<PAGE>

--------------------------------------------------------------------------------

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

                                   FORM 10-KSB

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

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

--------------------------------------------------------------------------------

                         Commission File Number: 0-25074

                             STONEHAVEN REALTY TRUST
             (Exact name of registrant as specified in its charter)

              Maryland                                       39-6594066
(State or other jurisdiction of incorporation)            (I.R.S. Employer
                                                       Identification Number)

2550 University West, Suite 240, St. Paul, Minnesota           55114
      (Address of principal executive offices)               (zip code)

    Issuer's telephone number: 651-917-5536     Fax number: 651-645-0615

                           Wellington Properties Trust
              18650 W. Corporate Drive, Brookfield, Wisconsin 53045
                            (Former name and address)

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

            Securities registered under to Section 12(g) of the Act:
                         Common Shares, $.01 par value

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 / /

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.


<PAGE>

Issuer's revenues for its most recent fiscal year: $6,896,557

At March 1, 2000, the Registrant had 4,758,540 Common Shares, $0.01 par value,
736,712 Class A Cumulative Convertible Preferred Shares and 95,000 Class B
Junior Cumulative Convertible Preferred Shares outstanding. The aggregate market
value of the voting stock held by non-affiliates of the Registrant was
approximately $12,663,837 based on the closing prices of $4.375 for its Common
Shares and $12.00 for its Class A Cumulative Convertible Preferred Shares on the
American Stock Exchange on March 1, 2000.

                       DOCUMENTS INCORPORATED BY REFERENCE

None

Transitional Small Business Disclosure Format (Check one): Yes ; No X (Added by
Exch Act Rel No. 31905, eff 4/26/93.)


                                       2

<PAGE>


                             STONEHAVEN REALTY TRUST
                                1999 FORM 10-KSB
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                      PAGE
                                                                                                      ----
<S>                <C>                                                                                <C>
PART I
Item 1             Description of Business                                                             4
Item 2             Description of Property                                                             8
Item 3             Legal Proceedings                                                                   9
Item 4             Submission of Matters to a Vote of Securities Holders                               9

PART II
Item 5             Market for Common Equity and Related Shareholder Matters                            9
Item 6             Management's Discussion and Analysis or Plan of Operation                           11
Item 7             Financial Statements                                                                17
Item 8             Changes In and Disagreements with Accountants on Accounting and
                      Financial Disclosure                                                             17

PART III
Item 9             Trustees, Executive Officers, Promoters and Control Persons, Compliance
                      with Section 16(a) of the Exchange Act                                           18
Item 10            Executive Compensation                                                              21
Item 11            Security Ownership of Certain Beneficial Owners and Management                      24
Item 12            Certain Relationships and Related Transactions                                      26
Item 13            Exhibits and Reports on Form 8-K                                                    29

SIGNATURES                                                                                             31
</TABLE>

                           FORWARD- LOOKING STATEMENTS

This Form 10-KSB contains "forward-looking" statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements are based on
current expectations, estimates and projections. Statements that are not
historical facts, including statements about management's beliefs and
expectations, are forward-looking statements. These statements are not
guarantees of future performance, events or results and involve potential risks
and uncertainties. Accordingly, actual performance, events or results may differ
materially from such forward-looking statements. Management undertakes no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.

Important facts that may affect these forward-looking statements include, but
are not limited to: the Company's ability to borrow on favorable terms; general
economic and business conditions, which will affect, among other things, demand
for real estate properties, availability and creditworthiness of tenants, lease
rents and the availability of financing; adverse changes in the real estate
markets including, among other things, competition with other companies; risks
of real estate acquisition and development; governmental actions and
initiatives; environment requirements; and other risks identified in this filing
or other reports of the Company filed with the Securities and Exchange
Commission.



                                       3
<PAGE>

                                     PART I

ITEM 1.   DESCRIPTION OF BUSINESS

Stonehaven Realty Trust (formerly, Wellington Properties Trust) (the "Company")
is a self-administered real estate investment trust ("REIT") formed on March 15,
1994 under Maryland law. In November 1998, the Company became an umbrella
partnership REIT and formed an operating partnership, Wellington Properties
Investments, L.P.(the "Operating Partnership"), of which the Company is the sole
general partner. Through the Operating Partnership and wholly owned
subsidiaries, the Company acquires, develops, owns and operates investment
properties.

As of December 31, 1999, the Operating Partnership or wholly owned subsidiaries
of the Company own four properties:

     -    a 119,722 square-foot office building in Minneapolis, Minnesota;

     -    a 77,533 square-foot office building in St. Cloud, Minnesota;

     -    a 50,291 square-foot light industrial facility in Burnsville,
          Minnesota; and

     -    a 72-unit apartment community in Schofield, Wisconsin.

Management believes that the Company is organized and operates in a manner that
satisfies the requirements for taxation as a REIT under the Internal Revenue
Code of 1986, as amended and expects to continue to operate in such a manner.
Under such provisions, the Company must distribute at least 95% of its taxable
income to its shareholders and meet certain other organizational, asset and
income tests. As a REIT, the Company generally is not subject to federal income
tax on taxable income that is distributed to the Company's shareholders.

SIGNIFICANT 1999 DEVELOPMENTS

On November 16, 1999, the Company disposed of Maple Grove Apartments, a 304 unit
apartment community in Madison, Wisconsin. Sale consideration totaled
$16,700,000, which included the assumption of approximately $12,630,000 of
mortgage indebtedness.

 On October 28, 1999, the Company issued 700,000 Class A Cumulative Convertible
Preferred Shares ("Class A Preferred Shares") to the public ("Preferred
Offering"). Each of the Class A Preferred Shares is entitled, at all meetings of
shareholders, to 3.448 votes, the number of Common Shares ($0.01 par value) into
which they are convertible, subject to adjustment for stock splits and similar
events. The Class A Preferred Shares are entitled to vote as a class on certain
matters that affect their respective rights. The Class A Preferred Shares bear a
liquidation value of $10.00 per share and accrue a dividend equal to $0.475 per
share, with such dividend payable every six months. The Class A Preferred Shares
are convertible into the number of Common Shares equal to the quotient obtained
by dividing (1) $10.00 plus any dividends then accrued but unpaid on the Class A
Preferred Shares, by (2) $2.90, a price equal to 110% of the average closing bid
price of Common Shares over the 10 trading days preceding the effective date of
the registration statement covering the Class A Preferred Shares. The Company
has the right to redeem the Class A Preferred Shares, under certain
circumstances, after the two-year anniversary date of the initial closing of the
Preferred Offering. On December 16, 1999, in connection with a 45-day option to
purchase additional Class A Preferred Shares solely to cover any overallotments
of the Preferred Offering, the Company issued 85,037



                                       4
<PAGE>

additional Class A Preferred Shares. Proceeds from these sales of Class A
Preferred Shares, net of underwriters' discount and total offering expenses,
were $6,761,303.

In the second quarter of 1999, due principally to the fact that the Operating
Partnership acquired only three properties since November 1998, the Company
entered into discussions with American Real Estate Equities, LLC ("AREE") and
Wellington Management Company ("WMC"). The Company's Chief Executive Officer and
two members of the Company's Board of Trustees are principal members of AREE or
related entities thereof. The Chairman of the Board of Trustees of the Company
is the President and Chief Executive Officer of WMC and holds an aggregate 41.8%
direct and indirect interest in WMC. As a result of these discussions, the
following occurred during 1999:

     -    Recipients of 838,372 limited partnership units ("Units) in the
          Operating Partnership, received in the November 1998 acquisitions,
          returned such Units to the Company for cancellation.

     -    AREE returned the warrant covering 791,667 Common Shares to the
          Company. Further, the Company issued 254,800 Class B Junior Cumulative
          Convertible Preferred Shares ("Class B Preferred Shares") to AREE as
          consideration for payment of advances to the Company for working
          capital purposes, costs incurred in connection with the Company's 1998
          commercial acquisitions and payments for abandoned project pursuit
          costs.

     -    As consideration for the termination of an advisory agreement between
          the Company and WMC, WMC returned the warrant covering 791,667 Common
          Shares to the Company, the Company issued 95,000 Class B Preferred
          Shares to WMC and WMC retained cash payments of $550,000 received
          during 1998.

The Class B Preferred Shares bear the same rights, terms and preferences as the
Class A Preferred Shares, but rank junior as to payment of dividends and
distributions upon liquidation. The Class B Preferred Shares were issued for a
value of $10.00 per share. The Class B Preferred Shares are entitled to vote as
a class on certain matters that affect their respective rights.

SUBSEQUENT EVENTS

On February 18, 2000, the Board of Trustees approved the conversion of 1,657,437
Units of the Operating Partnership into 1,468,484 Common Shares and further
approved the conversion of the 254,800 Class B Preferred Shares held by AREE
into 808,482 Common Shares.

On February 24, 2000, the Company acquired NETLink International, Inc.,
("Netlink") a privately held Internet consulting and web development company, in
exchange for 914,286 Common Shares (valued at $4.375 per share or an aggregate
of $4.0 million). Further by agreement, the Company set aside a pool of options
as to 200,000 Common Shares for future award to employees of Netlink. In
connection with the acquisition, the Chief Executive Officer of Netlink was
appointed President of the Company and will become a member of the Board of
Trustees of the Company upon the earlier of the Company's next Annual Meeting of
Shareholders or should a vacancy arise among the current Board of Trustees of
the Company; the Chief Financial Officer of Netlink, was appointed Chief
Financial Officer of the Company; and the employment contract of the Chief
Executive Officer was required to be extended to be co-terminous with that of
the President.



                                       5
<PAGE>

Effective February 24, 2000, the employment contract of the President provides
for an annual base salary of $120,000 and bonus at the discretion of the
Compensation Committee for a two year period. In addition, the Company issued to
the President options as to 1.0 million Common Shares at a price of $5.375 per
share. The options are exercisable as to 500,000 shares immediately, with
options as to 62,500 shares exercisable quarterly, commencing May 24, 2000. The
employment contract of the Chief Executive Officer provides for an annual base
salary of $80,000 and bonus at the discretion of the Compensation Committee for
a two year period. In addition, the Company issued to the Chief Executive
Officer options as to 666,667 Common Shares at a price of $6.375 per share. The
options are exercisable as to 333,333 shares immediately, with options as to
41,666.75 shares exercisable quarterly, commencing May 24, 2000.

On February 29, 2000, the Company, through the Operating Partnership, acquired
three commercial real estate properties located in suburban Minneapolis,
Minnesota from Plymouth Partners II, of which a Trustee of the Company is a
principal, for a total price of $6,716,060. The purchase price was funded
through the issuance of an aggregate of 181,629 Units in the Operating
Partnership (valued at $4.375 per Unit, or an aggregate value of $794,627), the
assumption of certain third-party debt totaling $4,449,505 secured by such
properties and the balance paid in cash.

COMPETITION

The real estate market is highly competitive. Numerous properties compete for
tenants with the Company's properties, and some competitors are building
additional properties in the markets in which the Company holds properties. Some
of these competing properties may be newer or have more desirable locations than
the Company's properties. If the market does not absorb newly constructed space,
market vacancies will increase and market rents may decline. As a result, the
Company may have difficulty leasing space within its properties and may be
forced to lower rents on leases to compete effectively.

The Company also competes for the purchase of property with many entities,
including other publicly traded REITs. Many competitors have substantially
greater financial resources than the Company. In addition, certain competitors
may be willing to accept lower returns on their investments. If competitors
prevent the Company from buying properties that may be targeted for acquisition,
the Company may not be able to meet its property acquisition and development
goals.

MAJOR TENANTS

During 1999, 13.30% of the Company's rental revenue was earned from one major
tenant. During 1998, no tenant represented 10.00% or more of total rental
revenue.

ENVIRONMENTAL MATTERS

The Company is subject to various federal, state and local environmental laws.
These laws can



                                       6
<PAGE>

impose liability on property owners or operators for the costs of removal or
remediation of certain hazardous substances released on a property, even if the
property owner was not responsible for the release of the hazardous substances.
The presence of hazardous substances on properties of the Company may adversely
affect occupancy and the Company's ability to sell or borrow against those
properties. In addition to the costs of government claims under environmental
laws, private plaintiffs may bring claims for personal injury or similar
reasons. Various laws also impose liability for the costs of removal or
remediation of hazardous substances at the disposal or treatment facility. Any
entity that arranges for the disposal or treatment of hazardous substances at
such a facility is potentially liable under such laws. These laws often impose
liability whether or not the facility is or ever was owned or operated by such
person. To date, the impact of these laws has not been materially adverse to the
operations of the Company.

EMPLOYEES

On December 31, 1999 the Company had 2 employees.



                                       7
<PAGE>

ITEM 2.   DESCRIPTION OF PROPERTY

     At December 31, 1999 the Company owned interests in the properties
described below.

<TABLE>
<CAPTION>
                                                                                      TENANTS LEASING
                                                                                            10%
                                                                                         OR MORE OF
                                                                                          RENTABLE
                                                           RENTABLE       TOTAL        SQ. FT. AS OF
                           YEAR BUILT/   % LEASED AS OF     SQUARE        RENTAL      12/31/99 & LEASE
    PROPERTY LOCATION       RENOVATED       12/31/99       FEET (1)    REVENUE (2)    EXPIRATION DATE
<S>                        <C>           <C>               <C>         <C>           <C>
Cold Springs Office                                                                  Cold Springs
Center,                                                                              Granite
St. Cloud, MN                      1990          100.00%       77,533      $900,302  (55%) - 4/02;
                                                                                     Central MN ECSU
                                                                                     (14%) - 9/02; First
                                                                                     American Bank (17%)
                                                                                     - 4/05

Thresher Square,                                                                     BRW, Inc. (48%) -
Minneapolis, MN               1900/1987          100.00%      119,722    $1,092,039  7/01;
                                                                                     Search Institute
                                                                                     (10%) - 8/02

Nicollet Business VI,                                                                Wakata Design
Burnsville, MN                     1997          100.00%       50,291      $355,206  Systems
                                                                                     (19%) - 3/02;
                                                                                     Quickdraw
                                                                                     Design, Inc.
                                                                                     (30%) - 8/02;
                                                                                     Xata Corp. (41%)
                                                                                     - 6/04

Lake Pointe Apartments,
Schofield, WI                      1990           98.61%     72 units     $ 531,423  None

Total                                                                    $2,878,970
</TABLE>

(1) Rentable Square Feet represents rentable square feet for office properties,
gross leaseable area for light industrial properties and number of units for
apartment communities.

(2) Total Rental Revenue represent base rents received during the twelve months
ended December 31, 1999, excluding tenant reimbursements, calculated in
accordance with generally accepted accounting principles determined on a
straight-line basis. Tenant reimbursements generally include payment of real
estate taxes, operating expenses, and escalations and common area maintenance
and utility charges.



                                       8
<PAGE>

MORTGAGE LOANS AND NOTES PAYABLE

For information relating to mortgage loans and notes payable associated with the
Company's properties, refer to Part II, Item 6, Management's Discussion and
Analysis or Plan of Operation and Note 5 to the Company's Consolidated Financial
Statements included with this Form 10-KSB.

ITEM 3.   LEGAL PROCEEDINGS

None

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

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.

The following matters were submitted to a vote of security holders on January 7,
2000:

<TABLE>
<S>                                         <C>
(a)      Meeting type and date:             Annual Meeting of Shareholders, January 7, 2000

(b)      Trustees elected at meeting:       N/A

(c)      Description of each matter voted on at meeting:
</TABLE>

     To approve the Amendment to the Company's Restated Declaration of Trust to
change the Company's name.

