be considered an alternative to net
income as an indication of the Company's performance or to cash flow as a
measure of liquidity or ability to make distributions.  The Company considers
FFO a meaningful, additional measure of operating performance because it
primarily excludes the assumption that the value of the real estate assets
diminishes predictably over time, and because industry analysts have accepted it
as a performance measure.  Comparison of the Company's presentation of FFO,
using the NAREIT definition, to similarly titled measures for other REITs may
not necessarily be meaningful due to possible differences in the application of
the NAREIT definition used by such REITs.

                                       17
<PAGE>

FFO of the Operating Partnership for the three months and six months ended June
30, 1999 and June 30, 1998 is computed as follows (in thousands):

<TABLE>
<CAPTION>

                                      Three Months Ended         Six Months Ended
                                           June 30,                  June 30,
                                    ----------------------     ----------------------
                                       1999         1998         1999         1998
                                    ---------    ---------     ---------    ---------
<S>                                <C>           <C>             <C>         <C>
Net Income before Minority
 Interest                           $   6,606    $   5,953     $  12,380    $   7,997

Real Estate Depreciation and
 Amortization                           3,808          965         7,628        1,294

Gain on Sale of Asset                    (164)           -          (164)           -
                                    ---------    ---------     ---------    ---------
Funds From Operations               $  10,250    $   6,918     $  19,844    $   9,291
                                    =========    =========     =========    =========
</TABLE>



FORWARD LOOKING STATEMENTS

Certain statements in this Form 10-Q are "forward-looking statements" within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which
are intended to be covered by the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995.  Forward looking statements involve a
number of risks and uncertainties.  The Company's actual operations may differ
significantly from the results discussed in the forward looking statements.
Such statements can be identified by the use of forward-looking terminology such
as "may," "will," "could," "should," "expect," "intends," "anticipate,"
"estimate," or "continue" or the negative thereof or other variations thereon or
comparable terminology.  Certain factors that may cause the actual results of
operations in future periods to differ materially from forecast or anticipated
results are set forth in the Company's Current Report on Form 8-K, dated
February 26, 1999 and filed February 26, 1999, include, but are not limited to
(i) the failure of lessees of real property owned by Capital Automotive Group to
pay rent or otherwise perform the terms of their leases, (ii) increases in
operating costs, (iii) the availability and terms of additional capital to fund
the acquisition of additional properties, (iv) risks that new or pending
acquisitions may not be consummated, (v) the inability of the Company to
identify and acquire suitable real properties that conform to its business
strategy, (vi) general economic and business conditions, both nationally and in
the regions in which the Company owns real property, including, but not limited
to, conditions affecting the motor vehicle retail and related businesses
specifically and real estate generally, (vii) changes to laws, rules and
governmental regulations affecting the Company, including the tax laws affecting
real estate investment trusts and zoning regulations affecting the operation of
the properties, (viii) risks that current or former operators of the properties
fail or have failed to comply with environmental laws and regulations, (ix) the
termination or abandonment of the dealerships or other motor vehicle related
businesses that occupy any real property owned by Capital Automotive Group, (x)
competition, (xi) the ability of the Company to retain its executive officers
and attract and retain additional key personnel, (xii) changes in business
strategy, (xiii) the ability to sell properties on suitable terms at such time
as the Company elects, (xiv) the impact on the Company of computer and related
problems that may arise from year 2000, and (xv) other risks described from time
to time in the registrant's filings with the Securities and Exchange Commission.

                                       18
<PAGE>

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
         ------------------------------------------------------------

The Company is exposed to certain financial market risks, the most predominant
being fluctuations in interest rates. Interest rate fluctuations are monitored
by the Company's management as an integral part of the Company's overall risk
management program, which recognizes the unpredictability of financial markets
and seeks to reduce the potentially adverse effect on the Company's results of
operations.

As of June 30, 1999, there have been no material changes in the Company's
financial market risk since December 31, 1998 as reported in the Company's
Annual Report on Form 10-K.

                                       19
<PAGE>

                            CAPITAL AUTOMOTIVE REIT
                           PART II-OTHER INFORMATION



Item 1.  Legal Proceedings

Not applicable.


Item 2.  Changes in Securities

The Company has not sold any common shares of beneficial interest, par value
$.01 per share ("Common Shares"), during the six-month period ended June 30,
1999.

On June 30, 1999, the Operating Partnership issued 320,000 Units to Auffenberg
Enterprises of Illinois, Inc., as partial consideration for the acquisition of
two parcels of real property and improvements located thereon in O'Fallon,
Illinois.  The Units will be eligible for redemption beginning on July 31, 2000
for cash by the Operating Partnership, or at the option of the Company, Common
Shares on a one for one basis.  The issuance of such Units was effected in
reliance on an exemption from registration under Section 4(2) of the Securities
Act.


Item 3.  Defaults Upon Senior Securities

Not applicable.


