CAPITAL AUTOMOTIVE REIT
10-K, 2000-03-21
REAL ESTATE INVESTMENT TRUSTS
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<PAGE>   1

================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   ----------
                                    FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 OR

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

FOR THE TRANSITION PERIOD FROM      TO

                        COMMISSION FILE NUMBER: 000-23733
                             CAPITAL AUTOMOTIVE REIT
       (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS DECLARATION OF TRUST)

                   MARYLAND                              54-1870224
           (STATE OF INCORPORATION)           (IRS EMPLOYER IDENTIFICATION NO.)
       1420 SPRING HILL ROAD, SUITE 525                     22102
               MCLEAN, VIRGINIA                          (ZIP CODE)
   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                 (703) 288-3075
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

         TITLE OF EACH CLASS           NAME OF EACH EXCHANGE ON WHICH REGISTERED
         -------------------           -----------------------------------------
COMMON SHARES OF BENEFICIAL INTEREST,           NASDAQ NATIONAL MARKET
      $.01 PAR VALUE PER SHARE

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

Yes [X]   No   [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. [ ]

The number of Registrant's common shares of beneficial interest outstanding on
February 29, 2000 was 20,707,415.

The aggregate market value of voting stock held by non-affiliates of the
Registrant, based upon the closing sales price of the Registrant's common shares
of beneficial interest on February 29, 2000 was $221,334,138.

                       DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of Capital Automotive REIT's Proxy Statement for the Annual
Meeting of shareholders for fiscal year 2000 are incorporated by reference into
Part III of this Annual Report on Form 10-K.


================================================================================




<PAGE>   2

                            CAPITAL AUTOMOTIVE REIT
                           ANNUAL REPORT ON FORM 10-K

                       FISCAL YEAR ENDED DECEMBER 31, 1999

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                   PAGE REFERENCE
                                                                                                                      FORM 10-K
                                                                                                                   --------------
                                    PART I
<S>          <C>                                                                                                        <C>
Item 1.       Business ...........................................................................................         1
Item 2.       Properties .........................................................................................         8
Item 3.       Legal Proceedings ..................................................................................        10
Item 4.       Submission of Matters to a Vote of Shareholders ....................................................        10

                                    PART II

Item 5.        Market for the Company's Common Equity and Related Shareholder Matters ............................        10
Item 6.        Selected Financial Information ....................................................................        11
Item 7.        Management's Discussion and Analysis of Financial Condition and Results of Operations .............        12
Item 7A.       Quantitative and Qualitative Disclosures About Market Risk ........................................        17
Item 8.        Financial Statements and Supplementary Data .......................................................        18
Item 9.        Changes In and Disagreements with Accountants on Accounting and Financial Disclosure ..............        33

                                   PART III

Item 10.       Trustees and Executive Officers of the Company ....................................................        34
Item 11.       Executive Compensation ............................................................................        34
Item 12.       Security Ownership of Certain Beneficial Owners and Management ....................................        34
Item 13.       Certain Relationships and Related Transactions ....................................................        34

                                    PART IV

Item 14.       Exhibits, Financial Statement Schedules, and Reports on Form 8-K ..................................        34
</TABLE>



                                       i

<PAGE>   3

                                     PART I

ITEM 1. BUSINESS

COMPANY OVERVIEW

      Capital Automotive REIT (the "Company") is a Maryland real estate
investment trust formed in October 1997. The Company owns its property interests
through Capital Automotive L.P. (the "Operating Partnership") and its
subsidiaries. The Company is the sole general partner of the Operating
Partnership. The Company completed its initial public offering of common shares
and began generating rental income in February 1998. References to "we," "us,"
"our," refer to the Company or, if the context otherwise requires, the Operating
Partnership and our business and operations conducted through the Operating
Partnership and/or its directly and indirectly owned subsidiaries.

      Our primary business purpose is to own and lease real estate properties
(land, buildings and other improvements) to operators of franchised automobile
dealerships, motor vehicle service, repair or parts businesses and related
businesses. In this Annual Report on Form 10-K, we use the term dealerships to
refer to these types of businesses that are operated on our properties. Our
strategy focuses on acquiring real estate used by multi-site, multi-franchised
dealerships located primarily in major metropolitan areas throughout the United
States.

      As of December 31, 1999, we invested approximately $935.5 million in
properties. As of December 31, 1999, we owned 230 properties located in 27
states, a total of approximately 1,292 acres of land containing approximately
8.0 million square feet of buildings and improvements. Our tenants operate 349
motor vehicle franchises on these properties, representing 39 brands of motor
vehicles, consisting of Acura, Audi, BMW, Buick, Cadillac, Chevrolet, Chrysler,
Daewoo, Dodge, Dodge Trucks, Ford, Freightliner, GMC, GMC Truck, Honda, Hyundai,
Infiniti, Isuzu, Jaguar, Jeep, Kia, Land Rover, Lexus, Lincoln-Mercury, Mazda,
Mercedes-Benz, Mitsubishi, Nissan, Oldsmobile, Plymouth, Pontiac, Porsche, Saab,
Saturn, Subaru, Suzuki, Toyota, Volkswagen and Volvo.

      We focus on buying properties from third parties that have a long history
of operating multi-site, multi-franchised dealerships. In this Annual Report on
Form 10-K, we use the term dealer group to refer to a group of related persons
and companies who sell us properties. We also use the terms dealer group, tenant
or lessee to refer to the related persons and companies that lease our
properties.

      We purchase properties in exchange for cash, units of limited partnership
interest in the Operating Partnership ("Units"), the assumption of existing
debt, new debt, or a combination of any of the four. We generally lease our
properties to established, creditworthy tenants, for an initial term of 10 to 20
years. We usually give the tenant the option to renew the lease on similar terms
and conditions for one or more additional periods of 5 to 10 years each. We
typically require our tenants to pay all operating expenses of the property,
including all real estate taxes and assessments, utilities, insurance, repairs,
maintenance and other expenses. This type of lease is commonly known as a
triple-net lease.

      When we evaluate dealer groups and potential properties for purchase, we
      consider such factors as:

      -     the management and operating experience of the dealer group;

      -     the adequacy of a dealer group's historical, current and forecasted
            financial position and cash flow;

      -     the value of the land, buildings and other improvements;

      -     the construction quality, condition and design of the dealership
            buildings and other improvements located on the property;

      -     the type of franchises operated by the dealer group;

      -     the geographic area in which the property is located; and

      -     the environmental condition of the real estate.



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<PAGE>   4

      We have, and will continue to, borrow funds to buy properties. As of
December 31, 1999, we had mortgage indebtedness totaling $501.5 million
(consisting of approximately $491.5 million of fixed rate indebtedness and
approximately $10.0 million of variable rate indebtedness), secured by
approximately 200 properties, and had a $50 million revolving secured credit
facility from a financial institution, under which no amounts were outstanding
at December 31, 1999. In addition, during December 1999, we entered into a
commitment letter with a financial institution for a $100 million secured
revolving credit facility which will provide interim real estate financing. We
continue to have discussions with several financial institutions to obtain
additional unsecured, partially secured or secured loans or credit facilities,
the amount and terms of which have not been determined. We may also issue equity
or debt securities, including preferred equity and senior or subordinated notes.
These securities may be secured by properties or leases. We have adopted a
policy to limit debt to approximately 65% of our assets (calculated as total
assets plus accumulated depreciation). As of December 31, 1999, our debt was
approximately 52% of our assets. This policy may be changed by our Board of
Trustees at any time without shareholder approval.

      As a real estate investment trust, we acquire properties through our
direct and indirect subsidiaries, including the Operating Partnership, and
manage our business in a manner that is intended to be consistent with the
requirements of the Internal Revenue Code of 1986, as amended (the "Code") and
the regulations of the Internal Revenue Service that govern taxation of real
estate investment trusts. We have paid, and expect to continue to pay, regular
cash dividends to our shareholders. It also is our objective to provide our
shareholders the opportunity for increased dividends from increasing annual
rental income; to preserve and protect the investments of our shareholders; and
to provide our shareholders with the opportunity to increase the value of their
investments.

      We are a self-administered and self-managed real estate investment trust,
meaning that our trustees, officers and employees manage and administer our
business. Our executive officers are Thomas D. Eckert, President and Chief
Executive Officer; David S. Kay, Vice President and Chief Financial Officer;
John M. Weaver, Vice President, Secretary and General Counsel; and Peter C.
Staaf, Vice President and Treasurer.

      Our principal executive office is located at 1420 Spring Hill Road, Suite
525, McLean, Virginia 22102 and our telephone number is (703) 288-3075.

STRATEGY

      Our primary business strategy is to acquire a diversified portfolio of
real property and improvements throughout the United States used by the
operators of franchised automobile dealerships, motor vehicle service, repair or
parts businesses and related businesses. In addition, we intend to commit to
purchase properties under construction, renovation or expansion upon completion
of such construction, renovation or expansion. We believe that our acquisition
strategy will provide dealer groups with an opportunity (1) to achieve
liquidity, while maintaining ownership and control of the operations of the
dealerships, (2) to diversify their investments, (3) to obtain funds to expand
operations or remodel the facilities of their dealerships, (4) to facilitate
their estate planning, and (5) to provide attractive tax deferral opportunities.

      We believe that because the improvements used by dealerships are usually
single purpose structures, such properties are a major and discrete sector of
the national retail real estate industry. Industry sources estimate that the
real property and improvements associated with franchised automobile dealerships
represent in excess of $40 billion of real estate. We believe that those
properties present attractive acquisition and financing opportunities because
they generally have locations with frontage on and visibility from major
thoroughfares, and zoning which permits a wide range of alternative uses. In the
event that such properties can no longer be leased to dealerships, we believe
that the land component of the property can be redeveloped for other commercial
uses.

      Our primary objective is to own and lease real estate properties used by
dealerships throughout the United States for the primary purpose of generating
rental income in order to provide us with long-term, predictable streams of cash
flow to maximize shareholder value. To achieve this objective, we are:



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<PAGE>   5

      -     Executing a disciplined acquisition program by purchasing properties
            used by dealer groups that operate multi-site, multi-franchised
            dealerships that have demonstrated historic growth, are well
            managed, have been maintained in good condition, and whose location
            and characteristics will be suitable for alternative uses;

      -     Diversifying geographically by acquiring properties located
            predominately in major metropolitan areas throughout the United
            States in order to minimize the potential adverse impact of economic
            downturns in certain markets;

      -     Diversifying by franchise to minimize the potential adverse impact
            of changes in consumer preferences and manufacturer fortunes;

      -     Leveraging the contacts and experience of our management to build
            and maintain long-term relationships with dealer groups;

      -     Partnering with dealer groups who are leading the consolidation that
            is occurring in the automotive retail sector. At this time, these
            consolidators are not acquiring real estate, which in many cases,
            allows us to become their exclusive real estate partner;

      -     Using the Company's "UPREIT" structure to acquire properties in
            exchange for Units, thereby giving the sellers the benefit of being
            able to defer some or all of their potential taxable gain that
            otherwise would have been incurred if the properties were sold for
            cash. This structure enhances our ability to consummate transactions
            and to structure more competitive acquisitions than other entities
            in the market that lack our access to capital and the ability to
            acquire properties with Units;

      -     Leasing back properties to dealer groups on a triple-net basis,
            thereby eliminating brokerage, re-leasing and similar costs, and the
            risk of high tenant turnover due to the general historic long-term
            operation of dealerships at property locations;

      -     Negotiating lease covenants designed to minimize the likelihood of
            loss to us, by permitting us to continually monitor the ability of
            our tenants to pay rent through periodic tenant submissions, and our
            careful review of financial data;

      -     Utilizing a variety of financing sources, such as the issuance of
            Units, or other equity securities or debt securities, or a
            combination thereof; and

      -     Minimizing interest rate risk by generally matching the average
            duration of our leases with the term of our long-term debt.

THE PROPERTIES, LEASES, TYPICAL LEASE TERMS AND DEALERSHIPS

PROPERTIES

      As of December 31, 1999, we owned 230 properties located in 27 states, a
total of approximately 1,292 acres of land containing approximately 8.0 million
square feet of buildings and improvements. Our tenants operated 349 motor
vehicle franchises on these properties, representing 39 brands of motor
vehicles. Our interest in each of the properties includes the land, buildings
and improvements, related easements and rights and fixtures. We do not own or
lease any significant amount of personal property, furniture or equipment at any
property.

      The properties generally consist of the land or a leasehold interest in
land and one or more retail showrooms, office space (which may or may not be
contained in separate buildings), adjacent service and repair facilities, parts
and accessories departments, and in many cases, acreage set aside for used car
sales, body shops and parking for inventory. As of December 31, 1999, all of our
230 properties, excluding one parcel, valued at approximately $500,000 (acquired
in connection with one property at no additional cost), were subject to leases
that were performing and in full force and effect. See Item 2 of this Annual
Report on Form 10-K for additional information regarding our properties.

LEASES AND TYPICAL LEASE TERMS

      Our properties are leased to dealer groups, persons or entities related to
the dealer groups or, in some cases, other third parties, which operate
dealerships on the properties. Although there are variations in the terms of our
leases, the following is a summary description of the general terms of a
majority of our leases. We intend to seek favorable terms for all future leases,
which may or may not be on similar terms to the leases described below. Leases
are individually negotiated and do vary from the terms summarized below, at
times in material ways.



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<PAGE>   6

      GENERAL. Substantially all of the leases are "triple-net," meaning that
the tenant is obligated to pay rent and, typically, all operating expenses of
the property, including, but not limited to, all taxes, assessments and other
governmental charges, insurance, utilities, service, repairs and maintenance. In
addition, the leases generally require the tenants to pay for additions,
repairs, renovations and improvements to the properties undertaken by the tenant
which, upon expiration or termination of the leases, become our property.

      RENT. During the initial lease term and any extensions, each tenant pays
annual base rent in monthly installments. Base rent is typically adjusted upward
periodically, usually based on a factor of the change in the consumer price
index ("CPI"). As of February 29, 2000, no tenants had defaulted on any rental
payments.

      TERM AND TERMINATION. The leases generally are for initial terms of 10 to
20 years, with options to renew upon the same terms and conditions for one or
more additional periods of five to ten years each exercisable at the option of
the tenant. The tenant does not have the right to terminate the lease and vacate
the property before the end of the lease term, except in extraordinary
circumstances such as the taking or condemnation of the property. See "--Damage
to, or Condemnation of, a Property" below. In the event of a default by the
tenant, among the legal remedies that could be available to us is the eviction
of the tenant, which could result in early termination of the lease. Typically,
all leases within a dealer group are cross-guaranteed which helps to ensure the
stability of the rental income from the respective tenant.

      INSURANCE. The leases provide that the tenants will maintain insurance on
the properties of the type and in the amounts that are usual and customary. We
believe that all of our properties are adequately covered by insurance,
including adequate commercial general liability, fire, flood and extended loss
insurance provided by reputable companies, with commercially reasonable
deductibles and limits. However, it is not possible or commercially reasonable
to insure against all risks, in all cases, due to the cost or the availability
of certain types of insurance. If a property suffers uninsured damage, the
repair of the property may depend on the tenant's ability to pay those costs or
we may have to bear all or a portion of such costs.

      DAMAGE TO, OR CONDEMNATION OF, A PROPERTY. If all or a material portion of
a property is condemned, the lease may be terminated. In certain circumstances,
the tenant may be entitled to share in the condemnation award. Typically, if
there is material damage to or destruction of the property, the tenant is
obligated to repair or rebuild such damage or destruction with insurance
proceeds and rent is not abated during the period of repair or rebuilding.

      ASSIGNMENT. The leases generally provide that the tenants may not, without
our prior written consent (which under certain circumstances may not be
unreasonably withheld) or upon compliance with conditions established by us,
assign, or otherwise transfer any lease in whole or in part except to a related
person. Generally, a change of control of the tenant will be considered an
assignment of the lease.

      EVENTS OF DEFAULT. If there is an event of default under a lease, we may
terminate the lease, retain possession of the property and/or lease the property
to others. An event of default typically includes, but is not limited to, a
failure to pay rent, a failure to comply with the provisions of the lease, the
occurrence of certain events relating to bankruptcy or insolvency of the tenant,
or certain defaults under a franchise or license agreement.

      INDEMNIFICATION. Generally, a tenant will be required to indemnify us and
our officers, trustees, employees, owners, agents and affiliates from
liabilities, costs and expenses arising from such things as, (1) the use,
condition, operation or occupancy of the property, (2) any breach, violation or
nonperformance of the lease or any law, (3) any injury or damage to the person,
property or business of the tenant or any customer of the tenant, and (4) the
violation of environmental laws.

      RIGHT OF FIRST OFFER AND OPTION TO PURCHASE PROPERTY. Certain leases
provide the tenant with a right of first offer to purchase the property if we
decide to sell the property. We will notify the tenant of our intention to sell
the property and the tenant will have a period of time to extend an offer,
including specifying the purchase price. We may in our discretion reject the
tenant's offer and sell the property to a third party on other terms if the
purchase price is higher or we reasonably believe such terms are better than the
terms proposed by the tenant. Under the terms of a limited number of leases, the
tenant has a period of time, after receiving notice from us of our intention to
sell the property and the proposed sales price for the property, to advise us
that it wishes to purchase the property at the specified price. If the tenant
does not exercise this right or if the tenant and we



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<PAGE>   7

cannot agree on the terms and conditions for the purchase of the property by the
tenant, we are free to offer and sell the property to a third party. In
addition, a limited number of our leases offer tenant purchase options at
various points after the initial lease term, generally at the greater of fair
market value of the property at the time of sale or our purchase price as
increased by a factor of CPI at the time the option is exercised.

      ENVIRONMENTAL MATTERS. The tenants are typically responsible for
compliance with material applicable environmental laws and for correcting
material adverse environmental conditions at or on the properties. Typically, a
lease will require the tenant to indemnify us for liabilities and costs related
to environmental matters.

DEALERSHIPS AND DEALER GROUPS

      Typically, new motor vehicle dealer groups operate their dealerships under
franchise arrangements with motor vehicle manufacturers. Typically, such
arrangements specify the locations at which the dealer group can sell motor
vehicles and related parts and products and perform certain approved services in
order to serve a specified market area. Manufacturers maintain control over the
designation of market areas and allocation of vehicles among dealer groups. The
manufacturer does not guaranty exclusivity within a specified territory.

      Each arrangement typically grants the dealer group the non-exclusive right
to use and display the manufacturer's trademarks, service marks and designs in
the form and manner approved by the manufacturer and imposes a variety of
requirements on the dealer group concerning, for example, the showrooms, the
facilities and equipment for servicing vehicles, the maintenance of vehicles and
parts inventories, the maintenance of minimum net working capital and the
training of personnel. The arrangements usually require the dealer groups to
submit a monthly financial statement of operations. In addition, the
manufacturer's prior approval is required for changes in certain members of
management or transfers of ownership of the dealer group. Pursuant to these
arrangements, several manufacturers require their consent to any transfers of
assets or real property considered necessary for conducting the business of the
dealership.

      Typically, the manufacturer has the ability to terminate the arrangement
earlier than the expiration of the term of such arrangement or refuse to renew
the arrangement under certain circumstances such as when a dealer group fails to
meet financial covenants established by the manufacturer. We believe that each
new motor vehicle dealer group generally expects to renew any expiring
arrangements in the ordinary course of business.

      In addition to selling and leasing new vehicles, many dealer groups sell
and lease used vehicles. Dealer groups also provide service and parts primarily
for the vehicle makes and models that they sell or lease and perform both
warranty and non-warranty service work. In general, parts departments support
the sales and service divisions. Dealers may also sell parts at retail to their
customers or at wholesale to independent repair shops. Dealer groups also
arrange third party financing for their customers, sell vehicle service
contracts and arrange selected types of credit insurance for which they receive
financing fees.

      For the year ended December 31, 1999, Sonic Automotive, Inc. and its
affiliates ("Sonic") accounted for approximately 11.6% of our total revenue,
approximately 11.8% of our total rental revenue and, as of December 31, 1999,
approximately 22.6% of our annualized total rental revenue, excluding
straight-line rental income. Sonic is the tenant of 56 properties, the majority
of which were acquired in August 1999. Failure of Sonic to pay rent could
materially affect our income if we are not able to re-lease the properties in a
timely manner. There was no other tenant that exceeded 10% of our total revenue
or total rental revenue for the year ended December 31, 1999, or total
annualized rental revenue, excluding straight-line rental income, as of December
31, 1999. For the year ended December 31, 1998, affiliates of the Rosenthal
Automotive Organization ("Rosenthal") accounted for approximately 17.7% of our
total revenue, approximately 22.9% of our total rental revenue and, as of
December 31, 1998, approximately 13.5% of our total annualized rental revenue,
excluding straight-line rental income. Due to the acquisition of properties
during 1999, Rosenthal accounted for approximately 9.4% of our total revenue and
approximately 9.6% of our total rental revenue for the year ended December 31,
1999, and approximately 7.4% of our total annualized rental revenue, excluding
straight-line rental income, as of December 31, 1999. See "Item
2--Properties--Property and Lease Concentrations."



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<PAGE>   8

      We invest in properties throughout the United States. As of December 31,
1999, our properties were diversified across 27 states with the largest
"geographic concentration" in Texas, which accounted for approximately 26.0% of
our total annualized rental revenue, excluding straight-line rental income, as
of December 31, 1999. Properties located in Virginia represented approximately
11.4% of our total annualized rental revenue, excluding straight-line rental
income, as of December 31, 1999. No other state's concentration of properties
exceeded 10% of our total annualized rental revenue, excluding straight-line
rental income, as of December 31, 1999.

      As of December 31, 1999, 181 of our 230 properties were operated by
franchised automobile dealerships. Properties that are not dealerships, such as
body shops and used vehicle lots, which are operated by franchised automotive
dealers, are generally not subject to any franchise arrangement. As of December
31, 1999, we leased 35 properties that are operated as non-franchised
dealerships or for other motor vehicle uses. The remaining 14 properties,
consisting solely of raw land are leased by various dealer groups, excluding one
parcel, valued at approximately $500,000 (acquired in connection with one
property at no additional cost).

GOVERNMENTAL REGULATIONS AFFECTING THE PROPERTIES

      The tenants and we as property owners are subject to a wide range of
federal, state and local laws and regulations, such as local licensing
requirements, consumer protection laws and regulations relating to gasoline
storage, waste treatment and other environmental matters, including:

      ENVIRONMENTAL LAWS. All real property and the operations conducted on real
property are subject to federal, state and local laws and regulations relating
to environmental protection and human health and safety. Certain of these laws
and regulations may impose joint and several liability on certain statutory
classes of persons, including tenants, owners (such as us) or operators, for the
costs of investigation or remediation of contaminated properties, regardless of
fault or the legality of the original disposal. These laws and regulations apply
to past and present business operations of the dealer groups and the use,
storage, handling and contracting for recycling or disposal of hazardous or
toxic substances or wastes. Generally, tenants are obligated to comply with
environmental laws and remediation requirements. Our leases impose obligations
on the tenants to indemnify us from all or most compliance costs we may
experience as a result of the environmental conditions on the properties. If a
tenant fails to or cannot comply, we could be forced to pay such costs. As of
February 29, 2000, we are not aware of any environmental condition with respect
to any of the properties that management believes would have a material adverse
effect on our business, financial condition or results of operations. We,
however, cannot predict whether new or more stringent laws relating to the
environment will be enacted in the future or how such laws or the operations of
the dealerships and other businesses on our properties will impact the
properties. Costs associated with an environmental event could be substantial.
Prior to the acquisition of our properties, we typically engage independent
environmental consultants to conduct or update Phase I environmental assessments
(which generally do not involve invasive techniques such as soil or ground water
sampling) on the properties. In many cases we have commissioned independent
environmental consultants to perform Phase II environmental testing (which
generally involves soil or groundwater testing for contaminants). Occasionally
when a contaminant is detected on a property, we require as a condition of our
acquisition of such property, that the seller post a cash escrow to secure
expected remediation costs. None of these assessments or updates revealed any
adverse environmental condition which management believes would have a material
adverse effect on our business, financial condition or results of operations.
There can be no assurances, however, that the environmental assessments detected
all contamination, that environmental liabilities have not developed since such
environmental assessments were prepared, or that future uses or conditions
(including, without limitation, changes in applicable environmental laws and
regulations) will not result in imposition of environmental liability.

      AMERICANS WITH DISABILITIES ACT OF 1990. The properties, as commercial
facilities, are required to comply with Title III of the Americans with
Disabilities Act of 1990 (the "ADA"). Investigation of a property may reveal
non-compliance with the ADA. The tenants will have primary responsibility for
complying with the ADA but we may incur costs if the tenant does not comply. As
of February 29, 2000, we have not been notified by any governmental authority of
any non-compliance with the ADA that management believes would have a material
adverse effect on our business, financial condition or results of operations.



                                        6

<PAGE>   9

      OTHER REGULATIONS. State and local fire, life-safety and similar
requirements regulate the use of the properties. The leases generally require
that each tenant will have primary responsibility for complying with
regulations, and failure to comply could result in fines by governmental
authorities, awards of damages to private litigants, or restrictions on the
ability to conduct business on such properties.

COMPETITION

      We believe that we are the first publicly-traded real estate investment
trust to primarily focus on consolidating the properties operated by dealerships
under one ownership structure. At this time, we are not aware of any other
entity that is pursuing, or intends to pursue, the acquisition of properties
used by motor vehicle dealerships.

      We anticipate that the majority of our competition will come from banks
and other finance companies that are offering primarily mortgage debt
instruments, or may, in the future offer other types of debt financing.

      Other public or private entities may decide to pursue our strategy of
acquiring and leasing back properties used by dealerships. Current and future
competitors may have greater financial resources or general real estate
experience than we do. We believe that competition for properties will primarily
be on the basis of acquisition price and negotiation of rents and other lease
terms. Our tenants may own or operate other properties that are not owned by us.

EMPLOYEES

      As of February 29, 2000, we had 18 employees. None of the employees is
represented by a collective bargaining unit. We believe that the relationship
with our employees is good.

RECENT DEVELOPMENTS

      During the three months ended December 31, 1999, we acquired 14 dealership
properties, representing 17 automotive franchises, for an aggregate purchase
price of approximately $71.6 million. Consideration for the properties consisted
of approximately $48.0 million in cash (including estimated closing costs
through December 31, 1999); $10.0 million in assumed and amended mortgage debt
and approximately 1.0 million Units (valued at approximately $13.6 million at
the time of acquisition). These properties total approximately 572,000 square
feet of buildings and improvements on approximately 64.4 acres of land and are
located in six states (California, Florida, Louisiana, New Mexico, Texas and
Utah). These properties have initial lease terms ranging from 10 to 15 years
(with an average initial lease term of 14.2 years), and have renewal options
(ranging from a total of 10 to 20 years). The renewal options are exercisable at
the option of the tenant.

1999 ACQUISITIONS

      During the year ended December 31, 1999, we acquired 112 dealership
properties, representing 156 automotive franchises, for an aggregate purchase
price of approximately $430.3 million. Consideration for the properties
consisted of approximately $247.5 million in cash (including estimated closing
costs through December 31, 1999), $160 million in assumed and amended mortgage
debt, and approximately 1.75 million Units (valued at approximately $22.8
million at the time of acquisition). These properties total approximately 3.7
million square feet of buildings and improvements on approximately 591 acres of
land and are located in 19 states (Alabama, California, Florida, Georgia,
Illinois, Indiana, Louisiana, Maryland, North Carolina, New Jersey, New Mexico,
New York, Ohio, Oregon, South Carolina, Tennessee, Texas, Utah and Virginia).
These properties have initial lease terms ranging from 10 to 20 years, with an
average initial lease term of approximately 13.7 years, and have renewal options
(ranging from a total of 10 to 40 years). The renewal options are exercisable at
the option of the tenant.

      Included in the acquisitions during 1999 are 57 properties acquired
through the acquisition of MMR Holdings, L.L.C., MMR Tennessee, L.L.C., and MMR
Viking Investment Associates, L.P. (collectively, "MMR"), each of which were
affiliates of Sonic. In addition, subsequent to the acquisition of MMR, we
purchased two additional properties through MMR. The aggregate purchase price
for all 59 properties was approximately $207 million. Consideration for the
properties consisted of $150 million in assumed and amended debt, $55 million in
the form of a bridge loan (which has subsequently been repaid with the proceeds
of an $85



                                        7

<PAGE>   10

million permanent secured loan) and the remainder in cash (including estimated
closing costs through December 31, 1999). The properties total approximately 1.9
million square feet of buildings and improvements on approximately 354 acres of
land and are located in ten states (Alabama, Florida, Georgia, Maryland, North
Carolina, Ohio, South Carolina, Tennessee, Texas and Virginia). In connection
with these acquisitions, we entered into or continued 58 long-term leases for
the 59 properties. Pursuant to these leases, we receive rent from Sonic (in the
case of 50 leases) and five other tenants that operate motor vehicle related
businesses (in the case of eight leases). The Sonic properties have initial
lease terms ranging from 7.6 years to 10 years. The Sonic leases are guaranteed
by Sonic Automotive, Inc. and Sonic has agreed to renew leases representing at
least 75% of the total rental payments due under the Sonic leases for an
additional five-year term.