<TABLE>
<CAPTION>
         RESULTS OF VOTES:
<S>                                                                     <C>
               For                                                      1,499,100

               Against or withheld                                         24,327

               Abstentions and broker non-votes                            41,820
</TABLE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The Common Shares of the Company began trading on the AMEX on October 28, 1999
under the



                                       9
<PAGE>

symbol "RPP". Prior to October 28, 1999, the Common Shares of the Company traded
on the NASDAQ Small Cap under the symbol "WLPT".

The table below shows the range of the high and low sale prices for the Common
Shares of the Company as reported on the AMEX and the NASDAQ Small Cap, as well
as the quarterly dividends per share declared. The quotations shown represent
interdealer prices without adjustment for retail markups, markdowns or
commissions, and may not reflect actual transactions.

<TABLE>
<CAPTION>


                                                                      Cash Dividends
                                                                       Declared Per
Quarter                              High(1)           Low(1)         Common Share(1)
-------                              -------           ------         --------------
<S>                                <C>              <C>               <C>
First Quarter, 1998                $     5.61       $     3.95        $     0.11
Second Quarter, 1998               $    10.58       $     4.58        $     0.11
Third Quarter, 1998                $     6.79       $     5.53        $     0.11
Fourth Quarter, 1998               $     6.24       $     3.79        $     0.11

First Quarter, 1999                $     6.33       $     3.48        $     0.11
Second Quarter, 1999               $     4.75       $     4.38        $     0.11
Third Quarter, 1999                $     4.94       $     3.00        $     0.11
Fourth Quarter, 1999               $     3.88       $     2.25        $     0.11
</TABLE>

(1) Adjusted to give effect to the Stock Split, described below.

On March 1, 2000, the last reported sales price of the Company's Common Shares
on the AMEX was $4.375. The number of holders of record of the Common Shares of
the Company was approximately 310 as of March 1, 2000 and the Company estimates
it has approximately 665 holders of common beneficial interest as of that same
date.

On March 16, 1999, the Company declared a 4.75 for 3.00 share split for its
Common Shares payable on March 24, 1999 to shareholders of record as of March
22, 1999 (the "Stock Split"). All amounts herein have been adjusted to give
effect to the Stock Split.

The Company's payment of future cash distributions is at the discretion of the
Board of Trustees. The Company's ability to pay cash distributions in the future
is dependent upon (i) the income and cash flow generated from operations, (ii)
cash generated or used by financing or investing activities and (ii) the annual
distribution requirements under the REIT provisions of the Internal Revenue Code
and other factors as the Board of Trustees deems relevant. The Company's ability
to make cash distributions will also be limited by the terms of the Operating
Partnership Agreement, the financing arrangements of the Company as well as
limitations imposed by state law and the agreements governing any future
indebtedness.

During 1999, the Company issued 785,037 Class A Preferred Shares. The Class A
Preferred Shares of the Company began trading on the AMEX on October 28, 1999
under the symbol "RPP.A".

On November 20, 1998, the Company issued 2,557,707 Units in the Operating
Partnership in



                                       10
<PAGE>

connection with the acquisition of three commercial properties. In issuing these
Units, the Company relied on the exemption from registration under Section 4 (2)
of the Securities Act of 1933, as amended. The Units are exchangeable into
Common Share, subject to certain conditions. Effective June 30, 1999, 838,372 of
these Units were returned to the Company and cancelled.

On August 12, 1999, the Company issued 254,800 Class B Preferred Shares to AREE
as consideration for payment of advances to the Company for working capital
purposes, costs incurred in connection with the Company's 1998 commercial
acquisitions and payments for abandoned project pursuit costs. Further, on
August 12, 1999, the Company issued 95,000 Class B Preferred Shares to WMC as
partial consideration for the termination of the incentive advisory agreement
between the Company and WMC. The Class B Preferred Shares bear the same rights,
terms and preferences as the Class A Preferred Shares, but rank junior as to
payment of dividends and distributions upon liquidation. Each of the Class B
Preferred Shares is entitled, at all meetings of shareholders, to 3.448 votes,
the number of Common Shares into which they are convertible, subject to
adjustment for stock splits and similar events. The Class B Preferred Shares are
entitled to vote as a class on certain matters that affect their respective
rights. The Class B Preferred Shares were issued for a value of $10.00 per
share, bear a liquidation value of $10.00 per share and accrue a dividend equal
to $0.475 per share, with such dividend payable every six months. The Class B
Preferred Shares are convertible into the number of Common Shares equal to the
quotient obtained by dividing (1) $10.00 plus any dividends then accrued but
unpaid on the Class A Preferred Shares, by (2) $2.90, a price equal to 110% of
the average closing bid price of Common Shares over the 10 trading days
preceding the effective date of the registration statement covering the Class A
Preferred Shares.

On February 18, 2000, the Board of Trustees approved the conversion of 1,657,437
Units of the Operating Partnership into 1,468,484 Common Shares and further
approved the conversion of the 254,800 Class B Preferred Shares held by AREE
into 808,482 Common Shares.

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

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

This report may contain certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Reform Act of
1995, and is including this statement for purposes of indicated such intent.
Forward-looking statements that are based on certain assumptions, and describe
future plans, strategies and expectations of the Company, are generally
identifiable by use of the words "believe", "expect", "intend", "anticipate",
"estimate", "project" or similar expressions. The Company's ability to predict
results or the actual effect of future prospects of the Company include, but are
not limited to, changes in interest rates, general economic conditions,
legislative/regulatory changes, monetary and fiscal policies of the U.S.
Government, including policies of the U.S. Treasury and the Federal Reserve
Board, the quality of composition of the Company's portfolio of finance
receivables, the ability of the Company to obtain debt or other financing,
competition, demand for financial services in the Company's market area and
accounting principles, policies and guidelines. These risks and uncertainties
should be considered in evaluating forward-looking statements and undue reliance
should not be placed on such statements. Further information concerning the
Company and its business, including additional factors that could



                                       11
<PAGE>

materially affect the Company's financial results, is included in other Company
filings with the Securities and Exchange Commission.

Stonehaven Realty Trust (formerly, Wellington Properties Trust) (the "Company")
is a self-administered real estate investment trust ("REIT") formed on March 15,
1994 under Maryland law. In November 1998, the Company became an umbrella
partnership REIT and formed an operating partnership, Wellington Properties
Investments, L.P. (the "Operating Partnership"), of which the Company is the
sole general partner. Through the Operating Partnership and wholly owned
subsidiaries, the Company acquires, develops, owns and operates investment
properties.

As of December 31, 1999, the Operating Partnership or wholly owned subsidiaries
of the Company own four properties:

     -    a 119,722 square-foot office building in Minneapolis, Minnesota;

     -    a 77,533 square-foot office building in St. Cloud, Minnesota;

     -    a 50,291 square-foot light industrial facility in Burnsville,
          Minnesota; and

     -    a 72-unit apartment community in Schofield, Wisconsin.

RESULTS OF OPERATIONS

Rental revenue and tenant recoveries increased by approximately $3.3 million or
94.66% for the year ended December 31, 1999 compared to the year ended December
31, 1998. The increased revenue was primarily a result of the Company's
acquisition of its three commercial properties during 1998, offset, in part, by
the sale of the Maple Grove residential property on November 16, 1999. Other
income increased by approximately $85,000 or 405.9%, during these same periods,
primarily due to earnings from the investment of proceeds from the consummation
of the sale of Class A Preferred Shares by the Company during 1999.

Total expenses increased from approximately $5,515,000 for the year ended
December 31, 1998 to approximately $11,184,000 for the year ended December 31,
1999, an increase of 102.8% of which approximately $2,003,000 of the change
represented non-recurring charges related to the abandonment of certain
potential acquisitions and the partial termination of the incentive advisory
agreement between WMC and the Company. The remaining $3,666,000 was attributable
to increased property expenses ($1,462,000), increased depreciation and
amortization ($516,000), increased interest expense ($1,140,000) and increased
general and administrative expenses ($548,000), primarily as a result of the
Company's acquisition of its three commercial properties during 1998, offset, in
part, by the sale of the Maple Grove residential property on November 16, 1999.

Depreciation and amortization increased from $694,000 in 1998 to $1,210,000 in
1999, an increase of 74.4%, as a result of the Company's acquisition of its
three commercial properties during 1998, offset, in part, by the disposition of
the Maple Grove residential property on November 16, 1999. Interest expense
increased from approximately $1,417,000 in 1998 to approximately $2,557,000 in
1999, an increase of 80.5%, primarily as a result of additional borrowings
during 1998 associated with the Company's three commercial properties offset, in
part, by the retirement of the borrowings associated with the sale of the Maple
Grove residential property.

General and administrative expenses increased from approximately $253,000 in
1998 to



                                       12
<PAGE>

approximately $801,000 in 1999, an increase of 216.6%. In the last quarter of
1998, the Company converted from an externally advised REIT to a
self-administered REIT and commenced administrative operations. As a result, the
Company incurred additional payroll expenses in 1999 of approximately $204,000
and increased rent and related costs associated with personnel totaling
approximately $144,000. Further, the Company incurred additional professional
fees of approximately $200,000.

The equity in income of unconsolidated subsidiary of approximately $10,000 for
the year ended December 31, 1999 is the result of the Company's March 4, 1999
acquisition of an 8.00% interest in Highlander Acquisition Company, LLC
("Highlander"), which owns a 154-unit apartment community.

Gain on sale of investment in real estate in the amount of $686,716 for the year
ended December 31, 1999 was a result of the disposition of the Maple Grove
residential property on November 16, 1999.

The extraordinary loss of approximately $482,000 for the year ended December 31,
1999 represents the write-off of unamortized deferred financing costs (a)
associated with the expiration of the Company's non-revolving line of credit
facility ($377,000) and (b) in connection with the retirement of the mortgage
loan associated with the sale of the Maple Grove residential property sold
during 1999.

The $35,565 cumulative effect of change in accounting principle for the year
ended December 31, 1999 is the result of the write-off of the unamortized
balance of organizational costs on the Company's balance sheet due to the
adoption of the Statement of Position 98-5, "Reporting on the Cost of Start-Up
Activities".

As a result of the above factors, net loss from operations before equity in
income of unconsolidated subsidiary and loss allocated to minority interests
increased from approximately ($2,005,000) for the year ended December 31, 1998
to a loss of approximately ($4,287,000) for the year ended December 31, 1999 and
net loss available to Common Shareholders increased from approximately
($941,000) for 1998 to approximately ($1,387,000) for 1999.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operations 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.

 On October 28, 1999, the Company issued 700,000 Class A Cumulative Convertible
Preferred Shares ("Class A Preferred Shares") to the public ("Preferred
Offering"). Each of the Class A Preferred Shares is entitled, at all meetings of
shareholders, to 3.448 votes, the number of Common Shares ($0.01 par value) into
which they are convertible, subject to adjustment for stock splits and similar
events. The Class A Preferred Shares are entitled to vote as a class on certain
matters that affect their respective rights. The Class A Preferred Shares bear a
liquidation value of $10.00 per share and accrue a dividend equal to $0.475 per
share, with such dividend payable every six months. The Class A Preferred Shares
are convertible into the number of Common Shares equal to the quotient obtained
by dividing (1) $10.00 plus any dividends then accrued but unpaid on the Class A
Preferred Shares,



                                       13
<PAGE>

by (2) $2.90, a price equal to 110% of the average closing bid price of Common
Shares over the 10 trading days preceding the effective date of the registration
statement covering the Class A Preferred Shares. The Company has the right to
redeem the Class A Preferred Shares, under certain circumstances, after the
two-year anniversary date of the initial closing of the Preferred Offering. On
December 16, 1999, in connection with a 45-day option to purchase additional
Class A Preferred Shares solely to cover any overallotments of the Preferred
Offering, the Company issued 85,037 additional Class A Preferred Shares.
Proceeds from these sales of Class A Preferred Shares, net of underwriters'
discount and total offering expenses, were $6,761,303.

In the second quarter of 1999, due principally to the fact that the Operating
Partnership acquired only three properties since November 1998, the Company
entered into discussions with AREE and WMC. As a result of these discussions,
the following occurred during 1999:

     -    Recipients of 838,372 limited partnership units ("Units) in the
          Operating Partnership, received in the November 1998 acquisitions,
          returned such Units to the Company for cancellation.

     -    AREE returned the warrant covering 791,667 Common Shares to the
          Company. Further, the Company issued 254,800 Class B Junior Cumulative
          Convertible Preferred Shares ("Class B Preferred Shares") to AREE as
          consideration for payment of advances to the Company for working
          capital purposes, costs incurred in connection with the Company's 1998
          commercial acquisitions and payments for abandoned project pursuit
          costs.

     -    As consideration for the termination of the advisory agreement between
          the Company and WMC, WMC returned the warrant covering 791,667 Common
          Shares to the Company, the Company issued 95,000 Class B Preferred
          Shares to WMC and WMC retained cash payments of $550,000 received
          during 1998.

The Class B Preferred Shares bear the same rights, terms and preferences as the
Class A Preferred Shares, but rank junior as to payment of dividends and
distributions upon liquidation. The Class B Preferred Shares are entitled to
vote as a class on certain matters that affect their respective rights.

On November 16, 1999, the Company disposed of the Maple Grove residential
property. Sale consideration totaled $16,700,000, which included the assumption
of approximately $12,630,000 of mortgage indebtedness.

As of December 31, 1999, the Company has approximately $19.3 million of debt
outstanding consisting of six mortgage loans (which had a weighted average
interest rate of 8.0% and will mature between September 30, 2000 and May 1,
2015).

On February 18, 2000, the Board of Trustees approved the conversion of 1,657,437
Units of the Operating Partnership into 1,468,484 Common Shares and further
approved the conversion of the 254,800 Class B Preferred Shares held by AREE
into 808,482 Common Shares.

On February 24, 2000, the Company acquired NETLink International, Inc.,
("Netlink") a privately held Internet consulting and web development company, in
exchange for 914,286 Common Shares (valued at $4.375 per share or an aggregate
of $4.0 million). Further by agreement, the Company set aside a pool of options
as to 200,000 Common Shares for future award to employees of Netlink. In
connection with the acquisition, the Chief Executive Officer of Netlink was
appointed President of the Company and will become a member of the Board of
Trustees of the Company upon the earlier of



                                       14
<PAGE>

the Company's next Annual Meeting of Shareholders or should a vacancy arise
among the current Board of Trustees of the Company; the Chief Financial Officer
of Netlink, was appointed Chief Financial Officer of the Company; and the
employment contract of the Chief Executive Officer was required to be extended
to be co-terminous with that of the President.

Effective February 24, 2000, the employment contract of the President provides
for an annual base salary of $120,000 and bonus at the discretion of the
Compensation Committee for a two year period. In addition, the Company issued to
the President options as to 1.0 million Common Shares at a price of $5.375 per
share. The options are exercisable as to 500,000 shares immediately, with
options as to 62,500 shares exercisable quarterly, commencing May 24, 2000. The
employment contract of the Chief Executive Officer provides for an annual base
salary of $80,000 and bonus at the discretion of the Compensation Committee for
a two year period. In addition, the Company issued to the Chief Executive
Officer options as to 666,667 Common Shares at a price of $6.375 per share. The
options are exercisable as to 333,333 shares immediately, with options as to
41,666.75 shares exercisable quarterly, commencing May 24, 2000.

