GROVE PROPERTY TRUST
S-2/A, 1997-11-18
REAL ESTATE INVESTMENT TRUSTS
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<PAGE>
 
   
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 18, 1997     
                                                     REGISTRATION NO. 333-38183
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
                                 ------------
                                
                             AMENDMENT NO. 2     
                                      TO
                                   FORM S-2
                            REGISTRATION STATEMENT
                                     UNDER
                          THE SECURITIES ACT OF 1933
 
                                 ------------
 
                             GROVE PROPERTY TRUST
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
               MARYLAND                               06-139108
    (STATE OR OTHER JURISDICTION OF     (I.R.S. EMPLOYER IDENTIFICATION NO.)
    INCORPORATION OR ORGANIZATION)
                               598 ASYLUM AVENUE
                          HARTFORD, CONNECTICUT 06105
                                (860) 246-1126
  (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                   REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
 
                              JOSEPH R. LABROSSE
                            CHIEF FINANCIAL OFFICER
                             GROVE PROPERTY TRUST
                               598 ASYLUM AVENUE
                          HARTFORD, CONNECTICUT 06105
                                (860) 246-1126
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)
 
                                 ------------
 
                                  COPIES TO:
            PAUL G. HUGHES                       JOHN J. KELLEY III
          CUMMINGS & LOCKWOOD                      KING & SPALDING
          FOUR STAMFORD PLAZA                   191 PEACHTREE STREET
      STAMFORD, CONNECTICUT 06904              ATLANTA, GEORGIA 30303
            (203) 351-4207                         (404) 572-4600
      (203) 351-4499 (FACSIMILE)             (404) 572-5100 (FACSIMILE)
 
  APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As promptly
as practicable following the effective date of this Registration Statement.
  If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
  If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this Form, check the following box. [_]
  If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
  If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
  If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
  If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
       
  THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
 
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- -------------------------------------------------------------------------------
<PAGE>
 
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A         +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE   +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY  +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT        +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR   +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE      +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE    +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF  +
+ANY SUCH STATE.                                                               +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
                 
              SUBJECT TO COMPLETION, DATED NOVEMBER 18, 1997     
 
PROSPECTUS
 
                                4,500,000 SHARES
 
[LOGO OF GROVE PROPERTY TRUST APPEARS HERE]

                              GROVE PROPERTY TRUST
                      COMMON SHARES OF BENEFICIAL INTEREST

                                   --------
   
  Grove Property Trust ("Grove" or the "Company") is a self-managed and self-
administered equity real estate investment trust ("REIT") that is engaged in
the acquisition, repositioning, management and operation of mid-priced
multifamily communities in the Northeastern United States. Grove currently owns
interests in and operates 30 multifamily properties containing a total of 2,863
units in Connecticut, Massachusetts and Rhode Island (the "Apartment
Communities"). For the nine months ended September 30, 1997, the Apartment
Communities had an average economic occupancy rate of approximately 96.5% and
an average monthly rental rate of approximately $698 per unit.     
   
  All of the common shares of beneficial interest, par value $0.01 per share,
of the Company (the "Common Shares") offered hereby are being sold by the
Company. Of the 4,500,000 Common Shares offered hereby, 3,141,475 shares are
being offered to the public in an underwritten public offering (the "Offering")
and 1,358,525 Common Shares are being offered directly to certain investors at
the price to public set forth below (the "Concurrent Offering," together with
the Offering, the "Offerings"). The closing of the Offering is not contingent
on the closing of the Concurrent Offering. See "The Concurrent Offering."     
 
  The Company makes regular distributions to its shareholders and expects to
increase its annual distribution following the completion of the Offering to
$0.68 per share. The Company intends to make a distribution based on its
historical distribution rate to holders of record as of the business day
preceding the closing of the Offering for the period beginning October 1, 1997
and ending on such record date, followed by a distribution to holders of record
as of December 31, 1997 for the period beginning the date of closing of the
Offering and ending on December 31, 1997. See "Distribution Policy."
   
  The Common Shares are traded on the Emerging Company Marketplace of the
American Stock Exchange (the "AMEX") under the symbol "GVE.EC." The Common
Shares have been approved for listing on the AMEX (Regular List) under the
symbol "GVE," subject to notice of issuance. On November 14, 1997, the last
reported sale price for the Common Shares was $11.375 per share.     
 
  To ensure that the Company maintains its qualification as a REIT, actual and
constructive ownership of Common Shares by any person is limited by the
Company's Third Amended and Restated Declaration of Trust. See "Description of
Shares of Beneficial Interest--Restrictions on Transfer."
 
  SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE COMMON SHARES.
 
 THESE SECURITIES HAVE NOT BEEN APPROVED  OR DISAPPROVED BY THE SECURITIES AND
  EXCHANGE  COMMISSION  OR  ANY  STATE  SECURITIES  COMMISSION  NOR  HAS  THE
   SECURITIES AND  EXCHANGE COMMISSION  OR  ANY STATE  SECURITIES COMMISSION
    PASSED  UPON  THE   ACCURACY  OR  ADEQUACY  OF   THIS  PROSPECTUS.  ANY
     REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                     UNDERWRITING
           PRICE TO  DISCOUNTS AND  PROCEEDS TO
            PUBLIC  COMMISSIONS (1) COMPANY (2)
- -----------------------------------------------
<S>        <C>      <C>             <C>
Per Share    $            $             $
- -----------------------------------------------
Total(3)    $            $             $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
   
(1) The Company and the Operating Partnership have jointly and severally agreed
    to indemnify the Underwriters against certain liabilities under the
    Securities Act of 1933, as amended (the "Securities Act"). See
    "Underwriting." No underwriting discounts or commissions will be paid in
    connection with the Common Shares sold in the Concurrent Offering.     
(2) Before deducting expenses payable by the Company estimated at $1,200,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
    an additional 675,000 Common Shares, on the same terms as the Offering,
    solely to cover over-allotments, if any. See "Underwriting." If such option
    is exercised in full, the total Price to Public, Underwriting Discounts and
    Commissions, and Proceeds to Company will be $    , $     and $    ,
    respectively, assuming that all Common Shares offered in the Concurrent
    Offering are purchased.
 
                                   --------
 
  The Common Shares being offered in the Offering are being offered by the
several Underwriters named herein, subject to prior sale, when, as and if
accepted by them, and subject to certain conditions. The Underwriters reserve
the right to withdraw, cancel or modify such offer and to reject orders in
whole or in part. It is expected that certificates for the Common Shares
offered in the Offering will be available for delivery on or about            ,
1997, at the offices of Smith Barney Inc., 333 West 34th Street, New York, New
York 10001.
 
                                   --------
 
SMITH BARNEY INC.                                                LEHMAN BROTHERS
 
        , 1997
<PAGE>
 
                               TABLE OF CONTENTS
<TABLE>   
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
PROSPECTUS SUMMARY........................................................    1
 The Company..............................................................    1
 Business Objectives and Growth Strategies................................    3
 Recent Developments......................................................    3
 The Properties...........................................................    4
 Company Structure........................................................    6
 The Offerings............................................................    7
 Summary Selected Financial Information...................................    7
RISK FACTORS..............................................................   10
 Absence of Appraisals....................................................   10
 Real Estate Investment Considerations....................................   10
 Expansion into New Geographic Markets....................................   12
 Dependence on Limited Geographic Area....................................   12
 Limitation on Control of Partially Owned Properties......................   13
 Real Estate Financing Risks..............................................   13
 Potential Conflicts of Interest..........................................   13
 Dependence on Key Personnel..............................................   14
 Adverse Tax Consequences of Failure to Qualify as a REIT.................   14
 Required Distributions; Potential Requirements to Borrow.................   15
 Limits on Changes in Control.............................................   16
 Possible Environmental Liabilities.......................................   17
 Shares Available for Future Sale.........................................   18
 Changes in Investment and Financing Practices Without Shareholder
  Approval................................................................   19
 Share Price Volatility...................................................   20
 Uninsured Loss...........................................................   20
 Offer and Sale of Unregistered Securities................................   20
THE COMPANY...............................................................   22
 Overview.................................................................   22
 Business Objectives and Growth Strategies................................   23
 The Operating Partnership................................................   26
THE CONCURRENT OFFERING...................................................   26
USE OF PROCEEDS...........................................................   27
DISTRIBUTION POLICY.......................................................   28
PRICE RANGE OF COMMON SHARES AND DIVIDENDS................................   29
CAPITALIZATION............................................................   30
SELECTED FINANCIAL INFORMATION............................................   31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
 OPERATIONS...............................................................   34
 Overview.................................................................   34
 Results of Operations....................................................   34
 Liquidity and Capital Resources..........................................   38
 Funds from Operations....................................................   39
 Seasonality..............................................................   39
 Inflation................................................................   39
BUSINESS AND PROPERTIES...................................................   40
 Multifamily Market Overview..............................................   40
 The Apartment Communities................................................   46
 Summary of Features and Amenities of the Apartment Communities...........   48
 The Retail Properties....................................................   50
 The Excluded Properties..................................................   50
 Management Strategies....................................................   50
 Property Management......................................................   51
 Employees................................................................   53
 Competition..............................................................   53
 Legal Proceedings........................................................   53
 Regulation...............................................................   53
 Environmental Matters....................................................   54
 Insurance................................................................   55
</TABLE>    
<TABLE>   
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
MANAGEMENT................................................................   56
 Trust Managers and Executive Officers....................................   56
 Committees of the Board..................................................   58
 Compensation of the Trust Managers.......................................   58
 Executive Compensation...................................................   59
 Employment Agreements....................................................   59
 Non-Competition Agreements...............................................   59
 Option Plans.............................................................   60
CERTAIN RELATIONSHIPS AND TRANSACTIONS....................................   61
 The January 1996 Acquisition.............................................   61
 Property Management and Construction Services............................   61
 Loans by NAVAB Associates................................................   61
 The Consolidation Transactions...........................................   61
 Management of Excluded Properties........................................   62
 The May 1997 Acquisitions................................................   62
 The July 1997 Acquisitions...............................................   63
 The September 1997 Acquisitions..........................................   63
 The October 1997 Acquisitions............................................   63
 Brokerage Services.......................................................   64
 Guarantees by Damon and
  Brian Navarro...........................................................   64
PRINCIPAL SHAREHOLDERS....................................................   65
DESCRIPTION OF SHARES OF BENEFICIAL INTEREST..............................   66
CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE COMPANY'S CHARTER AND
 BYLAWS...................................................................   70
 Duration.................................................................   70
 Board of Trust Managers..................................................   70
 Meetings of Shareholders.................................................   70
 Preferred Shares.........................................................   70
 Business Combinations....................................................   71
 Control Share Acquisitions...............................................   71
 Amendment of the Charter.................................................   72
 Termination of the Company and REIT Status...............................   72
 Transactions Between the Company and its Trustees or Officers............   72
 Limitation of Liability and Indemnification..............................   72
 Maryland Asset Requirements..............................................   73
PRACTICES AND OBJECTIVES WITH RESPECT TO CERTAIN ACTIVITIES...............   73
SHARES AVAILABLE FOR FUTURE SALE..........................................   75
 Registration Rights......................................................   76
THE OPERATING PARTNERSHIP AGREEMENT.......................................   77
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS.................................   80
 Taxation of the Company..................................................   80
 Failure To Qualify.......................................................   85
 Taxation of Taxable U.S. Shareholders Generally..........................   85
 Taxation of Tax-Exempt Shareholders......................................   86
 Taxation of Non-U.S. Shareholders........................................   87
 Tax Aspects of Operating Partnership and Subsidiary Partnerships.........   90
 Other Tax Consequences...................................................   91
UNDERWRITING..............................................................   92
CHANGE IN ACCOUNTANTS.....................................................   93
EXPERTS...................................................................   93
LEGAL MATTERS.............................................................   94
AVAILABLE INFORMATION.....................................................   94
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...........................   95
INDEX TO FINANCIAL STATEMENTS.............................................  F-1
</TABLE>    
 
                                       i
<PAGE>
 
 
                               PROSPECTUS SUMMARY
   
  The following summary is qualified in its entirety by the more detailed
information and the consolidated financial statements (including the notes
thereto) appearing elsewhere in this Prospectus or incorporated by reference
herein. Unless the context otherwise requires, references herein to the
"Company" or "Grove" refer to Grove Property Trust, a Maryland real estate
investment trust, and its subsidiaries, including Grove Operating, L.P., a
Delaware limited partnership (the "Operating Partnership"). As used herein, the
term "Concurrent Offering" means the proposed offering by the Company in a
separate transaction at the public offering price per share to certain
investors of 1,358,525 Common Shares. See "The Concurrent Offering." Prior to
the date of this Prospectus, no offer has been made by the Company with respect
to the Concurrent Offering and there can be no assurance that the Concurrent
Offering will be consummated or that all of the Common Shares offered in the
Concurrent Offering will be sold. Consummation of the Offering is not
contingent on consummation of the Concurrent Offering. Unless otherwise
indicated, the information in this Prospectus assumes that the Underwriters'
over-allotment option is not exercised and that all of the shares offered in
the Concurrent Offering will be sold. On February 10, 1997, the Board of Trust
Managers of the Company declared a share dividend aggregating 26,250 Common
Shares and concurrently declared a 1.125-for-one common share split. All shares
outstanding and per share amounts have been restated to reflect these changes
in capital structure.     
 
                                  THE COMPANY
 
  Grove Property Trust ("Grove" or the "Company") is a self-managed and self-
administered equity real estate investment trust ("REIT") that is engaged in
the acquisition, repositioning, management and operation of mid-priced
multifamily communities in the Northeastern United States. The Company is a
fully integrated real estate organization with in-house acquisition,
repositioning and renovation, financing, marketing, leasing and property
management expertise. Grove believes that its regional focus, experience in
acquiring and renovating under-managed apartment communities, reputation for
quality and experienced management team provide it with a strong competitive
position in the highly fragmented Northeastern apartment market.
   
  Grove currently owns interests in and operates 30 multifamily properties
containing a total of 2,863 units in Connecticut, Massachusetts and Rhode
Island (the "Apartment Communities") and three retail properties in
Massachusetts containing an aggregate of approximately 95,400 rentable square
feet (the "Retail Properties"; together with the Apartment Communities, the
"Properties"). Approximately 82%, 14% and 4% of the total units in the
Apartment Communities are located in Connecticut, Massachusetts and Rhode
Island, respectively. For the nine months ended September 30, 1997, the
Apartment Communities had an average economic occupancy rate of approximately
96.5% and an average monthly rental rate of approximately $698 per unit. The
Apartment Communities are mid-priced apartment properties consisting primarily
of two- and three-story buildings in landscaped settings. The Apartment
Communities are well located within their markets and appeal to middle income
residents who are generally "renters by necessity." Twenty of the Apartment
Communities, representing approximately 76% of the total number of units in the
Company's portfolio, have undergone extensive renovation within the last eight
years.     
 
  The Company believes that the "same community" comparison data shown in the
table below for the 23 Apartment Communities owned by Grove or its predecessors
since the beginning of 1995 reflect the strength of Grove's management team and
the general economic recovery that has taken place in the Company's markets
over the last twelve months.
<TABLE>   
<CAPTION>
                                           YEAR ENDED     NINE MONTHS ENDED
                                          DECEMBER 31,      SEPTEMBER 30,
                                          --------------  ------------------
                                           1995    1996     1996      1997
                                          ------  ------  --------  --------
   <S>                                    <C>     <C>     <C>       <C>
   Average Monthly Rental Rate Per Unit
    (1).................................. $  680  $  696  $    694  $    715
   Average Economic Occupancy Rate (2)...   95.7%   96.5%     96.4%     96.5%
   Net Operating Income (000's) (3)...... $9,125  $9,294  $  6,897  $  7,541
</TABLE>    
- --------
(1)Average monthly rental rate per unit is derived by dividing gross potential
   rental income by the total number of leasable units.
(2) Average economic occupancy rate is derived by dividing actual collected
    rental income by gross potential rental income. Gross potential rental
    income includes vacancy losses and bad debt, but does not include model
    expenses or employee concessions or discounts.
(3)Excludes intercompany management fees.
 
                                       1
<PAGE>
 
   
  On October 31, 1997, the Company consummated the acquisition of a multifamily
property containing a total of 100 units for approximately $4.2 million,
including closing costs, and completed an exchange offer to purchase two
affiliate-owned retail properties containing a total of approximately 16,400
rentable square feet for an aggregate of approximately $4.5 million including
closing costs. The Company believes that such Properties were purchased at
discounts of approximately 30% to 40% of replacement cost. Such Properties are
well located in Ellington, Connecticut and Edgartown (Martha's Vineyard),
Massachusetts. Management has an in-depth understanding of these markets and
believes that such Properties are well constructed and of comparable quality to
the other Properties.     
       
  Grove believes that opportunities for acquisitions in the Northeastern United
States are particularly attractive at this time because the region is generally
characterized by: (i) limited new construction due to significant barriers to
entry resulting from high construction costs, limited land availability, strict
zoning laws and extended permitting processes; (ii) a limited number of
publicly traded companies focusing on the acquisition of under-managed, mid-
priced multifamily communities; (iii) highly fragmented markets with many
small-to-medium sized companies that own older apartment properties in which
the owners are looking to sell with minimal tax impact and (iv) many older
apartment properties where maintenance and improvements have been deferred and
where the Company believes selective capital improvements and professional
management may create opportunities for increased rents. The Company intends to
continue its acquisition efforts in existing and new markets in the
Northeastern United States and may eventually expand its acquisition activity
into the Mid-Atlantic United States as appropriate opportunities arise.
   
  Grove's predecessors commenced operations in 1980. The Company completed its
initial public offering in 1994 with the acquisition of three apartment
properties. At that time, affiliates of Grove owned additional apartment
properties and other real estate assets outside of the REIT and conducted
management and acquisition activities through entities that were also owned
outside of the REIT. In 1996, management began to undertake a number of
strategic initiatives intended to maximize shareholder value. In March 1997,
the Company completed the following: (i) the creation of an umbrella
partnership REIT (an "UPREIT") structure by forming the Operating Partnership
to facilitate the consolidating transactions described below and to provide
potential sellers with a mechanism to defer their tax liability; (ii) the
acquisition through the Operating Partnership of 20 properties owned by
affiliates of Grove; (iii) the acquisition of the property management assets
and related liabilities of Grove Property Services Limited Partnership ("GPS"),
the entity that managed the properties owned by Grove as well as the 20
properties owned by affiliates of Grove; (iv) a $30 million private placement
(3,333,333 shares at $9.00 per share) of equity securities to investors that
included, among others, Morgan Stanley Group, Inc. ("MSGI") and the Oregon
Public Employees' Retirement Fund (the "Oregon Retirement Fund") as advised by
ABKB/LaSalle Securities Limited and (v) the closing of a $25 million revolving
credit facility and a $15 million term loan facility.     
   
  The Company is led by an experienced management team, whose five senior
executives have an average of approximately 16 years real estate experience in
the multifamily sector and an average of approximately 14 years experience with
the Company or its predecessors. In the aggregate, since 1980, Grove's senior
management team has been responsible for the acquisition of approximately 46
apartment properties containing a total of approximately 4,600 units and the
management of approximately 56 apartment properties containing a total of
approximately 5,350 units within the Northeastern United States. Upon
completion of the Offerings, Grove will own approximately 74% of the total
partnership interests (the "Common Units") in the Operating Partnership and the
Executive Officers (defined below) and the trust managers (the "Trust
Managers") of Grove will own, directly or indirectly, in the aggregate,
approximately 10.0% of the equity of the Company through ownership of Common
Units and Common Shares. The Company's address is 598 Asylum Avenue, Hartford,
Connecticut 06105. Its telephone number is (860) 246-1126.     
 
                                       2
<PAGE>
 
 
                   BUSINESS OBJECTIVES AND GROWTH STRATEGIES
   
  Grove's primary business objectives are to increase the value of the
Company's portfolio of properties and to maximize shareholder value by
maintaining long-term growth in cash available for distribution to its
shareholders. The Company intends to accomplish these objectives by: (i)
actively acquiring and, where appropriate, repositioning and renovating under-
managed multifamily properties at significant discounts to replacement cost and
at returns that enhance shareholder value; (ii) aggressively managing its
portfolio to increase revenues and reduce operating costs; (iii) maintaining a
conservative ratio of debt to total market capitalization and (iv) consistently
providing quality service and a desirable living environment to all of its
residents. Grove is currently negotiating to increase the borrowing capacity
under its revolving credit facility from $25 million to approximately $50
million to continue to fund its growth.     
 
                              RECENT DEVELOPMENTS
 
  Since the end of 1996, the Company has undertaken a number of strategic
initiatives intended to increase the value of the Company's portfolio of
properties and to maximize shareholder value. These initiatives include:
 
  .  Forming the Operating Partnership and converting to an UPREIT structure
     to facilitate the consolidation transactions discussed above and to
     provide flexibility to the Company in acquiring additional properties;
     
  .  Increasing the Company's portfolio of Apartment Communities from four
     containing a total of approximately 260 units to 30 containing a total
     of 2,863 units, including 28 Apartment Communities formerly controlled
     by affiliates of certain of the Company's Executive Officers;     
 
  .  Acquiring the property management assets and related liabilities of GPS,
     the entity that managed the properties owned by Grove as well as the 20
     properties owned by affiliates of Grove;
     
  .  Completing a private placement of 3,333,333 Common Shares for an
     aggregate of approximately $30 million to a group of investors including
     MSGI and the Oregon Retirement Fund;     
 
  .  Entering into a $25 million revolving credit facility (the "Credit
     Facility") with a BankBoston company to provide the Company with
     additional funds for acquisitions;
     
  .  Entering into a $15 million term loan facility with Citicorp Real
     Estate, Inc.; and     
     
  .  Increasing to 100% the Company's ownership interest in the entity owning
     349 of the 432 units at the River's Bend apartments.     
       
                                       3
<PAGE>
 
                                 THE PROPERTIES
   
  Apartment Communities. The following table sets forth certain information
concerning the Apartment Communities.     
 
<TABLE>   
<CAPTION>
                                                                                         AVERAGE         AVERAGE MONTHLY
                                                                                         ECONOMIC          RENTAL RATE
                                                                                    OCCUPANCY RATE(1)      PER UNIT(2)
                                                                                    -------------------  ----------------
                                                    NUMBER                 AVERAGE    YEAR      9 MOS.     YEAR   9 MOS.
                                         PERCENTAGE   OF   YEAR    YEAR    SQ. FT.    ENDED     ENDED     ENDED    ENDED
PROPERTY                TOWN/CITY        OWNERSHIP  UNITS  BUILT RENOVATED PER UNIT 12/31/96   9/30/97   12/31/96 9/30/97
- ----------------------- ---------------- ---------- ------ ----- --------- -------- ---------  --------  -------- -------
<S>                     <C>              <C>        <C>    <C>   <C>       <C>      <C>        <C>       <C>      <C>
CONNECTICUT
 208-210 Main St.(3)    Manchester          100%       28  1969    1988       929        97.8%     96.5%   $761    $778
 Arbor Commons(3)       Ellington           100%       28  1975    1988       780        97.6%     99.2%    686     693
 Avonplace              Avon                 98%      145  1973    1995     1,542        99.1%     99.1%    845     861
 Barons Apartments      Southington         100%       54  1970    1994       900        95.8%     97.2%    684     707
 Bradford Apartments    Newington            91%       64  1964    1989       894        91.6%     97.9%    686     694
 Brooksyde(4)           West Hartford       100%       80  1945    1997       800        94.0%     96.0%    643     678
 Burgundy Studios(4)    Middletown          100%      102  1973    1996       443        96.7%     97.8%    430     434
 Cambridge Estates      Norwich             100%       92  1977    1990       939        97.4%     98.1%    715     734
 Colonial Village       Plainville          100%      104  1968    1989       981        96.5%     94.5%    726     742
 Dogwood Hills          Hamden              100%       46  1971    1993     1,330        98.2%     98.0%    722     740
 Summit & Birch Hill(4) Farmington          100%      184  1967    1996       937        96.5%     97.7%    745     780
 Fox Hill Apartments    Enfield              97%      168  1974    1991       796        96.5%     94.9%    642     663
 Fox Hill Commons       Vernon              100%       74  1965    1989       849        97.1%     96.1%    692     706
 Greenfield
  Village(4)(5)         Rocky Hill          100%      127  1965    1997       729          --        --     --      --
 Hamden Centre          Hamden              100%       65  1968    1993       873        96.2%     96.7%    637     652
 High Meadow(4)(6)      Ellington           100%      100  1975      --       605        90.0%     95.7%    580     591
 Glastonbury Center     Glastonbury         100%      104  1962    1989       961        95.6%     89.9%    773     798
 Loomis Manor           West Hartford        91%       43  1948    1990     1,138       100.0%     99.3%    826     844
 Ocean Reef             New London           96%      163  1962    1995       829        94.4%     95.4%    633     646
 Park Place West        West Hartford       100%       63  1961    1989       861        97.9%     97.5%    656     669
 Sandalwood(4)(7)       New London           96%       39  1977    1996       517        61.7%     97.8%    453     460
 Westwynd Apartments    West Hartford        91%       46  1969    1990       901        95.2%     95.1%    648     657
 River's Bend           Windsor             100%      349  1973    1996     1,000        95.3%     96.2%    714     749
 Woodbridge             Newington           100%       73  1968    1991       792        94.7%     98.5%    712     722
MASSACHUSETTS
 Dean Estates           Taunton             100%       58  1984      --     1,014        94.9%     96.0%    668     684
 Four Winds(4)          Fall River          100%      168  1987    1996     1,089        90.5%     94.7%    627     685
 Security Manor         Westfield            88%       63  1971    1988     1,150        99.1%     99.9%    576     582
 Van Deene Manor(3)     West Springfield     88%      109  1970    1990       664        98.5%     98.8%    609     617
RHODE ISLAND
 Dean Estates II        Cranston             96%       48  1970    1994     1,170        93.5%     95.4%    687     699
 Royale                 Cranston             96%       76  1976    1993     1,151        96.9%     94.3%    684     697
                                                    -----                   -----    ---------  --------   ----    ----
 TOTAL/WEIGHTED AVERAGE                             2,863                     980        95.6%     96.5%   $676    $698
                                                    =====                   =====    =========  ========   ====    ====
 SAME COMMUNITY WEIGHTED AVERAGE(4)                                                      96.5%     96.5%   $696    $715
                                                                                     =========  ========   ====    ====
</TABLE>    
- --------
(1) Average economic occupancy rate is derived by dividing actual collected
    rental income by gross potential rental income. Gross potential rental
    income includes vacancy losses and bad debt, but does not include model
    expenses or employee concessions or discounts.
(2) Average monthly rental rate per unit is derived by dividing gross potential
    rental income by the total number of leasable units.
(3) The following Apartment Communities contain additional space which is
    rented to commercial tenants:
 
<TABLE>
<CAPTION>
               APARTMENT                       COMMERCIAL
               COMMUNITY                        SQ. FT.
               ---------                       ----------
            <S>                                <C>
            208-210 Main St. .................    9,597
            Arbor Commons.....................    4,016
            Van Deene Manor...................    1,630
                                                 ------
              Total...........................   15,243
                                                 ======
</TABLE>
 
                                       4
<PAGE>
 
   
(4) The same community weighted average amounts represent the average occupancy
    and rental rates for the 23 Apartment Communities owned by Grove or its
    affiliated predecessors for the years 1995 and 1996 and the nine months
    ended September 30, 1997. Seven Properties were purchased by Grove or its
    affiliated predecessors during or subsequent to such periods and have been
    excluded from the same community amounts. The following sets forth the
    acquisition dates for such Apartment Communities:     
 
<TABLE>   
<CAPTION>
               APARTMENT                      ACQUISITION
               COMMUNITY                         DATE
               ---------                      -----------
            <S>                               <C>
            Brooksyde........................   Oct-96
            Burgundy Studios.................   Oct-95
            Summit & Birch Hill..............   Feb-95
            Greenfield Village...............   Jul-97
            High Meadow......................   Oct-97
            Sandalwood ......................   Dec-95
            Four Winds.......................   Oct-95
</TABLE>    
   
(5) Greenfield Village was purchased in July 1997 from a non-affiliated party.
    Information on this Property is not available for the entirety of the
    periods covered in the above table.     
   
(6) High Meadow was purchased in October 1997 from a non-affiliated party.     
   
(7) Sandalwood was purchased in December 1995. The property was not leasable
    until September 1996.     
   
  Retail Properties. The following table sets forth certain information
concerning the Retail Properties.     
 
<TABLE>   
<CAPTION>
                                                                                      AVERAGE         AVERAGE ANNUAL
                                                                                      ECONOMIC       RENTAL RATE PER
                                                                                 OCCUPANCY RATE(1)      SQ. FT.(2)
                                                                                 ------------------  ----------------
                                                                                   YEAR     9 MOS.     YEAR   9 MOS.
                                                        YEAR    YEAR    RENTABLE   ENDED    ENDED     ENDED    ENDED
PROPERTY           TOWN/CITY      PRIMARY TENANTS      BUILT  RENOVATED SQ. FT.  12/31/96  9/30/97   12/31/96 9/30/97
- ------------------ ---------- ------------------------ ------ --------- -------- --------- --------  -------- -------
<S>                <C>        <C>                      <C>    <C>       <C>      <C>       <C>       <C>      <C>
MASSACHUSETTS
 Longmeadow Shops  Longmeadow CVS, Cherry & Webb,        1962  1994-96   79,012      97.9%    96.6%   $12.28  $12.88
                              BankBoston, Blockbuster,
                              Talbots, Fleet Bank
 Corner Block(3)   Edgartown  Compass Bank,            1800's     1988    5,400     100.0%   100.0%    30.38   34.55
                              Wallace & Company,
                              Mardells
 Wharf Building(3) Edgartown  Sunglass Hut,            1800's     1996   11,027     100.0%   100.0%    21.77   30.50
                              Wharf Pub,                                 ------   -------- --------   ------  ------
                              The Great Put On,
                              Destinations
  TOTAL/WEIGHTED AVERAGE                                                 95,439      98.3%    97.2%   $14.40  $16.14
                                                                         ======   ======== ========   ======  ======
</TABLE>    
- --------
(1) Average economic occupancy rate is derived by dividing actual collected
    rental income by gross potential rental income. Gross potential rental
    income includes vacancy losses and bad debt.
(2) Average annual rental rate per square foot is derived by dividing total
    revenue collected by leased square footage.
   
(3) Corner Block and Wharf Building were purchased in October 1997.     
 
                                       5
<PAGE>
 
                               COMPANY STRUCTURE
 
  The following diagram describes the ownership structure of Grove and the
Operating Partnership upon completion of the Offerings.


                                   0.01% to
            ______________________   1.0%  ________________________
            |                      General                        |
            |                      Partner                        |
            |                     Interests                       |
            |                                                     |
            |                                                     |
 GROVE PROPERTY TRUST                                SUBSIDIARY PARTNERSHIPS(1)
            |                                             (24 PROPERTIES) |
            |                                               |             |
            |                                               |             |
              74% Interest                         88% to 100% Limited    |
         (Sole General Partner)                     Partner Interests     |
            |                                               |             |
            |                                               |             |
            |                                               |             |
            |_______________ GROVE OPERATING, L.P. _________|             |
                                (9 PROPERTIES)                            |
                                      |                                   | 
                                      |                                   |
                                  26% Limited                             |
                             Partnership Interests                        |
                                      |                                   |
                                      |                                   | 
                            FORMER LIMITED PARTNERS            0% to 12% Limited
                          OF SUBSIDIARY PARTNERSHIPS           Partner Interests
                            AND FORMER PARTNERS OF                        |
                            GPS WHO PARTICIPATED IN                       |
                                 CONSOLIDATION                            | 
                               TRANSACTIONS AND                           |
                                EXCHANGE OFFERS                           |
                                                                          |
                                                                          |
                                                                __________|
                                                                |
                                                  REMAINING LIMITED PARTNERS OF
                                                      SUBSIDIARY PARTNERSHIPS

- --------
   
(1) Twenty-four of the Properties are owned by (i) certain partnerships in
    which Grove Property Trust, or a wholly owned subsidiary of Grove Property
    Trust, is the sole general partner and in which the Operating Partnership
    owns between 88% and 100% of the limited partner interests or (ii) certain
    limited liability companies in which the Operating Partnership is the sole
    member (collectively, the "Subsidiary Partnerships").     
 
  The following table sets forth the ownership of Common Shares and Common
Units upon completion of the Offerings.
<TABLE>   
<CAPTION>
                                     WITHOUT EXCHANGE OF    WITH EXCHANGE OF
                                         COMMON UNITS        COMMON UNITS(1)
                                     -------------------- ---------------------
                                     NUMBER OF PERCENTAGE NUMBER OF  PERCENTAGE
                                      SHARES    OF TOTAL    SHARES    OF TOTAL
                                     --------- ---------- ---------- ----------
<S>                                  <C>       <C>        <C>        <C>
Public(2)..........................  5,829,450    68.96%   5,829,450    50.85%
Executive Officers and Trust Manag-
 ers(3)............................     96,684     1.14%   1,152,032    10.05%
MSGI(4)............................  1,690,766    20.00%   1,690,766    14.75%
ABKB/LaSalle(5)....................    836,929     9.90%     836,929     7.30%
Continuing Investors(6)............        --       --     1,953,778    17.05%
                                     ---------   ------   ----------   ------
  Total............................  8,453,829   100.00%  11,462,955   100.00%
                                     =========   ======   ==========   ======
</TABLE>    
- --------
(1) Assumes that all Common Units are redeemed by the holders thereof and that
    the Company exercises its right to issue Common Shares on a one-for-one
    basis upon such redemption.
(2) Includes the 3,141,475 Common Shares offered in the Offering.
   
(3) Refers to the executive officers named under "Management-Executive
    Compensation" (the "Executive Officers"). Excludes Common Shares which
    could be acquired upon exercise of options and warrants and Common Shares
    owned by MSGI as to which a Trust Manager has shared voting and investment
    power.     
   
(4) Includes the 777,778 Common Shares currently held by MSGI and the 912,988
    to be offered to MSGI in the Concurrent Offering.     
(5) Includes the 391,392 Common Shares currently held by the Oregon Retirement
    Fund, the 87,000 Common Shares to be offered to the Oregon Retirement Fund
    in the Concurrent Offering and 358,537 Common Shares to be offered to
    certain other investment funds advised by ABKB/LaSalle Securities Limited
    in the Concurrent Offering (such funds and the Oregon Retirement Fund
    collectively, "ABKB/LaSalle")
(6) The Continuing Investors are holders of Common Units who are former limited
    partners of the Subsidiary Partnerships and former partners of GPS.
 
                                       6
<PAGE>
 
                                 THE OFFERINGS
 
<TABLE>   
<S>                                  <C>
Common Shares offered hereby:
  Offering.........................   3,141,475
  Concurrent Offering(1)...........   1,358,525
 
                                     ----------
    Total..........................   4,500,000
 
                                     ==========
Common Shares and Common Units out-
 standing
 after the Offerings(1)(2).........  11,462,955
Use of Proceeds....................  To repay outstanding indebtedness,
                                     including indebtedness incurred in
                                     connection with the acquisition of certain
                                     of the Properties, and for working capital
                                     and other general purposes. See "Use of
                                     Proceeds."
Proposed AMEX Symbol...............  "GVE" (The Common Shares currently trade on
                                     the Emerging Company Marketplace of the
                                     AMEX under the symbol "GVE.EC.")
</TABLE>    
- --------
   
(1) There can be no assurance that all of the Common Shares offered in the
    Concurrent Offering will be sold. See "The Concurrent Offering."     
   
(2) Includes 3,009,126 Common Shares reserved for issuance if the Company
    elects to issue Common Shares rather than cash upon redemption of Common
    Units. Excludes 117,726 Common Shares reserved for issuance under the
    Company's 1994 Share Option Plan (the "1994 Plan") and 900,000 Common
    Shares reserved for issuance under the 1996 Share Incentive Plan (the "1996
    Plan"), 50,000 Common Shares reserved for issuance upon exercise of an
    option granted to a consultant to the Company and 47,248 Common Shares
    reserved for issuance upon exercise of a warrant originally issued to
    Barclay Investments, Inc., the underwriter for the Company's initial public
    offering in 1994.     
 
                     SUMMARY SELECTED FINANCIAL INFORMATION
   
  The following table sets forth summary selected financial and operating data
on a historical and pro forma basis for the Company and on a combined
historical basis for GPS and the Property Partnerships (defined in the
Company's financial statements as those partnerships that were parties to the
transactions completed in March 1997). The following information should be read
in conjunction with all of the financial statements and notes thereto included
or incorporated by reference in this Prospectus. The historical operating
information of the Company and GPS and the Property Partnerships for the years
ended December 31, 1996 and 1995 has been derived from the historical combined
financial statements audited by Ernst & Young LLP, independent auditors, whose
reports with respect thereto are included elsewhere in this Prospectus. The
operating information for the nine months ended September 30, 1997 and 1996 has
been derived from the unaudited financial statements of the Company also
included elsewhere in this Prospectus. In the opinion of management, the
unaudited financial statements include all adjustments, consisting only of
normal recurring adjustments, that management considers necessary for a fair
presentation of the financial position and results of operations for these
periods. The results of operations for the nine months ended September 30, 1997
and 1996 are not necessarily indicative of the results to be obtained for the
full fiscal year.     
   
  The unaudited pro forma information assumes that the transactions completed
in March 1997, the Offerings, and the acquisition of nine properties acquired
after March 1997 all occurred on January 1, 1996 with respect to operating
data. With respect to the balance sheet data, to the extent not already
consummated by September 30, 1997, the unaudited pro forma information assumes
that such acquisitions occurred on September 30, 1997. In management's opinion,
all adjustments necessary to present fairly the effects of these transactions
have been made. The unaudited pro forma information is not necessarily
indicative of what the actual results of operations or financial condition of
the Company would have been for the periods or at the dates indicated, nor does
it purport to represent the Company's future financial condition or results of
operations as of any future date or for any future periods.     
 
                                       7
<PAGE>
 
<TABLE>   
<CAPTION>
                                                                GPS AND PROPERTY
                                                                  PARTNERSHIPS
                                 COMPANY HISTORICAL                HISTORICAL              COMPANY PRO FORMA
                          ------------------------------------  ------------------  ---------------------------------
                            YEARS ENDED     NINE MONTHS ENDED      YEARS ENDED       YEAR ENDED   NINE MONTHS ENDED
                           DECEMBER 31,       SEPTEMBER 30,       DECEMBER 31,      DECEMBER 31,    SEPTEMBER 30,
                          ----------------  ------------------  ------------------  ------------ --------------------
                           1996     1995      1997      1996      1996      1995        1996       1997       1996
                          -------  -------  ---------  -------  --------  --------  ------------ ---------  ---------
                                             (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                       <C>      <C>      <C>        <C>      <C>       <C>       <C>          <C>        <C>
OPERATING INFORMATION:
Revenues:
 Rental income..........  $ 2,046  $ 1,287  $  10,944  $ 1,521  $ 12,906  $ 11,965   $  23,531   $  18,578  $  17,533
 Property management....      --       --         380      --        777       815         381         346        311
 Interest and other.....       36       30        212       28     1,138     1,103         553         449        255
                          -------  -------  ---------  -------  --------  --------   ---------   ---------  ---------
  Total revenues........    2,082    1,317     11,536    1,549    14,821    13,883      24,465      19,373     18,099
                          -------  -------  ---------  -------  --------  --------   ---------   ---------  ---------
Expenses:
 Property operating and
  maintenance...........      656      406      3,741      485     5,705     5,276       8,929       6,984      6,549
 Real estate taxes......      208      148      1,143      155     1,299     1,234       2,590       1,924      1,927
 Related party
  management fees.......      109       67         22       80       --        --          --          --         --
 General and
  administrative........       67       56        610       55       279       261         949         712        710
                          -------  -------  ---------  -------  --------  --------   ---------   ---------  ---------
  Total operating
   expenses.............    1,040      677      5,516      775     7,283     6,771      12,468       9,620      9,186
                          -------  -------  ---------  -------  --------  --------   ---------   ---------  ---------
Net operating income....    1,042      640      6,020      774     7,538     7,112      11,997       9,753      8,913
Interest expense........      394       85      1,732      292     3,856     3,829       2,274       1,614      1,671
Depreciation and
 amortization...........      387      217      2,380      293     3,055     3,140       5,305       3,997      4,021
                          -------  -------  ---------  -------  --------  --------   ---------   ---------  ---------
Income before items
 shown below............      261      338      1,908      189       627       143       4,418       4,142      3,221
Minority interests in
 consolidated
 partnerships...........      --       --         114      --        --        --          --           91        --
Minority interest in
 Operating Partnership..      --       --         658      --        --        --        1,160       1,063        845
Extraordinary gain on
 debt restructuring.....      --       --         --       --        --      2,186         --          --         --
                          -------  -------  ---------  -------  --------  --------   ---------   ---------  ---------
Net income..............  $   261  $   338  $   1,136  $   189  $    627  $  2,329   $   3,258   $   2,988  $   2,376
                          =======  =======  =========  =======  ========  ========   =========   =========  =========
Net income per common
 share..................  $  0.42  $  0.55  $    0.37  $  0.30                       $    0.39   $    0.35  $    0.28
Weighted average number
 of common shares
 outstanding............  620,102  620,102  3,074,535  620,102                       8,453,829   8,453,829  8,453,829
OTHER INFORMATION:
Funds from
 operations(1)..........  $   595  $   517  $   2,384  $   443                       $   6,674   $   5,612  $   4,915
Cash flow from:(2)
 Operating activities...      718      585      3,844      481     3,232     3,317
 Investment activities..     (145)     (99)   (12,242)     (89)   (1,144)   (3,419)
Number of Apartment
 Communities (end of
 period)................        4        3         29        4        20        20          30          30         30
Number of apartment
 units (end of period)..      257      165      2,763      257     1,514     1,514       2,863       2,863      2,863
Average monthly rental
 rate per unit..........  $   693  $   660  $     702  $   687  $    693  $    677   $     676   $     698  $     683
Average economic
 occupancy rate.........     97.0%    97.8%      96.5%    97.3%     96.7%     96.4%       95.6%       96.5%      95.9%
Number of Retail
 Properties.............      --       --           1      --          1         1           3           3          3
BALANCE SHEET
 INFORMATION:
Real estate, before
 accumulated
 depreciation...........  $ 9,798  $ 5,393  $ 145,555  $ 9,762  $ 77,833  $ 76,835               $ 154,280
Total assets............    9,521    5,241    116,440    9,537    59,866    61,678                 130,285
Total mortgage and
 revolving credit
 facility debt..........    5,669    1,190     64,987    5,675    48,643    46,786                  29,612
Minority interests......      --       --      22,391      --        --        --                   26,212
Shareholders'/owners'
 equity.................    3,483    3,703     23,861    3,531     7,795    12,259                  69,260
</TABLE>    
 
                                                        (continued on next page)
 
                                       8
<PAGE>
 
(continued from previous page)
 
- --------
(1) The Company generally considers Funds from Operations ("FFO") to be a
    useful measure of the operating performance of an equity REIT because,
    together with net income and cash flow, FFO provides investors with an
    additional basis to evaluate the ability of a REIT to incur and service
    debt and to fund acquisitions and other capital expenditures. FFO does not
    represent net income or cash flow from operations as defined by generally
    accepted accounting principles ("GAAP") and does not necessarily indicate
    that cash flow will be sufficient to fund cash needs. It should not be
    considered as an alternative to net income as an indicator of the Company's
    operating performance or to cash flow as a measure of liquidity. FFO does
    not measure whether cash flow is sufficient to fund all of the Company's
    cash needs, including principal amortization, capital improvements and
    distributions to shareholders. FFO also does not represent cash flow
    generated from operating, investing or financing activities as defined by
    GAAP. Further, FFO as disclosed by other REIT's may not be comparable to
    the Company's calculation of FFO. The Company uses the NAREIT definition of
    FFO. FFO is defined as income before gains (losses) on investments and
    extraordinary items (computed in accordance with GAAP) plus real estate
    depreciation, less preferred dividends and after adjustment for significant
    non-recurring items, if any. The Company believes that in order to
    facilitate a clear understanding of its operating results, FFO should be
    examined in conjunction with the net income as presented in the financial
    statements and information included elsewhere in this Prospectus.
(2) Pro forma information relating to cash flow from operating and investing
    activities has not been included because the Company believes that the
    information would not be meaningful due to the number of assumptions
    required in order to calculate this information.
 
                                       9
<PAGE>
 
                                 RISK FACTORS
 
  Prospective purchasers of the Common Shares offered hereby should consider
carefully the risk factors set forth below, as well as the other information
contained or incorporated by reference herein, before making an investment in
the Common Shares offered hereby. Certain statements contained or incorporated
by reference herein constitute "forward looking statements" within the meaning
of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). These statements
include, among other things, statements concerning results of operations, cash
available for distributions, required capital expenditures, sources of growth,
economic conditions and trends and plans and objectives of management for
future operations. Such forward looking statements involve risks and
uncertainties that may cause actual results to differ materially, depending on
a variety of important factors. Important factors that contribute to such
risks and uncertainties include, but are not limited to: (i) those identified
under this caption; (ii) changes in general business and economic conditions;
and (iii) other factors which may be described from time to time in the
Company's filings with the Securities and Exchange Commission (the
"Commission").
 
ABSENCE OF APPRAISALS
   
  In connection with the Consolidation Transactions, the Company acquired 20
Properties and GPS, the management company for such Properties, based
primarily upon a capitalization of pro forma net operating income, rather than
an asset-by-asset valuation based on historical cost or appraised current
market value. A valuation of these Properties and GPS based on appraisals or
another method would likely have resulted in a different valuation. There can
be no assurance that the percentage interests or the value thereof received by
those participating in the Consolidation Transactions, including the Executive
Officers and their affiliates, accurately reflected the value of the assets
contributed to the Operating Partnership. Since the Consolidation
Transactions, the Company has acquired five Properties from affiliated parties
and two Properties from unaffiliated parties. The Company did not obtain
appraisals with respect to these additional Properties, although approval was
obtained from a majority of the Independent Trust Managers for the
transactions in which the additional Properties were acquired from affiliates
of the Company. If the fair market values of GPS and the Properties acquired
in and subsequent to the Consolidation Transactions are materially different
from the amounts paid by the Company, the Company may have overpaid for GPS or
such Properties, which could result in a material and adverse effect on the
financial performance of the Company and the value of the Common Shares. In
addition, the sellers of such Properties could in the future claim that they
were underpaid, which claim, if successful, could result in a material and
adverse effect on the financial performance of the Company and the value of
the Common Shares.     
 
REAL ESTATE INVESTMENT CONSIDERATIONS
 
  General. Real property investments are subject to varying degrees of risk.
The financial returns available from equity investments in apartment
properties depend on the amount of revenue generated and expenses incurred in
operating the properties. If the Properties do not generate revenue sufficient
to meet operating expenses, debt service, if any, and capital expenditures,
the Company's income and ability to make distributions to its shareholders
will be adversely affected. An apartment property's income and value may be
affected by the national and regional economic climates, local real estate
conditions, such as an oversupply of apartments or a reduction in demand for
apartments, availability of "for purchase" housing, the attractiveness of the
Apartment Communities to residents, competition from other apartment
properties, the ability of the owner to provide adequate maintenance and to
obtain adequate insurance and increased operating costs (including real estate
taxes). The Company's income will be adversely affected if a significant
number of residents are unable to pay rent or if the apartments cannot be
rented on favorable terms. Further, certain significant expenditures
associated with equity investments in real estate (such as mortgage payments,
if any, real estate taxes and maintenance costs) are generally not reduced
when circumstances cause a reduction in rental income. In addition, the net
income to Grove from any of the Properties may be adversely affected by such
factors, among others, as changes in zoning, building, environmental, rent
control and other laws and regulations, population shifts, which may affect
the demand for rental housing in the Company's markets, changes in real
property taxes and interest rates, the availability of financing, weather and
acts of God (such as earthquakes, hurricanes and floods) and other factors
beyond the control of Grove that may significantly affect the Company's
revenue and operating expenses. The Company is also exposed to the various
types of litigation that may be brought against a property owner or manager.
 
                                      10
<PAGE>
 
  Illiquidity of Real Estate. Investments in real estate are relatively
illiquid and, therefore, will tend to restrict the Company's ability to vary
its portfolio of properties promptly in response to changes in economic or
other conditions. Consequently, if the Operating Partnership were to be
liquidated, the proceeds realized by the Company might be less than the
Company's total investment in the Operating Partnership. In addition, the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"),
places limits on the amount of gross income the Company may realize from sales
of real property assets held for fewer than four years, which may affect the
Company's ability to sell the Properties without adversely affecting returns
to holders of Common Shares.
 
  Future Property Acquisitions. In the normal course of its business, and in
the pursuit of its business and growth strategies, the Company continually
evaluates potential acquisitions in the Northeast. The Company intends to
continue to acquire multifamily properties and, in certain circumstances,
select retail properties if attractive opportunities arise. In addition to
general investment risks associated with any new real estate investment,
acquisitions entail risks that investments will fail to perform in accordance
with expectations and that judgments with respect to the costs of improvements
to bring an acquired property up to standards established for the market
position intended for that property will prove inaccurate. Properties acquired
may have characteristics or deficiencies unknown to the Company affecting
their valuation or revenue potential, and it is possible that their operating
performance may decline under the Company's management. No assurance can be
given that the Company will identify suitable acquisitions, complete
acquisitions on terms favorable to it or successfully integrate acquired
properties into the Company's portfolio. If financing is not available on
acceptable terms for new acquisitions or renovations, further acquisitions
might be curtailed. Furthermore, the fact that the Company must distribute 95%
of its REIT taxable income in order to maintain its qualification as a REIT
under the Internal Revenue Code will limit the ability of the Company to rely
upon income from operations or cash flow from operations to finance new
acquisitions.
 
  Risks of Repositioning and Renovation. The Company intends to reposition or
renovate certain of the Properties and other properties it may acquire in the
future. In connection with any such project, the Company will bear certain
risks, including delays or cost overruns, that may increase project costs and
could make such projects uneconomical, and the risk that occupancy or rental
rates at a property once such a project has been completed will not be
sufficient to enable the Company to pay operating expenses or earn its
anticipated rate of return on its investment. In case of an unsuccessful
repositioning or renovation project, the Company's loss could exceed its
investment in such project. In cases where the Company owns less than the
entire interest in a property, the Company may nevertheless be required to
bear the entire cost of a repositioning or renovation project at such
property.
   
  Risks Relating to Distributions. The Company pays regular distributions to
its shareholders and expects to increase its annual distribution rate
following closing of the Offering to $0.68 per Common Share. The Company
expects to set a record date for the payment of a dividend based on its
historical distribution rate to holders of Common Shares at the close of
business on the business day immediately prior to the closing of the Offering
with respect to the period commencing October 1, 1997 and ending on such
record date. The Company then expects to set a record date for the payment of
a dividend to holders of Common Shares on December 31, 1997 with respect to
the period commencing on the closing date of the Offering and ending December
31, 1997. The Company's annual distribution rate to shareholders for the year
ended December 31, 1996 was 87.7% of the Company's cash available for
distribution ("CAD"), defined by the Company as FFO plus depreciation on
personal property and amortization of financing costs, less mortgage principal
payments and recurring capital improvements for such period and was 63.4% for
the nine months ended September 30, 1997. See "Distribution Policy." The
Company's determination to increase distributions as described above was based
on expectations with respect to pro forma REIT taxable income following the
Offerings and is intended to ensure the Company's continuing ability to
qualify for REIT status. In particular, the Company is seeking to ensure its
continuing compliance with the requirement that it distribute annually at
least 95% of its REIT taxable income. No assurance can be given, however, that
actual CAD following the Offerings will not be substantially below the
Company's expectations. In addition, the Company's ability to make
distributions will depend, in large part, on the performance of the Properties
and any properties it may acquire in the future, including occupancy levels,
expenditures with respect to the Properties and newly acquired properties, the
amount of the Company's debt     
 
                                      11
<PAGE>
 
and the interest rates thereon and other costs relating to the Properties and
the newly acquired properties, as well as the absence of significant
expenditures relating to environmental or other regulatory matters. Most of
these matters are beyond the control of the Company and any significant
difference between the Company's expectations with respect to these matters
and actual results could have a material adverse effect on the Company and its
ability to make or sustain distributions.
   
  Compliance with Applicable Laws. The Properties are subject to various
federal, state and local regulatory requirements, such as requirements of the
Americans with Disabilities Act (the "ADA") and state and local fire and
safety requirements. The ADA may require modifications to existing buildings
or restrict certain renovations by requiring access to such buildings, and
apartments in the buildings, by disabled persons. In addition, the Fair
Housing Amendments Act of 1988 ("FHAA") requires apartment communities first
occupied after March 13, 1990 to be accessible to the handicapped. Failure to
comply with these laws could result in the imposition of fines or an award of
damages to private litigants. Additional legislation may impose further
burdens or restrictions on owners with respect to access by disabled persons.
The costs of compliance with such laws may be substantial, and limits or
restrictions on completion of certain renovations may reduce overall returns
on the Company's investments. Although the Company believes that the
Properties are in substantial compliance with such laws as currently in
effect, the Company may incur additional costs to comply with such laws.
Although the Company believes that such costs will not have a material adverse
effect on the Company, if required changes involve a greater expenditure than
the Company currently anticipates or if the changes must be made on a more
accelerated basis than it anticipates, the Company's cash flow and ability to
make expected distributions could be adversely affected.     
   
  Competition. There are numerous real estate companies, including those
operating in the markets in which the Properties are located, which compete
with the Company in seeking properties for acquisition, and for tenants to
occupy such properties. The Company may compete with companies that have
greater resources and whose officers and directors or trustees have more
experience than the Company's officers and Trust Managers. Further, the
availability of single-family housing and other forms of multifamily
residential properties, such as manufactured housing communities, provide
alternatives to residents and potential residents of apartment communities.
The availability of such alternatives and competition generated thereby could
increase in the future. These competitive factors could adversely affect the
Company's financial performance and results of operations.     
 