ITEM 2. PROPERTIES

PROPERTIES

      As of December 31, 1999, we had invested approximately $935.5 million in
properties, with individual investments ranging from approximately $57,000 to
approximately $23.8 million. As of December 31, 1999, we owned 230 properties
located in 27 states (Alabama, Arizona, California, Colorado, Connecticut,
Florida, Georgia, Idaho, Illinois, Indiana, Louisiana, Maryland, Missouri,
Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma,
Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah and Virginia), and
a total of approximately 1,292 acres of land containing approximately 8.0
million square feet of buildings and improvements. Our tenants operated 349
motor vehicle franchises on these properties, representing 39 brands of motor
vehicles, consisting of Acura, Audi, BMW, Buick, Cadillac, Chevrolet, Chrysler,
Daewoo, Dodge, Dodge Trucks, Ford, Freightliner, GMC, GMC Truck, Honda, Hyundai,
Infiniti, Isuzu, Jaguar, Jeep, Kia, Land Rover, Lexus, Lincoln-Mercury, Mazda,
Mercedes-Benz, Mitsubishi, Nissan, Oldsmobile, Plymouth, Pontiac, Porsche, Saab,
Saturn, Subaru, Suzuki, Toyota, Volkswagen and Volvo.

      All of the properties are owned on a fee simple basis, except that a small
portion of one property is occupied pursuant to a ground lease from the owner of
the property. As of December 31, 1999, 181 of our 230 properties were operated
by franchised automobile dealerships. Properties that are not dealerships, such
as body shops and used vehicle lots, which are operated by franchised automotive
dealers, are generally not subject to any franchise arrangement. As of December
31, 1999, we leased 35 properties that are operated as non-franchised
dealerships or for other motor vehicle uses. The remaining 14 properties,
consisting solely of raw land are leased by various dealer groups, excluding one
parcel, valued at approximately $500,000 (acquired in connection with one
property at no additional cost).

GENERAL DESCRIPTION OF PROPERTIES

      As of December 31, 1999, our properties conform generally to the following
specifications for size, cost and type of land, buildings and other
improvements.

      Land sizes typically range from less than one acre to over 50 acres. The
improvements on the properties generally consist of one or more retail
showrooms, office space (which may or may not be contained in a separate
building), adjacent service and repair facilities, parts and accessories
departments, and in many cases, acreage set aside for used car sales, body
shops, parking for inventory and future development. The properties generally
are zoned for a wide range of commercial uses and typically have frontage on
major transportation arteries with high traffic patterns, high visibility,
signage and ease of ingress and egress.

LEASES AND LEASE EXPIRATIONS

      Substantially all of our properties are leased under triple-net leases,
under which the tenants typically pay all operating expenses of a property,
including, but not limited to, all taxes, assessments and other government
charges, insurance, utilities, service, repairs and maintenance. We believe that
our properties are covered by adequate commercial general, fire, flood and
extended loss insurance provided by reputable companies, with commercially
reasonable deductibles and limits.

      Our properties are subject to leases with initial terms that range
generally from 10 to 20 years, with an average initial lease term of
approximately 13.3 years. The leases typically have options to renew upon the
same terms and conditions for one or



                                        8

<PAGE>   11

more additional periods of five to ten years each exercisable at the option of
the tenant. As of December 31, 1999, the average remaining initial lease term is
approximately 12.3 years. The calculation of average initial lease term and
average remaining initial lease term assumes that Sonic, as required, will renew
for an additional five years, the initial terms of leases representing 75% of
the total rental payments for Sonic leases expiring in any given year.

      The following table sets forth the schedule of lease expirations for our
214 leases in place as of December 31, 1999 for each of the ten years beginning
with 2000, assuming that none of the tenants (other than Sonic) exercise or have
exercised renewal options and that Sonic, as required, will renew for an
additional five years, the initial terms of leases representing 75% of the total
rental payments for Sonic leases expiring in any given year.

<TABLE>
<CAPTION>
                                                                                                              PERCENTAGE OF
                                                                           TOTAL RENTAL REVENUE               TOTAL COMPANY
                                                          NUMBER OF           REPRESENTED BY              ANNUAL RENTAL REVENUE
                                                          EXPIRING            EXPIRING LEASES                REPRESENTED BY
                        YEAR OF LEASE EXPIRATION           LEASES             (IN THOUSANDS)                 EXPIRING LEASES
                      ---------------------------------------------------------------------------------------------------------
                     <S>                                   <C>               <C>                                 <C>
                       2000                                   0                $      --                              --
                       2001                                   0                       --                              --
                       2002                                   0                       --                              --
                       2003                                   1                      244                            0.3%
                       2004                                   0                        0                              --
                       2005                                   0                        0                              --
                       2006                                   1                      154                            0.2%
                       2007                                   6                    2,197                            2.3%
                       2008                                  29                   14,730                           15.2%
                       2009                                  19                   10,274                           10.6%
                       2010 and thereafter                  158                   69,044                           71.4%
</TABLE>

      As of December 31, 1999, all of our 230 properties, excluding one parcel
valued at approximately $500,000 (acquired in connection with one property at no
additional cost), were subject to leases which were performing and in full force
and effect.

PROPERTY AND LEASE CONCENTRATIONS

      We invest in properties throughout the United States. As of December 31,
1999, the properties were diversified across 27 states with the largest
"geographic concentration" in Texas, which accounted for approximately 26.0% of
our total annualized rental revenue, excluding straight-line rental income, as
of December 31, 1999. Properties located in Virginia represented approximately
11.4% of our total annualized rental revenue, excluding straight-line rental
income, as of December 31, 1999. No other state's concentration of properties
exceeded 10% of our total annualized rental revenue, excluding straight-line
rental income, as of December 31, 1999.

      As of December 31, 1999, the properties were leased to 44 different dealer
groups. Sonic accounted for approximately 11.6% of our total revenue and
approximately 11.8% of our total rental revenue for the year ended December 31,
1999, and approximately 22.6% of our total annualized rental revenue, excluding
straight-line rental income, as of December 31, 1999. Failure of Sonic to pay
rent could materially affect our income if we are not able to re-lease the
properties in a timely manner. There was no other tenant that exceeded 10% of
our total revenue, or total rental revenue for the year ended December 31, 1999
or total annualized rental revenue, excluding straight-line rental income, as of
December 31, 1999. For the year ended December 31, 1998, Rosenthal accounted for
approximately 17.7% of our total revenue, approximately 22.9% of our total
rental revenue and, as of December 31, 1998, approximately 13.5% of our total
annualized rental revenue, excluding straight-line rental income. Due to the
acquisition of properties during 1999, Rosenthal accounted for approximately
9.4% of our total revenue and approximately 9.6% of our total rental revenue for
the year ended December 31, 1999, and approximately 7.4% of our total annualized
rental revenue, excluding straight-line rental income, as of December 31, 1999.



                                        9

<PAGE>   12

ITEM 3. LEGAL PROCEEDINGS

      Neither we nor any of our properties currently is subject to any material
legal proceeding nor, to our knowledge, is any material litigation currently
threatened against us or any of our properties. Under the leases, the tenants
are typically obligated to indemnify us from and against all liabilities, costs
and expenses imposed upon or asserted against us (1) as owner of the properties
on account of certain matters relating to the operation of the properties by the
tenant, and (2) where appropriate, on account of certain matters relating to the
ownership of the properties prior to their acquisition by us. See "Item
1--Business--The Properties, Leases, Typical Lease Terms and Dealerships--Leases
and Typical Lease Terms--Indemnification."

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

      No matters were submitted to a vote of shareholders during the fourth
quarter of the fiscal year ended December 31, 1999.

                                     PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

      MARKET INFORMATION AND DISTRIBUTIONS. The common shares have been trading
on the Nasdaq National Market under the symbol "CARS" since February 13, 1998.
Listed below are the high and low sales prices of the common shares as reported
on the Nasdaq National Market and the distributions declared for the periods
indicated.

<TABLE>
<CAPTION>
                                                                              HIGH               LOW            DISTRIBUTION
                                                                        -----------------------------------------------------
                  FISCAL YEAR ENDING DECEMBER 31, 1999
                <S>                                                      <C>               <C>                 <C>
                  Fourth fiscal quarter                                    $        14       $   11 5/8          $     0.360
                  Third fiscal quarter                                          13 3/4               12                0.350
                  Second fiscal quarter                                         13 3/4           11 3/8                0.340
                  First fiscal quarter                                         15 3/16           11 1/4                0.330

                  FISCAL YEAR ENDED DECEMBER 31, 1998

                  Fourth fiscal quarter                                    $    14 7/8       $  8 13/16          $     0.320
                  Third fiscal quarter                                          15 3/4           10 7/8                0.270
                  Second fiscal quarter                                         19 3/8           13 1/8                0.210
                  First fiscal quarter (from February 13,1998)                  19 3/4           16 1/4                0.076
</TABLE>

      On February 29, 2000, the reported closing sales price on the Nasdaq
National Market was $12.50 per share and there were approximately 50 holders of
record of the common shares of the Company. We believe the total number of
beneficial shareholders of the Company to be approximately 2,300 since certain
common shares are held by depositories, brokers and other nominees.

      We intend to continue to pay regular quarterly distributions to holders of
common shares and Units. However, future distributions will be at the discretion
of our Board of Trustees and will depend on our actual funds from operations,
financial condition, capital requirements, the annual distribution requirements
under the REIT provisions of the Code and such other factors as the Board of
Trustees deems relevant.

      The Company's ongoing operations generally will not be subject to federal
income taxes as long as the Company maintains its REIT status. Under the Code,
real estate investment trusts are subject to numerous organizational and
operational requirements, including the requirement to distribute at least 95%
(90% for tax years beginning January 1, 2001) of REIT taxable income. Pursuant
to this requirement, we were required to distribute an estimated $24.2 million
for 1999 and approximately $18.4 million for 1998. In order to avoid
substantially all federal income taxes, we elected to distribute at least 100%
of our taxable income for 1999 and 1998. Although we are required to distribute
at least 95% (90% for tax years beginning January 1, 2001) of REIT taxableincome
to maintain our REIT status, we may or may not elect to distribute in excess of
95% (90% for tax years beginning January 1, 2001) in future years. Our estimated
distribution for 1999 was approximately $25.5 million and our actual
distribution for 1998 was approximately $19.4 million. State income taxes are
not significant.



                                       10

<PAGE>   13

      Distributions to the extent of our current and accumulated earnings and
profits for federal income tax purposes generally will be taxable to a
shareholder as ordinary dividend income. Distributions in excess of current and
accumulated earnings and profits will be treated as a nontaxable reduction of
the shareholder's basis in such shareholder's shares, to the extent thereof, and
thereafter as taxable gain. Distributions that are treated as a reduction of the
shareholder's basis in its shares will have the effect of deferring taxation
until the sale of the shareholder's shares. All of our distributions in 1999 and
1998 will be treated as ordinary dividend income to our shareholders for federal
income tax purposes. Given the dynamic nature of our long-term acquisition
strategy and the extent to which any future acquisitions would alter this
calculation, no assurances can be given regarding what portion, if any, of
distributions in 2000 or subsequent years will constitute a return of capital
for federal income tax purposes.

      ISSUANCES OF UNREGISTERED SECURITIES. On November 5, 1999, the Operating
Partnership issued 70,658 Units to Mark Miller Pontiac, Inc., 307,342 Units to
Mark Miller, 189,192 Units to the MarKat Company, L.L.C. and 467,276 Units to
the Harver Company L.L.C. as partial consideration for the acquisition of four
parcels of real property and improvements located in Salt Lake City, Utah. The
Units are redeemable beginning on January 31, 2001 by the Partnership for cash,
or at our option, common shares of the Company, on a one-for-one basis. The
offering and sale of the Units was exempt from registration as a private
placement under Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act").

      SHARE REPURCHASE PROGRAM. During 1998, we announced that our Board of
Trustees had authorized the repurchase of up to 6.0 million common shares.
Purchases have been and will be made from time to time in open market
transactions at prevailing prices or in negotiated private transactions at the
discretion of our management. During 1998, 3,184,700 common shares were
repurchased at an average price of $10.51 per common share. There were no common
shares repurchased during 1999. Subsequent to December 31, 1999, we repurchased
900,000 common shares at an average price of $10.96 per common share. In
conjunction with the common share repurchases, the Operating Partnership
redeemed an equivalent number of Units from the Company for equivalent purchase
prices.

      DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN. During the second quarter
of 2000, we intend to institute a Dividend Reinvestment and Stock Purchase Plan
under which holders of common shares or Units may elect to automatically
reinvest their distributions to purchase additional common shares and may make
optional cash payments for additional common shares. Under the proposed plan, we
may issue additional common shares or repurchase common shares in the open
market for purposes of financing our obligations under the Dividend Reinvestment
and Stock Purchase Plan. Notwithstanding the foregoing, our Board of Trustees
has full discretion to decide whether or not to implement this plan and thus,
there can be no assurance that we will institute this plan during the second
quarter of 2000 or at any time in the future.

ITEM 6. SELECTED FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                                      YEARS ENDED DECEMBER 31
                                                                              ----------------------------------------
                  (IN THOUSANDS, EXCEPT PER SHARE DATA)                       1999              1998           1997
                                                                              ----------------------------------------
                <S>                                                         <C>           <C>             <C>
                  Total Revenue                                                $75,873       $  34,931       $    --
                  Net Income (Loss)                                             21,731          16,491         (650)
                  Diluted Earnings Per Share                                      1.01            0.79            --
                  Annual Cash Dividend Declared Per Share                         1.38           0.876            --

<CAPTION>

                                                                                        AS OF DECEMBER 31,
                                                                              ----------------------------------------
                                                                              1999              1998           1997
                                                                              ----------------------------------------
               <S>                                                          <C>             <C>            <C>
                  Real Estate Before Accumulated Depreciation                 $935,525        $511,132       $    --
                  Total Assets                                                 942,559         583,211         1,011
                  Total Debt                                                   501,510         161,997         1,000
                  Minority Interest                                            115,384          93,898            --
                  Total Shareholders' Equity (Deficit)                         299,599         308,657         (650)
</TABLE>



                                       11

<PAGE>   14

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

      The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto appearing in Item 8 of this
report. Historical results set forth in Selected Financial Information, and the
Financial Statements and Supplementary Data included in Item 6 and Item 8 and
this section, should not be taken as indicative of our future operations.

      This Annual Report on Form 10-K, including documents incorporated by
reference, contains forward-looking statements within the meaning of Section 21E
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Also,
documents that we subsequently file with the Securities and Exchange Commission
and that are incorporated by reference herein will contain forward-looking
statements. When we refer to forward-looking statements or information,
sometimes we use words such as "may," "will," "could," "should," "plans,"
"intends," "expects," "believes," "estimates," "anticipates" and "continues." In
particular, the following summary of "Business Risks" describes forward-looking
information. The Business Risks that are described are not all inclusive,
particularly with respect to possible future events, and should be read together
with other filings made by the Company under the Securities Act and the Exchange
Act, including the risks and other risk factors contained in the Company's Form
8-K/A filed on January 19, 2000. Other parts of this Annual Report on Form 10-K
may also describe forward-looking information. Many things can happen that can
cause our actual results to be very different than those described. These
factors include:

      -     risks that our tenants will not pay rent or that our operating costs
            will be higher than expected;

      -     risks of interest rate fluctuations impacting future acquisitions;

      -     risks that additional acquisitions may not be consummated; and

      -     environmental and other risks associated with the acquisition and
            leasing of automotive properties.

      Given these uncertainties readers are cautioned not to place value
reliance on these forward-looking statements. We also make no promise to update
any of the forward-looking statements, or to publicly release the results if we
revise any of them.

OVERVIEW

      Our primary business purpose is to own and lease real estate properties
(land, buildings and other improvements) to operators of franchised automobile
dealerships, motor vehicle service, repair or parts businesses and related
businesses. As of December 31, 1999, we owned 230 dealership properties,
representing 349 automotive franchises, with a total investment of approximately
$935.5 million. Consideration for the properties consisted of approximately
$641.9 million in cash (including estimated closing costs through December 31,
1999), $172 million in assumed and amended mortgage debt, and approximately 8.3
million Units (valued at approximately $121.6 million at the time of
acquisition). These properties total approximately 8.0 million square feet of
buildings and improvements on 1,292 acres of land and are located in 27 states
(Alabama, Arizona, California, Colorado, Connecticut, Florida, Georgia, Idaho,
Illinois, Indiana, Louisiana, Maryland, Missouri, Nevada, New Jersey, New
Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South
Carolina, Tennessee, Texas, Utah and Virginia). These properties have initial
lease terms generally ranging from 10 to 20 years with an average initial lease
term of approximately 13.3 years, and have renewal options (ranging from a total
of 10 years to 40 years). The renewal options are exercisable at the option of
the tenant. Our portfolio weighted average initial cap rate at December 31, 1999
was 10.5%, which is calculated as the percentage of the initial annual base rent
over the purchase price paid to the sellers for the related properties.

      Substantially all our properties are leased pursuant to long-term
triple-net leases, under which the tenants typically pay substantially all
operating expenses of a property, including, but not limited to, taxes,
assessments and other government charges, insurance, utilities, service,
repairs, maintenance and other expenses. The leases are generally for a period
of 10 to 20 years, with options to renew upon the same terms and conditions for
one or more additional periods of 5 to 10 years. The renewal options are
exercisable at the option of the tenant.

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



                                       12

<PAGE>   15

      We incur general and administrative expenses including, principally,
compensation expense for our executive officers and other employees,
professional fees and various expenses incurred in the process of identifying
and acquiring additional properties. We are self-administered and managed by our
trustees, executive officers and staff. Our primary non-cash expense is the
depreciation of our properties. We depreciate buildings and improvements on our
properties over a 40-year period for tax purposes and a 20-year to 30-year
period for financial reporting purposes. We do not own or lease any significant
personal property, furniture or equipment at any property we currently own.

RECENT DEVELOPMENTS

      During the three months ended December 31, 1999, we acquired 14 dealership
properties, representing 17 automotive franchises, for an aggregate purchase
price of approximately $71.6 million. Consideration for the properties consisted
of approximately $48.0 million in cash (including estimated closing costs
through December 31, 1999), $10.0 million in assumed and amended mortgage debt
and approximately 1.0 million Units (valued at approximately $13.6 million at
the time of acquisition). These properties total approximately 572,000 square
feet of buildings and improvements on approximately 64.4 acres of land and are
located in six states (California, Florida, Louisiana, New Mexico, Texas and
Utah). These properties have initial lease terms ranging from 10 to 15 years
(with an average initial lease term of approximately 14.2 years), and have
renewal options (ranging from a total of 10 to 20 years). The renewal options
are exercisable at the option of the tenant.

1999 ACQUISITIONS

      During the year ended December 31, 1999, we acquired 112 dealership
properties, representing 156 automotive franchises, for an aggregate purchase
price of approximately $430.3 million. Consideration for the properties
consisted of approximately $247.5 million in cash (including estimated closing
costs through December 31, 1999), $160 million in assumed and amended mortgage
debt, and approximately 1.75 million Units (valued at approximately $22.8
million at the time of acquisition). These properties total approximately 3.7
million square feet of buildings and improvements on approximately 591 acres of
land and are located in 19 states (Alabama, California, Florida, Georgia,
Illinois, Indiana, Louisiana, Maryland, North Carolina, New Jersey, New Mexico,
New York, Ohio, Oregon, South Carolina, Tennessee, Texas, Utah and Virginia).
These properties have initial lease terms ranging from 10 to 20 years, and have
renewal options (ranging from a total of 10 to 40 years). The renewal options
are exercisable at the option of the tenant.

      Included in the acquisitions during 1999 are 57 properties acquired
through the acquisition of MMR, which was an affiliate of Sonic. In addition,
subsequent to the acquisition of MMR, we purchased two additional properties
through MMR. The aggregate purchase price for all 59 properties was
approximately $207 million. Consideration for the properties consisted of $150
million in assumed and amended debt, $55 million in the form of a bridge loan
(which has subsequently been repaid with the proceeds of an $85 million
permanent secured loan) and the remainder in cash (including estimated closing
costs through December 31, 1999). The properties total approximately 1.9 million
square feet of buildings and improvements on 354 acres of land and are located
in ten states (Alabama, Florida, Georgia, Maryland, North Carolina, Ohio, South
Carolina, Tennessee, Texas and Virginia). In connection with these acquisitions,
we entered into or continued 58 long-term leases for the 59 properties. Pursuant
to these leases, we receive rent from Sonic (in the case of 50 leases) and five
other tenants that operate motor vehicle related businesses (in the case of
eight leases). The Sonic properties have initial lease terms ranging from 7.6
years to 10 years. The Sonic leases are guaranteed by Sonic Automotive, Inc. and
Sonic has agreed to renew leases representing at least 75% of the total rental
payments due under the Sonic leases for an additional five-year term.

RESULTS OF OPERATIONS

      Although we were formed prior to January 1, 1998, we did not complete our
initial public offering ("IPO") until February 19, 1998, at which time we
purchased our initial properties and began generating rental income.

      Rental revenue for the year ended December 31, 1999 increased 175% to
$74.3 million, as compared to $27.0 million for 1998. The increase was primarily
attributable to the growth of our real estate portfolio and the timing of our
property acquisitions



                                       13

<PAGE>   16

(230 properties owned as of December 31, 1999 versus 120 properties as of
December 31, 1998), from which we generate our rental income. In addition,
during the third quarter of 1999, we began, on a prospective basis,
straight-lining our rents for leases with fixed minimum escalators. This
increased rental revenue for the year ended December 31, 1999 by approximately
$962,000. The effect on prior years was not material.

      Interest and other income for the year ended December 31, 1999 decreased
81% to $1.5 million from $7.9 million for 1998. Interest and other income during
the year ended December 31, 1998 was primarily generated from the investment of
the excess of the net proceeds of a private placement offering and our IPO
including the exercise of the underwriters' over-allotment option (both of which
were completed during the first quarter of 1998). These net proceeds were fully
used during 1998 and therefore did not generate interest income during 1999.
Interest and other income during 1999 was primarily generated from the
investment of the excess of debt issuance proceeds over the amount invested in
properties and a $245,000 gain on the sale of properties during 1999.

      Depreciation and amortization for the year ended December 31, 1999
increased 143% to $15.3 million from $6.3 million for 1998 and consisted
primarily of depreciation on buildings and improvements owned during those
years. The increase is attributable to the growth of our real estate portfolio,
resulting in an increase in our depreciable assets. Partially offsetting the
increase was a change in the depreciable life on the majority of our buildings
and improvements that were acquired prior to 1999 that were being depreciated
over 20 years. During the third quarter of 1999, we reviewed the age and
estimated remaining useful life of each of our properties in our real estate
portfolio that we acquired prior to 1999. Based on the average age of these
assets, we changed the depreciable life on the majority of our buildings and
improvements that were currently being depreciated over a 20-year life to a
30-year life in order to properly reflect the estimated remaining useful lives.
The change in depreciable life is consi-dered a change in an accounting estimate
and has been recorded on a prospective basis beginning in the third quarter of
1999. The impact of this change decreased depreciation and amortization expense
by approximately $2.2 million for the year ended December 31, 1999.

      General and administrative expenses for the year ended December 31, 1999
increased 24% to $6.8 million, as compared to $5.5 million for 1998. The
increase is primarily due to increased payroll and related benefits attributable
to personnel additions throughout 1998 and severance payments made in connection
with staffing reductions during the first quarter of 1999. Also contributing to
the increase were increased marketing expenses as well as increased professional
fees and other administrative costs associated with increased public reporting
requirements. These increases were partially offset by the reduction in payroll
and related expenses as a result of staffing reductions throughout 1999 and the
closing of the Chicago office during the second quarter of 1999.

      Interest expense for the year ended December 31, 1999 increased to $24.5
million from $2.3 million for 1998. The increase was due to interest charged on
issued debt in late 1998 and throughout 1999 (including mortgage debt and
borrowings under our credit facility). Debt outstanding as of December 31, 1999
was approximately $501.5 million (consisting of approximately $491.5 million of
fixed rate indebtedness and approximately $10.0 million of variable rate
indebtedness) compared to $162.0 million (all of which was fixed rate
indebtedness) as of December 31, 1998.

LIQUIDITY AND CAPITAL RESOURCES

      Cash and cash equivalents were $11.9 million and $72.1 million at December
31, 1999 and December 31, 1998, respectively. The changes in cash and cash
equivalents during the year ended December 31, 1999 and 1998 were attributable
to operating, investing and financing activities, as described below.

      Cash flow provided by operating activities for the year ended December 31,
1999 and 1998 was $39.8 million and $31.2 million, respectively, and represents,
in both years, cash received from rents under long-term triple-net leases, plus
interest and other income, less normal recurring general and administrative
expenses and interest payments on debt outstanding. Cash used in investing
activities for the year ended December 31, 1999 and 1998 was $401.2 million and
$412.6 million, respectively, and primarily reflects the acquisition of
dealership properties during those years. Cash flow from financing activities
for the year ended



                                       14

<PAGE>   17

December 31, 1999 and 1998 was $301.2 million and $453.5 million, respectively.
Cash flow from financing activities for the year ended December 31, 1999,
primarily reflects $345 million of proceeds from mortgage loans closed during
the year and $62 million of proceeds from bank borrowings. This was partially
offset by the repayment of bank borrowings and mortgage principal payments and
distributions made to shareholders and limited partners during the year. Cash
flow from financing activities for the year ended December 31, 1998, primarily
reflects net proceeds totaling $342.3 million from a private placement offering
and our IPO including the exercise of the underwriters' over-allotment option,
$162 million of proceeds from mortgage loans closed in 1998 and $63 million from
bank borrowings. This was partially offset by the repayment of bank borrowings
and distributions made to shareholders and limited partners during 1998.

      Mortgage Indebtedness. As of December 31, 1999, we had mortgage
indebtedness totaling approximately $501.5 million (consisting of approximately
$491.5 million of fixed rate indebtedness and approximately $10.0 million of
variable rate indebtedness) secured by various properties we owned. The
following is a summary of our mortgage debt at December 31, 1999 (amounts in
thousands):

<TABLE>
<CAPTION>
                                                                      BALANCES
                                                                    OUTSTANDING AS OF             EFFECTIVE
                                             ORIGINAL DEBT            DECEMBER 31,                INTEREST        AMORTIZATION
DESCRIPTION OF DEBT                             ISSUED                    1999                      RATE*           SCHEDULE
- -------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                      <C>                         <C>              <C>
7.50% Fixed rate debt due 1/20/03(1)          $    12,000              $    11,730                 7.75%            20 year
7.59% Fixed rate debt due 12/1/08(2)               38,050                   38,050                 7.98%            17 year
7.635% Fixed rate debt due 10/1/14(3)             111,950                  107,675                 7.92%            15 year
8.05% Fixed rate debt due 10/1/14(4)               85,000                   84,528                 8.32%            15 year
7.54% Fixed rate debt due 7/6/11(5)               100,000                   99,527                 7.70%            25 year
8.03% Fixed rate debt due 9/29/11(6)              150,000                  150,000                 8.08%            25 year
Floating rate debt due 12/22/09(7)                 10,000                   10,000                 7.67%                 --
                                              -----------              -----------
      Total                                   $   507,000              $   501,510
                                              ===========              ===========
</TABLE>

*     Includes deferred loan fees amortized over the life of the loans.

(1)   A 4.25-year, mortgage note payable to a financial institution and assumed
      by us as partial consideration for the acquisition of four dealership
      properties. The note is secured by the properties acquired, which as of
      December 31, 1999 have an aggregate net book value of approximately $22.3
      million. Principal and interest are payable monthly with a final payment
      at maturity of approximately $10.8 million. There are no financial
      covenants required under this note; however, there are negative covenants
      relating to customary items such as operation and maintenance of the
      properties securing the note and limitations on issuing additional secured
      debt at the subsidiary level. As of December 31, 1999, we were in
      compliance with the loan covenants.