On February 29, 2000, the Company, through the Operating Partnership, acquired
three commercial real estate properties located in suburban Minneapolis,
Minnesota from Plymouth Partners II, of which a Trustee of the Company is a
principal, for a total price of $6,716,060. The purchase price was funded
through the issuance of an aggregate of 181,629 Units in the Operating
Partnership (valued at $4.375 per Unit, or an aggregate value of $794,627), the
assumption of certain third-party debt totaling $4,449,505 secured by such
properties and the balance paid in cash.

Except as discussed above, the Company has no contractual obligations for
property acquisition or material capital costs, other than tenant improvements
in the ordinary course of business. The Company expects to meet its long-term
capital needs through a combination of cash from operations, additional
borrowings, additional equity issuances of Common or Preferred Shares, and/or
partnership Units.

On March 16, 1999, the Company declared a 4.75 for 3.00 share split payable on
March 24, 1999 to shareholders of record as of March 22, 1999 (the "Stock
Split"). All amounts herein have been adjusted to give effect to the Stock
Split. On March 30, 1999, July 15, 1999, September 30, 1999 and December 29,
1999, the Company declared in the aggregate, distributions of $0.44 per share.

CASH FLOWS

During the year ended December 31, 1999, the Company generated approximately
$6,761,000 from the consummation of the Preferred Offering, approximately
$16,000 from the issuance of Common Shares and approximately $3,138,000 from the
disposition of the Maple Grove residential property. These cash flows were used
primarily for (i) purchase of marketable securities aggregating approximately
$5,154,000; (ii) repayments of debt obligations and financing costs aggregating
$784,000; (iii) payment of cash dividends aggregating approximately $378,000;
(iv) investments in new ventures aggregating $90,000; (iv) payment of costs
associated with additions to real estate property aggregating $119,000; (v)
payment of deferred costs aggregating $24,000; and (vi) cash used in operating
activities of approximately $627,000. As a result, the Company's cash and cash
equivalents increased by approximately $2,739,000 to approximately $2,893,000 at
December 31, 1999 from approximately $154,000 at December 31, 1998.



                                       15
<PAGE>

FUNDS FROM OPERATIONS

The Company considers funds from operations to be one financial measure of the
operating performance of an equity REIT that provides a relevant basis for
comparison among REITs and it is presented to assist investors in analyzing the
performance of the Company. In accordance with the National Association of Real
Estate Investment Trusts' definition of funds from operations, the Company
calculates funds from operations to be equal to net income, excluding gains (or
losses) from debt restructuring and sales of property, plus depreciation and
amortization, excluding amortization of deferred financing costs and interest
rate protection agreements, and after adjustments for unconsolidated
partnerships and joint ventures. Funds from operations does not represent cash
generated from operating activities in accordance with generally accepted
accounting principles and is not necessarily indicative of cash available to
fund cash needs, including the payment of dividends and distributions. Funds
from operations should not be considered as a substitute for net income as a
measure of results of operations or for cash flow from operating activities
calculated with generally accepted accounting principles as a measure of
liquidity. Funds from operations as calculated by the Company may not be
comparable to similarly titled but differently calculated measures of other
REITs. The following is a reconciliation of net income to funds from operations:

<TABLE>
<CAPTION>
                                                                                Historical
                                                                         Year Ended December 31,
                                                                         1999                    1998
                                                                   ---------------        --------------
<S>                                                                <C>                     <C>
      Net loss available to Common Shareholders                    $    (1,386,590)       $     (941,382)
      Adjustments:
      Real estate related depreciation                                   1,124,818                616,209
      Nonrecurring charges
            Abandoned project pursuit costs                              2,613,383              1,010,154
            Provision for uncollectible advance to
              related party                                                     --                240,000
            Incentive advisory agreement termination
              fee                                                          950,000                310,000
      Gain on sale of investment in real estate                           (686,716)                    --
      Cumulative effect in change in accounting
         principle                                                          35,565                     --
      Extraordinary loss                                                   482,272                     --
      Loss allocated to minority interest                               (2,721,695)           (1,064,501)
                                                                   ---------------       ---------------
      Funds from operations                                        $       411,037       $       170,480
                                                                   ===============       ===============
      Weighted average Common Shares/Units
         outstanding - Basic and Diluted                                 3,499,553             1,483,323
                                                                   ===============       ===============
</TABLE>


(1) Assumes exchange of all Units, calculated on a weighted average basis for
Common Shares, adjusted to give effect to the Stock Split. Excludes Class A
Preferred Shares and Class B Preferred Shares.



                                       16
<PAGE>

YEAR 2000 DISCLOSURES

The Year 2000 problem resulted from the use of a two digit year date instead of
a four digit date in the programs that operate computers (information technology
or "IT" systems) and other devices (i.e. "non-IT" systems such as elevators,
utility monitoring systems and time clocks that use computer chips). Systems
with a Year 2000 problem had programs that were written to assume that the first
two digits for any date used in the program would always be "19". Unless
corrected, this assumption could have resulted in problems when the century date
occurred. On that date, these computer programs could have misinterpreted the
date January 1, 2000 as January 1, 1900. This could have caused systems to
incorrectly process critical financial and operational information, generate
erroneous information or fail altogether. The Year 2000 issue was expected to
affect almost all companies and organizations.

As of the date of this filing, the Company's IT systems and non-IT systems have
not encountered any significant Year 2000 operating problems. In addition, there
were no significant third-party Year 2000 operating problems that had any impact
on the Company's operations. Therefore, the Company does not expect to incur any
significant additional costs relating to the Year 2000 issue.

INFLATION

Inflation has not generally had a significant impact during the periods
presented on the Company because of the relatively low inflation rates in the
markets in which the Company's properties operate. Most of the Company's tenants
in the residential properties represent short-term leases and most of the
Company's tenants in the commercial properties are contractually obligated to
pay their share of operating expenses thereby reducing exposure to increases in
such costs resulting from inflation.

ITEM 7.  FINANCIAL STATEMENTS

The required audited financial statements of the Company are included herein.
See pages F-1 through F-26.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

On January 6, 2000, the Company changed its independent public accountant from
Grant Thornton LLP ("Grant") to PricewaterhouseCoopers LLP. The decision to
change independent public accountants was recommended and approved by the Board
of Trustees of the Company.

The Company is not aware of any disagreement with Grant during the two most
recent fiscal years and through January 6, 2000 on any matters of accounting
principles or practices, financial statement disclosures, or auditing scope or
procedures.



                                       17
<PAGE>


                                    PART III

ITEM 9. TRUSTEES, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT

BOARD OF TRUSTEES, EXECUTIVE OFFICERS, SIGNIFICANT EMPLOYEES AND FAMILY
RELATIONSHIPS

The Trustees and Officers of the Company, their ages at March 1, 2000 and their
positions and offices held with the Company are as follows:

<TABLE>
<CAPTION>
Name                               Age           Term Expires                 Position and Offices Held
----                               ---           ------------                 -------------------------
<S>                                <C>           <C>                     <C>
Arnold K. Leas                     66                2001                 Chairman of the Board of Trustees
Steven B. Hoyt                     47                2000                              Trustee
Paul T. Lambert                    47                2001                              Trustee
Robert D. Salmen                   44                2002                              Trustee
Mark S. Whiting                    42                2002                              Trustee
Odeh Muhawesh                      41                 N/A                             President
Duane H. Lund                      35                2000                Trustee and Chief Executive Officer
Robert F. Rice                     48                2000                       Trustee and Secretary
Ann K. Wessels                     37                 N/A                      Chief Financial Officer
</TABLE>

Arnold K. Leas, Chairman of the Board of Trustees of the Company, served as the
Company's original President/Chief Executive Officer from its inception in 1994
until November 1998. Mr. Leas also served as a Director, Chief Executive Officer
and President of Wellington Management Corporation since its inception in 1988.
Wellington Management Corporation and its subsidiary, Wellington Investment
Services Corp., currently manage over $100 million of investor's funds. From
1984 to 1988, Mr. Leas was Executive Vice President of Decade Securities, Inc.,
a Milwaukee, Wisconsin based company that was involved primarily in the
syndication of multi-family apartment communities throughout the United States.
Mr. Leas is on the board of directors of the Metropolitan Milwaukee Association
of Commerce Council of Small Business Executives and is a graduate of the
Realtors Institute.

Steven B. Hoyt was elected a Trustee of the Company in November 1998. He has
served as managing general partner of Hoyt Development (from 1979 to 1989) and
Chief Executive Officer of Hoyt Properties, Inc. ("HPI") (from 1989 to present).
HPI currently owns over 1,000,000 square feet of industrial and office property
in Minnesota and has developed over 5,000,000 square feet of commercial property
since its inception. From 1994 to 1995, Mr. Hoyt served as a Senior Regional
Director of First Industrial Realty Trust Inc., a Maryland corporation ("First
Industrial"). Mr. Hoyt is a member of the Board of Directors of the Better
Business Bureau and has served in numerous state and national positions for the
National Association of Industrial and Office Parks (NAIOP).

Paul T. Lambert was elected as a Trustee in November 1998. Mr. Lambert has been
a private investor since 1995. He served on the board of directors and was the
chief operating officer of First Industrial Realty Trust, Inc. from its initial
public offering in June 1994 until November 1998. Mr. Lambert was one of the
largest contributors to the formation of First Industrial and one of its
founding



                                       18
<PAGE>

shareholders. Prior to forming First Industrial, Mr. Lambert was Managing
Partner of the Midwest region for The Shidler Group, a national private real
estate investment company ("Shidler"). Prior to joining Shidler, Mr. Lambert was
a commercial real estate developer with Dillingham Corporation and, prior to
such time, was a consultant with The Boston Consulting Group. Mr. Lambert was
also a founding shareholder of CGA Group, Ltd., a holding company whose
subsidiary is a AAA-rated financial guarantor based in Bermuda.

Robert D. Salmen was elected to the Board in August 1999. Mr. Salmen founded
Equity Financial Services in 1993. While continuing to operate Equity
Financial's investment services company, he founded Equity Commercial Services
in 1996 to incorporate leasing and then property management services for Equity
Financial and currently serves as its president. Prior to founding Equity
Financial Services, Mr. Salmen was vice president of institutional investment
sales with Welsh Companies for eight years. He established the Institutional
Investment division at Welsh Companies in 1985. From its inception through 1992,
he directed Welsh's marketing force. Prior to joining Welsh, Mr. Salmen spent
over nine years with Towle Real Estate. Mr. Salmen is a graduate of University
of Minnesota.

Mark S. Whiting was elected to the Board in October 1999, upon the completion of
the public offering of the Class A Preferred Shares. Mr. Whiting has an
extensive public REIT background, having served as the President and a member of
the board of directors of TriNet Corporate Realty Trust, Inc. (NYSE: TRI) from
1993 until 1998 and as its Chief Executive Officer from 1996 until 1998. At the
time, TriNet owned a commercial real estate portfolio consisting of over 20
million square feet, located in 26 states and a total market capitalization of
$1.6 billion. Mr. Whiting holds an M.B.A. from Stanford University Graduate
School of Business.

Odeh Muhawesh was appointed the President of the Company on February 24, 2000.
Mr. Muhawesh is the founder of numerous businesses including real estate,
restaurants, technology and Internet companies. Mr. Muhawesh has more that 18
years of computer networking and engineering experience, and is an authority on
network and business technology. He is founder and past president of the Network
Professional Association. Mr. Muhawesh holds more that 40 certifications in
computer science and electronic engineering. He also holds a Jurist degree in
comparative theology and is a world-renowned expert on the subject.

Duane H. Lund was appointed the Chief Executive Officer of the Company in
November 1998 and was elected a Trustee of the Company in January 2000. Mr. Lund
was founding shareholder of First Industrial and served as a Senior Regional
Director of First Industrial from 1994 to June 1998. In such capacity, Mr. Lund
acquired and managed over 11,000,000 square feet of commercial property with a
value in excess of $750 million. From 1989 to 1994, Mr. Lund was an Acquisition
Partner with Shidler, where he was involved in coordinating the underwriting and
due diligence for over $200 million of commercial property. Mr. Lund was a tax
consultant with Peat Marwick Main & Company from 1986 until 1988. Mr. Lund is a
member of the Boards of Directors of the Wisconsin Real Estate Alumni
Association and National Association of Industrial and Office Properties
Minnesota Chapter and is a member of the advisory boards of Midwest Real Estate
News, Minnesota Real Estate Journal and KPMG Peat Marwick Alumni Association.

Robert F. Rice, has served as Secretary of the Company since its inception in
1994, President from November 1998 through February 24, 2000, Executive Vice
President from May 1997 until becoming the President of the Company in November
1998 and Trustee of the Company since January 2000. Prior to November 1998, Mr.
Rice served as Vice President/General Counsel to WMC beginning in November 1993.
From 1989 to October 1993, Mr. Rice provided advice with respect to Resolution




                                       19
<PAGE>

Trust Corporation matters through Resource Alternatives, Inc., a provider of
legal and consulting services to the real estate industry. From 1984 to 1989,
Mr. Rice served as a director, officer and general counsel for various
affiliates of St. Francis Bank, F.S.B. Mr. Rice graduated from Marquette
University Law School in 1976.

Ann K. Wessels was appointed Chief Financial Officer of the Company on February
24, 2000. Ms. Wessels has over 13 years of banking experience, including
expertise in Commercial Lending, Cash Management Services and Trust/Investment
Services. Ms. Wessels graduated from Luther College.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, Trustees and persons who own more that 10% of the Common Shares of the
Company to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, Trustees and greater that 10%
shareholders are required by regulation to furnish the Company with copies of
all Section 16(a) forms they file. Based solely on review of the copies of such
forms furnished to the Company, or written representations that no Annual
Statements of Beneficial Ownership of Securities on Form 5 were required to be
filed, the Company believes that during the period November 1, 1998 through
December 31, 1998 and for the fiscal year ended December 31, 1999, all Section
16(a) filing requirements applicable to its officers, Trustees and greater than
10% shareholders were complied with.

Each of (i) WMC; (ii) Arnold K. Leas, Chairman of the Board of Trustees of the
Company; (iii) Robert F. Rice, a current Trustee and executive officer of the
Company; (iv) Lyle W. Larcheid, Peter Ogden, Robert P. Ripp, and Gerald Sobczak,
each a former Trustee of the Company; and (v) Garret T. Nakama and Gregory S.
Leas, former executive officers of the Company failed to timely file their
respective Forms 3, Forms 4 and Forms 5 for the period 1994 through October
1998. All such filings have since been made. The Company cannot estimate the
number of such Forms or the number of transactions that were required to be
filed but were not so filed.


                                       20
<PAGE>



ITEM 10.  EXECUTIVE COMPENSATION

Since its inception through July 31, 1998, the Company paid no compensation to
any of its executive officers. The following table sets forth the compensation
paid for the period from August 1, 1998 through December 31, 1998 and for the
year ended December 31, 1999 and current base annual compensation for each of
the officers of the Company.

<TABLE>
<CAPTION>
                                                                                     Securities
                                                                                     Underlying
Name and Principal  Position              Year           Salary (1)                  Options
----------------------------              ----           ----------                 ----------
<S>                                       <C>          <C>                          <C>
Duane H. Lund                             1999         $ 132,500  (2)                80,000   (4)
Chief Executive Officer
                                          1998         $  18,750  (2)                    --

Robert F. Rice                            1999         $ 132,500  (3)                80,000   (4)
Secretary (3)
                                          1998         $  62,500  (3)                 7,917   (5)

Arnold K. Leas (6)                        1999         $      --                         --
Chairman of the Board
                                          1998         $      --                      9,500   (5)
</TABLE>


(1)  No bonuses were paid for the years ended December 31, 1999 and 1998.