EXPANSION INTO NEW GEOGRAPHIC MARKETS
   
  The Company currently intends to seek to acquire properties in geographic
markets other than those markets in which the Properties are located,
including other states in the Northeast and Mid-Atlantic regions. Such regions
may include markets in which the Company has little or no experience in the
acquisition and management of multifamily or other properties. Any such new
geographic market may be substantially dissimilar to the markets in which the
Company currently owns and operates the Properties, and management of the
Company may be unfamiliar with prevailing economic conditions, trends in real
estate and other factors in such markets, which may adversely affect the
Company's ability to acquire properties in such new geographic markets for
competitive purchase prices and to manage such properties effectively and
profitably thereafter. Payment of purchase prices for such properties in
excess of their fair market value or Grove's inability to manage such
properties so as to cause them to be profitable would have an adverse effect
on the results of operations of the Company.     
 
DEPENDENCE ON LIMITED GEOGRAPHIC AREA
   
  The Properties are located in Connecticut, Rhode Island and Massachusetts
and consist principally of multifamily residential communities. Of the 2,863
units in the Company's portfolio, 2,341, or 82%, are located in Connecticut.
The Company's cash flow, ability to make distributions to its shareholders and
the value of the Common Shares are therefore particularly dependent upon
general business and economic conditions, such as employment levels, average
salaries, population and industrial growth and the demand for rental
apartments, in Connecticut and in the individual markets in which the
Properties are located. In recent years the values of residential rental
properties in the Northeastern United States have fluctuated as a result of
these and other     
 
                                      12
<PAGE>
 
factors. Changes in such factors in Grove's markets could have a material
adverse effect on the Company's business, financial condition and results of
operations.
 
LIMITATION ON CONTROL OF PARTIALLY OWNED PROPERTIES
 
  Twelve of the Properties are not entirely owned by the Company, and the
Company may hereafter acquire properties in which it will own less than the
entire interest. To the extent that other persons continue to have a minority
interest in such properties, the Company may have certain fiduciary
responsibilities to such persons which it will need to consider when making
decisions that affect those properties (including decisions regarding sale,
refinancing and the timing and amount of distributions from such properties).
Potential conflicts and other problems which could adversely affect the
Company and its results of operations could arise as a consequence of these
ownership arrangements.
 
REAL ESTATE FINANCING RISKS
   
  Debt Service Obligations. The Company will be subject to the risks normally
associated with debt financing, including the risk that the Company's cash
flow will be insufficient to meet required payments of principal and interest.
If the Company or an entity in which it invests were unable to meet its debt
service obligations under its mortgage loans, the lender could foreclose on
the relevant property, in which case the Company would lose the property and
its associated investment and revenue stream. All indebtedness of the Company
is secured by mortgages on certain of the Properties. The cross-
collateralization of the mortgages on various of the Properties reduces
flexibility in selling individual properties.     
   
  Variable Rate Debt and Maturities. The Company's debt includes both fixed
rate and variable rate debt with interest rates that adjust based upon
prevailing market interest rates. A substantial portion of the Company's debt
may bear interest at variable rates. Upon completion of the Offerings and the
application of the net proceeds therefrom, the Company will have an aggregate
of $29.5 million in term debt outstanding, with $25 million available, subject
to certain limitations, for borrowing under the Credit Facility. If the
Concurrent Offering is not completed, then after the Offering, the Company
will have an aggregate of $44.6 million of term debt outstanding. See "Use of
Proceeds." The Company is negotiating to increase its available revolving
credit to $50 million. The Credit Facility bears interest at variable rates.
An increase in interest rates could have a material adverse effect on the
Company's results of operations and on its ability to make distributions on
the Common Shares. Debt outstanding, assuming completion of the Offerings and
application of the proceeds therefrom, would require principal repayments of
$200,000, $200,000 and $2.1 million in 1998, 1999 and 2000, respectively, with
$27.1 million due thereafter. If principal payments due at maturity cannot be
refinanced, extended or repaid with the proceeds of other capital raising
transactions, the Company may not be able to pay distributions at expected
levels and repay all such maturing debt. If the Company were unable to
refinance its indebtedness on acceptable terms, or at all, the Company might
be forced to dispose of one or more of the Properties upon disadvantageous
terms, which might result in losses to the Company and might adversely affect
the cash available for distribution.     
 
  No Limitation on Debt. Grove has followed a practice of limiting its ratio
of debt to total market capitalization (i.e., total debt of the Company as a
percentage of total market capitalization, defined as the sum of the aggregate
market value of the issued and outstanding Common Shares and Common Units
exchangeable for Common Shares and the total debt of the Company) to less than
60%. The organizational documents of the Company, however, do not limit the
amount or percentage of indebtedness that it may incur. Therefore, the Company
may change this practice regarding indebtedness without the vote of the
holders of Common Shares. If this practice is changed, the Company could
become more highly leveraged, resulting in an increased risk of default on the
obligations of the Company and an increase in debt service requirements which
could adversely affect the Company's financial condition and results of
operations and, consequently, the Company's ability to pay distributions on
the Common Shares.
 
POTENTIAL CONFLICTS OF INTEREST
   
  The Executive Officers or entities affiliated with the Executive Officers
have in the past been parties to transactions with Grove or its affiliates. Of
the Company's 33 Properties, 31 Properties were acquired by the     
 
                                      13
<PAGE>
 
   
Company from entities affiliated with Executive Officers. The Company may in
the future explore the possibility of purchasing other properties from its
affiliates or affiliates of the Executive Officers. As a result, these persons
may have interests that conflict with those of the other shareholders of the
Company. In addition, there can be no assurance that the prices paid by Grove
in connection with such transactions accurately reflected or will accurately
reflect the fair market value of the subject properties. While the Company has
entered into non-competition agreements with each of the Executive Officers
and certain of their affiliates designed to minimize conflicts of interest,
and the Company's Third Amended and Restated Declaration of Trust (the
"Charter") includes a provision which requires the composition of the Board of
Trust Managers (the "Board") at all times to consist of a majority of
Independent Trust Managers (as defined in the Charter), there can be no
assurance that the provisions of the non-competition agreements or the Charter
will be successful in eliminating the impact of conflicts of interest between
the Executive Officers and the Company. Accordingly, the interests of Grove's
shareholders may not have been, and in the future may not be, reflected fully
in all decisions made or actions taken or to be taken by certain officers of
the Company. See "Certain Relationships and Transactions."     
 
  In the Consolidation Transactions (defined below), certain affiliates of the
Executive Officers entered into a Contribution Agreement (the "Contribution
Agreement") with the Company and the Operating Partnership pursuant to which
20 Properties owned by such affiliates were contributed to the Operating
Partnership in exchange for Common Units and cash. Because of substantial
economic interests of the Executive Officers in entities which are parties to
the Contribution Agreement, there is a potential for a conflict of interest
with respect to the obligations of the Executive Officers as executive
officers of the Company in enforcing the terms of the Contribution Agreement.
The failure to enforce the material terms of the Contribution Agreement,
particularly the indemnification provisions and the remedy provisions for
breaches of representations and warranties, could result in losses to the
Company and could adversely affect the cash available for distribution. See
"Certain Relationships and Transactions."
 
  In addition, affiliates of the Executive Officers that have contributed
properties to the Company in the past, may have unrealized gain in their
interests in such properties. The sale of such properties by the Company could
cause adverse tax consequences to such Executive Officers or affiliates.
Although decisions regarding such dispositions must be made by the Board, a
majority of which is composed of Independent Trust Managers, the interests of
the Company and such Executive Officers and affiliates could be different in
connection with the disposition of such properties.
 
DEPENDENCE ON KEY PERSONNEL
 
  The Company is dependent on the efforts of all of the Executive Officers.
While Grove believes that it could find replacements for these key personnel,
the loss of their services could have a material adverse effect on the
operations of the Company. Currently, Grove has no intention to secure key-man
life insurance for the Executive Officers.
 
ADVERSE TAX CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT
 
  The Company currently intends to continue operating so as to qualify as a
REIT under the Internal Revenue Code. A REIT generally is not taxed at the
corporate level on income it currently distributes to shareholders so long as
it distributes at least 95% of its REIT taxable income annually. No assurance
can be given that the Company will be able to operate in a manner so as to
remain so qualified. Qualification as a REIT involves the application of
highly technical and complex provisions of the Internal Revenue Code for which
there are only limited judicial or administrative interpretations. The
determination of various factual matters and circumstances not entirely within
the Company's control may affect its ability to continue to qualify as a REIT.
The complexity of these provisions and of the applicable income tax
regulations that have been promulgated under the Internal Revenue Code is
greater in the case of a REIT that holds its assets through a partnership. In
addition, no assurance can be given that legislation, new regulations,
administrative interpretations or court decisions will not change tax laws
with respect to qualification as a REIT or the federal income tax consequences
of such qualification. Grove is relying on the opinion of Cummings & Lockwood,
counsel to the Company, to the effect
 
                                      14
<PAGE>
 
that, based on various assumptions relating to the organization and operation
of the Company and representations made by Grove as to certain factual
matters, the Company's organization and method of operation meets, and will
allow the Company to continue to meet, the requirements for qualification and
taxation as a REIT. Such opinion, however, is not binding upon the Internal
Revenue Service. See "Certain Federal Income Tax Considerations."
 
  If the Company fails to qualify as a REIT in any taxable year, the Company
will not be allowed a deduction for distributions to shareholders in computing
its taxable income and will be subject to federal income tax (including any
applicable alternative minimum tax) on its taxable income at the applicable
corporate rate. In addition, unless it were entitled to relief under certain
statutory provisions, the Company also would be disqualified from treatment as
a REIT for the four taxable years following the year during which
qualification is lost. This disqualification would reduce Grove's cash
available for investment or distribution to shareholders because of the
additional tax liability of the Company for the year or years involved. If the
Company were to fail to qualify as a REIT, it no longer would be subject to
the distribution requirements of the Internal Revenue Code, and, to the extent
that distributions to shareholders would have been made in anticipation of the
Company's qualifying as a REIT, the Company might be required to borrow funds
or to liquidate certain of its assets to pay the applicable corporate tax.
 
  Although the Company currently intends to continue to operate in a manner
designed to continue to qualify as a REIT, it is possible that future
economic, market, legal, tax or other considerations may cause the Board,
without the approval of the shareholders, to decide to revoke the REIT
election.
 
REQUIRED DISTRIBUTIONS; POTENTIAL REQUIREMENTS TO BORROW
 
  To obtain the favorable tax treatment accorded to a REIT under the Internal
Revenue Code, the Company generally is required each year to distribute to its
shareholders at least 95% of its REIT taxable income. The Company will be
subject to income tax on any undistributed REIT taxable income and net capital
gain, and to a 4% nondeductible excise tax on the amount, if any, by which
certain distributions paid by it with respect to any calendar year are less
than the sum of 85% of its ordinary income plus 95% of its capital gain net
income for the calendar year, plus 100% of its undistributed income from prior
years.
 
  Grove intends to make distributions to its shareholders to comply with the
distribution provisions of the Internal Revenue Code and to avoid income taxes
and the nondeductible 4% excise tax. The Company's income consists primarily
of the Company's share of the income of the Operating Partnership, and the
Company's cash flow consists primarily of its share of distributions from the
Operating Partnership. In turn, the Operating Partnership's income and cash
flow consists primarily of its share of the income and cash flow,
respectively, of the properties it owns or controls. Differences in timing
between the receipt of income and the payment of expenses in arriving at
taxable income (of the Company or the Operating Partnership) and the effect of
nondeductible capital expenditures, the creation of reserves or required debt
amortization payments could require the Company to borrow funds through the
Operating Partnership on a short-term or long-term basis to meet its
distribution requirements even if management believes that the then-prevailing
market conditions are not favorable for such borrowings or that such
borrowings are not advisable in the absence of such tax considerations. If
Grove is unable to obtain such borrowings, the Company could be disqualified
from REIT treatment.
 
  Distributions by the Operating Partnership are determined by the Company, as
the sole general partner, through the Board, and are dependent on a number of
factors, including the amount of cash available for distribution, the
Operating Partnership's financial condition and the financial condition of
each property in which the Company holds an interest, any decision by the
Board to reinvest rather than distribute funds, the capital expenditure
requirements relating to the properties in which the Company holds an
interest, the annual distribution requirements under the REIT provisions of
the Internal Revenue Code and such other factors as the Board deems relevant.
There is no assurance that the Company will be able to continue to satisfy the
annual distribution requirement so as to qualify as a REIT.
 
                                      15
<PAGE>
 
  For federal income tax purposes, distributions paid to holders of Common
Shares may consist of ordinary income, capital gains, nontaxable return of
capital or a combination thereof. The Company provides the holders of Common
Shares with an annual statement indicating the tax character of the
distributions.
 
LIMITS ON CHANGES IN CONTROL
 
  Certain provisions of the Charter and the Bylaws of the Company and of
Maryland law (described below) may have the effect of (i) discouraging a
change of control of the Company; (ii) deterring tender offers for Common
Shares, which offers may be attractive to the Company's shareholders or (iii)
limiting the opportunity for the Company's shareholders to receive a premium
for the Common Shares that might otherwise exist if an investor attempted to
assemble a block of Common Shares in excess of the Ownership Limit (as defined
below) or the Constructive Ownership Limit (as defined below) or to effect a
change of control of the Company.
 
  Ownership Limits. For the Company to maintain its qualification as a REIT,
not more than 50% in value of the outstanding capital shares may be owned,
actually or constructively under the applicable attribution rules of the
Internal Revenue Code, by five or fewer individuals (including certain tax-
exempt entities, other than, in general, qualified domestic pension funds) at
any time during the last half of any taxable year of the Company (the "five or
fewer" requirement). The Charter contains certain restrictions on the
ownership and transfer of Common Shares and Preferred Shares (as defined
below) (together, "Equity Shares"), described below, which are intended to
prevent concentration of share ownership. These restrictions, however, may not
ensure that the Company will be able to satisfy the "five or fewer"
requirement in all cases. If the Company fails to satisfy such requirement,
the Company's status as a REIT will terminate. See "--Adverse Tax Consequences
of Failure to Qualify as a REIT."
 
  The Charter does not permit any person to own more than 5.0% of the number
of outstanding Equity Shares (subject to adjustment by the Board) (the
"Ownership Limit") or to own constructively (within the meaning of the
Internal Revenue Code) in excess of 9.8% of the number of outstanding Equity
Shares (the "Constructive Ownership Limit") and the executive officers in the
aggregate may not own more than 20% of the outstanding Equity Shares (by
number or value, whichever is the more restrictive) (the "Executive Officer
Ownership Limit"), subject to certain exceptions. Each percentage is based on
the value or the number of shares, whichever is more restrictive. In addition,
no shareholder of the Company may sell, transfer, assign, devise or otherwise
dispose of Equity Shares if such a disposition would result in (i) Equity
Shares being owned by fewer than 100 shareholders; (ii) the Company's being
"closely held" within the meaning of Section 856(h) of the Internal Revenue
Code or (iii) the Company's failing to qualify as a REIT.
 
  Under the Charter, any attempted transfer of shares by a person, or other
change in the capital structure of the Company, which would violate one of the
limitations described above, unless compliance with such limitations has been
waived by the Board, will cause the shares in excess of such limits (the
"Excess Shares") to be transferred automatically to a special trust for the
benefit of a charitable beneficiary (a "Special Trust") or, if, for any
reason, the transfer to a Special Trust is not automatically effective, the
attempted transfer resulting in such violation will be deemed void ab initio.
Upon any transfer that results in Excess Shares pursuant to the foregoing,
such Excess Shares will be deemed to have been transferred to the trustee of a
Special Trust and will be considered issued and outstanding shares. The
trustee of the Special Trust will be entitled to voting, dividend and other
distribution rights on such Excess Shares, and any dividend or other
distribution paid prior to the discovery by the Company that the Common and/or
Preferred Shares have been transferred so as to be deemed Excess Shares must
be repaid to the trustee of the Special Trust upon demand. The Board may waive
the Ownership Limit, the Constructive Ownership Limit or the Executive Officer
Ownership Limit with respect to a particular shareholder if it is satisfied,
based on the receipt of certain representations and undertakings from the
person seeking to own shares in excess of the Ownership Limit, the
Constructive Ownership Limit or the Executive Officer Ownership Limit, that
such ownership in excess of the Ownership Limit, the Constructive Ownership
Limit or the Executive Officer Ownership Limit will not jeopardize the
Company's status as a REIT. Subject to certain limitations, the Board may from
time to time increase or decrease the Ownership Limit or the Constructive
Ownership Limit.
 
                                      16
<PAGE>
 
  Preferred Shares. The Charter permits the Board to issue up to 1,000
preferred shares of beneficial interest, par value $0.01 per share ("Preferred
Shares"), and to establish the preferences and rights (including the right to
vote and the right to convert into Common Shares) of any such Preferred Shares
issued. Thus, the Board could authorize the issuance of Preferred Shares with
terms and conditions which could have the effect of discouraging a takeover or
other transaction in which holders of some, or a majority, of the Common
Shares might receive a premium for their Common Shares over the then-
prevailing market price of the Common Shares.
 
  Staggered Board. The Board has three classes of Trust Managers who serve for
three-year terms, with the term of one class expiring in each year. A Trust
Manager may be removed only for cause (as defined in the Charter) and only by
the affirmative vote of the holders of at least two-thirds of the Common
Shares then outstanding and entitled to vote.
 
  Maryland Business Combination Law. Under the Maryland General Corporation
Law, as may be amended from time to time (the "MGCL"), certain "business
combinations" (including certain issuances of equity securities) between a
Maryland real estate investment trust such as the Company and any person who
owns 10.0% or more of the voting power of the trust's shares (an "Interested
Shareholder") or an affiliate thereof are prohibited for five years after the
most recent date on which the Interested Shareholder became an Interested
Shareholder. Thereafter, any such business combination must be approved by a
super-majority vote unless, among other conditions, the holders of Common
Shares receive a minimum price (as defined in the MGCL) for their shares and
the consideration is received in cash or in the same form as previously paid
by the Interested Shareholder for its shares.
 
POSSIBLE ENVIRONMENTAL LIABILITIES
 
  Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
required to investigate and clean up hazardous or toxic substances or
petroleum products released on, under, in or emitting from such property and
may be held liable to a governmental entity or to third parties for property
damage and for investigation and clean-up costs incurred by such parties in
connection with the contamination. Such laws typically impose clean up
responsibility and liability without regard to whether the owner knew of or
caused the presence of the contaminants, and the liability under such laws has
been interpreted to be joint and several unless the harm is divisible and
there is a reasonable basis for an allocation of responsibility. The cost of
investigation, remediation or removal of such substances may be substantial,
and the presence of such substances or the failure to remediate the
contamination properly on such property may adversely affect the owner's
ability to sell or rent such property or to borrow using such property as
collateral. Moreover, certain loan documents provide for recourse liability in
connection with the presence of hazardous or toxic materials. Persons who
arrange for the disposal or treatment of hazardous or toxic substances at a
disposal or treatment facility also may be liable for the costs of removal or
remediation of a release of hazardous or toxic substances at such disposal or
treatment facility, whether or not such facility is owned or operated by such
person. In addition, some environmental laws create a lien on the contaminated
site in favor of the government for damages and costs it incurs in connection
with the contamination. Finally, the owner of a site may be subject to common
law claims by third parties based on damages and costs resulting from
environmental contamination emanating from a site. In connection with its
ownership and operation of the Properties or any properties it acquires in the
future, the Company is potentially liable for such costs.
 
  Federal legislation requires owners and landlords of residential housing
constructed prior to 1978 to disclose to potential residents or purchasers of
the properties any known lead-paint hazards and will impose treble damages for
failure to give the required notice. The existence of lead-based paint in a
property may result in lead poisoning in children residing therein if chips or
particles of lead-based paint are ingested, and the Company may be held liable
under state laws for any injuries caused by ingestion of lead-based paint by
children living at the Apartment Communities or any apartment communities
acquired by the Company in the future.
 
  All of the Properties were subject to Phase I (or an update of a prior Phase
I) or similar environmental assessments by independent environmental
consultants. Phase I assessments are intended to discover information
regarding, and to evaluate the environmental condition of, the surveyed
property and surrounding properties.
 
                                      17
<PAGE>
 
Phase I assessments generally include a historical review, a public records
review, a preliminary investigation of the surveyed site and surrounding
properties, and preparation and issuance of a written report, but do not
include soil sampling or subsurface investigations.
   
  Certain environmental laws impose liability for release of asbestos-
containing materials ("ACM's") into the air and third parties may seek
recovery from owners or operators of real properties for personal injury
suffered by reason of ACM's. Because of the ownership and operation of the
Properties, the Company, the Operating Partnership and any partnership holding
an interest in any of the Properties are potentially liable for such costs.
    
  Various environmental laws and regulations also control how certain
activities can or must be conducted at the Properties. Such requirements
govern maintenance activities, renovation projects and other worker operations
involving asbestos or lead-based paint. They also may govern air emissions,
wastewater discharges, waste management or similar activities related to
operation of the Properties. No assurance can be given that the cost of
complying with such requirements in connection with any of the Properties will
not require any material expenditures by the Company in the future.
 
  Under various laws and regulations, owners and operators of underground and
aboveground storage tanks containing petroleum are obligated to meet certain
construction and operating standards. In addition, such tank owners and
operators are responsible for remediating any contamination caused by
petroleum released from such tanks. While currently available information does
not indicate that the Company currently has any material liabilities related
to such tanks, no assurance can be given that the Company will not be required
to make such material expenditures in the future.
   
  Grove's environmental assessments of the Properties have not revealed any
environmental liability that the Company believes would have a material
adverse effect on its business, assets or results of operations taken as a
whole, nor is the Company aware of any such material environmental liability.
Nonetheless, it is possible that the Company's assessments do not reveal all
environmental liabilities or that there are material environmental liabilities
of which the Company is unaware. No assurance can be given (i) that existing
environmental studies for the Properties reveal all environmental liabilities;
(ii) that any prior owner thereof or tenant therein or unrelated third party
did not and will not in the future create any environmental condition with
material adverse consequences to the Company; (iii) that future laws or
regulations or changes or new interpretations of existing laws or regulations
will not require any material expenditures by, or create any environmental
liabilities for, the Company in the future or (iv) that past, current or
future operations or conditions associated with land or property in the
vicinity of the Properties, such as the presence of leaking underground
storage tanks, will not have a material adverse effect on the business,
financial condition and results of operations of the Company.     
 
SHARES AVAILABLE FOR FUTURE SALE
   
  Sales of substantial amounts of Common Shares, or the perception that such
sales could occur, could adversely affect the prevailing market price for the
Common Shares. Upon completion of the Offerings, the Company will have
8,453,829 Common Shares outstanding. Of these shares, 3,587,012 shares sold in
the Offerings will be freely tradable without restriction and 912,988 shares
to be offered to an "affiliate" (as defined in Rule 144 under the Securities
Act) in the Concurrent Offering may be sold subject to the volume, manner of
sale and other restrictions of Rule 144. Of the remaining 3,953,829 shares,
3,430,017 shares are deemed "restricted shares" under Rule 144, as they were
originally issued by the Company in private transactions in reliance upon
exemptions under the Securities Act. The restricted shares may not be sold
except in compliance with the registration requirements of the Securities Act
or pursuant to an exemption from registration, including sales pursuant to
Rule 144. Of the restricted shares, 874,462 shares are held by persons who may
be "affiliates" of the Company, and thus may be sold only pursuant to Rule
144, and 2,555,555 shares are held by persons who are not affiliates. The
Company has filed a registration statement on Form S-3 for the purpose of
registering for resale 3,333,333 of such restricted shares (the "Shelf
Registration Statement"). The 96,684 shares held by Executive Officers and
Trust Managers of the Company and 1,169,170 of the shares covered by the Shelf
    
                                      18
<PAGE>
 
Registration Statement are subject to lock-up agreements that prohibit their
resale for a period of 180 days from the date of this Prospectus without the
prior consent of Smith Barney Inc. The Company intends to exercise its right
to prohibit sales of the remaining 2,164,163 shares under the Shelf
Registration Statement for a period of 90 days from the date of this
Prospectus. After the expiration of such periods, these shares may be freely
sold, subject to the volume limitations and other provisions of Rule 144 with
respect to the shares held by the Trust Managers, the Executive Officers and
other affiliates of the Company.
   
  The Operating Partnership, in connection with the Consolidation
Transactions, issued to persons other than the Company an aggregate of
2,114,439 Common Units. The Company has subsequently issued an aggregate of
894,687 Common Units in acquisitions of other Properties. Common Units may be
redeemed for cash based on their fair market value or, at the Company's
option, for Common Shares on a one-for-one basis. In certain circumstances,
the Company may not be able to exercise its option to satisfy such redemption
rights with Common Shares because of tax or securities law limitations. An
exercise of redemption rights in such circumstances could adversely affect the
Operating Partnership's liquidity because it would then be required to satisfy
such rights with cash. The Contribution Agreement (as defined under "--
Potential Conflicts of Interest") prohibits the redemption of Common Units for
a period of one year after the closing in March 1997 of the acquisition of 20
properties owned by affiliates of Grove for which the Operating Partnership
issued Common Units and the private placement by the Company of Common Shares
(collectively, the "Consolidation Transactions"). The Company granted certain
registration rights to the holders of the Common Units. Thus, an aggregate of
2,114,439 shares may be sold in the public market after March 14, 1998,
assuming the immediate redemption of all Common Units for Common Shares at
such time and concurrent exercise of such registration rights. In addition, an
aggregate of 1,114,974 Common Shares have been reserved for issuance pursuant
to the 1994 Plan, the 1996 Plan and other outstanding options and warrants.
    
  No prediction can be made as to the effect, if any, that future sales of
Common Shares, including the Common Shares offered hereby, or the availability
of such shares for future sale will have on the market price of the Common
Shares.
   
  The Board has the authority, without shareholder approval, to issue
additional Common Shares and other Equity Shares, or to cause the Operating
Partnership to issue additional Common Units or other classes of units of
interest in the Operating Partnership in any manner it deems appropriate,
including in exchange for property. Shareholders of the Company (other than
MSGI and the Oregon Retirement Fund who have certain preemptive rights which
will expire upon completion of the Offerings) will have no preemptive right to
purchase shares or units issued in any such offerings, and any such offerings
might cause a dilution of the shareholders' investment in the Company.     
 
CHANGES IN INVESTMENT AND FINANCING PRACTICES WITHOUT SHAREHOLDER APPROVAL
 
  The Board will determine the Company's investment and financing practices,
its growth strategy and its debt, capitalization, distribution and operating
practices. Although the Board has no present intention to revise or
amend these strategies and practices, the Board may do so at any time without
a vote of the Company's shareholders. Accordingly, the Company's shareholders
will have no control over changes in strategies and practices of the Company,
and such changes may not serve the interests of all the Company's shareholders
and could adversely affect the Company's financial condition or results of
operations.
 
  Risks Involved in Acquisitions Through Partnerships. The Company has and may
in the future invest in apartment properties through partnerships instead of
purchasing apartment properties directly or through wholly-owned subsidiaries.
Partnerships may, under certain circumstances, involve risks not otherwise
present in a direct acquisition of properties. These include the risks that
the Company's partner: (i) might become bankrupt; (ii) might at any time have
economic or business interests or goals which are inconsistent with the
business interests or goals of the Company or (iii) might be in a position to
take action contrary to the instructions or the requests of the Company or
contrary to the Company's practices or objectives. There is no limitation in
the Charter as to the amount of investment the Company may make in
partnerships.
 
                                      19
<PAGE>
 
  Risks Involved in Investments in Securities Related to Real Estate. The
Company has and may in the future pursue its investment objectives through the
ownership of securities or partnership interests of entities engaged in the
ownership of real estate. Ownership of such securities or partnership
interests may not entitle the Company to control the ownership, operation or
management of the underlying real estate. In addition, the Company may have no
ability to control the distributions with respect to such securities, which
may adversely affect the Company's ability to make distributions on the Common
Shares. Furthermore, if the Company desires to control an issuer of securities
or partnership interests, it may be prevented from doing so by the limitations
on percentage ownership and gross income tests which must be satisfied by the
Company in order for the Company to qualify as a REIT. The Company intends to
operate its business in a manner that will not require the Company to register
under the Investment Company Act of 1940 and the Company's shareholders will
therefore not have the protection of that Act.
 
  The Company may also invest in mortgages or mortgage-related securities and
may do so as a strategy for ultimately acquiring the underlying property. In
general, investments in mortgages include the risk that borrowers may not be
able to make debt service payments or pay principal when due, the risk that
the value of the mortgaged property may be less than the principal amount of
the mortgage note securing such property and the risk that interest rates
payable on the mortgages may be lower than the Company's cost of funds to
acquire these mortgages. In any of these events, cash available for
distributions and the Company's ability to make distributions on the Common
Shares could be adversely affected.
 
SHARE PRICE VOLATILITY
 
  The price of the Common Shares may be subject to wide fluctuations in
response to quarterly variations in operating results or announcement of
acquisitions. In addition, the stock market has from time to time experienced
extreme price and volume fluctuations which could adversely affect the market
price of the Common Shares. Further, the daily trading volumes of REIT's in
general and the Company's shares in particular may be lower than the trading
volumes of certain other industries. As a result, investors in the Company who
desire to liquidate substantial holdings at a particular time may find that
they are unable to dispose of their shares in the market without causing a
substantial decline in the market value of such shares. See "Price Range of
Common Shares and Dividends."
 
UNINSURED LOSS
 
  The Company carries comprehensive liability, fire, flood (where required)
and extended coverage and rental loss insurance on all of the Properties with
policy specifications, limits and deductibles customarily carried for similar
properties. There are, however, certain types of losses which may be either
uninsurable or not economically insurable, such as those resulting from
earthquakes, floods, tidal waves, explosion of water pipes, nuclear hazards,
wars, civil disturbances and environmental matters. Should an uninsured loss
or a loss in excess of insured limits occur, the Company could lose both its
investment in and anticipated profits and cash flow from a property while it
would continue to be obligated on any mortgage indebtedness or other financial
obligations on such property. Any such loss would adversely affect the Company
and its financial condition and results of operations. Moreover, as the
general partner of the Operating Partnership, the Company generally will be
liable for any of the Operating Partnership's unsatisfied obligations other
than non-recourse obligations. Similarly, as the general partner of other
partnerships which hold certain of the Properties, the Company generally will
be liable for any unsatisfied obligations of such partnerships other than non-
recourse obligations.
 
OFFER AND SALE OF UNREGISTERED SECURITIES
   
  The Company offered and sold 3,333,333 Common Shares and the Operating
Partnership issued 2,114,439 Common Units in the Consolidation Transactions.
Upon consummation of acquisition transactions which occurred after the
Consolidation Transactions, the Operating Partnership issued an additional
894,687 Common Units. The offer and sale of such Common Shares and such Common
Units was not registered under the Securities Act in reliance upon the
exemption from registration under Section 4(2) of the Securities Act. If it
were to be determined that the offer and sale of the Common Shares and Common
Units issued in the     
 
                                      20
<PAGE>
 
   
Consolidation Transactions should have been registered under the Securities
Act, the holders of such Common Shares and Common Units could be given the
right under federal securities laws to rescind their investment, or to pursue
other claims against the Company which could adversely affect the financial
condition of the Company or its ability to make expected distributions to its
shareholders. Although the Company believes that the offer of the Common
Shares and Common Units was exempt from registration under Section 4(2) of the
Securities Act and has received an opinion of Cummings & Lockwood to this
effect, there can be no assurance in this regard.     
 
                                      21
<PAGE>
 
                                  THE COMPANY
 
OVERVIEW
 
  The Company is a self-managed and self-administered REIT that is engaged in
the acquisition, repositioning, management and operation of mid-priced
multifamily properties in the Northeastern United States. The Company is a
fully integrated real estate organization with in-house acquisition,
repositioning and renovation, financing, marketing, leasing and property
management expertise. Grove believes that its regional focus, experience in
acquiring and renovating under-managed apartment communities, reputation for
quality and experienced management team provide it with a strong competitive
position in the highly fragmented Northeastern apartment market.
   
  Grove currently owns interests in and operates 30 multifamily properties
containing a total of 2,863 units in Connecticut, Massachusetts and Rhode
Island and three community shopping centers in Massachusetts containing an
aggregate of approximately 95,400 rentable square feet. Approximately 82%, 14%
and 4% of the total units in the Apartment Communities are located in
Connecticut, Massachusetts and Rhode Island, respectively. For the nine months
ended September 30, 1997, the Apartment Communities had an average economic
occupancy rate of approximately 96.5% and an average monthly rental rate of
approximately $698 per unit. The Apartment Communities are mid-priced
apartment properties consisting primarily of two- and three-story buildings in
landscaped settings. The Apartment Communities are well located within their
markets and appeal to middle income residents who are generally "renters by
necessity." Twenty of the Apartment Communities, representing approximately
76% of the total number of units in the Company's portfolio, have undergone
extensive renovation within the last eight years.     
 
  The Company believes that the "same community" comparison data shown below
for the 23 Apartment Communities owned by Grove or its predecessors since the
beginning of 1995 reflect the strength of Grove's management team and the
general economic recovery that has taken place in the Company's markets over
the last twelve months.
 
<TABLE>   
<CAPTION>
                                           YEAR ENDED     NINE MONTHS ENDED
                                          DECEMBER 31,      SEPTEMBER 30,
                                          --------------  ------------------
                                           1995    1996     1996      1997
                                          ------  ------  --------  --------
   <S>                                    <C>     <C>     <C>       <C>
   Average Monthly Rental Rate Per Unit
    (1).................................. $  680  $  696  $    694  $    715
   Average Economic Occupancy Rate (2)...   95.7%   96.5%     96.4%     96.5%
   Net Operating Income (000's) (3)...... $9,125  $9,294  $  6,897  $  7,541
</TABLE>    
- --------
(1) Average monthly rental rate is derived by dividing gross potential rental
    income by the total number of leasable units.
(2) Average economic occupancy rate is derived by dividing actual collected
    rental income by gross potential rental income. Gross potential rental
    income includes vacancy losses and bad debt, but does not include model
    expenses or employee concessions or discounts.
(3) Excludes intercompany management fees.
 
  Grove's predecessors commenced operations in 1980. The Company completed its
initial public offering in 1994 with the acquisition of three apartment
properties. At that time, affiliates of Grove owned additional apartment
properties and other real estate assets outside of the REIT and conducted
management and acquisition activities through entities that were also owned
outside of the REIT. In 1996, management began to undertake a number of
strategic initiatives intended to maximize shareholder value. In March 1997,
the Company completed the following: (i) the creation of an UPREIT structure
by forming the Operating Partnership to facilitate the consolidating
transactions described below and to provide potential sellers with a mechanism
to defer their tax liability; (ii) the acquisition through the Operating
Partnership of 20 properties owned by affiliates of Grove; (iii) the
acquisition of the property management assets and related liabilities of GPS,
the entity that managed the properties owned by Grove as well as the 20
properties owned by affiliates of Grove; (iv) a $30 million private placement
(3,333,333 shares at $9.00 per share) of equity securities to investors that
included, among others,
 
                                      22
<PAGE>
 
   
four investment funds managed by MSGI and the Oregon Retirement Fund and (v)
the closing of a $25 million Credit Facility and a $15 million term loan
facility. See "Certain Relationships and Transactions--The Consolidation
Transactions."     
   
  The Company is led by an experienced management team, whose five senior
executives have an average of approximately 16 years real estate experience in
the multifamily sector and an average of approximately 14 years experience
with the Company or its predecessors. In the aggregate, since 1980, Grove's
senior management team has been responsible for the acquisition of
approximately 46 apartment properties containing a total of approximately
4,600 units and the management of approximately 56 apartment properties
containing a total of approximately 5,350 units within the Northeastern United
States. Upon completion of the Offerings, Grove will own approximately 74% of
the Common Units in the Operating Partnership, and the Executive Officers and
the Trust Managers of Grove will own, directly or indirectly, in the
aggregate, approximately 10.0% of the equity of the Company through ownership
of Common Units and Common Shares.     
 
BUSINESS OBJECTIVES AND GROWTH STRATEGIES
 
  Grove's primary business objectives are to increase the value of the
Company's portfolio of properties and to maximize shareholder value by
maintaining long-term growth in cash available for distribution to its
shareholders. The Company intends to accomplish these objectives by (i)
actively acquiring and, where appropriate, repositioning and renovating under-
managed multifamily properties at significant discounts to replacement costs
and at returns that enhance shareholder value; (ii) aggressively managing its
portfolio to increase revenues and reduce operating costs; (iii) maintaining a
conservative ratio of debt to total market capitalization and (iv)
consistently providing quality service and a desirable living environment to
all of its residents. Grove is currently negotiating to increase the borrowing
capacity under its Credit Facility from $25 million to approximately $50
million to continue to fund its growth.
 
  Acquisitions. The Company's primary growth strategy is to acquire under-
managed, mid-priced apartment properties in the Northeastern United States.
Grove believes that opportunities for acquisitions in the Northeastern United
States are particularly attractive at this time because the region is
generally characterized by: (i) limited new construction due to significant
barriers to entry resulting from high construction costs, limited land
availability, strict zoning laws and extended permitting processes; (ii) a
limited number of publicly traded companies focusing on the acquisition of
under-managed, mid-priced multifamily communities; (iii) highly fragmented
markets with many small-to-medium sized companies that own older apartment
properties in which the owners are looking to sell with minimal tax impact and
(iv) many older apartment properties where maintenance and improvements have
been deferred and where the Company believes selective capital improvements
and professional management may create opportunities for increased rents.
Although the Company's principal focus is the acquisition of under-managed
apartment communities, it will continue to examine select mixed-use and
specialty retail properties that meet the Company's return requirements.
 
  The Company intends to continue its acquisition efforts in existing and new
markets in the Northeastern United States and may eventually expand its
acquisition activity into the Mid-Atlantic United States as appropriate
opportunities arise. The Company defines the Northeastern United States as
Connecticut, Massachusetts, Rhode Island, New York, Pennsylvania, New Jersey,
New Hampshire, Vermont and Maine and the Mid-Atlantic United States as
Delaware, Maryland, Virginia and Washington, D.C.
 
  When evaluating potential acquisitions, the Company considers: (i) the
demographic characteristics and resident profile of the neighborhood; (ii) the
age and quality of the property; (iii) the current and projected cash flow of
the property and the ability to increase cash flow through return-oriented
capital improvements; (iv) the potential for capital appreciation of the
property; (v) the terms of leases, including the potential for rent increases;
(vi) the potential for economic growth and the tax and regulatory environment
of the community in which the property is located; (vii) the occupancy of and
demand for properties of a similar type in the market and (viii) competition
from existing properties and the potential for the construction of new
properties in the area. The
 
                                      23
<PAGE>
 
Company intends to continue to acquire multifamily properties with physical
and market characteristics similar to the Apartment Communities.
 
  The Company believes that an important strategic focus for growth is the
acquisition of under-managed apartment portfolios that are owned and operated
by private individuals with little or no tax basis remaining in the properties
in such portfolios. The Company believes that its status as a publicly traded
REIT conducting business through the Operating Partnership enhances its
ability to acquire properties by providing sellers a means to defer federal
income taxes on gain through the use of Common Units as consideration for such
acquisitions. Grove believes that there are a significant number of potential
sellers in the Northeastern United States seeking to sell on a tax deferred
basis. Several owners of apartment portfolios have contacted senior management
and expressed an interest in selling their portfolios in return for Common
Units. Through their extensive experience and involvement in the Northeastern
market, the Executive Officers have developed relationships with a diverse
network of potentially motivated sellers of multifamily properties.
 
  Grove currently classifies itself as an opportunistic buyer that falls
between the large commodity buyers, who make money on economies of scale, and
the smaller buyers, who are constrained by their limited access to capital.
The Company's acquisitions of Apartment Communities have ranged from
approximately $4 million to $15 million and typically range in size from 75 to
300 units. The Company believes this is a unique market niche that offers
significant upside potential because it is not currently targeted by most
institutional or publicly traded buyers in the Northeastern United States.
   
  Repositioning and Renovation. The Company believes that it can continue to
increase shareholder value through repositioning and renovating newly acquired
properties as well as existing properties in its portfolio. When pursuing an
acquisition, members of the Company's in-house acquisition, development and
property management teams work closely together in underwriting the
transaction and evaluating potential renovation and repositioning strategies
and budgets. The officers of Grove have extensive experience in the renovation
and repositioning of multifamily properties. The Company and the prior
affiliated owners of the Apartment Communities have completed extensive
renovations to a majority of the Apartment Communities. Of the existing 30
Apartment Communities, 20 Apartment Communities, representing approximately
76% of the apartment units in the Company's portfolio, have undergone
extensive renovation within the last seven years, including 14 Apartment
Communities, representing approximately 57% of the apartment units in the
Company's portfolio, that have undergone extensive renovation within the last
five years. Additionally, the Company continually reviews its portfolio to
determine where opportunities exist to make incremental capital improvements
that meet its targeted return on cost. Typical renovations include replacing
carpets, appliances, kitchen cabinets, counter tops, bathroom fixtures and
vanities as well as upgrading landscaping, adding fitness centers and
community rooms, adding additional apartment units, repaving existing parking
spaces and adding additional parking spaces.     
 
  The Company engages in two types of repositioning and renovation projects.
One type of repositioning and renovation project includes those undertaken at
stabilized properties in its existing portfolio. When evaluating a capital
improvement project on a stabilized property, the Company typically sets an
initial return on cost target of approximately 15%.
   
  The second type of repositioning and renovation project includes those
undertaken in connection with acquisitions. In evaluating these types of
projects, the Company not only sets initial return targets but also return
targets over a period of several years. Set forth below is certain return on
cost and other information regarding the six most recent repositioning and
renovation projects related to acquisitions that were stabilized for the nine
months ended September 30, 1997.     
 
                                      24
<PAGE>
 
<TABLE>   
<CAPTION>
                                                1995                                1996
                                 ----------------------------------  ----------------------------------
                                                          ANNUAL                              ANNUAL
                                   AVERAGE       NET     RETURN ON     AVERAGE       NET     RETURN ON
                     ACQUISITION  CAPITALIZED OPERATING CAPITALIZED   CAPITALIZED OPERATING CAPITALIZED
    PROPERTY           DATE(1)     COST(2)    INCOME(3)   COST(4)      COST(2)    INCOME(3)   COST(4)
    --------         ----------- ------------ --------- -----------  ------------ --------- -----------
<S>                  <C>         <C>          <C>       <C>          <C>          <C>       <C>
Longmeadow Shops       Feb-94    $ 5,821,668  $ 706,527    12.1%     $ 5,984,879  $ 898,332    15.0%
River's Bend           May-94     12,186,607  1,249,428    10.3%      13,131,989  1,283,473     9.8%
Summit & Birch Hill    Feb-95      8,121,587    783,262     9.6%(6)    8,375,179    830,693     9.9%
Four Winds             Oct-95            --         --      --         6,330,568    580,503     9.2%
Burgundy Studios       Nov-95            --         --      --         1,998,763    252,796    12.6%
Sandalwood(7)          Dec-95            --         --      --               --         --      --
<CAPTION>
                      NINE MONTHS ENDED SEPTEMBER 30,
                                    1997
                     ----------------------------------
                                            NINE MONTH
                       AVERAGE       NET     RETURN ON
                      CAPITALIZED OPERATING CAPITALIZED
    PROPERTY           COST(2)    INCOME(3) COST(4)(5)
    --------         ------------ --------- -----------
<S>                  <C>          <C>       <C>
Longmeadow Shops     $ 6,019,766  $ 639,920    10.6%
River's Bend          13,603,956  1,077,678     7.9%
Summit & Birch Hill    8,527,949    653,157     7.7%
Four Winds             6,351,733    530,840     8.4%
Burgundy Studios       2,092,632    194,897     9.3%
Sandalwood(7)            661,998     84,470    12.8%
</TABLE>    
- -------
(1) Acquisition date represents the date the Property was acquired by the
    Company's predecessors.
(2) Average capitalized cost represents the average capitalized cost for the
    specified period incurred in connection with the initial acquisition and
    subsequent capital improvements.
   
(3) Net operating income is derived by subtracting total operating expenses
    for the specified period for the Property, including an intercompany
    management fee of approximately 5%, prior to the completion of
    Consolidation Transactions in March, 1997, from total revenue for the
    specified period.     
(4) Annual return on capitalized cost is derived by dividing net operating
    income for the specified period by average capitalized cost for the
    specified period.
   
(5) The returns represent the results of nine months of operations. Typically
    the Apartment Communities generate more net operating income in the last
    half of the year than the first half due to seasonality.     
(6) Summit & Birch Hill was purchased in February 1995, and, therefore, the
    annual return on capitalized cost is presented for approximately a 10
    month period.
(7) Sandalwood was not available for rent until September 1996. The property
    was not leaseable at acquisition and required complete renovation and
    repositioning.
 
 Aggressive Management. The Company is led by an experienced management team,
whose five senior executives have an average of approximately 16 years real
estate experience in the multifamily sector and an average of approximately 14
years experience with the Company or its predecessors. The Company
aggressively manages its portfolio with the goal of increasing revenues and
reducing operating costs. Grove believes that proactive marketing of the
Apartment Communities is key to increasing revenues. Accordingly, the Company
markets the Apartment Communities on a continual basis, instead of waiting for
vacancies to occur. The Company uses a variety of marketing alternatives to
promote its portfolio, including newspaper advertising, resident referrals,
apartment guides, the Internet, point-of-purchase materials and well-
maintained properties. In addition, on-site property management staff monitor
the success of Grove's marketing programs by preparing marketing reports that
track each Apartment Community's occupancy, lease expiration, prospective
resident traffic, unit availability, renewal rates, rental rates and resident
profile information.
 
  In addition to seeking to increase revenues, the Company focuses on reducing
operating costs by minimizing resident turnover, controlling expenses,
providing regular preventative maintenance, making periodic renovations,
utilizing effective management systems and motivating the Company's employees.
Historically, costs associated with resident turnover have caused the biggest
increase in Grove's operating costs. In order to reduce these costs, the
Company focuses on limiting turnover by providing high quality customer
service throughout the lease term as well as renewal incentives. The Company
also takes advantage of economies of scale by utilizing a limited number of
outside suppliers and contractors who grant the Company volume-based
discounts. Grove also encourages price competition among such suppliers and
contractors. The Company believes that its seasonal preventative maintenance
programs and periodic renovations of Apartment Communities lower operating
costs over the life of the Apartment Communities and may increase the long-
term value of its portfolio. Grove's management systems also allow the Company
to control operating costs further. Each Community's information systems
provide on-site management, regional property managers and accounting
personnel with information on vacancies, collections, leasing and budget
compliance. By constantly monitoring this information, the Company can ensure
that operating costs are minimized and budgeted targets are met or exceeded.
Additionally, Grove encourages employees to control operating costs closely by
maintaining a bonus program under which employees can earn bonuses of up to an
additional 25% of their monthly base salaries based upon their respective
Apartment Community's out-performing profitability goals.
 
  Conservative Debt Ratio. Grove believes in maintaining a conservative ratio
of debt to total market capitalization and, accordingly, has maintained a
ratio of debt to total market capitalization of less than 60%. The
organizational documents of
 
                                      25
<PAGE>
 
   
the Company, however, do not limit the amount or percentage of indebtedness
that it may incur. As of September 30, 1997, giving effect to the acquisition
of all properties or interests therein acquired since September 30, 1997 and
the closing of the Offerings, the debt to total market capitalization of the
Company was approximately 18.5%.     
 
  Quality Service. The Company believes that providing quality service and a
desirable living environment to all residents is critical to realizing its
business objectives. As such, the focus of Grove's on-site management program
is to provide prompt, courteous and responsive service to all of its residents.
The Company concentrates on hiring employees who understand the importance of
customer service. In order to monitor and continuously improve its on-site
performance, Grove uses various resident surveys, including soliciting service
satisfaction responses for maintenance services, conducting periodic resident
surveys and interviewing departing residents. At certain Apartment Communities,
the Company provides amenities, such as clubhouses, tennis courts, basketball
courts, swimming pools and fitness centers, to further enhance resident
satisfaction.
 
THE OPERATING PARTNERSHIP
 
  The Operating Partnership was formed to act as the vehicle for the
consolidation of the Properties and the acquisition of future properties. Grove
is the sole general partner of the Operating Partnership and thereby controls
the Operating Partnership. Grove is the sole general partner of each of the
Subsidiary Partnerships. Using the Operating Partnership, the Company is able
to acquire properties in exchange for Common Units, which represent limited
partnership interests in the Operating Partnership. The recipients of Common
Units are restricted from transferring such Common Units for a period of one
year from the acquisition date. The Common Units are redeemable after such time
for cash (based on the fair market value of an equivalent number of Common
Shares at the time of such redemption) or, at the Company's option, for Common
Shares of the Company on a one-for-one basis, subject to certain anti-dilution
adjustments and exceptions. With the Operating Partnership, the Company is able
to offer attractive purchase terms to owners of properties who have little or
no tax basis remaining in such properties. In many cases, the tax liability
incurred by such owners upon a transfer of such properties would be prohibitive
if the purchase price were paid in cash. By utilizing the Operating Partnership
structure, the Company can make payment in Common Units, thereby deferring all
or a portion of an owner's federal income tax liability. Upon completion of the
Offerings, Grove will own approximately 74% of the total partnership interests
in the Operating Partnership, consisting of Grove's ownership of 8,453,829
Common Units.
 
                            THE CONCURRENT OFFERING
   
  The Company is hereby offering MSGI the opportunity to purchase 912,988
Common Shares in the Concurrent Offering at the price to public set forth on
the cover page hereof. The Company also is hereby offering ABKB/LaSalle the
opportunity to purchase 445,537 Common Shares in the Concurrent Offering at the
price to public. A portion of the Concurrent Offering is required to be made
pursuant to previously existing preemptive rights held by MSGI and the Oregon
Retirement Fund. Such preemptive rights will terminate upon completion of the
Offering. The Company believes that any purchase of Common Shares by MSGI and
ABKB/LaSalle will be for investment purposes and not with a view to
distributing such shares to the public. No assurance can be given that any
shares will be purchased in the Concurrent Offering. If the Concurrent Offering
is not completed or less than the total number of Common Shares offered in the
Concurrent Offering are sold, the Company will repay less than the full amount
of indebtedness described under "Use of Proceeds."     
 
                                       26
<PAGE>
 
                                USE OF PROCEEDS
   
  Based on an assumed offering price of $11.375 per share (the closing price
of the Common Shares on November 14, 1997), (i) the net proceeds to the
Company from the Offering (after estimated underwriting discounts and
commissions and estimated expenses of the Offering) are expected to be
approximately $32.6 million (approximately $39.8 million if the Underwriters'
over-allotment option is exercised in full) and (ii) the net proceeds to the
Company from the Concurrent Offering, if consummated, are expected to be
approximately $15.1 million. See "The Concurrent Offering."     
   
  The Company will contribute all of the net proceeds of the Offerings to the
Operating Partnership in exchange for a number of Common Units equal to the
number of Common Shares issued in the Offerings. Such proceeds will be used:
(i) to repay $35.4 million of mortgage and credit facility indebtedness
secured by certain of the Properties, bearing interest at rates ranging from
7.5% to LIBOR plus 1.2% (6.9% as of September 30, 1997), with maturity dates
from 1998 to 2000; (ii) to repay approximately $7.2 million of indebtedness
incurred in connection with the acquisition, consummated October 31, 1997, of
three of the Properties, bearing interest at LIBOR plus 1.2% (6.9% as of
September 30, 1997) and maturing in 2000 and (iii) for working capital and
other general purposes. The Company regularly evaluates acquisition
opportunities consistent with its business objectives and growth strategies.
The Company may use the proceeds of the Offerings or amounts available under
its Credit Facility for additional acquisitions.     
 
  Pending the uses described above, the net proceeds will be invested in
interest bearing accounts and short-term, interest-bearing securities, which
are consistent with the Company's intention to continue to qualify for
taxation as a REIT.
 
                                      27
<PAGE>
 
                              DISTRIBUTION POLICY
   
  Grove has made a quarterly distribution to its holders of Common Shares in
each quarter since the closing of its initial public offering in 1994.
Distributions for the year ended December 31, 1995 totaled $475,125,
representing 90.3% of CAD. Distributions for the year ended December 31, 1996
totaled $481,688, representing 87.7% of CAD. Distributions for the nine months
ended September 30, 1997 totaled $1,466,602, representing 63.4% of CAD.     
 
  Following the Offering, the Company intends to increase its regular annual
distributions to $0.68 per Common Share (assuming the issuance of all shares
offered hereby). The Company expects to set a record date for the payment of a
dividend based on its historical distribution rate to holders of Common Shares
at the close of business on the business day immediately prior to the closing
of the Offering with respect to the period commencing October 1, 1997 and
ending on such record date. The Company then expects to set a record date for
the payment of a dividend to holders of Common Shares on December 31, 1997
with respect to the period commencing on the closing date of the Offering and
ending December 31, 1997. The Company's determination to increase
distributions as described above was based on its expectations with respect to
pro forma REIT taxable income following the Offerings and is intended to
ensure its continuing ability to qualify for REIT status. In particular, the
Company is seeking to ensure its continued compliance with the requirement
that it distribute at least 95% of its REIT taxable income annually. Although
the Company intends to maintain the stated distribution rate, future
distributions will be made at the discretion of the Board.
 
  The Company's ability to make distributions to its shareholders is dependent
upon its receipt of distributions from the Operating Partnership. Grove
intends to cause the Operating Partnership to distribute to its partners
sufficient amounts to permit the Company to make regular quarterly
distributions to its shareholders. The Operating Partnership's primary source
of revenue consists of income from the Properties. The actual return that the
Company will realize will be affected by a number of factors, including the
revenue received from the Properties, the distributions and other payments
received from the Subsidiary Partnerships, the operating expenses of the
Company and the Operating Partnership, the interest expense incurred on their
respective borrowings, the ability of tenants to meet their obligations,
general leasing activity and unanticipated capital expenditures.
 