(2)   A ten-year, non-recourse loan with Global Alliance Finance Company, L.L.C.
      ("GAFCO") that was amended in the first quarter of 1999. The loan requires
      monthly payments of interest only for approximately one year. Thereafter,
      monthly payments of principal and interest are required with a final
      payment at maturity of approximately $24.5 million. The loan is secured by
      mortgages on seven of our properties, which as of December 31, 1999 have
      an aggregate net book value of approximately $64.0 million. The Operating
      Partnership has provided a guaranty limited to approximately $8.9 million
      of this loan, which guaranty is contingent upon the occurrence of certain
      circumstances. There are no financial covenants required under this loan;
      however, there are negative covenants relating to customary items such as
      operation and maintenance of the properties securing the loan and
      limitations on issuing additional secured debt at the subsidiary level.
      As of December 31, 1999, we were in compliance with the loan covenants.

(3)   A 15-year, non-recourse loan, evidenced by three separate loans and notes,
      with German American Capital Corporation ("GACC") that was amended during
      the third quarter of 1999. The loan requires monthly payments of principal
      and interest with a final payment at maturity of approximately $3.4
      million. The loan is secured by mortgages on 50 of our properties, which
      as of December 31, 1999 have an aggregate net book value of approximately
      $185.1 million. The Operating Partnership has provided a guaranty limited
      to approximately $26.1 million of these loans, which guaranty is
      contingent upon the occurrence of certain circumstances. There are no
      financial covenants required under this loan; however, there are negative
      covenants relating to customary items such as operation and maintenance of
      the properties securing the loan and limitations on issuing additional
      secured debt at the subsidiary level. As of December 31, 1999, we were in
      compliance with the loan covenants.

(4)   A 15-year, non-recourse loan with GACC. The loan requires monthly payments
      of principal and interest with a final payment at maturity of
      approximately $2.9 million. The loan is secured by mortgages on
      approximately 28 of our properties, which as of December 31, 1999 have an
      aggregate net book value of approximately $154.2 million. Loan covenants
      required under this loan and our compliance with those covenants are
      consistent with the above-mentioned loan with GACC. The two loans with
      GACC are cross-collateralized.

(5)   A 12-year mortgage loan with Ford Motor Credit Company ("FMCC"). The loan
      requires quarterly payments of principal and interest with a final payment
      at maturity of approximately $73.3 million. The loan is secured by
      approximately 48 of our properties, which as of December 31, 1999 have an
      aggregate net book value of approximately $176.5 million. There is one
      financial covenant limiting total Company debt to 65% of assets, as
      defined in the FMCC loan agreement. There are negative covenants relating
      to customary items such as operation and maintenance of the properties
      securing the loan and limitations on issuing additional secured debt at
      the subsidiary level. As of December 31, 1999, we were in compliance with
      the loan covenants.

(6)   An assumed and amended 12-year mortgage loan with FMCC, of which the
      proceeds were used as partial consideration for the MMR acquisition. The
      terms of the loan require quarterly interest-only payments for two years.
      Thereafter, payments of principal and interest will be made quarterly with
      a final payment at maturity of approximately $124.6 million. The loan is
      secured by 59 of our properties, which as of December 31, 1999 have an
      aggregate net book value of approximately $206.3 million. Loan covenants
      required under this loan and our compliance with those covenants are
      consistent with the above-mentioned loan with FMCC.

(7)   A ten-year mortgage loan with FMCC. Approximately $6.7 million of the loan
      was assumed as partial consideration for the acquisition of three
      dealership properties and subsequently was amended and increased to $10.0
      million. The loan bears interest at a variable rate equal to 200 basis
      points per annum



                                       15

<PAGE>   18

      above the A1-P1 Commercial Paper Rate. The interest rate as of December
      31, 1999 was approximately 7.48%. The terms of the loan require quarterly
      principal payments of $100,000 and quarterly interest payments. At
      maturity the loan requires a final payment of approximately $6.3 million.
      The loan is secured by three properties, which as of December 31, 1999
      have an aggregate net book value of approximately $13.2 million. Loan
      covenants required under this loan and our compliance with those covenants
      are consistent with the above-mentioned loans with FMCC.

      As of December 31, 1999, we had a $50 million revolving secured credit
facility from a financial institution, under which no amounts were outstanding.
The facility has a three-year term and terminates on March 3, 2002. The facility
bears interest equal to the 30-day LIBOR rate plus 175 basis points. The
facility contains financial covenants, such as debt service coverage ratio and
debt to adjusted net worth requirements, that we must comply with annually. As
of December 31, 1999, we were in compliance with the loan covenants.

      COMMITMENTS. On December 16, 1999, we entered into a commitment letter
with a financial institution for a $100 million secured revolving credit
facility which will provide interim real estate financing. The proceeds are to
be used to acquire additional properties, which will be used as collateral for
the credit facility. Borrowings will require monthly interest payments at a
floating rate equal to 225 basis points above the 30-day LIBOR rate and
repayment of principal within 180 days. The facility will have a term of one
year, renewable annually, and will contain customary loan covenants. Final terms
and conditions are currently being negotiated. We also have had discussions with
several financial institutions to obtain additional unsecured, partially secured
or secured loans or credit facilities, the amount and terms of which have not
been determined.

      LIQUIDITY REQUIREMENTS. Short-term liquidity requirements consist
primarily of normal recurring operating expenses, regular debt service
requirements (including debt service relating to additional and replacement
debt), recurring capital expenditures, distributions to shareholders and
unitholders, and amounts required for additional property acquisitions. We
expect to meet these requirements (other than amounts required for additional
property acquisitions) through cash flow provided by operating activities. We
anticipate that any additional acquisition of properties during the next 12
months will be funded with amounts available under our existing and committed
secured credit facilities, and with future secured and unsecured debt.
Acquisitions will be made subject to our investment objectives and policies to
maximize both current income and long-term growth in income.

      As of December 31, 1999, long-term liquidity requirements consisted
primarily of maturities under our long-term debt. We anticipate that long-term
liquidity requirements will also include amounts required for acquisition of
properties. We expect to meet long-term liquidity requirements through long-term
secured and unsecured borrowings and other debt and equity financing
alternatives. The availability and terms of any such financing will depend upon
market and other conditions.

      Our liquidity requirements with respect to future acquisitions may be
reduced to the extent that we use Units as consideration for such purchases.

      During 1999, our Board of Trustees approved a resolution providing that
our policy shall be to limit debt to approximately 65% of our assets (calculated
as total assets plus accumulated depreciation). This policy may be changed by
the Board of Trustees at any time without shareholder approval. As of December
31, 1999, we had a debt to asset ratio of approximately 52%.

      In light of our current debt to asset ratio, we are able to obtain
additional financing for our long-term capital needs without exceeding our debt
to asset ratio policy. However, there can be no assurance that additional
financing or capital will be available, or that the terms will be acceptable or
advantageous to us.

YEAR 2000 UPDATE

      In 1999, we discussed the nature and progress of our plans to confront
year 2000 issues. In late 1999, we completed our remediation and testing of our
software applications and hardware systems. As a result of those planning and
implementation efforts, we experienced no material information technology or
non-information technology systems problems, and we believe those systems
successfully responded to the year 2000 date change. We did not occur
significant costs in designing and implementing our year 2000 plan, nor did we
incur significant costs in modifying our existing software applications,
replacing hardware or hiring consultants in resolving year 2000 issues. In
addition, we are not aware that any of our tenants or third parties with whom we
conduct business experienced any material systems problems related to year 2000
issues. We will continue to monitor our information technology and
non-information technology systems and those of our tenants and third parties
with whom we conduct business throughout the year 2000 to ensure that any latent
year 2000 matters that may arise are addressed promptly. Although management



                                       16

<PAGE>   19

does not anticipate any additional expenditures relating to year 2000 issues,
there can be no assurance as to the magnitude of any future costs until
significant time has passed.

FUNDS FROM OPERATIONS

      Funds From Operations ("FFO") is defined under the revised definition
adopted in 1995 by the National Association of Real Estate Investment Trusts
(NAREIT) as net income (loss) (computed in accordance with GAAP) excluding gains
(or losses) from debt restructuring or sales of property plus depreciation and
amortization of assets unique to the real estate industry. NAREIT developed FFO
as a relative measure of performance and liquidity of an equity REIT in order to
recognize that income-producing real estate historically has not depreciated on
the basis determined under GAAP. FFO does not represent cash flows from
operating activities in accordance with generally accepted accounting principles
(which, unlike FFO, generally reflects all cash effects of transactions and
other events in the determination of net income) and should not be considered an
alternative to net income as an indication of our performance or to cash flow as
a measure of liquidity or ability to make distributions. We consider FFO a
meaningful, additional measure of operating performance because it primarily
excludes the assumption that the value of the real estate assets diminishes
predictably over time, and because industry analysts have accepted it as a
performance measure. Comparison of our presentation of FFO, using the NAREIT
definition, to similarly titled measures for other REITs may not necessarily be
meaningful due to possible differences in the application of the NAREIT
definition used by such REITs.

      FFO of the Operating Partnership for the years ended December 31, 1999 and
1998 is computed as follows (in thousands):

<TABLE>
<CAPTION>
                                                                         1999         1998
                                                                     -------------------------
      <S>                                                           <C>          <C>
      Net Income before Minority Interest                            $  29,204    $  20,886
      Real Estate Depreciation and Amortization                         15,246        6,161
      Straight-line Rental Income                                        (962)           --
      Gain on Sale of Asset                                              (245)           --
                                                                     ---------    ---------
      Funds From Operations                                          $  43,243    $  27,047
                                                                     =========    =========
</TABLE>

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

      Interest rate fluctuations will affect the fair value of our fixed rate
debt instruments. As of December 31, 1999, we had fixed rate indebtedness
totaling approximately $491.5 million. If interest rates on our fixed rate debt
instruments at December 31, 1999 had been one percent higher, the fair value of
those debt instruments on that date would have decreased by approximately $29.7
million. Interest rate fluctuations will affect our annual interest expense on
our variable rate debt. As of December 31, 1999, we had variable rate
indebtedness totaling approximately $10.0 million. If the interest rate on our
variable rate debt instrument outstanding at December 31, 1999 had been one
percent higher, our annual interest expense relating to that debt instrument
would have increased by $100,000, based on balances at December 31, 1999.



                                       17

<PAGE>   20

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                  PAGE NO.
                                                                                 ----------
        <S>                                                                        <C>
          Report of Independent Public Accountants--Arthur Andersen LLP ......       19
          Consolidated Balance Sheets ........................................       20
          Consolidated Statements of Operations ..............................       21
          Consolidated Statements of Changes in Shareholders' Equity (Deficit)       22
          Consolidated Statements of Cash Flows ..............................       23
          Notes to Consolidated Financial Statements .........................       24
</TABLE>



                                       18

<PAGE>   21

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Capital Automotive REIT:

      We have audited the accompanying consolidated balance sheets of Capital
Automotive REIT (a Maryland real estate investment trust, the "Company") and
subsidiaries as of December 31, 1999 and 1998, and the related consolidated
statements of operations, changes in shareholders' equity (deficit) and cash
flows for the years ended December 31, 1999 and 1998, and the period from
October 20, 1997 (date of organization) through December 31, 1997. These
consolidated financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and schedule based on our
audits.

      We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards 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. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

      In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Capital
Automotive REIT and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for the years ended December
31, 1999 and 1998, and the period from October 20, 1997 (date of organization)
through December 31, 1997 in conformity with accounting principles generally
accepted in the United States.

      Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The Schedule of Real Estate
and Accumulated Depreciation is presented for purposes of complying with the
rules of the Securities and Exchange Commission and is not a required part of
the basic consolidated financial statements. This schedule has been subjected
to the auditng procedures applied in our audit of the basic consolidated
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic consolidated financial statements taken as a
whole.

/S/ ARTHUR ANDERSEN LLP

Vienna, Virginia
January 28, 2000



                                       19

<PAGE>   22

                            CAPITAL AUTOMOTIVE REIT

                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                               AS OF DECEMBER 31,
                                                                      ------------------------------------
                                                                              1999            1998
                                                                      ------------------------------------
                                     ASSETS
<S>                                                                     <C>               <C>
Real estate:
    Land ..........................................................       $ 423,757        $ 238,970
    Buildings and improvements ....................................         511,768          272,162
    Accumulated depreciation ......................................         (21,202)          (6,145)
                                                                          ---------        ---------
                                                                            914,323          504,987
Cash and cash equivalents .........................................          11,886           72,106
Other assets, net .................................................          16,350            6,118
                                                                          ---------        ---------
            TOTAL ASSETS ..........................................       $ 942,559        $ 583,211
                                                                          =========        =========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:
    Mortgage loans ................................................       $ 501,510        $ 161,997
    Accounts payable and accrued expenses .........................          21,298           14,752
    Security deposits payable .....................................           4,768            3,907
                                                                          ---------        ---------
            TOTAL LIABILITIES .....................................         527,576          180,656
                                                                          ---------        ---------
Minority interest .................................................         115,384           93,898
SHAREHOLDERS' EQUITY:
    Preferred shares, $.01 par value; 20,000,000 shares authorized;
        none outstanding ..........................................              --               --
    Common shares, $.01 par value; 100,000,000 shares authorized;
        24,792,115 shares issued and 21,607,415 outstanding .......             248              248
    Additional paid-in-capital ....................................         344,981          345,905
    Accumulated deficit ...........................................         (12,159)          (4,025)
    Less treasury shares at cost, 3,184,700 common shares .........         (33,471)         (33,471)
                                                                          ---------        ---------
            TOTAL SHAREHOLDERS' EQUITY ............................         299,599          308,657
                                                                          ---------        ---------
            TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............       $ 942,559        $ 583,211
                                                                          =========        =========
</TABLE>


          See accompanying Notes to Consolidated Financial Statements.


                                       20


<PAGE>   23

                            CAPITAL AUTOMOTIVE REIT

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                           YEARS ENDED DECEMBER 31,
                                                               ------------------------------------------
                                                                    1999           1998            1997
                                                               ------------------------------------------
<S>                                                             <C>            <C>            <C>
Revenue:
    Rental ...............................................       $ 74,339        $ 27,027       $      --
    Interest and other ...................................          1,534           7,904              --
                                                                 --------        --------       ---------
            Total revenue ................................         75,873          34,931              --
                                                                 --------        --------       ---------
Expenses:
    Depreciation and amortization ........................         15,347           6,304              --
    General and administrative ...........................          6,781           5,487             649
    Interest .............................................         24,541           2,254               1
                                                                 --------        --------       ---------
            Total expenses ...............................         46,669          14,045             650
                                                                 --------        --------       ---------
Net income (loss) before minority interest ...............         29,204          20,886            (650)
Minority interest ........................................         (7,473)         (4,395)             --
                                                                 --------        --------       ---------
Net income (loss) ........................................       $ 21,731        $ 16,491        $   (650)
                                                                 ========        ========       =========
Shares of common stock outstanding used to compute basic
    earnings per share ...................................         21,607          20,927              --
                                                                 ========        ========       =========
Basic earnings per share .................................       $   1.01        $   0.79        $     --
                                                                 ========        ========       =========
Shares of common stock outstanding used to compute diluted
    earnings per share ...................................         21,629          20,978              --
                                                                 ========        ========       =========
Diluted earnings per share ...............................       $   1.01        $   0.79         $    --
                                                                 ========        ========       =========
</TABLE>


          See accompanying Notes to Consolidated Financial Statements.


                                       21

<PAGE>   24

                            CAPITAL AUTOMOTIVE REIT

      CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                 COMMON SHARES       ADDITIONAL
                                           ------------------------    PAID-IN     ACCUMULATED     TREASURY
                                              SHARES       AMOUNT      CAPITAL       DEFICIT        SHARES      TOTAL
                                           -------------------------------------------------------------------------------
<S>                                        <C>           <C>         <C>          <C>           <C>          <C>
BALANCE AT OCTOBER 20, 1997                         --    $     --    $     --     $     --      $     --     $     --
Net loss ..............................             --          --          --         (650)           --         (650)
Capital contribution ..................             10          --          --           --            --           --
                                            ----------    --------    --------     --------      --------     --------
BALANCE AT DECEMBER 31, 1997                        10          --          --         (650)           --         (650)
Repurchase of initial shares...........            (10)         --          --           --            --           --
Proceeds from initial public offering..     20,000,000         200     299,800           --            --      300,000
Proceeds from exercise of underwriters'
    over-allotment option .............      3,000,000          30      44,970           --            --       45,000
Proceeds from private placement........      1,792,115          18      24,982           --            --       25,000
Payment of underwriting discounts,
    commissions and other offering
    expenses ..........................             --          --     (27,715)          --            --      (27,715)
Adjustment to reflect minority interest
    ownership in Operating Partnership              --          --       3,868           --            --        3,868
Purchase of treasury shares ...........     (3,184,700)         --          --           --       (33,471)     (33,471)
Dividend declared or paid .............             --          --          --      (19,866)           --      (19,866)
Net income ............................             --          --          --       16,491            --       16,491
                                            ----------    --------    --------     --------      --------     --------
BALANCE AT DECEMBER 31, 1998                21,607,415         248     345,905       (4,025)      (33,471)     308,657
Adjustment to reflect minority interest
    ownership in Operating Partnership              --          --      (1,356)          --            --       (1,356)
Registration fees and other ...........             --          --         432           --            --          432
Dividend declared or paid .............             --          --          --      (29,865)           --      (29,865)
Net income ............................             --          --          --       21,731            --       21,731
                                            ----------    --------    --------     --------      --------     --------
BALANCE AT DECEMBER 31, 1999                21,607,415    $    248    $344,981     $(12,159)     $(33,471)    $299,599
                                            ==========    ========    ========     ========      ========     ========
</TABLE>



          See accompanying Notes to Consolidated Financial Statements.


                                       22

<PAGE>   25

                            CAPITAL AUTOMOTIVE REIT

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                 YEARS ENDED DECEMBER 31,
                                                                                          1999            1998            1997
                                                                                  -----------------------------------------------
<S>                                                                                  <C>            <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income (loss) ..........................................................       $  21,731      $  16,491       $    (650)
    Adjustments to reconcile net income (loss) to net cash provided by (used in)
        operating activities:
    Depreciation and amortization ..............................................          16,042          6,304              --
    Income applicable to minority interest .....................................           7,473          4,395              --
    Increase in other assets ...................................................         (11,041)        (5,004)           (957)
    Increase in accounts payable and accrued expenses ..........................           4,732          5,118             661
    Increase in security deposits payable ......................................             861          3,907              --
                                                                                       ---------      ---------       ---------
        Net cash provided by (used in) operating activities ....................          39,798         31,211            (946)
                                                                                       ---------      ---------       ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of furniture and equipment, net of disposals ......................             (61)          (286)            (29)
    Real estate acquisitions, net of sales .....................................        (401,130)      (412,346)             --
                                                                                       ---------      ---------       ---------
        Net cash used in investing activities ..................................        (401,191)      (412,632)            (29)
                                                                                       ---------      ---------       ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from bank borrowings ..............................................          62,000         63,000           1,000
    Proceeds from mortgage loans ...............................................         345,000        162,032              --
    Repayment of bank borrowings ...............................................         (62,000)       (64,000)             --
    Mortgage principal payments ................................................          (5,487)           (35)             --
    Proceeds from issuance of initial public offering of common shares and
        underwriters' over-allotment option, net of issuance costs .............              --        317,285              --
    Proceeds from issuance of private placement, net of issuance costs .........              --         25,000              --
    Payment of cash dividend ...................................................         (28,990)       (12,952)             --
    Payment of partner distribution ............................................          (9,220)        (3,357)             --
    Purchase of treasury shares ................................................              --        (33,471)             --
    Other fees .................................................................            (130)            --              --
                                                                                       ---------      ---------       ---------
        Net cash provided by financing activities ..............................         301,173        453,502           1,000
                                                                                       ---------      ---------       ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ...........................         (60,220)        72,081              25
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ...............................          72,106             25              --
                                                                                       ---------      ---------       ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .....................................       $  11,886      $  72,106         $    25
                                                                                       =========      =========       =========

SUPPLEMENTAL DATA:
    Real estate acquisitions in exchange for equity issuance ...................       $  23,376      $  98,786         $    --
    Fourth quarter distribution ................................................       $  10,786(1)   $   8,973(2)      $    --
    Interest paid during the period ............................................       $  17,353      $   2,177         $    --
</TABLE>

NOTES:

(1)   Declared in fourth quarter 1999, paid in January 2000.
(2)   Declared in fourth quarter 1998, paid in January 1999.


          See accompanying Notes to Consolidated Financial Statements.


                                       23

<PAGE>   26

                             CAPITAL AUTOMOTIVE REIT

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION

      Capital Automotive REIT (the "Company") is a Maryland real estate
investment trust formed in October 1997. The Company owns its property interests
through Capital Automotive L.P. (the "Operating Partnership") and its
subsidiaries. The Company is the sole general partner of the Operating
Partnership. As of December 31, 1999, the Company held a 72.2% general
partnership interest in the Operating Partnership. The Company completed its
initial public offering of common shares and began generating rental income in
February 1998. References to "we," "us," "our," refer to the Company or, if the
context otherwise requires, the Operating Partnership and our business and
operations conducted through the Operating Partnership and/or its directly and
indirectly owned subsidiaries.

      Our primary business purpose is to own and lease real estate properties
(land, buildings and other improvements) to operators of franchised automobile
dealerships, motor vehicle service, repair or parts businesses and related
businesses. We use (i) the term dealerships to refer to these types of
businesses that are operated on our properties, (ii) the term dealer group to
refer to a group of related persons and companies who sell us properties, and
(iii) the term dealer, tenant or lessee to refer to the related persons and
companies that lease our properties. Our strategy focuses on acquiring real
estate used by multi-site, multi-franchised dealerships located primarily in
major metropolitan areas throughout the United States.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

      The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") and include
our accounts, net of minority interest as defined in Note 10 herein. All
intercompany balances and transactions have been eliminated in consolidation.

REAL ESTATE AND DEPRECIATION

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

      During 1999, management reviewed the age and estimated remaining useful
life of each of our properties in our real estate portfolio that were acquired
prior to 1999. Based on the average age of these assets, we changed the
depreciable life on the majority of our buildings and improvements that were
acquired prior to 1999 that were currently being depreciated over a 20-year life
to a 30-year life in order to properly reflect the estimated remaining useful
lives. The change in depreciable life is consi-dered a change in an accounting
estimate and has been recorded on a prospective basis beginning in the third
quarter of 1999. The impact of this change reduced depreciation and amortization
expense by approximately $2.2 million and thus, increased net income before
minority interest by approximately $2.2 million for the year ended December 31,
1999.

      We periodically assess our real estate assets for possible permanent
impairment when certain events or changes in circumstances indicate that the
carrying amount of real estate may not be recoverable. A significant decrease in
the real estate's fair market value, an accumulation of costs significantly
exceeding amounts originally expected to acquire the asset or a tenant's
inability to perform its duties and pay rent under the terms of the lease, may
all affect our ability to recover the carrying amount of the real property.
Management considers current market conditions, tenant credit analysis and third
party valuations in determining the net realizable value of our rental
properties. After completing this assessment, management believes no material
impairment has occurred in our net property carrying values as of December 31,
1999.



                                       24

<PAGE>   27

                            CAPITAL AUTOMOTIVE REIT

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)

FURNITURE, FIXTURES AND EQUIPMENT

      Furniture, fixtures and equipment are recorded at cost. Depreciation is
calculated on a straight-line basis over the estimated useful lives of the
assets, ranging from three to five years.

CASH AND CASH EQUIVALENTS

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

DEFERRED LOAN COSTS

      Included in other assets are costs incurred in connection with obtaining
our revolving secured credit facility and issuance of mortgage notes during 1999
and 1998, which costs are amortized over the terms of the respective credit
facility or notes on a straight-line basis (which approximates the effective
interest method).

CAPITALIZED LEASING COSTS

      Certain initial direct costs incurred by us in negotiating and
consummating a successful lease are capitalized and generally amortized over the
initial base term of the lease. These costs, net of accumulated amortization,
are included in other assets and total approximately $748,000 and $490,000 as of
December 31, 1999 and 1998, respectively. Capitalized leasing costs include
employee compensation and payroll related fringe benefits directly related to
time spent performing leasing related activities. Such activities include
evaluating the prospective tenant's financial condition, evaluating and
recording guarantees, collateral and other security arrangements, negotiating
contract terms, preparing lease documents and closing the transaction.

INCOME TAXES

      We are qualified as a real estate investment trust under the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"). As a real estate
investment trust, we are generally not subject to federal income tax to the
extent that we distribute annually at least 95% of our taxable income to our
shareholders and comply with certain other requirements.

RENTAL REVENUE RECOGNITION

      We lease our real estate pursuant to long-term triple-net leases which
typically require the tenants to pay substantially all expenses associated with
the operations of the real estate, including, but not limited to, taxes,
assessments and other government charges, insurance, utilities, service,
repairs, maintenance and other expenses. All leases are accounted for as
operating leases.

      During the third quarter of 1999, we began, on a prospective basis,
straight-lining our rents for our leases with fixed minimum escalators.
Straight-line rental revenue favorably impacted net income before minority
interest for the year ended December 31, 1999, by approximately $962,000. The
effect on prior years was not material.

USE OF ESTIMATES

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



                                       25

<PAGE>   28

                            CAPITAL AUTOMOTIVE REIT

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)

FAIR VALUE OF FINANCIAL INSTRUMENTS

      Management compares the carrying value and the estimated fair value of our
financial instruments. Due to the highly liquid and short-term nature of our
investments, the carrying value approximates the fair value. After determining
fair value of long-term debt instruments by discounting future cash flows using
current market rates, management believes there were no material differences in
the carrying value and the fair value of our debt instruments as of December 31,
1999 and 1998.

3. NEW ACCOUNTING PRONOUNCEMENTS

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

4. ACQUISITIONS OF PROPERTIES

      During the year ended December 31, 1999, we acquired 112 dealership
properties, representing 156 automotive franchises, for an aggregate purchase
price of approximately $430.3 million. Consideration for the properties
consisted of approximately $247.5 million in cash (including estimated closing
costs through December 31, 1999), $160 million in assumed and amended mortgage
debt, and approximately 1.75 million Units (valued at approximately $22.8
million at the time of acquisition). These properties total approximately 3.7
million square feet of buildings and improvements on approximately 591 acres of
land and are located in 19 states (Alabama, California, Florida, Georgia,
Illinois, Indiana, Louisiana, Maryland, North Carolina, New Jersey, New Mexico,
New York, Ohio, Oregon, South Carolina, Tennessee, Texas, Utah and Virginia).
These properties have initial lease terms ranging from 10 to 20 years, and have
renewal options (ranging from a total of 10 to 40 years). The renewal options
are exercisable at the option of the tenant.

      Included in the acquisitions during 1999 are 57 properties acquired
through the acquisition of MMR Holdings, L.L.C., MMR Tennessee, L.L.C., and MMR
Viking Investment Associates, L.P. (collectively, "MMR"), each of which were
affiliates of Sonic Automotive, Inc. and its affiliates ("Sonic"). In addition,
subsequent to the acquisition of MMR, we purchased two additional properties
through MMR. The aggregate purchase price for all 59 properties was
approximately $207 million. Consideration for the properties consisted of $150
million in assumed and amended debt, $55 million in the form of a bridge loan
(which has subsequently been repaid with the proceeds of an $85 million
permanent secured loan) and the remainder in cash (including estimated closing
costs through December 31, 1999). The properties total approximately 1.9 million
square feet of buildings and improvements on approximately 354 acres of land and
are located in ten states (Alabama, Florida, Georgia, Maryland, North Carolina,
Ohio, South Carolina, Tennessee, Texas and Virginia). In connection with these
acquisitions, we entered into or continued 58 long-term leases for the 59
properties. Pursuant to these leases, we receive rent from Sonic (in the case of
50 leases) and five other tenants that operate motor vehicle related businesses
(in the case of eight leases). The Sonic leases are guaranteed by Sonic
Automotive, Inc. and Sonic has agreed to renew leases representing at least 75%
of the total rental payments due under the Sonic leases for an additional
five-year term.

      As of December 31, 1999, we owned 230 dealership properties, representing
349 automotive franchises, with a total investment of approximately $935.5
million. Consideration for the properties consisted of approximately $641.9
million in cash (inclu-ding estimated closing costs through December 31, 1999),
$172 million in assumed and amended mortgage debt, and approxi-



                                       26

<PAGE>   29
                            CAPITAL AUTOMOTIVE REIT

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)

mately 8.3 million Units (valued at approximately $121.6 million at the time of
acquisition). These properties total approximately 8.0 million square feet of
buildings and improvements on 1,292 acres of land and are located in 27 states
(Alabama, Arizona, California, Colorado, Connecticut, Florida, Georgia, Idaho,
Illinois, Indiana, Louisiana, Maryland, Missouri, Nevada, New Jersey, New
Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South
Carolina, Tennessee, Texas, Utah and Virginia). These properties have initial
lease terms generally ranging from 10 to 20 years with an average initial lease
term of approximately 13.3 years, and have renewal options (ranging from a total
of 10 to 40 years). The renewal options are exercisable at the option of the
tenant.