(2)  Amount represents base annual salary of $80,000 for the period from October
     1, 1999 through December 31, 1999 and $150,000 for the period from November
     16, 1998 through September 30, 1999.

(3)  Amount represents base annual salary of $80,000 for the period from October
     1, 1999 through December 31, 1999 and $150,000 for the period from July 31,
     1998 through September 30, 1999. Mr. Rice served as President of the
     Company for the period from November 16, 1998 through February 24, 2000.

(4)  All options were granted in October 1999 in accordance with the Company's
     plan in effect and bear an exercise price of $2.90 per Common Share, a
     price equal to 110% of the average closing bid price for the Company's
     Common Shares over the 10 days preceding the effective date of the
     registration statement covering the Class A Preferred Shares. These options
     will become exercisable as to 40,000 shares on December 31, 1999 and, if
     specified financial goals are met, an additional 40,000 shares become
     exercisable on December 31, 2000.

(5)  Options reported were granted on May 27, 1998 under the Company's plan in
     effect at that date and bear an exercise price of $5.37 per Common Share.

(6)  Mr. Leas was the Chief Executive Officer of the Company from the inception
     of the Company in 1994 until November 20, 1998.


                                       21


<PAGE>

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>

                                                     Percentage of
                                                     Total Options
                                   Number of          Granted to
Name and                          Underlying         Employees in
Principal Position             Options Granted         Fiscal Year        Exercise Price      Expiration Date
------------------             ---------------         -----------        --------------      ---------------
<S>                                     <C>                  <C>              <C>                 <C>
Duane H. Lund
Chief Executive Officer                 80,000               50.00%           $ 2.90 (1)          10-1-09 (1)

Robert F. Rice
Secretary (2)                           80,000               50.00%           $ 2.90 (1)          10-1-09 (1)


(1)      All options were granted in October 1999 in accordance with the
         Company's plan in effect and bear an exercise price of $2.90 per Common
         Share, a price equal to 110% of the average closing bid price for the
         Company's Common Shares over the 10 days preceding the effective date
         of the registration statement covering the Class A Preferred Shares.
         These options will become exercisable as to 40,000 shares on December
         31, 1999 and, if specified financial goals are met, an additional
         40,000 Common Shares become exercisable on December 31, 2000.
(2)      Mr. Rice served as President for the period from November 16, 1998
         through February 24, 2000.


AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES

<CAPTION>

                                                                                               Value of
                                                                     # of Securities      unexercised in-the-
                                                                       Underlying               money
                                    Common                           Options/SARs at         options/SARs at
                                    Shares                          Fiscal Year End        Fiscal Year End ($)
Name and                          Acquired on          Value          Exercisable/           Exercisable/
Principal Position                 Exercise          Realized        Unexerciseable        Unexercisable (1)
------------------                 --------          --------        --------------        -----------------
<S>                                      <C>               <C>       <C>                         <C>
Duane H. Lund
Chief Executive Officer                  --                --        40,000/40,000               $ 0/$ 0

Robert F. Rice
Secretary (2)                            --                --        47,917/40,000               $ 0/$ 0

</TABLE>

(1) Calculations are based upon the closing bid price of $2.50 per share as of
    December 31, 1999.
(2) Mr. Rice served as President for the period from November 16, 1998 through
    February 24, 2000.

EMPLOYMENT AGREEMENTS

On November 16, 1998, the Company entered into employment agreements (the
"Employment Agreements") with Duane H. Lund and Robert F. Rice. The Employment
Agreements provided for




                                       22
<PAGE>

an initial base salary of $150,000 and a discretionary performance bonus of up
to 200% of base salary. In addition, each Employment Agreement provided that the
officers shall receive those health, life and disability and other benefits
extended by the Board of Trustees to other similarly situated executives. Each
Employment Agreement had an evergreen term of three years. In the event of
termination of the respective officer's employment by the Company without cause
or in the event such person's employment discontinues following a change in
control of the Company, the Company or, in the case of a change in control, its
successor, would have been obligated to pay to such officer an amount equal to
three year's base salary and performance bonus and continue his benefits for
three years. These employment agreements were terminated September 30, 1999 as
discussed below.

Effective as of October 1, 1999, the Company entered into new employment
agreements with Duane H. Lund, the Chief Executive Officer and Robert F. Rice,
the President. The employment agreements each provide for an initial base salary
of $80,000 and, if the Company achieves progressive annual targets of earnings
per share, the Board of Trustees may elect to award Mr. Lund and Mr. Rice a
bonus of up to 100% of base salary. In addition, each employment agreement
provides that officers shall receive those health, life and disability and other
benefits extended by the Board of Trustees to other similarly situated
executives. Each of the employment agreements extends through December 31, 2000,
subject to the Company's right to terminate at any time. In the event that the
Company terminates either officer's employment without cause or in the event
such persons employment discontinues upon the expiration of the employment
agreement or following the change of control, the Company or, in the case of
change of control, our successor, will be obligated to pay to such officer an
amount equal to one year's base salary and continue to pay his benefits for one
year.

Further, in October 1999, the Company issued each of Mr. Lund and Mr. Rice
options to purchase 80,000 of the Company's Common Shares at $2.90, a price
equal to 110% of the average closing bid price for the Company's Common Shares
over the 10 trading days preceding the effective date of the registration
statement covering the Class A Preferred Shares. These options will become
exercisable as to 40,000 shares on December 31, 1999 and, if specified financial
goals are met, an additional 40,000 shares become exercisable on December 31,
2000.

COMMITTEES OF THE BOARD OF TRUSTEES

AUDIT COMMITTEE
The Audit Committee consisted of Messrs. Ogden and Salmen for the year ended
December 31, 1999 and held no meetings during 1999. As of the date of this
filing, the Audit Committee consists of Messrs. Lund, Salmen and Whiting. The
Committee reviews related party transactions, makes recommendations concerning
the engagement of independent public accountants, reviews the performance of
independent public accountants, considers the range of audit and non-audit fees
and reviews the adequacy of the Company's internal accounting controls.

COMPENSATION COMMITTEE
The Company's Compensation Committee, which held one meeting during 1999,
currently consists of Messrs. Leas, Hoyt and Lambert. The Compensation Committee
makes recommendations and exercises all powers of the Board of Directors in
connection with certain compensation matters, including incentive compensation
and benefit plans. The Compensation Committee administers, and has authority to
grant awards under, the Company's 1998 Stock Incentive Plan.


                                       23
<PAGE>

MEETINGS OF TRUSTEES
The Trustees held five meetings in 1999. Each of Messrs. Leas and Lambert
attended all five meetings. Mr. Ripp attended four and each of Messrs. Hoyt and
Ogden attended three of the meetings of the Board of Trustees. Each of Messrs.
Larcheid and Sobczak attended the four meetings of the Board of Trustees held
during his tenure as Trustee in 1999. Each of Messrs. Salmen and Whiting
attended the one meeting of the Board of Trustees held during his tenure as
Trustee in 1999.

COMPENSATION OF TRUSTEES
Trustees of the Company who are not employees of the Company receive a fee of
$250 for each Board or committee meeting attended, plus reimbursement of all
reasonable out-of-pocket expenses incurred in connection with such attendance.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Voting Shares as of the Record Date by:
(i) each person known by the Company to own more than 5% interest of the
outstanding Voting Shares; (ii) each of the Company's trustees; (iii) each of
the Company's executive officers included in the Summary Compensation Table
included elsewhere herein; and (iv) all of the Company's trustees and executive
officers as a group. Except otherwise noted, the person or entity named has sole
voting and investment power over the shares indicated.

<TABLE>
<CAPTION>

                                                            Shares
                                                         Beneficially
Name                                                        Owned (1)          Percent of Class (1)
----                                                        ---------          --------------------
<S>                                                          <C>                         <C>
Arnold K. Leas   (3)                                           530,316                    6.9%
Steven B. Hoyt (2) (4)                                       2,282,425                   29.9%
Paul T. Lambert (2) (5)                                      1,071,292                   14.0%
Duane H. Lund (2) (6)                                        1,486,665                   19.4%
American Real Estate Equities, LLC (7)                         964,803                   12.7%
Lambert Equities II, LLC (8)                                 1,071,292                   14.0%
WLPT Funding, LLC (9)                                        1,446,665                   19.0%
Wellington Management Corporation (10)                         483,459                    6.3%
Robert F. Rice (11)                                             52,948                       *
Odeh Muhawesh (2) (12)                                         914,286                   12.0%
Robert D. Salmen (2)                                                --                       *
Mark S. Whiting (2)                                                 --                       *
Ann K. Wessels (2)                                             914,286                   12.0%

All trustees and current executive officers as a
group (9 persons) (13)                                       4,408,326                   57.1%

</TABLE>

-------------------------------------
* Indicates less than one percent.


                                       24
<PAGE>

(1)           Based on 4,579,336 Common Shares, 784,027 Class A Preferred Shares
              and 95,000 Class B Preferred Shares outstanding as of March 1,
              2000. Also assumes exercise by only the shareholder or group named
              in each row of all options and warrants for the purchase of the
              Common Shares held by such shareholder or group and exercisable
              within 60 days of March 1, 2000. Excludes options as to 833,333
              Common Shares which are currently exercisable but not
              in-the-money.

(2)           The business address for each of the current trustees and
              executive officers is 2550 University West, Suite 240, St. Paul,
              Minnesota 55114.

(3)           Includes 990 Common Shares held by a trust for the benefit of Mr.
              Lea's wife and options to purchase 9,500 Common Shares exercisable
              within 60 days of March 1, 2000. Also includes 150,321 Common
              Shares and an additional 327,560 Common Shares issuable upon
              conversion of 95,000 Class B Junior Cumulative Convertible
              Preferred Shares held by Wellington Management Corporation, of
              which Mr. Leas is the president and chief executive officer and
              with respect to which Mr. Leas, members of his immediate family
              and trusts for the benefits of such persons own approximately
              41.8% of the outstanding capital stock. Mr. Leas disclaims
              ownership of Common Shares held for the benefit of his wife. The
              business address for Mr. Leas is 18650 W. Corporate Drive, Suite
              300, PO Box 0919, Brookfield, WI 53008-0919.

(4)           Excludes 181,629 common units of the operating partnership held by
              Mr. Hoyt or members of his immediate family. Includes 482,720
              Common Shares issuable upon conversion of 140,000 Class A
              Preferred Shares, 964,803 Common Shares held by American Real
              Estate Equities, LLC, of which Mr. Hoyt is a member and 65,745
              Common Shares held by members of his immediate family. Mr. Hoyt
              disclaims ownership of Common Shares held by members of his
              immediate family.

(5)           Includes 106,486 Common Shares held by Lambert Equities II, LLC,
              of which Mr. Lambert is the controlling majority member and sole
              manager and 964,803 Common Shares held by American Real Estate
              Equities, LLC, of which Lambert Equities II, LLC is a member.

(6)           Includes 481,862 Common Shares held by WLPT Funding, LLC, of which
              Mr. Lund is the owner and sole manager, 964,803 Common Shares held
              by American Real Estate Equities, LLC, of which WLPT Funding, LLC
              is a member and options to purchase 40,000 Common Shares
              exercisable within 60 days of March 1, 2000. Excludes options as
              to 333,333 Common Shares which are currently exercisable but not
              in-the-money.

(7)           The business address for American Real Estate Equities, LLC is 300
              First Avenue North, Suite 115, Minneapolis, MN 55401.

(8)           Includes 964,803 Common Shares held by American Real Estate
              Equities, LLC, of which Lambert Equities II, LLC is a member. The
              business address for Lambert Equities II, LLC is 4155 East Jewel,
              Suite 103, Denver, Colorado 80222.

(9)           Includes 964,803 Common Shares held by American Real Estate
              Equities, LLC, of which WLPT Funding, LLC is a member. The
              business address for WLPT Funding, LLC is c/o Golden Acres
              Incorporated, 15315 Masons Pointe, Eden Prairie, Minnesota 55347.

(10)          Includes 327,560 Common Shares issuable upon conversion of 95,000
              Class B Cumulative Convertible Preferred Shares. The business
              address for Wellington Management Corporation is 18650 W.
              Corporate Drive, Suite 300, PO Box 0919, Brookfield, WI
              53008-0919.

(11)          Includes 3,448 Common Shares issuable upon conversion of 1,000
              Class A Preferred Shares and options to purchase 47,197 Common
              Shares exercisable within 60 days of March 1, 2000. The



                                       25
<PAGE>

              business address for Mr. Rice is 18650 W. Corporate Drive, Suite
              300, PO Box 0919, Brookfield, WI 53008-0919

(12)          Excludes options as to 500,000 Common Shares which are currently
              exercisable but not in-the-money.

(13)          Includes options to purchase an aggregate of 96,697 Common Shares
              exercisable within 60 days of March 1, 2000, 486,168 common shares
              issuable upon conversion of 141,000 Class A Preferred Shares and
              327,560 Common Shares issuable upon conversion of 95,000 Class B
              Junior Cumulative Convertible Preferred Shares. Figures do not
              reflect an aggregate of 243,527 common units of the Company's
              operating partnership and options as to 833,333 Common Shares
              which are currently exercisable but not in-the-money.

ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

1998 CONTRIBUTION AGREEMENT

In connection with the Company's execution of its Contribution Agreement between
the Operating Partnership and AREE, on November 16, 1998, the Company issued
166,666 Common Shares to AREE in exchange for $1,000,000 cash.

Additionally, on November 16, 1998, the Company issued warrants to acquire up to
791,667 Common Shares to each of AREE and Wellington Management Corporation
("WMC"). The warrants were to become exercisable one year after the date of
issuance and would be exercisable for a nine-year period thereafter, at an
exercise price of $5.37 per Common Share with respect to 395,833 warrants held
by each of AREE and WMC, $6.47 per Common Share with respect to 197,917 warrants
held by each of AREE and WMC, $7.74 per Common Share with respect to 118,750
warrants held by each of AREE and WMC and $9.32 per Common Share with respect to
79,167 warrants held by each of AREE and WMC. Effective June 30, 1999, all such
warrants were returned to the Company and canceled.

Further, on November 20, 1998, the Company through the Operating Partnership,
acquired two office properties and one light industrial property in the
Minneapolis, Minnesota metropolitan area. The combined purchase price of such
properties totaled approximately $31.1 million, including closing costs. Such
purchase price was funded through the issuance of an aggregate of 2,557,707
limited partnership units ("Units") in the Operating Partnership (valued at
$5.37 per Unit, or an aggregate value of approximately $13.7 million) and the
assumption of certain third-party indebtedness of approximately $17.1 million
secured by such properties. The Units are exchangeable, under certain
circumstances, on a one-for-one basis for common shares, $0.01 par value per
share from and after the one-year anniversary of the date of issuance. As a
result of this transaction, the Company appointed Duane H. Lund as its Chief
Executive Officer and further expanded its Board of Trustees with the election
of Steven B. Hoyt and Paul T. Lambert. An aggregate of 2,410,976 of the Units
issued were to Messrs. Hoyt, Lambert and Lund, directly and indirectly, through
their ownership in the entity of AREE and related owners thereof. Effective June
30, 1999, 838,372 of the Units were returned to the Company and canceled.