  The Board may vary the percentage of CAD which is distributed if the actual
results of operations, economic conditions or other factors differ from the
assumptions used in the Company's estimates. Common Units and Common Shares
will receive equal distributions. Under the federal income tax provisions
affecting REIT's, to obtain the favorable tax treatment accorded to a REIT
under the Internal Revenue Code, the Company is required each year to
distribute to its shareholders at least 95% of its REIT taxable income.
Moreover, the Company is required each year to distribute to its shareholders
at least 85% of its ordinary income and 95% of any capital gain income as
dividends to avoid certain excise taxes applicable to REIT's. Under certain
circumstances, the Company may be required to make distributions in excess of
its CAD in order to meet such distribution requirements. In such event, the
Company would seek to borrow the amount of deficiency or to sell assets to
obtain the cash necessary to make distributions to retain its qualification as
a REIT for federal income tax purposes.
 
  The future payment of dividends by the Company will be at the discretion of
the Board and will depend on numerous factors, including the actual cash flow
of the Company, its financial condition, capital requirements, the annual
distribution requirements under the REIT provisions of the Internal Revenue
Code and such other factors as the Board deems relevant.
 
                                      28
<PAGE>
 
                  PRICE RANGE OF COMMON SHARES AND DIVIDENDS
   
  The Common Shares are listed on the Emerging Company Marketplace of the AMEX
under the symbol "GVE.EC." The Common Shares have been approved for listing on
the AMEX (Regular List) under the symbol "GVE," subject to notice of issuance.
On November 14, 1997, there were approximately 123 holders of record of the
Common Shares. On November 14, 1997, the last reported sale price of the
Common Shares on the AMEX was $11.375. The following table sets forth for the
periods indicated the high and low sale prices as reported on the AMEX and the
dividends declared and paid by the Company on each Common Share for each such
period. All prices and dividends have been adjusted to reflect the share split
and share dividend paid by the Company in March 1997.     
 
<TABLE>   
<CAPTION>
                                                                  DIVIDEND PER
                                                   HIGH     LOW   COMMON SHARE
                                                  ------- ------- ------------
   1995 QUARTER ENDING
   -------------------
   <S>                                            <C>     <C>     <C>
   March 31, 1995................................ $ 7.514 $ 6.561   $0.1884
   June 30, 1995.................................   7.619   6.984    0.1926
   September 30, 1995............................   7.302   6.138    0.1926
   December 31, 1995.............................   7.566   6.138    0.1926
   1996 QUARTER ENDING
   -------------------
   March 31, 1996................................ $ 8.572 $ 7.090   $0.1926
   June 30, 1996.................................   8.466   7.619    0.1947
   September 30, 1996............................   8.043   7.514    0.1947
   December 31, 1996.............................   8.148   6.773    0.1947
   1997 QUARTER ENDING(1)
   ----------------------
   March 31, 1997................................ $10.371 $ 7.719   $0.1558(2)
   June 30, 1997.................................  11.250   9.625    0.1890(3)
   September 30, 1997............................  12.375  10.625    0.1575
   December 31, 1997 (through November 14,
    1997)........................................  12.000  11.250       --
</TABLE>    
- --------
(1) In connection with the Consolidation Transactions, the Company changed its
    distribution practice. The Company concluded that its decision to reduce
    its annual distribution per Common Share from $.78 to $.63, thereby
    increasing the amount of cash available to the Company for reinvestment,
    would increase the interest of institutional and other investors in owning
    Common Shares. The Company emphasized in its announcement that the
    decision was made for the foregoing reason and not in response to any
    adverse occurrence with respect to the business or operations of the
    Company.
(2) Represents the dividend declared and paid for the period beginning on
    January 1, 1997 and ending on March 14, 1997, the date of the consummation
    of the Consolidation Transactions.
(3) Represents the dividend declared and paid for the period beginning on
    March 15, 1997 and ending June 30, 1997.
 
 
                                      29
<PAGE>
 
                                CAPITALIZATION
   
  The following table sets forth the capitalization of the Company as of
September 30, 1997 on a historical basis, on a pro forma basis giving effect
to the acquisition of all properties or interests therein acquired since
September 30, 1997, and on a pro forma basis as adjusted to give effect to the
completion of the Offerings (at an assumed offering price of $11.375 per
share) and the application of the net proceeds therefrom as described under
"Use of Proceeds." The information set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the historical financial statements of the
Company and notes thereto included or incorporated by reference in this
Prospectus.     
 
<TABLE>   
<CAPTION>
                                                    SEPTEMBER 30, 1997
                                              ---------------------------------
                                                                     PRO FORMA
                                               ACTUAL    PRO FORMA  AS ADJUSTED
                                              ---------  ---------  -----------
                                                  (DOLLARS IN THOUSANDS)
   <S>                                        <C>        <C>        <C>
   Debt:
     Mortgage notes payable.................  $  53,862  $ 53,862    $ 29,612
     Borrowings under Revolving Credit Fa-
      cility................................     11,125    18,289         --
                                              ---------  --------    --------
   Total debt...............................     64,987    72,151      29,612
   Minority interests in consolidated
    partnerships............................      1,560     1,560       1,560
   Minority interest in the Operating
    Partnership.............................     20,831    22,392      24,652
   Shareholders' Equity:
     Preferred Shares, $.01 par value, 1,000
      shares authorized, none issued or
      outstanding...........................        --        --          --
     Common Shares, $.01 par value,
      13,999,000 shares authorized, 620,102
      shares (historical and pro forma) and
      8,453,829 shares (pro forma as
      adjusted) issued and outstanding(1)...         40        40          85
   Additional paid-in capital...............     24,590    24,590      69,944
   Distributions in excess of earnings......       (769)     (769)       (769)
                                              ---------  --------    --------
   Total shareholders' equity...............     23,861    23,861      69,260
                                              ---------  --------    --------
       Total capitalization.................  $ 111,239  $119,964    $125,084
                                              =========  ========    ========
</TABLE>    
- --------
   
(1) Excludes 2,860,458 (actual) and 3,009,126 (pro forma and pro forma as
    adjusted) Common Shares issuable on redemption of Common Units, 117,726
    and 900,000 Common Shares reserved for issuance under the 1994 Plan and
    the 1996 Plan, respectively, 50,000 Common Shares reserved for issuance
    upon exercise of an option granted to a consultant to the Company and
    47,248 Common Shares reserved for issuance upon exercise of a warrant
    originally issued to Barclay Investments, Inc., the underwriter for the
    Company's initial public offering in 1994. The number of Common Shares
    authorized reflects the Company's reclassification in October 1997, in
    which Preferred Shares were reclassified as Common Shares.     
 
                                      30
<PAGE>
 
                        SELECTED FINANCIAL INFORMATION
   
  The following table sets forth selected financial and operating data on a
historical and pro forma basis for the Company and on a combined historical
basis for GPS and the Property Partnerships (defined in the Company's
financial statements as those partnerships that were parties to the
transactions completed in March 1997). The following information should be
read in conjunction with all of the financial statements and notes thereto
included or incorporated by reference in this Prospectus. The historical
operating information of the Company and GPS and the Property Partnerships for
the years ended December 31, 1996 and 1995 has been derived from the
historical combined financial statements audited by Ernst & Young LLP,
independent auditors, whose reports with respect thereto are included
elsewhere in this Prospectus. The operating information for the nine months
ended September 30, 1997 and 1996 has been derived from the unaudited
financial statements of the Company also included elsewhere in this
Prospectus. In the opinion of management, the unaudited financial statements
include all adjustments, consisting only of normal recurring adjustments, that
management considers necessary for a fair presentation of the financial
position and results of operations for these periods. The results of
operations for the nine months ended September 30, 1997 and 1996 are not
necessarily indicative of the results to be obtained for the full fiscal year.
       
  The unaudited pro forma information assumes that the transactions completed
in March 1997, the Offerings, and the acquisition of nine properties acquired
after March 1997 all occurred on January 1, 1996 with respect to operating
data. With respect to the balance sheet data, to the extent not already
consummated by September 30, 1997, the unaudited pro forma information assumes
that such acquisitions occurred on September 30, 1997. In management's
opinion, all adjustments necessary to present fairly the effects of these
transactions have been made. The unaudited pro forma information is not
necessarily indicative of what the actual results of operations or financial
condition of the Company would have been for the periods or at the dates
indicated, nor does it purport to represent the Company's future financial
condition or results of operations as of any future date or for any future
periods.     
 
                                      31
<PAGE>
 
<TABLE>   
<CAPTION>
                                                                GPS AND PROPERTY
                                                                  PARTNERSHIPS
                                 COMPANY HISTORICAL                HISTORICAL              COMPANY PRO FORMA
                          ------------------------------------  ------------------  ---------------------------------
                            YEARS ENDED     NINE MONTHS ENDED      YEARS ENDED       YEAR ENDED   NINE MONTHS ENDED
                           DECEMBER 31,       SEPTEMBER 30,       DECEMBER 31,      DECEMBER 31,    SEPTEMBER 30,
                          ----------------  ------------------  ------------------  ------------ --------------------
                           1996     1995      1997      1996      1996      1995        1996       1997       1996
                          -------  -------  ---------  -------  --------  --------  ------------ ---------  ---------
                                             (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                       <C>      <C>      <C>        <C>      <C>       <C>       <C>          <C>        <C>
OPERATING INFORMATION:
Revenues:
 Rental income..........  $ 2,046  $ 1,287  $  10,944  $ 1,521  $ 12,906  $ 11,965   $  23,531   $  18,578  $  17,533
 Property management....      --       --         380      --        777       815         381         346        311
 Interest and other.....       36       30        212       28     1,138     1,103         553         449        255
                          -------  -------  ---------  -------  --------  --------   ---------   ---------  ---------
  Total revenues........    2,082    1,317     11,536    1,549    14,821    13,883      24,465      19,373     18,099
                          -------  -------  ---------  -------  --------  --------   ---------   ---------  ---------
Expenses:
 Property operating and
  maintenance...........      656      406      3,741      485     5,705     5,276       8,929       6,984      6,549
 Real estate taxes......      208      148      1,143      155     1,299     1,234       2,590       1,924      1,927
 Related party
  management fees.......      109       67         22       80       --        --          --          --         --
 General and
  administrative........       67       56        610       55       279       261         949         712        710
                          -------  -------  ---------  -------  --------  --------   ---------   ---------  ---------
  Total operating
   expenses.............    1,040      677      5,516      775     7,283     6,771      12,468       9,620      9,186
                          -------  -------  ---------  -------  --------  --------   ---------   ---------  ---------
Net operating income....    1,042      640      6,020      774     7,538     7,112      11,997       9,753      8,913
Interest expense........      394       85      1,732      292     3,856     3,829       2,274       1,614      1,671
Depreciation and
 amortization...........      387      217      2,380      293     3,055     3,140       5,305       3,997      4,021
                          -------  -------  ---------  -------  --------  --------   ---------   ---------  ---------
Income before items
 shown below............      261      338      1,908      189       627       143       4,418       4,142      3,221
Minority interests in
 consolidated
 partnerships...........      --       --         114      --        --        --          --           91        --
Minority interest in
 Operating Partnership..      --       --         658      --        --        --        1,160       1,063        845
Extraordinary gain on
 debt restructuring.....      --       --         --       --        --      2,186         --          --         --
                          -------  -------  ---------  -------  --------  --------   ---------   ---------  ---------
Net income..............  $   261  $   338  $   1,136  $   189  $    627  $  2,329   $   3,258   $   2,988  $   2,376
                          =======  =======  =========  =======  ========  ========   =========   =========  =========
Net income per common
 share..................  $  0.42  $  0.55  $    0.37  $  0.30                       $    0.39   $    0.35  $    0.28
Weighted average number
 of common shares
 outstanding............  620,102  620,102  3,074,535  620,102                       8,453,829   8,453,829  8,453,829
OTHER INFORMATION:
Funds from
 operations(1)..........  $   595  $   517  $   2,384  $   443  $         $          $   6,674   $   5,612  $   4,915
Cash flow from:(2)
 Operating activities...      718      585      3,844      481     3,232     3,317
 Investment activities..     (145)     (99)   (12,242)     (89)   (1,144)   (3,419)
Number of Apartment
 Communities (end of
 period)................        4        3         26        4        20        20          30          30         30
Number of apartment
 units (end of period)..      257      165      2,763      257     1,514     1,514       2,863       2,863      2,863
Average monthly rental
 rate per unit..........  $   693  $   660  $     702  $   687  $    693  $    677   $     676   $     698  $     683
Average economic
 occupancy rate.........     97.0%    97.8%      96.5%    97.3%     96.7%     96.4%       95.6%       96.5%      95.9%
Number of Retail
 Properties.............      --       --           1      --          1         1           3           3          3
BALANCE SHEET
 INFORMATION:
Real estate, before
 accumulated
 depreciation...........  $ 9,798  $ 5,393  $ 145,555  $ 9,762  $ 77,833  $ 76,835               $ 154,280
Total assets............    9,521    5,241    116,440    9,537    59,866    61,678                 130,285
Total mortgage and
 revolving credit
 facility debt..........    5,669    1,190     64,987    5,675    48,643    46,786                  29,612
Minority interests......      --       --      22,391      --        --        --                   26,212
Shareholders'/owners'
 equity.................    3,483    3,703     23,861    3,531     7,795    12,259                  69,260
</TABLE>    
 
                                                        (continued on next page)
 
                                       32
<PAGE>
 
(continued from previous page)
- --------
(1) The Company generally considers FFO to be a useful measure of the
    operating performance of an equity REIT because, together with net income
    and cash flow, FFO provides investors with an additional basis to evaluate
    the ability of a REIT to incur and service debt and to fund acquisitions
    and other capital expenditures. FFO does not represent net income or cash
    flow from operations as defined by GAAP and does not necessarily indicate
    that cash flow will be sufficient to fund cash needs. It should not be
    considered as an alternative to net income as an indicator of the
    Company's operating performance or to cash flow as a measure of liquidity.
    FFO does not measure whether cash flow is sufficient to fund all of the
    Company's cash needs, including principal amortization, capital
    improvements and distributions to shareholders. FFO also does not
    represent cash flow generated from operating, investing or financing
    activities as defined by GAAP. Further, FFO as disclosed by other REIT's
    may not be comparable to the Company's calculation of FFO. The Company
    uses the NAREIT definition of FFO. FFO is defined as income before gains
    (losses) on investments and extraordinary items (computed in accordance
    with GAAP) plus real estate depreciation, less preferred dividends and
    after adjustment for significant non-recurring items, if any. The Company
    believes that in order to facilitate a clear understanding of its
    operating results, FFO should be examined in conjunction with the net
    income as presented in the financial statements and information included
    elsewhere in this Prospectus.
(2) Pro forma information relating to cash flow from operating and investing
    activities has not been included because the Company believes that the
    information would not be meaningful due to the number of assumptions
    required in order to calculate this information.
 
                                      33
<PAGE>
 
  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                                  OPERATIONS
 
  The following discussion should be read in conjunction with "Selected
Financial Information" and the financial statements (including the notes
thereto) appearing elsewhere in this Prospectus or incorporated by reference
herein.
 
OVERVIEW
   
  The Company is a self-managed and self-administered equity REIT that is
engaged in the acquisition, repositioning, management and operation of mid-
priced multifamily communities in the Northeastern United States. Grove
currently owns interests in and operates 30 Apartment Communities and three
Retail Properties. Grove's predecessors commenced operations in 1980, and the
Company completed its initial public offering in 1994.     
   
  The financial history of the Company can be viewed in distinct phases based
upon the acquisitions of the Properties, which were acquired at various times
since the Company's formation. From its initial public offering in 1994
through the end of 1995, the Company owned three properties (Barons, Hamden
Center and Dogwood Hills) (collectively, the "Original Properties"). In
January 1996, the Company acquired Cambridge Estates. In March 1997, the
Company completed the Consolidation Transactions in which it acquired 20
properties and GPS (collectively, the "Consolidation Properties"). In June
1997, the Company acquired two additional properties (Four Winds and
Brooksyde) and a 29% controlling interest in the partnership that owned a
majority of the units in River's Bend (Four Winds, Brooksyde and River's Bend,
collectively, the "June Acquisition Properties"). In July 1997, the Company
acquired Greenfield Village, and in September 1997, the Company acquired two
additional properties (Glastonbury and Summit & Birch Hill). In October 1997,
the Company completed the exchange offers to purchase two retail properties
(Wharf Building and Corner Block) from an affiliate of the Company and
acquired an apartment property (High Meadow) from a non-affiliate. As a result
of these transactions, the financial statements included herein include
various Properties at various times and for various periods.     
 
  The Company receives income primarily from rental revenue from the
Properties and, to a lesser extent, from the management of certain properties
substantially owned by affiliates of the Company. The Company expects that
revenue growth will come from additional property acquisitions and from
increases in rents in its current portfolio.
 
RESULTS OF OPERATIONS
   
  Due to the significance of the transactions completed since the end of 1996,
the Company believes that comparing pro forma results for the nine months
ended September 30, 1997 against pro forma results for the comparable period
in 1996 as if all Properties were owned by the Company since January 1, 1996
is most meaningful for a complete understanding of the Company's results of
operations. The unaudited pro forma information presented below includes all
adjustments necessary in management's opinion to present fairly the effects of
these transactions and is not necessarily indicative of what the Company's
actual results of operations or financial condition would have been for the
periods or at the dates indicated, nor does it purport to represent the
Company's financial condition or results of operations as of any future date
or for any future period.     
 
  THE COMPANY
   
  Pro forma nine months ended September 30, 1997 compared to pro forma nine
months ended September 30, 1996.     
   
  Rental income for the Properties increased $1,045,000 from $17,533,000 to
$18,578,000 for the nine months ended September 30, 1997, as compared to the
corresponding period in 1996. Approximately $163,000 of such     
 
                                      34
<PAGE>
 
   
increase was due to the operations of Sandalwood. Sandalwood was acquired in
December 1995 by a predecessor of the Company and was redeveloped during 1996.
Construction was not completed until October 1996. During renovation,
Sandalwood was only partially occupied and was not stabilized until January
1997. Approximately $221,000 of the increase is due to increases in rental
rates at Four Winds which resulted primarily from a repositioning project in
which the Company converted from electric to gas heating systems. By making
this conversion, the Company was able to include heat in rents which
contributed to the increase in monthly rental rates. The average monthly
rental rate for the Apartment Communities increased to $698 per unit for the
nine months ended September 30, 1997 from $683 for the same period in 1996.
The average economic occupancy rate for the Apartment Communities increased to
96.5% for the nine months ended September 30, 1997 from 95.9% for the same
period in 1996. The average annual rental rate per square foot for the Retail
Properties increased to $16.41 for the nine months ended September 30, 1997
from $14.28 for the same period in 1996 because of new tenants and scheduled
rent increases.     
   
  Property management revenue increased $35,000 from $311,000 to $346,000 for
the nine months endedSeptember 30, 1997, as compared to the corresponding
period in 1996. The increase was due primarily to the increase in rental
income on which management fees were based.     
   
  Interest and other income increased $194,000 from $255,000 to $449,000 for
the nine months ended September 30, 1997, as compared to the corresponding
period in 1996. The increase in interest and other income was due in part to a
$96,000 increase in interest income resulting from higher cash balances during
the nine months ended September 30, 1997 and a $65,000 reimbursement received
during such period.     
   
  Property operating and maintenance expenses increased $435,000 from
$6,549,000 to $6,984,000 for the nine months ended September 30, 1997, as
compared to the corresponding period in 1996. The increase was due in part to
the Company's incurring additional operating costs of approximately $48,000 in
connection with the conversion from electric to gas heating systems at Four
Winds and due to other miscellaneous increases in operating expenses. As a
percentage of rental and property management revenue, property operating and
maintenance expenses were 36.9% for the nine months ended September 30, 1997,
as compared to 36.7% for the nine months ended September 30, 1996.     
   
  Real estate taxes decreased $3,000 from $1,927,000 to $1,924,000 for the
nine months ended September 30, 1997 as compared to the corresponding period
in 1996. The decrease was due to the net decreases in property tax rates from
1996 to 1997.     
          
  Interest expense decreased $58,000 from $1,672,000 to $1,614,000 for the
nine months ended September 30, 1997 as compared to the corresponding period
in 1996 due to lower interest rates on variable rate debt.     
   
  Net income increased $612,000 from $2,376,000 to $2,988,000 for the nine
months ended September 30, 1997, as compared to the corresponding period in
1996. The increase was due primarily to an increase in rental income of
$1,045,000, an increase in property management revenue of $35,000, an increase
in interest and other income of $194,000 and a decrease in interest expense of
$57,000, offset in part by an increase in property operating and maintenance
expenses of $435,000.     
   
  Historical nine months ended September 30, 1997 compared to historical nine
months ended September 30, 1996.     
   
  Total revenues increased $9,987,000 from $1,549,000 to $11,536,000 during
the nine months ended September 30, 1997, as compared to the corresponding
period in 1996. Approximately $9,472,000 of the increase is due to the
operations of those Properties acquired by the Company during the nine months
ended September 30, 1997 (the "1997 Acquisitions"). Additionally, $380,000 of
the increase was related to property management revenues which represent fees
earned on management services provided to properties owned by affiliated
entities. Such revenue was derived from management contracts acquired in
conjunction with the Consolidation Transactions; therefore, there was no
comparable revenue during the corresponding period in 1996. The     
 
                                      35
<PAGE>
 
remainder of the increase in total revenues is attributable to increases in
rental rates, offset by slight decreases in occupancy experienced at the
Original Properties and Cambridge Estates, discussed below.
   
  The Original Properties and Cambridge Estates experienced increases in
rental rates which increased revenues. The average monthly rental rates for
the Original Properties and Cambridge Estates increased to $708 per unit for
the nine months ended September 30, 1997 from $687 for the nine months ended
September 30, 1996. Average economic occupancy for the Original Properties and
Cambridge Estates increased to 97.5% for the nine months ended September 30,
1997 from 97.3% for the corresponding period in 1996. For the nine months
ended September 30, 1997, the average economic occupancy for the Original
Properties, Cambridge Estates and the 1997 Acquisition Properties was 96.5%.
       
  Property operating and maintenance expenses increased $3,256,000 from
$485,000 to $3,741,000 during the nine months ended September 30, 1997, as
compared to the corresponding period in 1996. The increase was primarily due
to the operations of the 1997 Acquisitions.     
   
  Real estate taxes increased $988,000 from $155,000 to $1,143,000 during the
nine months ended September 30, 1997, as compared to the corresponding period
in 1996. The increase was due primarily to the 1997 Acquisitions. Also related
party management fees decreased $58,000 from $80,000 to $22,000. This decrease
was due to the Company's acquisition of GPS in the Consolidation Transactions,
resulting in the elimination as of March 14, 1997 of all such expenses in
consolidation.     
          
  General and administrative expenses increased $555,000 from $55,000 to
$610,000 during the nine months ended September 30, 1997, as compared to the
corresponding period in 1996. This increase was primarily due to the increased
costs associated with the change in size and structure of the Company.     
   
  Interest expense increased $1,439,000 from $293,000 to $1,732,000 during the
nine months ended September 30, 1997, as compared to the corresponding period
in 1996. The increase was primarily due to the $38.3 million mortgage debt
assumed and/or refinanced as part of the 1997 Acquisitions.     
   
  Depreciation and amortization increased $2,088,000 from $292,000 to
$2,380,000 during the nine months ended September 30, 1997, as compared to the
corresponding period in 1996. This increase results from depreciation and
amortization attributable to the 1997 Acquisitions.     
   
  The Company's net income increased $947,000 from $189,000 to $1,136,000
during the nine months ended September 30, 1997, as compared to the
corresponding period in 1996. Approximately $100,000 of this increase resulted
from the net effect of decreased expenses and increased rental rates at the
Original Properties and Cambridge Estates. The remaining increase was due to
the operations of the 1997 Acquisitions.     
   
  Historical year ended December 31, 1996 compared to historical year ended
December 31, 1995.     
 
  Total revenues increased $765,000 from $1,317,000 to $2,082,000 for the
years ended December 31, 1995 and 1996, respectively. Approximately $733,000
of such increase was due to the operations of Cambridge Estates, and the
remainder is attributable to a small decrease in occupancy at the Original
Properties offset by increases in rental rates, which resulted in increased
revenues. The average monthly rental rate for the Original Properties
increased to $679 per unit for the year ended December 31, 1996 from $660 for
the year ended December 31, 1995. Average physical occupancy decreased to
97.6% for the year ended December 31, 1996 from 97.8% for the year ended
December 31, 1995. Physical occupancy at December 31, 1996 for the Original
Properties and Cambridge Estates was 97.4%.
 
  Property operating and maintenance expenses increased $250,000 from $406,000
for the year ended December 31, 1995 to $656,000 for the year ended December
31, 1996. Approximately $233,000 of the increase was due to the operations of
Cambridge Estates. Additionally, the Original Properties experienced an
increase in operating and maintenance expenses due primarily to the harsh
winter experienced in the New England area in 1996 compared to the more mild
winter experienced in 1995.
 
                                      36
<PAGE>
 
  Real estate taxes increased $60,000 from $148,000 to $208,000 and general
and administrative expenses increased $11,000 from $56,000 to $67,000 for the
years ended December 31, 1995 and 1996, respectively. Related party management
fees increased $42,000 from $67,000 to $109,000 for the years ended December
31, 1995 and 1996, respectively. These increases were due primarily to the
acquisition of Cambridge Estates.
 
  Interest expense increased $309,000 from $85,000 to $394,000 for the years
ended December 31, 1995 and 1996, respectively. This increase was due to the
$4,500,000 mortgage note payable used to finance the acquisition of Cambridge
Estates. Depreciation and amortization increased $170,000, primarily as a
result of the acquisition of Cambridge Estates.
 
  The Company's net income decreased $77,000 from $338,000 to $261,000 for the
years endedDecember 31, 1995 and 1996, respectively. Approximately $54,000 of
the decrease was due to a loss experienced by Cambridge Estates, primarily due
to depreciation and amortization associated with Cambridge Estates. The
decrease in net income for the Original Properties of approximately $23,000
was due to an increase in property operating and maintenance expenses as
discussed above.
 
  CONSOLIDATION PROPERTIES
 
  The following is a discussion of the results of the combined operations of
GPS and the Subsidiary Partnerships (the "Consolidation Properties") for the
years ended December 31, 1995 and December 31, 1996. The Consolidation
Properties were acquired by the Company on March 14, 1997 in connection with
the Consolidation Transactions.
 
  Historical year ended December 31, 1996 compared to historical year ended
  December 31, 1995.
 
  The Consolidation Properties included two properties acquired by affiliates
in 1995, Burgundy Studios (102 apartments) acquired in September 1995 and
Sandalwood (39 apartments) acquired in December 1995. Sandalwood was
redeveloped during 1996. Construction was completed in October 1996. The total
apartment units included in the Consolidation Properties were 1,495 at
December 31, 1996 compared to 1,456 at December 31, 1995.
 
  Rental income for the Consolidation Properties increased $941,000 to
$12,906,000 in 1996 from $11,965,000 in 1995. The increase was due to the
increase in total apartment units discussed above, together with increases in
rental rates. The average rental rates for the apartments in the Consolidation
Properties increased to $693 per unit for the year ended December 31, 1996
from $677 for the year ended December 31, 1995. Average physical occupancy for
the apartments in the Consolidation Properties decreased to 95.7% for the year
ended December 31, 1996 from 95.8% for the year ended December 31, 1995. The
average physical occupancy of the commercial properties increased to 97.9% for
the year ended December 31, 1996 from 90.9% for the year ended December 31,
1995. The average rent per square foot for the commercial properties increased
to $12.00 for the year ended December 31, 1996 from $9.84 for the year ended
December 31, 1995.
 
  Property management revenue for GPS decreased $38,000 to $777,000 in 1996,
from $815,000 in 1995.
 
  Interest and other income for the Consolidation Properties increased $35,000
to $1,138,000 in 1996 from $1,103,000 in 1995 primarily due to an increase in
sales of condominiums at the Avonplace.
 
  Real estate taxes for the properties increased $65,000 from $1,234,000 in
1995 to $1,299,000 in 1996, due primarily to an increase in the number of
properties included in the Consolidation Properties for 1996.
   
  Property operating and maintenance expenses for the Consolidation Properties
increased $294,000 from $2,918,000 in 1995 to $3,212,000 in 1996. The increase
was due primarily to the additional expenses of Burgundy Studios and
Sandalwood. As a percentage of rental revenue, other property operating
expenses were 24.9% for 1996, compared to 34.4% for 1995.     
 
                                      37
<PAGE>
 
  Interest expense for the Consolidation Properties increased $27,000 from
$3,829,000 in 1995 to $3,856,000 in 1996. The increase was primarily due to
the increased debt levels related to the acquisitions and refinancings of
certain of the properties during 1996, offset by lower interest rates during
1996.
 
  Income before extraordinary items for the Consolidation Properties increased
$484,000 to $627,000 for the year ended December 31, 1996 from $143,000 for
the year ended December 31, 1995. Net income decreased $1,702,000 to $627,000
for the year ended December 31, 1996 from $2,329,000 for the year ended
December 31, 1995. These variations were due primarily to an increase in
rental income of $941,000, a decrease in depreciation and amortization of
$85,000, offset in part by an increase in other property operating expenses of
$294,000, an increase in payroll of $135,000, an increase in general and
administrative of $18,000, an increase in real estate taxed of $65,000, an
increase in interest expense of $27,000 and a decrease in extraordinary item-
gain on restructuring of debt of $2,186,000. The extraordinary item represents
gains on restructuring of debt on various mortgages due to banks.
 
LIQUIDITY AND CAPITAL RESOURCES
   
  Cash and cash equivalents, assuming completion of the Offerings, totaled
$6,278,000 as of September 30, 1997. The Company's pro forma ratio of debt to
total market capitalization as of September 30, 1997 was 18.5%, based on a
total market capitalization of $160,003,000 (consisting of 3,009,126 Common
Units and 8,453,829 Common Shares valued at $11.875 per share/unit plus term
debt of $29,612,000). On a historical basis, cash and cash equivalents totaled
$1,158,000 as of September 30, 1997. The Company's historical ratio of debt,
including the Credit Facility, to total market capitalization on September 30,
1997 was 44.5% based on total market capitalization of $145,907,000, based on
2,860,458 Common Units and 3,953,829 Common Shares outstanding valued at
$11.875 per share/unit (price of Common Shares on September 30, 1997) plus
term debt of $64,987,000, including the Credit Facility.     
   
  Cash provided by operating activities was $3,844,000 for the nine months
ended September 30, 1997. Cash used in investing activities was $12,242,000
for the nine months ended September 30, 1997. Net cash provided by financing
activities was $9,017,000 for the nine months ended September 30, 1997.     
   
  On September 11, 1997 the Company declared a dividend of $0.1575 per share
for the three months ended September 30, 1997. The dividend was paid on
October 17, 1997 to shareholders of record on September 30, 1997. On June 18,
1997, the Company declared a "long" period dividend of $0.189 per share for
the period from March 14, 1997 to June 30, 1997. The dividend was paid on July
16, 1997 to shareholders of record on June 30, 1997. On March 10, 1997, the
Company declared a "short" period dividend of $0.1558 per share for the period
from January 1, 1997 to March 13, 1997, which was paid on March 28, 1997 to
shareholders of record on March 10, 1997. The dividends declared during the
period of $0.373 per share resulted in a 66.4% payout of FFO for the six
months ended June 30, 1997.     
   
  The Operating Partnership declared a distribution of $0.1575 per Common Unit
for the period July 1, 1997 to September 30, 1997. The distribution amount was
prorated for unit holders that were not unit holders for the entire period of
July 1, 1997 to September 30, 1997. The distribution was paid on October 17,
1997. The Operating Partnership declared a distribution of $0.189 per Common
Unit for all unit holders for the period March 14, 1997 to June 30, 1997. The
distribution amount was prorated for unit holders who were not unit holders
for the entire period of March 14, 1997 to June 30, 1997. The distribution was
paid on July 26, 1997.     
 
  In March 1997, the Operating Partnership entered into the Credit Facility, a
three year revolving credit facility, guaranteed by Grove, for up to $25.0
million. Borrowings under the Credit Facility are collateralized by nine of
the Properties and bear interest payable monthly at a floating rate of 1.2%
above the 30, 60, or 90 day LIBOR rate. The Credit Facility is available to
fund future property acquisitions, up to $4.0 million is available to fund
working capital needs, and up to $2.0 million is available to fund the
redemption of Common Units or the purchase of Common Shares by the Operating
Partnership.
 
                                      38
<PAGE>
 
  The Company intends to meet its short-term liquidity requirements through
cash on hand, cash flow provided by operations and funds from the Credit
Facility. The Company considers its ability to generate cash to be adequate
and expects it to continue to be adequate to meet operating requirements and
pay shareholder dividends in accordance with REIT requirements. The Company
may use other sources of capital to finance additional acquisitions including,
but not limited to, the selling of additional equity interest in the Company,
non-distributed FFO, the issuance of debt securities, funds from the Credit
Facility, and exchanging Common Shares or Common Units for properties or
interests in properties.
 
  The Company regularly evaluates properties for possible acquisition or
disposition. Individual properties may be acquired through direct purchase of
the property or through the purchase of the entity owning such property and
may be made for cash or securities of the Company or the Operating
Partnership. In connection with any acquisition, the Company may incur
additional indebtedness. The Company is currently negotiating to increase its
borrowing capacity under its revolving credit facility from $25 million to $50
million. If the Company acquires or disposes of any property, such acquisition
or disposition could have a significant effect on the Company's financial
condition, results of operations or cash flow.
 
FUNDS FROM OPERATIONS
 
  Industry analysts generally consider FFO an appropriate measure of
performance of an equity REIT. FFO is defined as income before gains (losses)
on investments and extraordinary items (computed in accordance with GAAP) plus
real estate depreciation, less preferred dividends and after adjustment for
significant non-recurring items, if any. This definition conforms to the
recommendations set forth in a White Paper adopted by NAREIT in early 1995.
The Company believes that in order to facilitate a clear understanding of its
operating results, FFO should be examined in conjunction with the net income
as presented in the financial statements and information included elsewhere in
this Prospectus. FFO does not represent cash generated from operating
activities in accordance with GAAP and is not necessarily indicative of cash
available to fund cash needs. FFO should not be considered as an alternative
to net income as an indication of the Company's performance or as an
alternative to cash flow as a measure of liquidity.
   
  FFO increased $697,000 from $4,915,000 for the nine months ended September
30, 1996 to $5,612,000 for the nine months ended September 30, 1997 on a pro
forma basis.     
   
  FFO increased $1,941,000 from $443,000 for the nine months ended September
30, 1996 to $2,384,000 for the nine months ended September 30, 1997 on a
historical basis. Dividends declared for the nine months ended September 30,
1997 were $1,467,000, representing 61.5% of FFO. Dividends declared for the
nine months ended September 30, 1996 were $361,000, representing 81.4% of FFO.
FFO per share was $0.78 and $0.71 for the nine months ended September 30, 1997
and 1996, respectively.     
 
  FFO increased $78,000 from $517,000 for the year ended December 31, 1995 to
$595,000 for the year ended December 31, 1996. Dividends declared for the year
ended December 31, 1996 was $481,000, representing 80.8% of FFO. Dividends
declared for the year ended December 31, 1995 was $475,000, representing 91.9%
of FFO. FFO per share was $0.96 and $0.83 for the year ended December 31, 1996
and 1995, respectively.
 
SEASONALITY
 
  Historically, net income from the Properties has been lower in the first and
second quarters than in the remainder of the year due to higher utility
charges, snow removal and other weather related expenses in the first and
second quarters and an historical increase in rental revenues in the second
half of the year.
 
INFLATION
   
  Substantially all of the leases at the Properties are for a term of one year
or less, which may enable the Company to seek increased rents upon renewal or
reletting. Such short-term leases generally lessen the risk to the Company of
the potential adverse effects of inflation.     
 
                                      39
<PAGE>
 
                            BUSINESS AND PROPERTIES
 
MULTIFAMILY MARKET OVERVIEW
 
  All of the Properties are located in the New England region of the United
States and the Company intends to continue to focus its acquisition efforts in
existing and new markets in the Northeastern United States. The Company
defines the Northeastern United States as Connecticut, Massachusetts, Rhode
Island, New York, Pennsylvania, New Jersey, New Hampshire, Vermont and Maine
and New England as Connecticut, Massachusetts, Rhode Island, New Hampshire,
Vermont and Maine. According to the U.S. Census Bureau reports, in 1996 the
Northeastern United States represented approximately 19.4% of total United
States population, of which approximately 37.7% lived in rental housing. The
Company believes that the limited supply of newly constructed multifamily
properties, coupled with stable or increasing demand fundamentals, may create
opportunities for increased rents in the Northeastern market.
 
  Supply of New Multifamily Units.  Relatively few new multifamily units have
been built in the Northeast since 1990. The lack of newly constructed
multifamily properties is illustrated by the table below, which shows the
number of building permits that have been issued since 1986. For the period
from 1991 through 1996, permits were issued to build 81,861 multifamily units
in the Northeast, representing approximately 64.3% fewer than the 229,201
units permitted in the period from 1986 through 1991. Further, a
disproportionate number of building permits included in the data for the
Northeast region is attributable to New York State, where none of the
Properties is located. For the period from 1991 through 1996, permits were
issued to build 50,085 multifamily units in the Northeast region excluding New
York, representing approximately 70.7% fewer than the 170,896 units permitted
in the period from 1986 through 1991. The decline in permit issuances has been
even more dramatic in New England, where all of the Properties are located.
For the period from 1991 through 1996, permits were issued to build 17,272
multifamily units in New England, representing approximately 80.1% fewer than
the 87,737 units permitted in the period from 1986 through 1991. In 1996,
permits were issued to build 20,150 multifamily units in the Northeast, of
which permits to build 10,420, or approximately 52.0%, were issued in New York
and 3,389, or approximately 16.8%, were issued in New England.
 
 
 
                                    (GRAPH)
 

                          Multifamily Permit Activity
                                  1986-1997

                     Northeast    Northeast w/o NY    New England
 
1986                  57,074           45,128            26,285
1987                  56,581           42,997            24,496
1988                  47,239           35,768            18,730
1989                  35,885           24,587            10,324
1990                  20,635           14,175             5,365
1991                  11,787            8,241             2,537
1992                  10,667            7,037             2,288
1993                  13,304            9,188             3,174
1994                  12,463            7,190             2,866
1995                  13,486            8,695             3,018
1996                  20,154            9,734             3,389

Source: M/PF Research Analysis of U.S. Bureau of the Census (5+ Units)  
 
                                      40
<PAGE>
 
  The Company believes that the reduced building permit issuance in the
Northeastern United States since the early 1990's has translated into limited
new construction starts. The chart below shows the number of new construction
starts in the Northeast as well as Northeast construction starts as a
percentage of total United States construction starts for the period from 1986
to 1996.
 
 
                                    (GRAPH)

                  Multifamily Housing Starts in the Northeast
                                   1986-1996
 

                Number of Starts       Percent of United States

1986                59,000                       10.9%
1987                59,000                       14.4%
1988                48,000                       13.8%
1989                41,000                       12.9%
1990                23,000                        8.6%
1991                 8,000                        5.8%
1992                11,000                        7.9%
1993                 7,000                        5.3%
1994                15,000                        6.7%
1995                15,000                        6.1%
1996                16,000                        5.9%

Source: M/PF Research analysis of U.S. Bureau of the Census (5+ Units)

  The Company believes that the limited number of permits issued and new
construction starts in the 1990's resulted from several factors, including
high construction costs, limited land availability, strict zoning laws and
extended permitting processes. Given that these barriers to entry continue to
exist, the Company believes that the supply of newly constructed units in the
Northeast should remain relatively constant for the next several years.
 
                                      41
<PAGE>

  Age of Existing Rental Stock. In addition to constrained supply, the
inventory of existing multifamily stock in the Northeast is significantly
older than the national average. As the following graph illustrates,
approximately 13.1% of multifamily units in the Northeast have been built
since 1980, compared with approximately 33.2% for the United States as a
whole.
 
 
 
                                    (GRAPH)

                       Age of Multifamily Housing Stock
                         Percent Built from 1980-1996

                             United States  33.2% 
                             Northeast      13.1%

Source: M/PF Research Analysis of U.S. Bureau of the Census (5+ Units)
 
   Furthermore, as the following graph illustrates, the vast majority of
multifamily units in the Northeast were built before 1970, with significantly
fewer units built in each four-year period thereafter.
 
 
                                    (GRAPH)
 
               Age of Multifamily Housing Stock in the Northeast
                                Pre 1970-1997
 
                           Pre 1970        68.0%
                           1970-1974       14.1%
                           1975-1979        4.8%
                           1980-1984        4.1%
                           1985-1989        6.0%
                           1990-1994        2.0%
                           1995-1997        1.0%

*  Total housing stock is estimated by M/PF Research to be 4,549,291 units as of
   December 31, 1997.

Source: M/PF Research Analysis of U.S. Bureau of the Census (5+ Units)

  The age of multifamily housing stock in the Northeast, coupled with the low
levels of new construction, is beneficial to Grove's growth prospects. The
Company believes that maintenance and improvements have been deferred at many
of these older properties. Accordingly, the Company believes the predominance
of older, under-managed properties in the Northeast creates numerous
acquisition, renovation and repositioning opportunities.
 
                                      42
<PAGE>
 
  Demand Growth. The Company believes that the demand for multifamily units in
the Northeast region is partially attributable to certain macroeconomic
factors, including job and population growth. The graph below shows the
increase in the number of jobs in the Northeast as the region recovered from
an economic downturn in the early 1990's.
 
 
                                    (GRAPH)

                        Number of Jobs in the Northeast
                                  1990-1996 

                                     Average Employment
 
                        1990             23,377,158
                        1991             22,511,183
                        1992             22,256,033
                        1993             22,416,717
                        1994             22,763,825
                        1995             23,051,683
                        1996             23,301,358

Source: M/PF Research analysis of U.S. Bureau of the Census

  According to The Rosen Consulting Group ("Rosen"), a doubling in employment
growth rates is expected to occur for 1995 through 1997 in the major markets
that it follows in the Northeast, including Boston, Hartford, Stamford,
Northern New Jersey, New York City, Philadelphia, Pittsburgh and Rochester.
Rosen's projections for 1997 show 244,800 additional jobs being created in
these markets, in addition to the 175,900 additional jobs created in 1996.
 
                                      43
<PAGE>
 
  The Company believes that demand continues to increase due, in part, to
population growth. The total population in the Northeast has increased each
year since 1990, as illustrated by the following graph.
 
 
                                    (GRAPH)
 
                             Northeast Population
                                  1990-1996

                             1990      50,857,291
                             1991      50,954,026
                             1992      51,097,031
                             1993      51,292,552
                             1994      51,426,298
                             1995      51,505,491
                             1996      51,580,085

Source: M/PF Research analysis of U.S. Bureau of the Census
 
  A further factor potentially influencing future demand for multifamily
properties is the relatively high cost of home ownership in many markets in
the Northeast. According to a report by the National Association of Realtors
ranking home prices in 135 U.S. metropolitan markets for the second quarter of
1997, five of the ten most expensive home ownership markets were in the
Northeast. The Company believes that the relatively high cost of ownership in
the area will continue in the future. In addition, the upfront expenses
associated with home ownership, including initial down payments and closing
costs, make home ownership unobtainable for a certain percentage of the
population.
 
  Occupancy and Rental Rates. The previously discussed factors, which have
affected the Northeast region's supply and demand fundamentals, have
translated into strengthening occupancy and rental rate statistics. Greater
demand for apartments has caused an increase in occupancy and resulted in
overall occupancy rates that exceed the national average. In 1996, the average
occupancy rate for all apartments in the Northeast increased to 96.5% or
approximately 3.2 percentage points over 1995. This increase caused the
average occupancy rate for the Northeast to exceed the average occupancy rate
for the United States by approximately 2.1 percentage points in 1996. The
Company believes this above average occupancy rate has contributed to
increased rental rates in the Northeast.
 
                                      44
<PAGE>

  The occupancy rates for the Northeast region for the years 1993 through 1996
are shown in the graph below.
 
 
                                    (GRAPH)

                           Apartment Occupancy Rate
                                  1993-1996

                                           US      Northeasst

                1993                      93.8%       92.5%
                1994                      94.2%       93.5% 
                1995                      93.9%       93.3%
                1996                      94.4%       96.5%

Source: M/PF Research analysis of U.S. Bureau of the Census
 
 
  The average rental rates for the Northeast region for the years 1993 through
1996 are shown in the graph below.
 
 
                                    (GRAPH)
 
                         Average Rental Rate Per Unit
                                  1993-1996

                                           US      Northeasst

                1993                      $615        $748 
                1994                      $666        $741  
                1995                      $679        $743 
                1996                      $711        $770 
 
Source: M/PF Research analysis of U.S. Bureau of the Census
 
                                      45
<PAGE>
 
  Public Ownership Opportunities. The Company believes that in addition to the
strong supply and demand fundamentals in the Northeastern market, its ability
to execute its business objectives and growth strategies is further supported
by the limited number of publicly traded companies focusing on multifamily
properties in the Northeast. As the following graph illustrates, REIT
ownership of apartment units in the Northeast is nominal at 0.42% of total
units in the Northeast, as compared to 3.18% REIT ownership of apartment units
in the entire United States. The Company believes that this low level of REIT
ownership in the Northeast will contribute to its ability to execute its
acquisition strategy.
 
 
                                    (GRAPH)
 

             Percentage of Apartment Units Owned by Public REIT's
                              As of June 30, 1997

                             United States  3.18%
                             Northeast      0.42%

Source: Rosen Consulting Group
 
THE APARTMENT COMMUNITIES
   
  The Company currently owns interests in and operates 30 Apartment
Communities containing a total of 2,863 units. The Apartment Communities are
mid-priced apartment properties that consist primarily of two- and three-story
buildings in landscaped settings. The Apartment Communities are well located
within their markets and appeal to middle income residents who are generally
"renters by necessity." The Apartment Communities are located in the following
states:     
 
<TABLE>   
<CAPTION>
                                      NUMBER OF                    PERCENTAGE
                                      APARTMENT     NUMBER OF       OF TOTAL
   STATE                             COMMUNITIES APARTMENT UNITS APARTMENT UNITS
   -----                             ----------- --------------- ---------------
   <S>                               <C>         <C>             <C>
   Connecticut......................      24          2,341             82%
   Massachusetts....................       4            398             14%
   Rhode Island.....................       2            124              4%
                                         ---          -----            ---
     Total..........................      30          2,863            100%
                                         ===          =====            ===
</TABLE>    
   
  Of the existing Apartment Communities, 20 Apartment Communities,
representing approximately 76% of the apartment units in the Company's
portfolio, have undergone extensive renovation within the last eight years,
including 14 Apartment Communities, representing approximately 57% of the
apartment units in the Company's portfolio, that have undergone extensive
renovation within the last five years. The Company continually reviews its
portfolio to determine where opportunities exist to make incremental capital
improvements that meet its targeted return on cost.     
   
  Of the 30 Apartment Communities, 12 have 100 units or more, with the largest
having 349 units and the smallest having 28 units. The average size of the
Apartment Communities is approximately 95 units. Of the 2,863     
 
                                      46
<PAGE>
 
   
units in the Apartment Communities, 183 units or approximately 6.4% are
studios, 1,091 units or approximately 38.1% are one bedrooms, 1,579 units or
approximately 55.2% are two bedrooms and 10 units or approximately 0.3% are
three bedrooms. The Apartment Communities contain an aggregate of
approximately 2.7 million rentable square feet with an average unit size of
approximately 980 square feet. For the nine months ended September 30, 1997,
the Apartment Communities had an average economic occupancy rate of
approximately 96.5% and an average monthly rental rate of approximately $698
per unit.     
          
  The following tables present information concerning the features and
amenities of the Apartment Communities.     
 
                                      47
<PAGE>
 
                              COMMUNITY FEATURES
<TABLE>   
<CAPTION>
                                                                                                         AVERAGE
                                                                                                         ECONOMIC
                                                                                                    OCCUPANCY RATE(1)
                                                                                                    -------------------
                                                                     AVERAGE
                                                              NUMBER SQ. FT.                          YEAR      9 MOS.
                                   PERCENTAGE YEAR    YEAR      OF     PER                            ENDED     ENDED
PROPERTY          TOWN/CITY        OWNERSHIP  BUILT RENOVATED UNITS   UNIT   STUDIO 1 BR  2 BR  3BR 12/31/96   9/30/97
- ----------------- ---------------- ---------- ----- --------- ------ ------- ------ ----- ----- --- ---------  --------
<S>               <C>              <C>        <C>   <C>       <C>    <C>     <C>    <C>   <C>   <C> <C>        <C>
CONNECTICUT
 208-210 Main
 St.(3)           Manchester          100%    1969    1988       28     929   --        8    20 --       97.8%     96.5%
 Arbor Commons(3) Ellington           100%    1975    1988       28     780   --       28   --  --       97.6%     99.2%
 Avonplace        Avon                 98%    1973    1995      145   1,542   --       38    98   9      99.1%     99.1%
 Barons
 Apartments       Southington         100%    1970    1994       54     900   --       16    38 --       95.8%     97.2%
 Bradford
 Apartments       Newington            91%    1964    1989       64     894   --       24    40 --       91.6%     97.9%
 Brooksyde(4)     West Hartford       100%    1945    1997       80     800   --       40    40 --       94.0%     96.0%
 Burgundy
 Studios(4)       Middletown          100%    1973    1996      102     443   102     --    --  --       96.7%     97.8%
 Cambridge
 Estates          Norwich             100%    1977    1990       92     939   --       42    50 --       97.4%     98.1%
 Colonial Village Plainville          100%    1968    1989      104     981    28      16    60 --       96.5%     94.5%
 Dogwood Hills    Hamden              100%    1971    1993       46   1,330   --       23    23 --       98.2%     98.0%
 Summit & Birch
 Hill(4)          Farmington          100%    1967    1996      184     937   --       92    92 --       96.5%     97.7%
 Fox Hill
 Apartments       Enfield              97%    1974    1991      168     796     8     124    36 --       96.5%     94.9%
 Fox Hill Commons Vernon              100%    1965    1989       74     849   --       24    50 --       97.1%     96.1%
 Greenfield
 Village(4)(5)    Rocky Hill          100%    1965    1997      127     729   --       71    56 --         --        --
 Hamden Centre    Hamden              100%    1968    1993       65     873     1      30    34 --       96.2%     96.7%
 High
 Meadow(4)(6)     Ellington           100%    1975     --       100     605   --       98     2 --       90.0%     95.7%
 Glastonbury
 Center           Glastonbury         100%    1962    1989      104     961   --       20    84 --       95.6%     89.9%
 Loomis Manor     West Hartford        91%    1948    1990       43   1,138   --        1    42 --      100.0%     99.3%
 Ocean Reef       New London           96%    1962    1995      163     829     8      52   103 --       94.4%     95.4%
 Park Place West  West Hartford       100%    1961    1989       63     861     2      30    30   1      97.9%     97.5%
 Sandalwood(4)(7) New London           96%    1977    1996       39     517    27      12   --  --       61.7%     97.8%
 Westwynd
 Apartments       West Hartford        91%    1969    1990       46     901   --       33    13 --       95.2%     95.1%
 River's Bend     Windsor             100%    1973    1996      349   1,000   --       69   280 --       95.3%     96.2%
 Woodbridge       Newington           100%    1968    1991       73     792   --       24    49 --       94.7%     98.5%
MASSACHUSETTS
 Dean Estates     Taunton             100%    1984     --        58   1,014     4       6    48 --       94.9%     96.0%
 Four Winds(4)    Fall River          100%    1987    1996      168   1,089   --        6   162 --       90.5%     94.7%
 Security Manor   Westfield            88%    1971    1988       63   1,150   --       45    18 --       99.1%     99.9%
 Van Deene
 Manor(3)         West Springfield     88%    1970    1990      109     664   --       47    62 --       98.5%     98.8%
RHODE ISLAND
 Dean Estates II  Cranston             96%    1970    1994       48   1,170   --       24    24 --       93.5%     95.4%
 Royale           Cranston             96%    1976    1993       76   1,151     3      48    25 --       96.9%     94.3%
                                                              -----   -----   ---   ----- ----- ---  ---------  --------
  TOTAL/WEIGHTED
  AVERAGE                                                     2,863     980   183   1,091 1,579  10      95.6%     96.5%
                                                              =====   =====   ===   ===== ===== ===  =========  ========
 SAME COMMUNITY
 WEIGHTED
 AVERAGE(4)                                                                                              96.5%     96.5%
                                                                                                     =========  ========
<CAPTION>
                  AVERAGE MONTHLY
                    RENTAL RATE
                    PER UNIT(2)
                  ----------------
                    YEAR   9 MOS.
                   ENDED    ENDED
PROPERTY          12/31/96 9/30/97
- ----------------- -------- -------
<S>               <C>      <C>
CONNECTICUT
 208-210 Main
 St.(3)             $761    $778
 Arbor Commons(3)    686     693
 Avonplace           845     861
 Barons
 Apartments          684     707
 Bradford
 Apartments          686     694
 Brooksyde(4)        643     678
 Burgundy
 Studios(4)          430     434
 Cambridge
 Estates             715     734
 Colonial Village    726     742
 Dogwood Hills       722     740
 Summit & Birch
 Hill(4)             745     780
 Fox Hill
 Apartments          642     663
 Fox Hill Commons    692     706
 Greenfield
 Village(4)(5)       --      --
 Hamden Centre       637     652
 High
 Meadow(4)(6)        580     591
 Glastonbury
 Center              773     798
 Loomis Manor        826     844
 Ocean Reef          633     646
 Park Place West     656     669
 Sandalwood(4)(7)    453     460
 Westwynd
 Apartments          648     657
 River's Bend        714     749
 Woodbridge          712     722
MASSACHUSETTS
 Dean Estates        668     684
 Four Winds(4)       627     685
 Security Manor      576     582
 Van Deene
 Manor(3)            609     617
RHODE ISLAND
 Dean Estates II     687     699
 Royale              684     697
                  -------- -------
  TOTAL/WEIGHTED
  AVERAGE           $676    $698
                  ======== =======
 SAME COMMUNITY
 WEIGHTED
 AVERAGE(4)         $696    $715
                  ======== =======
</TABLE>    
- ----
(1) Average economic occupancy rate is derived by dividing actual collected
    rental income by actual collected rental income. Gross potential rental
    income includes vacancy losses and bad debt, but does not include model
    expenses or employee concessions or discounts.
(2) Average monthly rental rate per unit is derived by dividing gross
    potential rental income by total number of leasable units.
(3) The following Apartment Communities contain additional space which is
    rented to commercial tenants:
<TABLE>
<CAPTION>
                                                COMMERCIAL
            APARTMENT COMMUNITY                   SQ. FT.
            -------------------                 ----------
            <S>                                 <C>
            208-210 Main St. .................     9,597
            Arbor Commons.....................     4,016
            Van Deene Manor...................     1,630
                                                  ------
             Total............................    15,243
                                                  ======
   
(4) The same community weighted average amounts represent the average
    occupancy and rental rates for the 23 Apartment Communities owned by Grove
    or its affiliated predecessors for the years 1995 and 1996 and the nine
    months ended September 30, 1997. Seven Properties were purchased by Grove
    or its affiliated predecessors during or subsequent to such periods and
    have been excluded from the same community amounts. The following sets
    forth the acquisition dates for such Apartment Communities:     
</TABLE>
<TABLE>   
<CAPTION>
            APARTMENT COMMUNITY          ACQUISITION DATE
            -------------------          ----------------
            <S>                          <C>
            Brooksyde...................      Oct-96
            Burgundy Studios............      Oct-95
            Summit & Birch Hill.........      Feb-95
            Greenfield Village..........      Jul-97
            High Meadow.................      Oct-97
            Sandalwood..................      Dec-95
            Four Winds..................      Oct-95
</TABLE>    
   
(5) Greenfield Village was purchased in July 1997 from a non-affiliated party.
    Information on this Property is not available for the entirety of the
    periods covered in the above table.     
   