5. RELATED PARTY TRANSACTIONS

      As of December 31, 1999, we owned 25 properties that were leased to
entities related to three members of our Board of Trustees and members of their
families. The properties were acquired by us during 1998 for an aggregate
purchase price of approximately $111.9 million and a renovation was funded
during 1999 for approximately $1.4 million. In conjunction with the purchases,
we entered into long-term triple-net lease agreements with two ten-year
extensions exercisable at the option of the tenant. The leases in the aggregate
provide for annualized rental payments as of December 31, 1999 of approximately
$12.4 million.

6. OPERATING LEASES

      In connection with the acquisitions discussed in Note 4 above, we entered
into long-term triple-net lease agreements with the operators of the dealerships
who are our tenants. The leases have initial terms generally ranging from 10 to
20 years and generally include multiple options to renew upon the same terms and
conditions, exercisable at the option of the tenants. Base rent is adjusted
upward periodically, usually based on a factor of the consumer price index
("CPI"). In general, the lease terms establish minimum and maximum periodic
adjustments. A limited number of our leases offer tenant purchase options at
various points after the initial lease term, generally at the greater of fair
market value of the property at the time of sale or our purchase price as
increased by a factor of CPI at the time the option is exercised. Future minimum
rental payments will be received as follows (in thousands):

<TABLE>
<CAPTION>
                                            FOR THE YEAR ENDED DECEMBER 31,
                                         <S>                                      <C>
                                            2000.............................        $      96,704
                                            2001.............................               96,870
                                            2002.............................               97,161
                                            2003.............................               97,490
                                            2004.............................               98,211
                                            Thereafter.......................              650,547
                                                                                     -------------
                                            Total............................        $   1,136,983
                                                                                     =============
</TABLE>

      As of December 31, 1999, there were four years and two months remaining on
a six-year lease agreement for our current office space. The office lease is
accounted for as an operating lease. Future minimum lease payments at December
31, 1999 are as follows:

<TABLE>
<CAPTION>
                                            FOR THE YEAR ENDED DECEMBER 31,
                                         <S>                                       <C>
                                            2000............................         $     206,921
                                            2001............................               213,129
                                            2002............................               219,523
                                            2003............................               226,109
                                            2004............................                37,869
                                                                                     -------------
                                            Total...........................         $     903,551
                                                                                     =============
</TABLE>



                                       27

<PAGE>   30

                            CAPITAL AUTOMOTIVE REIT

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)

7. EARNINGS PER SHARE

      Basic earnings per share is computed as net income divided by the weighted
average common shares outstanding for the period. Diluted earnings per share is
computed as net income divided by the weighted average common shares outstanding
for the period plus the effect of dilutive common equivalent shares outstanding
for the period, based on the treasury stock method. Dilutive common equivalent
shares include restricted shares, options and warrants. The weighted average
number of shares outstanding used to compute diluted earnings per share for the
years ended December 31, 1999 and 1998 was approximately 21.6 million, and 21.0
million, respectively. The impact of dilution of common equivalent shares for
the years ended December 31, 1999 and 1998 was approximately 22,000 and 51,000,
respectively.

8. MORTGAGE LOANS

      As of December 31, 1999, we had mortgage indebtedness totaling
approximately $501.5 million secured by various properties we owned. The
following is a summary of our mortgage debt at December 31, 1999 and 1998
(amounts in thousands):

<TABLE>
<CAPTION>
                                                                  BALANCES            BALANCES
                                                              OUTSTANDING AS OF   OUSTANDING AS OF     EFFECTIVE
                                            ORIGINAL DEBT       DECEMBER 31,        DECEMBER 31,       INTEREST      AMORTIZATION
DESCRIPTION OF DEBT                            ISSUED               1999                1998             RATE*         SCHEDULE
- ----------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                <C>                  <C>                 <C>             <C>
7.50% Fixed rate debt due 1/20/03(1)...      $   12,000         $  11,730            $   11,997           7.75%          20 year
7.59% Fixed rate debt due 12/1/08(2)...          38,050            38,050                38,050           7.98%          17 year
7.635% Fixed rate debt due 10/1/14(3)..         111,950           107,675               111,950           7.92%          15 year
8.05% Fixed rate debt due 10/1/14(4)...          85,000            84,528                    --           8.32%          15 year
7.54% Fixed rate debt due 7/6/11(5)....         100,000            99,527                    --           7.70%          25 year
8.03% Fixed rate debt due 9/29/11(6)...         150,000           150,000                    --           8.08%          25 year
Floating rate debt due 12/22/09(7).....          10,000            10,000                    --           7.67%               --
                                             ----------         ---------            ----------
    Total..............................      $  507,000         $ 501,510            $  161,997
                                             ==========         =========            ==========
</TABLE>

*  Includes deferred loan fees amortized over the life of the loans.

(1)   A 4.25-year, mortgage note payable to a financial institution and assumed
      by us as partial consideration for the acquisition of four dealership
      properties. The note is secured by the properties acquired, which as of
      December 31, 1999 have an aggregate net book value of approximately $22.3
      million. Principal and interest are payable monthly with a final payment
      at maturity of approximately $10.8 million. There are no financial
      covenants required under this note; however, there are negative covenants
      relating to customary items such as operation and maintenance of the
      properties securing the note and limitations on issuing additional secured
      debt at the subsidiary level. As of December 31, 1999, we were in
      compliance with the loan covenants.

(2)   A ten-year, non-recourse loan with Global Alliance Finance Company, L.L.C.
      ("GAFCO") that was amended in the first quarter of 1999. The loan requires
      monthly payments of interest only for approximately one year. Thereafter,
      monthly payments of principal and interest are required with a final
      payment at maturity of approximately $24.5 million. The loan is secured by
      mortgages on seven of our properties, which as of December 31, 1999 have
      an aggregate net book value of approximately $64.0 million. The Operating
      Partnership has provided a guaranty limited to approximately $8.9 million
      of this loan, which guaranty is contingent upon the occurrence of certain
      circumstances. There are no financial covenants required under this loan;
      however, there are negative covenants relating to customary items such as
      operation and maintenance of the properties securing the loan and
      limitations on issuing additional secured debt at the subsidiary level. As
      of December 31, 1999, we were in compliance with the loan covenants.

(3)   A 15-year, non-recourse loan, evidenced by three separate loans and notes,
      with German American Capital Corporation ("GACC") that was amended in the
      third quarter of 1999. The loan requires monthly payments of principal and
      interest with a final payment at maturity of approximately $3.4 million.
      The loan is secured by mortgages on 50 of our properties, which as of
      December 31, 1999 have an aggregate net book value of approximately $185.1
      million. The Operating Partnership has provided a guaranty limited to
      approximately $26.1 million of these loans, which guaranty is contingent
      upon the occurrence of certain circumstances. There are no financial
      covenants required under this loan; however, there are negative covenants
      relating to customary items such as operation and maintenance of the
      properties securing the loan and limitations on issuing additional secured
      debt at the subsidiary level. As of December 31, 1999, we were in
      compliance with the loan covenants.

(4)   A 15-year, non-recourse loan with GACC. The loan requires monthly payments
      of principal and interest with a final payment at maturity of
      approximately $2.9 million. The loan is secured by mortgages on
      approximately 28 of our properties, which as of December 31, 1999 have an
      aggregate net book value of approximately $154.2 million. Loan covenants
      required under this loan and our compliance with those covenants are
      consistent with the above-mentioned loan with GACC. The two loans with
      GACC are cross-collateralized.

(5)   A 12-year mortgage loan with Ford Motor Credit Company ("FMCC"). The loan
      requires quarterly payments of principal and interest with a final payment
      at maturity of approximately $73.3 million. The loan is secured by
      approximately 48 of our properties, which as of December 31, 1999 have an
      aggregate net book value of approximately $176.5 million. There is one
      financial covenant limiting total Company debt to 65% of assets, as
      defined in the FMCC loan agreement. There are negative covenants relating
      to customary items such as operation and maintenance of the properties
      securing the loan and limitations on issuing additional secured debt at
      the subsidiary level. As of December 31, 1999, we were in compliance with
      the loan covenants.

(6)   An assumed and amended 12-year mortgage loan with FMCC, of which the
      proceeds were used as partial consideration for the MMR acquisition. The
      terms of the loan require quarterly interest-only payments for two years.
      Thereafter, payments of principal and interest will be made quarterly with
      a final



                                       28

<PAGE>   31

                            CAPITAL AUTOMOTIVE REIT

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


      payment at maturity of approximately $124.6 million. The loan is secured
      by 59 of our properties, which as of December 31, 1999 have an aggregate
      net book value of approximately $206.3 million. Loan covenants required
      under this loan and our compliance with those covenants are consistent
      with the above-mentioned loan with FMCC.

(7)   A ten-year mortgage loan with FMCC. Approximately $6.7 million of the loan
      was assumed as partial consideration for the acquisition of three
      dealership properties and subsequently was amended and increased to $10.0
      million. The loan bears interest at a variable rate equal to 200 basis
      points per annum above the A1-P1 Commercial Paper Rate. The interest rate
      as of December 31, 1999 was approximately 7.48%. The terms of the loan
      require quarterly principal payments of $100,000 and quarterly interest
      payments. At maturity the loan requires a final payment of approximately
      $6.3 million. The loan is secured by three properties, which as of
      December 31, 1999 have an aggregate net book value of approximately $13.2
      million. Loan covenants required under this loan and our compliance with
      those covenants are consistent with the above-mentioned loans with FMCC.

      Aggregate annual principal maturities of mortgage indebtedness as of
      December 31, 1999, is as follows (in thousands):

<TABLE>
<CAPTION>
                                            FOR THE YEAR ENDED DECEMBER 31,
<S>                                                                                   <C>
                                            2000............................           $     9,861
                                            2001............................                11,000
                                            2002............................                13,831
                                            2003............................                25,361
                                            2004............................                15,618
                                            Thereafter......................               425,839
                                                                                       ------------
                                            Total...........................           $   501,510
                                                                                       ============
</TABLE>

9. SHORT-TERM FINANCING

      As of December 31, 1999, we had a $50 million revolving secured credit
facility from a financial institution, under which no amounts were outstanding.
The facility has a three-year term and terminates on March 3, 2002. The facility
bears interest equal to the 30-day LIBOR rate plus 175 basis points. The
facility contains financial covenants, such as debt service coverage ratio and
debt to adjusted net worth requirements, that we must comply with annually. As
of December 31, 1999, we were in compliance with the loan covenants.

      COMMITMENTS. On December 16, 1999, we entered into a commitment letter
with a financial institution for a $100 million secured revolving credit
facility which will provide interim real estate financing. The proceeds are to
be used to acquire additional properties, which will be used as collateral for
the credit facility. Borrowings will require monthly interest payments at a
floating rate equal to 225 basis points above the 30-day LIBOR rate and
repayment of principal within 180 days. The facility will have a term of one
year, renewable annually, and will contain customary loan covenants. Final terms
and conditions are currently being negotiated.

10. MINORITY INTEREST

      Minority interest is calculated at approximately 27.8% and 23.3% of the
Operating Partnership's partners' capital and net income as of December 31, 1999
and 1998, respectively. The ownership of the Operating Partnership as of
December 31, 1999 and 1998 is as follows (Units in thousands):

<TABLE>
<CAPTION>
                                                                                    DECEMBER 31,
                                                             ---------------------------------------------------------
                                                                        1999                          1998
                                                             ---------------------------------------------------------
                                                               UNITS          PERCENT         UNITS         PERCENT
                                                             ---------      -----------    ---------     -------------
<S>                                                          <C>              <C>           <C>             <C>
                           Partners' capital:
                              Limited Partners......           8,321.6          27.8%         6,573.3         23.3%
                              The Company...........          21,607.4          72.2%        21,607.4         76.7%
                                                             ---------         -----        ---------         ----
                              Total.................          29,929.0         100.0%        28,180.7        100.0%
                                                             =========         =====        =========        =====
</TABLE>

11. STOCK-BASED COMPENSATION

      During 1998, we adopted the Capital Automotive Group 1998 Equity Incentive
Plan (the "Plan"). Under the Plan, the Executive Compensation Committee of the
Board of Trustees (the "Committee") was authorized to grant up to approximately
2.8



                                       29

<PAGE>   32

                            CAPITAL AUTOMOTIVE REIT

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)

million options to our employees, non-employee trustees and certain other
service providers, to purchase common shares of the Company ("Share Options")
and/or Units of the Operating Partnership ("Unit Options").

      In February 1999, the Committee and the Board of Trustees approved
amendments to the Plan and subsequently received shareholder approval on May 7,
1999 (the "Amended Plan"). The Amended Plan (i) eliminated Unit Options, (ii)
provided that the Committee could make grants of restricted shares or restricted
phantom shares, and (iii) increased the number of shares the Committee may grant
under the Amended Plan to approximately 3.8 million. In May 1999, all
outstanding Unit Options were exchanged for an equal number of Share Options.
The exchanged Share Options were granted at the same exercise price and on the
same exercise schedule, terms and conditions on which the Unit Options were
originally granted.

      Share Options granted under the Amended Plan have exercise prices equal to
or greater than the fair market value of a common share at the date of the grant
and typically become exercisable at a rate of 25% per year over a four-year
period, generally commencing on the first anniversary of the date of hire, for
employees. For trustees, Share Options become exercisable in stages, one-third
beginning six months after date of grant, two-thirds beginning on the first
anniversary of the date of grant and 100% beginning on the second anniversary of
the date of grant. Share Options expire no later than the tenth anniversary of
the date of grant or, if earlier, within certain time limits for employment
termination.

      On May 7, 1999, the Committee approved the granting of approximately
37,000 Performance Accelerated Restricted Shares ("PARS") at a purchase price of
$0.01 per share, to certain employees. The PARS were granted under the Amended
Plan and are subject in all respects to the applicable provisions of the Amended
Plan. The PARS originally had a vesting period of approximately seven years from
the effective date of January 1, 1999 with the opportunity to accelerate the
vesting period if the Company meets certain specified performance targets. On
January 17, 2000, the Committee approved a change in the vesting period on all
PARS granted on May 7, 1999 to reflect that one half (1/2) of such PARS will
vest after approximately three years from the effective date of January 1, 1999
and the remainder, still subject to performance acceleration, will vest over
seven years. The Company adjusted the compensation expense related to the PARS
based on the revised vesting schedule in 1999.

      As of December 31, 1999, approximately 2.8 million Share Options and
32,000 PARS were outstanding under the Amended Plan, thus leaving approximately
911,000 shares available under the Amended Plan to be granted. On January 17,
2000, the Committee granted an additional 325,000 Share Options under the
Amended Plan to employees. In addition, on January 17, 2000, the Committee
approved a PARS grant of approximately 46,000 shares at a purchase price of
$0.01 per share to employees. These shares are subject to the same terms and
vesting period as the PARS granted during 1999.

      The following is a summary of our Share Option activity for the years
ended December 31, 1999 and 1998 (share options in thousands):

<TABLE>
<CAPTION>
                                                                                    NUMBER OF         WEIGHTED AVERAGE
                                                                                     OPTIONS           EXERCISE PRICE
                                                                                 ---------------------------------------
<S>                                                                                <C>                  <C>
                        Share Options outstanding at December 31, 1997.....              -                    --
                             Granted.......................................          3,124                $14.95
                             Forfeited.....................................             22                $15.34
                             Exercised or expired..........................             --                    --
                                                                                     -----                ------
                        Share Options outstanding at December 31, 1998.....          3,102                $14.95
                                                                                     =====                ======
                             Granted.......................................            438                $13.14
                             Forfeited.....................................            712                $14.94
                             Exercised or expired..........................             --                    --
                                                                                     -----                ------
                        Share Options outstanding at December 31, 1999.....          2,828                $14.67
                                                                                     =====                ======
</TABLE>



                                       30


<PAGE>   33

                            CAPITAL AUTOMOTIVE REIT

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)

      Share Options outstanding at December 31, 1999 have exercise prices
between $12.94 and $18.69, with a weighted average exercise price of $14.67 and
a weighted average remaining contractual life of 9.40 years. At December 31,
1999, there were approximately 1.3 million Share Options exercisable at a
weighted average exercise price of $14.91 and a weighted average remaining
contractual life of 8.20 years.

      We apply APB Opinion 25 in accounting for our stock-based compensation and
accordingly recognized no compensation expense related to the grant of Share
Options during the years ended December 31, 1999 and 1998. Had compensation cost
been determined using the fair value method of accounting prescribed by SFAS No.
123, "Accounting for Stock-Based Compensation," our net income and earnings per
share would have been changed to the following pro-forma amounts (in thousands
except per share amounts) (unaudited):

<TABLE>
<CAPTION>
                        FOR THE YEAR ENDED DECEMBER 31,                            1999                  1998
                        ------------------------------------------------------------------------------------------
                     <S>                                                          <C>                   <C>
                        Net Income............................
                             As reported......................                     $ 21,731              $16,491
                             Pro forma........................                     $ 20,521              $15,312
                        Basic Net Income Per Share............
                             As reported......................                     $   1.01              $  0.79
                             Pro forma........................                     $   0.95              $  0.73
                        Diluted Net Income Per Share..........
                             As reported......................                     $   1.01              $  0.79
                             Pro forma........................                     $   0.95              $  0.73
</TABLE>

      The Black-Scholes option pricing model has been used to estimate the value
of the Share Options granted during 1999 and 1998. For Share Options issued
during 1999 the model uses a risk-free interest rate of 6.67%, a dividend growth
rate of 5.0%, stock volatility of 34.96% with an expected Share Option life of
4.0 years. For Share Options issued during 1998 the model uses a risk-free
interest rate of 4.625%, a dividend growth rate of 10.0%, stock volatility of
21.75% with an expected Share Option life of 4 years.

12. STOCK WARRANTS

      As of December 31, 1999, we had warrants outstanding to acquire a total of
3,141,952 common shares. Warrants for a total of 2,691,952 common shares were
exercisable by the holders on that date. Warrants for a total of 400,000 common
shares became exercisable for 25% of the common shares each year over a
four-year period beginning on January 5, 2000. The warrant for the remaining
50,000 common shares will become exercisable beginning on January 31, 2000. We
have issued the warrants under written warrant agreements. The exercise price of
our common shares issuable under each outstanding warrant is $15.00 per common
share. Warrants for a total of 2,741,952 common shares are for terms of five
years. Warrants for a total of 400,000 common shares are for terms of ten years.
Under each warrant agreement, we are obligated to file a registration statement,
after the warrant has been exercised by the holder, to register the common
shares issued when the holder exercises the warrant if the holder so requests or
if we file a registration statement for our own shares.

13. 401(k) PLAN

      During 1998, we adopted the Capital Automotive L.P. Employee 401(k) Plan
(the "401(k) Plan") available to all employees hired prior to April 1, 1998 who
are at least 21 years of age. Employees hired subsequent to April 1, 1998 are
eligible to participate in the plan after three months of service. Participants
may contribute up to 20% of their earnings, on a pre-tax basis, subject to
annual limitations imposed by the Code. We may make matching or discretionary
contributions to the plan at the discretion of



                                       31

<PAGE>   34

                            CAPITAL AUTOMOTIVE REIT

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)

our management. As of December 31, 1999 no matching or discretionary
contributions had been paid. However, during December 1999, we announced that we
intended to make matching contributions for the 2000 plan year to all
participants in the 401(k) Plan. We will match 20% of the participant's elected
deferral contribution during 2000 (subject to maximum limits) and our matching
contributions will vest ratably over five years from each employee's date of
service.

14. COMMON SHARE REPURCHASE PROGRAM

      During 1998, we announced that our Board of Trustees had authorized the
repurchase of up to 6.0 million common shares. Purchases have been and will be
made from time-to-time in open market transactions at prevailing prices or in
negotiated private transactions at the discretion of management. During 1998,
3,184,700 common shares were repurchased at an average price of $10.51 per
common share. There were no common shares repurchased during 1999. Subsequent to
December 31, 1999, through our common share repurchase program, we repurchased
900,000 common shares at an average price of $10.96 per common share. In
conjunction with the common share repurchases, the Operating Partnership
redeemed an equivalent number of Units from the Company for equivalent purchase
prices.

15. DIVIDEND DECLARATION

      On December 6, 1999 our Board of Trustees declared a cash dividend of
$0.36 per share for the fourth quarter ended December 31, 1999, to shareholders
of record as of December 31, 1999. The dividend was paid on January 31, 2000.
Dividends declared to shareholders during 1999 and 1998 totaled $1.38 per share
and $0.876 per share, respectively. Of total dividends declared, the amount that
is characterized as ordinary income for tax reporting purposes for 1999 and 1998
is $1.18 per share and $0.861 per share, respectively. None of the amounts
declared in 1999 and 1998 were characterized as return on capital.

16. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

      Summarized quarterly financial data for the year ended December 31, 1999
and 1998 is as follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                                    QUARTER ENDED
                                                                  ----------------------------------------------------------
                                                                   MARCH 31*     JUNE 30     SEPTEMBER 30    DECEMBER 31
                                                                  ----------------------------------------------------------
                              1999
                              ----
                             <S>                                  <C>           <C>           <C>             <C>
                              Revenue...................          $  14,788     $  15,898     $  20,757       $  24,430
                              Net Income................          $   4,389     $   4,965     $   6,182       $   6,195
                              Diluted Earnings Per Share          $    0.20     $    0.23     $    0.29       $    0.29
                              Weighted Average Number of
                                 Shares--Diluted........             21,607        21,630        21,640          21,640

                              1998
                              ----
                              Revenue...................          $   3,321     $   8,545     $  10,363       $  12,702
                              Net Income................          $   1,702     $   4,747     $   5,221       $   4,821
                              Diluted Earnings Per Share*         $    0.14    $     0.19     $    0.21       $    0.22
                              Weighted Average Number of
                                Shares--Diluted.........             12,267        24,876        24,713          21,907
</TABLE>

 *Although the Company was formed prior to January 1, 1998, it did not complete
  its initial public offering until February 19, 1998, at which time it began
  generating rental income. This resulted in a difference between the sum of
  each quarter's diluted earnings per share of $0.76 and the actual diluted
  earnings per share calculation for 1998 of $0.79.

17. SEGMENT INFORMATION

      We adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information" during 1998. SFAS No. 131 provides standards for public
companies relating to the reporting of financial and descriptive information
about their operating segments in financial statements. Operating segments are
defined as components of an enterprise for which separate



                                       32

<PAGE>   35

                            CAPITAL AUTOMOTIVE REIT

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)

financial information is available and is evaluated regularly by the chief
operating decision maker or decision making group, in deciding how to allocate
resources and in assessing performance. Our management is our chief decision
making group.

      All of our operations are derived from one operating segment. This
operating segment engages in the purchase and lease back, pursuant to long-term
triple-net leases, of the real property and improvements used by multi-site,
multi-franchised automotive dealerships and related businesses. These automotive
dealerships and related businesses are located predominately in major
metropolitan areas throughout the United States. The purchase and lease back is
performed through the Company's ownership interest in the Operating Partnership
and/or its directly and indirectly owned subsidiaries.

TENANT CONCENTRATION

      Sonic accounted for approximately 11.6% of our total revenue, and
approximately 11.8% of our total rental revenue for the year ended December 31,
1999 and approximately 22.6% of our total annualized rental revenue, excluding
straight-line rental income, as of December 31, 1999. Failure of Sonic to pay
rent could materially affect our income if we are not able to re-lease the
properties in a timely manner. There was no other tenant that exceeded 10% of
our total revenue, or total rental revenue for the year ended December 31, 1999,
or total annualized rental revenue, excluding straight-line rental income, as of
December 31, 1999. For the year ended December 31, 1998, affiliates of the
Rosenthal Automotive Organization ("Rosenthal") accounted for approximately
17.7% of our total revenue, approximately 22.9% of our total rental revenue and,
as of December 31, 1998, approximately 13.5% of our total annualized rental
revenue, excluding straight-line rental income. Due to the acquisition of
properties during 1999, Rosenthal accounted for approximately 9.4% of our total
revenue and approximately 9.6% of our total rental revenue for the year ended
December 31, 1999, and approximately 7.4% of our total annualized rental
revenue, excluding straight-line rental income, as of December 31, 1999.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

    Not Applicable.



                                       33

<PAGE>   36

                                    PART III

      Certain information required in Part III is omitted from this Report but
is incorporated herein by reference from our Proxy Statement for the Annual
Meeting of Shareholders for fiscal year 2000 (the "Proxy Statement").

ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE COMPANY

      The information contained in the Proxy Statement under the captions "The
Board of Trustees" and "Executive Officers" is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

      The information contained in the Proxy Statement under the captions
"Executive Compensation" and "Executive Compensation Committee Report on
Executive Compensation" is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The information contained in the Proxy Statement under the caption "Share
Ownership" is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The information contained in the Proxy Statement under the caption
"Certain Relationships and Related Transactions" is incorporated herein by
reference.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)   (1)   See Index to Consolidated Financial Statements

      (2)   Financial Statement Schedules

      Schedule III. Schedule of Real Estate and Accumulated Depreciation

      (3)   Exhibits

<TABLE>
<CAPTION>
EXHIBIT NO.                               DESCRIPTION
- -------------------------------------------------------------------------------------------------
<S>               <C>

2.1-                Acquisition Agreement dated as of June 30, 1999, as amended, by and among
                    CAR MMR L.L.C., O. Bruton Smith, Sonic Financial Corporation, MMR Holdings
                    L.L.C., MMR Viking Investment Associates, L.P. and MMR Tennessee, L.L.C.

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

3.1*                Amended and Restated Declaration of Trust of Capital Automotive REIT.

3.2+                Amended and Restated Bylaws of Capital Automotive REIT, as amended.

4.1*                Specimen Common Share certificate.

4.2#                Form of Share Warrant.

4.3*                Form of Underwriting Warrant issued to Friedman, Billings, Ramsey & Co.,
                    Inc.

4.4*                Form of Dealers' Warrant.

4.5#                Second Amended and Restated Partnership Agreement of Capital Automotive
                    L.P.

10.2*               Form of Indemnification Agreement executed by certain trustees and
                    officers of Capital Automotive REIT.

10.8*               Form of Option Agreement.

10.10*              FBR Asset Investment Purchase Agreement.

10.11*              FBR Registration Rights Agreement.

10.35*              Amended and Restated Employment Agreement by and between Capital
                    Automotive L.P. and Thomas D. Eckert.

10.36*              Amended and Restated Employment Agreement by and between Capital
                    Automotive L.P. and Scott M. Stahr.

10.37*              Amended and Restated Employment Agreement by and between Capital
                    Automotive L.P. and Donald L. Keithley.

10.38*              Amended and Restated Employment Agreement by and between Capital
                    Automotive L.P. and David S. Kay.

10.42**             Employment Agreement by and between Capital Automotive L.P. and John M.
                    Weaver.

10.44-              Loan Agreement dated as of July 7, 1999, between CAR CZ L.L.C., CARS-FEN,
                    L.L.C., CAR
</TABLE>



                                       34

<PAGE>   37

<TABLE>
<S>               <C>
                    HDV L.L.C., CAR Alexander L.P., Capital Automotive L.P., CAR MOT II,
                    L.L.C., CAR MOT L.L.C., CAR AUF L.L.C., CAR I Jackson L.P., and CAR MUL
                    L.L.C., as Borrower and Ford Motor Credit Company as Lender.

10.47--             Amended and Restated Loan Agreement dated August 13, 1999, between MMR
                    Holdings, L.L.C., MMR Tennessee, L.L.C., MMR Viking Investment
                    Associates, L.P. and Ford Motor Credit Company.

10.50##             Form of 1998 Equity Incentive Plan, as amended.

21.2+               Subsidiaries of Company.

23.1+               Consent of Arthur Andersen LLP.

25.0+               Power of Attorney (included on signature page).

27.0+               Financial Data Schedule.

99.8++              Revolving Loan Agreement dated as of March 4, 1999 among Comerica Bank
                    and Capital Automotive, L.P., et al.

99.9..              Form of Lease Agreement for 50 separate leases, each between an affiliate of Capital
                    Automotive REIT, as landlord, and an affiliate of Sonic Automotive, Inc., as
                    tenant.

99.10..             Form of Lease Guaranty from Sonic Automotive, Inc., relating to 50
                    separate leases with affiliates of Sonic Automotive, Inc., in favor of
                    affiliates of Capital Automotive REIT, as landlord.
</TABLE>

+     Filed herewith.

- -     Previously filed as an Exhibit to Quarterly Report on Form 10-Q for the
      quarter ended June 30, 1999 filed on August 12, 1999 (File No. 000-23733)
      and incorporated herein by reference. Confidential portions of Exhibits
      2.1 and 2.2 omitted pursuant to a request for confidential treatment and
      supplied separately to the Securities and Exchange Commission. Exhibits
      and Schedules omitted but will be furnished supplementally to the
      Securities and Exchange Commission upon request.