                                       26
<PAGE>

MANAGEMENT FEES

The Company has entered into property management agreements with WMC Realty,
Inc. ("WRI"), a wholly-owned subsidiary of WMC, an affiliate of the Company in
which the Company's Chairman of the Board of Trustees is President and Chief
Executive Officer, and Hoyt Properties, Inc. ("Hoyt"), an entity controlled by a
Trustee of the Company to serve as property managers of properties owned by the
Company. The property managers manage the day to day operations of the
properties and receive a management fee for this service. Management fees
consisted of $195,523 to Hoyt and $138,464 to WRI for the year ended December
31, 1999 and $31,503 to Hoyt and $149,386 to WRI for the year ended December 31,
1998.

INCENTIVE ADVISORY AGREEMENT AND TERMINATION FEE

On August 2, 1994, the Company contracted to retain WMC to serve as advisor to
the Company. In payment for these services, the advisor received a fee equal to
5% of the gross proceeds of the public share offering of Common Shares, which
terminated on October 1995. In addition, the advisor was entitled to receive an
incentive advisory fee equal to 10% of the realized gain with respect to each
sale or refinancing of property owned by the Company. In the event a property
was sold at a loss, no incentive advisory fee was earned until the amount of the
loss had been offset by gains from other sales. In addition, the advisor was
entitled to recover certain expenses including travel, legal, accounting and
insurance. Fees for services, such as legal and accounting, provided by the
advisor's employees, in the opinion of the advisor, may not have exceeded fees
that would have been charged by independent third parties. During 1998, no
incentive advisory fees were paid in connection with this agreement and expenses
related to this agreement totaled $149,178. As discussed below, this agreement
was terminated on November 20, 1998.

The initial term of the incentive advisory agreement ended on December 31, 1995
and had been renewed automatically each year. In connection with the purchase of
properties by the Operating Partnership, the Company terminated the incentive
advisory agreement with WMC on November 20, 1998. The termination fee, payable
to WMC, was to be determined by taking 1% of the first $150,000,000 of the
aggregate gross purchase price for properties acquired by the Operating
Partnership plus 0.25% of the aggregate gross purchase price for properties
acquired in excess of $150,000,000. Fees paid to terminate the incentive
advisory agreement with WMC amounted to $950,000 and $310,000 for the years
ended December 31, 1999 and 1998, respectively. As discussed below, the 1999 fee
was made by the issuance of 95,000 Class B Preferred Shares.

ABANDONED PROJECT PURSUIT COSTS AND REIMBURSEMENT OF CERTAIN EXPENSES TO RELATED
PARTIES

During 1998 and through June 30, 1999, the Operating Partnership was in
negotiations with AREE regarding the reimbursement by the Operating Partnership
to AREE of certain costs and expenses incurred by AREE related to the potential
acquisition of properties and certain administrative expenses. As a result of
the negotiations, the Company, through the Operating Partnership agreed to



                                       27
<PAGE>

reimburse AREE for certain costs as further discussed below.

In connection with the negotiations during 1998 by the Company with respect to
the contribution agreement between AREE and the Operating Partnership, a
$240,000 advance was paid to WMC by AREE for the benefit of the Operating
Partnership. At December 31, 1998, this amount was reflected as an advance to
related party, with a related liability recorded due to AREE. Under the terms of
the contribution agreement, the advance was to be repaid to AREE in the event
certain transactions closed before December 31, 1998. Due to the uncertainty of
the collectibility of this advance, the entire amount was reserved as
uncollectible as of December 31, 1998 and in connection with the agreement
discussed below, was written off as of June 30, 1999.

In the second quarter of 1999, due principally to the fact that the Operating
Partnership acquired only three properties since November 1998, the Company
entered into discussions with AREE and WMC. As a result of these discussions,
the following occurred during 1999:

    o    Recipients of 838,372 Units, received in the November 1998
         acquisitions, returned such Units to the Company for cancellation.

    o    AREE returned the warrant covering 791,667 Common Shares to the
         Company. Further, the Company issued 254,800 Class B Preferred Shares
         to AREE as consideration for payment of advances to the Company for
         working capital purposes, costs incurred in connection with the
         Company's 1998 commercial acquisitions and payments for abandoned
         project pursuit costs.

    o    As consideration for the termination of the advisory agreement between
         the Company and WMC, WMC returned the warrant covering 791,667 Common
         Shares to the Company, the Company issued 95,000 Class B Preferred
         Shares to WMC and WMC retained cash payments of $550,000 received
         during 1998.

LISTING AGREEMENTS

In January 1998, the Company entered into two listing agreements with WRI. The
agreements provided that WRI would receive a fee equal to 3% of the sales price
in the event of a sale of either of the Company's then held residential
properties, Maple Grove or Lake Pointe. In connection with the sale of Maple
Grove Apartments on November 16, 1999, WRI received a fee totaling $501,000 and
the agreement in regard to Maple Grove was terminated.

RENTAL INCOME

During 1999, the Company recognized revenue of $23,010 on office space leased to
Hoyt.

INSURANCE

From time to time, the Company has purchased insurance through another affiliate
of WMC, Wellington Insurance Services, Inc., which received a commission of
those sales equal to 15% of scheduled premiums. These commissions totaled
$10,000 and $8,660 for the years ended December 31, 1999 and 1998, respectively.


                                       28
<PAGE>

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit Description
  2.1          Amended and Restated Contribution Agreement between the
                  Company, the Operating Partnership, AREE and other limited
                  partnership Unit recipients dated as of August 31, 1998 (filed
                  as Exhibit A with the Company's Schedule 14A on November 6,
                  1998 and incorporated herein by reference)

  2.2          Agreement and Plan of Reorganization dated as of February 25,
                  2000,by and among the Company, NTLI Acquisition Corporation, a
                  Delaware corporation, Netlink International, Inc., a Minnesota
                  corporation and Odeh A. Muhawesh, Mary Henschel, Alan Schmidt,
                  Ahmad Yassine, Patrick Archbold, Ann Wessels, Art Carruth,
                  Patricia Hewitt, Thomas walker and Sherry Ajax (filed as
                  Exhibit 2.2 with the Company's Form 8-K on March 17, 2000 and
                  incorporated herein by reference)

  2.3          Contribution Agreement between Wellington Partners, L.P., the
                  Company and Plymouth Partners II, LLC and other LP Unit
                  Recipients dated as of February 29, 2000 (filed as Exhibit 2.3
                  with the Company's Form 8-K on March 17, 2000 and incorporated
                  herein by reference)

  3.1          Declaration of Trust (filed with the Company's Registration
                  Statement on Form SB-2 (Commission File No. 33-82888C) and
                  incorporated herein by reference)

  3.2          Bylaws of the Company (filed with the Company's Registration
                  Statement on Form SB-2 (Commission file No. 33-82888C) and
                  incorporated herein by reference)

  3.3          Articles of Amendment and Restatement of the Declaration of
                  Trust (filed as Exhibit E with the Company's Schedule 14A on
                  November 6, 1998 and incorporated herein by reference)

  10.1         Agreement of Limited Partnership of the Operating Partnership
                  dated as of August 31, 1998 (filed as Exhibit C with the
                  Company's Schedule 14A on November 6, 1998 and incorporated
                  herein by reference)

  10.2         Contribution Agreement between the Operating Partnership and
                  WMC dated as of August 31, 1998 (filed as Exhibit B with the
                  Company's Schedule 14A on November 6, 1998 and incorporated
                  herein by reference)

  10.3         Master Registration Rights Agreement dated as of August 31,
                  1998 (filed as Exhibit E of Exhibit C with the Company's
                  Schedule 14A on November 6, 1998 and incorporated herein by
                  reference)


                                       29
<PAGE>

  10.8         Promissory Note for $2,750,000 by Lake Pointe Apartment Homes,
                  Inc. to Credit Suisse First Boston Mortgage Capital, LLC dated
                  March 5, 1998 (filed with the Company's Current Report on Form
                  8-K on August 31, 1998 and incorporated herein by reference)

  10.9         Mortgage, Assignment of Leases and Rents and Security
                  Agreement by and between Lake Pointe Apartment Homes, Inc. to
                  Credit Suisse First Boston Mortgage Capital, LLC dated March
                  5, 1998 (filed with the Company's Current Report on Form 8-K
                  on August 31, 1998 and incorporated herein by reference)

  10.10        Common Stock Purchase Warrant by the Company to Credit Suisse
                  First Boston Mortgage Capital LLC, dated March 5, 1998 (filed
                  with the Company's Current Report on Form 8-K on August 31,
                  1998 and incorporated herein by reference)

  10.11        Registration Rights Agreement by and between the Company and
                  Credit Suisse First Boston Mortgage Capital, LLC dated March
                  5, 1998 (filed with the Company's Current Report on Form 8-K
                  on August 31, 1998 and incorporated herein by reference)

  10.12        Purchase Agreement by and between Maple Grove Apartment Homes,
                  Inc. and The Shelard Group, Inc., dated July 2, 1999 (filed
                  with the Company's Current Report on Form 8-K on November 23,
                  1999 and incorporated herein by reference)

  27.1         Financial Data Schedule


Shareholders may obtain a copy of any exhibit listed in Item 13(a) by writing to
Robert F. Rice, Secretary of the Company. Reasonable expenses will be charged
for copies and postage.

(b) Reports on Form 8-K

During the fourth quarter ended December 31, 1999 and through March 28, 2000,
the Company filed the following Current Reports on Form 8-K:

Item 2 in connection with the disposition of the Company's 304-unit apartment
community in Madison, Wisconsin filed November 23, 1999.

Item 4 in connection with the Company's change of independent public accountant
from Grant Thornton LLP to PricewaterhouseCoopers LLP filed January 14, 2000.

Item 2 in connection with the acquisitions of NETLink International, Inc. and
three commercial real estate properties located in suburban Minneapolis,
Minnesota filed March 17, 2000.


                                       30
<PAGE>

                                   SIGNATURES


BY:  /s/ ROBERT F. RICE
     ROBERT F. RICE, SECRETARY                    Dated:  March 28, 2000

KNOW ALL PERSON BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Duane H. Lund and Robert F. Rice, jointly and
severally, his attorneys-in-fact, each with the power of substitution, for him
in any and all capacities, to sign any amendments to this Report on Form 10-KSB
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorney-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.

In accordance with Section 13 or 15(d) of the Securities Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

<TABLE>
<CAPTION>

                             STONEHAVEN REALTY TRUST

             Signature                             Title                                  Date

<S>                                   <C>                                            <C>
/s/ Duane H. Lund                     Trustee and Chief Executive Officer            March 28, 2000
Duane H. Lund                         (Principal Executive Officer)

/s/ Ann K. Wessels                    Chief Financial Officer                        March 28, 2000
Ann K. Wessels                        (Principal Accounting Officer)

/s/ Arnold K. Leas                    Chairman of the Board                          March 28, 2000
Arnold K. Leas

/s/ Steven B. Hoyt                    Trustee                                        March 28, 2000
Steven B. Hoyt

/s/ Paul T. Lambert                   Trustee                                        March 28, 2000
Paul T. Lambert

/s/ Robert F. Rice                    Trustee and Secretary                          March 28, 2000
Robert F. Rice

/s/ Robert D. Salmen                  Trustee                                        March 28, 2000
Robert D. Salmen

/s/ Mark S. Whiting                   Trustee                                        March 28, 2000
Mark S. Whiting

</TABLE>


                                       31
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY

<TABLE>
<CAPTION>

                                                                            Page

<S>                                                                          <C>
Report of Independent Accountants                                            F-2

Report of Independent Certified Public Accountants                           F-3

Consolidated Balance Sheet at December 31, 1999                              F-4

Consolidated Statements of Operations for the Years Ended December
31, 1999 and December 31, 1998                                               F-5

Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1999 and December 31, 1998                                      F-6

Consolidated Statements of Cash Flows for the Years Ended December
31, 1999 and December 31, 1998                                               F-8

Notes to Consolidated Financial Statements                                   F-10

</TABLE>


<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Trustees and Shareholders of
Stonehaven Realty Trust and Subsidiaries:

In our opinion, the accompanying consolidated balance sheet and related
consolidated statements of operations, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Stonehaven
Realty Trust and Subsidiaries at December 31, 1999, and the results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above. The financial statements of the Company for the
year ended December 31, 1998 were audited by other independent accountants whose
report dated April 9, 1999, expressed an unqualified opinion on those
statements.

PricewaterhouseCoopers LLP
Chicago, IL
March 21, 2000


                                      F-2
<PAGE>


REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Trustees and Shareholders of
Stonehaven Realty Trust (f.k.a.Wellington Properties Trust) and Subsidiaries

We have audited the accompanying consolidated statements of operations,
shareholders' equity and cash flows of Stonehaven Realty Trust and Subsidiaries
for the year ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statements of operations, shareholders' equity and
cash flows are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the statements of
operations, shareholders' equity and cash flows. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the results of
operations and cash flows. We believe that our audit of the statements of
operations, shareholders' equity and cash flows provides a reasonable basis for
our opinion.

In our opinion, the statements of operations, shareholders' equity and cash
flows referred to above present fairly, in all material respects, the
consolidated results of operations and consolidated cash flows of Stonehaven
Realty Trust for the year ended December 31, 1998, in conformity with generally
accepted accounting principles.




/s/ Grant Thornton LLP
Fond du Lac, Wisconsin
April 9, 1999


                                      F-3
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 1999

<TABLE>

<S>                                                                                  <C>
ASSETS
Investments in real estate:
   Land and land improvements                                                        $    6,574,723
   Buildings and improvements                                                            28,100,909
   Appliances and equipment                                                                 125,418
--------------------------------------------------------------------------------- ------------------------
                                                                                         34,801,050
   Accumulated depreciation                                                              (1,013,588)
--------------------------------------------------------------------------------- ------------------------
                                                                                         33,787,462

Cash  and cash equivalents                                                                2,892,724
Marketable securities                                                                     5,187,855
Restricted cash                                                                             680,821
Accounts receivable, trade and other                                                          3,413
Investment in unconsolidated subsidiary                                                     100,269
Deferred rent receivable                                                                     55,662
Deferred financing costs, net                                                               327,018
Prepaid and other assets                                                                     51,242
--------------------------------------------------------------------------------- ------------------------
TOTAL ASSETS                                                                         $   43,086,466
--------------------------------------------------------------------------------- ------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage loans and notes payable                                                     $   19,290,947
Accounts payable and accrued expenses                                                       477,508
Related party payable                                                                         9,297
Rents received in advance and security deposits                                              71,853
Dividends/distributions payable                                                             861,828
--------------------------------------------------------------------------------- ------------------------
Total liabilities                                                                        20,711,433

--------------------------------------------------------------------------------- ------------------------
Commitments and contingencies
--------------------------------------------------------------------------------- ------------------------
Minority interest in consolidated subsidiary                                              7,835,561
--------------------------------------------------------------------------------- ------------------------

Shareholders' equity:
Preferred Shares - $0.01 par value, 10,000,000 authorized:
   784,037 Class A cumulative convertible shares issued and outstanding,
   $10.00/share liquidation preference;                                                       7,840
    349,800 Class B junior cumulative convertible shares issued and
   outstanding, $10.00/share liquidation preference                                           3,498
Common Shares - $0.01 par value, 100,000,000 authorized;
     1,388,080 shares issued and outstanding                                                 13,881
Additional paid-in capital                                                               20,764,877
Accumulated deficit                                                                      (6,250,624)
--------------------------------------------------------------------------------- ------------------------
Total shareholders' equity                                                               14,539,472
--------------------------------------------------------------------------------- ------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                           $   43,086,466
================================================================================= ========================