(6) High Meadow was purchased in October 1997 from a non-affiliated party.
           
(7) Sandalwood was purchased in December 1995. The property was not leasable
    until the September 1996.     
 
                                       48
<PAGE>
 
                              COMMUNITY AMENITIES
 
<TABLE>   
<CAPTION>
                                   NUMBER          PATIO                           HARD-                  CABLE  OUT-
                                     OF   PARKING   OR    LAUNDRY MINI-             WOOD           DISH-   TV    SIDE
PROPERTY          TOWN/CITY        UNITS  SPACES  BALCONY HOOKUPS BLINDS CARPETING FLOORS REFRIG. WASHERS READY STORAGE
- ----------------- ---------------- ------ ------- ------- ------- ------ --------- ------ ------- ------- ----- -------
<S>               <C>              <C>    <C>     <C>     <C>     <C>    <C>       <C>    <C>     <C>     <C>   <C>
CONNECTICUT
 208-210 Main St. Manchester         28      42     Yes     Yes    Yes      Yes      No     Yes     Yes    Yes    Yes
 Arbor Commons    Ellington          28      90     Yes      No    Yes      Yes      No     Yes     Yes    Yes    Yes
 Avonplace        Avon              145     392     Yes      No    Yes      Yes      No     Yes     Yes    Yes    Yes
 Barons
  Apartments      Southington        54     100      No      No    Yes      Yes      No     Yes      No    Yes    Yes
 Bradford
  Apartments      Newington          64     150      No      No    Yes      Yes      No     Yes      No    Yes    Yes
 Brooksyde        West Hartford      80     120      No      No    Yes      Yes     Yes     Yes      No    Yes    Yes
 Burgundy Studios Middletown        102     116     Yes      No    Yes      Yes      No     Yes      No    Yes     No
 Cambridge
  Estates         Norwich            92     190     Yes      No    Yes      Yes      No     Yes     Yes    Yes    Yes
 Colonial Village Plainville        104     200     Yes     Yes    Yes      Yes     Yes     Yes     Yes    Yes    Yes
 Dogwood Hills    Hamden             46      68     Yes      No    Yes      Yes      No     Yes     Yes    Yes     No
 Summit & Birch
  Hill            Farmington        184      90     Yes      No    Yes      Yes      No     Yes     Yes    Yes    Yes
 Fox Hill
  Apartments      Enfield           168     283     Yes      No    Yes      Yes      No     Yes     Yes    Yes    Yes
 Fox Hill Commons Vernon             74     148     Yes     Yes    Yes      Yes      No     Yes      No    Yes    Yes
 Greenfield
  Village         Rocky Hill        127     190      No      No    Yes      Yes      No     Yes     Yes    Yes    Yes
 Hamden Centre    Hamden             65     130      No      No    Yes      Yes      No     Yes     Yes    Yes     No
 High Meadow      Ellington         100     200     Yes      No    Yes      Yes      No     Yes      No    Yes    Yes
 Glastonbury
  Center          Glastonbury       104     156      No      No    Yes      Yes     Yes     Yes     Yes    Yes    Yes
 Loomis Manor     West Hartford      43      42      No      No    Yes      Yes      No     Yes      No    Yes    Yes
 Ocean Reef       New London        163     175      No      No    Yes      Yes      No     Yes      No    Yes    Yes
 Park Place West  West Hartford      63     106      No      No    Yes      Yes      No     Yes     Yes    Yes     No
 River's Bend     Windsor           349     864     Yes      No    Yes      Yes      No     Yes     Yes    Yes    Yes
 Sandalwood       New London         39      55     Yes      No    Yes      Yes      No     Yes      No    Yes     No
 Westwynd
  Apartments      West Hartford      46      70      No      No    Yes      Yes      No     Yes      No    Yes    Yes
 Woodbridge       Newington          73      90      No      No    Yes      Yes      No     Yes     Yes    Yes    Yes
MASSACHUSETTS
 Dean Estates     Taunton            58      97     Yes      No    Yes      Yes      No     Yes     Yes    Yes     No
 Four Winds       Fall River        168     300     Yes     Yes    Yes      Yes      No     Yes     Yes    Yes     No
 Security Manor   Westfield          63      63      No      No    Yes      Yes      No     Yes      No    Yes    Yes
 Van Deene Manor  West Springfield  109     163      No      No    Yes      Yes      No     Yes      No    Yes    Yes
RHODE ISLAND
 Dean Estates II  Cranston           48      75     Yes      No    Yes      Yes      No     Yes     Yes    Yes    Yes
 Royale           Cranston           76     160     Yes      No    Yes      Yes      No     Yes     Yes    Yes    Yes

<CAPTION>

PROPERTY          ADDITIONAL AMENITIES
- ----------------- ------------------------
<S>               <C>
CONNECTICUT
 208-210 Main St. Garages
 Arbor Commons
 Avonplace        Clubhouse, Fitness
                  Center, Swimming Pool,
                  Tennis Courts,
                  Basketball Courts
 Barons
  Apartments
 Bradford
  Apartments      Playground
 Brooksyde        Garages
 Burgundy Studios
 Cambridge
  Estates
 Colonial Village
 Dogwood Hills    Carports, Clubhouse,
                  Fitness Center, Swimming
                  Pool
 Summit & Birch
  Hill            Carports, Swimming Pool
 Fox Hill         Swimming Pool, Tennis
  Apartments      Courts
 Fox Hill Commons
 Greenfield
  Village         Swimming Pool
 Hamden Centre
 High Meadow
 Glastonbury
  Center          Swimming Pool
 Loomis Manor
 Ocean Reef       Fitness Center
 Park Place West
 River's Bend     Clubhouse, Fitness
                  Center, 2 Swimming Pools
                  (indoor & outdoor),
                  Basketball Courts, Boat
                  Launch, Hiking Trails,
                  Water Front Picnic Area
 Sandalwood
 Westwynd
  Apartments      Fitness Center
 Woodbridge
MASSACHUSETTS
                  Clubhouse, Tennis
 Dean Estates     Courts,
 Four Winds       Clubhouse, Fitness
                  Center, 2 Swimming Pools
                  (indoor & outdoor),
                  Jacuzzi,
                  Basketball Courts
 Security Manor
 Van Deene Manor
RHODE ISLAND
 Dean Estates II  Swimming Pool
                  Fitness Center, Swimming
 Royale           Pool
</TABLE>    
 
                                       49
<PAGE>
 
THE RETAIL PROPERTIES
   
  Although the Company's principal focus is the acquisition of under-managed
apartment communities, it will continue to examine select mixed-use and
specialty retail properties that meet management's return requirements. The
Company currently owns three Retail Properties. One of these properties is a
community shopping center in Longmeadow, Massachusetts that contains
approximately 79,000 rentable square feet of retail and office space. The
shopping center was originally constructed by an unaffiliated owner in 1962
and subsequently expanded in 1978, purchased by an affiliate of the Company in
1994 and renovated and retenanted by management at various times from 1994
through 1996. For the nine months ended September 30, 1997, the shopping
center had an average annual rental rate of approximately $12.88 per square
foot and was approximately 96.6% leased to creditworthy tenants including,
among others, CVS, Talbots, Cherry & Webb, Blockbuster Video, BankBoston and
Fleet Bank.     
   
  Two of the Retail Properties are specialty retail properties, which were
acquired from an affiliate of the Company on October 31, 1997. Such properties
are well located in the historic district of Edgartown, Massachusetts, one of
the most affluent towns in Martha's Vineyard. The two properties were
originally constructed in the 1800's. The first building, known as the Wharf
Building, contains approximately 11,000 rentable square feet, and was
renovated by the previous affiliated owner in 1996. As of September 30, 1997,
the Wharf Building had an average annual rental rate of approximately $30.50
per square foot and was 100% leased to Sunglass Hut and three well-known local
tenants, the Wharf Pub, the Great Put On and Destinations. The second
building, known as the Cornerblock, contains approximately 5,400 rentable
square feet, and was substantially renovated by an unaffiliated predecessor
owner in 1988. For the nine months ended September 30, 1997, the Cornerblock
had an average annual rental rate of approximately $34.55 per square foot and
was 100% leased to Compass Bank and two well-known local tenants, Mardells and
Wallace & Company.     
 
THE EXCLUDED PROPERTIES
 
  The Executive Officers hold a direct or indirect interest in nine properties
in which the Company has no ownership interest (the "Excluded Properties").
The Excluded Properties consist of (i) a hotel on Martha's Vineyard; (ii)
three commercial properties, two of which contain residential apartment units
in Mystic, Connecticut; (iii) one commercial property that contains seasonal
retail stores in Watch Hill, Rhode Island; (iv) two apartment communities, one
in Stafford, Connecticut and the other in Fall River, Massachusetts and (v)
two apartment buildings, one of which contains some retail space, in Hartford,
Connecticut. With the exception of the two Hartford properties, each of the
Excluded Properties is currently for sale. The Excluded Properties have not
been acquired by the Company because the Company believes that such properties
do not meet its strategic or investment objectives. The Company currently
provides management services for the Excluded Properties pursuant to
management agreements with the owners of the Excluded Properties. See "Certain
Relationships and Transactions."
 
MANAGEMENT STRATEGIES
 
  Management believes that providing its employees with a positive, rewarding
work environment contributes to the achievement of its business objectives.
Grove believes its on-site employees are the primary means for delivering
service and value to residents of the Company's properties. In order to ensure
that its employees respond effectively to the needs of residents and are
rewarded for their initiatives, the Company has developed a comprehensive
management strategy. Key elements of this strategy include: (i) hiring quality
employees; (ii) encouraging teamwork to pursue common goals; (iii) utilizing
effective employee training programs and management information systems and
(iv) measuring performance and providing employees with incentives.
 
  Grove believes that ensuring on-site management success begins with hiring
quality employees. Because the focus of Grove's on-site management program is
to provide prompt, courteous and responsive service to all
 
                                      50
<PAGE>
 
of its residents, the Company concentrates on hiring individuals who
understand the importance of customer service. Grove seeks out
entrepreneurial, self-motivated, highly-organized, creative people with
positive attitudes, effective communications skills, strong customer service
skills and sales and marketing experience. In hiring apartment maintenance
technicians, the Company seeks individuals with strong technical backgrounds
who will be courteous and responsive to residents.
 
  The Company encourages its employees to use teamwork to pursue common goals
and emphasizes collective decision making in which all employees participate.
To do so, Grove holds weekly and monthly on-site goal meetings at each of the
Apartment Communities. At these meetings, all on-site employees participate in
planning, budgeting and trouble-shooting. In addition, the Company holds
quarterly meetings for its regional property managers, on-site property
managers and senior maintenance personnel at which quarterly results of the
Company, performance of each of the Apartment Communities and other issues are
discussed. The Company also distributes a quarterly employee newsletter that
updates all employees on the Company's financial performance and includes
recent examples of exceptional service to residents.
 
  Grove utilizes effective employee training programs and management
information systems. Personnel are trained extensively and are encouraged, and
in certain cases required, to continue their education through Company-
designed, in-house courses and participation in outside seminars. At their
quarterly meetings, regional property managers, on-site property managers and
senior maintenance personnel attend seminars given by outside consultants. In
addition, Grove supports its employees by updating its management systems. The
management systems at each of the Apartment Communities provide on-site
management, regional property managers and accounting personnel with
meaningful and accurate information, including information on vacancies,
collections, leasing and budget compliance. By monitoring this information,
the Company seeks to ensure that operating costs are minimized and budgeted
targets are met or exceeded.
 
  Grove believes that measuring on-site performance and providing employees
with incentives are essential. The Company views each Property as a separate
business and profit center and, accordingly, measures various performance
criteria at each Property on a monthly basis, including budget compliance, net
operating income, economic occupancy, cash flow and gross potential rent. In
addition, Grove's regional managers make weekly visits to each Property and
accounting personnel make monthly visits to each Property. The information
generated is used to set team and personal goals. The Company also uses
various resident surveys to measure on-site performance, including soliciting
service satisfaction responses for maintenance services, conducting periodic
resident surveys and interviewing departing residents. Additionally, Grove
employs a program in which new leasing employees pose as potential residents
at a number of the Apartment Communities and provide constructive criticism
and feedback to fellow leasing agents.
 
  The Company has created a number of incentives, as well as opportunities for
long-term career advancement, to reward and retain its outstanding employees.
Grove maintains a bonus program under which all property management and
maintenance personnel can earn bonuses of up to an additional 25% of their
monthly base salaries based upon their respective Apartment Community's out-
performing profitability goals. At its quarterly meetings for regional
property managers, on-site property managers and senior maintenance personnel,
the Company recognizes outstanding performance by awarding merit certificates
and cash bonuses. In addition, regional property managers and other senior-
level employees will receive options to purchase Common Shares at the closing
of the Offering that will generally vest over three years. The Company also
demonstrates its commitment to its employees by showing a preference for
promoting from within.
 
PROPERTY MANAGEMENT
 
  Grove manages its portfolio through its staff of approximately 130 full-time
professional and support personnel and approximately 40 part-time support
personnel, including the Chief Operating Officer and regional property
managers at the corporate level and property managers, service technicians,
leasing agents, porters and landscapers at the property level. The chief
operating officer, regional property managers and on-site personnel are
supported by seven accounting and administrative employees.
   
  The management team's in-depth experience and size enable it to deliver
uninterrupted quality services, thereby promoting resident satisfaction and
improving resident retention. During 1995, 1996 and the nine months     
 
                                      51
<PAGE>
 
   
ended September 30, 1997 (annualized), the Company experienced average
retention rates of 60%, 61% and 60%, respectively. Grove's property management
division plays a critical role in the Company's growth strategy of acquiring,
repositioning and effectively managing previously under-managed properties to
increase revenues and reduce operating cost. Before the Company makes an
acquisition, the property management division works closely with the Company's
acquisition and development teams to evaluate potential repositioning
strategies. Once a property has been acquired, the management division
implements on-site management programs, accounting systems, marketing systems
and resident quality control and retention procedures.     
   
  On-site property management teams perform leasing and rent collection
functions and coordinate resident services. The focus of the Company's on-site
management program is to provide prompt, courteous and responsive service to
its residents. For 1996 and the nine months ended September 30, 1997, the
percentage of residents returning service satisfaction responses that rated
the Company's maintenance services as "excellent" or "good" was 93.8% and
94.6%, respectively.     
 
  Grove's marketing personnel attempt to ensure that each Apartment Community
is effectively marketed through aggressive promotion and realistic pricing.
The Company uses newspaper advertisements, resident referrals, apartment
guides and the Internet to market and advertise the Apartment Communities.
Approximately 55% of the Company's apartments are leased through newspaper
advertisements, approximately 20% through resident referrals, approximately
20% through apartment guides and approximately 5% through the Internet. Grove
typically offers residents a referral incentive bonus of approximately $100.
The Company supplements its marketing and advertising with point-of-purchase
materials and well-maintained properties.
 
  The Company's marketing personnel proactively market the Apartment
Communities on a continual basis, rather than waiting until vacancies occur,
and take steps necessary to avoid turnover by quality residents, which steps
include high quality customer service throughout the lease term as well as
renewal incentives. In addition, on-site property management staff monitor the
success of the Company's aggressive marketing programs by preparing marketing
reports that track each Apartment Community's occupancy, lease expiration,
prospective resident traffic, unit availability, renewal rates, rental rates
and resident profile information. All members of the on-site staff participate
in weekly goal-setting sessions to evaluate these marketing reports and
examine issues related to resident underwriting.
 
  On-site management is aided by the regional managers and accounting
personnel. Regional managers monitor performance criteria at each Apartment
Community on a weekly and monthly basis and visit the Apartment Communities on
a weekly basis. The accounting division is managed by the Company's
Controller. The accounting staff audits and monitors each Apartment
Community's financial records, including monthly income and expense reports,
bank statement reconciliations, rent rolls, economic reports and budget
compliance. Staff members visit each site on a regular basis to conduct on-
site audits, supervise bookkeeping and provide ongoing training to personnel.
The information generated during these visits is used by the Company's on-site
management staff to set team and personal goals that relate to budget and
fiscal matters on a weekly and monthly basis.
 
  Prior to entering into leases, Grove conducts thorough background
investigations of potential residents, including credit checks, prior landlord
checks and employer verifications. Substantially all of the apartments in the
Apartment Communities are rented pursuant to standard twelve-month leases,
which facilitate uniform lease administration by helping to standardize rent
collections, security deposit dispositions, evictions, repairs and renewals.
The Company typically requires residents to provide security deposits equal to
one month's rent. In addition, the Company manages lease expirations to ensure
that vacancies occur on a staggered basis.
 
  The Company's marketing and leasing procedures are designed to ensure
compliance with all federal, state and local laws and regulations.
Underwriting guidelines for prospective residents comply with FHAA and ADA
regulations and are designed to stabilize cash flows. None of the Apartment
Communities is currently subject to rent control or rent stabilization
regulation.
 
  In addition to managing the Properties, the Company provides management
services for nine properties in which the Executive Officers have interests.
See "Certain Relationships and Transactions--Management of Excluded
Properties."
 
                                      52
<PAGE>
 
EMPLOYEES
 
  As of September 30, 1997, the Company employed approximately 170 persons,
including the five Executive Officers, none of whom is represented by a labor
union. The Company considers its relations with its employees to be good.
 
COMPETITION
   
  All of the Apartment Communities are located in developed areas that include
other apartment communities. The number of competitive apartment properties in
a particular area could have a material effect on the Company's ability to
lease apartment units at the Apartment Communities or at any newly developed
or acquired properties and on the rents charged. There are numerous real
estate companies, including those operating in the markets in which the
Properties are located, which compete with the Company in seeking properties
for acquisition and for tenants to occupy such properties. The Company may
compete with companies that have greater resources than the Company and whose
officers and directors or trustees may have more experience than the Company's
officers and Trust Managers. Further, the availability of single-family
housing and other forms of multifamily residential properties, such as
manufactured housing communities, provide alternatives to existing and
potential residents of apartment communities. The availability of such
alternatives and competition generated thereby could increase in the future.
    
LEGAL PROCEEDINGS
 
  Neither the Company nor the Properties are presently subject to any material
litigation, nor, to the Company's knowledge, is material litigation threatened
against the Company or any of the Properties other than routine litigation
arising in the ordinary course of business, some of which is expected to be
covered by liability insurance and all of which, collectively, is not expected
to have a material adverse effect on the business, financial condition or
results of operations of the Company.
 
REGULATION
 
  General. Multifamily apartment properties are subject to various laws,
ordinances and regulations, including regulations relating to recreational
facilities such as swimming pools, activity centers and other common areas.
The Company believes that under present laws, ordinances and regulations, it
has the necessary permits and approvals to operate the Properties.
   
  Americans With Disabilities Act. The Properties and any newly acquired
properties must comply with Title III of the ADA to the extent that such
properties are "public accommodations" and/or "commercial facilities" (each as
defined by the ADA). Compliance with the ADA could require removal of
structural barriers to handicapped access in certain public areas of the
Properties where such removal is readily achievable. The ADA does not,
however, consider residential properties, such as multifamily properties, to
be public accommodations or commercial facilities, except to the extent
portions of such facilities, such as a leasing office, are open to the public.
Noncompliance with ADA requirements could result in imposition of fines or an
award of damages to private litigants. Although the Company believes that the
Properties are in substantial compliance with all requirements under the ADA
and applicable state laws as currently in effect, the Company may incur
additional costs to comply with such laws. Although the Company believes that
such costs will not have a material adverse effect on the Company, if required
changes involve greater expenditures than the Company currently anticipates,
or if the changes must be made on a more accelerated basis than it
anticipates, the Company's cash flow and ability to make expected
distributions could be adversely affected. The Company believes that its
competitors face similar costs to comply with requirements of the ADA.     
   
  Fair Housing Amendments Act of 1988. The FHAA requires multifamily
properties first occupied after March 13, 1990 to be accessible to the
handicapped. Noncompliance with the FHAA could result in the imposition of
fines or an award of damages to private litigants. The Company believes that
the Properties that are subject to the FHAA are in substantial compliance with
such law.     
 
                                      53
<PAGE>
 
  Rent Control Legislation. State and local rent control laws in certain
jurisdictions limit a property owner's ability to increase rents and to
recover increases in operating expenses and costs of capital improvements from
residents. Enactment of such laws has been considered from time to time in
other jurisdictions, although such laws have not been adopted in the
jurisdictions in which the Company operates. The Company does not presently
intend to acquire multifamily properties in jurisdictions that are either
subject to rent control or in which rent limiting legislation exists.
 
ENVIRONMENTAL MATTERS
 
  Under various federal, state and local laws, ordinances and regulations
relating to the protection of the environment, a current or previous owner or
operator of real estate may be held liable for the costs of investigations or
performing removal or remediation of certain hazardous or toxic substances or
petroleum products released on, under, in, emitting from, or located on, under
or in the property and may be held liable to a governmental entity or third
parties for damages, investigation, remediation, or other costs associated
with such contamination. These laws often impose liability without regard to
whether the owner was responsible for, or even knew of, the presence of such
hazardous or toxic substances or petroleum products. The costs of
investigation, removal or remediation of such substances may be substantial,
and the presence of such substances may adversely affect the owner's ability
to rent or sell the property or to borrow using such property as collateral
and may expose it to liability resulting from any release or exposure of such
substances. Moreover, certain loan documents provide for recourse liability in
connection with hazardous or toxic substances. Persons who arrange for the
disposal or treatment of hazardous or toxic substances at another location may
also be liable for the costs of removal or remediation of such substances at
the disposal or treatment facility, whether or not such facility is owned or
operated by such person. Certain environmental laws impose liability for
release of ACM's into the air, and third parties may also seek recovery from
owners or operators of real properties for personal injury associated with
ACM's and other hazardous or toxic substances or petroleum products. In
connection with the ownership (direct or indirect), operation, management and
development of real properties, the Company may be considered an owner or
operator of such properties regulated by such laws, ordinances, and
regulations relating to the protection of the environment or as having
arranged for the off-site disposal or treatment of hazardous or toxic
substances and, therefore, if environmental contamination were to be found at
such real properties or off-site locations, the Company could be potentially
liable for removal or remediation costs, as well as certain other related
costs, including governmental penalties and injuries to persons and property.
 
  Federal legislation requires owners and landlords of residential housing
constructed prior to 1978 to disclose to potential residents or purchasers of
the properties any known lead-paint hazards and will impose treble damages for
failure to give the required notice. The existence of lead-based paint in a
property may result in lead poisoning in children residing therein if chips or
particles of lead-based paint are ingested, and the Company may be held liable
under state laws for any injuries caused by ingestion of lead-based paint by
children living at the Apartment Communities or any apartment properties
acquired by the Company in the future.
 
  All of the Properties were subject to Phase I (or an update of a prior Phase
I) or similar environmental assessments by independent environmental
consultants. Phase I assessments are intended to discover information
regarding, and to evaluate the environmental condition of, the surveyed
property and surrounding properties. Phase I assessments generally include a
historical review, a public records review, a preliminary investigation of the
surveyed site and surrounding properties, and preparation and issuance of a
written report, but do not include soil sampling or subsurface investigations.
 
  The environmental assessments disclose that certain underground storage
tanks ("UST's"), which have been removed from the Sandalwood, Fox Hill Commons
and Ocean Reef, need to be registered with the Connecticut Department of
Environmental Protection ("DEP"). The environmental assessments also disclose
that four properties include floor drains which need to be sealed or for which
permits must be obtained from DEP. The Company intends to comply with the DEP
registration and permit requirements related to UST's and floor drains.
 
                                      54
<PAGE>
 
   
  Various environmental laws and regulations also control how certain
activities can or must be conducted at the Properties. Such requirements
govern maintenance activities, renovation projects and other worker operations
involving asbestos or lead-based paint. They also may govern air emissions,
wastewater discharges, waste management or similar activities related to
operation of the Properties. No assurance can be given that the cost of
complying with such requirements in connection with any of the Properties will
not require any material expenditures by the Company in the future.     
 
  Under various laws and regulations, owners and operators of underground and
aboveground storage tanks containing petroleum are obligated to meet certain
construction and operating standards. In addition, such tank owners and
operators are responsible for remediating any contamination caused by
petroleum released from such tanks. While currently available information does
not indicate that the Company currently has any material liabilities related
to such tanks, no assurance can be given that the Company will not be required
to make such material expenditures in the future.
   
  Grove's environmental assessments of the Properties have not revealed any
environmental liability that the Company believes would have a material
adverse effect on its business, assets or results of operations taken as a
whole, nor is the Company aware of any such material environmental liability.
Nonetheless, it is possible that the Company's assessments do not reveal all
environmental liabilities or that material environmental liabilities exist of
which the Company is unaware. Moreover, there can be no assurance that (i)
future laws, ordinances or regulations or new interpretations of existing laws
or regulations will not impose any material environmental liability or (ii)
the current environmental condition of the Properties will not be affected by
tenants, by the condition of land or operations in the vicinity of the
Properties (such as the presence of leaking UST's), or by third parties
unrelated to the Company so as to impose any material environmental liability.
    
INSURANCE
 
  Grove carries comprehensive liability, fire, flood (where required) and
extended coverage and rental loss insurance on all of the Properties with
policy specifications, insured limits and deductibles customarily carried for
similar properties. There are, however, certain types of losses which may be
either uninsurable or not economically insurable, such as those resulting from
earthquakes, floods, tidal waves, explosion of water pipes, nuclear hazards,
wars, civil disturbances and environmental matters. Should an uninsured loss
or a loss in excess of insured limits occur, Grove could lose both its
investment in and anticipated profits and cash flow from such property while
it would continue to be obligated on any mortgage indebtedness or other
financial obligations on such property. Any such loss would adversely affect
the Company and its financial condition and results of operations. Management
of the Company believes that the Company and the Properties are insured in
accordance with industry standards.
 
 
                                      55
<PAGE>
 
                                  MANAGEMENT
 
TRUST MANAGERS AND EXECUTIVE OFFICERS
 
  The following table sets forth certain information with respect to Trust
Managers and Executive Officers of the Company:
 
<TABLE>   
<CAPTION>
NAME                     AGE POSITIONS AND OFFICES HELD
- ----                     --- --------------------------
<S>                      <C> <C>
Damon D. Navarro........  43 Chairman of the Board, President and Chief Executive Officer
Joseph R. LaBrosse......  34 Chief Financial Officer, Secretary, Treasurer and Trust Manager
Edmund F. Navarro.......  37 Chief Operating Officer and Trust Manager
Theodore R. Bigman......  35 Trust Manager
James F. Twaddell.......  58 Trust Manager
Harold V. Gorman........  53 Trust Manager
J. Joseph Garrahy.......  66 Trust Manager
Brian A. Navarro........  42 Executive Vice President--Acquisitions
Gerald A. McNamara......  57 Executive Vice President--Marketing and Strategic Planning
</TABLE>    
 
  Pursuant to the terms of the Charter, the Board must consist of not less
than two nor more than 15 persons, of which a majority must be "Independent
Trust Managers" (who are neither executive officers nor affiliates of the
Company). Trust Managers are divided into three classes serving staggered
three-year terms. The terms of Messrs. Edward Navarro and Twaddell will expire
at the Annual Meeting of Shareholders to be held in 1998; the terms of Messrs.
Garrahy and LaBrosse will expire at the Annual Meeting of Shareholders to be
held in 1999; and the terms of Messrs. Damon Navarro, Gorman and Bigman will
expire at the Annual Meeting of Shareholders to be held in 2000. Trust
Managers whose terms expire at the next annual meeting will hold office until
their successors are duly elected and qualified. The Charter requires majority
approval by the Independent Trust Managers of the Company for all Board
decisions. Currently, the Independent Trust Managers are Messrs. Bigman,
Twaddell, Gorman and Garrahy.
 
  Damon D. Navarro is Chairman of the Board, President and Chief Executive
Officer of the Company. Mr. Navarro co-founded the Company's predecessor in
1980 and is responsible for new business development and strategic planning.
Mr. Navarro is a graduate of the University of Rhode Island with a degree in
Finance.
 
  Joseph R. LaBrosse is Chief Financial Officer, Secretary and Treasurer, as
well as a Trust Manager of the Company. Mr. LaBrosse is responsible for
financing, loan portfolio management, financial reporting, tax planning, cash
management, strategic budgeting and planning. Prior to joining the Company's
predecessor in 1988, Mr. LaBrosse was a real estate tax consultant at Arthur
Andersen & Company in Hartford, Connecticut. Mr. LaBrosse is a magna cum laude
graduate of the University of Connecticut with a degree in Accounting. He is
also a licensed Certified Public Accountant and a member of the American
Institute of Certified Public Accountants, the Connecticut Society of
Certified Public Accountants and the Real Estate Finance Association.
 
  Edmund F. Navarro is Chief Operating Officer and a Trust Manager of the
Company. Mr. Navarro is responsible for managing the day-to-day operations of
the Company and its 170 employees. Mr. Navarro became a principal of Grove's
predecessor in 1983. Prior to his employment with the Company, Mr. Navarro was
a Media Marketing Planner with Vitt Media International in New York City. Mr.
Navarro is a graduate of the University of Rhode Island with a degree in
Marketing.
 
  Theodore R. Bigman has been a Trust Manager of the Company since April,
1997. From 1987 to 1995, he was a Director at Credit Suisse First Boston in
the real estate group, establishing and managing their REIT effort. He had
primary responsibility for $2.5 billion of initial public offerings by REIT's.
Previously, he had extensive real estate experience in a wide variety of
transactions involving the financing and sale of both individual assets and
portfolios of real estate assets, as well as the acquisition of several real
estate companies. Since 1995, he has been a Principal of Morgan Stanley Asset
Management Inc., a subsidiary of Morgan Stanley, responsible for its real
estate securities investment management business. He graduated from Brandeis
University in 1983 with a B.A. in Economics and received an M.B.A. from
Harvard University in 1987.
 
                                      56
<PAGE>
 
  James F. Twaddell is a Trust Manager of the Company. Mr. Twaddell is a
member of the investment banking group of Schnieder Securities, Inc., located
in Providence, Rhode Island. From 1974 through 1995, Mr. Twaddell served as
Chairman of Barclay Investments, Inc., a member firm of the National
Association of Securities Dealers, Inc. (the "NASD"). Mr. Twaddell also served
as Chairman of Regional Investment Brokers, Inc., a 125-member cooperative
association of regional investment bankers and broker/dealers conducting
business throughout the United States. For the 1993-1995 term, he was elected
to serve on both the NASD District 11 Committee and the District Business
Conduct Committee. He has served as Chairman of the Board of First Mutual
Fund, a 30-year old publicly-traded mutual fund, since 1979. Mr. Twaddell
received his B.A. from Brown University in 1961.
   
  Harold V. Gorman is a Trust Manager of the Company. From 1968 to 1993, Mr.
Gorman served as Vice President and Assistant General Counsel of IDV North
America. From October 1993 to March 31, 1995, he served as Vice
President/General Counsel to the Paddington Corporation. Since April 1, 1995,
Mr. Gorman has served as Vice President and Senior Regulatory Counsel for
Heublein, Inc., located in Hartford, Connecticut. He received his B.A. from
Wesleyan University in 1965 and his J.D. from the University of Connecticut
Law School. Mr. Gorman is a member of each of the Connecticut Bar Association,
the American Bar Association and the Board of Directors of the Arthritis
Society.     
 
  J. Joseph Garrahy is a Trust Manager of the Company. Governor Garrahy began
his career in public service in 1962 as a Rhode Island State Senator. In 1968,
he was elected Lieutenant Governor of Rhode Island, where he served four two-
year terms. In 1976, Governor Garrahy was elected Governor of Rhode Island,
and was reelected in 1978, 1980 and 1982. He served as Chairman of the
National Governors' Association's Subcommittee on Health Policy in 1977 and
the National Governors' Association's Human Services Committee as Chairman of
the Coalition of Northeast Governors' Committee on Transportation. Governor
Garrahy was a Senior Vice President with the merchant banking firm of G.
William Miller & Company, Inc. of Washington, D.C. from 1985 to 1990. Governor
Garrahy has served as President of J. Joseph Garrahy & Associates, Inc., a
consulting firm, in Providence, Rhode Island, since its formation in 1990.
Governor Garrahy attended the University of Buffalo and the University of
Rhode Island.
 
  Brian A. Navarro is Executive Vice President--Acquisitions of the Company.
Mr. Navarro is responsible for the acquisition and disposition of properties
for the Company. Prior to co-founding the Company's predecessor in 1980, Mr.
Navarro acquired, renovated and sold over 30 residential properties in the
Hartford, Connecticut, Springfield, Massachusetts and Westerly, Rhode Island
markets. Mr. Navarro is a graduate of the University of Connecticut with a
degree in Finance and a concentration in Real Estate.
 
  Gerald A. McNamara is Executive Vice President--Marketing and Strategic
Planning of the Company. Mr. McNamara has been a principal and vice president
of the Company and its predecessor since 1982. Mr. McNamara is responsible for
public relations and strategic planning. Prior to joining the Company,
Mr. McNamara was Senior Vice President of Heublein International, responsible
for its food and beverage operations overseas. Mr. McNamara is a graduate of
Trinity College with a degree in History and Economics.
   
  Messrs. Damon, Brian and Edmund Navarro are brothers. No family
relationships exist among any of the other Trust Managers or Executive
Officers of the Company. No arrangement or understanding exists between any
Trust Manager or Executive Officer or any other person pursuant to which any
Trust Manager or Executive Officer was selected as a Trust Manager or
Executive Officer, except that Mr. Bigman was elected to the Board following
the closing of the Consolidation Transactions in accordance with an agreement
with MSGI. The agreement that requires the election of a nominee of MSGI will
terminate upon consummation of the Offerings. Subject to the provisions of
their respective employment agreements, if any, executive officers of the
Company are elected by and serve at the discretion of the Board. See "--
Employment Agreements" and "--Non-Competition Agreements."     
 
                                      57
<PAGE>
 
COMMITTEES OF THE BOARD
 
  Audit Committee. An Audit Committee of the Board has been established,
consisting of two Independent Trust Managers. The Audit Committee makes
recommendations concerning the engagement of independent public accountants,
reviews with the independent public accountants the plans and results of audit
engagements, approves professional services provided by the independent public
accountants, reviews the independence of the independent public accountants,
considers the range of audit and non-audit fees and reviews the adequacy of
the Company's internal accounting controls. The current members of the Audit
Committee are Messrs. Gorman and Garrahy.
 
  Acquisition and Investment Committee. The Board has established an
Acquisition and Investment Committee. The Acquisition and Investment Committee
has the authority to acquire, dispose of and finance investments for the
Company (including the direct or indirect purchase or sale by the Company of
real estate properties or interests in real estate properties) and to execute
contracts and agreements, including those related to the borrowing of money by
the Company or the purchase or sale by the Company of direct or indirect
interests in real properties, and generally to exercise all other powers of
the Trust Managers except those which require action by all Trust Managers or
the Independent Trust Managers under the Charter or Bylaws or under applicable
law. The current members of the Acquisition and Investment Committee are
Messrs. Garrahy, E. Navarro and Bigman.
 
  Compensation Committee. The Board has established a Compensation Committee,
currently consisting of Independent Trust Managers. The Compensation Committee
has the authority to determine compensation for the Company's Executive
Officers and to administer the 1994 Plan and the 1996 Plan. The Compensation
Committee has the authority to grant share options in accordance with the 1994
Plan to the Trust Managers, Executive Officers, other key employees of the
Company and consultants and to grant share options and share appreciation
rights to the Trust Managers, Executive Officers and other key employees of
the Company in accordance with the 1996 Plan. The current members of the
Compensation Committee are Messrs. Twaddell and Gorman.
 
COMPENSATION OF THE TRUST MANAGERS
 
  Currently, the Company pays the Non-Employee Trust Managers a fee of $1,000
for attending each meeting of the Board. Trust Managers who are employees of
the Company are not paid any trust manager fees. In addition, the Company
reimburses the Trust Managers for travel expenses incurred in connection with
their activities on behalf of the Company.
 
  The 1996 Plan provides that each Non-Employee Trust Manager who is first
elected or appointed after the 1996 Annual Meeting of Shareholders receives an
automatic initial grant of a nonqualified stock option to purchase 10,000
Common Shares. In addition, promptly following the date of each Annual Meeting
of Shareholders, each Non-Employee Trust Manager elected by the shareholders
will receive an additional automatic grant of an option to purchase 5,000
Common Shares; provided, however, that no Non-Employee Trust Manager will
receive more than one such automatic grant in any calendar year. The exercise
price for grants to Non-Employee Trust Managers under the 1996 Plan is 100% of
the fair market value of the Common Shares on the date of grant. Each such
option will expire ten years from the grant date (subject to earlier
termination). Upon the consummation of the Consolidation Transactions, each
Non-Employee Trust Manager received a grant of an option to purchase 10,000
Common Shares at an exercise price equal to the fair market value of the
Common Shares on the date of grant. Non-Employee Trust Managers who assist the
Company in locating acquisitions which are consummated receive a finder's fee
of 0.2% of the acquisition purchase price plus an additional 0.1% if they
participate in the negotiations.
 
                                      58
<PAGE>
 
EXECUTIVE COMPENSATION
 
  The annual base salary of each of Damon D. Navarro, Joseph R. LaBrosse,
Brian A. Navarro and Edmund F. Navarro will increase to $100,000, and the
annual base salary of Gerald A. McNamara will increase to $50,000, upon
consummation of the Offering. Upon consummation of the Offering, it is
expected that the Compensation Committee will grant certain employees,
including the Executive Officers, options to purchase 500,000 Common Shares in
the amounts set forth in the table below. The Options granted under the 1994
Plan and the 1996 Plan prior to and at the Offering are set forth below.
 
                                 OPTION GRANTS
 
<TABLE>
<CAPTION>
   OFFICER/EMPLOYEE                PRIOR TO THE OFFERING AT THE OFFERING  TOTAL
   ----------------                --------------------- --------------- -------
   <S>                             <C>                   <C>             <C>
   Damon D. Navarro...............        105,280            102,133     207,413
   Joseph R. LaBrosse.............         33,227             76,601     109,828
   Brian A. Navarro...............        103,880            102,133     206,013
   Edmund F. Navarro..............        103,880            102,133     206,013
   Gerald A. McNamara.............         27,678             40,000      67,678
   Other Employees................              0             77,000      77,000
                                          -------            -------     -------
     Total........................        373,945            500,000     873,945
                                          =======            =======     =======
</TABLE>
 
EMPLOYMENT AGREEMENTS
 
  The Executive Officers of the Company entered into employment agreements in
March 1997, as amended (collectively, the "Employment Agreements"), which
provide for annual base salaries of $100,000 for Messrs. Damon, Edmund and
Brian Navarro and Joseph LaBrosse and of $50,000 for Mr. Gerald McNamara,
effective upon consummation of the Offering. The Employment Agreements provide
that the Executive Officers shall devote a substantial part of their business
time to the operations of Grove. The Employment Agreements provide for an
initial three-year term which is automatically extended for an additional year
upon expiration of the initial term and any extension period unless either
Grove or the Executive Officer provides the other with at least 120 days'
prior written notice that such term will not be extended. If the Employment
Agreements are terminated by Grove "without cause" or are terminated by the
Executive Officer after a "change in control" or for "good reason," the
Executive Officer will be entitled to a lump sum payment equal to 200 percent
of such Executive Officer's annual base salary plus an amount equal to the
aggregate value of all bonuses, whether cash, shares, options, or otherwise,
granted to such Executive Officer for the previous year.
 
NON-COMPETITION AGREEMENTS
 
  The Executive Officers are parties to non-competition agreements with the
Company (the "Non-Competition Agreements"). The Non-Competition Agreements
preclude the Executive Officers from directly or indirectly developing,
redeveloping, acquiring, managing or operating multifamily or retail mixed-use
properties, other than the Excluded Properties for so long as they are
Executive Officers, Trust Managers, holders of 5% or more of the outstanding
Common Shares or employees of, or consultants to, the Company, and for a
period of twenty-four months after termination of their affiliation with the
Company other than in the event of termination of employment by the Company
without cause or by an Executive Officer in the event of a "change in control"
or "for good reason."
 
  The Executive Officers control or share control, and have substantial
economic interest in, the limited partnerships that own the Excluded
Properties. Ownership and management of the Excluded Properties are
specifically exempted from the provisions of the Non-Competition Agreements.
Certain of the Excluded Properties may compete with some of the Properties for
tenants or require the attention of certain Executive Officers, which could
give rise to conflicts of interest. With the exception of two properties, each
of the Excluded Properties is currently for sale.
 
                                      59
<PAGE>

OPTION PLANS
 
  The Company has in effect the 1994 Plan and the 1996 Plan pursuant to which
117,726 Common Shares and 900,000 Common Shares are reserved, respectively.
 
  The 1994 Plan is administered by the Compensation Committee. No further
options will be granted under the 1994 Plan. Pursuant to the 1994 Plan,
options to purchase an aggregate of 66,147 Common Shares were automatically
granted to certain eligible participants upon consummation of the Company's
initial public offering. These options were incentive stock options ("ISO's")
and were granted to the Executive Officers of the Company in consideration of
their agreement to serve without base compensation pursuant to their then
respective employment agreements with the Company. These ISO's had an exercise
price equal to the public offering price of the Common Shares sold by the
Company in its initial public offering in 1994, although such prices have been
adjusted to reflect the stock dividend paid and the stock split declared by
the Company in 1997. These ISO's, having terms expiring in June 2004, are all
currently exercisable.
   
  Under the 1994 Plan, each Trust Manager who was not also an employee of the
Company (a "Non-Employee Trustee") automatically received upon his initial
election to the Board, a non-qualified stock option (a "Non-Employee Trustee
Option") to purchase 2,000 Common Shares. On each anniversary of his election
to the Board through 1996, each Non-Employee Trustee also received a Non-
Employee Trustee Option to purchase 1,000 Common Shares. The exercise price
for each Common Share covered by a Non-Employee Trustee Option was the fair
market value of a Common Share on the date of grant. Each Non-Employee Trustee
Option expires on the tenth anniversary of the date of grant and, generally,
becomes exercisable in increments of 33 1/3% on each of the first three
anniversaries of the date of grant.     
 
  Options under the 1994 Plan are not transferable and may not be assigned,
provided, however, that the estate of a deceased holder can exercise options.
Options generally will be exercisable by the holder thereof subject to terms
fixed by the Compensation Committee. However, an option will be exercisable
immediately upon the happening of any of the following (but in no event
subsequent to the expiration of the term of an option): (i) the holder's
retirement on or after attainment of age 62; (ii) the holder's disability or
death; (iii) a "change in control" of the Company (as defined in the 1994
Plan) or (iv) except with respect to Non-Employee Trustee Options, the
occurrence of such special circumstances or events as the Compensation
Committee determines merit special considerations.
 
  Awards under the 1996 Plan may be granted to officers and key employees of
the Company or its subsidiaries. Awards are also granted pursuant to formulas
specified in the 1996 Plan to Non-Employee Trust Managers. All employees of
the Company and its subsidiaries, including its Executive Officers, are
eligible to receive awards under the 1996 Plan, subject to the discretion of
the Compensation Committee to determine the particular individuals who, from
time to time, will be selected to receive awards. In addition, stock option
awards have been and will be granted automatically to Non-Employee Trust
Managers pursuant to the terms set forth in the 1996 Plan. Awards to employees
under the 1996 Plan may be in the form of nonqualified share options,
incentive share options, share appreciation rights ("SAR's") restricted shares
and other share-based incentive awards. Awards may be granted singly, in
tandem or in combination with other awards.
 
  All awards under the 1996 Plan will be granted subject to the Ownership
Limit, the Constructive Ownership Limit and the Executive Officer Ownership
Limit and the other restrictions on transfer of Equity Shares contained in the
Charter.
 
  The 1996 Plan provides that each Non-Employee Trust Manager who is first
elected or appointed after March 10, 1997 (the date of shareholder approval of
the 1996 Plan) will receive an automatic initial grant of a nonqualified share
option to purchase 10,000 Common Shares. In addition, promptly following the
date of each Annual Meeting of Shareholders, each Non-Employee Trust Manager
elected by the shareholders (including any director reelected at such meeting)
will receive an additional automatic grant of an option to purchase 5,000
Common Shares; provided, however, that no Non-Employee Trust Manager will
receive more than one such automatic grant in any calendar year. In addition,
pursuant to the 1996 Plan, each of the three Non-Employee Trust Managers in
office at the closing of the Consolidation Transactions automatically received
a nonqualified share option to purchase 10,000 Common Shares.
 
                                      60
<PAGE>
 
                    CERTAIN RELATIONSHIPS AND TRANSACTIONS
 
  Since January 1, 1995, the Company has completed a number of transactions in
which Damon Navarro, Edmund Navarro and Joseph LaBrosse, Executive Officers
and Trust Managers of the Company, and Brian Navarro and Gerald McNamara,
Executive Officers of the Company, have had a direct or indirect interest.
 
THE JANUARY 1996 ACQUISITION
 
  In January 1996, the Company acquired Cambridge Estates, an apartment
property containing 92 apartment units located in Norwich, Connecticut, from
Grove Cambridge Associates Limited Partnership for $4,250,000. Grove Cambridge
Associates Limited Partnership was owned 99% by Grove Norwich Associates
Limited Partnership, 0.5% by Grove Investment Group, Inc. and 0.5% by an
unrelated third party. Grove Norwich Associates Limited Partnership and Grove
Investment Group, Inc., in turn, were owned 50% and 100%, respectively by
Messrs. Damon, Brian and Edmund Navarro. In accordance with the Company's then
effective Second Restated and Amended Declaration of Trust, this transaction
was approved by a majority of the Company's Independent Trust Managers and the
value of Cambridge Estates was appraised by a third-party appraiser. The
purchase price was used to repay loans in the amount of $4,250,000, a majority
of which had been guaranteed by certain of the Executive Officers. Each of
Grove Cambridge Associates Limited Partnership, Grove Norwich Associates
Limited Partnership and Grove Investment Group, Inc. was either dissolved or
acquired by the Company.
 
PROPERTY MANAGEMENT AND CONSTRUCTION SERVICES
   
  Prior to the consummation of the Consolidation Transactions, GPS, a
partnership owned 100% by Messrs. Damon, Brian and Edmund Navarro and Joseph
LaBrosse, provided all of the operating and support functions for the
operation of the Company's four Properties, including building management and
leasing. The management agreement between the Company and GPS provided for a
management fee equal to 5% of gross rental revenues, as defined. Management
fees paid by the Company (excluding its predecessors) to GPS in 1995, 1996 and
for the nine months ended September 30, 1997 were $66,781, $108,731 and
$21,795, respectively. The management-related assets and liabilities of GPS
were acquired in the Consolidation Transactions and GPS is no longer active.
       
  Grove Development Corporation, which was owned 100% by Messrs. Damon, Brian
and Edmund Navarro, provided construction services to the Company prior to
consummation of the Consolidation Transactions. These services were generally
provided at the cost of materials and labor plus a project management and
supervision fee equal to 20% of the direct project costs. During 1995, 1996
and for the nine months ended September 30, 1997, the Company (excluding its
predecessors) paid Grove Development Corporation $14,607, $12,488 and $0,
respectively, for construction services, including reimbursement for the cost
of materials and labor. Grove Development Corporation was acquired by the
Company in the Consolidation Transactions.     
 
LOANS BY NAVAB ASSOCIATES
 
  NAVAB Associates (owned one-quarter each by Damon and Brian Navarro and
Ronald and George Abdow) ("NAVAB") from time to time prior to the
Consolidation Transactions made unsecured demand loans to certain of the
Company's predecessors, with interest payable monthly at a rate equal to 2.5%
over the prime rate. In addition, certain of the Company's predecessors made
unsecured demand loans to NAVAB, with interest payable monthly at a rate equal
to 1.5% below the prime rate. In connection with the Consolidation
Transactions, the Company's predecessors paid $1,286,586 to NAVAB and NAVAB
paid to the Company's predecessors $742,873 as payment in full of the amount
due to or from NAVAB. Substantially all of such net amount was used by NAVAB
to repay a bank loan. The Company is not pursuing additional business with
NAVAB and has been informed that the principals of NAVAB intend to dissolve
the entity.
 
THE CONSOLIDATION TRANSACTIONS
 
  In March 1997, the Company completed the following: (i) the creation of an
UPREIT structure by forming the Operating Partnership to facilitate the
Consolidation Transactions and to provide potential sellers with a
 
                                      61
<PAGE>
 
   
mechanism to defer their tax liability; (ii) the acquisition through the
Operating Partnership of 20 properties owned by affiliates of Grove; (iii) the
acquisition of the property management assets and related liabilities of GPS,
the entity that managed the properties owned by the REIT as well as the 20
properties owned by affiliates of Grove; (iv) a $30 million private placement
(3,333,333 shares at $9.00 per share) of equity securities to investors that
included, among others, MSGI and the Oregon Retirement Fund; (v) the closing
of a $25 million revolving credit facility and a $15 million term loan
facility and the release of guarantees by certain of the Executive Officers
and (vi) an agreement for National Realty to provide certain property related
services to the Company, which agreement will be terminated concurrently with
the Offering.     
 
  The valuation of the properties acquired by the Company in the Consolidation
Transactions was determined based primarily upon a capitalization of net
operating income produced by such properties. This methodology was used
because the Company believed it appropriate to value such properties. No third
party determination of the value was sought or obtained in connection with the
acquisition by the Company of these properties and the value of such
properties was not determined as a result of arms-length negotiations. As a
result, there can be no assurance that the aggregate value of the
consideration paid by the Company for such properties did not exceed the fair
market value of the properties and assets acquired by the Company in
connection with the Consolidation Transactions.
 
  As consideration for their ownership interests in the properties acquired by
the Company in the Consolidation Transactions, persons contributing such
properties to the Company (the "Participants in the Consolidation
Transactions") received an aggregate of 2,114,439 Common Units (having an
aggregate value of approximately $19.0 million, based upon the approximate
market price at the time of the Consolidation Transactions) and $3.4 million
in cash. The Executive Officers received an aggregate of 909,115 Common Units
(having an aggregate value of approximately $8.2 million, based upon the
approximate market price at the time of the Consolidation Transactions) and
$177,669 in cash in connection with the Consolidation Transactions. The
aggregate value of the Common Units received by the Executive Officers
substantially exceeded the book value of the assets that they contributed in
the Consolidation Transactions. The number of Common Units and the cash
received by each of the Executive Officers individually is set forth below.
 
 
<TABLE>
<CAPTION>
    EXECUTIVE OFFICER                                       COMMON UNITS  CASH
    -----------------                                       ------------ -------
    <S>                                                     <C>          <C>
    Damon D. Navarro.......................................   289,874    $85,797
    Brian A. Navarro.......................................   282,322     85,797
    Edmund F. Navarro......................................   247,174      6,075
    Joseph R. LaBrosse.....................................    65,833        --
    Gerald A. McNamara.....................................    23,912        --
</TABLE>
 
MANAGEMENT OF EXCLUDED PROPERTIES
   
  Pursuant to management services agreements, the Operating Partnership
provides property management services with respect to the Excluded Properties
and one other property not owned by the Company in which Executive Officers
have a minority ownership interest. Such management services agreements
provide that the Operating Partnership will receive, with respect to each
property, a fee equal to from 5% to 6% of gross income (excluding interest
income). Such management services agreements have terms of one year and will
automatically renew for successive one-year terms if neither party thereto
gives notice of termination within 90 days prior to the end of the then
current term. For the period from March 14, 1997 through September 30, 1997,
the Company received management fees in the aggregate amount of $355,000.     
 