*     Previously filed as an Exhibit to Registration Statement on Form S-11
      (File No. 333-41183) and incorporated herein by reference.

#     Previously filed as an Exhibit to Registration Statement on Form S-3
      (File No. 333-73183) filed on March 2, 1999 and incorporated herein by
      reference.

**    Previously filed as an Exhibit to Quarterly Report on Form 10-Q for the
      quarter ended September 30, 1998 filed on November 12, 1998 (File No.
      000-23733) and incorporated herein by reference.

- --    Previously filed as an Exhibit to Quarterly Report on Form 10-Q for the
      quarter ended September 30, 1999 filed on November 12, 1999 (File No.
      000-23733) and incorporated herein by reference.

##    Previously filed as an Exhibit to Registration Statement on Form S-8
      (File No. 333-78215) filed on May 11, 1999 and incorporated herein by
      reference.

++    Previously filed as an Exhibit to Quarterly Report on Form 10-Q for the
      quarter ended March 31, 1999 filed on May 11, 1999 (File No. 000-23733)
      and incorporated herein by reference.

 ..    Previously filed as an Exhibit to Current Report on Form 8-K filed on
      August 30, 1999 (File No. 000-23733) and incorporated herein by reference.

(b) Reports on Form 8-K

None.

(c) Exhibits

See Item 14(a)(3) above.



                                       35

<PAGE>   38

                                   SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Report to be signed on its behalf
by the undersigned thereunto duly authorized this 21st day of March 2000.

                                        Capital Automotive REIT

                                        By: /s/ THOMAS D. ECKERT
                                         ------------------------------
                                                Thomas D. Eckert
                                          President and Chief Executive Officer

      Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons in the
capacities indicated. Each person whose signature appears below hereby
constitutes and appoints each of Thomas D. Eckert and David S. Kay as his
attorney-in-fact and agent, with full power of substitution and resubstitution
for him in any and all capacities, to sign any or all amendments to this Report
and to file same, with exhibits thereto and other documents in connection
therewith, granting unto such attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
in connection with such matters and hereby ratifying and confirming all that
such attorney-in-fact and agent or his substitutes may do or cause to be done by
virtue hereof.

<TABLE>
<CAPTION>
                           Signature                            Title                                 Date
                       ----------------                         -----                                 ----
<S>                                                      <C>                                      <C>
                /s/  THOMAS D. ECKERT                      President and Chief Executive           March 21, 2000
                 ----------------------------              Officer and Trustee (principal
                     Thomas D. Eckert                      executive officer)



                /s/  DAVID S. KAY                          Vice President and Chief                March 21, 2000
                 ----------------------------              Financial Officer (principal
                     David S. Kay                          financial and accounting officer)



                /s/  CRAIG L. FULLER                       Trustee                                 March 21, 2000
                 ----------------------------
                     Craig L. Fuller


                /s/  DAVID GLADSTONE                       Trustee                                 March 21, 2000
                 ----------------------------
                     David Gladstone


                /s/  WILLIAM E. HOGLUND                    Trustee                                 March 21, 2000
                 ----------------------------
                     William E. Hoglund


                /s/  R. MICHAEL MCCULLOUGH                 Trustee                                 March 21, 2000
                 ----------------------------
                     R. Michael McCullough


                /s/  LEE P. MUNDER                         Trustee                                 March 21, 2000
                 ----------------------------
                     Lee P. Munder


                /s/  JOHN J. POHANKA                       Chairman of the Board                   March 21, 2000
                 ----------------------------
                     John J. Pohanka


                /s/  JOHN E. REILLY                        Trustee                                 March 21, 2000
                 ----------------------------
                     John E. Reilly


                /s/  ROBERT M. ROSENTHAL                   Trustee                                 March 21, 2000
                 ----------------------------
                     Robert M. Rosenthal


                /s/  VINCENT A. SHEEHY                     Trustee                                 March 21, 2000
                 ----------------------------
                     Vincent A. Sheehy


                /s/  WILLIAM R. SWANSON                    Trustee                                 March 21, 2000
                 ----------------------------
                     William R. Swanson
</TABLE>

<PAGE>   39
                              Index to Exhibits

<TABLE>
<CAPTION>
EXHIBIT NO.                               DESCRIPTION
- -------------------------------------------------------------------------------------------------
<S>               <C>

2.1-                Acquisition Agreement dated as of June 30, 1999, as amended, by and among
                    CAR MMR L.L.C., O. Bruton Smith, Sonic Financial Corporation, MMR Holdings
                    L.L.C., MMR Viking Investment Associates, L.P. and MMR Tennessee, L.L.C.

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

3.1*                Amended and Restated Declaration of Trust of Capital Automotive REIT.

3.2+                Amended and Restated Bylaws of Capital Automotive REIT, as amended.

4.1*                Specimen Common Share certificate.

4.2#                Form of Share Warrant.

4.3*                Form of Underwriting Warrant issued to Friedman, Billings, Ramsey & Co.,
                    Inc.

4.4*                Form of Dealers' Warrant.

4.5#                Second Amended and Restated Partnership Agreement of Capital Automotive
                    L.P.

10.2*               Form of Indemnification Agreement executed by certain trustees and
                    officers of Capital Automotive REIT.

10.8*               Form of Option Agreement.

10.10*              FBR Asset Investment Purchase Agreement.

10.11*              FBR Registration Rights Agreement.

10.35*              Amended and Restated Employment Agreement by and between Capital
                    Automotive L.P. and Thomas D. Eckert.

10.36*              Amended and Restated Employment Agreement by and between Capital
                    Automotive L.P. and Scott M. Stahr.

10.37*              Amended and Restated Employment Agreement by and between Capital
                    Automotive L.P. and Donald L. Keithley.

10.38*              Amended and Restated Employment Agreement by and between Capital
                    Automotive L.P. and David S. Kay.

10.42**             Employment Agreement by and between Capital Automotive L.P. and John M.
                    Weaver.

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

10.47--             Amended and Restated Loan Agreement dated August 13, 1999, between MMR
                    Holdings, L.L.C., MMR Tennessee, L.L.C., MMR Viking Investment
                    Associates, L.P. and Ford Motor Credit Company.

10.50##             Form of 1998 Equity Incentive Plan, as amended.

21.2+               Subsidiaries of Company.

23.1+               Consent of Arthur Andersen LLP.

25.0+               Power of Attorney (included on signature page).

27.0+               Financial Data Schedule.

99.8++              Revolving Loan Agreement dated as of March 4, 1999 among Comerica Bank
                    and Capital Automotive, L.P., et al.

99.9..              Form of Lease Agreement for 50 separate leases, each between an affiliate of Capital
                    Automotive REIT, as landlord, and an affiliate of Sonic Automotive, Inc., as
                    tenant.

99.10..             Form of Lease Guaranty from Sonic Automotive, Inc., relating to 50
                    separate leases with affiliates of Sonic Automotive, Inc., in favor of
                    affiliates of Capital Automotive REIT, as landlord.
</TABLE>

+     Filed herewith.

- -     Previously filed as an Exhibit to Quarterly Report on Form 10-Q for the
      quarter ended June 30, 1999 filed on August 12, 1999 (File No. 000-23733)
      and incorporated herein by reference. Confidential portions of Exhibits
      2.1 and 2.2 omitted pursuant to a request for confidential treatment and
      supplied separately to the Securities and Exchange Commission. Exhibits
      and Schedules omitted but will be furnished supplementally to the
      Securities and Exchange Commission upon request.

*     Previously filed as an Exhibit to Registration Statement on Form S-11
      (File No. 333-41183) and incorporated herein by reference.

#     Previously filed as an Exhibit to Registration Statement on Form S-3
      (File No. 333-73183) filed on March 2, 1999 and incorporated herein by
      reference.

**    Previously filed as an Exhibit to Quarterly Report on Form 10-Q for the
      quarter ended September 30, 1998 filed on November 12, 1998 (File No.
      000-23733) and incorporated herein by reference.

- --    Previously filed as an Exhibit to Quarterly Report on Form 10-Q for the
      quarter ended September 30, 1999 filed on November 12, 1999 (File No.
      000-23733) and incorporated herein by reference.

##    Previously filed as an Exhibit to Registration Statement on Form S-8
      (File No. 333-78215) filed on May 11, 1999 and incorporated herein by
      reference.

++    Previously filed as an Exhibit to Quarterly Report on Form 10-Q for the
      quarter ended March 31, 1999 filed on May 11, 1999 (File No. 000-23733)
      and incorporated herein by reference.

 ..    Previously filed as an Exhibit to Current Report on Form 8-K filed on
      August 30, 1999 (File No. 000-23733) and incorporated herein by reference.
<PAGE>   40

                                  SCHEDULE III
                            CAPITAL AUTOMOTIVE REIT
              SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
                            AS OF DECEMBER 31, 1999

<TABLE>
<CAPTION>
Dealer Group Name                       Dealership                                  Location
- -------------------------------------------------------------------------------------------------------
<S>                                     <C>                                         <C>
ABRA Auto Body & Glass, LLC             ABRA Auto Body & Glass LLC                  Chattanooga,TN
ABRA AUTO BODY & GLASS, LLC TOTAL

Auffenberg Automotive Group             Auffenburg Ford North                       O'Fallon,IL
Auffenberg Automotive Group             St. Clair Auto Mall                         O'Fallon,IL
Auffenberg Automotive Group             Auffenburg Ford                             Belleville,IL
AUFFENBERG AUTOMOTIVE GROUP TOTAL

AutoNation                              T-West Sales & Service, Inc.                Las Vegas,NV
AutoNation                              Westgate Chevrolet, Inc.                    Amarillo,TX
AutoNation                              Midway Chevrolet, Inc.                      Amarillo,TX
AutoNation                              Quality Nissan, Inc.                        Amarillo,TX
AutoNation                              Park Place Mercedes - Houston               Houston,TX
AutoNation                              Plains Chevrolet, Inc.                      Amarillo,TX
AUTONATION TOTAL

Behlmann Automotive                     Behlmann Wholesale                          Florissant,MO
Behlmann Automotive                     Behlmann Carnection                         Florissant,MO
Behlmann Automotive                     Behlmann Pontiac-GMC (Main)                 Hazelwood,MO
BEHLMANN AUTOMOTIVE TOTAL

Cherner Automotive Group                Cherner Lincoln Mercury                     Annandale,VA
CHERNER AUTOMOTIVE GROUP TOTAL

Craig Zinn Automotive Group             Toyota of Hollywood                         Hollywood,FL
Craig Zinn Automotive Group             County Line Lexus                           Hollywood,FL
Craig Zinn Automotive Group             Truck Center                                Hollywood,FL
Craig Zinn Automotive Group             Quick Service Center                        Hollywood,FL
CRAIG ZINN AUTOMOTIVE GROUP TOTAL

Crown Auto World                        Crown Motors BMW/Buick                      Tulsa,OK
CROWN AUTO WORLD TOTAL

Dealer's Auto Auction                   Dealer's Auto Auction                       Oklahoma City,OK
DEALER'S AUTO AUCTION TOTAL

Fenton Motors Group                     Brad Fenton Motors of Ardmore               Ardmore,OK
Fenton Motors Group                     Ada Ford Lincoln-Mercury                    Ada,OK
Fenton Motors Group                     Brad Fenton Motors                          McAlester,OK
FENTON MOTORS GROUP TOTAL

FirstAmerica Automotive                 Kramer Honda                                Santa Monica,CA
FirstAmerica Automotive                 Kramer Volvo                                Santa Monica,CA
FirstAmerica Automotive                 First America San Rafael                    San Rafael,CA
FIRSTAMERICA AUTOMOTIVE TOTAL

Freightliner of Dothan                  Freightliner of Dothan                      Dothan,AL
FREIGHTLINER OF DOTHAN TOTAL
</TABLE>


<TABLE>
<CAPTION>
                                             Gross Amount at December 31, 1999
                                        ------------------------------------------
                                                       Building and                   Accumulated       Date     Depreciation
Dealer Group Name                           Land       Improvements      Total        Depreciation    Acquired       Life
- -----------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>            <C>             <C>           <C>             <C>         <C>
ABRA Auto Body & Glass, LLC             $   452,668      $1,490,413    $1,943,081        18,631      08/14/1999    30 years
ABRA AUTO BODY & GLASS, LLC TOTAL           452,668       1,490,413     1,943,081        18,631

Auffenberg Automotive Group               1,816,149       2,310,324     4,126,473        41,714      06/30/1999    30 years
Auffenberg Automotive Group               5,672,561       7,595,913    13,268,473       137,148      06/30/1999    30 years
Auffenberg Automotive Group                 663,479       2,124,663     2,788,142        20,656      09/10/1999    30 years
AUFFENBERG AUTOMOTIVE GROUP TOTAL         8,152,189      12,030,899    20,183,088       199,519

AutoNation                                5,540,606       8,697,735    14,238,341       631,386      05/19/1998    30 years
AutoNation                                1,235,516       3,181,296     4,416,812       270,462      02/25/1998    30 years
AutoNation                                  871,516       2,245,296     3,116,812       190,887      02/25/1998    30 years
AutoNation                                  283,516         733,295     1,016,811        62,342      02/25/1998    30 years
AutoNation                                9,086,654      10,719,435    19,806,090       600,547      09/28/1998    30 years
AutoNation                                1,324,616       3,400,896     4,725,512       289,132      02/25/1998    30 years
AUTONATION TOTAL                         18,342,424      28,977,953    47,320,377     2,044,756

Behlmann Automotive                         104,005         203,620       307,625        13,938      06/25/1998    30 years
Behlmann Automotive                       1,042,674       1,865,812     2,908,485       127,715      06/25/1998    30 years
Behlmann Automotive                       4,637,602       4,383,835     9,021,437       300,075      06/25/1998    30 years
BEHLMANN AUTOMOTIVE TOTAL                 5,784,281       6,453,267    12,237,548       441,728

Cherner Automotive Group                  4,026,275       2,405,880     6,432,155       204,539      02/19/1998    30 years
CHERNER AUTOMOTIVE GROUP TOTAL            4,026,275       2,405,880     6,432,155       204,539

Craig Zinn Automotive Group               3,014,998       2,592,184     5,607,183        68,405      03/05/1999    30 years
Craig Zinn Automotive Group               2,061,645       1,314,700     3,376,345        34,693      03/05/1999    30 years
Craig Zinn Automotive Group                 628,115          87,278       715,393         2,303      03/05/1999    30 years
Craig Zinn Automotive Group                 423,054          92,339       515,393         2,437      03/05/1999    30 years
CRAIG ZINN AUTOMOTIVE GROUP TOTAL         6,127,812       4,086,501    10,214,313       107,838

Crown Auto World                          1,077,838       5,258,691     6,336,529       229,262      12/11/1998    30 years
CROWN AUTO WORLD TOTAL                    1,077,838       5,258,691     6,336,529       229,262

Dealer's Auto Auction                     1,129,351       8,477,273     9,606,624       404,714      11/25/1998    30 years
DEALER'S AUTO AUCTION TOTAL               1,129,351       8,477,273     9,606,624       404,714

Fenton Motors Group                         205,101       1,816,079     2,021,180        79,175      12/29/1998    30 years
Fenton Motors Group                         237,123       2,797,228     3,034,351       121,950      12/07/1998    30 years
Fenton Motors Group                         356,120       3,678,231     4,034,351       160,359      12/07/1998    30 years
FENTON MOTORS GROUP TOTAL                   798,344       8,291,537     9,089,881       361,484

FirstAmerica Automotive                   3,830,427       2,882,169     6,712,596        12,011      11/10/1999    30 years
FirstAmerica Automotive                   2,560,136         352,460     2,912,596         1,469      11/10/1999    30 years
FirstAmerica Automotive                   2,846,834               -     2,846,834             -      01/14/1999
FIRSTAMERICA AUTOMOTIVE TOTAL             9,237,397       3,234,629    12,472,026        13,480

Freightliner of Dothan                      490,443       2,193,587     2,684,030       141,066      07/23/1998    30 years
FREIGHTLINER OF DOTHAN TOTAL                490,443       2,193,587     2,684,030       141,066
</TABLE>

<PAGE>   41

                                  SCHEDULE III
                            CAPITAL AUTOMOTIVE REIT
              SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
                            AS OF DECEMBER 31, 1999

<TABLE>
<CAPTION>
Dealer Group Name                       Dealership                                  Location
- -------------------------------------------------------------------------------------------------------
<S>                                     <C>                                         <C>
Group 1 Automotive, Inc.                Maxwell Chrysler Five Pack                  Taylor,TX
Group 1 Automotive, Inc.                Acura Southwest                             Houston,TX
Group 1 Automotive, Inc.                Clear Lake Lexus                            Clear Lake,TX
Group 1 Automotive, Inc.                Sterling McCall Toyota - Club Creek Drive   Houston,TX
Group 1 Automotive, Inc.                Sterling McCall Toyota                      Houston,TX
Group 1 Automotive, Inc.                Sterling McCall Lexus Body Shop             Houston,TX
Group 1 Automotive, Inc.                Sterling McCall Lexus                       Houston,TX
Group 1 Automotive, Inc.                Toyota Body Shop                            Houston,TX
Group 1 Automotive, Inc.                Town North Nissan/Mitsubishi                Austin,TX
Group 1 Automotive, Inc.                AJ Foyt Honda/Isuzu                         Houston,TX
Group 1 Automotive, Inc.                Round Rock Nissan                           Round Rock,TX
Group 1 Automotive, Inc.                Bohn Brothers Toyota                        Harvey,LA
Group 1 Automotive, Inc.                Sunshine Buick, Pontiac, GMC Truck          Albequerque,NM
Group 1 Automotive, Inc.                Casa Chevrolet                              Albequerque,NM
Group 1 Automotive, Inc.                Luby Chevrolet                              Lakewood,CO
Group 1 Automotive, Inc.                Don Bohn Ford & Training Ctr                Harvey,LA
Group 1 Automotive, Inc.                Southwest Freeway Land                      Houston,TX
Group 1 Automotive, Inc.                Town North Nissan/Mitsubishi Land           Austin,TX
Group 1 Automotive, Inc.                Round Rock Nissan Land                      Round Rock,TX
GROUP 1 AUTOMOTIVE, INC. TOTAL

Gunn Automotive Group                   Gunn Pontiac-GMC                            San Antonio,TX
Gunn Automotive Group                   Gunn Dodge                                  San Antonio,TX
Gunn Automotive Group                   Gunn Land Rover                             San Antonio,TX
Gunn Automotive Group                   Gunn Chevrolet & Body Shop                  San Antonio,TX
Gunn Automotive Group                   Gunn Nissan                                 San Antonio,TX
GUNN AUTOMOTIVE GROUP TOTAL

Gurley-Leep Automotive Group            Gurley-Leep Olds-Cadillac &
                                        Saturn of Michiana                          Mishawaka,IN
Gurley-Leep Automotive Group            University Park Chrysler-Plymouth           Mishawaka,IN
Gurley-Leep Automotive Group            Gurley-Leep Imports                         Elkhart,IN
Gurley-Leep Automotive Group            Gurley-Leep Buick-GMC-Mercedes-Dodge        Mishawaka,IN
GURLEY-LEEP AUTOMOTIVE GROUP TOTAL

Hand Automotive Group                   Saturn Airport Marina                       Los Angeles,CA
HAND AUTOMOTIVE GROUP TOTAL

Hoz de Vila Automotive                  Sport Hyundai/Dodge                         Pleasantville,NJ
Hoz de Vila Automotive                  Dodge City                                  Burlington,NJ
HOZ DE VILA AUTOMOTIVE TOTAL


Jackson Automotive Group                Jackson Mazda                               Greenville,TX
Jackson Automotive Group                Jackson Autoplex                            Commerce,TX
Jackson Automotive Group                Jackson Autoplex-Used Cars                  Greenville,TX
Jackson Automotive Group                Jackson Cadillac-Oldsmobile-Pontiac,
                                        Inc.                                        Sulphur Springs,TX
Jackson Automotive Group                Jackson Motor Company                       Greenville,TX
JACKSON AUTOMOTIVE GROUP TOTAL

Kelley Automotive Group                 Kelley Buick Atlanta                        Chamblee,GA
</TABLE>

<TABLE>
<CAPTION>
                                             Gross Amount at December 31, 1999
                                        ------------------------------------------
                                                       Building and                   Accumulated       Date     Depreciation
Dealer Group Name                           Land       Improvements      Total        Depreciation    Acquired       Life
- -----------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>            <C>             <C>           <C>             <C>         <C>
Group 1 Automotive, Inc.                    114,807       1,167,895     1,282,702        50,847      12/30/1998    30 years
Group 1 Automotive, Inc.                  2,336,436       2,098,715     4,435,152        91,461      12/30/1998    30 years
Group 1 Automotive, Inc.                  1,219,635       4,531,450     5,751,085        56,643      08/26/1999    30 years
Group 1 Automotive, Inc.                  1,236,831       1,218,208     2,455,040        53,072      12/30/1998    30 years
Group 1 Automotive, Inc.                  4,100,143       5,557,985     9,658,129       177,532      01/06/1999    30 years
Group 1 Automotive, Inc.                    223,233         632,551       855,784        20,188      01/06/1999    30 years
Group 1 Automotive, Inc.                  3,151,187       5,632,950     8,784,137       179,925      01/06/1999    30 years
Group 1 Automotive, Inc.                    216,378         951,547     1,167,925        30,376      01/06/1999    30 years
Group 1 Automotive, Inc.                  1,590,983       3,201,370     4,792,353        84,481      03/24/1999    30 years
Group 1 Automotive, Inc.                  1,496,005       2,538,835     4,034,841       110,637      12/30/1998    30 years
Group 1 Automotive, Inc.                  1,017,942       1,982,518     3,000,460        63,314      01/13/1999    30 years
Group 1 Automotive, Inc.                  2,918,814       2,361,344     5,280,159         9,839      11/15/1999    30 years
Group 1 Automotive, Inc.                  3,132,901       2,254,275     5,387,175        28,178      08/06/1999    30 years
Group 1 Automotive, Inc.                  2,508,727       2,887,770     5,396,497         4,011      12/16/1999    30 years
Group 1 Automotive, Inc.                  2,737,284       4,299,889     7,037,174       187,415      12/30/1998    30 years
Group 1 Automotive, Inc.                  5,275,280       4,371,263     9,646,543        18,214      11/15/1999    30 years
Group 1 Automotive, Inc.                  1,132,586               -     1,132,586             -      12/30/1998
Group 1 Automotive, Inc.                    779,333               -       779,333             -      03/24/1999
Group 1 Automotive, Inc.                    763,882               -       763,882             -      01/13/1999
GROUP 1 AUTOMOTIVE, INC. TOTAL           35,952,390      45,688,567    81,640,956     1,166,134

Gunn Automotive Group                     2,239,624       3,326,606     5,566,230       200,150      08/25/1998    30 years
Gunn Automotive Group                     1,964,831       2,051,398     4,016,229       123,425      08/25/1998    30 years
Gunn Automotive Group                     1,057,209         759,909     1,817,118        45,721      08/25/1998    30 years
Gunn Automotive Group                     3,495,048       5,024,374     8,519,421       302,298      08/25/1998    30 years
Gunn Automotive Group                     1,331,537       1,184,692     2,516,228        71,278      08/25/1998    30 years
GUNN AUTOMOTIVE GROUP TOTAL              10,088,248      12,346,979    22,435,227       742,872

Gurley-Leep Automotive Group
                                          2,961,116       3,670,103     6,631,220       175,229      11/05/1998    30 years
Gurley-Leep Automotive Group              1,478,019         920,201     2,398,220        43,930      11/05/1998    30 years
Gurley-Leep Automotive Group                396,114       1,124,106     1,520,220        53,664      11/05/1998    30 years
Gurley-Leep Automotive Group              5,190,840       7,142,324    12,333,164       340,991      11/05/1998    30 years
GURLEY-LEEP AUTOMOTIVE GROUP TOTAL       10,026,090      12,856,734    22,882,824       613,814

Hand Automotive Group                     2,341,054       1,502,527     3,843,580        96,625      07/22/1998    30 years
HAND AUTOMOTIVE GROUP TOTAL               2,341,054       1,502,527     3,843,580        96,625

Hoz de Vila Automotive                    1,297,432       1,258,745     2,556,177        29,720      04/07/1999    30 years
Hoz de Vila Automotive                      636,471       1,795,592     2,432,063        42,396      04/07/1999    30 years
HOZ DE VILA AUTOMOTIVE TOTAL              1,933,904       3,054,336     4,988,240        72,116


Jackson Automotive Group                    111,264         549,476       660,739        28,508      10/23/1998    30 years
Jackson Automotive Group                     54,129         581,612       635,741        35,139      10/23/1998    20 years
Jackson Automotive Group                    279,686          83,943       363,629         4,355      10/23/1998    30 years
Jackson Automotive Group                    266,308       1,121,394     1,387,702        58,180      10/23/1998    30 years

Jackson Automotive Group                    260,000               -       260,000             -      10/23/1998
JACKSON AUTOMOTIVE GROUP TOTAL              971,387       2,336,424     3,307,811       126,182

Kelley Automotive Group                   3,249,737       2,844,383     6,094,119       194,699      06/17/1998    30 years
</TABLE>

<PAGE>   42

                                  SCHEDULE III
                            CAPITAL AUTOMOTIVE REIT
              SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
                            AS OF DECEMBER 31, 1999

<TABLE>
<CAPTION>
Dealer Group Name                       Dealership                                  Location
- -------------------------------------------------------------------------------------------------------
<S>                                     <C>                                         <C>
Kelley Automotive Group                 Kelley Buick Roswell                        Roswell,GA
Kelley Automotive Group                 Courtesy Motors                             Decatur,IN
Kelley Automotive Group                 Saturn of Gwinnett                          Duluth,GA
Kelley Automotive Group                 TST Car/Van Wash                            Fort Wayne,IN
Kelley Automotive Group                 Tom Kelley Buick                            Fort Wayne,IN
Kelley Automotive Group                 Tom Kelley Pontiac/GMC                      Fort Wayne,IN
Kelley Automotive Group                 Tom Kelley Cadillac                         Fort Wayne,IN
Kelley Automotive Group                 Northside Chevrolet                         Evansville,IN
Kelley Automotive Group                 Kelley Chevrolet                            Fort Wayne,IN
Kelley Automotive Group                 Saturn of Fort Wayne                        Fort Wayne,IN
Kelley Automotive Group                 Saturn of Fort Wayne                        Fort Wayne,IN
Kelley Automotive Group                 Midwest Auto Parts                          Fort Wayne,IN
KELLEY AUTOMOTIVE GROUP TOTAL

Ken Dixon Automotive                    Ken Dixon Chevrolet                         Waldorf,MD
KEN DIXON AUTOMOTIVE TOTAL

Kline Automotive                        Kline Toyota Greenbrier/
                                        Kline Chevrolet                             Chesapeake,VA
Kline Automotive                        Kline Undeveloped Lot                       Chesapeake,VA
KLINE AUTOMOTIVE TOTAL

Larry H. Miller Group                   Denver Toyota                               Denver,CO
LARRY H. MILLER GROUP TOTAL

Lithia Motors                           Grants Pass Auto Mart                       Grants Pass,OR
Lithia Motors                           Lithia Isuzu-Suzuki                         Medford,OR
Lithia Motors                           Lithia Toyota/Mazda                         Medford,OR
Lithia Motors                           Lithia Dodge                                Medford,OR
Lithia Motors                           Lithia Saturn                               Medford,OR
Lithia Motors                           Lithia Honda                                Medford,OR
Lithia Motors                           Roundtree Chevrolet-Lincoln                 Boise,ID
LITHIA MOTORS TOTAL

Lynn Alexander Automotive Group         Fiesta Dodge Chrysler-Plymouth Jeep Eagle   Big Spring,TX
Lynn Alexander Automotive Group         Chrysler-Plymouth Jeep-Eagle (Autoplex)     San Angelo,TX
Lynn Alexander Automotive Group         Dodge Lincoln-Mercury Nissan (Autoplex)     San Angelo,TX
Lynn Alexander Automotive Group         All-American Chevrolet, Inc.                San Angelo,TX
LYNN ALEXANDER AUTOMOTIVE GROUP TOTAL

Mark Miller Automotive Group            Mark Miller Toyota                          Salt Lake City,UT
Mark Miller Automotive Group            Mark Miller Pontiac                         Salt Lake City,UT
Mark Miller Automotive Group            Mark Miller Toyota-Used Cars                Salt Lake City,UT
Mark Miller Automotive Group            Undeveloped Lot Adjacent to Pontiac         Salt Lake City,UT
MARK MILLER AUTOMOTIVE GROUP TOTAL