Item 4.  Submission of Matters to Vote of Security Holders

The first annual meeting of shareholders of Capital Automotive REIT (the
"Meeting")was held on May 7, 1999.  The matters voted upon at the meeting were:
(1) Election of Trustees; (2) Approval of Amendments to the 1998 Equity
Incentive Plan; and (3) Ratification of Arthur Andersen LLP as Independent
Accountants for 1999.  Proxies for the meeting were solicited pursuant to
Section 14(a) of the Securities and Exchange Act of 1934, as amended, and the
regulations promulgated thereunder. There was no solicitation in opposition to
management's solicitations.  All of management's nominees for trust managers
were elected.  The following table sets forth the results of these votes:

                                       20
<PAGE>

<TABLE>
<CAPTION>
                      Proposal                                           Results
-----------------------------------------------------    --------------------------------------
(1) A proposal to elect ten Board of Trustee members:
<S>                                                        <C>                     <C>
Thomas D. Eckert                                           For:                        18,649,971
                                                           Withheld:                        4,500

Craig L. Fuller                                            For:                        18,649,971
                                                           Withheld:                        4,500

William E. Hoglund                                         For:                        18,649,971
                                                           Withheld:                        4,500

R. Michael McCullough                                      For:                        18,649,971
                                                           Withheld:                        4,500

Lee P. Munder                                              For:                        18,649,971
                                                           Withheld:                        4,500

John J. Pohanka                                            For:                        18,649,971
                                                           Withheld:                        4,500

John E. Reilly                                             For:                        18,649,971
                                                           Withheld:                        4,500

Robert M. Rosenthal                                        For:                        18,649,971
                                                           Withheld:                        4,500

Vincent A. Sheehy                                          For:                        18,649,971
                                                           Withheld:                        4,500

William R. Swanson                                         For:                        18,649,971
                                                           Withheld:                        4,500

(2) Approval of Amendments to the 1998 Equity Incentive Plan:

                                                           For:                        10,556,473
                                                           Against:                     5,898,873
                                                           Abstain:                        18,775
                                                           Broker No Vote:              2,180,350

(3) Ratification of Arthur Andersen LLP as Independent Accountants:

                                                           For:                        17,159,791
                                                           Against:                         2,219
                                                           Abstain:                     1,492,461
                                                           Broker No Vote:                      0
</TABLE>

                                       21
<PAGE>

Item 5.  Other Information

On May 7, 1999, the Board of Trustees unanimously elected David Gladstone to
fill the remaining vacancy on the Board of Trustees, bringing the total number
of trustees to 11.

David Gladstone, 56, is the Vice-Chairman of the Board of American Capital
Strategies, a buyout and specialty finance firm.  Mr. Gladstone has over 24
years of experience in making loans to small and medium-sized businesses and is
considered an industry leader in venture capital investing.  Prior to joining
American Capital, Mr. Gladstone was Chairman and CEO of Allied Capital
Corporation.  Mr. Gladstone is also Chairman of Coastal Berry Company, a large
agricultural business.  He is a Trustee of George Washington University, a past
member of the Listings and Hearing Committee at the National Association of
Securities Dealers, Inc. and a former director of Riggs National Corporation.
Mr. Gladstone holds a Master of Business Administration degree from Harvard
Business School, a Master of Arts degree from American University and a Bachelor
of Arts degree from the University of Virginia.

Item 6.  Exhibits and Reports on Form 8-K

<TABLE>
<CAPTION>

(a)  Exhibits:
--   --------
<S>    <C>
*2.1    Acquisition Agreement dated as of June 30, 1999, as amended, by and
        among CAR MMR L.L.C., O. Bruton Smith, Sonic Financial Corporation, MMR
        Holdings L.L.C., MMR Viking Investment Associates, L.P. and MMR
        Tennessee, L.L.C.

*2.2    Sonic Agreement made and entered into as of June 30, 1999, by and among
        (i) Sonic Automotive, Inc., (the "Guarantor"), (ii) certain subsidiaries
        or affiliates of the Guarantor (the "Tenants"), and (iii) CAR MMR
        L.L.C., (the "Acquirer"), in connection with that certain Acquisition
        Agreement dated of even date.

10.46   Loan Agreement dated as of July 7, 1999, between CAR CZ L.L.C.,
        CARS-FEN, L.L.C., CAR HDV L.L.C., CAR Alexander L.P., Capital Automotive
        L.P., CAR MOT II, L.L.C., CAR MOT L.L.C., CAR AUF L.L.C., CAR I Jackson
        L.P., and CAR MUL L.L.C., as Borrower and Ford Motor Credit Company as
        Lender.

27      Financial Data Schedule

*Confidential portions omitted pursuant to a request for confidential treatment
and supplied separately to the Securities and Exchange Commission. Exhibits and
Schedules omitted but will be furnished supplementally to the Securities and
Exchange Commission upon request.

(b)  Reports on Form 8-K
     -------------------

Not applicable

</TABLE>

                                       22
<PAGE>

                                   SIGNATURES
                                   ----------


          Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                 CAPITAL AUTOMOTIVE REIT
                                 (Registrant)



                                 BY: /s/  Thomas D. Eckert
                                     -------------------------
                                     Thomas D. Eckert
                                     President and Chief Executive Officer
                                     (principal executive officer)



                                 BY: /s/  David S. Kay
                                     -------------------------
                                     David S. Kay
                                     Vice President and Chief Financial
                                     Officer
                                     (principal financial and accounting
                                     officer)


Dated:  August 11, 1999
       -------------------

                                       23