THE MAY 1997 ACQUISITIONS
 
  Pursuant to a Contribution Agreement dated as of May 30, 1997, effective
June 1, 1997, the Company acquired through the Operating Partnership two
apartment communities and a 29% controlling interest in the partnership that
owns 349 of the 432 units in River's Bend, an apartment community located in
Windsor, Connecticut.
 
 
                                      62
<PAGE>
 
  In connection with these transactions, the Operating Partnership issued an
aggregate of 420,183 Common Units. The Board assigned a value of $10 for each
of the Common Units issued, based upon the approximate market value of the
Common Shares at that time. The Company also assumed mortgage debt with an
aggregate remaining principal amount of $6.2 million, borrowed $1.8 million
under its Credit Facility and used $68,000 of its available cash. As permitted
under the Charter, the Company did not obtain independent appraisals of such
properties, although the transactions were approved by a majority of the
Independent Trust Managers. Of the Common Units issued in connection with
these transactions, an aggregate of 9,625 were issued to entities controlled
50% by Damon Navarro and 50% by Brian Navarro. An additional 68,441 of such
Common Units were issued to a partnership in which Messrs. Damon, Edmund and
Brian Navarro and Joseph LaBrosse are the general partners. For services
rendered in connection with investor communications, negotiation of the
Contribution Agreement dated as of May 30, 1997 and related agreements,
financial analyses of the acquisitions and structuring the transactions,
National Realty was paid an aggregate of $522,000.
 
  On September 30, 1997, the Company acquired the remaining interest in the
entity owning 349 of the 432 units at River's Bend Apartments from a non-
affiliate for a cash payment of $4.9 million and the assumption of mortgage
debt with an aggregate remaining principal amount of $8.6 million. As a
result, the Company owns all of the entity that owns these 349 units. None of
the Executive Officers of the Company received any portion of such cash
payment.
 
THE JULY 1997 ACQUISITIONS
 
  On July 2, 1997, the Company acquired 126 condominium units at Greenfield
Village Condominium in Rocky Hill, Connecticut from an unaffiliated third
party. In connection with the purchase of these units, the Company paid
$107,000 for expense and overhead reimbursement to National Realty.
 
THE SEPTEMBER 1997 ACQUISITIONS
   
  Pursuant to two Offers to Exchange All Outstanding Limited Partnership
Interests in two affiliated partnerships, effective September 1, 1997, the
Company acquired three residential apartment complexes through the Operating
Partnership. In connection with these transactions, the Operating Partnership
issued an aggregate of 325,836 Common Units. The Board assigned a value of
$10.50 for each of the Common Units issued, based upon the approximate market
value of the Common Shares at that time. The Company also assumed mortgage
debt with an aggregate remaining principal amount of $9.8 million, assumed a
short-term liability of $1.1 million, borrowed $750,000 under its Credit
Facility and used $200,000 of its available cash. As permitted under the
Charter, the Company did not obtain independent appraisals of such properties,
although the transactions were approved by a majority of the Independent Trust
Managers. Of the Common Units issued in connection with these transactions,
3,718 were issued to an entity controlled 50% by Damon Navarro and 50% by
Brian Navarro and 794 were issued to an entity owned 32.34% by Damon Navarro
and Brian Navarro. An additional 41,579 of such Common Units were issued to a
partnership in which Messrs. Damon, Edmund and, Brian Navarro and Joseph
LaBrosse are the general partners. In connection with this acquisition, the
Company will pay National Realty a fee estimated to be $50,000.     
   
THE OCTOBER 1997 ACQUISITIONS     
   
  On October 31, 1997, the Company closed the acquisitions of one multifamily
property containing a total of 100 units and two affiliate-owned retail
properties containing a total of approximately 16,400 rentable square feet. In
connection with these transactions, the Company issued an aggregate of 148,668
Common Units and paid an aggregate of approximately $7.0 million in cash. The
Board assigned a value of $10.50 for each of the Common Units issued, based
upon the approximate market value of the Common Shares at the time the
acquisitions were approved by the Board. As permitted under the Charter, the
Company did not obtain independent appraisals of such properties, although the
transactions were approved by a majority of the Independent Trust Managers. Of
the Common Units issued in connection with these transactions, 3,256 were
issued to an entity owned 40% by Damon Navarro, 40% by Brian Navarro and 20%
by Edmund Navarro. In connection with these acquisitions, the Company will pay
National Realty a fee estimated to be $120,000.     
 
                                      63
<PAGE>
 
BROKERAGE SERVICES
 
  Following the consummation of the Consolidation Transactions, National
Realty, which is 100% owned by Messrs. Damon, Brian and Edmund Navarro and
Joseph LaBrosse, provided real estate brokerage and related services to the
Company. Prior to the Consolidation Transactions, these services were provided
by GPS. The real estate brokerage services performed by National Realty for
the Company prior to the completion of the Offering included the finding,
underwriting and negotiation of purchase contracts with respect to properties
to be acquired by the Company, the negotiation of the contracts with respect
to properties to be sold by the Company and certain commercial leasing
services. In connection with such services, National Realty received a
commission on purchases or sales arranged by National Realty of less than 2%.
The brokerage services contracts provided for indemnification by the Operating
Partnership of National Realty and its affiliates for any liability incurred
in performing such services, except in certain circumstances. The brokerage
services contracts were not negotiated on an arm's-length basis and Messrs.
Damon, Brian and Edmund Navarro and Mr. Joseph LaBrosse may have had conflicts
of interest (due to their ownership of National Realty) in connection with the
brokerage services contracts and the provision of real estate brokerage
services by National Realty to the Company. In connection with the Offering,
the employees of National Realty related to its real estate brokerage service
will become employees of the Operating Partnership. Thereafter, the Company
believes National Realty will cease operations.
 
GUARANTEES BY DAMON AND BRIAN NAVARRO
 
  Guarantees of approximately $20.3 million of mortgage indebtedness on four
of the Properties guaranteed by Messrs. Damon and Brian Navarro will be
released upon the repayment of such indebtedness from the net proceeds of the
Offerings. See "Use of Proceeds."
 
                                      64
<PAGE>
 
                            PRINCIPAL SHAREHOLDERS
   
  The following table sets forth certain information as of November 1, 1997
concerning the beneficial ownership of Common Shares and Common Units owned
directly or indirectly by (i) each Trust Manager of the Company; (ii) each
Executive Officer of the Company, (iii) all Trust Managers and Executive
Officers as a group, and (iv) each person believed by the Company, based
solely on a review of Schedules 13D filed with the Commission, to be the
beneficial owner, as defined in Rule 13d-3 under the Exchange Act, of more
than 5% of the outstanding Common Shares. Each person named below has sole
voting and investment power with respect to the shares listed, except where
noted.     
 
  The information presented assumes that all Common Units are redeemed by the
holders thereof and that the Company issues Common Shares on a one-for-one
basis upon such redemptions.
 
<TABLE>   
<CAPTION>
                                                   NUMBER OF     PERCENTAGE OF
NAME AND ADDRESS OF                                 COMMON          COMMON
BENEFICIAL OWNER(1)                                 SHARES          SHARES
- -------------------                                ---------     -------------
<S>                                                <C>           <C>
MSGI(2)...........................................   777,778         11.2%
 1585 Broadway
 New York, New York 10036
Oregon Retirement Fund............................   391,392          5.6%
 c/o ABKB/LaSalle Securities Limited
 100 East Pratt Street
 Baltimore, Maryland 21202
Damon D. Navarro..................................   373,708(3)       5.4%
Joseph R. LaBrosse................................    87,337(4)       1.3%
Edmund F. Navarro.................................   320,376(5)       4.6%
Theodore R. Bigman................................   777,778(6)      11.2%
James F. Twaddell.................................    43,311(7)        *
Harold V. Gorman..................................     3,542(8)        *
J. Joseph Garrahy.................................     3,542(9)        *
Brian A. Navarro..................................   363,318(10)      5.2%
Gerald A. McNamara................................    49,117(11)       *
Trust Managers and Executive Officers as a Group
 (9 Persons)...................................... 2,022,029(12)     28.7%
</TABLE>    
- --------
  *  Less than 1%.
 (1) Unless otherwise indicated, the business address of each person listed is
     598 Asylum Avenue, Hartford, Connecticut 06105.
   
 (2) MSGI has sole voting and dispositive power as to 70,707 Common Shares,
     and shares such power with Morgan Stanley Asset Management, Inc., its
     wholly owned subsidiary, as to 707,071 shares.     
   
 (3) Includes 330,852 Common Shares which might be acquired by Mr. Navarro
     upon redemption of an equal number of Common Units and 22,248 Common
     Shares which could be acquired within 60 days upon exercise of options.
            
 (4) Includes 76,883 Common Shares which might be acquired by Mr. LaBrosse
     upon redemption of an equal number of Common Units and 5,550 Common
     Shares which could be acquired within 60 days upon exercise of options.
            
 (5) Includes 280,357 Common Shares which might be acquired by Mr. Navarro
     upon redemption of an equal number of Common Units and 20,848 Common
     Shares which could be acquired within 60 days upon exercise of options.
            
 (6) Represents the Common Shares which are owned by MSGI as to which Mr.
     Bigman has shared voting and investment power.     
   
 (7) Includes 11,221 and 3,542 Common Shares which could be acquired by Mr.
     Twaddell within 60 days upon exercise of warrants and options,
     respectively.     
   
 (8) Common Shares which could be acquired by Mr. Gorman within 60 days upon
     exercise of options.     
   
 (9) Includes 3,148 Common Shares which could be acquired by Mr. Garrahy
     within 60 days upon exercise of options.     
   
(10) Includes 323,299 Common Shares which might be acquired by Mr. Navarro
     upon redemption of an equal number of Common Units and 20,848 Common
     Shares which could be acquired within 60 days upon exercise of options.
            
(11) Includes 40,750 Common Shares which might be acquired by Mr. McNamara
     upon redemption of an equal number of Common Units and 4,528 Common
     Shares which could be acquired within 60 days upon exercise of options.
            
(12) Includes 1,052,092 Common Shares which might be acquired upon redemption
     of an equal number of Common Units and 11,221 and 84,254 Common Shares
     which could be acquired within 60 days upon exercise of warrants and
     options, respectively.     
 
                                      65
<PAGE>
 
                 DESCRIPTION OF SHARES OF BENEFICIAL INTEREST
 
  The following summary of the Company's capital shares does not purport to be
complete, and is qualified in its entirety by reference to the pertinent
sections of the Charter, which is filed as an exhibit to or incorporated by
reference to the Registration Statement of which this Prospectus is a part
(the "Registration Statement"). See "Available Information."
 
  The Company is a REIT. Rights of shareholders are governed by the Maryland
Real Estate Investment Trust Act and related statutes (collectively, the
"Maryland REIT Act"), the Charter and the Company's Bylaws.
   
  General. The Charter provides that the Company may issue up to 14,000,000
shares of beneficial interest, consisting of 13,999,000 Common Shares and
1,000 Preferred Shares. The Transfer Agent and Registrar for the Common Shares
is BankBoston, N.A.     
 
  Indemnification for, and Limitation on, Liability. Both the Maryland REIT
Act and the Charter provide that no shareholder will be personally liable for
any obligation of the Company solely as a result of his, her or its status as
a shareholder of the Company. The Bylaws further provide that the Company
shall indemnify each shareholder against any claim or liability for which the
shareholder may become subject by reason of being or having been a
shareholder, and that the Company shall pay or reimburse each shareholder for
all legal and other expenses reasonably incurred in connection with any such
claim or liability. In addition, it is the Company's policy that shareholders
assume no personal liability for obligations entered into on behalf of the
Company. However, with respect to tort claims, contractual claims where
shareholder liability is not so negated, claims for taxes and certain
statutory liability, shareholders may, in some jurisdictions, be personally
liable to the extent that such claims are not satisfied by the Company.
Inasmuch as the Company carries public liability insurance which it believes
will be adequate, any risk of personal liability to shareholders is limited to
a situation in which the Company's assets plus its insurance coverage would be
insufficient to satisfy such claims against the shareholders.
 
  Under the Charter and the Company's Bylaws, the Company has similar
indemnification obligations to the Trust Managers and officers and to persons
who, at the request of the Company, serve or have served another corporation,
partnership, joint venture, trust, employee benefit plan or any other
enterprise as a director, officer, shareholder or trustee to the maximum
extent permitted by Maryland law as in effect from time to time unless (i)
such person's 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) such person actually received an improper benefit
or profit in money, property or services actually received or (iii) in the
case of a criminal proceeding, such person had reasonable cause to believe his
or her act or omission was unlawful. The Charter further provides that, to the
maximum extent permitted by Maryland law as in effect from time to time, no
Trust Manager or officer is liable to the Company or any shareholder of the
Company for money damages. Under the Maryland REIT Act, the provision of the
Charter limiting the liability of Trust Managers and officers is not
applicable (a) to the extent that it is proved that the Trust Manager or
officer actually received an improper benefit or profit in money, property or
services, for the amount of the benefit or profit in money, property or
services actually received or (b) to the extent that a judgment or other final
adjudication adverse to the Trust Manager or officer is entered in a
proceeding based on a finding in the proceeding that such Trust Manager's or
officer'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. Indemnification of any such person by the Company may also be made
in accordance with any indemnification agreement which the Company may enter
into with such person.
 
  Rights with Respect to Dividends and in the Event of Liquidation,
Dissolution or Winding-Up. All issued and outstanding Common Shares are duly
authorized, fully paid and nonassessable. Subject to the preferential rights
of any other shares or series of shares of beneficial interest (if any),
holders of Common Shares are entitled to receive dividends if, as and when
authorized and declared by the Board out of assets legally available therefor,
and to share ratably in the assets of the Company legally available for
distribution to its shareholders in the event of its liquidation, dissolution
or winding-up after payment of, or adequate provision for, all known debts and
liabilities of the Company.
 
                                      66
<PAGE>
 
  Voting Rights. Each outstanding Common Share entitles the holder thereof to
one vote on all matters submitted to a vote of shareholders, including the
election of Trust Managers, and, except as otherwise required by law or except
as provided with respect to any other class or series of shares of beneficial
interest, the holders of Common Shares will possess exclusive voting power.
Shareholders have the right to vote only on the following matters: (i) the
election or removal of Trust Managers; (ii) the amendment of the Charter;
(iii) the voluntary dissolution or termination of the Company; (iv) the
reorganization of the Company and (v) the merger or consolidation of the
Company or the sale or other disposition of all or substantially all of its
assets. There is no cumulative voting in the election of Trust Managers, which
means that the holders of a majority of the outstanding Common Shares can
elect all of the Trust Managers then standing for election, and the holders of
the remaining shares of beneficial interest, if any, will not be able to elect
any Trust Managers. The Charter permits the Trust Managers to amend the
Charter, by a two-thirds vote, from time to time to enable the Company to
qualify as a REIT under the Internal Revenue Code or the Maryland REIT Act
without the affirmative vote or written consent of the shareholders.
 
  The Company's Bylaws contain provisions requiring shareholders to provide
advance notice to the Company before presenting a nomination or bringing any
other business before an annual meeting of the Company's shareholders. Such
notice must be received by the Company not less than 60 nor more than 90 days
before the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is more than 30
days before or 60 days after such first anniversary, then notice by the
shareholders must be delivered not earlier than the 90th day prior to such
annual meeting and not later than the close of business on the later of the
60th day prior to such annual meeting or the tenth day following the day on
which public announcement of the date of such meeting is first made. The
Company's Bylaws further specify information which must be included in any
such notice. If a shareholder fails to comply with these procedures, any
nomination or other business which the shareholder proposes to bring before
the annual meeting will be considered not properly brought before the meeting.
 
  Other Rights. Under the Charter, holders of Common Shares have no
conversion, sinking fund, redemption or preemptive rights to subscribe for any
securities of the Company. Subject to the provisions of the Charter regarding
Excess Shares, and to any future classification of Common Shares (see "--
Preferred Shares in General" and "--Classification or Reclassification of
Common Shares or Preferred Shares"), Common Shares have equal voting,
dividend, distribution, liquidation and other rights, and have no preference,
exchange or, except as expressly required by the Maryland REIT Act, appraisal
rights.
 
  Preferred Shares in General. Preferred Shares may be issued from time to
time, in one or more series, as authorized by the Board. Prior to issuance of
shares of each series, the Board is required by the Maryland REIT Act and the
Charter to designate for each such series, subject to the provisions of the
Charter regarding Excess Shares, the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends or other
distributions, qualifications and terms or conditions of redemption, as are
permitted by Maryland law. The Board could authorize the issuance of Preferred
Shares with terms and conditions which could have the effect of discouraging a
takeover or other transaction which holders of some, or a majority, of the
Common Shares might believe to be in their best interests or in connection
with which holders of some, or a majority, of the Common Shares might receive
a premium for their Common Shares over the then-prevailing market price of
such Common Shares. As of the date hereof, no Preferred Shares are
outstanding.
 
  Classification or Reclassification of Common Shares or Preferred
Shares. Subject to the express terms of any series of Preferred Shares or any
class of Common Shares then outstanding and to the provisions of the Charter
regarding Excess Shares, the Charter authorizes the Board to increase or
decrease the number of, alter the designation of or classify or reclassify any
unissued shares by setting or changing, in any one or more respects, from time
to time before issuing the shares, the terms, preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications or terms or conditions of redemption of any
series or class of shares.
 
 
                                      67
<PAGE>
 
  Restrictions on Transfer. In order for the Company to qualify as a REIT
under the Internal Revenue Code, Equity Shares (i.e., Common Shares or
Preferred Shares) must be beneficially owned by 100 or more persons during at
least 335 days of a taxable year of 12 months or during a proportionate part
of a shorter taxable year. Also, not more than 50% of the value of the issued
and outstanding Equity Shares may be owned, directly or indirectly, by five or
fewer individuals (as defined in the Internal Revenue Code to include certain
entities such as qualified private pension plans) during the last half of a
taxable year or during a proportionate part of a shorter taxable year.
   
  Because the Company expects to continue to qualify as a REIT, the Charter
contains restrictions on the ownership and transfer of Equity Securities which
are intended to assist the Company in complying with these requirements. The
Charter provides that, subject to certain specified exceptions, no person or
entity (other than executive officers of the Company) may beneficially own
more than 5.0% and no person or entity may be deemed to own by virtue of the
applicable constructive ownership provisions of the Internal Revenue Code,
more than 9.8% (by number or value, whichever is more restrictive) of the
outstanding Equity Shares (i.e., the Ownership Limit and the Constructive
Ownership Limit, respectively) and no executive officer of the Company may,
nor may the executive officers in the aggregate, own more than the Executive
Officer Ownership Limit. The Board has waived such limits with respect to MSGI
and the Oregon Retirement Fund. The constructive ownership rules of the
Internal Revenue Code are complex and may cause Equity Shares owned actually
or constructively by a group of related individuals and/or entities to be
owned constructively by one individual or entity. As a result, the acquisition
of less than 5.0% or 20% of the Equity Shares (or the acquisition of an
interest in an entity that owns, actually or constructively, Equity Shares) by
an individual or entity could nevertheless cause that individual, or another
individual or entity, to own constructively in excess of 5.0%, 9.8% or 20% of
the outstanding Equity Shares and, thus, subject such Equity Shares to the
Ownership Limit, the Constructive Ownership Limit or the Executive Officer
Ownership Limit, as the case may be. The Board may, but in no event is
required to, waive the Ownership Limit, the Constructive Ownership Limit or
the Executive Officer Ownership Limit with respect to a particular shareholder
if it determines that such ownership will not jeopardize the Company's status
as a REIT. As a condition to such waiver, the Board may require undertakings
or representations from the applicant with respect to preserving the REIT
status of the Company.     
 
  The Charter prohibits a person from beneficially or constructively owning
Equity Shares that would result in the Company's being "closely held" under
Section 856(h) of the Internal Revenue Code or otherwise cause the Company to
fail to qualify as a REIT (including, but not limited to, ownership that would
result in the Company's owning (actually or constructively) an interest in a
tenant that is described in Section 856(d)(2)(B) of the Internal Revenue Code
if the income derived by the Company (either directly or through one or more
partnerships) from such tenant would cause the Company to fail to satisfy any
of the gross income requirements of Section 856(c) of the Internal Revenue
Code). The Charter further provides that any transfer of Equity Shares, if
such transfer would result in Equity Shares being owned by fewer than 100
persons, shall be void ab initio. Any person who acquires or attempts or
intends to acquire Equity Shares that will or may violate any of the foregoing
restrictions on transferability and ownership is required to give written
notice immediately to the Company and to provide the Company with such other
information as the Company may request in order to determine the effect of
such transfer on the Company's status as a REIT. The foregoing restrictions on
transferability and ownership will not apply if the Board determines that it
is no longer in the best interest of the Company to attempt to quality, or to
continue to qualify, as a REIT.
 
  The Charter provides that, if any attempted transfer of Equity Shares or any
other event would otherwise result in any person's violating the Ownership
Limit, the Constructive Ownership Limit, the Executive Officer Ownership Limit
or the Charter, then, unless the Board has waived compliance with the
Ownership Limit, the Constructive Ownership Limit or the Executive Officer
Ownership Limit, as the case may be, the shares in excess of the applicable
limit are automatically transferred by operation of law to a Special Trust,
the beneficiary of which will be a qualified charitable organization selected
by the Company (the "Beneficiary"). If for any reason the transfer to the
Special Trust is not effective, the attempted transfer resulting in such
violation will be void ab
 
                                      68
<PAGE>
 
initio and of no force or effect with respect to the purported transferee (the
"Prohibited Transferee") as to that number of Equity Shares in excess of the
Ownership Limit, the Constructive Ownership Limit or the Executive Officer
Ownership Limit, as the case may be, and the Prohibited Transferee shall
acquire no right or interest (or, in the case of any event other than a
purported transfer, the person or entity holding record title to any such
Equity Shares in excess of the Ownership Limit, the Constructive Ownership
Limit or the Executive Officer Ownership Limit, as the case may be (the
"Prohibited Owner") shall cease to own any right or interest) in such Equity
Shares.
 
  Any automatic transfer described in the preceding paragraph shall be deemed
to be effective as of the close of business on the business day prior to the
date of such violative transfer. Within 20 days of receiving notice from the
Company of the transfer of Equity Shares to the Special Trust, the trustee of
the Special Trust (who shall be designated by the Company and be unaffiliated
with the Company and any Prohibited Transferee or Prohibited Owner) (the
"Special Trustee") will be required to sell such shares to a person or entity
who may own such shares without violating the Ownership Limit, the
Constructive Ownership Limit or the Executive Officer Ownership Limit, as the
case may be, and distribute to the Prohibited Transferee an amount equal to
the lesser of the price paid by the Prohibited Transferee for such Equity
Shares or the net sales proceeds received by the Special Trust for such Equity
Shares.
 
  In the case of any Equity Shares in excess of the Ownership Limit, the
Constructive Ownership Limit or the Executive Officer Ownership Limit, as the
case may be, resulting from an event other than a transfer, or from a transfer
for no consideration (such as a gift), the Special Trustee will be required to
sell such Equity Shares to a qualified person or entity and distribute to the
Prohibited Owner an amount equal to the lesser of the fair market value of
such Equity Shares as of the date of such event or the sale proceeds received
by the Special Trust for such Equity Shares. In either case, any proceeds in
excess of the amount distributable to the Prohibited Transferee or Prohibited
Owner, as applicable, will be distributed to the Beneficiary. Prior to a sale
by the Special Trust of any Equity Shares in excess of the Ownership Limit,
the Constructive Ownership Limit or the Executive Officer Ownership Limit, the
Special Trustee will be entitled to receive, in trust for the Beneficiary, all
dividends and other distributions paid by the Company with respect to such
Equity Shares. Subject to Maryland law, effective as of the date that such
Equity Shares have been transferred to the Special Trust, the Special Trustee
shall have the authority (at the Special Trustee's sole discretion) (i) to
rescind as void any vote cast by a Prohibited Transferee prior to the
discovery by the Company that such Equity Shares have been transferred to the
Special Trustee and (ii) to recast such vote in accordance with the desires of
the Special Trustee acting for the benefit of the Beneficiary. However, if the
Company has already taken irreversible action, then the Special Trustee shall
not have the authority to rescind and recast such vote. Any dividend or other
distribution paid to the Prohibited Transferee or Prohibited Owner (prior to
the discovery by the Company that such shares had been automatically
transferred to the Special Trust as described above) will be required to be
repaid to the Special Trustee upon demand for distribution to the Beneficiary.
In the event that the transfer to the Special Trust as described above is not
automatically effective (for any reason) to prevent violation of the Ownership
Limit, the Constructive Ownership Limit or the Executive Officer Ownership
Limit, as the case may be, then the Charter provides that the transfer of the
Equity Shares will be void.
 
  In addition, Equity Shares held in the Special Trust shall be deemed to have
been offered for sale to the Company or its designee, at a price per Equity
Share equal to the lesser of (i) the price per share in the transaction that
resulted in such transfer to the Special Trust (or, in the case of a devise or
gift, the market price at the time of such devise or gift) and (ii) the market
price on the date the Company or its designee accepts such offer. The Company
shall have the right to accept such offer until the Special Trustee has sold
the Equity Shares held in the Special Trust. Upon such a sale to the Company,
the interest of the Beneficiary in the shares sold shall terminate, and the
Special Trustee shall distribute the net proceeds of the sale to the
Prohibited Transferee or Prohibited Owner, as the case may be, and any
dividends or distributions held by the Special Trustee with respect to such
Equity Shares shall thereupon be paid to the Beneficiary.
 
  All certificates representing shares of beneficial interest will bear a
legend referring to the restrictions described above.
 
                                      69
<PAGE>
 
  Each shareholder will, upon demand, be required to disclose to the Company
in writing such information with respect to the direct, indirect and
constructive ownership of Common Shares as the Board deems reasonably
necessary to comply with the provisions of the Internal Revenue Code
applicable to a REIT. These ownership limitations could have the effect of
discouraging a takeover or other transaction in which holders of some, or a
majority, of Common Shares might receive a premium for their Common Shares
over the then prevailing market price or which such holders might believe to
be otherwise in their best interest.
 
  Reports. Shareholders will receive annual reports containing audited
financial statements with a report thereon by the Company's independent
certified public accountants and quarterly reports containing unaudited
financial information for each of the first three quarters of each fiscal
year.
 
                      CERTAIN PROVISIONS OF MARYLAND LAW
                    AND OF THE COMPANY'S CHARTER AND BYLAWS
 
  The following summary of certain provisions of Maryland law and of the
Charter and Bylaws of the Company does not purport to be complete and is
subject to and qualified in its entirety by reference to Maryland law and to
the Charter and Bylaws of the Company, as amended, which are filed as exhibits
to or incorporated by reference to the Registration Statement.
 
DURATION
 
  Under the Charter, the Company has a perpetual term, subject to the
authority of the shareholders to terminate the Company's existence and
liquidate its assets and subject to termination pursuant to the Maryland REIT
Act. See "--Termination of the Company and REIT Status."
 
BOARD OF TRUST MANAGERS
 
  The Charter provides that the number of Trust Managers of the Company may be
established by the Board, but may not be fewer than two nor more than fifteen.
It also provides that the Board must consist of a majority of Independent
Trust Managers at all times. The Company's Bylaws provide that any vacancy
will be filled, at any regular meeting or at any special meeting called for
that purpose, by a majority of the Trust Managers.
 
  The Charter provides that at each annual meeting of shareholders, the
successors of the class of Trust Managers whose term expires at such meeting
shall be elected to hold office for a term expiring at the annual meeting of
shareholders held in the third year following the year of their election.
 
  The Charter provides that a Trust Manager may be removed only for cause (as
defined in the Charter) and only by the affirmative vote of holders of not
less than two-thirds of the Equity Shares then outstanding and entitled to
vote in the election of Trust Managers.
 
MEETINGS OF SHAREHOLDERS
 
  The Charter requires the Company to hold an annual meeting of shareholders
for the election of Trust Managers and the conduct of any other proper
business. Special meetings of shareholders may be called by the Company's
Secretary upon written request of the holders of shares entitled to cast not
less than 25% of all votes entitled to be cast at such meeting. Special
meetings of shareholders may also be called by the Chairman of the Board or
the President or by action of one-third of the Trust Managers.
 
PREFERRED SHARES
 
  The Charter authorizes the Board to designate one or more series of
Preferred Shares and to determine, with respect to any series of Preferred
Shares, the number of shares constituting such series and the terms,
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms
or conditions of redemption.
 
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<PAGE>
 
BUSINESS COMBINATIONS
 
  Under the MGCL, as applicable to a Maryland REIT, certain "business
combinations" (including mergers, consolidations, share exchanges or, in
certain circumstances, asset transfers or issuances or reclassifications of
equity securities) between a Maryland real estate investment trust and any
Interested Shareholder must be: (i) recommended by the trustees of such trust
and (ii) approved by the affirmative vote of at least: (a) 80% of the votes
entitled to be cast by holders of outstanding voting shares of beneficial
interest of the trust and (b) two-thirds of the votes entitled to be cast by
holders of outstanding voting shares of beneficial interest other than shares
held by the Interested Shareholder with whom the business combination is to be
effected, unless, among other conditions, the trust's common shareholders
receive a minimum price (as defined in the MGCL) for their shares and the
consideration is received in cash or in the same form as previously paid by
the Interested Shareholder for its shares. In addition, an Interested
Shareholder or any affiliate thereof may not engage in a "business
combination" with the trust for a period of five years following the most
recent date on which the Interested Shareholder becomes an Interested
Shareholder. These provisions of the MGCL do not apply, however, to business
combinations that are approved or exempted by the board of trustees of the
trust prior to the time that the Interested Shareholder becomes an Interested
Shareholder. An amendment to a Maryland REIT's declaration of trust electing
not to be subject to the foregoing requirements must be approved by the
affirmative vote of at least 80% of the votes entitled to be cast by holders
of outstanding voting shares of beneficial interest of the trust, voting
together as a single voting group, including two-thirds of the votes entitled
to be cast by holders of outstanding voting shares of beneficial interest
other than shares of beneficial interest held by Interested Shareholders. Any
such amendment shall not be effective until 18 months after the vote of
shareholders and does not apply to any business combination of the trust with
an Interested Shareholder on the date of the shareholder vote.
 
  The business combination statute could have the effect of delaying,
deferring or preventing offers to acquire the Company, and of increasing the
difficulty of consummating any such offer.
 
CONTROL SHARE ACQUISITIONS
 
  The MGCL, as applicable to a Maryland REIT, provides that "control shares"
of a Maryland real estate investment trust acquired in a "control share
acquisition" have no voting rights except to the extent approved by a vote of
two-thirds of the votes entitled to be cast on the matter by shareholders,
excluding shares owned by the acquiror, by officers or by trustees who are
employees of the trust in question. "Control shares" are voting shares which,
if aggregated with all other shares previously acquired by such acquiror,
would entitle the acquiror to exercise the voting power in the election of
trustees within one of the following ranges of voting power: (i) one-fifth or
more but less than one-third; (ii) one-third or more but less than a majority
or (iii) a majority or more of all voting power. Control shares do not include
shares that the acquiring person is then entitled to vote as a result of
having previously obtained shareholder approval. A "control share acquisition"
means the acquisition of control shares, subject to certain exceptions.
 
  A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the trust's board of trustees to call a special meeting of
shareholders to be held within 50 days of demand to consider the voting rights
of the shares. If no request for a meeting is made, the trust may itself
present the question at any shareholders meeting.
 
  If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute,
then, subject to certain conditions and limitations, the trust may redeem any
or all of the control shares, except those for which voting rights have
previously been approved, for fair value determined, without regard to the
absence of voting rights, as of the date of the last control share acquisition
by the acquiror or of any meeting of shareholders at which the voting rights
of such shares are considered and not approved. If voting rights for control
shares are approved at a shareholders meeting and the acquiror becomes
entitled to vote a majority of the shares entitled to vote, all other
shareholders may exercise
 
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<PAGE>
 
appraisal rights. The fair value of the shares as determined for purposes of
such appraisal rights may not be less than the highest price per share paid by
the acquiror in the control share acquisition, and certain limitations and
restrictions otherwise applicable to the exercise of dissenters' rights do not
apply in the context of a control share acquisition.
 
  The control share acquisition statute does not apply to shares acquired in a
merger, consolidation or share exchange if the trust is a party to the
transaction, or to acquisitions approved or exempted by the declaration of
trust or bylaws of the trust.
 
  The Bylaws contain a provision exempting from the control share provisions
any and all acquisitions by any person of shares of the Company. Although
there can be no assurance that this provision will not be amended or
eliminated, the Bylaws provide that such provision may not be amended or
eliminated without the approval of at least a majority of the Common Shares.
 
AMENDMENT OF THE CHARTER
 
  The Charter may be amended by the shareholders, only by the affirmative vote
of the holders of not less than two-thirds of the votes entitled to be cast on
the matter. In addition, the Charter may be amended by the Trust Managers, by
a two-thirds vote, from time to time to enable the Company to qualify as a
REIT. The Charter provides that in the event that the Board shall determine,
with the advice of counsel, that any one or more of the provisions of the
Charter (the "Conflicting Provisions") are in conflict with the Maryland REIT
Act, the Internal Revenue Code or other applicable Federal or state law, the
Conflicting Provisions shall be deemed never to have constituted a part of the
Charter, even without any amendment thereof.
 
TERMINATION OF THE COMPANY AND REIT STATUS
 
  The Charter permits the Board to revoke or otherwise terminate the election
that the Company be taxed as a REIT if the Board determines that it is no
longer in the best interest of Grove for it to continue to qualify as a REIT.
Pursuant to the Charter, the Company may be dissolved or terminated by the
affirmative vote of the holders of not less than two-thirds of the votes
entitled to be cast on the matter.
 
TRANSACTIONS BETWEEN THE COMPANY AND ITS TRUSTEES OR OFFICERS
 
  The Charter provides that any contract or transaction between the Company
and one or more Trust Managers or officers of the Company must be approved by
the Board, including approval by a majority of the Independent Trust Managers.
 
LIMITATION OF LIABILITY AND INDEMNIFICATION
 
  The Maryland REIT Act permits a Maryland real estate investment trust to
include in its Charter a provision limiting the liability of its trustees to
the trust and its shareholders for money damages except for liability
resulting from (i) actual receipt of an improper benefit or profit in money,
property or services or (ii) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Charter of the
Company contains such a provision which eliminates such liability to the
maximum extent permitted by Maryland law.
 
  The Company's Bylaws require it to indemnify (i) any present or former Trust
Manager, officer or shareholder (including among the foregoing, any individual
who, while a Trust Manager, officer or shareholder at the express request of
the Company, serves or has served another corporation, partnership, joint
venture, trust, employee benefit plan or any other enterprise as a director,
officer, shareholder, partner or trust manager) 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 such status, against reasonable expenses incurred by him in
connection with the proceeding; (ii) any present or former Trust Manager
against any claim or liability to which he may become subject by reason of his
 
                                      72
<PAGE>
 
status as such unless it is established that (a) 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; (b) he actually
received an improper personal benefit in money, property or services or (c) in
the case of a criminal proceeding, he had reasonable cause to believe that his
act or omission was unlawful and (iii) each shareholder or former shareholder
against any claim or liability to which he may become subject by reason of his
status as a shareholder or former shareholder. In addition, the Company's
Bylaws require it to pay or reimburse, in advance of final disposition of a
proceeding, reasonable expenses incurred by a present or former Trust Manager,
officer or shareholder made party to a proceeding by reason of his status as a
Trust Manager, officer or shareholder provided that in the case of a Trust
Manager or officer, the Company shall have received (i) a written affirmation
by the Trust Manager or officer of his good faith belief that he has met the
applicable standard of conduct necessary for indemnification by the Company as
authorized by the Bylaws and (ii) a written undertaking by or on his behalf to
repay the amount paid or reimbursed by the Company if it shall ultimately be
determined that the applicable standard of conduct was not met. The Company's
Bylaws also (i) permit the Company to provide indemnification and payment or
reimbursement of expenses to a present or former Trust Manager, officer or
shareholder who served a predecessor of the Company; (ii) provide that any
indemnification or payment or reimbursement of expenses permitted by the
Bylaws shall be furnished in accordance with the procedures provided for
indemnification and payment or reimbursement of expenses under Section 2-418
of the MGCL for directors of Maryland corporations and (iii) permit the
Company to provide such other and further indemnification or payment or
reimbursement of expenses as may be permitted by the MGCL for directors of
Maryland corporations.
 
MARYLAND ASSET REQUIREMENTS
 
  To maintain its qualification as a Maryland REIT, the Maryland REIT Act
requires that the Company hold, either directly or indirectly, at least 75% of
the value of its assets in real estate assets, mortgage or mortgage-related
securities, government securities, cash and cash equivalent items, including
high-grade short-term securities and receivables. The Maryland REIT Act also
prohibits using or applying land for farming, agriculture, horticulture or
similar purposes.
 
          PRACTICES AND OBJECTIVES WITH RESPECT TO CERTAIN ACTIVITIES
 
  General. The following is a discussion of certain investment, financing and
other practices of the Company. These practices may be amended or revised from
time to time without a vote of the Company's shareholders, except that the
Company cannot change its policy of holding its assets and conducting its
business principally through the Operating Partnership without the consent of
the holders of Common Units as provided in the Operating Partnership
Agreement. See "Operating Partnership Agreement--Transferability of
Interests." No assurance can be given that the Company's investment objectives
will be attained or that the value of the Company will not decrease.
 
  Investment Objectives and Practices. The Company's investment objective is
to provide quarterly distribution of a portion of cash available for
distribution and achieve long-term capital appreciation through increases in
cash flow from operations, reinvestment of retained cash and growth of the
Company's property portfolio through acquisitions and repositioning. For a
discussion of the Company's growth strategy of property acquisition and
repositioning and related business strategies, see "The Company--Business
Objectives and Growth Strategies." The Company's practice is to acquire assets
primarily for generation of current income and appreciation in long-term
value.
 
  The Company may purchase or lease income-producing multifamily, mixed-use or
specialty retail properties for long-term investment, expand and improve the
properties acquired, or sell such properties, in whole or in part, when
circumstances warrant. Financing or indebtedness of the Properties, or any
properties to be acquired by the Company in the future, may be secured by a
first mortgage. Any such financing or indebtedness will have a priority over
the Common Shares in the event of a forced sale or upon liquidation of any
property in the Company's portfolio.
 
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<PAGE>
 
  While the Company emphasizes equity real estate investments in multifamily
properties, it may, at the discretion of the Board, invest in shoreline or
coastal mixed-use buildings, equity real estate investments in other types of
properties, mortgages (including participating or convertible mortgages),
stock of other REIT's and other real estate interests. The Company does not
presently intend to invest in mortgages or stock of other REIT's. The
investment by the Company in securities of other REIT's, other concerns
engaged in real estate activities or other issues is subject to the percentage
of ownership limitations and gross income tests necessary for REIT
qualification.
 
  Disposition. The Company periodically will review the assets in the
Company's portfolio. The Company has no current intention to dispose of any of
the Properties, or any property that may be acquired in the future, unless the
Board, based in part upon management's periodic reviews, determines that the
disposition of such property is in the best interests of the Company.
 
  Financing Practices. The Company intends to maintain a conservative debt to
total capitalization ratio of 60% or less. Such ratio presents total debt of
the Company as a percentage of the market value of the Common Shares (assuming
the exchange of all Common Units for Common Shares) plus total debt of the
Company. The Company's Charter and Bylaws, however, do not limit the amount of
percentage of indebtedness that the Company may incur. In addition, from time
to time, the Company may modify its debt practice in light of current economic
conditions, relative costs of debt and equity capital, market values of its
properties, general conditions in the market for debt and equity securities,
fluctuations in the fair market prices of the Common Shares, growth and
acquisition opportunities and other factors. Accordingly, the Company may
increase or decrease its debt to total capitalization above or below 60%.
 
  In the event that the Board determines to raise additional equity capital,
the Board has the authority, without approval of the shareholders, to issue
additional Common Shares, Preferred Shares or Common Units in any manner (and
on such terms and for such consideration) it deems appropriate, including in
exchange for property. Existing shareholders will have no preemptive right to
purchase shares issued in any subsequent offering by the Company, and any such
offering might cause a dilution of shareholders' investment in the Company. It
is currently the Company's intention to seek shareholder approval of an
amendment to the Charter to permit the Board to increase or decrease the
number of Common Shares and Preferred Shares which the Company may issue
without any further approval of the Company's shareholders.
 
  Indebtedness incurred by the Company may be in the form of bank borrowings,
purchase money obligations to the sellers of properties, publicly or privately
placed debt instruments or financing from institutional investors or other
lenders, any of which indebtedness may be unsecured or may be secured by
mortgages or other interests in the property owned by the Company. The
recourse of the holders of such indebtedness may be to all or any part of the
property of the Company or may be limited to the particular property to which
the indebtedness relates. The proceeds from any borrowings by the Company must
be lent, on the same terms, to the Operating Partnership. See "The Operating
Partnership Agreement--Capital Contribution."
 
  Other. The Company intends to operate in a manner that will not subject it
to regulation under the Investment Company Act of 1940. The Company does not
intend (i) to invest in the securities of other issuers for the purpose of
exercising control over such issuer; (ii) to underwrite securities of other
issuers or (iii) to trade actively in loans or other investments.
 
  The Company may make investments other than as previously described,
although it does not currently intend to do so. The Company has authority to
purchase or otherwise acquire Common Shares or any of its other securities in
the open market or otherwise may engage in such activities in the future.
 
                                      74
<PAGE>
 
  The Company has not made any loans to third parties, although it may in the
future make loans to third parties, including, without limitation, to entities
in which it has an interest. The Company has not engaged in trading,
underwriting or agency distribution or sale of securities of other issuers,
and the Company does not intend to do so in the future. The Company's
practices with respect to such activities may be reviewed and modified from
time to time by the Board without the vote of the shareholders.
 
  At all times, the Company intends to make investments in such a manner as to
be consistent with the requirements of the Internal Revenue Code to qualify as
a REIT unless, because of circumstances or changes in the Internal Revenue
Code, the Board determines to revoke the Company's REIT election.
 
  The Company has authority to offer its Common Shares, or options to purchase
Common Shares, in exchange for property and to repurchase or otherwise acquire
its Common Shares in the open market or otherwise and may engage in such
activities in the future. The Company expects (but is not obligated) to issue
Common Shares to holders of Common Units in the Operating Partnership upon
exercise of their redemption rights.
 
                       SHARES AVAILABLE FOR FUTURE SALE
   
  Upon completion of the Offerings, the Company will have outstanding
8,453,829 Common Shares, of which 4,110,824 Common Shares will be freely
tradable in the public market by persons who are not then affiliates of the
Company without restriction or registration under the Securities Act. In
addition, the Company has reserved approximately 3.0 million Common Shares for
issuance upon exchange of Common Units and 1,017,726 Common Shares for
issuance upon exercise of options granted under the 1994 Plan and the 1996
Plan. On the date hereof, the Compensation Committee has granted options for
500,000 additional Common Shares with an exercise price equal to the public
offering price set forth on the cover page hereof. See "Management--Executive
Compensation." All of the Common Shares issued in the Offerings will be freely
tradable by persons other than "affiliates" of the Company without
registration or other restrictions under the Securities Act, subject to
limitations on ownership set forth in the Charter. See "Description of Shares
of Beneficial Interest--Restrictions on Transfer." The 3,333,333 Common Shares
issued in March 1997, the Common Shares owned by "affiliates" of the Company,
and the Common Shares issuable at the option of the Company upon exchange of
Common Units (other than those issued pursuant to registration rights as
described below), are deemed to be "restricted securities" within the meaning
of Rule 144, and may not be transferred in the absence of registration under
the Securities Act unless an exemption from registration is available,
including exemptions pursuant to Rule 144. The 3,333,333 Common Shares issued
in March 1997 may be publicly resold pursuant to the Shelf Registration
Statement. The shares held by the Executive Officers and Trust Managers and
1,169,170 of the Common Shares covered by the Shelf Registration Statement are
subject to lock-up agreements that prohibit their resale for a period of 180
days from the date of this Prospectus without the prior consent of Smith
Barney Inc. The Company intends to exercise its right to suspend sales of the
remaining shares under the Shelf Registration Statement for a period of 90
days from the date of this Prospectus. After the expiration of such periods,
these shares may be freely sold, subject to the volume limitations and other
provisions of Rule 144 with respect to the Common Shares held by the Trust
Managers, the Executive Officers and other affiliates of the Company. The
Common Shares are also subject to other restrictions to facilitate the
maintenance of REIT status by the Company. See "Description of Shares of
Beneficial Interest--Restrictions on Transfer."     
 
  In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated with them in accordance with Rule 144) who has
beneficially owned "restricted shares" (defined generally as shares acquired
from the issuer or an affiliate in a non-public transaction) for at least one
year, as well as any person who purchased unrestricted shares on the open
market who is an affiliate of the Company, would be entitled to sell, subject
to certain manner of sale, public information and notice requirements, within
any three-month period, a number of Common Shares that does not exceed the
greater of 1% of the then-outstanding number of Common Shares or 1% of the
average weekly trading volume of those shares during the four calendar weeks
preceding each such sale. After restricted shares are held for two years, a
person who is not then an affiliate of
 
                                      75
<PAGE>
 
the Company and has not been an affiliate of the Company at any time during
the 90 days preceding a sale is entitled to sell such shares under Rule 144(k)
without regard to these volume limitations. Sales of Common Shares by
affiliates of the Company will continue to be subject to the volume
limitations, unless resold under an effective registration statement under the
Securities Act.
   
  The Operating Partnership issued a total of 2.1 million Common Units to
affiliates, including the Executive Officers, and non-affiliates in connection
with the Consolidation Transactions, which may be redeemed by holders for cash
or, at the Company's option, exchanged for Common Shares, subject to certain
anti-dilution adjustments.     
 
  Common Shares issued at the option of the Company upon the redemption of
Common Units for Common Shares may be sold in the public market pursuant to
the registration rights described below. Future sales of the Common Shares
could have an adverse effect on the market price of Common Shares and the
existence of Common Units, options and Common Shares reserved for issuance at
the option of the Company upon redemption of Common Units, and the exercise of
registration rights (described below) may adversely affect the market price of
Common Shares and/or the terms upon which the Company may be able to obtain
capital through the sale of equity securities.
   
  Each limited partner of the Operating Partnership will have redemption
rights, which will permit the holder, at any time beginning one year after the
issuance of Common Units of the Operating Partnership, to require the
Operating Partnership to redeem part or all of such holder's Common Units for
cash (based on the fair market value of an equivalent number of Common Shares
on the date of such redemption) or, at the option of the Company, to exchange
such Common Units for Common Shares on a one-for-one basis (subject to certain
antidilution adjustments and conditions), subject to indemnification claims.
As of the date hereof, approximately 3,009,126 Common Units are outstanding
which are not held by the Company.     
 
  In order to protect the Company's status as a REIT, a holder of Common Units
is prohibited from receiving Common Shares upon redemption of Common Units, to
the extent that as a result of such exchange any person would own or would be
deemed to own a number of Common Shares in excess of the Ownership Limit, the
Constructive Ownership Limit or the Executive Officer Ownership Limit, or if
ownership of such Common Shares by such holder would otherwise cause the
Company to fail to continue to qualify as a REIT. See "Description of Shares
of Beneficial Interest--Restrictions on Transfer."
 
REGISTRATION RIGHTS
 
  The Company has granted certain entities and individuals receiving Common
Units certain registration rights with respect to Common Shares which may be
issued upon redemption of such Common Units. Pursuant to a Registration Rights
Agreement with the holders of Common Units issued in the Consolidation
Transactions, the Company has agreed to file and, except as described below,
keep continuously effective beginning promptly one year after the completion
of the Consolidation Transactions a registration statement covering the
issuance of shares upon redemption of Common Units issued in the Consolidation
Transactions and the resale thereof. Pursuant to a Registration Rights
Agreement with the purchasers of Common Shares sold in March 1997, the Company
has filed and will generally keep continuously effective the Shelf
Registration Statement. All such registration rights permit holders to include
shares for sale in any registration statement filed by the Company, subject to
certain exceptions. All such registration rights will be subject to certain
significant conditions, including, but not limited to, the Company's ability
to effect and maintain such registration, customary blackout provisions and
any procedures and limitations which may be imposed by the staff of the
Commission. The Company will bear expenses incident to its registration
obligations upon exercise of such registration rights, except that it will not
bear any underwriting discounts or commissions, transfer taxes or fees of
counsel for selling securityholders relating to registration of registrable
shares; provided that, for an underwritten offering, the Company will not pay
such expenses unless the gross proceeds thereof are at least $10 million.
 
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<PAGE>
 
                      THE OPERATING PARTNERSHIP AGREEMENT
 
  The following summary of the Agreement of Limited Partnership of the
Operating Partnership (the "Operating Partnership Agreement") and the
description of certain provisions set forth elsewhere in this Prospectus, are
qualified in their entirety by reference to the Operating Partnership
Agreement, which is filed as an exhibit or incorporated by reference to the
Registration Statement. See "Available Information."
 
  Management. The Operating Partnership has been organized as a Delaware
limited partnership pursuant to the terms of the Operating Partnership
Agreement. Grove is the sole general partner of the Operating Partnership.
Generally, pursuant to the Operating Partnership Agreement, Grove, as the sole
general partner of the Operating Partnership, has full, exclusive and complete
responsibility and discretion in the management and control of the Operating
Partnership, including the ability to cause the Operating Partnership to enter
into certain major transactions, including acquisitions, dispositions and
financings, and to make distributions in accordance with the terms of the
Operating Partnership Agreement. The limited partners of the Operating
Partnership have no authority to transact business for, or participate in or
exercise control or management power over, the business and affairs of the
Operating Partnership, except as provided in the Operating Partnership
Agreement and as required by applicable law.
 
  Indemnification. The Operating Partnership Agreement provides for
indemnification of Grove, as general partner, the officers and Trust Managers
or directors of Grove and the Operating Partnership and such other persons as
Grove may designate for any losses, claims, damages, liabilities or expenses
incurred by them by reason of operations of the Operating Partnership in which
they are involved, unless it is established that their conduct was in bad
faith or the result of active and deliberate dishonesty, they received an
improper personal benefit, or they had reason to believe such conduct was
unlawful.
 
  Transferability of Interests. Except as otherwise provided below, the
Operating Partnership Agreement provides that Grove may not voluntarily
withdraw from the Operating Partnership, or transfer or assign its interest in
the Operating Partnership, without the consent of all of the holders of
limited partner interests. Pursuant to the Operating Partnership Agreement,
each limited partner has agreed not to transfer, assign, sell, encumber or
otherwise dispose of, without the consent of Grove, its interest in the
Operating Partnership during the one year period following the date of
issuance of Common Units to such limited partner, other than, subject to a
right of first refusal in favor of Grove, to Grove or to certain other
specified persons who agree to assume the obligations of the transferor under
the Operating Partnership Agreement.
 
  Grove may not engage in any merger, consolidation or other combination with
or into another person, any sale of all or substantially all of its assets or
any reclassification, recapitalization or change of its outstanding equity
interests (a "Termination Transaction"), unless the Termination Transaction
has been approved by holders of at least 66 2/3% of the Common Units
(including Common Units held by the Company) and in connection with which all
holders of Common Units will receive, or will have the right to elect to
receive, for each Common Unit an amount of cash, securities or other property
equal to the product of the number of Common Shares for which each Common Unit
is then exchangeable and the greatest amount of cash, securities, or other
property paid to the holder of one Common Share in consideration of one Common
Share pursuant to the Termination Transaction. If, in connection with the
Termination Transaction, a purchase, tender or exchange offer shall have been
made to and accepted by the holders of more than 33 1/3% of the outstanding
Common Shares, each holder of Common Units will receive, or will have the
right to elect to receive, the greatest amount of cash, securities or other
property which such holder would have received had it exercised its right to
redemption and received Common Shares in exchange for its Common Units
immediately prior to the expiration of such purchase, tender or exchange
offer, and had thereupon accepted such purchase, tender or exchange offer.
 
  Grove also may merge or otherwise combine its assets with another entity if
the following conditions are met: (i) substantially all of the assets directly
or indirectly owned by the surviving entity, other than Common Units held by
Grove, are held, directly or indirectly, by the Operating Partnership or
another limited partnership
 
                                      77
<PAGE>
 
or limited liability company which is the survivor of a merger, consolidation
or combination of assets with the Operating Partnership (in each case, the
"Surviving Partnership"); (ii) the limited partners of the Operating
Partnership own a percentage interest of the Surviving Partnership based on
the relative fair market value of the net assets of the Operating Partnership
and the other net assets of the Surviving Partnership immediately prior to the
consummation of such transaction; (iii) the rights, preferences and privileges
of the limited partners of the Operating Partnership in the Surviving
Partnership are at least as favorable as those in effect immediately prior to
the consummation of such transaction and as those applicable to any other
limited partners or non-managing members of the Surviving Partnership; and
(iv) such rights of the limited partners of the Operating Partnership include
the right to exchange their interests in the Surviving Partnership for at
least one of the following: (a) the consideration available to such persons
pursuant to the preceding paragraph or (b) if the ultimate controlling person
of the Surviving Partnership has publicly traded common equity securities,
such common equity securities, with an exchange ratio based on the relative
fair market value of such securities and the Common Shares. For purposes of
this paragraph, the determination of relative fair market values shall be
reasonably determined by Grove as of the time of the Termination Transaction
and, to the extent applicable, shall be no less favorable to the limited
partners of the Operating Partnership than the relative values reflected in
the terms of the Termination Transaction.
 
  In respect of any transaction described in the preceding two paragraphs,
Grove is required to use its commercially reasonable efforts to structure such
transaction to avoid causing the limited partners of the Operating Partnership
to recognize gain for federal income tax purposes by virtue of the occurrence
of or their participation in such transaction.
 
  Issuance of Additional Common Units. As sole general partner of the
Operating Partnership, Grove has the ability to cause the Operating
Partnership to issue additional Common Units representing general and limited
partnership interests in the Operating Partnership, including partnership
interests with such designations, preferences and other special rights as
shall be determined by Grove in its sole discretion and subject to applicable
laws.
 