McCluskey Chevrolet                     McCluskey Chevrolet --555 E. Galbraith      Cincinnati,OH
McCluskey Chevrolet                     McCluskey Chevrolet - 435 E. Galbraith      Cincinnati,OH
McCluskey Chevrolet                     McCluskey Chevrolet -- Reading Rd.          Cincinnati,OH
MCCLUSKEY CHEVROLET TOTAL
</TABLE>


<TABLE>
<CAPTION>
                                             Gross Amount at December 31, 1999
                                        ------------------------------------------
                                                       Building and                   Accumulated       Date     Depreciation
Dealer Group Name                           Land       Improvements      Total        Depreciation    Acquired       Life
- -----------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>            <C>             <C>           <C>             <C>         <C>
Kelley Automotive Group                   2,956,057       3,061,851     6,017,908       196,903      07/23/1998    30 years
Kelley Automotive Group                   1,207,661       1,826,458     3,034,119       125,021      06/17/1998    30 years
Kelley Automotive Group                   3,050,226       1,243,894     4,294,119        85,145      06/17/1998    30 years
Kelley Automotive Group                     345,079         863,130     1,208,208        15,584      06/09/1999    30 years
Kelley Automotive Group                   1,226,261       3,588,808     4,815,069       230,790      07/23/1998    30 years
Kelley Automotive Group                   1,115,426       4,299,643     5,415,069       276,503      07/23/1998    30 years
Kelley Automotive Group                     547,361       2,203,906     2,751,267       150,858      06/17/1998    30 years
Kelley Automotive Group                     795,030       1,939,090     2,734,119       132,729      06/17/1998    30 years
Kelley Automotive Group                   1,499,957       5,211,666     6,711,623       356,740      06/17/1998    30 years
Kelley Automotive Group                     263,895       1,158,798     1,422,693        79,320      06/17/1998    30 years
Kelley Automotive Group                     631,772         540,340     1,172,112         6,754      08/09/1999    30 years
Kelley Automotive Group                     385,416       1,508,703     1,894,119       116,296      06/17/1998    20 years
KELLEY AUTOMOTIVE GROUP TOTAL            17,273,877      30,290,669    47,564,547     1,967,342

Ken Dixon Automotive                      3,329,652       3,978,480     7,308,132       288,806      05/22/1998    30 years
KEN DIXON AUTOMOTIVE TOTAL                3,329,652       3,978,480     7,308,132       288,806

Kline Automotive
                                          2,683,823       4,319,163     7,002,986       367,200      02/27/1998    30 years
Kline Automotive                          1,529,567               -     1,529,567             -      02/27/1998
KLINE AUTOMOTIVE TOTAL                    4,213,390       4,319,163     8,532,553       367,200

Larry H. Miller Group                     1,993,036       7,243,001     9,236,037       585,786      03/31/1998    30 years
LARRY H. MILLER GROUP TOTAL               1,993,036       7,243,001     9,236,037       585,786

Lithia Motors                             1,248,419       1,371,522     2,619,941        24,764      06/18/1999    30 years
Lithia Motors                             1,182,429         557,500     1,739,929        10,066      06/18/1999    30 years
Lithia Motors                             2,102,213       3,130,794     5,233,007        56,528      06/18/1999    30 years
Lithia Motors                             2,033,425       2,710,753     4,744,178        48,944      06/18/1999    30 years
Lithia Motors                               414,453         781,560     1,196,013        14,112      06/18/1999    30 years
Lithia Motors                             1,360,759       1,503,668     2,864,427        27,150      06/18/1999    30 years
Lithia Motors                             2,588,238       7,227,467     9,815,705       524,656      05/06/1998    30 years
LITHIA MOTORS TOTAL                      10,929,936      17,283,265    28,213,200       706,219

Lynn Alexander Automotive Group             159,857         972,371     1,132,228        54,476      09/11/1998    30 years
Lynn Alexander Automotive Group             282,954       1,267,274     1,550,228        70,998      09/11/1998    30 years
Lynn Alexander Automotive Group             788,552       2,015,676     2,804,228       112,926      09/11/1998    30 years
Lynn Alexander Automotive Group           1,597,006       2,672,092     4,269,097       149,702      09/11/1998    30 years
LYNN ALEXANDER AUTOMOTIVE GROUP TOTAL     2,828,369       6,927,412     9,755,781       388,102

Mark Miller Automotive Group              1,133,391       5,119,582     6,252,972        21,332      11/05/1999    30 years
Mark Miller Automotive Group              3,431,993       1,545,979     4,977,972         6,442      11/05/1999    30 years
Mark Miller Automotive Group              3,071,102       1,431,870     4,502,972         5,966      11/05/1999    30 years
Mark Miller Automotive Group                452,972               -       452,972             -      11/05/1999
MARK MILLER AUTOMOTIVE GROUP TOTAL        8,089,459       8,097,431    16,186,890        33,739

McCluskey Chevrolet                         457,295         961,450     1,418,745        28,042      02/02/1999    30 years
McCluskey Chevrolet                       1,013,496       1,404,046     2,417,542        40,951      02/02/1999    30 years
McCluskey Chevrolet                         515,525       1,201,554     1,717,078        35,045      02/02/1999    30 years
MCCLUSKEY CHEVROLET TOTAL                 1,986,316       3,567,050     5,553,366       104,039
</TABLE>

<PAGE>   43

                                  SCHEDULE III
                            CAPITAL AUTOMOTIVE REIT
              SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
                            AS OF DECEMBER 31, 1999

<TABLE>
<CAPTION>
Dealer Group Name                       Dealership                                  Location
- --------------------------------------------------------------------------------------------------------
<S>                                     <C>                                         <C>
Momentum Automotive                     Momentum Jaguar/Porsche/Saab                Houston,TX
Momentum Automotive                     Momentum BMW                                Houston,TX
Momentum Automotive                     Momentum Volvo                              Houston,TX
Momentum Automotive                     Momentum Paint & Body                       Houston,TX
Momentum Automotive                     Momentum Used Car Lot                       Houston,TX
Momentum Automotive                     Barney Garver Land Rover/VW/Mazda           Houston,TX
MOMENTUM AUTOMOTIVE TOTAL

Motorcars Automotive Group              Motorcars Honda                             Cleveland Heights,OH
Motorcars Automotive Group              Motorcars Oldsmobile-Pontiac                Cleveland Heights,OH
Motorcars Automotive Group              Motorcars West                              North Olmstead,OH
MOTORCARS AUTOMOTIVE GROUP TOTAL

Mulkin Automotive Group                 Mulkin Parking Lot                          Brockport,NY
Mulkin Automotive Group                 Mulkin Chevrolet & Courtesy
                                        Pontiac,Buick,GMC Truck                     Brockport,NY
MULKIN AUTOMOTIVE GROUP TOTAL

Nebco of Cleveland, Inc.                Toyota of Cleveland                         Cleveland,TN
NEBCO OF CLEVELAND, INC. TOTAL

Noarus Auto Group                       Airport Marina Ford                         Los Angeles,CA
NOARUS AUTO GROUP TOTAL

O'Rielly Motor Company                  O'Rielly Chevrolet                          Tucson,AZ
O'RIELLY MOTOR COMPANY TOTAL

Orr Automotive                          Performance Motors, Inc.                    Atlanta,TX
Orr Automotive                          Orr Honda                                   Texarkana,TX
Orr Automotive                          Orr Mitsubishi                              Texarkana,TX
Orr Automotive                          Orr BMW/Infiniti                            Shreveport,LA
Orr Automotive                          Orr Acura                                   Shreveport,LA
ORR AUTOMOTIVE TOTAL

Park Place Motorcars                    PPM Specialists, Inc.                       Dallas,TX
Park Place Motorcars                    Park Place Lexus                            Plano,TX
Park Place Motorcars                    Park Place Motorcars                        Dallas,TX
Park Place Motorcars                    Park Place Motorcars Mid-Cities             Bedford,TX
PARK PLACE MOTORCARS TOTAL

Pohanka Automotive Group                Towne Toyota Mercedes-Benz                  Salisbury,MD
Pohanka Automotive Group                Good News Mazda                             Salisbury,MD
Pohanka Automotive Group                Pohanka Saturn, Isuzu, & Oldsmobile         Marlow Heights,MD
Pohanka Automotive Group                Good News Honda                             Salisbury,MD
Pohanka Automotive Group                Pohanka Honda                               Marlow Heights,MD
Pohanka Automotive Group                Pohanka Body Shop                           Marlow Heights,MD
Pohanka Automotive Group                Good News Olds-Cadillac-GMC                 Salisbury,MD
Pohanka Automotive Group                Good News Body Shop                         Salisbury,MD
Pohanka Automotive Group                Good News Nissan                            Salisbury,MD
Pohanka Automotive Group                Pohanka Lexus                               Chantilly,VA
Pohanka Automotive Group                Pohanka Saturn of Bowie                     Bowie,MD
</TABLE>

<TABLE>
<CAPTION>
                                             Gross Amount at December 31, 1999
                                        ------------------------------------------
                                                       Building and                   Accumulated       Date     Depreciation
Dealer Group Name                           Land       Improvements      Total        Depreciation    Acquired       Life
- -----------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>            <C>             <C>           <C>             <C>         <C>
Momentum Automotive                       7,282,438      11,151,887    18,434,325       624,775      09/01/1998    30 years
Momentum Automotive                       3,676,493       8,185,594    11,862,087       261,484      12/04/1998    30 years
Momentum Automotive                       1,383,124       3,282,423     4,665,546       183,895      09/01/1998    30 years
Momentum Automotive                       1,191,776       3,473,983     4,665,759       194,627      09/01/1998    30 years
Momentum Automotive                         638,118       1,654,978     2,293,096        79,008      11/25/1998    30 years
Momentum Automotive                       1,062,966       1,455,407     2,518,373        30,321      05/17/1999    30 years
MOMENTUM AUTOMOTIVE TOTAL                15,234,915      29,204,271    44,439,187     1,374,109

Motorcars Automotive Group                  818,578       4,279,543     5,098,121       222,031      10/28/1998    30 years
Motorcars Automotive Group                  656,210       2,122,204     2,778,414       110,104      10/28/1998    30 years
Motorcars Automotive Group                1,974,998       3,187,807     5,162,804       165,389      10/28/1998    30 years
MOTORCARS AUTOMOTIVE GROUP TOTAL          3,449,785       9,589,554    13,039,339       497,524

Mulkin Automotive Group                      30,639          26,769        57,407           706      03/25/1999    30 years
Mulkin Automotive Group                     356,033       2,164,438     2,520,471        57,117      03/25/1999    30 years

MULKIN AUTOMOTIVE GROUP TOTAL               386,672       2,191,207     2,577,879        57,824

Nebco of Cleveland, Inc.                    581,158       1,891,855     2,473,013        23,648      08/14/1999    30 years
NEBCO OF CLEVELAND, INC. TOTAL              581,158       1,891,855     2,473,013        23,648

Noarus Auto Group                         4,898,755       1,950,690     6,849,445       125,446      07/22/1998    30 years
NOARUS AUTO GROUP TOTAL                   4,898,755       1,950,690     6,849,445       125,446

O'Rielly Motor Company                    4,515,062       5,321,125     9,836,187       386,271      05/22/1998    30 years
O'RIELLY MOTOR COMPANY TOTAL              4,515,062       5,321,125     9,836,187       386,271

Orr Automotive                              459,509       2,571,824     3,031,333        46,436      06/30/1999    30 years
Orr Automotive                            1,006,979       1,040,405     2,047,384        58,288      09/16/1998    30 years
Orr Automotive                              142,496         169,189       311,684        10,179      08/28/1998    30 years
Orr Automotive                              497,268         715,262     1,212,531        43,035      08/27/1998    30 years
Orr Automotive                              536,735       1,380,648     1,917,383        83,069      08/27/1998    30 years
ORR AUTOMOTIVE TOTAL                      2,642,987       5,877,328     8,520,315       241,006

Park Place Motorcars                        528,767       1,574,618     2,103,385        88,217      09/28/1998    30 years
Park Place Motorcars                      7,318,505       6,483,194    13,801,699       363,215      09/28/1998    30 years
Park Place Motorcars                      6,373,615      12,920,058    19,293,674       412,724      01/08/1999    30 years
Park Place Motorcars                      1,948,747       5,824,772     7,773,518        40,450      10/12/1999    30 years
PARK PLACE MOTORCARS TOTAL               16,169,634      26,802,642    42,972,276       904,607

Pohanka Automotive Group                    406,556         163,715       570,271        13,919      02/27/1998    30 years
Pohanka Automotive Group                    246,923         167,699       414,622        14,257      02/27/1998    30 years
Pohanka Automotive Group                  2,005,304       2,358,089     4,363,393       200,476      02/19/1998    30 years
Pohanka Automotive Group                    428,563         159,768       588,331        13,583      02/27/1998    30 years
Pohanka Automotive Group                    771,065       2,934,756     3,705,821       249,502      02/19/1998    30 years
Pohanka Automotive Group                    614,767          98,007       712,774         8,332      02/19/1998    30 years
Pohanka Automotive Group                    634,419         197,652       832,071        16,804      02/27/1998    30 years
Pohanka Automotive Group                  1,122,544         166,184     1,288,728        15,580      02/27/1998    30 years
Pohanka Automotive Group                    220,415         230,757       451,172        19,618      02/27/1998    30 years
Pohanka Automotive Group                  2,017,383       1,422,902     3,440,285       120,970      02/19/1998    30 years
Pohanka Automotive Group                  3,600,517         504,858     4,105,375        42,921      02/19/1998    30 years
</TABLE>

<PAGE>   44

                                  SCHEDULE III
                            CAPITAL AUTOMOTIVE REIT
              SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
                            AS OF DECEMBER 31, 1999

<TABLE>
<CAPTION>
Dealer Group Name                       Dealership                                  Location
- -------------------------------------------------------------------------------------------------------
<S>                                     <C>                                         <C>
Pohanka Automotive Group                Pohanka Cadillac/Hyundai/Nissan             Fredericksburg,VA
Pohanka Automotive Group                Pohanka Acura & Chevy                       Chantilly,VA
Pohanka Automotive Group                Pohanka Undeveloped Lot                     Chantilly,VA
Pohanka Automotive Group                Pohanka Hyundai                             Marlow Heights,MD
POHANKA AUTOMOTIVE GROUP TOTAL

Rosenthal Automotive Group              Rosenthal Nissan/Acura/Mazda/Isuzu          Gaithersburg,MD
Rosenthal Automotive Group              Rosenthal Infiniti-Mazda-Nissan             Tyson's Corner,VA
Rosenthal Automotive Group              Rosenthal Body Shop                         Tyson's Corner,VA
Rosenthal Automotive Group              Rosenthal Storage Lot                       Arlington,VA
Rosenthal Automotive Group              Rosenthal Mazda                             Arlington,VA
Rosenthal Automotive Group              Rosenthal Chevrolet/Jeep/Eagle              Arlington,VA
Rosenthal Automotive Group              Rosenthal Honda/Jaguar                      Tyson's Corner,VA
ROSENTHAL AUTOMOTIVE GROUP TOTAL

Roundtree Automotive Group              Champion Mitsubishi                         Shreveport,LA
Roundtree Automotive Group              Roundtree Olds-Cadillac                     Shreveport,LA
Roundtree Automotive Group              Champion Ford                               Shreveport,LA
Roundtree Automotive Group              Roundtree Hyundai-Subaru                    Shreveport,LA
Roundtree Automotive Group              Auto Trim Design (Roundtree)                Shreveport,LA
Roundtree Automotive Group              Brocks Service Facility                     Shreveport,LA
Roundtree Automotive Group              Roundtree-Car Central                       Bossier City,LA
Roundtree Automotive Group              Roundtree Lake Charles Land                 Lake Charles,LA
ROUNDTREE AUTOMOTIVE GROUP TOTAL

Saturn Retail Enterprises               Saturn of Regency                           Jacksonville,FL
Saturn Retail Enterprises               Saturn of the Avenues                       Jacksonville,FL
Saturn Retail Enterprises               Saturn of Houston-Gulf Freeway              Houston,TX
Saturn Retail Enterprises               Saturn of Plano                             Plano,TX
Saturn Retail Enterprises               Saturn of Chattanooga                       Chattanooga,TN
SATURN RETAIL ENTERPRISES TOTAL

Sheehy Auto Stores                      Sheehy Lincoln-Mercury/Mitsubishi           Woodbridge,VA
Sheehy Auto Stores                      Chapman Ford Sales                          Philadelphia,PA
Sheehy Auto Stores                      Sheehy Ford of Marlow Heights               Marlow Heights,MD
Sheehy Auto Stores                      Sheehy Ford of Springfield                  Springfield,VA
SHEEHY AUTO STORES TOTAL

Sonic Automotive, Inc.                  Freeland-BMW Nissan                         Ft. Myers,FL
Sonic Automotive, Inc.                  HMC Finance Office Building                 Port Orange,FL
Sonic Automotive, Inc.                  Tom Williams Used Cars                      Birmingham,AL
Sonic Automotive, Inc.                  Tom Williams Buick                          Birmingham,AL
Sonic Automotive, Inc.                  Lone Star Ford                              Houston,TX
Sonic Automotive, Inc.                  Shottenkirk Honda                           Pensacola,FL
Sonic Automotive, Inc.                  Lone Star Nissan Olds                       The Medows,TX
Sonic Automotive, Inc.                  Manhattan BMW of Fairfax                    Fairfax,VA
Sonic Automotive, Inc.                  Global BMW                                  Atlanta,GA
Sonic Automotive, Inc.                  Freeland-Mercedes                           Ft. Myers,FL
Sonic Automotive, Inc.                  Clearwater Toyota & Mitsubishi              Clearwater,FL
Sonic Automotive, Inc.                  Freeland-Honda                              Ft. Myers,FL
</TABLE>

<TABLE>
<CAPTION>
                                             Gross Amount at December 31, 1999
                                        -----------------------------------------
                                                       Building and                   Accumulated       Date     Depreciation
Dealer Group Name                           Land       Improvements      Total        Depreciation    Acquired       Life
- -----------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>            <C>             <C>           <C>             <C>         <C>
Pohanka Automotive Group                  1,631,722       3,248,564     4,880,286       160,097      02/19/1998    30 years
Pohanka Automotive Group                  3,367,127       4,308,211     7,675,338       366,269      02/19/1998    30 years
Pohanka Automotive Group                  2,455,659           6,284     2,461,943           534      02/19/1998    30 years
Pohanka Automotive Group                    888,234         683,156     1,571,390        58,079      02/19/1998    30 years
POHANKA AUTOMOTIVE GROUP TOTAL           20,411,198      16,650,603    37,061,801     1,300,941

Rosenthal Automotive Group                6,810,506       4,998,589    11,809,095       424,962      02/19/1998    30 years
Rosenthal Automotive Group               19,396,815       4,446,289    23,843,104       378,207      02/19/1998    30 years
Rosenthal Automotive Group                  665,989         419,089     1,085,078        35,629      02/19/1998    30 years
Rosenthal Automotive Group                4,894,106          15,114     4,909,220         1,285      02/19/1998    30 years
Rosenthal Automotive Group                4,874,676         493,251     5,367,927        41,934      02/19/1998    30 years
Rosenthal Automotive Group                5,009,272       1,783,436     6,792,708       151,621      02/19/1998    30 years
Rosenthal Automotive Group                9,281,370       2,167,729    11,449,099       184,293      02/19/1998    30 years
ROSENTHAL AUTOMOTIVE GROUP TOTAL         50,932,735      14,323,497    65,256,232     1,217,932

Roundtree Automotive Group                  876,554       1,139,964     2,016,518        78,031      06/04/1998    30 years
Roundtree Automotive Group                1,470,535       1,931,846     3,402,381       132,235      06/04/1998    30 years
Roundtree Automotive Group                2,236,421       4,792,478     7,028,899       328,046      06/04/1998    30 years
Roundtree Automotive Group                  364,792         251,726       616,518        19,404      06/04/1998    20 years
Roundtree Automotive Group                  123,612         470,906       594,518        32,234      06/04/1998    30 years
Roundtree Automotive Group                  232,351         634,167       866,518        43,409      06/04/1998    30 years
Roundtree Automotive Group                  406,884         409,627       816,511        28,039      06/04/1998    30 years
Roundtree Automotive Group                2,194,235               -     2,194,235             -      09/01/1998
ROUNDTREE AUTOMOTIVE GROUP TOTAL          7,905,383       9,630,714    17,536,098       661,398

Saturn Retail Enterprises                   853,048       1,678,422     2,531,470         6,993      11/15/1999    30 years
Saturn Retail Enterprises                 1,154,281       2,116,261     3,270,543        55,846      03/25/1999    30 years
Saturn Retail Enterprises                 2,094,123       2,469,920     4,564,043        65,178      03/25/1999    30 years
Saturn Retail Enterprises                 2,331,099       2,139,854     4,470,953        56,468      03/25/1999    30 years
Saturn Retail Enterprises                 1,433,676       1,752,271     3,185,947        21,903      08/14/1999    30 years
SATURN RETAIL ENTERPRISES TOTAL           7,866,228      10,156,728    18,022,956       206,389

Sheehy Auto Stores                        1,756,405         824,206     2,580,611        70,071      02/19/1998    30 years
Sheehy Auto Stores                        3,006,604           8,082     3,014,686           687      02/19/1998    30 years
Sheehy Auto Stores                        1,212,923         933,763     2,146,686        87,540      02/19/1998    30 years
Sheehy Auto Stores                        4,221,356       2,107,330     6,328,686       179,158      02/19/1998    30 years
SHEEHY AUTO STORES TOTAL                 10,197,288       3,873,381    14,070,669       337,456

Sonic Automotive, Inc.                    4,274,695       1,871,965     6,146,660         7,800      11/04/1999    30 years
Sonic Automotive, Inc.                      426,576         202,295       628,870         2,529      08/14/1999    30 years
Sonic Automotive, Inc.                      427,565         374,296       801,862         4,679      08/14/1999    30 years
Sonic Automotive, Inc.                    2,035,519       2,127,823     4,163,342        26,598      08/14/1999    30 years
Sonic Automotive, Inc.                    4,985,549       6,215,450    11,201,000        77,693      08/14/1999    30 years
Sonic Automotive, Inc.                      943,985       1,750,263     2,694,248        17,016      09/01/1999    30 years
Sonic Automotive, Inc.                    3,013,604       3,266,078     6,279,682        40,826      08/14/1999    30 years
Sonic Automotive, Inc.                    3,026,528       2,421,474     5,448,002        30,268      08/14/1999    30 years
Sonic Automotive, Inc.                    4,761,991       5,687,137    10,449,129        71,089      08/14/1999    30 years
Sonic Automotive, Inc.                    1,549,131       1,464,755     3,013,886         6,103      11/04/1999    30 years
Sonic Automotive, Inc.                    4,136,070       3,915,854     8,051,924       219,382      09/18/1998    30 years
Sonic Automotive, Inc.                    2,742,915       1,270,971     4,013,886         5,296      11/04/1999    30 years

</TABLE>

<PAGE>   45

                                  SCHEDULE III
                            CAPITAL AUTOMOTIVE REIT
              SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
                            AS OF DECEMBER 31, 1999

<TABLE>
<CAPTION>
Dealer Group Name                       Dealership                                  Location
- -------------------------------------------------------------------------------------------------------
<S>                                     <C>                                         <C>
Sonic Automotive, Inc.                  Halifax Body Shop-Parcel 12                 New Smyrna Beach,FL
Sonic Automotive, Inc.                  Cleveland Village Honda                     Cleveland,TN
Sonic Automotive, Inc.                  Halifax Ford-Mercury                        New Smyrna Beach,FL
Sonic Automotive, Inc.                  Lute Riley Honda                            Richardson,TX
Sonic Automotive, Inc.                  Halifax Ford Used Cars                      Edgewater,FL
Sonic Automotive, Inc.                  Higginbotham Chevrolet-Oldsmobile           New Smyrna Beach,FL
Sonic Automotive, Inc.                  Fred Bondenson Chevrolet-Olds-Cadillac      Deland,FL
Sonic Automotive, Inc.                  Higginbotham Mercedes                       Daytona Beach,FL
Sonic Automotive, Inc.                  Clearwater Collision Center                 Clearwater,FL
Sonic Automotive, Inc.                  Dyer & Dyer Volvo                           Duluth,GA
Sonic Automotive, Inc.                  Newsome Chevrolet World                     Columbia,SC
Sonic Automotive, Inc.                  Lake Norman Chrysler-Plymouth-Dodge #2      Cornelius,NC
Sonic Automotive, Inc.                  Reading Buick, Pontiac, GMC                 Baytown,TX
Sonic Automotive, Inc.                  Lake Norman Dodge #2                        Cornelius,NC
Sonic Automotive, Inc.                  Fitzgerald Chevrolet                        Monroe,NC
Sonic Automotive, Inc.                  Infiniti of Chattanooga                     Chattanooga,TN
Sonic Automotive, Inc.                  Heritage Lincoln-Mercury                    Greenville,SC
Sonic Automotive, Inc.                  Century BMW Auto Sales                      Spartanburg,SC
Sonic Automotive, Inc.                  Lake Norman Chrysler-Plymouth #1            Cornelius,NC
Sonic Automotive, Inc.                  Newsome Automotive LLC                      Florence,SC
Sonic Automotive, Inc.                  Lake Norman Dodge #1                        Cornelius,NC
Sonic Automotive, Inc.                  Century BMW                                 Greenville,SC
Sonic Automotive, Inc.                  North Charleston Lincoln-Mercury/Hyundai    North Charleston,SC
Sonic Automotive, Inc.                  Westside Dodge                              Columbus,OH
Sonic Automotive, Inc.                  Toyota West                                 Columbus,OH
Sonic Automotive, Inc.                  Hatfield Hyundai                            Columbus,OH
Sonic Automotive, Inc.                  Hatfield Lincoln-Mercury                    Columbus,OH
Sonic Automotive, Inc.                  Hatfield VW-Jeep West                       Columbus,OH
Sonic Automotive, Inc.                  Fort Mill Ford                              Fort Mill,SC
Sonic Automotive, Inc.                  VW-Kia of Chattanooga                       Chattanooga,TN
Sonic Automotive, Inc.                  Town & Country Ford Cleveland
                                        (Parcels 1 & 3)                             Cleveland,TN
Sonic Automotive, Inc.                  Town & Country Ford Cleveland #2            Cleveland,TN
Sonic Automotive, Inc.                  Infiniti of Charlotte                       Charlotte,NC
Sonic Automotive, Inc.                  Volkswagon of Nashville                     Nashville,TN
Sonic Automotive, Inc.                  Manhattan Jaguar Lincoln-Mercury            Rockville,MD
Sonic Automotive, Inc.                  Manhattan Nissan Jeep-Eagle                 Waldorf,MD
Sonic Automotive, Inc.                  BMW-Volvo of Chattanooga                    Chattanooga,TN
Sonic Automotive, Inc.                  Ron Craft Chrysler-Plymouth-Jeep            Baytown,TX
Sonic Automotive, Inc.                  Town & Country Ford                         Charlotte,NC
Sonic Automotive, Inc.                  Town & Country Ford RAC                     Charlotte,NC
Sonic Automotive, Inc.                  Town & Country Toyota                       Charlotte,NC
Sonic Automotive, Inc.                  Superior Olds-Cadillac-GMC                  Cleveland,TN
Sonic Automotive, Inc.                  Manhattan BMW of Fairfax-Storage            Fairfax,VA
Sonic Automotive, Inc.                  Infiniti of Chattanooga #2                  Chattanooga,TN
SONIC AUTOMOTIVE, INC. TOTAL

Sterling Collision Centers, Inc.        JSI Collision Center - Bedford              Bedford,OH
Sterling Collision Centers, Inc.        JSI Collision Center - CF                   Cuyahoga Falls,OH
Sterling Collision Centers, Inc.        JSI Collision Center - CL                   Cleveland,OH
STERLING COLLISION CENTERS, INC. TOTAL
</TABLE>