</TABLE>

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


                                      F-4
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                           For the year ended December 31,
                                                                ---------------------------------------------------
                                                                         1999                      1998
                                                                ----------------------- ---------------------------
<S>                                                              <C>                     <C>
REVENUES
   Rental revenue                                                $        5,260,268      $         3,312,866
   Tenant recoveries                                                      1,530,277                  175,615
   Other                                                                    106,012                   20,955
--------------------------------------------------------------- ----------------------- ---------------------------
     Total revenues                                                       6,896,557                3,509,436
--------------------------------------------------------------- ----------------------- ---------------------------
EXPENSES
   Property, operating and maintenance                                    1,508,873                  773,745
   Advertising and promotion                                                 51,915                   66,968
   Property taxes and insurance                                           1,157,772                  568,905
   Depreciation and amortization                                          1,210,404                  694,366
   Interest                                                               2,556,624                1,417,194
   General and administrative                                               801,032                  253,098
   Management fees                                                          333,987                  180,889
   Abandoned project pursuit costs                                        2,613,383                1,010,154
   Provision for uncollectible advance - related party                           --                  240,000
   Incentive advisory agreement termination fee                             950,000                  310,000
--------------------------------------------------------------- ----------------------- ---------------------------
     Total expenses                                                      11,183,990                5,515,319
--------------------------------------------------------------- ----------------------- ---------------------------
Loss from operations before equity in income of
  unconsolidated subsidiary and loss allocated to minority
  interest                                                               (4,287,433)              (2,005,883)
Equity in income of unconsolidated subsidiary                                10,269                       --
Loss allocated to minority interest                                       2,721,695                1,064,501
--------------------------------------------------------------- ----------------------- ---------------------------
Loss from operations                                                     (1,555,469)                (941,382)
Gain on sale of investment in real estate                                   686,716                       --
--------------------------------------------------------------- ----------------------- ---------------------------

Loss before extraordinary loss and cumulative effect of
  change in accounting principle                                           (868,753)                (941,382)
Extraordinary loss                                                         (482,272)                      --
Cumulative effect of change in accounting principle                         (35,565)                      --
--------------------------------------------------------------- ----------------------- ---------------------------
Net Loss                                                                 (1,386,590)                (941,382)
Preferred Share Dividends                                                        --                       --
--------------------------------------------------------------- ----------------------- ---------------------------

Net loss available to Common Shareholders                        $       (1,386,590)     $          (941,382)
--------------------------------------------------------------- ----------------------- ---------------------------

Net loss available to Common Shareholders before
  extraordinary loss and cumulative effect of change in
  accounting principle per Common Share:  Basic and Diluted      $            (0.64)     $             (0.80)
--------------------------------------------------------------- ----------------------- ---------------------------
Net loss available to Common Shareholders per Common Share:
  Basic and Diluted                                              $            (1.02)     $             (0.80)
--------------------------------------------------------------- ----------------------- ---------------------------

</TABLE>

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


                                      F-5
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>

                                        Class A          Class B                        Common
                                       Preferred        Preferred        Common          Share
                                        Shares           Shares          Shares        Warrants
                                    ---------------- ---------------- ------------- ----------------
<S>                                   <C>              <C>              <C>         <C>
Balance at December 31, 1997          $        --      $        --      $   7,148   $          --

Cash dividends declared                        --               --             --              --

Common Shares issued in
   connection with dividend
   reinvestments                               --               --            257              --

Issuance of common shares                      --               --          1,053              --

Issuance of warrants                           --               --             --       1,510,000

Cost of 66 shares of common
   shares acquired for treasury                --               --             --              --

Retirement of 4,816 shares of
   common shares in treasury                   --               --             --              --

Reclassification due to effect of
   common share split                          --               --          4,934              --

Net loss                                       --               --             --              --
----------------------------------- ---------------- ---------------- ------------- ----------------

Balance at December 31, 1998          $        --      $        --      $  13,392   $   1,510,000
----------------------------------- ---------------- ---------------- ------------- ----------------

<CAPTION>

                                       Additional                         Cost of
                                        Paid-in         Accumulated    Shares held in
                                        Capital           Deficit         Treasury            Total
                                    ----------------- ----------------- --------------- ------------------
<S>                                 <C>               <C>               <C>             <C>
Balance at December 31, 1997        $     6,286,053   $    (2,787,991)  $     (27,764)  $      3,477,446

Cash dividends declared                          --          (533,644)             --           (533,644)

Common Shares issued in
   connection with dividend
   reinvestments                            245,453                --              --            245,710

Issuance of common shares                   998,947                --              --          1,000,000

Issuance of warrants                             --                --              --          1,510,000

Cost of 66 shares of common
   shares acquired for treasury                  --                --            (329)              (329)

Retirement of 4,816 shares of
   common shares in treasury                (28,093)               --          28,093                 --

Reclassification due to effect of
   common share split                        (4,934)               --              --                 --

Net loss                                         --          (941,382)             --           (941,382)
----------------------------------- ----------------- ----------------- --------------- ------------------

Balance at December 31, 1998        $     7,497,426   $    (4,263,017)  $          --   $      4,757,801
----------------------------------- ----------------- ----------------- --------------- ------------------

</TABLE>


                                      F-6
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
                                   (CONTINUED)

<TABLE>
<CAPTION>

                                        Class A          Class B                         Common
                                       Preferred        Preferred                         Share
                                         Shares          Shares       Common Shares     Warrants
------------------------------------ --------------- ---------------- -------------- ----------------
<S>                                    <C>             <C>              <C>          <C>
Balance at December 31, 1998           $       --      $       --       $  13,392    $   1,510,000

Cash dividends declared                        --              --              --               --

Common Shares issued in connection
   with dividend reinvestments                 --              --             455               --

Issuance of preferred shares                7,850           3,498              --               --

Retirement of warrants                         --              --              --       (1,510,000)

Conversion of preferred shares to
   common shares                              (10)             --              34               --

Adjustments to minority interest
   resulting from changes in
   ownership of the Operating
   Partnership by the Company                  --              --              --               --

Net loss                                       --              --              --               --
------------------------------------ --------------- ---------------- -------------- ----------------

Balance at December 31, 1999           $    7,840      $    3,498       $  13,881    $          --
------------------------------------ --------------- ---------------- -------------- ----------------

<CAPTION>

                                        Additional                           Cost of
                                          Paid-in         Accumulated      Shares held
                                          Capital           Deficit        in Treasury        Total
------------------------------------ ------------------ ----------------- -------------- -----------------
<S>                                  <C>                <C>               <C>            <C>
Balance at December 31, 1998         $      7,497,426   $     (4,263,017) $        --    $      4,757,801

Cash dividends declared                           --            (601,017)          --            (601,017)

Common Shares issued in connection
   with dividend reinvestments               200,629                  --           --             201,084

Issuance of preferred shares              10,247,955                  --           --          10,259,303

Retirement of warrants                     1,510,000                  --           --                  --

Conversion of preferred shares to
   common shares                                 (24)                 --           --                  --

Adjustments to minority interest
   resulting from changes in
   ownership of the Operating
   Partnership by the Company              1,308,891                  --           --           1,308,891

Net loss                                          --          (1,386,590)          --          (1,386,590)
------------------------------------ ------------------ ----------------- -------------- -----------------

Balance at December 31, 1999         $    20,764,877    $     (6,250,624) $        --    $     14,539,472
------------------------------------ ------------------ ----------------- -------------- -----------------

</TABLE>


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


                                      F-7
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                             FOR THE YEAR ENDED DECEMBER 31,
                                                                       ----------------------------------------
                                                                               1999                 1998
                                                                       ------------------- --------------------
<S>                                                                      <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                              $  (1,386,590)      $     (941,382)
   Adjustments to reconcile net loss to net cash
     used in operating activities:
     Loss allocated to minority interest                                    (2,721,695)          (1,064,501)
     Depreciation and amortization                                           1,210,404              694,366
     Amortization of discount on marketable securities                         (34,351)                  --
     Gain on sale of investment in real estate                                (686,716)                  --
     Extraordinary loss                                                        482,272                   --
     Cumulative effect of change in accounting principle                        35,565                   --
     Incentive advisory agreement termination fee paid through
       issuance of Class B Preferred Shares                                    950,000                   --
     Abandoned project pursuit costs paid through issuance of Class
       B Preferred Shares                                                    2,548,000                   --
     Equity in income of unconsolidated subsidiary                             (10,269)                  --
     Deferred rent receivable                                                  (55,662)                  --
    Net change in assets and liabilities:
      Accounts receivable, trade and other                                      12,448                4,084
      Restricted cash                                                          (45,368)            (192,081)
      Prepaid and other assets                                                  72,808              (75,268)
     Accounts payable and accrued liabilities                                 (938,325)             378,051
     Related party payable                                                       9,061                   --
     Rents received in advance                                                 (63,968)             (25,624)
     Tenant security deposits                                                   (5,071)              34,913
---------------------------------------------------------------------- ------------------- --------------------
         Net cash used in operating activities                                (627,457)          (1,187,442)
---------------------------------------------------------------------- ------------------- --------------------


CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from sale of real estate property                                3,138,476                   --
   Acquisitions of and additions to real estate properties                    (119,021)            (563,413)
   Purchase of marketable securities                                        (5,153,504)                  --
   Investment in unconsolidated subsidiary                                     (90,000)                  --
   Deferred costs                                                              (24,200)             (98,437)
---------------------------------------------------------------------- ------------------- --------------------
         Net cash used in investing activities                              (2,248,249)            (661,850)
---------------------------------------------------------------------- ------------------- --------------------

</TABLE>


                                      F-8
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (CONTINUED)

<TABLE>
<CAPTION>

                                                                             FOR THE YEAR ENDED DECEMBER 31,
                                                                       ----------------------------------------
                                                                               1999                 1998
                                                                       ------------------- --------------------
<S>                                                                      <C>                 <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from mortgage loans payable and note payable loan fees                   --            2,750,000
   Proceeds from related party payable                                               --            1,744,423
   Repayments of mortgage loans payable and mortgage note                      (584,459)          (1,978,038)
   Repayments on line of credit                                                (200,000)            (600,000)
   Payment of financing costs                                                        --             (766,550)
   Gross proceeds from issuance of Preferred Shares                           7,850,370                   --
   Gross proceeds from issuance of Common Shares                                 15,411            1,245,710
   Costs associated with issuance of Preferred Shares                        (1,089,067)                  --
   Dividends/distributions paid                                                (377,726)            (505,968)
   Purchase of treasury shares                                                       --                 (329)
---------------------------------------------------------------------- ------------------- --------------------
         Net cash provided by financing activities                            5,614,529            1,889,248
---------------------------------------------------------------------- ------------------- --------------------


Net increase in cash and cash equivalents                                     2,738,823               39,956

Cash and cash equivalents
   Beginning of year                                                            153,901              113,945
---------------------------------------------------------------------- ------------------- --------------------
   End of year                                                           $    2,892,724       $      153,901
---------------------------------------------------------------------- ------------------- --------------------

</TABLE>

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


                                      F-9
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.       ORGANIZATION

Stonehaven Realty Trust (formerly, Wellington Properties Trust ) ( the
"Company") was organized under the laws of the state of Maryland on March 15,
1994 to acquire, develop, own and operate investment real estate. The Company is
a real estate investment trust ("REIT") as defined in the Internal Revenue Code
of 1986, as amended (the "Code"). At December 31, 1999, the Company owned one
residential property comprised of 72 apartment units and three commercial
properties that contain a total of 247,546 commercial rentable square feet
(unaudited). The Company's interest in the residential property is held through
Lake Pointe Apartment Homes, Inc., a wholly owned subsidiary of the Company. The
Company's interest in the commercial properties is held through Wellington
Properties Investments, LP (the "Operating Partnership"), a Delaware limited
partnership formed in 1998. The Company is the sole general partner of, and as
of December 31, 1999, owns approximately a 9.00% interest in the Operating
Partnership. The Company also holds an 8.00% interest in Highlander Acquisition
Company, LLC ("Highlander") which owns a 154 unit residential property.

2.       BASIS OF PRESENTATION

The Company is the sole general partner of the Operating Partnership, with an
approximate 9.00% interest at December 31, 1999. Minority interest at December
31, 1999 represents approximately a 91.00% aggregate partnership interest in the
Operating Partnership held by the limited partners thereof.

The consolidated financial statements of the Company at December 31, 1999 and
for the years ended December 31, 1999 and 1998 include the accounts and
operating results of the Company, its subsidiaries and the Operating Partnership
as the Company's general partnership interest provides for control over all
significant Operating Partnership activities. The 1999 financial statements
include the Company's 8.00% equity interest in Highlander under the equity
method of accounting. All significant intercompany transactions have been
eliminated in consolidation.

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 the Company's 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 December
31, 1999, and the reported amounts of revenues and expenses for the years ended
December 31, 1999 and 1998. Actual results could differ from those estimates.


                                      F-10
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

INVESTMENTS IN REAL ESTATE AND DEPRECIATION

Real estate assets are carried at cost. The Company periodically reviews its
properties for impairment and provides for a provision if impairments are
determined. First, to determine if impairment may exist, the Company reviews its
properties and identifies those, if any, which have had either an event of
change or event of circumstances warranting further assessment of
recoverability. Then, the Company estimates 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. The Company has not
recognized impairment losses on real estate assets to date.

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

<TABLE>
<CAPTION>

                                                                           YEARS
                                                                    ---------------------
<S>                                                                          <C>
                       Buildings and Improvements                            40
                       Land Improvements                                     20
                       Appliances and Equipment                              7

</TABLE>

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

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

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include all cash and liquid investments purchased with
an initial maturity date of three months or less. The carrying amount
approximates fair value due to short maturity of these investments.

MARKETABLE SECURITIES

Marketable securities are classified as held to maturity. The Company's
amortized cost approximates market value at December 31, 1999.

INVESTMENT IN UNCONSOLIDATED SUBSIDIARY

The Company accounts for the investment in Highlander under the equity method.
The investment is recorded initially at the Company's cost and subsequently
adjusted for the Company's net equity in income or loss and cash contributions
and distributions.


                                      F-11
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


DEFERRED FINANCING COSTS

Costs incurred to obtain and secure mortgage debt financing are amortized over
the life of the respective loan. Accumulated amortization of deferred financing
is $37,924 at December 31, 1999.

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
tenants' share of real estate taxes and certain common area maintenance costs.
Such costs are recognized as revenue in the period the costs are incurred.

INCOME TAXES

The Company has elected to be taxed as a REIT under Sections 856 through 860 of
the Code. As a result, the Company generally is not subject to federal income
taxation at the corporate level to the extent it distributes annually at least
95% of its REIT taxable income, as defined in the Code, to its shareholders and
satisfies certain other requirements. Accordingly, no provision has been made
for federal income taxes in the accompanying consolidated financial statements.
The Company and certain of its subsidiaries are 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.

For federal income tax purposes, all cash distributions paid to shareholders for
1999 and 1998 were characterized as return of capital.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments include cash and cash equivalents,
marketable securities, accounts receivable, trade and other, accounts payable
and accrued liabilities and mortgage loans payable. The fair value of these
financial instruments was not materially different from their carrying or
contract values.

SEGMENT REPORTING

In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosure about Segments of an Enterprise and Related Information". This
statement requires that a public business enterprise 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.


                                      F-12
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


RECLASSIFICATION

Certain 1998 amounts have been reclassified to conform to the 1999 presentation.

RECENT ACCOUNTING PRONOUNCEMENTS

 In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities" ("SOP 98-5"). SOP 98-5 requires
that the net unamortized balance of all start up costs and organizational costs
be written off as a cumulative effect of a change in accounting principle and
all future start-up costs and organizational costs should be expensed. In the
first quarter of 1999, the Company reported cumulative effect of a change in
accounting principle in the amount of $35,565 to reflect the write-off of the
unamortized balance of organizational costs on the Company's balance sheet.