  Capital Contribution. The Operating Partnership Agreement provides that if
the Operating Partnership requires additional funds at any time or from time
to time in excess of funds available to the Operating Partnership from
borrowings or capital contributions, Grove may incur debt and lend such funds
to the Operating Partnership on the same terms and conditions as are
applicable to Grove's borrowing of such funds. As an alternative to borrowing
funds required by the Operating Partnership, Grove may contribute the amount
of such required funds as an additional capital contribution to the Operating
Partnership. If Grove so contributes additional capital to the Operating
Partnership, Grove's partnership interest in the Operating Partnership will be
increased on a proportionate basis. Conversely, the partnership interests of
the limited partners will be decreased on a proportionate basis in the event
of additional capital contributions by Grove.
 
  Pursuant to the Operating Partnership Agreement, Grove is required to
contribute the net proceeds from the issuance of additional Common Shares to
the Operating Partnership. In accordance with this requirement, Grove will
contribute all of the net proceeds of the Offerings to the Operating
Partnership, and Grove's partnership interest in the Operating Partnership
will be increased on a proportionate basis. See "Use of Proceeds."
 
  Awards Under Employee Benefit Plans. If Common Shares are issued pursuant to
an award granted under any stock incentive, stock option, stock ownership or
employee benefits plan, the Operating Partnership Agreement requires Grove to
contribute to the Operating Partnership, as an additional contribution, any
consideration received by Grove upon such issuance. Upon such contribution,
Grove will be issued a number of Common Units in the Operating Partnership
equal to the number of Common Shares so issued.
 
  Distributions. Distributions made by the Operating Partnership shall be made
first to holders of interests in the Operating Partnership entitled to
preferences in distribution (of which currently there are none) and second on
a pro rata basis to the holders of interests not entitled to any such
preferences.
 
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<PAGE>
 
  Limited Partner Redemption/Exchange Rights. Beginning one year after the
issuance of Common Units to a limited partner, such limited partner of the
Operating Partnership will have the right to require the Operating Partnership
to redeem part or all of such limited partner's Common Units (based on the
fair market value of an equivalent number of Common Shares at the time of such
redemption). The Operating Partnership may redeem such Common Units for cash
or Grove may, at its option, elect to redeem such Common Units, in lieu of
redemption by the Operating Partnership, by delivering to the limited partner
one Common Share for each Common Unit tendered (subject to antidilution
adjustments). In order to protect Grove's status as a REIT, a holder of Common
Units is prohibited from exchanging Common Units for Common Shares to the
extent that such exchange would cause any person to violate restrictions on
ownership and transfer of the Common Shares set forth in the Charter. See
"Description of Shares of Beneficial Interest--Restrictions on Transfer."
 
  Tax Matters. Pursuant to the Operating Partnership Agreement, Grove is the
"tax matters partner" of the Operating Partnership and, as such, will have
authority to make tax elections under the Internal Revenue Code on behalf of
the Operating Partnership.
 
  The net income or net loss of the Operating Partnership generally is
allocated to Grove and the limited partners in accordance with their
percentage interests, subject to compliance with the provisions of Sections
704(b) and 704(c) of the Internal Revenue Code and the applicable Treasury
Regulations. For further discussion of such allocations, see "Federal Income
Tax Considerations--Tax Aspects of Operating Partnership and Property
Partnerships."
 
  Operations. The Operating Partnership Agreement requires that the Operating
Partnership be operated in a manner that will enable Grove to satisfy the
requirements for qualification as a REIT and to avoid any federal income or
excise tax liability.
 
  Representations and Warranties. Each partner of the Operating Partnership
made certain customary representations and warranties regarding such partner's
ability to receive Common Units and enter into the Operating Partnership
Agreement. In addition, each partner of the Operating Partnership which was a
party to the Contribution Agreement made the same representations and
warranties in the Operating Partnership Agreement as such partner made in the
Contribution Agreement including, in the case of the partners affiliated with
Grove at the time of execution of the Contribution Agreement, representations
and warranties which related to, among other things, compliance with laws,
environmental matters, the absence of liens and encumbrances, tenant leases,
litigation, contractual obligations and the existence of insurance. The
Operating Partnership Agreement provides that the representations and
warranties of the partners survive the execution of the Operating Partnership
Agreement.
 
  Certain Limited Partner Approval Rights. The Operating Partnership Agreement
provides that if the limited partners other than Grove own at least 5% of the
outstanding Common Units (including Common Units held by Grove), Grove shall
not, on behalf of the Operating Partnership, take any of the following actions
without the prior consent of the holders of more than 50% (excluding Common
Units held by Grove) of the Common Units representing limited partner
interests: (i) dissolve the Operating Partnership, other than incident to a
merger or sale of substantially all of Grove's asset or (ii) prior to March
14, 2002, sell in a taxable transaction the Fox Hill Commons, Colonial Village
or Woodbridge Apartment Properties, other than incident to a merger or sale of
substantially all of Grove's assets.
 
  Term. The Operating Partnership will continue in full force and effect until
December 31, 2056 or until sooner dissolved pursuant to the terms of the
Operating Partnership Agreement.
 
  Amendments. The Operating Partnership Agreement generally may be amended
only with the consent of the partners holding Common Units in the aggregate at
least equal to 66 2/3% of the Common Units, except (i) to add to the
obligations of the general partner; (ii) to reflect the issuance of additional
partnership interests in the Operating Partnership; (iii) to cure ambiguities
or reflect inconsequential changes which do not adversely and materially
affect the limited partners of the Operating Partnership; (iv) to satisfy
requirements of federal or state law; (v) to reflect changes reasonably
necessary for Grove to maintain status as a REIT and (vi) to modify the manner
in which the capital accounts of the partners in the Operating Partnership are
computed; provided, that
 
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<PAGE>
 
the Operating Partnership Agreement may not be amended in any manner described
above, or otherwise, to the extent such amendment would adversely affect a
partner of the Operating Partnership, without the consent of such partner, if
the amendment would (i) convert the limited partner's limited partner interest
in the Operating Partnership into a general partner interest; (ii) modify the
limited liability of the limited partner; (iii) alter rights of the partner to
receive certain distributions or allocations (except as permitted under the
Operating Partnership Agreement) or (iv) materially alter or modify the
redemption rights of the partner as set forth in the Operating Partnership
Agreement.
 
                   CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
 
  The following summary of material federal income tax considerations
regarding the Company is based on current law, is for general information only
and is not tax advice. This discussion does not purport to deal with all
aspects of taxation that may be relevant to particular shareholders in light
of their personal investment or tax circumstances, or to certain types of
shareholders subject to special treatment under the federal income tax laws,
including certain financial institutions, life insurance companies, dealers in
securities or currencies, shareholders holding Common Shares as part of a
conversion transaction, as part of a hedge or hedging transaction, or as a
position in a straddle for tax purposes, tax-exempt organizations (except to
the extent discussed under the heading "--Taxation of Tax-Exempt
Shareholders") or foreign corporations and persons who are not citizens or
residents of the United States (except to the extent discussed under the
heading "Taxation of Non-U.S. Shareholders"). In addition, the summary below
does not consider the effect of any foreign, state, local or other tax laws
that may be applicable to prospective shareholders. Cummings & Lockwood, tax
counsel to the Company, is of the opinion that such summary fairly and
accurately summarizes the federal income tax considerations that would be
material to a holder of Common Shares.
 
  EACH INVESTOR IS ADVISED TO CONSULT HIS, HER OR ITS OWN TAX ADVISOR
REGARDING THE SPECIAL TAX CONSEQUENCES TO SUCH INVESTOR OF THE PURCHASE,
OWNERSHIP AND SALE OF THE COMMON SHARES INCLUDING THE FEDERAL, STATE, LOCAL,
FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP AND SALE AND OF
POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
 
TAXATION OF THE COMPANY
 
  General. The Company has made an election to be taxed as a REIT under
Sections 856 through 860 of the Internal Revenue Code commencing with its
taxable year ended December 31, 1994. The Company believes that, commencing
with such taxable year, it has been organized and operated in such a manner as
to qualify for taxation as a REIT under the Internal Revenue Code, and the
Company intends to continue to operate in such a manner, but no assurance can
be given that it will operate in such a manner so as to remain so qualified.
The Company has received an opinion from Cummings & Lockwood that the
Company's organization and method of operation are such that it has met the
requirements for qualification and taxation as a REIT for its taxable years
ended December 31, 1994, 1995 and 1996, and that its current organization and
method of operation will allow it to continue to qualify as a REIT for 1997
and subsequent taxable years. Such opinion is based on various assumptions and
various factual representations made by Grove. Such qualification will depend
on the Company's continuing ability to meet, through actual annual operating
results, distribution levels, and diversity of stock ownership, and the
various qualification tests imposed under the Internal Revenue Code. Cummings
& Lockwood will not review compliance with these tests on a continuing basis.
No assurance can be given that Grove will satisfy such tests on a continuing
basis.
 
  These sections of the Internal Revenue Code, and the corresponding Treasury
Regulations, are highly technical and complex. The following sets forth the
material aspects of the sections that govern the federal income tax treatment
of a REIT and its shareholders. This summary is qualified in its entirety by
the applicable Internal Revenue Code provisions, rules and regulations
promulgated thereunder, and administrative and judicial interpretations
thereof.
 
  If the Company qualifies for taxation as a REIT, it generally will not be
subject to federal corporate income taxes on its net income that is currently
distributed to shareholders. This treatment substantially eliminates the
 
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<PAGE>
 
"double taxation" (at the corporate and shareholder levels) that generally
results from investment in a regular corporation. However, the Company will be
subject to federal income tax as follows: First, the Company will be taxed at
regular corporate rates on any undistributed "REIT taxable income," including
undistributed net capital gains. Second, under certain circumstances, the
Company may be subject to the "alternative minimum tax" on its items of tax
preference. Third, if the Company has (i) net income from the sale or other
disposition of "foreclosure property" (defined generally as property acquired
by the Company through foreclosure or otherwise after a default on a loan
secured by the property or a lease of the property) which is held primarily
for sale to customers in the ordinary course of business or (ii) other
nonqualifying income from foreclosure property, it will be subject to tax at
the highest corporate rate on such income. Fourth, if the Company has net
income from prohibited transactions (which are, in general, certain sales or
other dispositions of property held primarily for sale to customers in the
ordinary course of business other than foreclosure property), such income will
be subject to a 100% tax. Fifth, if the Company should fail to satisfy the 75%
gross income test or the 95% gross income test (as discussed below), but has
nonetheless maintained its qualification as a REIT because certain other
requirements have been met, it will be subject to a 100% tax on an amount
equal to (a) the gross income attributable to the greater of the amount by
which the Company fails the 75% or 95% test multiplied by (b) a fraction
intended to reflect the Company's profitability. Sixth, if the Company should
fail to distribute during each calendar year at least the sum of (i) 85% of
its REIT ordinary income for such year, (ii) 95% of its REIT capital gain net
income for such year and (iii) any undistributed taxable income from prior
periods, the Company would be subject to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed. Seventh, with
respect to any asset (a "Built-In Gain Asset") acquired by the Company from a
corporation which is or has been a C corporation (i.e., generally a
corporation subject to full corporate-level tax) in a transaction in which the
basis of the Built-In Gain Asset in the hands of the Company is determined by
reference to the basis of the asset in the hands of the C corporation, if the
Company recognizes gain on the disposition of such asset during the ten-year
period (the "Recognition Period") beginning on the date on which such asset
was acquired by the Company, then, to the extent of the Built-In Gain (i.e.,
the excess of (a) the fair market value of such asset over (b) the Company's
adjusted basis in such asset, determined as of the beginning of the
Recognition Period), such gain will be subject to tax at the highest regular
corporate rate pursuant to Treasury Regulations that have not yet been
promulgated. The results described above with respect to the recognition of
built-in gain assume that the Company will make an election pursuant to IRS
Notice 88-19 and that such treatment is not modified by certain revenue
proposals in the Administration's Fiscal Year 1998 Budget Proposal.
 
  Requirements for Qualification. The Internal Revenue Code defines a REIT as
a corporation, trust or association: (i) which is managed by one or more
trustees or directors; (ii) the beneficial ownership of which is evidenced by
transferable shares, or by transferable certificates of beneficial interest;
(iii) which would be taxable as a domestic corporation, but for Sections 856
through 859 of the Internal Revenue Code; (iv) which is neither a financial
institution nor an insurance company subject to certain provisions of the
Internal Revenue Code; (v) the beneficial ownership of which is held by 100 or
more persons; (vi) during the last half of each taxable year not more than 50%
in value of the outstanding stock of which is owned, actually or
constructively, by five or fewer individuals (as defined in the Internal
Revenue Code to include certain entities) and (vii) which meets certain other
tests, described below, regarding the nature of its income and assets. The
Internal Revenue Code provides that conditions (i) to (iv), inclusive, must be
met during the entire taxable year and that condition (v) must be met during
at least 335 days of a taxable year of twelve months, or during a
proportionate part of a taxable year of less than twelve months. Conditions
(v) and (vi) will not apply until after the first taxable year for which an
election is made to be taxed as a REIT. For purposes of conditions (v) and
(vi), pension funds and certain other tax-exempt entities are treated as
individuals, subject to a "look-through" exception in the case of condition
(vi).
 
  The Company believes that it has issued sufficient Common Shares with
sufficient diversity of ownership to allow it to satisfy conditions (v) and
(vi). In addition, the Charter provides for restrictions regarding the
transfer and ownership of shares, which restrictions are intended to assist
the Company in continuing to satisfy the share ownership requirements
described in (v) and (vi) above. Such ownership and transfer restrictions are
described
 
                                      81
<PAGE>
 
in "Description of Shares of Beneficial Interest--Restrictions on Transfer."
These restrictions may not ensure that the Company will, in all cases, be able
to satisfy the share ownership requirements described above. If the Company
fails to satisfy such share ownership requirements, the Company's status as a
REIT will terminate. However, commencing with the Company's 1998 taxable year,
the Taxpayer Relief Act of 1997 (the "1997 Act") provides that if the Company
complies with the rules contained in the applicable Treasury Regulations
requiring the Company to ascertain the actual ownership of its shares but the
Company does not know, or would not have known through the exercise of
reasonable diligence, whether it failed to meet the requirement in condition
(vi) above, the Company will be treated as having met such share ownership
requirement. See "--Failure to Qualify."
 
  In addition, a corporation may not elect to become a REIT unless its taxable
year is the calendar year. The Company has a calendar taxable year.
 
  Ownership of a Partnership Interest. In the case of a REIT which is a
partner in a partnership, Treasury Regulations provide that the REIT will be
deemed to own its proportionate share of the assets of the partnership and
will be deemed to be entitled to the income of the partnership attributable to
such share. In addition, the character of the assets and gross income of the
partnership shall retain the same character in the hands of the REIT for
purposes of Section 856 of the Internal Revenue Code, including satisfying the
gross income tests and the asset tests. Thus, the Company's proportionate
share of the assets and items of income of the Operating Partnership
(including the Operating Partnership's share of such items of any subsidiary
partnerships) will be treated as assets and items of income of the Company for
purposes of applying the requirements described herein. A summary of the rules
governing the federal income taxation of partnerships and their partners is
provided below in "--Tax Aspects of the Operating Partnership and Subsidiary
Partnerships." The Company has direct control of the Operating Partnership and
intends to operate it consistent with the requirements for qualification as a
REIT.
 
  Income Tests. In order to maintain its qualification as a REIT, the Company
annually must satisfy three gross income requirements. First, at least 75% of
the Company's gross income (excluding gross income from prohibited
transactions) for each taxable year must be derived directly or indirectly
from investments relating to real property or mortgages on real property
(including "rents from real property" and, in certain circumstances, interest)
or from certain types of temporary investments. Second, at least 95% of the
Company's gross income (excluding gross income from prohibited transactions)
for each taxable year must be derived from such real property investments,
dividends, interest and gain from the sale or disposition of stock or
securities (or from any combination of the foregoing). Third, subject to
certain exceptions in the year in which the Company is liquidated, short-term
gain from the sale or other disposition of stock or securities, gain from
prohibited transactions and gain on the sale or other disposition of real
property held for less than four years (apart from involuntary conversions and
sales of foreclosure property) must represent less than 30% of the Company's
gross income (including gross income from prohibited transactions) for each
taxable year. For purposes of applying the 30% gross income test, the holding
period of properties acquired by the Operating Partnership will be deemed to
have commenced on the date of acquisition. The 1997 Act repealed the 30% gross
income test requirement commencing with the Company's 1998 taxable year.
 
  Rents received by the Company will qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if
several conditions are met. First, the amount of rent must not be based in
whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "rents from
real property" solely by reason of being based on a fixed percentage or
percentages of receipts or sales. Second, the Internal Revenue Code provides
that rents received from a tenant will not qualify as "rents from real
property" in satisfying the gross income tests if the REIT, or an owner of 10%
or more of the REIT, actually or constructively owns 10% or more of such
tenant (a "Related Party Tenant"). Third, if rent attributable to personal
property, leased in connection with a lease of real property, is greater than
15% of the total rent received under the lease, then the portion of rent
attributable to such personal property will not qualify as "rents from real
property." Finally, for rents received to qualify as "rents from real
property," the REIT generally must not operate or manage the property or
furnish or render
 
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<PAGE>
 
services to the tenants of such property, other than through an independent
contractor from whom the REIT derives no revenue, except that the REIT may
directly perform services that are "usually or customarily rendered" in
connection with the rental of space for occupancy only and are not otherwise
considered "rendered to the occupant" of the property. Further, under a de
minimis exception provided by the 1997 Act, the independent contractor
requirement will not apply to customary services provided by the Company, the
annual value of which does not exceed 1% of the gross income derived from the
property with respect to which the services are provided. For this purpose,
such services may not be valued at less than 150% of the Company's direct cost
of providing the service. The Company does not and will not: (i) charge rent
for any property that is based in whole or in part on the income or profits of
any person (except by reason of being based on a percentage of receipts or
sales, as described above); (ii) rent any property to a Related Party Tenant
(unless the Board determines in its discretion that the rent received from
such Related Party Tenant is not material and will not jeopardize the
Company's status as a REIT); (iii) derive rental income attributable to
personal property (other than personal property leased in connection with the
lease of real property, the amount of which is less than 15% of the total rent
received under the lease) or (iv) perform services considered to be rendered
to the occupant of the property, other than through an independent contractor
from whom the REIT derives no revenue, unless, beginning in 1998, such
services qualify under the 1% de minimis exception.
 
  The Operating Partnership will receive fees in exchange for the performance
of certain third party property management activities. The Company's
proportionate share of these fees will be treated as income of the Company by
virtue of its status as a partner of the Operating Partnership as discussed
above. Such fees will not qualify under the 95% gross income test or the 75%
gross income test. The Company believes, however, that the aggregate amount of
this and other nonqualifying income in any taxable year will not exceed the
limit on nonqualifying income under the gross income tests.
 
  If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such
year if it is entitled to relief under certain provisions of the Internal
Revenue Code. These relief provisions will be generally available if the
Company's failure to meet such tests was due to reasonable cause and not due
to willful neglect and the Company attaches a schedule of the sources of its
income to its federal income tax return, and any incorrect information on the
schedule was not due to fraud with intent to evade tax. It is not possible,
however, to state whether in all circumstances the Company would be entitled
to the benefit of these relief provisions. For example, if the Company fails
to satisfy the gross income tests because nonqualifying income that the
Company intentionally incurs exceeds the limits on such income, the IRS could
conclude that the Company's failure to satisfy the tests was not due to
reasonable cause. If these relief provisions are inapplicable to a particular
set of circumstances involving the Company, the Company would not qualify as a
REIT. As discussed above in "--Taxation of the Company--General," even if
these relief provisions apply, a 100% tax would be imposed on an amount equal
to (a) the gross income attributable to the greater of the amount by which the
Company failed the 75% or 95% test multiplied by (b) a fraction intended to
reflect the Company's profitability.
 
  Any gain realized by the Company on the sale of any property held as
inventory or other property held primarily for sale to customers in the
ordinary course of business will be treated as income from a prohibited
transaction that is subject to a 100% penalty tax. Such prohibited transaction
income may also have an adverse effect upon the Company's ability to satisfy
the income tests for qualification as a REIT. Under existing law, whether
property is held as inventory or primarily for sale to customers in the
ordinary course of a trade or business is a question of fact that depends on
all the facts and circumstances with respect to the particular transaction.
The Operating Partnership intends to hold its properties for investment with a
view to long-term appreciation, to engage in the business of acquiring,
developing, owning, and operating its properties and to make such occasional
sales of properties as are consistent with the Operating Partnership's
investment objectives.
 
  Asset Tests. The Company, at the close of each quarter of its taxable year,
must also satisfy three tests relating to the nature of its assets. First, at
least 75% of the value of the Company's total assets must be represented by
real estate assets including (i) its allocable share of real estate assets
held by partnerships in which the Company owns a direct or indirect interest
(such as the Operating Partnership) and (ii) stock or debt
 
                                      83
<PAGE>
 
instruments held for not more than one year purchased with the proceeds of a
stock offering or long-term (at least five years) public debt offering of the
Company, cash, cash items and government securities. Second, not more than 25%
of the Company's total assets may be represented by securities other than
those in the 75% asset class. Third, of the investments included in the 25%
asset class, the value of any one issuer's debt and equity securities owned by
the Company may not exceed 5% of the value of the Company's total assets and
the Company may not own more than 10% of any one issuer's outstanding voting
securities.
 
  The Company anticipates that it will continue to satisfy these asset tests.
 
  After initially meeting the asset tests at the close of any quarter, the
Company will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset
values. If the failure to satisfy the asset tests results from an acquisition
of securities or other property during a quarter (including as a result of the
Company's increasing its interest in the Operating Partnership), the failure
can be cured by the disposition of sufficient nonqualifying assets within 30
days after the close of that quarter. The Company intends to maintain adequate
records of the value of its assets to ensure compliance with the asset tests
and to take such other actions within 30 days after the close of any quarter
as may be required to cure any noncompliance. If the Company fails to cure
noncompliance with the asset tests within such time period, the Company would
cease to qualify as a REIT.
 
  Annual Distribution Requirements. The Company, in order to qualify as a
REIT, is required to distribute dividends (other than capital gain dividends)
to its shareholders in an amount at least equal to (i) the sum of (a) 95% of
the Company's "REIT taxable income" (computed without regard to the dividends
paid deduction and by excluding the Company's net capital gain) and (b) 95% of
the excess of the net income, if any, from foreclosure property over the tax
imposed on such income, minus (ii) the excess of the sum of certain items of
noncash income (e.g., income attributable to leveled stepped rents, original
issue discount or purchase money debt, or a like-kind exchange that is later
determined to be taxable) over 5% of "REIT taxable income" as described in
clause (i)(a) above. Such distributions must be paid in the taxable year to
which they relate, or in the following taxable year if declared before the
Company timely files its tax return for such year and if paid on or before the
first regular dividend payment after such declaration. The amount distributed
must not be preferential--i.e., each holder of Common Shares must receive the
same distribution per share. A REIT may have more than one class of capital
stock, as long as distributions within each class are pro rata and non-
preferential. To the extent that the Company does not distribute all of its
net capital gain or distributes at least 95%, but less than 100%, of its "REIT
taxable income," as adjusted, it will be subject to tax thereon at regular
ordinary and capital gain corporate tax rates. The Company has made and will
continue to make timely distributions sufficient to satisfy these annual
distribution requirements. In this regard, the Operating Partnership Agreement
authorizes the Company, as general partner, to take such steps as may be
necessary to cause the Operating Partnership to distribute to its partners an
amount sufficient to permit the Company to meet these distribution
requirements.
 
  It is expected that the Company's REIT taxable income will be less than its
cash flow due to the allowance of depreciation and other non-cash charges in
computing REIT taxable income. Accordingly, the Company anticipates that it
will generally have sufficient cash or liquid assets to enable it to satisfy
the distribution requirements described above. It is possible, however, that
the Company, from time to time, may not have sufficient cash or other liquid
assets to meet these distribution requirements due to timing differences
between (i) the actual receipt of income and actual payment of deductible
expenses and (ii) the inclusion of such income and deduction of such expenses
in arriving at taxable income of the Company. In the event that such timing
differences occur, in order to meet the distribution requirements, the Company
may find it necessary to arrange for short-term, or possibly long-term,
borrowings to pay required dividends.
 
  Under certain circumstances, the Company may be able to rectify a failure to
meet the distribution requirement described above for a year by paying
"deficiency dividends" to shareholders in a later year, which may be included
in the Company's deduction for dividends paid for the earlier year. Thus, the
Company may be able to avoid being taxed on amounts distributed as deficiency
dividends; however, the Company will be required to pay interest based upon
the amount of any deduction taken for deficiency dividends.
 
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<PAGE>
 
  Furthermore, if the Company should fail to distribute during each calendar
year (or in the case of distributors with declaration and record dates falling
in the last three months of the calendar year, by the end of January
immediately following such year) at least the sum of (i) 85% of its REIT
ordinary income for such year, (ii) 95% of its REIT capital gain income for
such year, and (iii) any undistributed taxable income from prior periods, the
Company would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed. Any REIT taxable income
and net capital gain on which this excise tax is imposed for any year is
treated as an amount distributed during that year for purposes of calculating
such tax.
 
FAILURE TO QUALIFY
 
  If the Company fails to qualify for taxation as a REIT in any taxable year,
and the relief provisions do not apply, the Company will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to shareholders in any year in which
the Company fails to qualify will not be deductible by the Company nor will
they be required to be made. As a result, the Company's failure to qualify as
a REIT would reduce the cash available for distribution by the Company to its
shareholders. In addition, if the Company fails to qualify as a REIT, all
distributions to shareholders will be taxable as ordinary income, to the
extent of the Company's current and accumulated earnings and profits, and,
subject to certain limitations of the Internal Revenue Code, corporate
distributees may be eligible for the dividends received deduction. Unless
entitled to relief under specific statutory provisions, the Company will also
be disqualified from taxation as a REIT for the four taxable years following
the year during which qualification was lost. It is not possible to state
whether in all circumstances the Company would be entitled to such statutory
relief.
 
TAXATION OF TAXABLE U.S. SHAREHOLDERS GENERALLY
 
  As used herein, the term "U.S. Shareholder" means a holder of Common Shares
who (for United States federal income tax purposes) (i) is a citizen or
resident of the United States, (ii) is a corporation, partnership or other
entity created or organized in or under the laws of the United States or of
any political subdivision thereof, (iii) is an estate, the income of which is
subject to United States federal income taxation regardless of its source or a
trust if (a) a U.S. Court can exercise primary supervision over the
administration of such trust and (b) one or more U.S. fiduciaries have the
authority to control all of the substantial decisions of such trust.
 
  As long as the Company qualifies as a REIT, distributions made by the
Company out of its current or accumulated earnings and profits (and not
designated as capital gain dividends) will constitute dividends taxable to its
taxable U.S. Shareholders as ordinary income. Such distributions will not be
eligible for the dividends received deduction otherwise available with respect
to dividends received by U.S. Shareholders that are corporations.
Distributions made by the Company that are properly designated by the Company
as capital gain dividends will be taxable to taxable U.S. Shareholders as gain
from the sale or exchange of a capital asset held for more than one year (to
the extent that they do not exceed the Company's actual net capital gain for
the taxable year) without regard to the period for which a U.S. Shareholder
has held his Common Shares. It is not clear whether such gain will be taxed as
"long-term" capital gain or "mid-term" capital gain under the new capital
gains rates enacted by the 1997 Act. U.S. Shareholders that are corporations
may, however, be required to treat up to 20% of certain capital gain dividends
as ordinary income. To the extent that the Company makes distributions (not
designated as capital gain dividends) in excess of its current and accumulated
earnings and profits, such distributions will be treated first as a tax-free
return of capital to each U.S. Shareholder, reducing the adjusted basis which
such U.S. Shareholder has in his Common Shares for tax purposes by the amount
of such distribution (but not below zero), with distributions in excess of a
U.S. Shareholder's adjusted basis in his shares taxable as capital gain (such
gain being taxed as long-term capital gain if the shares have been held for
more than eighteen months, mid-term capital gain if the shares have been held
for more than one year but not more than eighteen months, or short-term
capital gain if the shares have been held for one year or less), provided that
the shares have been held as a capital asset. Dividends declared by the
Company in October, November or December of any year and payable to a
shareholder of record on a specified date in any such month shall be treated
as both paid by the Company and received by the shareholder on December 31 of
such year, provided
 
                                      85
<PAGE>
 
that the dividend is actually paid by the Company on or before January 31 of
the following calendar year. Shareholders may not include in their own income
tax returns any net operating losses or capital losses of the Company.
 
  Distributions made by the Company and gain arising from the sale or exchange
by a U.S. Shareholder of Common Shares will not be treated as passive activity
income, and, as a result, U.S. Shareholders generally will not be able to
apply any "passive losses" against such income or gain. Distributions made by
the Company (to the extent they do not constitute a return of capital)
generally will be treated as investment income for purposes of computing the
investment income limitation. Gain arising from the sale or other disposition
of Common Shares, however, will not be treated as investment income under
certain circumstances.
 
  The Company may elect to retain, rather than distribute as a capital gain
dividend, its net long-term capital gains. In such event, the Company would
pay tax on such retained net long-term capital gains. In addition, to the
extent so designated by the Company, a U.S. Shareholder generally would (i)
include its proportionate share of such undistributed capital gains in
computing its capital gains in its return for its taxable year in which the
last day of the Company's taxable year falls (subject to certain limitations
as to the amount so includable), (ii) be deemed to have paid the capital gains
tax imposed on the Company on the designated amounts included in such U.S.
Shareholder's capital gains, (iii) receive a credit or refund for such amount
of tax deemed paid by it, (iv) increase the adjusted basis of its Common
Shares by the difference between the amount of such includable gains and the
tax deemed to have been paid by it, and (v), in the case of a U.S. Shareholder
that is a corporation, appropriately adjust its earnings and profits for the
retained capital gains in accordance with Treasury Regulations to be
prescribed by the Internal Revenue Service (the "IRS"). As noted above, the
tax rate applicable to such capital gains included by the U.S. Shareholder is
not clear under the 1997 Act.
 
  Upon any sale or other disposition of Common Shares, a U.S. Shareholder will
recognize gain or loss for federal income tax purposes in an amount equal to
the difference between (i) the amount of cash and the fair market value of any
property received on such sale or other disposition and (ii) the holder's
adjusted basis in such Common Shares for tax purposes. Such gain or loss will
be capital gain or loss if the shares have been held by the U.S. Shareholder
as a capital asset, and will be a mid-term capital gain if such shares are
held more than one year but not more than 18 months, or long-term gain or loss
if such shares have been held for more than 18 months. In general, any loss
recognized by a U.S. Shareholder upon the sale or other disposition of Common
Shares that have been held for six months or less (after applying certain
holding period rules) will be treated as a long-term capital loss, to the
extent of capital gain dividends received by such U.S. Shareholder from the
Company which were required to be treated as gain from the sale or exchange of
a capital asset held for more than one year.
 
  Backup Withholding. The Company will report to its U.S. Shareholders and the
IRS the amount of dividends paid during each calendar year, and the amount of
tax withheld, if any. Under the backup withholding rules, a shareholder may be
subject to backup withholding at the rate of 31% with respect to dividends
paid unless such holder (a) is a corporation or comes within certain other
exempt categories and, when required, demonstrates this fact, or (b) provides
a taxpayer identification number, certifies as to no loss of exemption from
backup withholding, and otherwise complies with applicable requirements of the
backup withholding rules. A U.S. Shareholder that does not provide the Company
with his correct taxpayer identification number may also be subject to
penalties imposed by the IRS. Any amount paid as backup withholding will be
creditable against the shareholder's income tax liability. In addition, the
Company may be required to withhold a portion of capital gain distributions to
any shareholders who fail to certify their non-foreign status to the Company.
See "--Taxation of Non-U.S. Shareholders."
 
TAXATION OF TAX-EXEMPT SHAREHOLDERS
 
  The IRS has ruled that amounts distributed as dividends by a qualified REIT
do not constitute unrelated business taxable income ("UBTI") when received by
a tax-exempt entity. Based on that ruling, provided that a tax-exempt
shareholder (except certain tax-exempt shareholders described below) has not
held its Common
 
                                      86
<PAGE>
 
Shares as "debt financed property" within the meaning of the Internal Revenue
Code and such shares are not otherwise used in a trade or business (and except
as further discussed below in the case of a "pension held REIT"), the dividend
income from the Company will not be UBTI to a tax-exempt shareholder.
Similarly, income from the sale of Common Shares will not constitute UBTI
unless such tax-exempt shareholder has held such shares as "debt financed
property" within the meaning of the Internal Revenue Code or has used the
shares in a trade or business.
 
  For tax-exempt shareholders which are social clubs, voluntary employee
benefit associations, supplemental unemployment benefit trusts, and qualified
group legal services plans exempt from federal income taxation under Internal
Revenue Code Sections 501 (c)(7), (c)(9), (c)(17) and (c)(20), respectively,
income from an investment in the Company will constitute UBTI unless the
organization is able to properly deduct amounts set aside or placed in reserve
for certain purposes so as to offset the income generated by its investment in
the Company. Such prospective investors should consult their own tax advisors
concerning these "set aside" and reserve requirements.
 
  Notwithstanding the above, however, a portion of the dividends paid by a
"pension held REIT" may be treated as UBTI as to any trust which (i) is
described in Section 401(a) of the Internal Revenue Code, (ii) is tax-exempt
under Section 501(a) of the Internal Revenue Code, and (iii) holds more than
10% (by value) of the interests in the REIT. Tax-exempt pension funds that are
described in Section 401(a) of the Internal Revenue Code are referred to below
as "qualified trusts."
 
  A REIT is a "pension held REIT" if (i) it would not have qualified as a REIT
but for the fact that Section 856(h)(3) of the Internal Revenue Code provides
that stock owned by qualified trusts shall be treated, for purposes of the
"not closely held" requirement, as owned by the beneficiaries of the trust
(rather than by the trust itself), and (ii) either (a) at least one such
qualified trust holds more than 25% (by value) of the interests in the REIT or
(b) one or more such qualified trusts, each of which owns more than 10% (by
value) of the interests in the REIT, hold in the aggregate more than 50% (by
value) of the interests in the REIT. The percentage of any REIT dividend
treated as UBTI is equal to the ratio of (i) the UBTI earned by the REIT
(treating the REIT as if it were a qualified trust and therefore subject to
tax on UBTI) to (ii) the total gross income of the REIT. A de minimis
exception applies where the percentage is less than 5% for any year. The
provisions requiring qualified trusts to treat a portion of REIT distributions
as UBTI will not apply if the REIT is able to satisfy the "not closely held"
requirement without relying upon the "look-through" exception with respect to
qualified trusts.
 
TAXATION OF NON-U.S. SHAREHOLDERS
 
  The rules governing United States federal income taxation of the ownership
and disposition of stock by persons that are, for purposes of such taxation,
nonresident alien individuals, foreign corporations, foreign partnerships or
foreign estates or trusts (collectively, "Non-U.S. Shareholders") are complex,
and no attempt is made herein to provide more than a brief summary of such
rules. Accordingly, the discussion does not address all aspects of United
States federal income tax and does not address state, local or foreign tax
consequences that may be relevant to a Non-U.S. Shareholder in light of its
particular circumstances, including, for example, if the investment in the
Company is connected to the conduct by a Non-U.S. Shareholder of a U.S. trade
or business. In addition, this discussion is based on current law, which is
subject to change, and assumes that the Company qualifies for taxation as a
REIT. Prospective Non-U.S. Shareholders should consult with their own tax
advisers to determine the impact of federal, state, local and foreign income
tax laws with regard to an investment in Common Shares, including any
reporting requirements.
 
  Distributions by the Company to a Non-U.S. Shareholder that are neither
attributable to gain from sales or exchanges by the Company of United States
real property interests nor designated by the Company as capital gains
dividends will be treated as dividends of ordinary income to the extent that
they are made out of current or accumulated earnings and profits of the
Company. Such distributions ordinarily will be subject to withholding of
United States federal income tax on a gross basis (that is, without allowance
of deductions) at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty, unless the dividends are treated as
 
                                      87
<PAGE>
 
effectively connected with the conduct by the Non-U.S. Shareholder of a United
States trade or business. Dividends that are effectively connected with such a
trade or business will be subject to tax on a net basis (that is, after
allowance of deductions) at graduated rates, in the same manner as domestic
shareholders are taxed with respect to such dividends and are generally not
subject to withholding. Any such dividends received by a Non-U.S. Shareholder
that is a corporation may also be subject to an additional branch profits tax
at a 30% rate or such lower rate as may be specified by an applicable income
tax treaty.
 
  Pursuant to Treasury Regulations currently in effect, dividends paid to an
address in a country outside the United States are generally presumed to be
paid to a resident of such country for purposes of determining the
applicability of withholding discussed above and the applicability of a tax
treaty rate. Commencing in 1999, however, a Non-U.S. Shareholder who wishes to
claim the benefit of an applicable treaty rate must satisfy certain
certification and other requirements. Under certain treaties, lower
withholding rates generally applicable to dividends do not apply to dividends
from a REIT, such as the Company. Certain certification and disclosure
requirements must be satisfied to be exempt from withholding under the
"effectively connected" income exemption discussed above.
 
  Distributions in excess of current or accumulated earnings and profits of
the Company will not be taxable to a Non-U.S. Shareholder to the extent that
they do not exceed the adjusted basis of the shareholder's Common Shares, but
rather will reduce the adjusted basis of such stock. To the extent that such
distributions exceed the adjusted basis of a Non-U.S. Shareholder's Common
Shares, they will give rise to gain from the sale or exchange of his stock,
the tax treatment of which is described below. If it cannot be determined at
the time a distribution is made whether or not such distribution will be in
excess of current or accumulated earnings and profits, the distribution will
generally be treated as a dividend for withholding purposes. However, amounts
thus withheld are generally refundable if it is subsequently determined that
such distribution was, in fact, in excess of current or accumulated earnings
and profits of the Company. Under a "technical corrections" provision recently
added to the Internal Revenue Code by the Small Business Job Protection Act of
1996, distributions in excess of earnings and profits may also be subject to a
10% withholding under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA") withholding provisions.
 
  Distributions to a Non-U.S. Shareholder that are designated by the Company
at the time of distribution as capital gains dividends (other than those
arising from the disposition of a United States real property interest)
generally will not be subject to United States federal income taxation, unless
(i) investment in the Common Shares is effectively connected with the Non-U.S.
Shareholder's United States trade or business, in which case the Non-U.S.
Shareholder will be subject to the same treatment as domestic shareholders
with respect to such gain (except that a shareholder that is a foreign
corporation may also be subject to the 30% branch profits tax, as discussed
above) or (ii) the Non-U.S. Shareholder is a nonresident alien individual who
is present in the United States for 183 days or more during the taxable year
and has a "tax home" in the United States, in which case the nonresident alien
individual will be subject to a 30% tax on the individual's capital gains.
 
  Distributions to a Non-U.S. Shareholder that are attributable to gain from
sales or exchanges by the Company of "United States real property interests"
under FIRPTA will cause the Non-U.S. Shareholder to be treated as recognizing
such gain as income effectively connected with a United States trade or
business. Non-U.S. Shareholders would thus generally be entitled to offset its
gross income by allowable deductions and would pay tax on the resulting
taxable income at the same rates applicable to domestic shareholders (subject
to a special alternative minimum tax in the case of nonresident alien
individuals). Also, such gain may be subject to a 30% branch profits tax in
the hands of a Non-U.S. Shareholder that is a corporation and is not entitled
to treaty relief or exemption, as discussed above. The Company is required to
withhold 35% of any distribution that is or could be designated as a capital
gain dividend. That amount is creditable against the Non-U.S. Shareholder's
United States federal income tax liability. To the extent that such
withholding exceeds the actual tax owed by the Non-U.S. Shareholder, the Non-
U.S. Shareholder may claim a refund from the IRS.
 
  The Company or any nominee (e.g., a broker holding shares in street name)
may rely on a certificate of non-foreign status issued in accordance with the
FIRPTA regulations or on a Form W-9 to determine whether withholding is
required on gains realized from the disposition of United States real property
interests. A domestic
 
                                      88
<PAGE>
 
person who holds Common Shares on behalf of a Non-U.S. Shareholder will bear
the burden of withholding, provided that the Company has properly designated
the appropriate portion of a distribution as a capital gain dividend.
 
  Sale of Common Shares. Gain recognized by a Non-U.S. Shareholder upon the
sale or exchange of Common Shares generally will not be subject to United
States taxation unless such shares constitute a "United States real property
interest" within the meaning of FIRPTA. The Common Shares will not constitute
a "United States real property interest" so long as the Company is a
"domestically controlled REIT." A "domestically controlled REIT" is a REIT in
which at all times during a specified testing period less than 50% in value of
its stock is held directly or indirectly by Non-U.S. Shareholders. The Company
believes that at December 31, 1996 it was a "domestically controlled REIT,"
and therefore that the current sale of Common Shares will not be subject to
taxation under FIRPTA. However, because the Common Shares are publicly traded,
no assurance can be given that the Company will continue to be a
"domestically-controlled REIT." Notwithstanding the foregoing, gain from the
sale or exchange of Common Shares not otherwise subject to FIRPTA will be
taxable to a Non-U.S. Shareholder if the Non-U.S. Shareholder is a nonresident
alien individual who is present in the United States for 183 days or more
during the taxable year and has a "tax home" in the United States. In such
case, the nonresident alien individual will be subject to a 30% United States
withholding tax on the amount of such individual's gain. If the gain on the
sale of Common Shares were to be subject to taxation under FIRPTA, the Non-
U.S. Shareholder would be subject to the same treatment as U.S. Shareholders
with respect to such gain (subject to applicable alternative minimum tax,
possible withholding tax and a special alternative minimum tax in the case of
nonresident alien individuals).
 
  If the Company does not qualify as or ceases to be a "domestically-
controlled REIT," gain arising from the sale or exchange by a Non-U.S.
Shareholder of Common Shares would be subject to United States taxation under
FIRPTA as a sale of a "United States real property interest" unless the shares
are "regularly traded" (as defined by applicable Treasury Regulations) on an
established securities market (e.g., the American Stock Exchange) and the
selling Non-U.S. Shareholder did not hold more than 5% of the Common Shares at
any time during the shorter of (i) the period during which the taxpayer held
such interest, or (ii) the five-year period ending on the date of the
disposition of such interest. If gain on the sale or exchange of Common Shares
were subject to taxation under FIRPTA, the Non-U.S. Shareholder would be
subject to regular United States income tax with respect to such gain in the
same manner as a U.S. Shareholder (subject to any applicable alternative
minimum tax, a special alternative minimum tax in the case of nonresident
alien individuals and the possible application of the 30% branch profits tax
in the case of foreign corporations), and the purchaser of the stock would be
required to withhold and remit to the IRS 10% of the purchase price. The 10%
withholding tax will not apply if the shares are "regularly traded" in an
established securities market.
 
  Backup Withholding Tax and Information Reporting. Backup withholding tax
(which generally is a withholding tax imposed at the rate of 31% on certain
payments to persons that fail to furnish certain information under the United
States information reporting requirements) and information reporting will
generally not apply to distributions paid to Non-U.S. Shareholders outside the
United States that are treated as (i) dividends subject to the 30% (or lower
treaty rate) withholding tax discussed above, (ii) capital gains dividends or
(iii) distributions attributable to gain from the sale or exchange by Grove of
United States real property interests. As a general matter, backup withholding
and information reporting will not apply to a payment of the proceeds of a
sale of Common Shares by or through a foreign office of a foreign broker.
Information reporting (but not backup withholding) will apply, however, to a
payment of the proceeds of a sale of Common Shares by a foreign office of a
broker that (a) is a United States person, (b) derives 50% or more of its
gross income for certain periods from the conduct of a trade or business in
the United States or (c) is a "controlled foreign corporation" (generally, a
foreign corporation controlled by United States shareholders) for United
States tax purposes, unless the broker has documentary evidence in its records
that the holder is a Non-U.S. Shareholder and certain other conditions are
met, or the shareholder otherwise establishes an exemption. Payment to or
through a United States office of a broker of the proceeds of a sale of Common
Shares is subject to both backup withholding and information reporting unless
the shareholder certifies under penalty of perjury that the shareholder is a
Non-U.S. Shareholder, or otherwise establishes an exemption. A Non-U.S.
Shareholder may obtain a refund of any amounts withheld under the backup
withholding rules by filing the appropriate claim for refund with the IRS.
 
                                      89
<PAGE>
 
  New Withholding Regulations. New Treasury Regulations have been issued
regarding the withholding and information reporting rules discussed above. In
general, the new Treasury Regulations do not alter the substantive withholding
and information reporting requirements but unify current certification
procedures and forms and clarify and modify reliance standards. They are
generally effective for payments made after December 31, 1998, subject to
certain transition rules. Shareholders should consult their tax advisors
regarding the new withholding regulations.
 
TAX ASPECTS OF OPERATING PARTNERSHIP AND SUBSIDIARY PARTNERSHIPS
 
  General. Substantially all of the Company's investments will be held
indirectly through the Operating Partnership and (to some extent) the
Subsidiary Partnerships. In general, partnerships are "pass-through" entities
which are not subject to federal income tax. Rather, partners are allocated
their proportionate shares of the items of income, gain, loss, deduction and
credit of a partnership, and are potentially subject to tax thereon, without
regard to whether the partners receive a distribution from the partnership.
The Company will include in its income its proportionate share of the
foregoing partnership items for purposes of the various REIT income tests and
in the computation of its REIT taxable income. Moreover, for purposes of the
REIT asset tests, the Company will include its proportionate share of assets
held by the Operating Partnership (including Operating Partnership's share of
assets held by the Subsidiary Partnerships). See "--Taxation of the Company."
 
  Entity Classification. The Company's interest in the Operating Partnership
involves special tax considerations, including the possibility of a challenge
by the IRS of the status of the Operating Partnership and the Subsidiary
Partnerships as partnerships (as opposed to associations taxable as
corporations) for federal income tax purposes. The Company has received an
opinion of counsel that the Operating Partnership and each Subsidiary
Partnership qualifies as a partnership for federal income tax purposes and not
as an association taxable as a corporation or as a publicly traded partnership
under Section 7704 of the Internal Revenue Code.
 
  The IRS recently finalized and published certain Treasury Regulations (the
"Final Regulations") which provide that a domestic business entity not
otherwise classified as a corporation and which has at least two members (an
"Eligible Entity") may elect to be taxed as a partnership for federal income
tax purposes. In addition, an Eligible Entity which did not exist, or did not
claim a classification, prior to the Effective Date (as defined below), will
be classified as a partnership for federal income tax purposes unless it
elects otherwise. The final Regulations apply for tax periods beginning on or
after January 1, 1997 (the "Effective Date"). Unless it elects otherwise, an
Eligible Entity in existence prior to the Effective Date will have the same
classification for federal income tax purposes that it claimed under the
entity classification Treasury Regulations in effect prior to the Effective
Date, and such classification should not be challenged by the IRS, so long as
there exists a reasonable basis in support of such claimed characterization
under the rules in effect under prior law. The Company believes that there is
a reasonable basis under prior law for treating the Operating Partnership and
the Subsidiary Partnerships as partnerships for federal income tax purposes.
Accordingly, although no absolute assurance can be given that the IRS will not
challenge the status of the Operating Partnership or any Subsidiary
Partnership as a partnership for federal income tax purposes, such challenge
is unlikely. If such challenge were sustained by a court, the Operating
Partnership or a Subsidiary Partnership could be treated as a corporation for
federal income tax purposes and subject to an entity-level tax on its income.
In such a situation the character of the Company's assets and items of gross
income would change and preclude the Company from satisfying the asset tests
and possibly the income tests (see "--Taxation of the Company--Income Tests"
and "--Asset Tests"), and in turn would prevent the Company from qualifying as
a REIT. See "--Taxation of the Company--Failure to Qualify" above for a
discussion of the effect of the Company's failure to meet such tests for a
taxable year. In addition, a change in the Operating Partnership's (or any
Subsidiary Partnership's) status for tax purposes might be treated as a
taxable event in which case the Company might incur a tax liability without
any related cash distributions.
 
  Partnership Allocations. Although a partnership agreement will generally
determine the allocation of income and loss among partners, such allocations
will be disregarded for tax purposes if they do not comply
 
                                      90
<PAGE>
 
with the provisions of Section 704(b) of the Internal Revenue Code and the
Treasury Regulations promulgated thereunder. Generally, Section 704(b) and the
Treasury Regulations promulgated thereunder require that partnership
allocations respect the economic arrangement of the partners.
 
  If an allocation is not recognized for federal income tax purposes, the item
subject to the allocation will be reallocated in accordance with the partners'
interests in the partnership, which will be determined by taking into account
all of the facts and circumstances relating to the economic arrangement of the
partners with respect to such item. The Operating Partnership's allocations of
taxable income and loss are intended to comply with the requirements of
Section 704(b) of the Internal Revenue Code and the Treasury Regulations
promulgated thereunder.
 
  Tax Allocations With Respect to the Properties. Pursuant to Section 704(c)
of the Internal Revenue Code, income, gain, loss and deduction attributable to
appreciated or depreciated property (such as the Company's properties) that is
contributed to a partnership in exchange for an interest in the partnership,
must be allocated in a manner such that the contributing partner is charged
with, or benefits from, respectively, the unrealized gain or unrealized loss
associated with the property at the time of the contribution. The amount of
such unrealized gain or unrealized loss is generally equal to the difference
between the fair market value of contributed property at the time of
contribution and the adjusted tax basis of such property at such time (a
"Book-Tax Difference"). Such allocations are solely for federal income tax
purposes and do not affect the book capital accounts or other economic or
legal arrangements among the partners. The Operating Partnership was formed by
way of contributions of appreciated property (including the Properties)
directly or indirectly, through contributions of interests in the Subsidiary
Partnerships. Consequently, the Operating Partnership Agreement requires that
such allocations be made in a manner consistent with Section 704(c) of the
Internal Revenue Code.
 
  Treasury Regulations under Section 704(c) of the Internal Revenue Code
provide partnerships with a choice of several methods of accounting for Book-
Tax Differences, including use of the "traditional method" or the election of
certain methods which would permit any distortions caused by a Book-Tax
Difference to be entirely rectified on an annual basis or with respect to a
specific taxable transaction such as a sale. The Operating Partnership and the
Company expect to use the traditional method without curative allocations for
accounting for Book-Tax Differences with respect to the properties initially
contributed to the Operating Partnership.
 
  With respect to any property purchased by the Operating Partnership
subsequent to the admission of the Company to the Operating Partnership, such
property will initially have a tax basis equal to its fair market value, and
Section 704(c) of the Internal Revenue Code will not apply.
 
OTHER TAX CONSEQUENCES
 
  The Company and its shareholders may be subject to state or local taxation
in various state or local jurisdictions, including those in which it or they
transact business or reside. The state and local tax treatment of the Company
and its shareholders may not conform to the federal income tax consequences
discussed above. Consequently, prospective shareholders should consult their
own tax advisors regarding the effect of state and local tax laws on an
investment in the Company.
 
                                      91
<PAGE>
 
                                 UNDERWRITING
   
  Upon the terms and subject to the conditions stated in the Underwriting
Agreement between the several Underwriters named below, the Company and the
Operating Partnership, each Underwriter has severally agreed to purchase, and
the Company has agreed to sell to such Underwriter, the number of Common
Shares set forth opposite the name of such Underwriter below.     
 
<TABLE>
<CAPTION>
                                                                       NUMBER OF
      UNDERWRITER                                                       SHARES
      -----------                                                      ---------
      <S>                                                              <C>
      Smith Barney Inc. ..............................................
      Lehman Brothers Inc.............................................
                                                                       ---------
        Total......................................................... 3,141,475
                                                                       =========
</TABLE>
 
  The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares offered in the
Offering are subject to the approval of certain legal matters by counsel and
to certain other conditions. The Underwriters are obligated to take and pay
for all of the Common Shares offered in the Offering (other than those covered
by the over-allotment option described below) if any such shares are taken.
   
  The Underwriters, for whom Smith Barney Inc. and Lehman Brothers Inc. are
acting as the representatives (the "Representatives"), propose to offer part
of the shares directly to the public at the public offering price set forth on
the cover page of this Prospectus and part of the shares to certain dealers at
a price which represents a concession not in excess of $  .  per share under
the public offering price. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $  .  per share to certain other
dealers. After the Common Shares are released for sale to the public, the
public offering price and such concessions may be changed by the
Representatives.     
 
  The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to 675,000 additional
Common Shares at the price to public set forth on the cover page of this
Prospectus minus the underwriting discounts and commissions. The Underwriters
may exercise such option solely for the purpose of covering over-allotments,
if any, in connection with the Offering. To the extent such option is
exercised, each Underwriter will be obligated, subject to certain conditions,
to purchase approximately the same percentage of such additional shares as the
number of shares set forth opposite such Underwriter's name in the preceding
table bears to the total number of shares listed in such table.
   
  In connection with the Offering, the Operating Partnership, the Company, its
Trust Managers and executive officers, and MSGI and the Oregon Retirement Fund
have agreed, subject to certain limited exceptions, not to sell, offer to
sell, solicit an offer to buy, contract to sell, grant any option to purchase
or otherwise transfer or dispose of any Common Shares, except, in the case of
MSGI and the Oregon Retirement Fund, Common Shares purchased in the Concurrent
Offering, or any securities convertible into or exchangeable or exercisable
for Common Shares for a period of 180 days from the date of this Prospectus,
without the prior written consent of Smith Barney Inc., except, in the case of
the Company and the Operating Partnership, for the issuance of such securities
in connection with the acquisition of any property, upon the exercise of any
outstanding options or warrants of the Company or in connection with the
Concurrent Offering.     
 