<TABLE>
<CAPTION>
                                             Gross Amount at December 31, 1999
                                         -----------------------------------------
                                                       Building and                   Accumulated       Date     Depreciation
Dealer Group Name                           Land       Improvements      Total        Depreciation    Acquired       Life
- -----------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>            <C>             <C>           <C>             <C>         <C>
Sonic Automotive, Inc.                      336,834         505,236       842,070         6,315      08/14/1999    30 years
Sonic Automotive, Inc.                      687,598         840,154     1,527,752        10,502      08/14/1999    30 years
Sonic Automotive, Inc.                    1,443,980       2,392,446     3,836,427        29,906      08/14/1999    30 years
Sonic Automotive, Inc.                    6,843,575       4,773,825    11,617,400        59,673      08/14/1999    30 years
Sonic Automotive, Inc.                      304,620         424,103       728,723         5,301      08/14/1999    30 years
Sonic Automotive, Inc.                    1,354,320       6,266,025     7,620,345        78,325      08/14/1999    30 years
Sonic Automotive, Inc.                    1,248,734       2,705,218     3,953,952        33,815      08/14/1999    30 years
Sonic Automotive, Inc.                      922,825       1,262,355     2,185,180        15,779      08/14/1999    30 years
Sonic Automotive, Inc.                      331,082         316,218       647,300        17,716      09/18/1998    30 years
Sonic Automotive, Inc.                    3,291,271       1,515,620     4,806,891        18,945      08/14/1999    30 years
Sonic Automotive, Inc.                    1,351,718       2,287,864     3,639,582        28,598      08/14/1999    30 years
Sonic Automotive, Inc.                      301,208         794,296     1,095,504         9,929      08/14/1999    30 years
Sonic Automotive, Inc.                      500,776       1,442,373     1,943,149        18,030      08/14/1999    30 years
Sonic Automotive, Inc.                      537,636         653,550     1,191,186         8,169      08/14/1999    30 years
Sonic Automotive, Inc.                    1,095,932       2,666,403     3,762,335        33,330      08/14/1999    30 years
Sonic Automotive, Inc.                    1,327,613       1,622,395     2,950,009        20,280      08/14/1999    30 years
Sonic Automotive, Inc.                    1,684,188       1,409,824     3,094,013        17,623      08/14/1999    30 years
Sonic Automotive, Inc.                      492,922         627,656     1,120,578         7,846      08/14/1999    30 years
Sonic Automotive, Inc.                    1,405,770       3,318,291     4,724,062        41,479      08/14/1999    30 years
Sonic Automotive, Inc.                    1,300,237       4,002,699     5,302,937        50,034      08/14/1999    30 years
Sonic Automotive, Inc.                    1,010,854       2,535,582     3,546,437        31,695      08/14/1999    30 years
Sonic Automotive, Inc.                    1,664,632       2,470,617     4,135,249        30,883      08/14/1999    30 years
Sonic Automotive, Inc.                    4,273,963         952,326     5,226,289        11,904      08/17/1999    30 years
Sonic Automotive, Inc.                    2,092,735       3,808,952     5,901,687        47,612      08/14/1999    30 years
Sonic Automotive, Inc.                    1,470,122       3,253,940     4,724,062        40,674      08/14/1999    30 years
Sonic Automotive, Inc.                    2,125,937       2,598,124     4,724,062        32,477      08/14/1999    30 years
Sonic Automotive, Inc.                    1,331,040       1,626,584     2,957,624        20,332      08/14/1999    30 years
Sonic Automotive, Inc.                    1,331,040       1,626,584     2,957,624        20,332      08/14/1999    30 years
Sonic Automotive, Inc.                    1,723,276       3,000,786     4,724,062        37,510      08/14/1999    30 years
Sonic Automotive, Inc.                      592,846         724,346     1,317,192         9,054      08/14/1999    30 years
Sonic Automotive, Inc.                      953,129       1,164,692     2,117,820        14,559      08/14/1999    30 years
Sonic Automotive, Inc.                      403,661         493,120       896,780         6,164      08/14/1999    30 years
Sonic Automotive, Inc.                    1,913,965       2,339,047     4,253,012        29,238      08/14/1999    30 years
Sonic Automotive, Inc.                      655,378         800,774     1,456,152        10,010      08/14/1999    30 years
Sonic Automotive, Inc.                    4,296,067       1,774,425     6,070,491        22,180      08/14/1999    30 years
Sonic Automotive, Inc.                    1,827,322       2,063,909     3,891,231        25,799      08/14/1999    30 years
Sonic Automotive, Inc.                      934,434       1,825,349     2,759,783        22,817      08/14/1999    30 years
Sonic Automotive, Inc.                      974,936       1,099,469     2,074,405        13,743      08/14/1999    30 years
Sonic Automotive, Inc.                    6,119,289       5,082,461    11,201,750        63,531      08/14/1999    30 years
Sonic Automotive, Inc.                      520,786         557,672     1,078,458         6,971      08/14/1999    30 years
Sonic Automotive, Inc.                    2,999,555       2,902,131     5,901,687        36,277      08/14/1999    30 years
Sonic Automotive, Inc.                      858,566       1,892,706     2,751,271        23,659      08/14/1999    30 years
Sonic Automotive, Inc.                            -               -             -             -      08/14/1999
Sonic Automotive, Inc.                      455,171               -       455,171             -      08/14/1999
SONIC AUTOMOTIVE, INC. TOTAL             99,615,673     114,988,510   214,604,183     1,578,294

Sterling Collision Centers, Inc.             73,602       1,398,430     1,472,031        17,480      08/14/1999    30 years
Sterling Collision Centers, Inc.            432,246       1,334,192     1,766,438        16,677      08/14/1999    30 years
Sterling Collision Centers, Inc.            448,136       1,023,895     1,472,031        12,799      08/14/1999    30 years
STERLING COLLISION CENTERS, INC. TOTAL      953,984       3,756,517     4,710,500        46,956
</TABLE>

<PAGE>   46

                                  SCHEDULE III
                            CAPITAL AUTOMOTIVE REIT
              SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
                            AS OF DECEMBER 31, 1999

<TABLE>
<CAPTION>
Dealer Group Name                       Dealership                                  Location
- ------------------------------------------------------------------------------------------------------
<S>                                     <C>                                         <C>
The Price Organization                  Price Buick-Pontiac                         Salisbury,MD
THE PRICE ORGANIZATION TOTAL

Town & Country Automotive               Town & Country Buick, Pontiac-GMC,
                                        Olds, Cadillac                              Middletown,CT
Town & Country Automotive               Town & Country Super Used Car Store         Middletown,CT
Town & Country Automotive               Town & Country Lincoln-Mercury, Mazda       Middletown,CT
Town & Country Automotive               Town & Country Mazda                        Ivorytown,CT
Town & Country Automotive               Town & Country Chrysler/Jeep                Middletown,CT
TOWN & COUNTRY AUTOMOTIVE TOTAL

United Auto Group                       Citrus Chrysler-Plymouth Dodge              Dade City,FL
United Auto Group                       Citrus Chrysler Used Car Lot                Dade City,FL
UNITED AUTO GROUP TOTAL

Warren Henry Automobiles, Inc.          Warren Henry Jaguar/Volvo                   Miami,FL
Warren Henry Automobiles, Inc.          Warren Henry Land Rover                     Miami,FL
Warren Henry Automobiles, Inc.          Warren Henry Infiniti                       Miami,FL
WARREN HENRY AUTOMOBILES, INC. TOTAL
- ------------------------------------------------------------------------------------------------------
GRAND TOTAL
- ------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                              Gross Amount at December 31, 1999
                                         ------------------------------------------
                                                        Building and                   Accumulated       Date     Depreciation
Dealer Group Name                            Land       Improvements      Total        Depreciation    Acquired       Life
- ------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>             <C>             <C>         <C>               <C>         <C>
The Price Organization                       649,805         696,792     1,346,597        59,239      02/27/1998    30 years
THE PRICE ORGANIZATION TOTAL                 649,805         696,792     1,346,597        59,239

Town & Country Automotive                    453,096       1,484,057     1,937,153       114,396      06/09/1998    20 years
Town & Country Automotive                    177,770       1,081,524     1,259,294        74,031      06/09/1998    30 years
Town & Country Automotive                    542,904       1,238,415     1,781,319        84,770      06/09/1998    30 years
Town & Country Automotive                    302,977         905,317     1,208,294        61,969      06/09/1998    30 years
Town & Country Automotive                    697,975         765,319     1,463,294        52,386      06/09/1998    30 years
TOWN & COUNTRY AUTOMOTIVE TOTAL            2,174,721       5,474,632     7,649,352       387,552

United Auto Group                            548,395       1,088,504     1,636,899        13,606      08/14/1999    30 years
United Auto Group                            247,301               -       247,301             -      08/14/1999
UNITED AUTO GROUP TOTAL                      795,697       1,088,504     1,884,200        13,606

Warren Henry Automobiles, Inc.             2,560,916       2,430,812     4,991,727       146,253      08/27/1998    30 years
Warren Henry Automobiles, Inc.               958,959         913,176     1,872,135        54,942      08/27/1998    30 years
Warren Henry Automobiles, Inc.             3,279,263       2,562,606     5,841,869       154,183      08/27/1998    30 years
WARREN HENRY AUTOMOBILES, INC. TOTAL       6,799,138       5,906,593    12,705,731       355,378
- ------------------------------------------------------------------------------------------------
GRAND TOTAL                             $423,756,945    $511,767,809  $935,524,754  $(21,201,569)
- ----------------------------------------========================================================
</TABLE>


<PAGE>   1
                                               EXHIBIT 3.2

                             CAPITAL AUTOMOTIVE REIT

                           AMENDED AND RESTATED BYLAWS

                                    ARTICLE I

                                      NAME

     Section 1.1    Name.     The name of the Trust is CAPITAL AUTOMOTIVE REIT.

     Section 1.2    State of Formation.  The Trust has been formed under the
laws of the State of Maryland.

                                   ARTICLE II

                        REGISTERED AND PRINCIPAL OFFICES

     Section 2.1    Registered Office.   The registered office of the Trust in
the State of Maryland shall be at WC&P Agent Corporation, whose address is 100
Light Street, Baltimore, Maryland 21202.

     Section 2.2    Offices.  The principal office of the Trust and any other
offices of the Trust shall be located at such places, within and without the
State of Maryland, as the Board of Trustees may from time to time determine or
as the business of the Trust may require.

                                   ARTICLE III

                            MEETINGS OF SHAREHOLDERS

     Section 3.1    Place of Meetings.  All meetings of the holders
("shareholders") of shares of beneficial interest ("shares") of the Trust shall
be held at such place or places, within or without the State of Maryland, as
shall be determined by the Board of Trustees from time to time.

     Section 3.2    Annual Meetings.  An annual meeting of the shareholders for
the election of Trustees and the transaction of any business within the powers
of the Trust shall be held during the month of May of each year, after the
delivery of the annual report, referred to in Section 3.15 of this Article III,
at a convenient location and on proper notice, on a date and at the time set by
the Trustees. Failure to hold an annual meeting does not invalidate the Trust's
existence or affect any otherwise valid acts of the Trust.

                                       1

<PAGE>   2

     Section 3.3    Special Meetings.  Subject to the provisions of the
Declaration of Trust of the Trust, as amended, restated or supplemented from
time to time (the "Declaration" or "Declaration of Trust"), special in lieu of
annual meetings or special meetings of the shareholders may be called at any
time by the Chairman of the Board, Chief Executive Officer, President or a
majority of members of the Board of Trustees and shall be called upon the
request in writing of holders of 50% or more of the outstanding shares entitled
to vote. Special meetings of the shareholders shall be held on a date fixed by
the Secretary of the Trust which shall be not more than ninety (90) days after
the date of the call, or after receipt of the request. If the Secretary shall
neglect or refuse to fix the date or to give notice as required by Section 3.4,
below, the person or persons making the request may do so.

     Section 3.4    Notice of Meetings.  Written notice of every meeting of
shareholders, stating the time and place thereof, shall be given as herein
provided by, or at the direction of, the person authorized to call the meeting,
to each shareholder of record entitled to vote at the meeting, not less than ten
(10) nor more than ninety (90) days prior to the day named for the meeting,
unless a greater period of notice is required by statute in a particular case.
In the case of a special meeting of shareholders, the notice shall also set
forth the purpose of the meeting. When a meeting is adjourned, it shall not be
necessary to give any notice of the adjourned meeting or of the business to be
transacted at any adjourned meeting, other than by announcement at the meeting
at which such adjournment is taken. Except as set forth in Section 4.4, below,
business to be conducted at any annual, special in lieu of annual or special
meeting of shareholders may be proposed only by the Board of Trustees or by a
shareholder who is entitled to vote at the meeting and who has filed his
proposed item of business with the Secretary of the Trust within the time limits
set forth in the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or, if the Trust is not subject to the requirements of the Exchange Act,
forty-five (45) days prior to the meeting. Only the business specified in the
notice of meeting may be brought before the meeting.

     Section 3.5    Quorum.   At any meeting of shareholders, the presence in
person or by proxy of shareholders entitled to cast a majority of all the votes
entitled to be cast at such meeting shall constitute a quorum; but this Section
shall not affect any requirement under any statute or the Declaration of Trust
for the vote necessary for the adoption of any measure. If, however, such quorum
shall not be present at any meeting of the shareholders, the shareholders
entitled to vote at such meeting, present in person or by proxy, shall have the
power to adjourn the meeting from time to time to a date not more than 120 days
after the original record date without notice other than announcement at the
meeting. At such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting as
originally notified.

     Section 3.6    Voting.   A plurality of all the votes cast at a meeting of
shareholders duly called and at which a quorum is present shall be sufficient to
elect a Trustee. Each share may be voted for as many individuals as there are
Trustees to be elected and for whose election the share is entitled to be voted.
A majority of the votes cast at a meeting of shareholders duly

                                       2

<PAGE>   3

called and at which a quorum is present shall be sufficient to approve any other
matter which may properly come before the meeting, unless more than a majority
of the votes cast is required herein or by statute or by the Declaration. Unless
otherwise provided in the Declaration, each outstanding share, regardless of
class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders.

     Section 3.7    Voting by Ballot.  Voting on any question or in any election
may be viva voce unless the presiding officer shall order or any shareholder
shall demand that voting be by ballot.

     Section 3.8    Voting by Proxy.  At each meeting of the shareholders, every
shareholder having the right to vote shall be entitled to vote in person or by
proxy appointed by an instrument in writing subscribed by such shareholder and
delivered to the Secretary at the meeting. No unrevoked proxy shall be valid
after eleven (11) months from the date of its execution, unless a longer time is
expressly provided therein.

     Section 3.9    Unpaid Shares.  No share upon which any installment is due
the Trust and unpaid shall be voted at any meeting.

     Section 3.10   Voting List.    The officer or agent having charge of the
transfer books shall make, at least five (5) days before each meeting of
shareholders, a complete list of the shareholders entitled to vote at the
meeting, arranged in alphabetical order, setting forth the address of and the
number of shares held by each, which list shall be kept on file at the
registered office of the Trust, and shall be subject to inspection by any
shareholder at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting, and shall be
subject to the inspection of any shareholder during the whole time of the
meeting. The original share ledger or transfer book, or a duplicate thereof
(kept at the office of the transfer agent for the Trust) shall be prima facie
evidence as to who are the shareholders entitled to examine such list or share
ledger or transfer book, or to vote in person or by proxy, at any meeting of
shareholders.

     Section 3.11   Action by Consent.  Any action required or permitted to be
taken at a meeting of shareholders may be taken without a meeting if a consent
in writing, setting forth such action, is signed by each shareholder entitled to
vote on the matter and any other shareholder entitled to notice of a meeting of
shareholders (but not to vote thereat) has waived in writing any right to
dissent from such action, and such consent and waiver are filed with the minutes
of proceedings of the shareholders.

     Section 3.12.  Cumulative Voting.  Unless the Declaration expressly
provides for cumulative voting, in all elections for Trustees, every shareholder
entitled to vote shall have the right, in person or by proxy, to cast one vote
per share; there shall be no cumulative voting.

                                       3

<PAGE>   4

     Section 3.13.  Voting of Shares by Certain Holders.  Shares of the Trust
registered in the name of a corporation, partnership, trust or other entity, if
entitled to be voted, may be voted by the president or a vice president, a
general partner or trustee thereof, as the case may be, or a proxy appointed by
any of the foregoing individuals, unless some other person who has been
appointed to vote such shares pursuant to a bylaw or a resolution of the
governing board of such corporation or other entity or agreement of the partners
of the partnership presents a certified copy of such bylaw, resolution or
agreement, in which case such person may vote such shares. Any trustee or other
fiduciary may vote shares registered in his name as such fiduciary, either in
person or by proxy.

          The Trustees may adopt by resolution a procedure by which a
shareholder may certify in writing to the Trust that any shares registered in
the name of the shareholder are held for the account of a specified person other
than the shareholder. The resolution shall set forth the class of shareholders
who may make the certification, the purpose for which the certification may be
made, the form of certification and the information to be contained in it; if
the certification is with respect to a record date or closing of the share
transfer books, the time after the record date or closing of the share transfer
books within which the certification must be received by the Trust; and any
other provisions with respect to the procedure which the Trustees consider
necessary or desirable. On receipt of such certification, the person specified
in the certification shall be regarded as, for the purposes set forth in the
certification, the shareholder of record of the specified shares in place of the
shareholder who makes the certification.

     Section 3.14   Inspectors.  At any meeting of shareholders, the chairman of
the meeting may, or upon the request of any shareholder shall, appoint one or
more persons as inspectors for such meeting. Such inspectors shall ascertain and
report the number of shares represented at the meeting based upon their
determination of the validity and effect of proxies, count all votes, report the
results and perform such other acts as are proper to conduct the election and
voting with impartiality and fairness to all the shareholders.

          Each report of an inspector shall be in writing and signed by him or
by a majority of them if there is more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall be
the report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be prima facie evidence thereof.

     Section 3.15   Reports to Shareholders.

          (a) Not later than 90 days after the close of each fiscal year of the
Trust, the Trustees shall deliver or cause to be delivered a financial report of
the business and operations of the Trust during such fiscal year to the
shareholders, containing a balance sheet and a statement of income and surplus
of the Trust, accompanied by the certification of an independent certified
public accountant based on the accountant's full examination of the books and
records of the real estate investment trust in accordance with generally
accepted auditing procedure, and such

                                       4

<PAGE>   5

further information as the Trustees may determine is required pursuant to any
law or regulation to which the Trust is subject. A signed copy of the annual
report and the accountant's certificate shall be placed on file at the principal
office of the Trust and filed by the Trustees with such governmental agencies,
if any, as may be required by law and as the Trustees may deem appropriate.

          (b) Not later than 45 days after the end of each of the first three
quarterly periods of each fiscal year, the Trustees shall deliver or cause to be
delivered an interim financial report to the shareholders containing unaudited
financial statements for such quarter and for the period from the beginning of
the fiscal year to the end of such quarter, and such further information as the
Trustees may determine is required pursuant to any law or regulation to which
the Trust is subject.

                                   ARTICLE IV

                           TRUSTEES AND BOARD MEETINGS

     Section 4.1    Management by Board of Trustees.  The business, property and
affairs of the Trust shall be managed by its Board of Trustees. The Board of
Trustees may exercise all such powers of the Trust and do all such lawful acts
and things as are not by statute or by the Declaration or by these Bylaws
directed or required to be exercised or done by the shareholders. A Trustee
shall be an individual at least 21 years of age who is not under legal
disability. Unless otherwise agreed between the Trust and the Trustee, each
individual Trustee, may engage in other business activities of the type
conducted by the Trust. In case of failure to elect Trustees at an annual
meeting of the shareholders, the Trustees holding over shall continue to direct
the management of the business and affairs of the Trust until their successors
are elected and qualify.

     Section 4.2    Annual and Regular Meetings.  An annual meeting of the
Trustees shall be held immediately after and at the same place as the annual
meeting of shareholders, no notice other than this By-law being necessary. The
Trustees may provide, by resolution, the time and place, either within or
without the State of Maryland, for the holding of regular meetings of the
Trustees without other notice than such resolution.

     Section 4.3    Special Meetings.  Special meetings of the Trustees may be
called by or at the request of the Chairman of the Board, the Chief Executive
Officer or the President or by a majority of the Trustees then in office. The
person or persons authorized to call special meetings of the Trustees may fix
any place, either within or without the State of Maryland, as the place for
holding any special meeting of the Trustees called by them.

     Section 4.4    Notice.   Notice of any special meeting shall be given by
written notice delivered personally, telegraphed or mailed to each Trustee at
his business or residence address. Personally delivered or telegraphed notices
shall be given at least two days prior to the meeting. Notice by mail shall be
given at least five days prior to the meeting. Telephone notice shall be given
at least 24 hours prior to the meeting. If mailed, such notice shall be deemed
to be given when deposited in the United States mail properly addressed, with
postage thereon prepaid. If given by telegram, such notice shall be deemed to be
given when the telegram is delivered to the telegraph company. Telephone notice

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<PAGE>   6

shall be deemed given when the Trustee is personally given such notice in a
telephone call to which he is a party. Neither the business to be transacted at,
nor the purpose of, any annual, regular or special meeting of the Trustees need
be stated in the notice, unless specifically required by statute or these
Bylaws.

     Section 4.5    Quorum.   Except as provided in subsection (b) of Section
4.6, a majority of the entire Board of Trustees shall constitute a quorum for
transaction of business at any meeting of the Trustees, provided that, if less
than a majority of such Trustees are present at said meeting, a majority of the
Trustees present may adjourn the meeting from time to time without further
notice, and provided further that if, pursuant to the Declaration or these
Bylaws, the vote of a majority of a particular group of Trustees is required for
action, a quorum must also include a majority of such group.

          The Trustees present at a meeting which has been duly called and
convened may continue to transact business until adjournment, notwithstanding
the withdrawal of enough Trustees to leave less than a quorum.

     Section 4.6    Voting.   The action of the majority of the Trustees present
at a meeting at which a quorum is present shall be the action of the Trustees,
unless the concurrence of a greater proportion is required for such action by
the Declaration, these Bylaws or applicable statute.

     Section 4.7    Telephone Meetings.  Trustees may participate in a meeting
by means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person at
the meeting.

     Section 4.8    Informal Action by Trustees.  Any action required or
permitted to be taken at any meeting of the Trustees may be taken without a
meeting, if a consent in writing to such action is signed by each Trustee and
such written consent is filed with the minutes of proceedings of the Trustees.

     Section 4.9    Vacancies.      If due to an increase in the size of the
Board of Trustees, death, resignation or for any reason any or all the Trustees
cease to be Trustees, such event shall not terminate the Trust or affect these
Bylaws or the powers of the remaining Trustees hereunder (even if fewer than two
Trustees remain). If the office of any Trustee shall become vacant by reason of
death, resignation, disqualification or other cause, such vacancy or vacancies,
including vacancies resulting from an increase in the number of Trustees, shall
be filled by a majority of the remaining members of the Board, though less than
a quorum. Each person so elected by the Board of Trustees to fill a vacancy
shall be a Trustee until his or her successor is elected by the

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<PAGE>   7

shareholders who may make such election at the next annual meeting of
shareholders, or at any earlier special meeting of the shareholders duly called
for that purpose, and until such successor shall qualify.

     Section 4.10   Compensation. Trustees shall not receive any stated salary
for their services as Trustees but, by resolution of the Trustees, may receive
cash compensation or shares of beneficial interest of the Trust for any service
or activity they performed or engaged in as Trustees. By resolution of the
Trustees, Trustees may receive a fee for and may be reimbursed for expenses in
connection with attendance, if any, at each annual, regular or special meeting
of the Trustees or of any committee thereof; and for their expenses, if any, in
connection with each property visit and any other service or activity performed
or engaged in as Trustees; but nothing herein contained shall be construed to
preclude any Trustees from serving the Trust in any other capacity and receiving
compensation therefor.

     Section 4.11   Removal of Trustees.  The shareholders may, at any time,
remove any Trustee in the manner provided in the Declaration.

     Section 4.12   Loss of Deposits.  No Trustee shall be liable for any loss
which may occur by reason of the failure of the bank, trust company, savings and
loan association, or other institution with whom moneys or shares have been
deposited.

     Section 4.13   Surety Bonds.   Unless required by law, no Trustee shall be
obligated to give any bond or surety or other security for the performance of
any of his duties.

     Section 4.14   Number, Tenure and Qualifications.  The number of Trustees
of the Trust shall not be less than three (3) nor more than fifteen (15), as
determined from time to time by the Board of Trustees, except that the number of
Trustees may be equal to the number of shareholders of the Company, if the
number of shareholders is less than three. Trustees need not be shareholders of
the Trust. The number of members of the Board of Trustees may be increased or
decreased by the vote of a majority of the whole Board of Trustees.

                                    ARTICLE V

                                   COMMITTEES

     Section 5.1    General.  The Board of Trustees may, by resolution passed by
a majority of the whole Board of Trustees, designate one or more committees,
each such committee to consist of one or more of the Trustees of the Trust. The
Board of Trustees may designate one or more Trustees as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. Any such committee, to the extent provided in the resolution of
the Board of Trustees shall have and may exercise all the powers and authority
of the Board of Trustees in the management of the business and affairs of the
Trust, and may authorize the seal of the Trust to be affixed to all papers which
may require it; but no such committee shall have the power or authority to amend
the Declaration (except that a

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<PAGE>   8

committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares adopted by the Board of Trustees, fix the
price of any such shares, or otherwise establish the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution or assets of the Trust or the conversion into, or
the exchange of such shares for, shares of any other class or classes or any
other series of any series of shares or authorize the increase or decrease of
the shares of any series), adopting an agreement of merger or consolidation,
recommending to the shareholders the sale, lease or exchange of all or
substantially all of the Trust's property and assets, recommending to the
shareholders a dissolution of the Trust or a revocation of a dissolution, or
amending the Bylaws of the Trust; and, unless the resolution or the Declaration
expressly so provides, no such committee shall have the power or authority to
declare a dividend, to authorize the issuance of shares or to adopt a
certificate of ownership and merger.

     Section 5.2    Committees.     The committees designated by the Trust may
include the following committees, the specific authority and members of which
shall be as designated herein or by resolution of the Board of Trustees.

          (a) An Audit Committee, which shall make recommendations concerning
the engagement of independent public accounts, review with the independent
public accountants the plans and results of the audit engagement, approve
professional services provided by the independent public accounts, review the
independence of the independent public accounts, consider the range of audit and
non-audit fees and review the adequacy of the Trust's initial accounting
controls.

          (b) An Executive Committee, which shall have certain authority to
acquire and dispose of real property and the power to authorize, on behalf of
the full Board of Trustees, the execution of certain contracts and agreements,
including those related to the borrowing of money by the Trust or on behalf of
the Trust as general partner of any partnership, to authorize such partnership
to take such actions.

          (c) An Executive Compensation Committee, which shall determine
compensation for the Trust's executive officers and administer any share
incentive plans adopted by the Trust.

     Section 5.3.   Records of Committee Meetings.  Each committee shall keep
regular minutes of its meetings and report the same to the Board of Trustees
when required. The presence of a majority of the total membership of any
committee shall constitute a quorum for the transaction of business at any
meeting of such committee and the act of a majority of those present shall be
necessary and sufficient for the taking of any action at such meeting.

                                   ARTICLE VI

                                    OFFICERS

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<PAGE>   9

     Section 6.1    General Provisions.  The officers of the Trust may consist
of a Chairman of the Board, a Vice Chairman of the Board, a Chief Executive
Officer, a President, one or more Executive Vice Presidents or Vice Presidents,
a Chief Operating Officer, a Chief Financial Officer, a Treasurer, one or more
Assistant Treasurers, a Secretary, and one or more Assistant Secretaries. In
addition, the Trustees may from time to time appoint such other officers with
such powers and duties as they shall deem necessary or desirable. The officers
of the Trust shall be elected annually by the Trustees at the first meeting of
the Trustees held after each annual meeting of shareholders. If the election of
officers shall not be held at such meeting, such election shall be held as soon
thereafter as may be convenient. Each officer shall hold office until his
successor is elected and qualifies or until his death, resignation or removal in
the manner hereinafter provided. Any two or more offices except President and
Vice President may be held by the same person. In their discretion, the Trustees
may leave unfilled any office except that of President and Secretary. Election
of an officer or agent shall not of itself create contract rights between the
Trust and such officer or agent.

     Section 6.2    Removal and Resignation.  Except as otherwise provided in an
employment contract or other agreement governing terms of employment to which
the Company and the officer are a party, in which case the terms therein shall
govern, any officer or agent of the Trust may be removed by the Trustees if in
their judgment the best interests of the Trust would be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Any officer of the Trust may resign at any time by giving written
notice of his resignation to the Trustees, the Chairman of the Board, the
President or the Secretary. Any resignation shall take effect at any time
subsequent to the time specified therein or, if the time when it shall become
effective is not specified therein, immediately upon its receipt. The acceptance
of a resignation shall not be necessary to make it effective unless otherwise
stated in the resignation. Such resignation shall be without prejudice to the
contract rights, if any, of the Trust.

     Section 6.3    Vacancies.  A vacancy in any office may be filled by the
Trustees for the balance of the term.