4.       ACQUISITIONS AND DISPOSITION OF INVESTMENTS IN REAL ESTATE

INVESTMENT IN UNCONSOLIDATED SUBSIDIARY

On March 4, 1999, the Company acquired an 8.00% limited liability company
interest in Highlander at a cost of $90,000 funded in cash.

ACQUISITION OF INVESTMENTS IN REAL ESTATE

On November 20, 1998, the Company through the Operating Partnership, acquired
two office properties and one light industrial property in the Minneapolis,
Minnesota metropolitan area. The combined purchase price of such properties
totaled approximately $31.1 million, including closing costs. Such purchase
price was funded through the issuance of an aggregate of 2,557,707 limited
partnership units ("Units") in the Operating Partnership (valued at $5.37 per
Unit, or an aggregate value of approximately $13.7 million) and the assumption
of certain third-party indebtedness of approximately $17.1 million secured by
such properties. The Units are exchangeable, under certain circumstances, on a
one-for-one basis for common shares, $0.01 par value per share from and after
the one-year anniversary of the date of issuance. As a result of this
transaction, the Company appointed Duane H. Lund as its Chief Executive Officer
and further expanded its Board of Trustees with the election of Steven B. Hoyt
and Paul T. Lambert. An aggregate of 2,410,976 of the Units issued were to
Messrs. Hoyt, Lambert and Lund, directly and indirectly, through their ownership
in the entity of American Real Estate Equities, LLC ("AREE") and related owners
thereof. Effective June 30, 1999, 838,372 of these Units were returned to the
Company and canceled.

DISPOSITION OF INVESTMENT  IN REAL ESTATE

On November 16, 1999, the Company disposed of Maple Grove Apartments, a 304 unit
apartment community in Madison, Wisconsin. Sale consideration totaled
$16,700,000, which included the assumption of approximately $12,630,000 of
mortgage indebtedness. The gain from the disposition of




                                      F-13
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


this property totaled $686,716.

5.       MORTGAGE LOANS AND NOTES PAYABLE

Mortgage loans and notes payable as of December 31, 1999 consisted of the
following:

<TABLE>
<CAPTION>

                                                                   Amount                   Payment Terms
                                                                   ------                   -------------
<S>                                                               <C>             <C>
First Union National Bank, 7.600%,
maturing March 11, 2008, collateralized by
the Lake Pointe residential property and an                                       Monthly principal and interest of
assignment of rents and security agreement                        $    2,711,401                  $19,417

GMAC Commercial Mortgage Corporation, 7.000%, maturing
February 1, 2008, collateralized by the Nicollet
commercial property and an assignment of rents and                                Monthly principal and interest of
security agreement**                                                   2,304,922                  $15,635

Commercial Development Revenue Refunding Bonds-Series
1996A issued by City of Minneapolis, Minnesota, variable
rates ranging from 5.25% to 7.25%, maturing May 1, 2015,                            Principal payable annually in
collateralized by the Thresher Square East commercial                              amounts ranging from $140,000 to
property and an assignment of rents and security agreement*                         $395,000 and interest payable
                                                                       3,955,000             semi-annually

Commercial Development Revenue Refunding Bonds-dated
October 1, 1992 issued by the City of Minneapolis,
variable rates ranging from 6.50% to 7.60%, maturing June                           Principal payable annually in
1, 2010, collateralized by the Thresher Square West                                amounts ranging from $170,000 to
commercial property and an assignment of rents and                                  $375,000 and interest payable
security agreement*                                                    2,965,000             semi-annually

Bremer Bank, NA, variable rate (effective rate of 9.50%
at December 31, 1999), maturing October 1, 2000,
collateralized by the Cold Springs commercial property                            Monthly principal and interest of
                                                                       5,479,624               $51,518

Bremer Business Financial Corp, variable rate (effective
rate of 11.50% at December 31, 1999), maturing
September 30, 2000, collateralized by the Cold Springs                            Monthly interest at a variable
commercial property                                                    1,875,000            interest rate
                                                               -----------------
                                                                  $   19,290,947
                                                               =================

</TABLE>

*        A Trustee of the Company has guaranteed an aggregate of $676,935 with
         respect to these notes payable.
**       A Trustee of the Company and his spouse have fully guaranteed this
         mortgage loan.


                                      F-14

<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


The mortgage loans and notes payable mature as follows:

<TABLE>

<S>                                                                     <C>
                   Year ending December 31, 2000                        $    7,736,104
                   2001                                                        410,991
                   2002                                                        440,242
                   2003                                                        469,817
                   2004                                                        499,159
                   Thereafter                                                9,734,634

</TABLE>

During 1998, the Company obtained a line of credit for $300,000 with Milwaukee
Western Bank. This line of credit and was paid off and expired during 1999.

6.       SHARES, WARRANTS AND OPTIONS

On November 16, 1998, the Company issued 166,666 Common Shares to AREE in
exchange for $1,000,000.

On March 16, 1999, the Company's Board of Trustees declared a stock split of
4.75 Common Shares for each 3.00 Common Shares, effective on March 24, 1999 to
shareholders of record as of March 22, 1999 ("Stock Split"). The Operating
Partnership simultaneously declared a split of 4.75 Units for each 3.00 Units
effective on March 24, 1999 to holders of Units of record as of March 22, 1999.
All amounts herein have been adjusted to give effect to the Stock Split.

On August 12, 1999, the Company issued 349,800 Class B Junior Cumulative
Convertible Preferred Shares ("Class B Preferred Shares"). Of the total, 95,000
Class B Preferred Shares were issued to Wellington Management Company ("WMC") as
consideration for the termination of the advisory incentive agreement between
the Company and WMC. The Chairman of the Board of Trustees of the Company is the
President and Chief Executive Officer of WMC and holds an aggregate 41.8% direct
and indirect interest in WMC. The remaining 254,800 Class B Preferred Shares
were issued to AREE as consideration for payment of advances to the Company for
working capital purposes, costs incurred in connection with the Company's 1998
commercial acquisitions and payments for abandoned project pursuit costs. The
Class B Preferred Shares were issued for a value of $10.00 per share. The Class
B Preferred Shares bear the same rights, terms and preferences as the Class A
Preferred Shares (defined below), but rank junior as to payment of dividends and
distributions upon liquidation. The Class B Preferred Shares are entitled to
vote as a class on certain matters that affect their respective rights.

On October 28, 1999, the Company issued 700,000 Class A Cumulative Convertible
Preferred Shares ("Class A Preferred Shares") to the public ("Preferred
Offering"). Each of the Class A Preferred Shares is entitled, at all meetings of
shareholders, to 3.448 votes, the number of Common Shares into which they are
convertible, subject to adjustment for stock splits and similar events. The
Class A Preferred Shares are entitled to vote as a class on certain matters that
affect their respective rights. The Class A Preferred Shares bear a liquidation
value of $10.00 per share and accrue a dividend equal to $0.475 per



                                      F-15
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


share, with such dividend payable every six months. The Class A Preferred Shares
are convertible into the number of Common Shares equal to the quotient obtained
by dividing (1) $10.00 plus any dividends then accrued but unpaid on the Class A
Preferred Shares, by (2) $2.90, a price equal to 110% of the average closing bid
price of Common Shares over the 10 trading days preceding the effective date of
the registration statement covering the Class A Preferred Shares. The Company
has the right to redeem the Class A Preferred Shares, under certain
circumstances, after the two-year anniversary date of the initial closing of the
Preferred Offering. Proceeds from the Preferred Offering, net of underwriters'
discount and total offering expenses, were $6,016,718.

On December 16, 1999, in connection with a 45-day option to purchase additional
Class A Preferred Shares solely to cover any overallotments of the Preferred
Offering, the Company issued 85,037 additional Class A Preferred Shares.
Proceeds from this sale of additional Class A Preferred Shares, net of
underwriters' discount and total offering expenses, were $744,585.

In connection with the Preferred Offering, the Company issued to a
representative of the underwriters a warrant to purchase 35,500 Class A
Preferred Shares at a price of $10.00 per share. The warrants issued to the
underwriters' representative will become exercisable one year after date of
issuance and will be exercisable for a period of four years thereafter. The
warrants contain provisions for (1) "cashless exercise," whereby the
underwriters' representative may forfeit a portion of the warrants at the time
of exercise in lieu of the cash payment of the exercise price, (2) appropriate
adjustment in the event of a merger, consolidation, recapitalization,
reclassification, share dividend, shared split or similar transaction, (3) a
one-time right to demand registration of the Common Shares underlying the
warrants under the Securities Act of 1933, and (4) participation of the Common
Shares underlying such warrant, on a "piggy-back" basis, in specified
registrations by the Company during the duration of the underwriters' warrant
and for two years thereafter.

On December 31, 1999, 1,000 Class A Preferred Shares were converted into 3,448
Common Shares.

At December 31, 1999, no dividends had been declared on the Class A Preferred
Shares and/or Class B Preferred Shares.

On March 5, 1998, the Company issued warrants to Credit Suisse First Boston
Mortgage LLC in connection with the refinancing of debt. The warrants provide
for the right to purchase 47,500 Common Shares at a price of $5.37 per Common
Share. The warrant is exercisable at any time through March 5, 2008. The warrant
was not exercised during the year ended December 31, 1999.

On November 16, 1998, the Company issued warrants to acquire up to 791,667
Common Shares to each of AREE and WMC. The warrants were to become exercisable
one year after the date of issuance and would be exercisable for a nine-year
period thereafter, at an exercise price of $5.37 per Common Share with respect
to 395,833 warrants held by each of AREE and WMC, $6.47 per Common Share with
respect to 197,917 warrants held by each of AREE and WMC, $7.74 per Common Share
with respect to 118,750 warrants held by each of AREE and WMC and $9.32 per
Common Share with respect to 79,167 warrants held by each of AREE and WMC.
Effective June 30, 1999, all such warrants were returned to the Company and
canceled.

The Company maintains a dividend reinvestment and share purchase plan whereby
holders of Common Shares may automatically reinvest cash dividends into
additional Common Shares. Under the plan,



                                      F-16
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


certain investors may also make optional cash payments on a quarterly basis to
acquire even more Common Shares. The price of the shares sold under the plan is
the average of the high and low sale prices of the Company's Common Shares on
the scheduled date of reinvestment.

On May 27, 1998, in accordance with the Company's former stock option plan
("Former Plan") the Company granted options as to 54,387 Common Shares to then
employees and Trustees of the Company. The options are exercisable on any date
through May 26, 2008 at a price of $5.37 per share. The options were not
exercised during the year ended December 31, 1999 and no new options have been
granted.

On November 16, 1998, the shareholders of the Company adopted the 1998 Share
Option Plan ("Current Plan") which provides for the granting of share options to
officers, trustees and employees at a price determined by a formula in the plan
agreement. The options are to be exercisable over a period of time determined by
the Plan Committee, but no longer than ten years after the grant date.
Compensation resulting from the share options is initially measured at the grant
date based on fair market value of the shares. In connection with employment
agreements during 1999, in accordance with the Current Plan, the Company issued
options to purchase 80,000 Common Shares at $2.90, a price equal to 110% of the
average closing bid price of Common Shares over the 10 trading days preceding
the effective date of the registration statement covering the Class A Preferred
Shares to each of the Company's Chief Executive Officer and President.

The following summarizes the Company's activity relative to warrants and
options:

<TABLE>
<CAPTION>

                                                 Options for Common      Warrants for Common       Range of Exercise
                                                       Shares            and Preferred Shares       Price per Share
                                                 ------------------      -------------------       -----------------
<S>                                                        <C>                       <C>            <C>
Outstanding at December 31, 1997                                 --                       --               --
Granted - March 1998                                             --                   47,500             $5.37
Granted - May 1998                                           54,387                       --             $5.37
                                                 ------------------      -------------------
Outstanding at December 31, 1998                             54,387                   47,500             $5.37
Granted - October 1999 (a)                                   80,000                       --             $2.90
Granted - October 1999 (a)                                   80,000                       --             $2.90
Granted - October 1999 (b)                                       --                   35,500              (b)
                                                 ------------------      -------------------
Outstanding at December 31, 1999                            214,387                   83,000         $2.90 - $5.37
                                                 ==================      ===================
Exercisable at December 31, 1999                            134,387                   47,500         $2.90 - $5.37
                                                 ==================      ===================

</TABLE>

(a)      The options expire on September 30, 2009 and are exercisable as to
         40,000 Common Shares on December 31, 1999 and, if specified financial
         goals are met, an additional 40,000 Common Shares become exercisable on
         December 31, 2000.
(b)      Warrants are for Class A Preferred Shares. The warrants will become
         exercisable on October 28, 2000 at a price of $10.00 per Class A
         Preferred Shares (3.448 conversion rate to Common Shares) and expire on
         October 28, 2004.

The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees", in accounting for its stock incentive plans.
Accordingly, no compensation expense has been recognized in the consolidated
statements of operations. Had compensation expense for the Company's stock
incentive plans been determined based upon the fair value at the grant date for
awards under the Stock Incentive Plans consistent with the methodology
prescribed under Statement of Financial



                                      F-17
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


Accounting Standards No. 123 "Accounting for Stock-Based Compensation", net loss
and loss per share would have been the pro forma amounts indicated in the table
below:

<TABLE>
<CAPTION>

                                                                           1999                  1998
                                                                        -----------           ----------
<S>                                                                 <C>                    <C>
  Net loss available to Common Shares, as reported                  $    (1,386,590)       $    (941,382)
  Net loss available to Common Shares, pro forma                         (1,620,985)          (2,539,157)
  Loss per share - basic and diluted, as reported                             (1.02)               (0.80)
  Loss per share - basic and diluted, pro forma                               (1.15)               (1.76)

The assumptions used in estimating the fair value on the grant date using the
Black-Scholes option pricing model are as follows:

<CAPTION>

                                                                   1999              1998
                                                                ----------        -------
<S>                                                                 <C>              <C>
              Risk-free interest rate                                6.03%            5.65%
              Expected life in years                                 3.68             4.46
              Expected volatility                                   53.15%           38.26%
              Expected dividend yield                                8.18%            7.78%

</TABLE>

7.       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 is computed based on the weighted
average number of Common Shares outstanding for the period. The weighted average
number of Common Shares outstanding as of December 31, 1999 and December 31,
1998 were 1,361,309 and 1,175,438, respectively. Common share equivalents
include outstanding convertible preferred shares, warrants and stock options,
and are not included in net loss per weighted average Common Share outstanding -
diluted as they would be anti-dilutive.


                                      F-18
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>

                                                                           For the year ended December 31,
                                                                ---------------------------------------------------
                                                                         1999                      1998
                                                                ----------------------- ---------------------------
<S>                                                              <C>                     <C>
NUMERATOR
Loss before extraordinary loss and cumulative effect of
  change in accounting principle                                 $         (868,753)     $          (941,382)
Extraordinary loss                                                         (482,272)                      --
Cumulative effect of change in accounting principle                         (35,565)                      --
--------------------------------------------------------------- ----------------------- ---------------------------
Net Loss                                                                 (1,386,590)                (941,382)
Preferred Share Dividends                                                        --                       --
--------------------------------------------------------------- ----------------------- ---------------------------

Net loss available to Common Shareholders                        $       (1,386,590)     $          (941,382)
=============================================================== ======================= ===========================

DENOMINATOR
Weighted average Common Shares Outstanding at December 31,
  1999 and 1998, respectively:  Basic and Diluted                         1,361,309                1,175,438

BASIC AND DILUTED EPS
Net loss available to Common Shareholders before
  extraordinary loss and cumulative effect of change in
  accounting principle                                           $            (0.64)      $            (0.80)
Extraordinary loss                                                            (0.35)                      --
Cumulative effect of change in accounting principle                           (0.03)                      --
--------------------------------------------------------------- ----------------------- ---------------------------

Net loss available to Common Shareholders                        $            (1.02)      $            (0.80)
=============================================================== ======================= ===========================

</TABLE>


8.       DIVIDENDS/DISTRIBUTIONS

During 1999 and 1998, cash distributions declared totaled $0.44 and $0.44,
respectively per Common Share. Total cash distributions to shareholders for 1999
and 1998 represented 100% return of capital to the shareholders.