  In connection with this Offering and in compliance with applicable law, the
Underwriters may over-allot (i.e., sell more Common Shares than the total
amount shown on the list of Underwriters and participations which
 
                                      92
<PAGE>
 
appears above) and may effect transactions which stabilize, maintain or
otherwise affect the market price of the Common Shares at levels above those
which might otherwise prevail in the open market. Such transactions may include
placing bids for the Common Shares or effecting purchases of the Common Shares
for the purpose of pegging, fixing or maintaining the price of the Common
Shares or for the purpose of reducing a syndicate short position created in
connection with the Offering. A syndicate short position may be covered by
exercise of the option described above in lieu of or in addition to open market
purchases. In addition, the contractual arrangements among the Underwriters
include a provision whereby, if an Underwriter purchases Common Shares in the
open market for the account of the underwriting syndicate and the securities
purchased can be traced to a particular Underwriter or member of the selling
group, the underwriting syndicate may require the Underwriter or selling group
member in question to purchase the Common Shares in question at the cost price
to the syndicate or may recover from (or decline to pay to) the Underwriter or
selling group member in question the selling concession applicable to the
securities in question. The Underwriters are not required to engage in any of
these activities and any such activities, if commenced, may be discontinued at
any time.
   
  The Company, the Operating Partnership and the Underwriters have agreed to
indemnify each other against certain liabilities that may be incurred in
connection with the Offering, including liabilities under the Securities Act.
       
  The Common Shares to be sold by the Company in connection with the Concurrent
Offering will be sold at the same price per share as the Common Shares sold in
the Offering. A portion of the Concurrent Offering is required to be made
pursuant to previously existing preemptive rights held by MSGI and the Oregon
Retirement Fund. The Company believes that any purchase by MSGI and
ABKB/LaSalle will be for investment purposes and not with a view to
distributing such shares to the public. The Underwriters will not receive a
discount or commission on the sale of the Common Shares in the Concurrent
Offering. See "The Concurrent Offering."     
                              
                           CHANGE IN ACCOUNTANTS     
   
  The Company dismissed BDO Siedman, LLP as its independent public accountants
effective August 16, 1996. During the Company's two most recent fiscal years
and the subsequent interim period from January 1, 1996 to August 16, 1996,
there have been no disagreements with the former accountants on any matter of
accounting principle or practice, financial statement disclosure, or auditing
scope or procedure. The former accountants' report on the financial statements
of the Company for each of the two past fiscal years was unqualified. The
Company has engaged Ernst & Young LLP as its independent public accountants
effective with the dismissal of its former accountants. During the Company's
two most recent fiscal years and the subsequent interim period from January 1,
1996 to August 16, 1996, there were no consultations with the newly engaged
accountants with regard to either the application of accounting principles as
to any specific transaction, either completed or contemplated, the type of
audit opinion that would be rendered on the Company's financial statements, or
any matter of disagreements with the former accountants. The decision to change
accountants was approved by all members of the Board.     
 
                                    EXPERTS
   
  The audited financial statements of Grove Property Trust at December 31,
1996, and for each of the two years in the period ended December 31, 1996, the
audited combined financial statements of Grove Property Services Limited
Partnership and Property Partnerships at December 31, 1996, and each of the two
years in the period ended December 31, 1996 and the audited combined statements
of revenues and certain expenses of the: (i) Post-March 1997 Property
Acquisitions--Affiliates for each of the two years in the period ended December
31, 1996 and (ii) 1997 Property Acquisitions--Non-Affiliates for the year ended
December 31, 1996, appearing     
 
                                       93
<PAGE>
 
in this Prospectus and Registration Statement, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their reports thereon
appearing elsewhere herein and are included in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
   
  The (i) audited financial statements of Grove Property Trust at December 31,
1996, and for each of the two years in the period ended December 31, 1996,
appearing in Grove Property Trust's Annual Report on Form 10-KSB for the year
ended December 31, 1996, as amended, and the report thereon dated September 2,
1997 and (ii) the statements of revenues and certain expenses of: (a) Four
Winds for the period September 28, 1995 to December 31, 1995 and for the year
ended December 31, 1996; (b) Brooksyde for the periods January 1, 1995 to
September 30, 1995, October 1, 1995 to December 31, 1995 and the year ended
December 31, 1996; (c) River's Bend for the years ended December 31, 1995 and
1996; (d) Greenfield Village for the years ended December 31, 1995 and 1996
and (e) Glastonbury Center, Summit & Birch Hill for the years ended December
31, 1995 and 1996, appearing in Grove Property Trust's Current Reports on
Forms 8-K dated May 30, 1997, July 2, 1997 and September 30, 1997, all as
amended, and the reports thereon included therein, all as incorporated by
reference herein, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon included therein, and
incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.     
 
                                 LEGAL MATTERS
 
  Certain legal matters with respect to the Registration Statement have been
passed upon for the Company by Cummings & Lockwood, Stamford, Connecticut. The
validity of the Common Shares offered hereby has been passed upon for the
Company by Piper & Marbury L.L.P., Baltimore, Maryland. Certain legal matters
related to the Offering will be passed upon for the Underwriters by King &
Spalding, Atlanta, Georgia. Cummings & Lockwood and King & Spalding will rely
on Piper & Marbury L.L.P., as to certain matters of Maryland law.
 
                             AVAILABLE INFORMATION
 
  The Company is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's
Regional Offices at 7 World Trade Center, Suite 1300, New York, New York 10048
and at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates, or accessed electronically on the Commission's Web Site at
http://www.sec.gov.
   
  The Common Shares are currently traded on the Emerging Company Marketplace
of the AMEX under the symbol "GVE.EC." The Common Shares have been approved
for listing on the AMEX (Regular List) under the symbol "GVE," subject to
notice of issuance. The Company's reports, proxy statements, and other
information concerning the Company may also be inspected at the offices of the
American Stock Exchange at 86 Trinity Place, New York, New York 10006.     
 
  The Company has filed a Registration Statement with the Commission in
accordance with the provisions of the Securities Act with respect to the
Common Shares subject to this Prospectus. This Prospectus does not contain all
of the information set forth in the Registration Statement, certain portions
of which have been omitted as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Shares covered hereby, reference is made to the Registration Statement and the
exhibits filed as part thereof. Statements herein concerning the provisions of
any document are not necessarily complete and, in each instance, reference is
made to the copy of such document filed as an exhibit to the Registration
Statement. The Registration Statement and the exhibits may be inspected
without charge at the offices of the Commission, or copies thereof may be
obtained at prescribed rates from the Public Reference Section of the
Commission at the address set forth above.
 
                                      94
<PAGE>
 
                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
 
  The following documents filed by the Company with the Commission are
incorporated into this Prospectus by reference as if fully set forth herein:
 
    1. The Company's Annual Report on Form 10-KSB for the year ended December
  31, 1996, as amended;
     
    2. The Company's Quarterly Reports on Form 10-QSB for the quarters ended
  March 31, 1997, as amended, June 30, 1997, as amended and September 30,
  1997; and     
     
    3. The Company's Current Reports on Form 8-K dated February 13, 1997,
  February 21, 1997, March 14, 1997 (2 Reports), May 30, 1997, as amended,
  July 2, 1997, as amended, September 2, 1997, as amended, and October 31,
  1997.     
 
  Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
 
  The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon written
or oral request of such person, a copy of any and all information that has
been incorporated by reference in the Registration Statement (other than
exhibits to such information, unless such exhibits are specifically
incorporated by reference into any such information). Requests should be
directed to the Company at 598 Asylum Avenue, Hartford, Connecticut 06105,
Attention: Joseph R. LaBrosse, Chief Financial Officer, Telephone number:
(860) 246-1126.
 
 
                                      95
<PAGE>
 
                         INDEX TO FINANCIAL STATEMENTS
 
<TABLE>   
<CAPTION>
                                                                          PAGES
                                                                          -----
<S>                                                                       <C>
GROVE PROPERTY TRUST (FORMERLY KNOWN AS GROVE REAL ESTATE ASSET TRUST)
Pro Forma Condensed Consolidated Financial Statements (Unaudited):
Pro Forma Condensed Consolidated Balance Sheet as of September 30,
 1997...................................................................   F-2
Notes to Pro Forma Condensed Consolidated Balance Sheet.................   F-3
Pro Forma Condensed Consolidated Statements of Income for the Nine
 Months Ended September 30, 1997 and 1996 and the Year Ended December
 31, 1996...............................................................   F-4
Notes to Pro Forma Condensed Consolidated Statements of Income..........   F-7
Consolidated Historical Financial Statements:
Report of Independent Auditors..........................................  F-10
Consolidated Balance Sheets as of September 30, 1997 (Unaudited) and
 December 31, 1996......................................................  F-11
Consolidated Statements of Income for the Nine Months Ended September
 30, 1997 and 1996 (Unaudited) and for the Years Ended December 31, 1996
 and 1995...............................................................  F-12
Consolidated Statements of Changes in Shareholders' Equity for the Nine
 Months Ended September 30, 1997 (Unaudited) and for the Years Ended
 December 31, 1996 and 1995.............................................  F-13
Consolidated Statements of Cash Flows for the Nine Months Ended
 September 30, 1997 and 1996 (Unaudited) and for the Years Ended
 December 31, 1996 and 1995.............................................  F-14
Notes to Financial Statements...........................................  F-15
GROVE PROPERTY SERVICES LIMITED PARTNERSHIP AND PROPERTY PARTNERSHIPS
Combined Financial Statements:
Report of Independent Auditors..........................................  F-23
Combined Balance Sheet as of December 31, 1996..........................  F-24
Combined Statements of Income for the Years Ended December 31, 1996 and
 1995...................................................................  F-25
Combined Statements of Changes in Owners' Equity for the Years Ended
 December 31, 1996 and 1995.............................................  F-26
Combined Statements of Cash Flows for the Years Ended December 31, 1996
 and 1995...............................................................  F-27
Notes to the Combined Financial Statements..............................  F-28
POST MARCH 1997 PROPERTY ACQUISITIONS--AFFILIATES
Combined Financial Statements:
Report of Independent Auditors..........................................  F-32
Combined Statements of Revenues and Certain Expenses for the Nine Months
 Ended September 30, 1997 (Unaudited) and for the Years Ended December
 31, 1996 and 1995......................................................  F-33
Notes to the Combined Statements of Revenues and Certain Expenses.......  F-34
1997 PROPERTY ACQUISITIONS--NON-AFFILIATES
Financial Statements:
Report of Independent Auditors..........................................  F-35
Statements of Revenues and Certain Expenses for the Nine Months Ended
 September 30, 1997 (Unaudited) and for the Year Ended December 31,
 1996...................................................................  F-36
Notes to the Statements of Revenues and Certain Expenses................  F-37
</TABLE>    
 
                                      F-1
<PAGE>
 
                             GROVE PROPERTY TRUST
 
                PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
                               
                            SEPTEMBER 30, 1997     
                                  (UNAUDITED)
   
  This unaudited Pro Forma Condensed Consolidated Balance Sheet is presented
as if: (i) acquisitions completed after September 30, 1997, had occurred on
September 30, 1997, (ii) the Operating Partnership issued Common Units, used
working capital and/or drew down on the Credit Facility to purchase such
properties and (iii) the Company completed the Offerings on September 30,
1997, and used the net proceeds therefrom to repay indebtedness outstanding
under the Credit Facility and certain mortgage notes payable and for working
capital. The unaudited Pro Forma Condensed Consolidated Balance Sheet should
be read in conjunction with the financial statements and notes thereto of the
Company, GPS and the Property Partnerships, Post March 1997 Property
Acquisitions--Affiliates, and 1997 Property Acquisitions--Non-Affiliates,
included elsewhere herein. In management's opinion, all adjustments necessary
to present fairly the effects of the above mentioned transactions have been
made.     
 
  The pro forma information is not necessarily indicative of the results that
would have been reported had such events actually occurred on the date
specified, nor is it indicative of the Company's future results.
 
<TABLE>   
<CAPTION>
                                                 SEPTEMBER 30, 1997
                          ------------------------------------------------------------------
                                     POST SEPTEMBER
                          HISTORICAL    30, 1997
                           COMPANY    ACQUISITIONS  AS ADJUSTED                  PRO FORMA
                             (A)          (B)       CONSOLIDATED THE OFFERING   CONSOLIDATED
                          ---------- -------------- ------------ ------------   ------------
                                                   (IN THOUSANDS)
<S>                       <C>        <C>            <C>          <C>            <C>
ASSETS
  Real estate, net......   $112,014      $8,725       $120,739     $    --        $120,739
  Cash and cash
   equivalents including
   resident security
   deposits.............      1,158         --           1,158        5,120 (C)      6,278
  Deferred costs, net...      1,351         --           1,351          --           1,351
  Due from affiliates...        602         --             602          --             602
  Other assets..........      1,315         --           1,315          --           1,315
                           --------      ------       --------     --------       --------
    Total assets........   $116,440      $8,725       $125,165     $  5,120       $130,285
                           ========      ======       ========     ========       ========
LIABILITIES AND
 SHAREHOLDERS' EQUITY
  Mortgage notes
   payable..............   $ 53,862      $  --        $ 53,862     $(24,250)(C)   $ 29,612
  Revolving Credit
   Facility.............     11,125       7,164         18,289      (18,289)(C)        --
  Accounts payable and
   other liabilities....      1,763         --           1,763          --           1,763
  Due to affiliates.....        843         --             843          --             843
  Resident security
   deposits.............      1,429         --           1,429          --           1,429
  Dividends payable.....      1,166         --           1,166          --           1,166
                           --------      ------       --------     --------       --------
    Total liabilities...     70,188       7,164         77,352      (42,539)        34,813
                           --------      ------       --------     --------       --------
Minority interests in
 consolidated
 partnerships...........      1,560         --           1,560          --           1,560
Minority interest in
 Operating Partnership..     20,831       1,561         22,392        2,260 (D)     24,652
Shareholders' equity:
  Common shares.........         40         --              40           45 (C)         85
  Additional paid-in
   capital..............     24,590         --          24,590       47,614 (C)
                                                                     (2,260)(D)     69,944
  Distributions in
   excess of earnings...       (769)        --            (769)         --            (769)
                           --------      ------       --------     --------       --------
    Total shareholders'
     equity.............     23,861         --          23,861       45,399         69,260
                           --------      ------       --------     --------       --------
    Total liabilities
     and shareholders'
     equity.............   $116,440      $8,725       $125,165     $  5,120       $130,285
                           ========      ======       ========     ========       ========
</TABLE>    
 
                            See accompanying notes.
 
                                      F-2
<PAGE>
 
                             GROVE PROPERTY TRUST
 
            NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
                               
                            SEPTEMBER 30, 1997     
                                  (UNAUDITED)
   
  (A) Balance sheet data was derived from the Company consolidated financial
statements as of September 30, 1997 (Unaudited), which is included elsewhere
in this Registration Statement.     
   
  (B) Balance sheet data reflects the following property acquisitions which
were consummated by the Company after September 30, 1997 as follows (in
thousands):     
 
<TABLE>   
<CAPTION>
                                                                          METHOD OF PAYMENT
                                                                          ------------------
                                    NUMBER OF                             REVOLVING VALUE OF
                                     UNITS OR                    PURCHASE  CREDIT      OP
    PROPERTIES         LOCATION    SQUARE FEET   DATE ACQUIRED   PRICE(2) FACILITY  UNITS(1)
    ----------       ------------- ------------ ---------------- -------- --------- --------
<S>                  <C>           <C>          <C>              <C>      <C>       <C>
1. Corner Block and
 Wharf Building
 (2 properties)(2)   Edgartown, MA 16,427 sq ft October 31, 1997  $4,421   $2,860    $1,561
2. High Meadow
 Apartments          Ellington, CT     100      October 31, 1997   4,050    4,050       --
                                                                  ------   ------    ------
                                                                   8,471    6,910     1,561
Acquisition costs                                                    254      254       --
                                                                  ------   ------    ------
                                                                  $8,725   $7,164    $1,561
                                                                  ======   ======    ======
</TABLE>    
- --------
   
(1)  Operating Partnership ("OP") Unit Holders are represented on the
     accompanying pro forma condensed consolidated balance sheet as "minority
     interest in Operating Partnership." The value ascribed to the OP Units
     for 1. above was $10.50 per OP Unit, representing actual amounts.     
          
(2)  These Properties are retail centers.     
       
  (C) Balance sheet data reflects the Offering and the application of the net
proceeds therefrom as contemplated by this Registration Statement, as follows:
 
<TABLE>   
<CAPTION>
                                          MORTGAGE  REVOLVING
                                           NOTES     CREDIT    COMMON PAID IN
                                  CASH    PAYABLE   FACILITY   STOCK  CAPITAL
                                --------  --------  ---------  ------ -------
                                              (IN THOUSANDS)
<S>                             <C>       <C>       <C>        <C>    <C>
1. Gross proceeds from the
 Offering(1)................... $ 51,188  $    --   $    --     $ 45  $51,143
2. Costs of the Offering(2)....   (3,529)      --        --      --    (3,529)
3. Paydown of debt.............  (42,539)  (24,250)  (18,289)    --       --
                                --------  --------  --------    ----  -------
                                $  5,120  $(24,250) $(18,289)   $ 45  $47,614
                                ========  ========  ========    ====  =======
</TABLE>    
- --------
   
(1)  4,500,000 shares at $11.375 per share.     
(2)  Includes underwriters' discount and an estimated $1,200,000 of other
     costs and expenses.
   
  (D) Represents a reallocation between shareholders' equity and minority
interest in the Operating Partnership upon consummation of the Offering
contemplated in this Registration Statement based upon pro forma: (i) shares
of common stock (8,453,829) and (ii) OP Units not owned by the Company
(3,009,126). See Note (K) in the Notes to Pro Forma Condensed Consolidated
Statements of Income included herein.     
 
                                      F-3
<PAGE>
 
                             GROVE PROPERTY TRUST
 
             PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 
                                  (UNAUDITED)
   
  These unaudited Pro Forma Condensed Consolidated Statements of Income are
presented as if (i) the Company had acquired GPS and Property Partnerships,
Post March 1997 Property Acquisitions--Affiliates, and 1997 Property
Acquisition--Non-Affiliates, (ii) the Consolidation Transactions, including
the New Equity Investment and Refinancings and (iii) the Offering and the
application of the net proceeds therefrom, all as defined and described
elsewhere in this Registration Statement had all occurred as of January 1,
1996. The unaudited Pro Forma Condensed Consolidated Statements of Income
should be read in conjunction with the financial statements of the Company,
GPS and Property Partnerships, Post March 1997 Property Acquisitions--
Affiliates, and 1997 Property Acquisitions--Non-Affiliates, included elsewhere
in this Registration Statement. In management's opinion, all adjustments
necessary to present fairly the effects of the above mentioned transactions
have been made.     
 
  The pro forma information is not necessarily indicative of the results that
would have been reported had such events actually occurred on the date
specified, nor is it indicative of the Company's future results.
 
<TABLE>   
<CAPTION>
                                     NINE MONTHS ENDED SEPTEMBER 30, 1997
                         ---------------------------------------------------------------
                         HISTORICAL                            MANAGEMENT
                          COMPANY   ACQUISITIONS  PRO FORMA      COMPANY     PRO FORMA
                            (A)         (B)      ADJUSTMENTS   ADJUSTMENTS  CONSOLIDATED
                         ---------- ------------ -----------   -----------  ------------
                                                (IN THOUSANDS)
<S>                      <C>        <C>          <C>           <C>          <C>
Revenues:
  Rental income.........  $10,944      $7,643      $  --          $  (9)(G)   $18,578
  Property management...      380         321         --           (355)(H)       346
  Interest and other....      212         241         --             (4)(G)       449
                          -------      ------      ------         -----       -------
    Total revenues......   11,536       8,205         --           (368)       19,373
                          -------      ------      ------         -----       -------
Expenses:
  Related party
   management fees......       22         333         --           (355)(H)       --
  Real estate taxes.....    1,143         781         --            --          1,924
  Other property
   operating............    3,741       3,199         (20)(G)       135 (G)
                                                                    (71)(G)     6,984
  General and
   administrative.......      610          36          30 (F)
                                                      (35)(G)        71 (G)       712
                          -------      ------      ------         -----       -------
    Total operating
     expenses...........    5,516       4,349         (25)         (220)        9,620
                          -------      ------      ------         -----       -------
Net operating income....    6,020       3,856          25          (148)        9,753
Interest expense........    1,732         853        (971)(C)       --          1,614
Depreciation and
 amortization...........    2,380         617         (19)(D)
                                                    1,019 (E)       --          3,997
                          -------      ------      ------         -----       -------
  Income before minority
   interests............    1,908       2,386          (4)         (148)        4,142
Minority interests in
 earnings of
 consolidated
 partnerships...........      114         --          (23)(J)       --             91
Minority interests in
 earnings of Operating
 Partnership............      658         --          405 (K)       --          1,063
                          -------      ------      ------         -----       -------
    Net income..........  $ 1,136      $2,386      $ (386)        $(148)      $ 2,988
                          =======      ======      ======         =====       =======
</TABLE>    
 
                            See accompanying notes.
 
                                      F-4
<PAGE>
 
                              GROVE PROPERTY TRUST
 
       PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME--(CONTINUED)
 
                                  (UNAUDITED)
 
<TABLE>   
<CAPTION>
                                     NINE MONTHS ENDED SEPTEMBER 30, 1996
                         ---------------------------------------------------------------
                         HISTORICAL                            MANAGEMENT
                          COMPANY   ACQUISITIONS  PRO FORMA      COMPANY     PRO FORMA
                            (A)         (B)      ADJUSTMENTS   ADJUSTMENTS  CONSOLIDATED
                         ---------- ------------ -----------   -----------  ------------
                                                (IN THOUSANDS)
<S>                      <C>        <C>          <C>           <C>          <C>
Revenues:
  Rental income.........   $1,521     $16,038      $  --          $ (26)(G)   $17,533
  Property management...      --          610         --           (299)(H)       311
  Interest and other....       28         827         (98)(G)      (214)(G)
                                                                   (100)(I)
                                                                   (188)(G)       255
                           ------     -------      ------         -----       -------
    Total revenues......    1,549      17,475         (98)         (827)       18,099
                           ------     -------      ------         -----       -------
Expenses:
  Related party
   management fees......       80         219         --           (299)(H)       --
  Real estate taxes.....      155       1,772         --            --          1,927
  Other property
   operating............      485       6,571        (136)(G)      (371)(G)     6,549
  General and
   administrative.......       55         191          90 (F)
                                                        3 (G)       371 (G)       710
                           ------     -------      ------         -----       -------
    Total operating
     expenses...........      775       8,753         (43)         (299)        9,186
                           ------     -------      ------         -----       -------
Net operating income....      774       8,722         (55)         (528)        8,913
Interest expense........      293       2,773      (1,394)(C)       --          1,672
Depreciation and
 amortization...........      292       2,310         (16)(D)
                                                    1,434 (E)       --          4,020
                           ------     -------      ------         -----       -------
  Income before minority
   interest.............      189       3,639         (79)         (528)        3,221
Minority interest in
 earnings of Operating
 Partnership............      --          --          845 (K)       --            845
                           ------     -------      ------         -----       -------
    Net income..........   $  189     $ 3,639      $ (924)        $(528)      $ 2,376
                           ======     =======      ======         =====       =======
</TABLE>    
 
 
                            See accompanying notes.
 
                                      F-5
<PAGE>
 
                              GROVE PROPERTY TRUST
 
       PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME--(CONTINUED)
 
                                  (UNAUDITED)
 
<TABLE>   
<CAPTION>
                                         YEAR ENDED DECEMBER 31, 1996
                         ----------------------------------------------------------------
                         HISTORICAL                            MANAGEMENT
                          COMPANY   ACQUISITIONS  PRO FORMA      COMPANY      PRO FORMA
                            (A)         (B)      ADJUSTMENTS   ADJUSTMENTS   CONSOLIDATED
                         ---------- ------------ -----------   -----------   ------------
                                                (IN THOUSANDS)
<S>                      <C>        <C>          <C>           <C>           <C>
Revenues:
  Rental income.........   $2,046     $21,515      $   --        $   (30)(G)   $23,531
  Property management...      --          777          --           (396)(H)       381
  Interest and other....       36       1,266         (138)(G)      (307)(G)
                                                                    (204)(G)
                                                                    (100)(I)       553
                           ------     -------      -------       -------       -------
    Total revenues......    2,082      23,558         (138)       (1,037)       24,465
                           ------     -------      -------       -------       -------
Expenses:
  Related party
   management fees......      109         287          --           (396)(H)       --
  Real estate taxes.....      208       2,382          --            --          2,590
  Other property
   operating............      656       8,914         (149)(G)      (492)(G)     8,929
  General and
   administrative.......       67         344          120 (F)       --
                                                       (74)(G)       492 (G)       949
                           ------     -------      -------       -------       -------
    Total operating
     expenses...........    1,040      11,927         (103)         (396)       12,468
                           ------     -------      -------       -------       -------
Net operating income....    1,042      11,631          (35)         (641)       11,997
Interest expense........      394       3,814       (1,934)(C)       --          2,274
Depreciation and
 amortization...........      387       3,011           (5)(D)
                                                     1,912 (E)       --          5,305
                           ------     -------      -------       -------       -------
  Income before minority
   interest.............      261       4,806           (8)         (641)        4,418
Minority interest in
 earnings of Operating
 Partnership............      --          --         1,160 (K)       --          1,160
                           ------     -------      -------       -------       -------
    Net income..........   $  261     $ 4,806      $(1,168)      $  (641)      $ 3,258
                           ======     =======      =======       =======       =======
</TABLE>    
 
 
                            See accompanying notes.
 
                                      F-6
<PAGE>
 
                             GROVE PROPERTY TRUST
 
        NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 
                                  (UNAUDITED)
                                (IN THOUSANDS)
 
  (A) Historical results of operations data were derived from the financial
statements of the Company appearing elsewhere in this Registration Statement.
 
  (B) The historical financial statements of the Company contain results of
operations data for the properties below from the date of acquisition to the
end of the respective period. The results of operations from the beginning of
the respective period to the acquisition date is included in this column.
 
<TABLE>   
<CAPTION>
 PROPERTY/ENTITY                                               DATE ACQUIRED
 ---------------                                              -----------------
 <C> <S>                                                      <C>
  1. Cambridge..............................................  January 12, 1996
  2. Grove Property Services Limited Partnership and
     Property Partnerships (20 properties and management
     company)(1)............................................   March 14, 1997
  3. Four Winds.............................................    June 1, 1997
  4. Brooksyde..............................................    June 1, 1997
  5. River's Bend...........................................    June 1, 1997
  6. Greenfield Village.....................................    July 1, 1997
  7. Glastonbury Center.....................................  September 1, 1997
  8. Summit & Birch Hill....................................  September 1, 1997
  9. Corner Block and Wharf Building (2 properties).........  October 31, 1997
 10. High Meadow Apartments.................................  October 31, 1997
</TABLE>    
- --------
          
(1) The historical financial statements of Grove Property Services Limited
    Partnership and Property Partnerships for the years ended December 31,
    1996 and 1995, contained elsewhere in this Registration Statement, include
    a property (Talcott Forest) which was not included in the Consolidation
    Transactions and has been omitted herein.     
 
  (C) Represents the following:
 
<TABLE>   
<CAPTION>
                                                   NINE MONTHS
                                                 ENDED SEPTEMBER
                                                       30,          YEAR ENDED
                                                 ----------------  DECEMBER 31,
                                                 1997(1)   1996        1996
                                                 -------  -------  ------------
<S>                                              <C>      <C>      <C>
Pro forma interest expense on new or refinanced
 mortgage debt and the Revolving Credit
 Facility....................................... $   475  $ 1,145    $ 1,530
Historical interest expense on refinanced or
 retired mortgage debt..........................  (1,446)  (2,539)    (3,464)
                                                 -------  -------    -------
                                                 $  (971) $(1,394)   $(1,934)
                                                 =======  =======    =======
</TABLE>    
- --------
   
(1) The New Equity Investment was effective on March 14, 1997. The historical
    financial information for the period March 15, 1997 to September 30, 1997
    already takes effect for this transaction.     
   
  Pro forma interest expense is based on rates ranging from 6.5% to 8.3% per
annum. Assumes proceeds of $30 million ($27.5 million after costs) from the
New Equity Investment and $51.2 million ($47.7 million after costs) from the
Offerings were received by the Company on January 1, 1996.     
 
 
                                      F-7
<PAGE>
 
                             GROVE PROPERTY TRUST
 
  NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME--(CONTINUED)
 
  (D) Represents the following:
 
<TABLE>   
<CAPTION>
                                                     NINE MONTHS
                                                        ENDED
                                                    SEPTEMBER 30,   YEAR ENDED
                                                    -------------  DECEMBER 31,
                                                    1997(1) 1996       1996
                                                    ------- -----  ------------
<S>                                                 <C>     <C>    <C>
Pro forma deferred financing amortization expense
 on new or refinanced mortgage debt and the
 Revolving Credit Facility.........................  $ 30   $  99     $ 138
Historical deferred financing amortization expense
 on refinanced or retired mortgage debt............   (49)   (115)     (143)
                                                     ----   -----     -----
                                                     $(19)  $ (16)    $  (5)
                                                     ====   =====     =====
</TABLE>    
- --------
   
(1) The New Equity Investment was effective on March 14, 1997. The historical
    financial information for the period March 15, 1997 to September 30, 1997
    already reflects this transaction.     
   
  (E) Represents adjustment to record depreciation on the excess of the
purchase price relating to the purchase of certain partnership interests from
partners, over the net book amount and for properties acquired during or after
the nine months ended September 30, 1997, to the extent depreciation was not
reflected in the historical financial statements during the six months ended
September 30, 1997.     
   
  (F) Represents adjustment to record non-cash compensation expense in 1996
and the first quarter of 1997 associated with the Deferred Stock Grants
granted to Executive Officers in connection with the consummation of the
Consolidation Transactions, pursuant to the 1996 Plan. Such compensation
expense was recorded by the Company commencing March 15, 1997 in its
historical financial statements included elsewhere herein.     
 
  (G) Represents adjustments to: (i) provide for elimination adjustments as a
result of combining the operating properties with the management company,
which historically charged properties a management fee, (ii) exclude certain
non-recurring revenues and expenses including those of Grove Property Services
Limited Partnership attributable to brokerage and other services and sales of
apartment units, (iii) reclassify certain expenses historically classified by
Grove Property Services Limited Partnership as property operating expenses to
general and administrative expenses, (iv) decrease general and administrative
expenses to reflect the cost savings (predominately professional fees)
associated with operating all Properties on a combined, self-managed basis
offset by an increase in compensation expense to the Company's officers to
take effect after the Offering, and (v) increase property operating costs
subsequent to the Consolidation Transactions to reflect the recombining of
certain property leasing costs that GPS provided prior to the Consolidation
Transaction and that the Company will commence providing subsequent to the
Offering as follows:
 
<TABLE>   
<CAPTION>
                                               NINE MONTHS ENDED
                                                 SEPTEMBER 30,     YEAR ENDED
                                               ------------------ DECEMBER 31,
                                                 1997      1996       1996
                                               --------  -------- ------------
 <C>   <S>                                     <C>       <C>      <C>
   (i) Non-recurring property operating
       expenses..............................  $     20  $    136     $149
   (i) Non-recurring rental revenues.........         9        26       30
   (i) Non-recurring other revenues..........       --        188      204
  (ii) Gain on sales of apartments...........       --         98      138
  (ii) Brokerage services--other revenues....         4       214      307
 (iii) Reclassification of other property
       operating to general and
       administrative........................        71       371      492
  (iv) (Decrease)Increase in general and
       administrative........................       (35)        3      (74)
   (v) Increase in property operating
       expenses..............................       135       --       --
</TABLE>    
 
  (H) Elimination of intercompany management fees.
 
                                      F-8
<PAGE>
 
                             GROVE PROPERTY TRUST
 
  NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME--(CONTINUED)
 
 
  (I) Elimination of non-recurring commission received in 1996 from an
affiliate.
 
  (J) To eliminate minority interest in a consolidated partnership (acquired
in June 1997) where the Company acquired the remaining interest in such
property partnership on September 30, 1997.
 
  (K) Based upon Operating Partnership ("OP") Units (OP Units are exchangeable
on a one-for-one basis into Common Shares) assumed to be owned by Limited
Partners and Common Shares assumed to be outstanding as follows:
 
<TABLE>   
<CAPTION>
                                                                      OPERATING
                                                           COMMON    PARTNERSHIP
                                                           SHARES       UNITS
                                                          ---------  -----------
<S>                                                       <C>        <C>
Grove Property Trust at December 31, 1996................   620,102         --
New Equity in March 1997................................. 3,333,333         --
Consolidation Transactions in March 1997:
  --affiliates...........................................       --      909,115
  --non-affiliates.......................................       --    1,205,324
June 1997 acquisitions...................................       --      420,183
Exercise of stock options in May 1997....................       394         --
September 1997 acquisitions..............................       --      325,836
October 1997 acquisitions................................       --      148,668
The Offerings............................................ 4,500,000         --
                                                          ---------   ---------
                                                          8,453,829   3,009,126
                                                          =========   =========
                                                              73.75%      26.25%
                                                          =========   =========
</TABLE>    
 
                                      F-9
<PAGE>
 
                        REPORT OF INDEPENDENT AUDITORS
 
The Shareholders and Board of Trust Managers
Grove Property Trust
 
  We have audited the accompanying consolidated balance sheet of Grove
Property Trust (formerly known as Grove Real Estate Asset Trust) as of
December 31, 1996, and the related statements of income, changes in
shareholders' equity and cash flows for the years ended December 31, 1996 and
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Grove
Property Trust as of December 31, 1996 and the results of its operations and
its cash flows for the years ended December 31, 1996 and 1995 in conformity
with generally accepted accounting principles.
 
                                          Ernst & Young LLP
 
New York, New York
September 2, 1997
 
                                     F-10
<PAGE>
 
                              GROVE PROPERTY TRUST
 
                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>   
<CAPTION>
                                                         SEPTEMBER  DECEMBER 31,
                                                         30, 1997       1996
                                                        ----------- ------------
                                                        (UNAUDITED)
<S>                                                     <C>         <C>
                        ASSETS
Real estate assets:
  Land................................................   $ 15,013     $   920
  Buildings and improvements..........................    124,229       8,528
  Furniture, fixtures and equipment...................      6,313         350
                                                         --------     -------
                                                          145,555       9,798
  Less accumulated depreciation.......................    (33,541)     (1,050)
                                                         --------     -------
Net real estate assets................................    112,014       8,748
Cash and cash equivalents, including resident security
 deposits.............................................      1,158         539
Deferred charges, net of accumulated amortization of
 $1,522 (1997) and $6 (1996)..........................      1,351         223
Due from affiliates...................................        602         --
Other assets..........................................      1,315          11
                                                         --------     -------
    Total assets......................................   $116,440     $ 9,521
                                                         ========     =======
         LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
  Mortgage notes payable..............................   $ 53,862     $ 5,669
  Revolving Credit Facility...........................     11,125         --
  Accounts payable, accrued expenses and other
   liabilities........................................      1,763          72
  Due to affiliates...................................        843          19
  Resident security deposits..........................      1,429         157
  Dividends payable...................................      1,166         121
                                                         --------     -------
    Total liabilities.................................     70,188       6,038
                                                         --------     -------
Commitments and subsequent events.....................        --          --
Minority interests in consolidated partnerships.......      1,560         --
Minority interest in Operating Partnership............     20,831         --
Shareholders' equity:
  Preferred shares, $.01 par value per share, 1,000
   shares authorized; no shares issued or
   outstanding........................................        --          --
  Common shares, $.01 par value per share, 13,999,000
   shares authorized; 3,953,829 (1997) and 620,102
   (1996) shares issued and outstanding...............         40           6
  Additional paid-in capital..........................     24,590       3,912
  Distributions in excess of earnings.................       (769)       (435)
                                                         --------     -------
    Total shareholders' equity........................     23,861       3,483
                                                         --------     -------
    Total liabilities and shareholders' equity........   $116,440     $ 9,521
                                                         ========     =======
</TABLE>    
 
                            See accompanying notes.
 
                                      F-11
<PAGE>
 
                              GROVE PROPERTY TRUST
 
                       CONSOLIDATED STATEMENTS OF INCOME
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>   
<CAPTION>
                                           NINE MONTHS ENDED     YEARS ENDED
                                             SEPTEMBER 30,      DECEMBER 31,
                                          ------------------- -----------------
                                             1997      1996     1996     1995
                                          ---------- -------- -------- --------
                                              (UNAUDITED)
<S>                                       <C>        <C>      <C>      <C>
Revenues:
  Rental income.........................  $   10,944 $  1,521 $  2,046 $  1,287
  Property management...................         380      --       --       --
  Interest and other income.............         212       28       36       30
                                          ---------- -------- -------- --------
    Total revenues......................      11,536    1,549    2,082    1,317
                                          ---------- -------- -------- --------
Expenses:
  Property operating and maintenance....       3,741      485      656      406
  Real estate taxes.....................       1,143      155      208      148
  Related party management fees.........          22       80      109       67
  General and administrative............         610       55       67       56
                                          ---------- -------- -------- --------
    Total expenses......................       5,516      775    1,040      677
                                          ---------- -------- -------- --------
Net operating income....................       6,020      774    1,042      640
Interest expense........................       1,732      293      394       85
Depreciation and amortization...........       2,380      292      387      217
                                          ---------- -------- -------- --------
Income before minority interests........       1,908      189      261      338
Minority interest in consolidated
 partnerships...........................         114      --       --       --
Minority interest in Operating
 Partnership............................         658      --       --       --
                                          ---------- -------- -------- --------
Net income..............................  $    1,136 $    189 $    261 $    338
                                          ========== ======== ======== ========
Net income per common share.............  $     0.37 $   0.30 $   0.42 $   0.55
                                          ========== ======== ======== ========
Weighted average number of common shares
 outstanding during the period..........   3,074,535  620,102  620,102  620,102
                                          ========== ======== ======== ========
</TABLE>    
 
 
                            See accompanying notes.
 
                                      F-12
<PAGE>
 
                              GROVE PROPERTY TRUST
 
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                 (IN THOUSANDS)
 
<TABLE>   
<CAPTION>
                                                       ADDITIONAL DIVIDENDS IN
                                                COMMON  PAID-IN   EXCESS OF NET
                                                SHARES  CAPITAL      INCOME
                                                ------ ---------- -------------
<S>                                             <C>    <C>        <C>
Shareholders' equity at January 1, 1995........  $ 6    $ 3,912      $   (78)
Net income.....................................  --         --           338
Declared dividends.............................  --         --          (475)
                                                 ---    -------      -------
Shareholders' equity at December 31, 1995......    6      3,912         (215)
Net income.....................................  --         --           261
Declared dividends.............................  --         --          (481)
                                                 ---    -------      -------
Shareholders' equity at December 31, 1996......    6      3,912         (435)
New Equity Investment, net of related costs
 (unaudited)...................................   34     27,490          --
Allocation of shareholders' equity to minority
 interest in Operating Partnership related to
 the Company's Consolidation Transactions
 (Unaudited)...................................  --      (6,812)         --
Net income (unaudited).........................  --         --         1,136
Declared dividends (unaudited).................  --         --        (1,470)
                                                 ---    -------      -------
Shareholders' equity at September 30, 1997
 (unaudited)...................................  $40    $24,590      $  (769)
                                                 ===    =======      =======
</TABLE>    
 
 
                            See accompanying notes.
 
                                      F-13
<PAGE>
 
                              GROVE PROPERTY TRUST
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>   
<CAPTION>
                                                  NINE MONTHS     YEARS ENDED
                                                     ENDED         DECEMBER
                                                 SEPTEMBER 30,        31,
                                                 ---------------  ------------
                                                   1997    1996   1996   1995
                                                 --------  -----  -----  -----
                                                  (UNAUDITED)
<S>                                              <C>       <C>    <C>    <C>
OPERATING ACTIVITIES
Net income.....................................  $  1,136  $ 189  $ 261  $ 338
Adjustments to reconcile net income to net cash
 provided by operating activities:
  Depreciation and amortization................     2,380    293    387    217
  Minority interests...........................       772    --     --     --
  Non-cash compensation expenses...............        90    --     --     --
  Imputed interest--mortgage...................        20     28     37     35
(Increase) decrease in other assets............    (1,247)   (59)    (8)     4
Increase (decrease) in accounts payable,
 accrued expenses and other liabilities........      (693)    30     41     (9)
                                                 --------  -----  -----  -----
  Net cash provided by operating activities....     3,844    481    718    585
                                                 --------  -----  -----  -----
INVESTING ACTIVITIES
Purchase of partnership interests..............    (8,333)   --     --     --
Cash acquired on purchase of partnership
 interests.....................................     3,013    --     --     --
Deferred charges...............................    (1,076)   --    (174)   --
Other..........................................       --     --     155    --
Additions to real estate assets................    (5,846)   (89)  (126)   (99)
                                                 --------  -----  -----  -----
  Net cash (used in) investing activities......   (12,242)   (89)  (145)   (99)
                                                 --------  -----  -----  -----
FINANCING ACTIVITIES
Net proceeds from mortgages and Revolving
 Credit Facility payable.......................    26,209    220    220    --
Financing costs................................      (648)   (56)   (21)   (23)
Repayment of mortgages payable.................   (41,888)   (42)   (59)   --
Net proceeds from New Equity investment........    27,524    --     --     --
Payments to affiliates.........................      (758)   (96)   (78)   (23)
Dividends paid.................................    (1,422)  (360)  (480)  (472)
                                                 --------  -----  -----  -----
Net cash provided by (used in) financing activ-
 ities.........................................     9,017   (334)  (418)  (518)
                                                 --------  -----  -----  -----
Net increase (decrease) in cash and cash equiv-
 alents........................................       619     58    155    (32)
Cash and cash equivalents, beginning of peri-
 od............................................       539    384    384    416
                                                 --------  -----  -----  -----
Cash and cash equivalents, end of period.......  $  1,158  $ 442  $ 539  $ 384
                                                 ========  =====  =====  =====
</TABLE>    
 
                            See accompanying notes.
 
                                      F-14
<PAGE>
 
                             GROVE PROPERTY TRUST
 
                         NOTES TO FINANCIAL STATEMENTS
 
                               DECEMBER 31, 1996
 
1. FORMATION AND BUSINESS OF THE COMPANY
 
  Grove Property Trust (the "Company" or "GPT"), formerly Grove Real Estate
Asset Trust was organized in the State of Maryland on April 4, 1994, as a Real
Estate Investment Trust ("REIT"). As of December 31, 1996, the Company
operated four properties with a total of 257 residential apartments located in
the northeast. The Company purchased three properties, (the "Original
Properties") on June 23, 1994, and the fourth property was acquired in January
1996 (collectively, the "Properties").
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Use of Estimates
 
  The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
 
 Cash and Cash Equivalents
 
  The Company considers all highly liquid financial instruments with an
original maturity of three months or less at the time of the purchase to be
cash equivalents.
 
 Real Estate Assets and Depreciation
 
  The Original Properties were recorded at their historical cost due to the
controlling relationship between the principals of the entities previously
operating the Properties (the "Grove Affiliates"). The portion of the purchase
price attributable to the net assets acquired from Grove Affiliates exceeds
their amortized historical cost. Accordingly, the excess amount was reflected
as a decrease in equity for accounting purposes. All real estate assets
purchased subsequent to the initial acquisitions have been recorded at cost.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets (7 to 27.5 years).
 
 Long-Lived Assets
 
  In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed of " (FAS No. 121),
which requires long-lived assets to be reviewed for impairment when events or
circumstances indicate that an impairment might exist. When an impairment
indicator is present, assets must be grouped at the lowest level for which
there are identifiable cash flows. If the sum of the undisclosed cash flows is
less than the carrying amounts of the assets, an impairment loss must be
recorded. The impairment loss is measured by comparing the fair value of the
assets with their carrying amount. To date, no losses have been recognized.
 
 Per Share Data
 
  Net income per common share is based on the weighted average number of
shares outstanding during each year. Common stock equivalents (options and
warrants) did not have a dilutive effect on net income per share for any year
presented. On February 10, 1997, the Board of Trust Managers of the Company
declared a stock dividend aggregating 26,250 Common Shares and concurrently
declared a 1.125-for-one common stock split. All shares outstanding and per
share amounts have been restated to reflect these changes in capital
structure.
 
 
                                     F-15
<PAGE>
 
                             GROVE PROPERTY TRUST
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
  In February 1997, the Financial Accounting Standard Board issued Statement
No. 128, Earnings Per Share, which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior periods.
Under the new requirements for calculating primary earnings per share, the
dilutive effect of stock options will be excluded. The impact of Statement 128
on the calculation of primary and fully diluted earnings per share for the
years ended December 31, 1996 and 1995, is not material.
 
 Stock-Based Compensation
 
  Effective in fiscal year 1996, the Company adopted Financial Accounting
Standard No. 123, "Accounting for Stock-Based Compensation." This statement
defines a fair value based method of accounting for employee stock
compensation plans. However, it also allows an entity to continue to measure
compensation cost for those plans in accordance with Accounting Principle
Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees." Under
APB No. 25, compensation cost is the excess, if any, of the quoted market
price of the stock at the grant date over the amount the employee must pay to
acquire the stock. The company has elected to continue to account for its
employee stock compensation plans under APB No. 25.
 
 Unaudited Interim Financial Information
   
  The accompanying financial information as of September 30, 1997 and for the
nine months ended September 30, 1997 and 1996 is unaudited, however, in the
opinion of management, all adjustments (consisting of normal recurring
adjustments) necessary to present fairly, the information set forth therein
for these interim periods have been included. The results of these interim
periods are not necessarily indicative of the results to be obtained for a
full fiscal year.     
 
 Income Taxes and Dividends
 
  The Company has made the election to be taxed as a REIT under Sections 856
through 860 of the Internal Revenue Code of 1986, as amended (the "Code"). A
REIT will generally not be subject to federal income tax to the extent it
distributes at least 95% of its taxable income to its shareholders and
complies with other requirements. Accordingly, no provision has been made for
federal income taxes for the Company in the accompanying financial statements.
Even though the Company qualifies for taxation as a REIT, the Company may be
subject to certain state and local taxes on its income and property and to
federal income and excise taxes on its undistributed income, if any.
Shareholders are taxed on dividends declared and must report such dividends as
either ordinary income, short term gains, long term gains, or as a return of
capital. The federal income tax characteristics of dividends paid by the
Company consisted of:
 
<TABLE>
<CAPTION>
                                                                    1996   1995
                                                                   ------ ------
   <S>                                                             <C>    <C>
   Ordinary income................................................ 97.46% 83.22%
   Return of principal............................................  2.54% 16.78%
</TABLE>
 
 Advertising
 
  The Company expenses advertising costs as incurred. Advertising costs were
$24,000 and $17,000 in 1996 and 1995, respectively.
 
 Deferred Charges
 
  Deferred charges, consisting principally of loan costs, are amortized on a
straight line basis over the term of the related obligations.
 
                                     F-16
<PAGE>
 
                             GROVE PROPERTY TRUST
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
 
 Rental Income
 
  Rental income attributable to leases is recognized on a straight-line basis
over the term of the leases, which are generally for one year. The Company
generally requires tenants to provide a cash security deposit equal to one
month's rent or pay the last month's rent in advance. Such amounts are
deposited into a restricted bank account and the Company records an offsetting
liability.
 
3. ACQUISITION
 
  On January 12, 1996, the Company purchased the assets and operations of
Grove Cambridge Associates Limited Partnership ("Cambridge"), a ninety-two
unit multifamily apartment complex located in Norwich, Connecticut, for
$4,250,000, which was funded with a $4,500,000 mortgage note payable. The
results of Cambridge's operations have been combined with those of the Company
since the date of acquisition.
 
  The unaudited pro forma information for the period set forth below gives
effect to the transaction as if it had occurred at the beginning of the
period. The pro forma information is presented for informational purposes only
and is not necessarily indicative of the results of operations that actually
would have been achieved had the acquisition been consummated as of that time.
The pro forma results for 1996 are not materially different from the reported
amounts.
 
  Pro Forma Year Ended December 31, 1995 (in thousands, except share data):
 
<TABLE>
     <S>                                                                 <C>
     Revenues........................................................... $2,079
     Net income......................................................... $  278
     Net income per common share........................................ $ 0.45
</TABLE>
 
4. MORTGAGE NOTES PAYABLE
 
  Mortgage notes payable as of December 31, 1996, consist of the following (in
thousands):
 
<TABLE>
     <S>                                                                 <C>
     Southington Apartments note........................................ $1,228
     Cambridge Estates note.............................................  4,441
                                                                         ------
       Total............................................................ $5,669
                                                                         ======
</TABLE>
 
  The mortgage note on the Southington Apartments property, which has a face
amount of $1,250,000, has an imputed interest rate of 7.25% due in monthly
interest payments of $4,167 through June 1997 and monthly principal and
interest payments of $8,527 through July 2013. The note is collateralized by
the property and 15% of the face amount is guaranteed by certain executive
officers and shareholders of the Company.
 
  The Cambridge note payable had an original principal balance of $4,500,000
with interest payable at 7.04%. Monthly principal and interest payments of
$31,920 are due through January 2006. The note is collateralized by the
Cambridge property and by first mortgage liens on two additional properties.
 
 
                                     F-17
<PAGE>
 
                             GROVE PROPERTY TRUST
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
  Aggregate annual maturities of mortgage notes payable as of December 31,
1996, are as follows (in thousands):
 
<TABLE>
     <S>                                                                  <C>
     1997................................................................ $   55
     1998................................................................     86
     1999................................................................     92
     2000................................................................    103
     2001................................................................    111
     Thereafter..........................................................  5,222
                                                                          ------
       Total............................................................. $5,669
                                                                          ======
</TABLE>
   
  Interest paid was approximately $380,000 and $85,000 in 1996 and 1995,
respectively and $1,700,000 and $279,000 for the nine months ended September
30, 1997 and 1996, respectively.     
   
  Subsequent to year end, the Company entered into the Consolidation
Transactions, a New Equity Investment and acquired various properties. As part
of these transactions, the Company entered into and assumed various new debt
obligations (see Note 10) and repaid certain mortgage notes payable. After
taking effect for these transactions, the Company's mortgage and other debt as
of September 30, 1997 (unaudited) consists of:     
 
<TABLE>   
<CAPTION>
                                                                   SEPTEMBER 30,
                                                                       1997
                                                                   -------------
                                                                    (UNAUDITED)
     <S>                                                           <C>
     Amortizing first mortgage notes..............................    $14,425
     Interest only first mortgage notes...........................     39,437
     Revolving Credit Facility (See Notes 5 and 10)...............     11,125
                                                                      -------
                                                                      $64,987
                                                                      =======
</TABLE>    
   
  The amortizing first mortgage notes have fixed interest rates between 7.04%
and 8.33%, have monthly principal and interest payments based on amortization
schedules between 25 and 30 years, and maturities between the year 2000 and
2013. The notes are collateralized by 6 properties and are partially
guaranteed by certain executive officers and shareholders of the Company.     
   
  The interest only first mortgage notes are comprised of variable rate and
fixed rate notes, are collateralized by 13 properties, and are partially
guaranteed by certain executive officers and shareholders of the Company. One
note has a principal balance of $4.0 million, monthly payments of interest
only at a fixed rate of 7.50%, and matures in 1999. One note has a principal
balance of $15.1 million, monthly payments of interest only at a variable rate
of one month LIBOR plus 1.14%, and matures in 2007. Four notes have an
aggregate principal balance of $20.3 million, monthly payments of interest
only at a variable rate of one month LIBOR plus 1.20%, and mature between 1999
and 2005.     
 
  The interest rate on the variable notes is partially fixed with three
interest rate swap contracts (the "Interest Swaps") with two banks. The
Interest Swaps have, in effect, (i) fixed $7.6 million of debt at 7.67% for
the period from October 1, 1997 through October 1, 2007, (ii) fixed $7.6
million of debt at 7.68% for the period from October 1, 1997 through January
4, 2005, and (iii) fixed $9.1 million of debt at 7.09% from December 15, 1995
through December 15, 2000. The Interest Swaps have been pledged as collateral
under the various related variable notes.
 
 
                                     F-18
<PAGE>
 
                             GROVE PROPERTY TRUST
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
5. INITIAL CREDIT FACILITY
 
  The Company entered into an Initial Credit Facility concurrent with its
initial public offering ("IPO") in 1994. The Initial Credit Facility, which
provided for up to $3.0 million in borrowings, was expected to be used to
finance acquisitions of properties, re-development and renovation costs and
expenses, and for working capital purposes related to future acquisitions. The
Initial Credit Facility was not drawn upon, and was terminated in January
1996. In March 1997, the Company entered into a new credit facility (see Note
10).
 
6. STOCK OPTION PLAN
 
  The Company adopted a stock option plan in 1994 (the "1994 Plan") for a
maximum of 118,120 common shares for key employees and non-employees of the
Company. Options are granted at the market price of the Company's common stock
on the date of grant, become exercisable in increments of 33 1/3% per year on
each of the first three anniversaries of the date of grant and have a maximum
term of ten years. At December 31, 1996, no options had been exercised. In May
1997, an employee exercised options on 394 Common Shares. Information
regarding the 1994 Plan is summarized below. In March 1997, the Company
instituted an additional stock option plan (see Note 10).
 
<TABLE>
<CAPTION>
                                                     1996             1995
                                               ---------------- ----------------
                                                       WEIGHTED         WEIGHTED
                                                       AVERAGE          AVERAGE
                                                       EXERCISE         EXERCISE
                                               OPTIONS  PRICE   OPTIONS  PRICE
                                               ------- -------- ------- --------
<S>                                            <C>     <C>      <C>     <C>
Outstanding at beginning of year..............  69,689  $9.31   66,146   $9.42
Granted.......................................  48,428  $7.29    3,543   $7.20
                                               -------          ------
Outstanding at end of year.................... 118,117  $8.48   69,689   $9.31
                                               =======          ======
Options exercisable at end of year............  45,272  $9.36   22,049   $9.42
                                               =======  =====   ======   =====
</TABLE>
 
  The Company accounts for stock option grants under its 1994 Plan in
accordance with APB No. 25. Accordingly, no compensation cost has been
recognized for stock option grants since the options have exercise prices
equal to the market value of the Company's common stock at the date of grant.
The pro forma compensation cost for the Company's 1994 Plan determined in
accordance with FAS No. 123 was not material for 1996 and 1995.
 