     Section 6.4    Chairman and Vice Chairman of the Board.   The Trustees may
designate a Chairman of the Board and a Vice Chairman of the Board from among
the Trustees. If there shall be a Chairman of the Board or a Vice-Chairman or
the Board, the Chairman of the Board shall preside over the meetings of the
Trustees and of the shareholders at which he shall be present and shall in
general oversee all of the business and affairs of the Trust. In the absence of
the Chairman of the Board, the Vice Chairman of the Board shall preside at such
meetings at which he shall be present. The Chairman and the Vice Chairman of the
Board may execute any deed, mortgage, bond, contract or other instrument, except
in cases where the execution thereof shall be expressly delegated by the
Trustees or by these Bylaws to some other officer or agent of the Trust or shall
be required by law to be otherwise executed. The Chairman of the Board and the
Vice Chairman of the Board shall perform such other duties as may be assigned to
him or

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<PAGE>   10

them by the Trustees. In the absence of a Chairman of the Board and Vice
Chairman of the Board, the Chief Executive Officer or President of the Trust
shall preside.

     Section 6.5    Chief Executive Officer.  The Trustees may designate a Chief
Executive Officer from among the elected officers. The Chief Executive Officer
shall have responsibility for implementation of the policies of the Trust, as
determined by the Trustees, and for the administration of the business affairs
of the Trust. In the absence of both the Chairman and Vice Chairman of the
Board, the Chief Executive Officer shall preside over the meetings of the
Trustees and of the shareholders at which he shall be present.

     Section 6.6    Chief Operating Officer.  The Trustees may designate a Chief
Operating Officer from among the elected officers. Said officer will have the
responsibilities and duties as set forth by the Trustees or the Chief Executive
Officer.

     Section 6.7    Business Development Officer. The Trustees may designate a
Chief Development Officer from among the elected officers. Said officer will
have the responsibilities and duties as set forth by the Trustees or the Chief
Executive Officer.

     Section 6.8    Chief Financial Officer.  The Trustees may designate a Chief
Financial Officer from among the elected officers. Said officer will have the
responsibilities and duties as set forth by the Trustees or the Chief Executive
Officer.

     Section 6.9    President.  In the absence of the Chairman, the Vice
Chairman of the Board and the Chief Executive Officer, the President shall
preside over the meetings of the Trustees and of the shareholders at which he
shall be present. In the absence of a designation of a Chief Executive Officer
by the Trustees, the President shall be the Chief Executive Officer and shall be
ex officio a member of all committees that may, from time to time, be
constituted by the Trustees other than committees that are required to consist
of independent members pursuant to these Bylaws, the Declaration, the rules and
regulations of any governmental authority or national or regional securities
exchange or The Nasdaq Stock Market, Inc. on which any class or series of
securities of the Trust may be listed for trading. The President may execute any
deed, mortgage, bond, contract or other instrument, except in cases where the
execution thereof shall be expressly delegated by the Trustees or by these
Bylaws to some other officer or agent of the Trust or shall be required by law
to be otherwise executed; and in general shall perform all duties incident to
the office of President and such other duties as may be prescribed by the
Trustees from time to time.

     Section 6.10   Executive Vice Presidents or Vice Presidents.  In the
absence of the President or in the event of a vacancy in such office, the Vice
President (or in the event there be more than one Vice President, the Vice
Presidents in the order designated at the time of their election or, in the
absence of any designation, then in the order of their election) shall perform
the duties of the President and when so acting shall have all the powers of and
be subject to all the restrictions upon the President; and shall perform such
other duties as from time to time may

                                       10

<PAGE>   11

be assigned to him by the President or by the Trustees. The Trustees may
designate one or more Vice Presidents as Executive Vice President or as Vice
President for particular areas of responsibility.

     Section 6.11   Secretary.      The Secretary shall (a) keep the minutes of
the proceedings of the shareholders, the Trustees and committees of the Trustees
in one or more books provided for that purpose; (b) see that all notices are
duly given in accordance with the provisions of these Bylaws or as required by
law; (c) be custodian of the Trust records and of the seal of the Trust; (d)
keep a register of the post office address of each shareholder which shall be
furnished to the Secretary by such shareholder; (e) have general charge of the
share transfer books of the Trust; and (f) in general perform such other duties
as from time to time may be assigned to him by the Chief Executive Officer, the
President or by the Trustees.

     Section 6.12   Treasurer.  The Treasurer shall have the custody of the
funds and securities of the Trust and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Trust and shall deposit all
moneys and other valuable effects in the name and to the credit of the Trust in
such depositories as may be designated by the Trustees.

          The Treasurer shall disburse the funds of the Trust as may be ordered
by the Trustees, taking proper vouchers for such disbursements, and shall render
to the President and Trustees, at the regular meetings of the Trustees or
whenever they may require it, an account of all his transactions as Treasurer
and of the financial condition of the Trust.

          If required by the Trustees, the Treasurer shall give the trust a bond
in such sum and with such surety or sureties as shall be satisfactory to the
Trustees for the faithful performance of the duties of his office and for the
restoration to the Trust, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, moneys and other property
of whatever kind in his possession or under his control belonging to the Trust.

     Section 6.13   Assistant Secretaries and Assistant Treasurers.  The
Assistant Secretaries and Assistant Treasurers, in general, shall perform such
duties as shall be assigned to them by the Secretary or Treasurer, respectively,
or by the President or the Trustees. The Assistant Treasurers shall, if required
by the Trustees, give bonds for the faithful performance of their duties in such
sums and with such surety or sureties as shall be satisfactory to the Trustees.

     Section 6.14   Salaries.  The salaries of the officers shall be fixed from
time to time by the Trustees and no officer shall be prevented from receiving
such salary by reason of the fact that he is also a Trustee.

                                   ARTICLE VII

                      CONTRACTS, LOANS, CHECKS AND DEPOSITS

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<PAGE>   12

     Section 7.1    Contracts.  The Trustees may authorize any officer or agent
to enter into any contract or to execute and deliver any instrument in the name
of and on behalf of the Trust and such authority may be general or confined to
specific instances. Any agreement, deed, mortgage, lease or other document
executed by one or more of the Trustees or by an authorized person shall be
valid and binding upon the Trustees and upon the Trust when authorized or
ratified by action of the Trustees.

     Section 7.2    Checks and Drafts.  All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Trust shall be signed by such officer or officers, agent or agents
of the Trust in such manner as shall from time to time be determined by the
Trustees.

     Section 7.3    Deposits.  All funds of the Trust not otherwise employed
shall be deposited from time to time to the credit of the Trust in such banks,
trust companies or other depositories as the Trustees may designate.

                                  ARTICLE VIII

                                     SHARES

     Section 8.1    Certificates.  Each shareholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of each class or series of beneficial interests held by him in the Trust.
Each certificate shall be signed by the Chief Executive Officer, the President
or a Vice President and countersigned by the Secretary or an Assistant Secretary
or the Treasurer or an Assistant Treasurer and may be sealed with the seal, if
any, of the Trust. The signatures may be either manual or facsimile.
Certificates shall be consecutively numbered; and if the Trust shall, from time
to time, issue several classes of shares, each class may have its own number or
letter series. A certificate is valid and may be issued whether or not an
officer who signed it is still an officer when it is issued. Each certificate
representing shares which are restricted as to their transferability or voting
powers, which are preferred or limited as to their dividends or as to their
allocable portion of the assets upon liquidation or which are redeemable at the
option of the Trust, shall have a statement of such restriction, limitation,
preference or redemption provision, or a summary thereof, plainly stated on the
certificate. In lieu of such statement or summary, the Trust may set forth upon
the face or back of the certificate a statement that the Trust will furnish to
any shareholder, upon request and without charge, a full statement of such
information.

     Section 8.2    Transfers.      Certificates shall be treated as negotiable,
and title thereto and to the shares they represent shall be transferred by
delivery thereof to the same extent as those of a Maryland stock corporation. No
transfers of shares of the Trust shall be made if (i) void ab initio pursuant to
any provision of the Declaration, (ii) the Board of Trustees, pursuant to any
provision of the Declaration or other written agreement between or among any
shareholder(s) and the Trust, shall have refused to permit the transfer of such
shares, or (iii) the

                                       12

<PAGE>   13

shares have not been registered under the Securities Act of 1933, as amended
(the "Act"), or under applicable state blue-sky or securities laws, unless
exemptions from the registration requirements of the Act and applicable state
blue-sky or securities laws are, in the opinion of counsel, satisfactory to the
Trust, for the transferor, available. Permitted transfers of shares of the Trust
shall be made on the share records of the Trust only upon the instruction of the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent or
transfer clerk, and upon surrender of the certificate or certificates, if
issued, for such shares properly endorsed or accompanied by a duly executed
share transfer power and the payment of all taxes thereon. Upon surrender to the
Trust or the transfer agent of the Trust of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, as to any transfers not prohibited by any provision of
the Declaration or by action of the Board of Trustees thereunder, it shall be
the duty of the Trust to issue a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.

     Section 8.3    Replacement Certificate.  Any officer designated by the
Trustees may direct a new certificate to be issued in place of any certificate
previously issued by the Trust alleged to have been lost, stolen or destroyed
upon the making of an affidavit of that fact by the person claiming the
certificate to be lost, stolen or destroyed. When authorizing the issuance of a
new certificate, the officer designated by the Trustees may, in his discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or the owner's legal representative to
advertise the same in such manner as he shall require and/or to give bond, with
sufficient surety, to the Trust to indemnify it against any loss or claim which
may arise as a result of the issuance of a new certificate.

     Section 8.4    Closing of Transfer Books or Fixing of Record Date.   The
Trustees may set, in advance, a record date for the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
determining shareholders entitled to receive payment of any dividend or the
allotment of any other rights, or in order to make a determination of
shareholders for any other purpose. Such date, in any case, shall not be prior
to the close of business on the day the record date is fixed and shall be not
more than 90 days and in the case of a meeting of shareholders not less than ten
days, before the date on which the meeting or particular action requiring such
determination of shareholders of record is to be held or taken.

          In lieu of fixing a record date, the Trustees may provide that the
share transfer books shall be closed for a stated period but not longer than 20
days. If the share transfer books are closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders, such
books shall be closed for at least ten days before the date of such meeting.

          If no record date is fixed and the share transfer books are not closed
for the determination of shareholders, (a) the record date for the determination
of shareholders entitled to notice of or to vote at a meeting of shareholders
shall be at the close of business on the day on

                                       13

<PAGE>   14

which the notice of meeting is mailed or the 30th day before the meeting,
whichever is the closer date to the meeting; and (b) the record date for the
determination of shareholders entitled to receive payment of a dividend or an
allotment of any other rights shall be the close of business on the day on which
the resolution of the Trustees, declaring the dividend or allotment of rights,
is adopted.

          When a determination of shareholders entitled to vote at any meeting
of shareholders has been made as provided in this section, such determination
shall apply to any adjournment thereof, except when (i) the determination has
been made through the closing of the transfer books and the stated period of
closing has expired or (ii) the meeting is adjourned to a date more than 120
days after the record date fixed for the original meeting, in either of which
case a new record date shall be determined as set forth herein.

     Section 8.5    Share Ledger.  The Trust shall maintain at its principal
office or at the office of its counsel, accountants or transfer agent, an
original or duplicate share ledger containing the name and address of each
shareholder and the number of shares of each class held by such shareholder.

     Section 8.6    Fractional Share; Issuance of Units.  The Trustees may issue
fractional shares or provide for the issuance of scrip, all on such terms and
under such conditions as they may determine. Notwithstanding any other provision
of the Declaration or these Bylaws, the Trustees may issue units consisting of
different securities of the Trust. Any security issued in a unit shall have the
same characteristics as any identical securities issued by the Trust, except
that the Trustees may provide that for a specified period securities of the
Trust issued in such unit may be transferred on the books of the Trust only in
such unit.

     Section 8.7    Agreements Restricting Transfer of Shares.  The Board of
Trustees may authorize the Trust to become party to agreements with shareholders
and others relating to transfer, repurchase, and issuance, of shares of the
Trust; provided, however, that such agreement must be filed with the Trust and
all share certificates affected thereby shall have clearly imprinted thereon a
legend containing such agreement or referring thereto.

                                   ARTICLE IX

                                  DISTRIBUTIONS

     Section 9.1    Authorization.  Dividends and other distributions upon the
shares of the Trust may be authorized and declared by the Board Trustees in
their discretion, subject to the provisions of law and the Declaration or as
required by law. Dividends may be paid in cash, property or shares of the Trust,
subject to the provisions of law and the Declaration.

     Section 9.2    Contingencies.  Before payment of any dividends, there may
be set aside out of any funds of the Trust available for dividends such sum or
sums as the Trustees may from

                                       14

<PAGE>   15

time to time, in their absolute discretion, think proper as a reserve fund for
contingencies, for equalizing dividends, for repairing or maintaining any
property of the Trust or for such other purpose as the Trustees shall determine
to be in the best interest of the Trust, and the Trustees may modify or abolish
any such reserve in the manner in which it was created.

                                    ARTICLE X

                                      SEAL

     Section 10.1   Seal. The Trustees may authorize the adoption of a seal by
the Trust. The seal shall have inscribed thereon the name of the Trust and the
year of its formation. The Trustees may authorize one or more duplicate seals
and provide for the custody thereof.

     Section 10.2   Affixing Seal.  Whenever the Trust is required to place its
seal to a document, it shall be sufficient to meet the requirements of any law,
rule or regulation relating to a seal to place the word "(SEAL)" adjacent to the
signature of the person authorized to execute the document on behalf of the
Trust.

                                   ARTICLE XI

  INDEMNIFICATION AND ADVANCES FOR EXPENSES; RELIANCE ON CERTAIN INFORMATION

     Section 11.1   Indemnification.  To the maximum extent permitted by
Maryland law in effect from time to time, the Trust, without requiring a
preliminary determination of the ultimate entitlement to indemnification, shall
indemnify (a) any Trustee or officer or any former Trustee or officer (including
among the foregoing, for all purposes of this Article XI and without limitation,
any individual who, while a Trustee or officer and at the express request of the
Trust, serves or has served another corporation, partnership, limited liability
company, joint venture, trust, employee benefit plan or any other enterprise as
a director, officer, shareholder, manager, member, partner or trustee of such
corporation, partnership, limited liability company, joint venture, trust,
employee benefit plan or other enterprise) who has been successful, on the
merits or otherwise, in the defense of a proceeding to which he was made a party
by reason of service in such capacity, against reasonable expenses incurred by
him in connection with the proceeding, and (b) any Trustee or officer or any
former Trustee or officer against any claim or liability to which he may become
subject by reason of such status unless it is established that (i) his act or
omission was material to the matter giving rise to the proceeding and was
committed in bad faith or was the result of active and deliberate dishonesty,
(ii) he actually received an improper personal benefit in money, property or
services or (iii) in the case of a criminal proceeding, he had reasonable cause
to believe that his act or omission was unlawful. In addition, the Trust shall
pay or reimburse, in advance of final disposition of a proceeding, reasonable
expenses incurred by a Trustee or officer or former Trustee or officer made a
party to a proceeding by reason such status, provided that, the Trust shall have
received

                                       15

<PAGE>   16

(i) a written affirmation by the Trustee or officer of his good faith belief
that he has met the applicable standard of conduct necessary for indemnification
by the Trust as authorized by these Bylaws and (ii) a written undertaking by or
on its behalf to repay the amount paid or reimbursed by the Trust if it shall
ultimately be determined that the applicable standard of conduct was not met.
The Trust may, with the approval of its Trustees, provide such indemnification
or payment or reimbursement of expenses to any Trustee or officer or any former
Trustee or officer who served a predecessor of the Trust and to any employee or
agent of the Trust or a predecessor of the Trust. Neither the amendment nor
repeal of this Article, nor the adoption or amendment of any other provision of
the Declaration or these Bylaws inconsistent with this Article, shall apply to
or affect in any respect the applicability of this Article with respect to any
act or failure to act which occurred prior to such amendment, repeal or
adoption.

   Section 11.2   Payments by Trust.  Any indemnification or payment or
reimbursement of the expenses permitted by these Bylaws shall be furnished in
accordance with the procedures provided for indemnification or payment or
reimbursement of expenses, as the case may be, under Section 2-418 of the
Maryland General Corporation Law (the "MGCL") for directors of Maryland
corporations. The Trust may provide to Trustees, officers and shareholders such
other and further indemnification or payment or reimbursement of expenses, as
the case may be, to the fullest extent permitted by the MGCL, as in effect from
time to time, for directors of Maryland corporations.

   Section 11.3   Nonexclusivity. The indemnification provided by this Article
shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under Maryland law, the Declaration, any by-law,
agreement, resolution of shareholders or trustees or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
trustee, officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.

   Section 11.4   Insurance.  The Trust shall have power to purchase and
maintain insurance on behalf of any person who is or was a trustee, officer,
employee or agent of the Trust, or is or was serving at the request of the Trust
as a director, officer, partner, manager, member, trustee, employee or agent of
another corporation, partnership, limited liability company, joint venture,
trust, other enterprise or employee benefit plan against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the Trust would have the power to indemnify him
against such liability under the specified statutory authority, the Declaration
or the provisions of this Article XI.

   Section 11.5   Reliance on Certain Information. In performing his duties, a
Trustee shall be entitled to rely on any information, opinion, report or
statement, including any financial statement or other financial data, in each
case prepared or presented by any of the following:

                                       16

<PAGE>   17

           (a) One or more officers or employees of the Trust whom the Trustee
reasonably believes to be reliable and competent in the matters presented.

           (b) A lawyer, certified public accountant or other person as to
matters which a Trustee reasonably believes to be within the person's
professional or expert competence.

           (c) A committee of the Board of Trustees upon which he does not
serve, as to matters within its designated authority, which the Trustee
reasonably relieves to merit confidence; provided however that a Trustee shall
not be considered to be acting in good faith it he has any knowledge concerning
the matter in question that would cause his reliance to be unwarranted.

                                   ARTICLE XII

            LIABILITY OF TRUSTEES AND RELATION OF OFFICERS TO TRUST

     Section 12.1   Fiduciary Relationship.  Trustees and officers of the Trust
shall discharge the duties of their respective positions in good faith, in a
manner they reasonably believe to be in the best interests of the Trust and with
the care which ordinarily prudent persons in like positions would use under
similar circumstances.

     Section 12.2   Liability of Trustees to the Trust.  The Trustees and
officers of the Trust shall not be personally liable for monetary damages as
such for any action except to the extent that (i) it is proved that any such
person actually received an improper benefit or profit in money, property or
services or (ii) a judgment or other final adjudication adverse to the person is
entered in a proceeding based on a finding in the proceeding that the person's
action or failure to act was the result of active and deliberate dishonesty and
was material to the cause of action adjudicated in the proceeding.

                                  ARTICLE XIII

                             MINUTES OF PROCEEDINGS

     There shall be kept at the principal office of the Trust an original or
duplicate record of the proceedings of the shareholders and of the Trustees, and
the original or a copy of its Bylaws, including all amendments or alterations
thereof to date, together with other necessary and appropriate corporate
records.

                                   ARTICLE XIV

                                WAIVER OF NOTICE

                                       17

<PAGE>   18

     Whenever any notice is required to be given pursuant to the Declaration or
Bylaws or pursuant to applicable law, a waiver thereof in writing, signed by the
person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice. Neither
the business to be transacted at nor the purpose of any meeting need be set
forth in the waiver of notice, unless specifically required by statute. The
attendance of any person at any meeting shall constitute a waiver of notice of
such meeting, except where such person attends a meeting for the express purpose
of objecting to the transaction of any business on the ground that the meeting
is not lawfully called or convened.

                                   ARTICLE XV

                               AMENDMENT OF BYLAWS

     The Trustees shall have the exclusive power to adopt, alter or repeal any
provision of these Bylaws and to make new Bylaws in accordance with Article IV
hereof.

                                   ARTICLE XVI

                                  MISCELLANEOUS

     Section 16.1   Fiscal Year. The fiscal year of the Trust shall be as fixed
by resolution of the Board of Trustees. If the Board of Trustees shall not do
so, the Chief Executive Officer shall fix the fiscal year.

     Section 16.2   Designation of Presiding and Recording Officers. The
Trustees or shareholders, at any meeting of Trustees or shareholders, as the
case may be, shall have the right to designate any person, whether or not an
officer, Trustee or shareholder to preside over, or record the proceedings of,
such meeting.

     Section 16.3   Amendments and Supplements to Bylaws.  All references to the
Declaration shall include any amendments or supplements thereto.

     Section 16.4   Recording Amendments and Alterations. The text of all
amendments and alterations to these Bylaws shall be attached to the Bylaws with
a notation of the date of each such amendment or alteration.

                                       18

<PAGE>   19

                                  ARTICLE XVII

                     ADOPTION OF BYLAWS; RECORD OR AMENDMENT

         These Amended and Restated Bylaws have been adopted and filed with the
undersigned to be effective as of the 3rd day of February, 1998.

                                            /s/ David S. Kay
                                            ------------------------------------
                                            David Kay, Secretary

                                       19

<PAGE>   20

                            AMENDMENT NO. 1 TO BYLAWS

                                       OF

                             CAPITAL AUTOMOTIVE REIT

          ARTICLE VI, SECTION 6.5. Chief Executive Officer.  Section 6.5. Chief
Executive Officer. be and hereby is deleted in its entirety and is replaced in
its entirety with the following:

          "Section 6.5  Chief Executive Officer.  The Trustees may designate a
          Chief Executive Officer from among the elected officers. The Chief
          Executive Officer shall have responsibility for implementation of the
          policies of the Trust, as determined by the Trustees, and for the
          administration of the business affairs of the Trust. Except as
          otherwise provided in the Declaration of Trust or ByLaws of the
          Company, the Restated Partnership Agreement or pursuant to resolutions
          adopted by the Board of Trustees, the Chief Executive Officer is
          authorized and empowered to decide all matters that are submitted to
          the Trust in its capacity as sole General Partner of Capital
          Automotive L.P. (the "Operating Partnership") and to decide all
          matters that are submitted to the Operating Partnership in its
          capacity as owner or general partner of any Partnership-Owned Entities
          (as defined in the Agreement of Limited Partnership of the Operating
          Partnership, as amended, restated and supplemented from time to time).

          The Secretary of Capital Automotive REIT be and hereby certifies that
the foregoing Amendment No.1 to the ByLaws have been adopted and approved by the
Board of Trustees of Capital Automotive REIT on this 2nd day of February 1999.

                                             /s/ John M. Weaver
                                            ------------------------------------
                                            John M. Weaver
                                            Secretary

[Seal]

<PAGE>   21

                            AMENDMENT NO. 2 TO BYLAWS

                                       OF

                             CAPITAL AUTOMOTIVE REIT

    ARTICLE III.  MEETINGS OF SHAREHOLDERS. SECTION 3.4 Notice of Meetings.

    Section 3.4  Notice of Meetings be and hereby is deleted in its entirety
and is replaced in its entirety with the following:

        "Section 3.4  Notice of Meetings.  Written notice of every meeting of
    shareholders, stating the time and place thereof, shall be given as herein
    provided by, or at the direction of, the person authorized to call the
    meeting, to each shareholder of record entitled to vote at the meeting, not
    less than ten (10) nor more than ninety (90) days prior to the day named for
    the meeting, unless a greater period of notice is required by statute in a
    particular case. In the case of a special meeting of shareholders, the
    notice shall also set forth the purpose of the meeting. When a meeting is
    adjourned, it shall not be necessary to give any notice of the adjourned
    meeting or of the business to be transacted at any adjourned meeting, other
    than by announcement at the meeting at which such adjournment is taken.
    Except as set forth in Section 4.4, below, business to be conducted at any
    annual, special in lieu of annual or special meeting of shareholders may be
    proposed only by the Board of Trustees or by a shareholder who is entitled
    to vote at the meeting and who has filed his proposed item of business with
    the Secretary of the Trust within the time limits set forth in the
    Securities Exchange Act of 1934, as amended (the "Exchange Act"), or, if the
    Trust is not subject to the requirements of the Exchange Act or if no rule
    has been established, for the 2000 Annual Meeting at least forty-five (45)
    days and, beginning with the 2001 Annual Meeting and thereafter at least
    one-hundred and twenty (120) days, prior to the meeting date. Only the
    shareholder proposals specified in the notice of meeting may be brought
    before the meeting."

    The Secretary of Capital Automotive REIT be and hereby certifies that the
foregoing Amendment No. 2 to the ByLaws have been adopted and approved by the
Board of Trustees of Capital Automotive REIT on this 7th day of May 1999.

                                      /s/  JOHN M. WEAVER
                                     ----------------------------------
                                     John M. Weaver

                                    Secretary

[Seal]

<PAGE>   1











                                                                    EXHIBIT 21.2

                   CAPITAL AUTOMOTIVE REIT AND SUBSIDIARIES

<TABLE>
<CAPTION>

                                                     STATE OF INCORPORATION
                NAME OF SUBSIDIARY                      OR ORGANIZATION
                ------------------                      ---------------
<S>           <C>                                    <C>
                CAPITAL AUTOMOTIVE L.P.                    DELAWARE
                2298 CRAIN HIGHWAY LLC                     MARYLAND
                CAR PARK L.L.C.                            DELAWARE
                CAR JACKSON L.L.C.                         DELAWARE
                CAR WIGGINS L.L.C.                         DELAWARE
                CAR GUR L.L.C.                             DELAWARE
                CAR TON L.L.C.                             DELAWARE
                CAR MOT II L.L.C.                          DELAWARE
                CAR I JACKSON L.P.                         DELAWARE
                CAR MOT L.L.C.                             DELAWARE
                CARS-DBSPE1, INC.                          DELAWARE
                CARS-DB1, L.L.C.                           DELAWARE
                CARS-DBSPE2, INC.                          DELAWARE
                CARS-DBSPE3, INC.                          DELAWARE
                CARS-DBSPE4, INC.                          DELAWARE
                CARS-DB4, L.P.                             DELAWARE
                CARS-FEN L.L.C.                            DELAWARE
                CAR FAA L.L.C.                             DELAWARE
                CAR GP1, INC.                              DELAWARE
                CAR PER L.L.C.                             DELAWARE
                CAR GRAUTO1 LAND L.P.                      DELAWARE
                CAR GPAAUTO1 LAND L.L.C.                   DELAWARE
                CAR I ALEXANDER, INC.                      DELAWARE
                CAR ALEXANDER L.P.                         DELAWARE
                CAR CZ L.L.C.                              DELAWARE
                CAR MUL L.L.C.                             DELAWARE
                CAR MMC L.L.C.                             DELAWARE
                CAR MCC L.L.C.                             DELAWARE
                CAR HDV L.L.C.                             DELAWARE
                CAR GPASB INC.                             DELAWARE
                CAR ASBTX L.P.                             DELAWARE
                CAR ASBFL L.L.C.                           DELAWARE
                CAR WORTH, INC.                            DELAWARE
                CAR WTH L.P.                               DELAWARE
                CAR AUF L.L.C.                             DELAWARE
                CAR GPLAFO L.L.C.                          DELAWARE
                CAR MMR L.L.C.                             DELAWARE
                CAR CASA L.L.C.                            DELAWARE
                CAR BOH L.L.C.                             DELAWARE
                CAR MIL L.L.C.                             DELAWARE
                CAR SONFREE L.L.C.                         DELAWARE
</TABLE>


<PAGE>   1





                                                                    EXHIBIT 23.1

                  CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

    As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 10-K, into Capital Automotive REIT's
previously filed Registration Statement File No. 333-73181, Registration
Statement File No. 333-73183, Registration Statement File No. 333-78233,
Registration Statement File No. 333-78215, Registration Statement No.
333-78235, Registration Statement File No. 333-80257 and Registration
Statement File No. 333-94943.

                                        /S/   ARTHUR ANDERSEN LLP

Vienna, Virginia
March 21, 2000


<TABLE> <S> <C>

<ARTICLE> 5
<MULTIPLIER> 1,000

<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1999
<PERIOD-START>                             JAN-01-1999
<PERIOD-END>                               DEC-31-1999
<CASH>                                          11,886
<SECURITIES>                                         0
<RECEIVABLES>                                        0
<ALLOWANCES>                                         0
<INVENTORY>                                          0
<CURRENT-ASSETS>                                16,139
<PP&E>                                         935,902
<DEPRECIATION>                                  21,368
<TOTAL-ASSETS>                                 942,559
<CURRENT-LIABILITIES>                           21,298
<BONDS>                                        501,510
                                0
                                          0
<COMMON>                                           248
<OTHER-SE>                                     299,351
<TOTAL-LIABILITY-AND-EQUITY>                   942,559
<SALES>                                              0
<TOTAL-REVENUES>                                75,873
<CGS>                                                0
<TOTAL-COSTS>                                        0
<OTHER-EXPENSES>                                22,128
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                              24,541
<INCOME-PRETAX>                                 21,731
<INCOME-TAX>                                         0
<INCOME-CONTINUING>                             21,731
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    21,731
<EPS-BASIC>                                       1.01
<EPS-DILUTED>                                     1.01


</TABLE>



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