During 1999 and 1998, cash distributions totaled $0.44 and $0.11, respectively
per Unit of the Operating Partnership.

9.       EXTRAORDINARY LOSS

On June 30, 1999, in connection with the agreements of that same date, discussed
below, the Company recorded an extraordinary loss of $377,647 representing the
unamortized deferred financing fees associated with the expiration of the
Company's non-revolving line of credit facility.

On November 16, 1999, in connection with the sale of the Maple Grove property,
the Company paid off the mortgage loan on the property and recorded an
extraordinary loss of $104,625 representing the



                                      F-19
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


unamortized deferred financing fees associated with the mortgage loan.

10.      RELATED PARTY TRANSACTIONS

MANAGEMENT FEES

The Company has entered into property management agreements with WMC Realty,
Inc. ("WRI"), a wholly-owned subsidiary of WMC, an affiliate of the Company in
which the Company's Chairman of the Board of Trustees is President and Chief
Executive Officer, and Hoyt Properties, Inc. ("Hoyt"), an entity controlled by a
Trustee of the Company to serve as property managers of properties owned by the
Company. The property managers manage the day to day operations of the
properties and receive a management fee for this service. Management fees
consisted of $195,523 to Hoyt and $138,464 to WRI for the year ended December
31, 1999 and $31,503 to Hoyt and $149,386 to WRI for the year ended December 31,
1998.

INCENTIVE ADVISORY AGREEMENT AND  TERMINATION FEE

On August 2, 1994, the Company contracted to retain WMC to serve as advisor to
the Company. In payment for these services, the advisor received a fee equal to
5% of the gross proceeds of the public share offering of Common Shares, which
terminated on October 1995. In addition, the advisor was entitled to receive an
incentive advisory fee equal to 10% of the realized gain with respect to each
sale or refinancing of property owned by the Company. In the event a property
was sold at a loss, no incentive advisory fee was earned until the amount of the
loss had been offset by gains from other sales. In addition, the advisor was
entitled to recover certain expenses including travel, legal, accounting and
insurance. Fees for services, such as legal and accounting, provided by the
advisor's employees, in the opinion of the advisor, may not have exceeded fees
that would have been charged by independent third parties. During 1998, no
incentive advisory fees were paid in connection with this agreement and expenses
related to this agreement totaled $149,178. As discussed below, this agreement
was terminated on November 20, 1998.

The initial term of the incentive advisory agreement ended on December 31, 1995
and had been renewed automatically each year. In connection with the purchase of
properties by the Operating Partnership, the Company terminated the incentive
advisory agreement with WMC on November 20, 1998. The termination fee, payable
to WMC, was to be determined by taking 1% of the first $150,000,000 of the
aggregate gross purchase price for properties acquired by the Operating
Partnership plus 0.25% of the aggregate gross purchase price for properties
acquired in excess of $150,000,000. Fees paid to terminate the incentive
advisory agreement with WMC amounted to $950,000 and $310,000 for the years
ended December 31, 1999 and 1998, respectively. As discussed below, the 1999 fee
was paid by the issuance of 95,000 Class B Preferred Shares.

ABANDONED PROJECT PURSUIT COSTS AND REIMBURSEMENT OF CERTAIN EXPENSES TO RELATED
PARTIES

During 1998 and through June 30, 1999, the Operating Partnership was in
negotiations with AREE regarding the reimbursement by the Operating Partnership
to AREE of certain costs and expenses



                                      F-20
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


incurred by AREE related to the potential acquisition of properties and certain
administrative expenses. As a result of the negotiations, the Company, through
the Operating Partnership agreed to reimburse AREE for certain costs as further
discussed below.

In connection with the negotiations during 1998 by the Company with respect to
the contribution agreement between AREE and the Operating Partnership, a
$240,000 advance was paid to WMC by AREE for the benefit of the Operating
Partnership. At December 31, 1998, this amount was reflected as an advance to
related party, with a related liability recorded due to AREE. Under the terms of
the contribution agreement, the advance was to be repaid to AREE in the event
certain transactions closed before December 31, 1998. Due to the uncertainty of
the collectibility of this advance, the entire amount was reserved as
uncollectible as of December 31, 1998 and in connection with the agreement
discussed below, was written off as of June 30, 1999.

In the second quarter of 1999, due principally to the fact that the Operating
Partnership acquired only three properties since November 1998, the Company
entered into discussions with AREE and WMC. As a result of these discussions,
the following occurred during 1999:

    o    Recipients of 838,372 Units, received in the November 1998
         acquisitions, returned such Units to the Company for cancellation.

    o    AREE returned the warrant covering 791,667 Common Shares to the
         Company. Further, the Company issued 254,800 Class B Preferred Shares
         to AREE as consideration for an aggregate of $2,548,000 representing
         advances to the Company for working capital purposes and costs incurred
         in connection with the November 1998 acquisitions and certain abandoned
         project pursuit costs.

    o    As consideration for the termination of the advisory agreement between
         the Company and WMC, WMC returned the warrant covering 791,667 Common
         Shares to the Company, the Company issued 95,000 Class B Preferred
         Shares to WMC and WMC retained cash payments of $550,000 received
         during 1998.

LISTING AGREEMENTS

In January 1998, the Company entered into two listing agreements with WRI. The
agreements provided that WRI would receive a fee equal to 3% of the sales price
in the event of a sale of either of the Company's then held residential
properties, Maple Grove or Lake Pointe. In connection with the sale of Maple
Grove Apartments on November 16, 1999, WRI received a fee totaling $501,000 and
the agreement in regard to Maple Grove was terminated.

RENTAL INCOME

During 1999, the Company recognized revenue of $23,010 on office space leased to
Hoyt.


                                      F-21
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


INSURANCE

From time to time, the Company has purchased insurance through another affiliate
of WMC, Wellington Insurance Services, Inc., which received a commission of
those sales equal to 15% of scheduled premiums. These commissions totaled
$10,000 and $8,660 for the years ended December 31, 1999 and 1998, respectively.

11.  RENTALS UNDER OPERATING LEASES

The Company and its subsidiaries lease residential and commercial space to
individual and corporate tenants. These leases expire at various times through
2005. The following is a schedule by year of minimum rental income under such
operating leases.

<TABLE>
<CAPTION>

                           YEAR ENDING DECEMBER 31,
<S>                        <C>                                          <C>
                           2000                                         $    2,575,802
                           2001                                              1,998,724
                           2002                                              1,014,165
                           2003                                                435,613
                           2004                                                305,274
                           Thereafter                                           70,516
                                                                      ----------------
                                                                        $    6,400,094
                                                                      ================

</TABLE>

The total minimum future rentals presented above do not include amounts that may
be received from commercial properties as tenant reimbursements.

During 1999, 13.30% of the Company's rental revenue was earned from one major
tenant. During 1998, no tenant represented 10% or more of total rental revenue.

One of the commercial properties has one primary tenant who leases 55% of that
property's rentable square footage and 17% of the Company's aggregate rentable
square footage of its commercial portfolio. The future minimum rental income
from this tenant represents approximately 20% of the above total.

12.      COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Company is involved in legal actions
arising from the ownership of its properties. In management's opinion, the
liabilities, if any, that may ultimately result from such legal actions are not
expected to have a materially adverse effect on the consolidated financial
position, operations or liquidity of the Company.


                                      F-22
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


13.   SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                              YEAR ENDED DECEMBER 31,
                                                                  ---------------------------------------------
                                                                          1999                      1998
                                                                  ----------------------- ---------------------
<S>                                                               <C>                       <C>
Interest paid                                                     $         2,593,502       $         1,326,606
                                                                  ======================= =====================
Supplemental schedule of noncash investing and
   financing activities:

Dividends/distributions payable                                   $           861,828       $           443,018
                                                                  ----------------------- ---------------------

Conversion of Class A Preferred Shares for Common Shares:
     Preferred shares                                             $               (10)      $                --
     Common Shares                                                                 34                        --
     Additional paid in capital                                                   (24)                       --
                                                                  ----------------------- ---------------------
                                                                  $                --       $                --
                                                                  ======================= =====================

In connection with the sale of Maple Grove, the
   following assets and liabilities were disposed:

     Gain on sale of investment in real estate                    $           686,716       $                --
     Disposition of investment in real estate                              14,953,942                        --
     Restricted cash                                                          208,415                        --
     Mortgage loan assumed by purchaser                                   (12,629,744)                       --
     Tenant security deposits                                                 (80,853)                       --
                                                                  ----------------------- ---------------------
        Proceeds from disposition                                 $         3,138,476       $                --
                                                                  ======================= =====================

In connection with the commercial real estate investments
   acquired in November 1998 , the following assets and
   liabilities were assumed:

     Real estate investments                                      $                --       $        30,797,781
     Mortgage loans payable                                                        --               (17,066,935)
     Minority interests/operating partnership units                                --               (13,730,846)
                                                                  ----------------------- ---------------------
                                                                  $                --       $                --
                                                                  ======================= =====================

</TABLE>

                                      F-23
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>

                                                                             YEAR ENDED DECEMBER 31,
                                                                  -------------------------------------------
                                                                           1999                   1998
                                                                  ----------------------- -------------------
<S>                                                               <C>                       <C>
In connection with agreements during 1999, the
  following charges were financed:

Termination of incentive advisory contract for Class
  B Preferred Shares:
     Incentive advisory agreement termination fee                 $          (950,000)      $             --
     Preferred shares                                                             950                     --
     Additional paid-in capital                                               949,050                     --
                                                                  ----------------------- -------------------
                                                                  $                --       $             --
                                                                  ======================= ===================

In connection with agreements during 1999, the
  following charges were financed:

Nonrecurring charges paid through issuance of
  Class B Preferred Shares:
     Abandoned project pursuit costs                              $        (2,548,000)      $             --
     Preferred shares                                                           2,548                     --
     Additional paid-in capital                                             2,545,452                     --
                                                                  ----------------------- -------------------
                                                                  $                --       $             --
                                                                  ======================= ===================

</TABLE>


                                      F-24
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


14.      QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>

                                                              Year End December 31, 1999
                                      ---------------------------------------------------------------------------
                                       First Quarter      Second Quarter      Third Quarter       Fourth Quarter
                                      ---------------    ----------------    ---------------     ----------------
<S>                                   <C>                <C>                 <C>                 <C>
Total revenues                        $     1,672,655    $     1,772,234     $     1,814,055     $     1,637,613
                                      ===============    ===============     ===============     ===============
Equity in income of unconsolidated
  subsidiary                                      915              3,118               3,118               3,118
(Income) loss allocated to
  minority interest                           193,466          2,714,400              35,197            (221,368)
Loss from operations                          (66,475)        (1,057,066)            (27,847)           (404,081)
Gain on sale of investment in real
  estate                                           --                 --                  --             686,716
                                      ---------------    ----------------    ---------------     ----------------
Income (loss) before extraordinary
  loss and cumulative effect of
  change in accounting principle              (66,475)        (1,057,066)            (27,847)            282,635
Extraordinary loss                                 --           (377,647)                 --            (104,625)
Cumulative effect of change in
  accounting principle                        (35,565)                --                  --                  --
                                      ---------------    ----------------    ---------------     ----------------
Net income (loss)                            (102,040)        (1,434,713)            (27,847)            178,010

Preferred Share Dividends                          --                 --                  --                  --
                                      ---------------    ----------------    ---------------     ----------------
Net income (loss) available to
  Common Shareholders                 $      (102,040)   $    (1,434,713)    $       (27,847)    $       178,010
                                      ===============    ===============     ===============     ===============
Net income (loss) available to
  Common Shareholders before
  extraordinary loss and cumulative
  effect of change in accounting
  principle per Common
  Share:
  Basic                               $         (0.05)   $         (0.78)    $         (0.02)    $          0.20
                                      ===============    ===============     ===============     ===============
  Diluted                             $         (0.05)   $         (0.78)    $         (0.02)    $          0.08
                                      ===============    ===============     ===============     ===============
Net income (loss) available to
  Common Shareholders per Common
  Share:
  Basic                               $         (0.08)   $         (1.06)    $         (0.02)    $          0.13
                                      ===============    ===============     ===============     ===============
  Diluted                             $         (0.08)   $         (1.06)    $         (0.02)    $          0.05
                                      ===============    ===============     ===============     ===============

</TABLE>

Each quarter during 1999 has been restated to reflect adjustments arising in the
proper quarterly periods.



                                      F-25
<PAGE>

                    STONEHAVEN REALTY TRUST AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


15.      SUBSEQUENT EVENTS

On February 18, 2000, the Board of Trustees approved the conversion of 1,657,437
Units of the Operating Partnership into 1,468,484 Common Shares and further
approved the conversion of the 254,800 Class B Preferred Shares held by AREE
into 808,482 Common Shares.

On February 24, 2000, the Company acquired NETLink International, Inc.,
("Netlink") a privately held Internet consulting and web development company, in
exchange for 914,286 Common Shares (valued at $4.375 per share or an aggregate
of $4.0 million). Further by agreement, the Company set aside a pool of options
as to 200,000 Common Shares for future award to employees of Netlink. In
connection with the acquisition, the Chief Executive Officer of Netlink was
appointed President of the Company and will become a member of the Board of
Trustees of the Company upon the earlier of the Company's next Annual Meeting of
Shareholders or should a vacancy arise among the current Board of Trustees of
the Company; the Chief Financial Officer of Netlink, was appointed Chief
Financial Officer of the Company; and the employment contract of the Chief
Executive Officer was required to be extended to be co-terminous with that of
the President.

Effective February 24, 2000, the employment contract of the President provides
for an annual base salary of $120,000 and bonus at the discretion of the
Compensation Committee for a two year period. In addition, the Company issued to
the President options as to 1.0 million Common Shares at a price of $5.375 per
share. The options are exercisable as to 500,000 shares immediately, with
options as to 62,500 shares exercisable quarterly, commencing May 24, 2000. The
employment contract of the Chief Executive Officer provides for an annual base
salary of $80,000 and bonus at the discretion of the Compensation Committee for
a two year period. In addition, the Company issued to the Chief Executive
Officer options as to 666,667 Common Shares at a price of $6.375 per share. The
options are exercisable as to 333,333 shares immediately, with options as to
41,666.75 shares exercisable quarterly, commencing May 24, 2000.

On February 29, 2000, the Company, through the Operating Partnership, acquired
three commercial real estate properties located in suburban Minneapolis,
Minnesota from Plymouth Partners II, of which a Trustee of the Company is a
principal, for a total price of $6,716,060. The purchase price was funded
through the issuance of an aggregate of 181,629 Units in the Operating
Partnership (valued at $4.375 per Unit, or an aggregate value of $794,627), the
assumption of certain third-party debt totaling $4,449,505 secured by such
properties and the balance paid in cash.



                                      F-26