7. UNDERWRITER WARRANTS
 
  In conjunction with the IPO, the managing underwriter was granted
Underwriter Warrants to purchase 47,248 Common Shares. The Underwriter
Warrants are exercisable at $11.31 per Common Share and expire in June 1999.
No warrants have been exercised as of December 31, 1996.
 
8. RELATED PARTY TRANSACTIONS
 
 Management Fee
   
  On June 23, 1994, the Company entered into a Management Agreement (the
"Agreement") with Grove Property Services Limited Partnership ("GPS"), an
affiliated company which provides operating and support functions requisite to
the operation of the Properties. The Agreement provides for a management fee
equal to 5% of gross monthly revenues, as defined, and was terminated pursuant
to the Consolidated Transactions in March 1997. Management fees incurred in
1996 and 1995 were approximately $109,000 and $67,000, respectively, and
$22,000 and $80,000 for the nine months ended September 30, 1997 and 1996,
respectively (Unaudited).     
 
                                     F-19
<PAGE>
 
                             GROVE PROPERTY TRUST
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
 
 Operating Expenses and Non-Operating Expenses
 
  Certain operating and non-operating expenses include amounts allocated to
the Company by GPS. These charges reflect an allocation of the cost of
services required by the Company, which are outside the scope of services
customarily included in the property management fees. Total costs of
approximately $11,000 were allocated in 1996.
 
 Rent to Related Party
 
  The Company's executive offices are leased from an affiliated company for
$500 per month under a three year lease which expired in June 1997; rent
expense related thereto was $6,000 in 1996 and 1995. The lease was
subsequently extended on a month-to-month basis at a comparable rent.
 
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
 
  The following disclosures of estimated fair value were determined by
management using available market information and appropriate valuation
methodologies. Judgment is necessary to interpret market data and develop
estimated fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Company could realize on disposition
of the financial instruments. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair
value amounts.
 
  Cash equivalents, accounts receivable, accounts payable and other accruals,
because of their short term nature, approximate fair value. Mortgage notes are
also carried at amounts that approximate their fair values. Fair values of
mortgage notes were estimated using discounted cash flow analyses, based on
interest rates currently available to the Company for issuance of debt with
similar terms and remaining maturities.
 
10. SUBSEQUENT EVENTS
 
 Consolidation Transactions
 
  On March 14, 1997, GPT completed a series of transactions pursuant to which
the Company was transformed into a self-administered and self-managed REIT
with control over a portfolio of 23 multi-family residential projects and a
neighborhood shopping center in the Northeastern United States. A summary of
the steps involved in these Consolidation Transactions is as follows:
 
  . GPT formed an Operating Partnership to serve as the vehicle for the
    consolidation of ownership and/or control of the operations, assets and
    liabilities of the Company.
 
  . Pursuant to an Exchange Offer, the Operating Partnership purchased from
    the Limited Partners of certain Property Partnerships, the outstanding
    partnership units of each of the Property Partnerships in exchange for
    Common Units of the Operating Partnership, or, in certain circumstances,
    cash. The number of Common Units received by a Limited Partner (1,205,324
    in the aggregate, excluding Grove Companies) was calculated based upon
    such partners' interest in the applicable partnership as applied to the
    value of the Property Partnership associated therewith.
     
  . Immediately prior to the consummation of the Consolidation Transactions,
    GPT declared and issued a stock dividend aggregating 26,250 Common Shares
    and concurrently declared a stock split of 1.125 to 1, thereby issuing on
    a pro rata basis a total of 95,102 Common Shares to the holders of the
    then issued and outstanding Common Shares. The Company retroactively
    adjusted all share and per share amounts in the accompanying financial
    statements to reflect these transactions.     
 
  . GPT issued 3,333,333 Common Shares to new equity investors in exchange
    for $30 million.
 
 
                                     F-20
<PAGE>
 
                             GROVE PROPERTY TRUST
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
  . Pursuant to a Contribution Agreement among GPT, certain companies and
    individuals affiliated with GPT (the "Grove Companies") and the Operating
    Partnership, substantially all of the assets and operations of GPT, the
    management services division of Grove Property Services Limited
    Partnership and the Grove Companies' interests in the acquired Property
    Partnerships were transferred to the Company.
 
   In exchange for the above, the Grove Companies received an aggregate of
   909,115 Common Units in the Operating Partnership and a cash payment of
   $177,669 from GPT, and GPT received 620,102 Common Units in the Operating
   Partnership. Additionally, GPT contributed to the Operating Partnership
   the proceeds received from the new equity investment ($30 million less
   related costs) in exchange for a number of additional Common Units equal
   to the number of Common Shares issued by GPT to the new equity investors.
 
 Revolving Credit Facility and Mortgage Loan Refinancings
   
  In connection with the Consolidation Transactions, the Operating Partnership
entered into a three-year secured revolving acquisition and working capital
facility ("Revolving Credit Facility") of up to $25 million and an
approximately $15.1 million ten-year term mortgage loan. Borrowings under the
Revolving Credit Facility are collateralized by certain properties and bear
interest, payable monthly, at a floating rate of 1.2% above the 30, 60 or 90
day LIBOR. The Operating Partnership is required to maintain certain financial
covenants. At September 30, 1997, $11,125,000 (Unaudited) was outstanding
under this facility.     
 
  The Company used a portion of the proceeds from the new equity investment,
together with borrowings under the $15.1 million ten-year term mortgage loan
to paydown or refinance approximately $39.3 million of mortgage indebtedness
of the Property Partnerships and to acquire certain minority interests in
certain of the Property Partnerships.
 
 Property Acquisitions
   
  Effective on June 1, 1997, The Company acquired two residential apartment
complexes through the Operating Partnership. These acquisitions were completed
by the Operating Partnership through the acquisition of the assets (other than
certain amounts of cash) and the assumption of liabilities of Northeast
Apartments I Limited Partnership, the owner of Four Winds Apartments, and of
West Hartford Center Associates, Limited Partnership, the owner of Brooksyde
Apartments. In addition, simultaneously with the acquisition of Four Winds
Apartments and Brooksyde Apartments, the Company acquired an interest in
Windsor Arbor Limited Partnership ("Windsor"), the owner of River's Bend
Apartments, and anticipates that it will acquire, pursuant to certain put and
call options, the remaining limited partnership interest in Windsor on or
before December 31, 1997 for $4.9 million. Commencing June 1, 1997, the
Company will consolidate Windsor in its financial statements. On September 30,
1997 (Unaudited), the Company acquired this remaining interest.     
 
  Upon consummation of the June 1, 1997 transactions referred to above, the
Operating Partnership issued an aggregate of 420,183 Common Units valued at
$10 per unit, which under certain circumstances, could be redeemed for an
equal number of Common Shares of the Company. The Company also assumed
mortgage debt on Four Winds Apartments and Brooksyde Apartments in the
aggregate remaining principal amount of $6.2 million. Additionally, the
Windsor investment is encumbered by $8.6 million mortgage debt. To complete
these transactions, the Company borrowed $1.825 million under its Revolving
Credit Facility and used $68,000 of its available cash.
 
  Four Winds Apartments is a 168-unit community located in North Fall River,
Massachusetts. Brooksyde Apartments is an 80-unit apartment community located
in West Hartford, Connecticut. River's Bend Apartments is a 432-unit
condominium community located in Windsor, Connecticut, of which 349 units are
owned by Windsor.
 
 
                                     F-21
<PAGE>
 
                             GROVE PROPERTY TRUST
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
  On July 1, 1997, the Company purchased 127 condominium units constituting a
part of Greenfield Village Condominium in Rocky Hill, Connecticut. The
purchase was made pursuant to a Purchase and Sale Agreement dated May 14,
1997, between Highland Income Partners, L.P. and Grove Corporation, an
affiliate of the Company. The $4,282,500 purchase price for Greenfield Village
was paid utilizing a portion of the Company's cash and borrowings under the
Revolving Credit Facility. In addition, Grove Rocky Hill assumed certain
obligations of the seller, principally related to security deposits held by
the seller. In connection with the purchase of Greenfield Village, the Company
paid $107,000 for expense and overhead reimbursement to National Realty
Services, L.P., a limited partnership owned by four of the executive officers
of the Company.
 
  Pursuant to two Offers to Exchange All Outstanding Limited Partnership
Interests in two affiliated partnerships, effective September 1, 1997, the
Company acquired three residential apartment communities through the Operating
Partnership. These acquisitions were completed by the Operating Partnership
through the acquisition of the assets and the assumption of liabilities of
Heritage Court Associates Limited Partnership, the owner of the Glastonbury
Center Apartments, and of Farmington Summit Associates Limited Partnership,
the owner of Summit Apartments and Birch Hill Apartments.
   
  Upon consummation of the transactions, the Operating Partnership issued an
aggregate of 325,836 Common Units valued at $10.50 per unit, which under
certain circumstances, could be redeemed for an equal number of Common Shares
of the Company. The Company also assumed mortgage debt on Summit Apartments,
Birch Hill Apartments and Glastonbury Apartments in the aggregate remaining
principal amount of $9.8 million. To complete these transactions, the Company
borrowed $750,000 under its Revolving Credit Facility, assumed a current
liability of $1.1 million (subsequently paid), including approximately
$200,000 due to an affiliate, and paid the balance from its available cash.
    
  Summit Apartments and Birch Hill Apartments have a total of 184 apartments
and are located in Farmington Connecticut. Glastonbury Apartments is a 104-
unit apartment community located in Glastonbury, Connecticut.
 
 1996 Stock Option Plan
 
  In March 1997, the Company instituted an additional stock option plan ("1996
Plan"). The Company reserved a total of 900,000 common shares, subject to
adjustment, pursuant to the 1996 Plan. The provisions of the 1996 Plan are
similar to the 1994 Plan (see Note 6). Pursuant to the Consolidation
Transactions, the Company granted 300,000 options to certain executive
officers and non-employee Board of Trust Managers. Each non-employee Board of
Trust Manager receives 5,000 options per year.
   
11. SUBSEQUENT EVENTS (UNAUDITED)     
   
  On October 31, 1997, the Company purchased a 100 unit apartment complex from
an unrelated party through the Operating Partnership in Ellington, Connecticut
("High Meadow"). The $4,200,000 purchase price was paid utilizing borrowings
under the Revolving Credit Facility.     
   
  On October 31, 1997, the Company also acquired two related party retail
communities through the Operating Partnership. These acquisitions ("Corner
Block" and the "Wharf Building") are speciality retail properties, include a
total of 16,427 square feet and are located in Edgartown, Massachusetts.     
   
  Upon consummation of the October 31, 1997 transactions, the Operating
Partnership issued 148,668 Common Units valued at $10.50 per unit under
certain circumstances, could be redeemed for an equal number of Common Shares
of the Company. To complete these transactions, the Company borrowed
approximately $7 million under its Revolving Credit Facility.     
 
                                     F-22
<PAGE>
 
                        REPORT OF INDEPENDENT AUDITORS
 
To the Shareholders and Board of Trust Managers
Grove Property Trust
 
  We have audited the accompanying combined balance sheet of Grove Property
Services Limited Partnership and Property Partnerships as of December 31,
1996, and the related combined statements of income, owners' equity and cash
flows for each of the two years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
 
  We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the 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 audit provides a reasonable basis
for our opinion.
 
  In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Grove Property
Services Limited Partnership and Property Partnerships at December 31, 1996,
and the combined results of their operations and their cash flows for each of
the two years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
 
                                          Ernst & Young LLP
 
New York, New York
September 2, 1997
 
                                     F-23
<PAGE>
 
     GROVE PROPERTY SERVICES LIMITED PARTNERSHIP AND PROPERTY PARTNERSHIPS
 
                             COMBINED BALANCE SHEET
 
                               DECEMBER 31, 1996
                                 (IN THOUSANDS)
 
<TABLE>
<S>                                                                     <C>
                                    ASSETS
Real estate assets, at cost:
  Land................................................................. $ 7,718
  Buildings and improvements...........................................  66,933
  Furniture, fixtures and equipment....................................   4,182
                                                                        -------
                                                                         77,833
Less accumulated depreciation..........................................  24,209
                                                                        -------
  Net real estate assets...............................................  54,624
Cash and cash equivalents..............................................   1,702
Restricted cash--resident security deposits............................     679
Due from related parties...............................................     931
Due from partners......................................................     922
Deferred costs, net of accumulated amortization of $1,585..............     807
Other assets...........................................................     201
                                                                        -------
  Total assets......................................................... $59,866
                                                                        =======
                        LIABILITIES AND OWNERS' EQUITY
Mortgage notes payable................................................. $48,643
Accounts payable and other liabilities.................................     853
Due to related parties.................................................   1,896
Resident security deposits.............................................     679
                                                                        -------
  Total liabilities....................................................  52,071
Commitments and contingencies..........................................     --
Owners' equity.........................................................   7,795
                                                                        -------
  Total liabilities and owners' equity................................. $59,866
                                                                        =======
</TABLE>
 
 
                            See accompanying notes.
 
                                      F-24
<PAGE>
 
     GROVE PROPERTY SERVICES LIMITED PARTNERSHIP AND PROPERTY PARTNERSHIPS
 
                         COMBINED STATEMENTS OF INCOME
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                  YEARS ENDED
                                                                 DECEMBER 31,
                                                                ---------------
                                                                 1996    1995*
                                                                ------- -------
<S>                                                             <C>     <C>
Revenues:
  Rental income................................................ $12,906 $11,965
  Property management..........................................     777     815
  Interest and other...........................................   1,138   1,103
                                                                ------- -------
    Total revenues.............................................  14,821  13,883
                                                                ------- -------
Expenses:
  Allocated payroll............................................   2,493   2,358
  Real estate taxes............................................   1,299   1,234
  Other property operating.....................................   3,212   2,918
  General and administrative...................................     279     261
                                                                ------- -------
    Total expenses.............................................   7,283   6,771
                                                                ------- -------
Net operating income...........................................   7,538   7,112
Interest expense...............................................   3,856   3,829
Depreciation and amortization..................................   3,055   3,140
                                                                ------- -------
Income before extraordinary item...............................     627     143
Extraordinary item--gain on debt restructuring.................     --    2,186
                                                                ------- -------
    Net income................................................. $   627 $ 2,329
                                                                ======= =======
</TABLE>
- --------
* Certain amounts have been reclassified for comparative purposes.
 
 
                            See accompanying notes.
 
                                      F-25
<PAGE>
 
     GROVE PROPERTY SERVICES LIMITED PARTNERSHIP AND PROPERTY PARTNERSHIPS
 
                COMBINED STATEMENTS OF CHANGES IN OWNERS' EQUITY
 
                     YEARS ENDED DECEMBER 31, 1996 AND 1995
                                 (IN THOUSANDS)
 
<TABLE>
<S>                                                                     <C>
Owners' equity, January 1, 1995........................................ $10,946
Capital contributions..................................................       2
Distributions..........................................................  (1,018)
Net income.............................................................   2,329
                                                                        -------
Owners' equity, December 31, 1995......................................  12,259
Capital contributions..................................................     925
Distributions..........................................................  (6,016)
Net income.............................................................     627
                                                                        -------
Owners' equity, December 31, 1996...................................... $ 7,795
                                                                        =======
</TABLE>
 
 
 
                            See accompanying notes.
 
                                      F-26
<PAGE>
 
     GROVE PROPERTY SERVICES LIMITED PARTNERSHIP AND PROPERTY PARTNERSHIPS
 
                       COMBINED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                               YEAR ENDED
                                                              DECEMBER 31,
                                                             ----------------
                                                              1996     1995*
                                                             -------  -------
<S>                                                          <C>      <C>
OPERATING ACTIVITIES
Net income.................................................. $   627  $ 2,329
Adjustments to reconcile net income to net cash provided by
 operating activities:
  Depreciation and amortization.............................   3,055    3,140
  Gain on debt restructuring................................     --    (2,186)
  Gain on sales of condominiums.............................    (210)     --
(Increase) in assets:
  Other assets..............................................     (16)     (25)
(Decrease) increase in liabilities:
  Accounts payable and other liabilities....................    (224)      59
                                                             -------  -------
  Net cash provided by operating activities.................   3,232    3,317
                                                             -------  -------
INVESTING ACTIVITIES
Purchase of real estate assets..............................  (1,544)  (3,004)
Proceeds from sale of condominiums..........................     443      --
Payment for deferred costs..................................     (43)    (415)
                                                             -------  -------
  Net cash (used in) investing activities...................  (1,144)  (3,419)
                                                             -------  -------
FINANCING ACTIVITIES
Repayment of mortgage notes.................................    (784)  (7,655)
Proceeds from mortgage notes................................   2,641    7,800
Due from related parties, net...............................   1,210     (502)
Payment for financing costs.................................    (184)    (256)
Due from partners...........................................    (598)     750
Due to NAVAB................................................     252    1,171
Distributions to owners.....................................  (6,016)  (1,018)
Capital contributions.......................................     925        2
                                                             -------  -------
  Net cash (used in) provided by financing activities.......  (2,554)     292
                                                             -------  -------
Net (decrease) increase in cash and cash equivalents........    (466)     190
Cash and cash equivalents, beginning of year................   2,168    1,978
                                                             -------  -------
  Cash and cash equivalents, end of year.................... $ 1,702  $ 2,168
                                                             =======  =======
SUPPLEMENTAL INFORMATION
Cash paid during the year for interest...................... $ 3,816  $ 3,883
                                                             =======  =======
</TABLE>
- --------
* Certain amounts have been reclassified for comparative purposes.
 
                            See accompanying notes.
 
                                      F-27
<PAGE>
 
     GROVE PROPERTY SERVICES LIMITED PARTNERSHIP AND PROPERTY PARTNERSHIPS
 
                  NOTES TO THE COMBINED FINANCIAL STATEMENTS
 
                               DECEMBER 31, 1996
 
1. BASIS OF PRESENTATION
 
  Grove Property Services Limited Partnership and Property Partnerships (the
"Group") combined financial statements include the accounts of various
partnerships and is not a separate legal entity. "Property Partnerships" are a
combination of affiliated entities that have ownership interests principally
in multifamily communities in the Connecticut, Massachusetts and Rhode Island
areas. The accounts are presented on a combined basis because all of the
communities are managed by Grove Property Services Limited Partnership ("GPS")
whose general partners have a controlling interest in each of the communities
and because these communities were subject of a business combination in
connection with the formation of an umbrella REIT (the "Company") effective on
March 14, 1997. Each of the communities is owned by Grove Operating, L.P. (the
"Operating Partnership"), which is owned, in part, by the Company. The Company
qualifies as a real estate investment trust under the Internal Revenue Code of
1986, as amended.
 
  The business combination was structured so that the former partners received
cash, units in the Operating Partnership, or a combination thereof. The
Company is the sole general partner of the Operating Partnership.
 
  In addition to GPS and Grove Longmeadow Associates (a neighborhood shopping
center) the following residential communities have been included in the
combined financial statements:
 
<TABLE>
<CAPTION>
                                                                   NUMBER OF
   LIMITED PARTNERSHIP NAME          EXISTING COMMUNITY NAME       APARTMENTS
   ------------------------          -----------------------       ----------
   <C>                               <S>                           <C>
   Avonplace Associates              Avonplace                        146
   Burgundy Associates               Burgundy Studios                 102
   Grove-Ellington Associates        Arbor Commons                     28
   Grove-Enfield Associates          Fox Hill Apartments              168
   Grove-Manchester Associates       208-210 Main Street               28
                                     Apartments
   Grove-Newington Associates        Woodbridge Apartments             73
   Grove Opportunity Fund II         Dean Estates II                   58
                                     Royale Apartments                 76
                                     Talcott Forest*                   19
   Grove-Plainville Associates       Colonial Village Apartments      104
   Grove Properties III              Bradford Commons                  64
                                     Loomis Manor                      43
   Grove Taunton Associates          Dean Estates                      48
   Grove-Vernon Associates           Fox Hill Commons                  74
   Grove-West Hartford Associates    Park Place West                   63
   Grove-West Springfield Associates Van Deene Manor                  109
   Grove-Westfield Associates        Security Manor                    63
   Grove-Westwynd Associates         Westwynd Apartments               46
   Shoreline London Associates       Ocean Reef                       163
   Nautilus Properties               Sandalwood**                      39
</TABLE>
- --------
 * Talcott Forest is included in the accompanying combined financial
   statements as it is part of a legal entity combined herewith. However, this
   property was not included in the Consolidation Transactions and, as such,
   the operations were not included in the pro forma statements of income
   contained elsewhere in this Registration Statement.
** Available for lease August 1996.
 
  All significant intercompany accounts and transactions have been eliminated
in combination
 
                                     F-28
<PAGE>
 
     GROVE PROPERTY SERVICES LIMITED PARTNERSHIP AND PROPERTY PARTNERSHIPS
 
            NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
 
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Depreciation of Real Estate Assets
 
  Ordinary repairs and maintenance are expensed as incurred; major
replacements and betterments are capitalized and depreciated over their
estimated useful lives. Depreciation of real estate is computed principally on
a straight-line basis over the expected useful lives of depreciable property,
which ranges from 15 to 39 years for buildings, improvements and land
improvements and 5 to 7 years for furnishings and equipment.
 
 Long-Lived Assets
 
  In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company adopted Statement 121 in the first quarter of 1996. The adoption of
Statement 121 had no effect on the accompanying financial statements.
 
 Revenue Recognition
 
  Rental income attributable to leases is recognized on a straight-line basis
over the term of the leases. Residential leases are generally for periods of
one year. Commercial leases are generally for periods of 5 to 10 years. The
Company generally requires tenants to provide a cash security deposit equal to
one month's rent. Such amounts are deposited into a restricted bank account
and the Company records an offsetting liability.
 
 Cash and Cash Equivalents
 
  Cash and cash equivalents include all highly liquid financial instruments
with maturities of three months or less from the date of purchase.
 
 Deferred Costs
 
  Deferred costs consist of organization costs and costs incurred in obtaining
long-term financing. Deferred financing costs are amortized over the term of
the related mortgage loan obligation. Organization costs are amortized over 5
years.
 
 Income Taxes
 
  The Group is owned by various partnerships whose partners are required to
include their respective share of profits and losses in their individual
income tax returns. Accordingly, no federal or state income taxes have been
provided in the accompanying combined financial statements.
 
 Use of Estimates
 
  The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
 
 
                                     F-29
<PAGE>
 
     GROVE PROPERTY SERVICES LIMITED PARTNERSHIP AND PROPERTY PARTNERSHIPS
 
            NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
 
3. DUE TO AND FROM RELATED PARTIES
 
  Certain properties managed by GPS are not included in the Group. Due to/from
related parties represent costs paid by the Group on behalf of these
properties, property expense and other advances from the Group to those
properties, and management fees owed to the Group by those properties. An
affiliate of the Group, NAVAB, periodically loans funds to the partnerships
under its line of credit. These loans generally bear interest at 2.5% above
the prime rate. Interest due NAVAB was approximately $145,000 and $116,000 for
the years ended December 31, 1996 and 1995, respectively.
 
4. MORTGAGE NOTES PAYABLE
 
  The Group's mortgage notes at December 31, 1996 consisted of the following
(in thousands):
 
<TABLE>
     <S>                                                                 <C>
     Mortgage notes payable at fixed interest rates ranging from 7.09%
      to 8.00%, payable in varying amounts through December 2003.......  $12,362
     Mortgage notes payable with floating interest rates (7.0% to 9.27%
      at December 31, 1996), payable in varying amounts through
      November 2005....................................................   36,281
                                                                         -------
                                                                         $48,643
                                                                         =======
</TABLE>
 
  Each of the mortgage notes is collateralized by a first mortgage on separate
communities. Certain loans are guaranteed in whole or part by individuals
affiliated with the Group. Such guarantees aggregate approximately $31 million
at December 31, 1996.
 
  Annual principal maturities as of December 31, 1996, are as follows (in
thousands):
 
<TABLE>
     <S>                                                                 <C>
     1997............................................................... $   890
     1998...............................................................     970
     1999...............................................................   9,478
     2000...............................................................  21,746
     2001...............................................................   4,589
     Thereafter.........................................................  10,970
                                                                         -------
       Total............................................................ $48,643
                                                                         =======
</TABLE>
 
  As part of the Consolidation Transactions, certain of these mortgage notes
payable were retired early or refinanced.
 
5. RELATED PARTY TRANSACTIONS
 
  GPS performs management services for certain communities not included in the
Group. Management fees received from these communities were approximately
$777,000 and $891,000 for the years ended December 31, 1996 and 1995,
respectively.
 
  The Group leases office space from an affiliate at a rate of $4,150 per
month.
 
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
 
  The following disclosures of estimated fair value were determined by
management using available market information and appropriate valuation
methodologies. Judgment is necessary to interpret market data and develop
 
                                     F-30
<PAGE>
 
     GROVE PROPERTY SERVICES LIMITED PARTNERSHIP AND PROPERTY PARTNERSHIPS
 
            NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
 
estimated fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Group could realize on disposition
of the financial instruments. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair
value amounts.
 
  Cash equivalents, accounts receivable, accounts payable and other accruals
because of their short-term nature approximate fair value. Mortgage notes are
carried at amounts that approximate their fair values. Fair values of mortgage
notes were estimated using discounted cash flow analyses, based on interest
rates currently available to the Group for issuance of debt with similar terms
and remaining maturities.
 
7. COMMERCIAL LEASES
 
  Future minimum annual lease payments to be received on noncancelable
commercial operating leases with terms greater than one year consist of the
following at December 31, 1996 (in thousands):
 
<TABLE>
     <S>                                                                  <C>
     1997................................................................ $  989
     1998................................................................    882
     1999................................................................    830
     2000................................................................    697
     2001................................................................    591
     Thereafter..........................................................  1,983
                                                                          ------
       Total............................................................. $5,972
                                                                          ======
</TABLE>
 
  Residential leases are generally for a term of one year and are not included
above. The commercial leases generally contain provisions for increases in
rent tied to various indices, increases in operating costs and/or a percentage
of the tenants' sales in excess of a specified base amount. Such additional
rents are included in rental income on the accompanying combined statements of
income and are not material.
 
                                     F-31
<PAGE>
 
                        REPORT OF INDEPENDENT AUDITORS
 
To the Shareholders and Board of Trust Managers
Grove Property Trust
   
  We have audited the combined statements of revenues and certain expenses of
the Post March 1997 Property Acquisitions--Affiliates (the "Properties") for
the years ended December 31, 1996 and 1995. The combined statements of
revenues and certain expenses are the responsibility of the Properties'
management. Our responsibility is to express an opinion on the combined
statements of revenues and certain expenses based on our audit.     
 
  We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined statements of revenues
and certain expenses are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the combined statements of revenues and certain expenses. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
combined statements of revenues and certain expenses. We believe that our
audit provides a reasonable basis for our opinion.
 
  The accompanying combined statements of revenues and certain expenses were
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Registration Statement
on Form S-2 of Grove Property Trust described in Note 2 and is not intended to
be a complete presentation of the Properties' revenues and expenses.
   
  In our opinion, the combined statements of revenues and certain expenses
referred to above present fairly, in all material respects, the combined
revenues and certain expenses as described in Note 2 of the Post March 1997
Property Acquisitions--Affiliates for the years ended December 31, 1996 and
1995, in conformity with generally accepted accounting principles.     
 
                                          Ernst & Young LLP
 
New York, New York
September 2, 1997
 
                                     F-32
<PAGE>
 
                
             POST MARCH 1997 PROPERTY ACQUISITIONS--AFFILIATES     
 
              COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
 
<TABLE>   
<CAPTION>
                                                     NINE MONTHS   YEARS ENDED
                                                        ENDED     DECEMBER 31,
                                                    SEPTEMBER 30, -------------
                                                        1997       1996   1995
                                                    ------------- ------ ------
                                                     (UNAUDITED)
                                                          (IN THOUSANDS)
<S>                                                 <C>           <C>    <C>
Revenues:
  Rental income....................................    $4,544     $8,224 $7,040
  Miscellaneous income.............................        66        187    138
                                                       ------     ------ ------
    Total revenues.................................     4,610      8,411  7,178
                                                       ------     ------ ------
Certain expenses:
  Property operating and maintenance...............     1,627      2,983  2,292
  Real estate taxes................................       499      1,055    939
  Related party management fees....................       182        355    321
                                                       ------     ------ ------
                                                        2,308      4,393  3,552
                                                       ------     ------ ------
Revenues in excess of certain expenses.............    $2,302     $4,018 $3,626
                                                       ======     ====== ======
</TABLE>    
 
 
                            See accompanying notes.
 
                                      F-33
<PAGE>
 
               
            POST MARCH 1997 PROPERTY ACQUISITIONS--AFFILIATES     
 
       NOTES TO THE COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
 
                    YEARS ENDED DECEMBER 31, 1996 AND 1995
 
1. BUSINESS
   
  The accompanying Combined Statements of Revenues and Certain Expenses relate
to the operations of certain residential "Properties" as identified below. The
Properties were acquired by Grove Property Trust (the "Company") between June
1, 1997 and October 31, 1997. The Properties were previously owned by
affiliates of the Company. Summit and Birch Hill were acquired by the
Company's affiliate in February 1995 from an unrelated party. Four Winds was
acquired by the Company's affiliate in September 1995. The accompanying
combined statement of revenues and certain expenses for the year ended
December 31, 1995, includes the operations of these three properties from the
date of acquisition by the affiliate.     
 
<TABLE>   
<CAPTION>
     PROPERTY NAME                                             DATE ACQUIRED(1)
     -------------                                             ----------------
     <S>                                                       <C>
     Four Winds............................................... June 1, 1997
     Brooksyde................................................ June 1, 1997
     River's Bend............................................. June 1, 1997
     Greenfield............................................... July 1, 1997
     Glastonbury.............................................. September 1, 1997
     Summit................................................... September 1, 1997
     Birch Hill............................................... September 1, 1997
     Corner Block and Wharf Building.......................... October 31, 1997
</TABLE>    
- --------
(1) See Note 2, "Interim Unaudited Information"
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Basis of Presentation
 
  The accompanying Combined Statements of Revenues and Certain Expenses were
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Registration Statement
on Form S-2 of the Company. Accordingly, the financial statements exclude
certain expenses that may not be comparable to those expected to be incurred
by the Company in the proposed future operations of the Properties. Items
excluded consist of depreciation, amortization, interest and certain non-
operating expenses.
 
 Use of Estimates
 
  The preparation of the Combined Statements of Revenues and Certain Expenses
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported
in the Combined Statements of Revenues and Certain Expenses and accompanying
notes. Actual results could differ from those estimates.
 
 Revenue Recognition
 
  Rental income attributable to leases is recognized on a straight-line basis
over the term of the leases, which are generally for one year.
 
 Interim Unaudited Information
   
  The accompanying interim Combined Statement of Revenues and Certain Expenses
for the nine months ended September 30, 1997 is unaudited, however, in the
opinion of management, all adjustments (consisting solely of normal recurring
adjustments) necessary for a fair presentation of the Combined Statement of
Revenues and Certain Expenses for this interim period have been included. The
results of this interim period is not necessarily indicative of the results to
be obtained for a full fiscal year.     
   
  The Properties were acquired by the Company in 1997. The accompanying
unaudited Combined Statement of Revenues and Certain Expenses for the nine
months ended September 30, 1997, includes operations for these properties only
through the date of acquisition by the Company (see Note 1).     
 
                                     F-34
<PAGE>
 
                        REPORT OF INDEPENDENT AUDITORS
 
To the Shareholders and Board of Trust Managers
Grove Property Trust
   
  We have audited the statement of revenues and certain expenses of the 1997
Property Acquisitions--Non-Affiliates (the "Property") for the year ended
December 31, 1996. The statement of revenues and certain expenses is the
responsibility of the Property's management. Our responsibility is to express
an opinion on the statement of revenues and certain expenses based on our
audit.     
 
  We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of revenues and
certain expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement of revenues and certain expenses. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the statement of
revenues and certain expenses. We believe that our audit provides a reasonable
basis for our opinion.
 
  The accompanying statement of revenues and certain expenses was prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the Registration Statement on Form S-2 of
Grove Property Trust described in Note 2 and is not intended to be a complete
presentation of the Property's revenues and expenses.
   
  In our opinion, the statement of revenues and certain expenses referred to
above presents fairly, in all material respects, the revenues and certain
expenses as described in Note 2 of the 1997 Property Acquisition--Non-
Affiliates for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.     
 
                                          Ernst & Young LLP
 
New York, New York
October 3, 1997
 
                                     F-35
<PAGE>
 
                   
                1997 PROPERTY ACQUISITIONS--NON-AFFILIATES     
 
                  STATEMENTS OF REVENUES AND CERTAIN EXPENSES
 
<TABLE>   
<CAPTION>
                                                       NINE MONTHS
                                                          ENDED      YEAR ENDED
                                                      SEPTEMBER 30, DECEMBER 31,
                                                          1997          1996
                                                      ------------- ------------
                                                       (UNAUDITED)
                                                            (IN THOUSANDS)
<S>                                                   <C>           <C>
Revenues:
  Rental income......................................     $509          $626
  Other..............................................       11            18
                                                          ----          ----
                                                           520           644
                                                          ----          ----
Certain expenses:
  Property operating and maintenance.................      223           313
  Real estate taxes..................................       42            54
                                                          ----          ----
                                                           265           367
                                                          ----          ----
Revenues in excess of certain expenses...............     $255          $277
                                                          ====          ====
</TABLE>    
 
 
                            See accompanying notes.
 
                                      F-36
<PAGE>
 
                   
                1997 PROPERTY ACQUISITIONS--NON-AFFILIATES     
 
           NOTES TO THE STATEMENTS OF REVENUES AND CERTAIN EXPENSES
 
                         YEAR ENDED DECEMBER 31, 1996
 
1. BUSINESS
   
  The accompanying Statements of Revenues and Certain Expenses relate to the
operations of a certain property known as High Meadow (a residential apartment
building located in Ellington, Connecticut) (the "Property"). Grove Property
Trust (the "Company") acquired the Property from an unrelated party on October
31, 1997.     
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Basis of Presentation
 
  The accompanying Statements of Revenues and Certain Expenses was prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission for inclusion in the Registration Statement on Form S-
2 of the Company. Accordingly, the financial statements exclude certain
expenses that may not be comparable to those expected to be incurred by the
Company in the proposed future operations of the Property. Items excluded
consist of depreciation, amortization, interest and certain non-operating
expenses.
 
 Use of Estimates
 
  The preparation of the Statements of Revenues and Certain Expenses in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the
Statements of Revenues and Certain Expenses and accompanying notes. Actual
results could differ from those estimates.
 
 Revenue Recognition
 
  Rental income attributable to leases is recognized on a straight-line basis
over the term of the leases, which are generally one year.
 
 Interim Unaudited Information
   
  The accompanying Statement of Revenues and Certain Expenses for the nine
months ended September 30, 1997 is unaudited, however, in the opinion of
management, all adjustments (consisting solely of normal recurring
adjustments) necessary for a fair presentation of the Statement of Revenues
and Certain Expenses for this interim period have been included. The results
of this interim period are not necessarily indicative of the results to be
obtained for a full fiscal year.     
 
                                     F-37
<PAGE>
 
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
 
 NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER
DESCRIBED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY OR THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
 
                                  -----------
                               TABLE OF CONTENTS
<TABLE>   
<CAPTION>
                                                                          PAGE
                                                                          ----
<S>                                                                       <C>
Prospectus Summary.......................................................   1
Risk Factors.............................................................  10
The Company..............................................................  22
The Concurrent Offering..................................................  26
Use of Proceeds..........................................................  27
Distribution Policy......................................................  28
Price Range of Common Shares and Dividends...............................  29
Capitalization...........................................................  30
Selected Financial Information...........................................  31
Management's Discussion and Analysis of Financial Condition and Results
 of Operations...........................................................  34
Business and Properties..................................................  40
Management...............................................................  56
Certain Relationships and Transactions...................................  61
Principal Shareholders...................................................  65
Description of Shares of Beneficial Interest.............................  66
Certain Provisions of Maryland Law and of the Company's Charter and
 Bylaws..................................................................  70
Practices and Objectives with Respect to Certain Activities..............  73
Shares Available for Future Sale.........................................  75
The Operating Partnership Agreement......................................  77
Certain Federal Income Tax Considerations................................  80
Underwriting.............................................................  92
Change in Accountants....................................................  93
Experts..................................................................  93
Legal Matters............................................................  94
Available Information....................................................  94
Incorporation of Certain Documents by Reference..........................  95
Index to Financial Statements............................................ F-1
</TABLE>    
 
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
 
                               4,500,000 SHARES
 
                             GROVE PROPERTY TRUST
 
                     COMMON SHARES OF BENEFICIAL INTEREST
                                 
                              [INSERT LOGO]     
 
                                    -------
 
                                  PROSPECTUS
 
                                       , 1997
 
                                    -------
 
                               SMITH BARNEY INC.
 
                                LEHMAN BROTHERS
 
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
 
                                    PART II
 
                    INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 
  The following table sets forth the fees and expenses in connection with the
issuance and distribution of the securities being registered hereunder, all of
which are being paid by the Company. Except for the SEC registration fees, the
NASD filing fee and the American Stock Exchange listing fee, all amounts are
estimates.
 
<TABLE>   
      <S>                                                            <C>
      Registration fees............................................. $   18,000
      NASD fee......................................................      7,000
      Transfer agent fee............................................     25,000
      American Stock Exchange Listing Fee...........................     40,000
      Printing costs................................................    150,000
      Legal fees and expenses.......................................    300,000
      Accounting fees and expenses..................................    200,000
      Advisory fee..................................................    360,000
      Miscellaneous.................................................    100,000
                                                                     ----------
        Total....................................................... $1,200,000
                                                                     ==========
</TABLE>    
 
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
  The Company's officers and directors are and will be indemnified against
certain liabilities under Maryland law, the Charter and Bylaws of the Company
and the Partnership Agreement of the Operating Partnership. The Charter of the
Company contains a provision which eliminates such liabilities to the maximum
extent permitted by Maryland law.
 
  As permitted under the MGCL, the Company's Bylaws require it to indemnify
(a) any present or former Trust Manager, officer or shareholder (including
among the foregoing, any individual who, while a Trust Manager, officer or
shareholder at the express request of the Company, serves or has served
another corporation, partnership, joint venture, trust, employee benefit plan
or any other enterprise as a director, officer, shareholder, partner or trust
manager) who has been successful, on the merits or otherwise, in the defense
of a proceeding to which such person was made a party by reason of such
status, against reasonable expenses incurred by such person in connection with
the proceeding, (b) any present or former Trust Manager against any claim or
liability to which he may become subject by reason of his status as such
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; and (c) each shareholder or former shareholder against
any claim or liability to which such person may become subject by reason of
such person's status as a shareholder or former shareholder.
 
  In addition, the MGCL permits and the Company, under its Bylaws, is required
to pay or reimburse, in advance of final disposition of a proceeding,
reasonable expenses incurred by a present or former Trust Manager, officer or
shareholder made party to a proceeding by reason of such person's status as a
Trust Manager, officer or shareholder provided that in the case of a Trust
Manager or officer, the Company shall have received in accordance with the
MGCL, (i) a written affirmation by the Trust Manager or officer of such
person's good faith belief that such person has met the applicable standard of
conduct necessary for indemnification by the Company as authorized by the
Bylaws and (ii) a written undertaking by or on such person's behalf to repay
the amount paid or reimbursed by the Company if it shall ultimately be
determined that he applicable standard of conduct was not met. The Company's
Bylaws also (i) permit the Company to provide indemnification and payment or
 
                                     II-1
<PAGE>
 
reimbursement of expenses to a present or former Trust Manager, officer or
shareholder who served a predecessor of the Company, (ii) provide that any
indemnification or payment or reimbursement of expenses permitted by the
Bylaws shall be furnished in accordance with the procedures provided for
indemnification and payment or reimbursement of expenses under Section 2-418
of the MGCL for directors of Maryland corporations and (iii) permit the
Company to provide such other and further indemnification or payment or
reimbursement of expenses as may be permitted by the MGCL for directors of
Maryland corporation.
 
  For the undertaking with respect to the indemnification, see Item 17.
 
ITEM 16. EXHIBITS
 
<TABLE>   
<CAPTION>
 EXHIBIT
   NO.                                 DESCRIPTION
 -------                               -----------
 <C>     <S>
  1      Form of Underwriting Agreement
  2.1    Contribution Agreement, dated as of May 30, 1997, by and between Grove
         Operating, L.P., Northeast Apartments I Limited Partnership, West
         Hartford Center Associated Limited Partnership, Windsor Equity
         Partnership and Windsor Commons Corporation (incorporated by reference
         to Exhibit 2.1 to the Company's Current Report on Form 8-K dated May
         30, 1997 (Commission File No. 1-13080))
  2.2    Form of First Amendment effective as of June 1, 1997 to Agreement of
         Limited Partnership of Windsor Arbor Limited Partnership (incorporated
         by reference to Exhibit 2.2 to the Company's Current Report on Form 8-
         K dated May 30, 1997 (Commission File No. 1-13080))
  2.3    Purchase and Sale Agreement, dated May 14, 1997, between Highland
         Income Partners, L.P, as Seller, and Grove Corporation, a Purchaser
         (incorporated by reference to Exhibit 2.1 to the Company's Current
         Report on Form 8-K dated July 2, 1997 (Commission File No. 1-13080))
  2.4    Purchase and Sale Agreement, dated September 5, 1997, by and between
         Werner O. Kunzli, as Seller, and Grove Corporation, a Purchaser.
  2.5    Grove Operating, L.P., Solicitation of Consent and Offer to Exchange
         Certain Outstanding Units of Limited Partnership Interest in Grove-
         Coastal Associates L.P. for Consideration of 3,435.5 Common Units of
         Grove Operating, L.P. with an option to holders to instead receive
         cash consideration, dated June 19, 1997, as supplemented on June 19,
         1997, and Letter of Transmittal and Addendum to Letter of Transmittal
         in connection therewith.
  4.1    Form of Agreement of Limited Partnership of Grove Operating, L.P.,
         among the Company and the other partners named therein (incorporated
         by reference to Exhibit 10.2 to the Company's Current Report on Form
         8-K dated February 13, 1997 (Commission File No. 1-13080))
  4.2    Revolving Credit Agreement dated March 26, 1997, among Grove
         Operating, L.P., the Company and Rhode Island Hospital Trust National
         Bank (a Bank of Boston company) and Other Banks which may become
         parties to the Agreement and Rhode Island Hospital Trust National
         Bank, as Agent (incorporated by reference to Exhibit 4.1 to the
         Company's Quarterly Report on Form 10-QSB for the quarter ended March
         31, 1997)
 
 
  4.3    Amendment to the Agreement of Limited Partnership of Grove Operating,
         L.P., among the Company and the other partners named therein.
  5*     Opinion of Piper & Marbury L.L.P.
  8      Opinion of Cummings & Lockwood re: Tax Matters.
 10.1    Securities Purchase Agreement, dated March 14, 1997, between the
         Company and Morgan Stanley Group Inc. (incorporated by reference to
         Exhibit 10.1 to the Company's Current Report on Form 8-K dated March
         14, 1997 (Commission File No. 1-13080))
 10.2    Securities Purchase Agreement, dated March 14, 1997, between the
         Company and ABKB/LaSalle Securities Limited (incorporated by reference
         to Exhibit 10.2 to the Company's Current Report on Form 8-K dated
         March 14, 1997 (Commission File No. 1-13080))
</TABLE>    
 
 
                                     II-2
<PAGE>
 
<TABLE>   
<CAPTION>
 EXHIBIT
   NO.                                 DESCRIPTION
 -------                               -----------
 <C>     <S>
 10.3    Form of Securities Purchase Agreement executed by other Investors in
         the Private Placement (incorporated by reference to Exhibit 10.3 to
         the Company's Current Report on Form 8-K dated
         March 14, 1997)
 10.4    Registration Rights Agreement between the Company and the Investors
         (incorporated by reference to Exhibit 10.4 to the Company's Current
         Report on Form 8-K dated March 14, 1997 (Commission File No. 1-13080))
 10.5    Multifamily Note, dated March 14, 1997, among Citicorp Real Estate,
         Inc., GR-Properties III Limited Partnership, Foxwoodburg, L.P., Grove-
         Westfield Associates Limited Partnership, Grove-West Springfield
         Associates Limited Partnership and GR-Westwynd Associates Limited
         Partnership (incorporated by reference to Exhibit 10.5 to the
         Company's Current Report on Form 8-K dated
         March 14, 1997 (Commission File No. 1-13080))
 10.6    Cash Management Agreement, dated as of March 14, 1997, among Citicorp
         Real Estate, Inc., GR-Properties III Limited Partnership, Foxwoodburg,
         L.P., Grove-Westfield Associates Limited Partnership, Grove-West
         Springfield Associated Limited Partnership and GR-Westwynd Associates
         Limited Partnership (incorporated by reference to Exhibit 10.6 to the
         Company's Current Report on Form 8-K dated March 14, 1997 (Commission
         File No. 1-13080))
 10.7    Form of Multifamily Open-End Mortgage Deed, Assignment of Rents and
         Security Agreement, among Citicorp Real Estate, Inc. and each of GR-
         Properties III Limited Partnership, Foxwoodburg, L.P., Grove-Westfield
         Associates Limited Partnership, Grove-West Springfield Associates
         Limited Partnership and GR-Westwynd Associates Limited Partnership
         (incorporated by reference to Exhibit 10.7 to the Company's Current
         Report on Form 8-K dated March 14, 1997 (Commission File No. 1-13080))
 10.8    Pledge Agreement, dated as of March 14, 1997, between Grove Operating,
         L.P. and Citicorp Real Estate, Inc. (incorporated by reference to
         Exhibit 10.8 to the Company's Current Report on Form 8-K dated March
         14, 1997 (Commission File No. 1-13080))
 10.9    Registration Rights Agreement, dated March 14, 1997, between the
         Company and certain partners of Grove Operating, L.P. (incorporated by
         reference to Exhibit 10.9 to the Company's Current Report on Form 8-K
         dated March 14, 1997 (Commission File No. 1-13080))
 10.10   1994 Share Option Plan (incorporated by reference to Exhibit 10.16 to
         the Company's Registration Statement on Form SB 2 (Commission File No.
         33-76732))
 10.11   1996 Share Incentive Plan (incorporated by reference to Exhibit 10.10
         to the Company's Current Report on Form 8-K dated March 14, 1997
         (Commission File No. 1-13080))
 10.12   Pledge Agreement, dated March 14, 1997, among Damon Navarro, Brian
         Navarro, Edmund Navarro, Joseph LaBrosse, Gerald McNamara, National
         Realty Services Limited Partnership, GIG, Burgundy Associates Limited
         Partnership, Grove Equity Partnership, Grove Holding Co. Inc. and the
         Company (incorporated by reference to Exhibit 10.11 to the Company's
         Current Report on Form 8-K dated March 14, 1997 (Commission File No.
         1-13080))
 10.13   Noncompetition Agreement among the Company, Grove Operating, L.P.,
         National Realty Services Limited Partnership, GIG and Burgundy
         Associates Limited Partnership (incorporated by reference to Exhibit
         10.12 to the Company's Current Report on Form 8-K dated March 14, 1997
         (Commission File No. 1-13080))
 10.14   Form of Noncompetition Agreement executed by each of Damon Navarro,
         Brian Navarro, Joseph LaBrosse, Edmund Navarro and Gerald McNamara
         (incorporated by reference to Exhibit 10.13 to the Company's Current
         Report on Form 8-K dated March 14, 1997 (Commission File No. 1-13080))
 10.15   Amendment, dated as of October 15, 1997, to Noncompetition Agreement,
         dated March 14, 1997, between the Company and Damon Navarro
</TABLE>    
 
 
                                      II-3
<PAGE>
 
<TABLE>   
<CAPTION>
 EXHIBIT
   NO.                                DESCRIPTION
 -------                              -----------
 <C>     <S>
 10.16   Amendment, dated as of October 15, 1997, to Noncompetition Agreement,
         dated March 14, 1997, between the Company and Brian Navarro
 10.17   Amendment, dated as of October 15, 1997, to Noncompetition Agreement,
         dated March 14, 1997, between the Company and Edmund Navarro
 10.18   Amendment, dated as of October 15, 1997, to Noncompetition Agreement,
         dated March 14, 1997, between the Company and Joseph LaBrosse
 10.19   Amendment, dated as of October 15, 1997, to Noncompetition Agreement,
         dated March 14, 1997, between the Company and Gerald McNamara
 10.20   Employment Agreement, dated March 14, 1997, between the Company and
         Damon Navarro (incorporated by reference to Exhibit 10.14 to the
         Company's Current Report on Form 8-K dated March 14, 1997 (Commission
         File No. 1-13080))
 10.21   Amendment, dated as of October 15, 1997, to Employment Agreement,
         dated March 14, 1997, between the Company and Damon Navarro
 10.22   Employment Agreement, dated March 14, 1997, between the Company and
         Brian Navarro (incorporated by reference to Exhibit 10.15 to the
         Company's Current Report on Form 8-K dated March 14, 1997 (Commission
         File No. 1-13080))
 10.23   Amendment, dated as of October 15, 1997, to Employment Agreement,
         dated March 14, 1997, between the Company and Brian Navarro
 10.24   Employment Agreement, dated March 14, 1997, between the Company and
         Edmund Navarro (incorporated by reference to Exhibit 10.16 to the
         Company's Current Report on Form 8-K dated March 14, 1997 (Commission
         File No. 1-13080))
 10.25   Amendment, dated as of October 15, 1997, to Employment Agreement,
         dated March 14, 1997, between the Company and Edmund Navarro
 10.26   Employment Agreement, dated March 14, 1997, between the Company and
         Joseph LaBrosse (incorporated by reference to Exhibit 10.17 to the
         Company's Current Report on Form 8-K dated March 14, 1997 (Commission
         File No. 1-13080))
 10.27   Amendment, dated as of October 15, 1997, to Employment Agreement,
         dated March 14, 1997, between the Company and Joseph LaBrosse
 10.28   Employment Agreement, dated March 14, 1997, between the Company and
         Gerald McNamara (incorporated by reference to Exhibit 10.18 to the
         Company's Current Report on Form 8-K dated March 14, 1997 (Commission
         File No. 1-13080))
 10.29   Amendment, dated as of October 15, 1997, to Employment Agreement,
         dated March 14, 1997, between the Company and Gerald McNamara
 10.30   Form of Contribution Agreement among the Company, Grove Operating,
         L.P. and certain other parties (incorporated by reference to Exhibit
         10.1 to the Company's Current Report on Form 8-K dated February 13,
         1997 (Commission File No. 1-13080))
 10.31   Form of Indemnification Agreement by and between the Company, the
         Trust Managers and the Executive Officers (incorporated by reference
         to Exhibit 10.18 to the Company's Registration Statement on Form SB 2
         (Commission File No. 33-76732))
 10.32   Assumption of Mortgage Deed and Security Agreement made June 23, 1994
         by and among Southington Baron Limited Partnership, Charles D.
         Gersten, Ada C. Berin, the Company, Damon D. Navarro and Brian A.
         Navarro (incorporated by reference to Exhibit 10.22 to the Company's
         Annual Report on Form 10 KSB for the year ended December 31, 1994
         (Commission File No. 1-13080))
</TABLE>    
 
 
                                      II-4
<PAGE>
 
<TABLE>   
<CAPTION>
 EXHIBIT
   NO.                                 DESCRIPTION
 -------                               -----------
 <C>     <S>
 10.33   Mortgage Note from Southington Baron Limited Partnership to Charles D.
         Gersten and Ada C. Berin dated June 8, 1994 (incorporated by reference
         to Exhibit 10.23 to the Company's Annual Report on Form 10 KSB for the
         year ended December 31, 1994 (Commission File No. 1-13080))
 10.34   Purchase and Sale Agreement between the Company and Grove Cambridge
         Associates Limited Partnership (incorporated by reference to Exhibit 1
         to the Company's Current Report on Form 8-K dated October 30, 1995
         (Commission File No. 1-13080))
 10.35   Mortgage Note from the Company to First Union Bank of Connecticut
         dated January 11, 1996 (incorporated by reference to Exhibit 10.25 to
         the Company's Annual Report on Form 10 KSB for the year ended December
         31, 1995 (Commission File No. 1-13080))
 23.1    Consent of Ernst & Young LLP
 23.2    Consent of Piper & Marbury L.L.P. (included in Exhibit 5)
 23.3    Consent of Cummings & Lockwood (included in Exhibit 8)
 24*     Power of Attorney
</TABLE>    
- --------
          
*Previously filed     
 
ITEM 17. UNDERTAKINGS
 
  (b) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of any employee
benefit plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
 
  (h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in that Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
 
                                     II-5
<PAGE>
 
                                  SIGNATURES
   
  PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-2 AND HAS DULY CAUSED THIS AMENDMENT NO. 2
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF HARTFORD, STATE OF CONNECTICUT, ON
NOVEMBER 18, 1997.     
 
                                          GROVE PROPERTY TRUST
 
                                                 /s/ Joseph R. LaBrosse
                                          By __________________________________
                                             Joseph R. LaBrosse
                                             Chief Financial Officer
   
  PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES SHOWN ON THE 18TH DAY OF NOVEMBER, 1997.     
 
              *                Trust Manager and
_____________________________  Chairman of the Board
Damon D. Navarro               and Chief Executive
                               Officer (Principal
                               executive officer)
 
              *                Trust Manager and Chief
_____________________________  Financial Officer
Joseph R. LaBrosse             (Principal financial and
                               accounting officer)
 
              *                Trust Manager
_____________________________
Theodore R. Bigman
 
              *                Trust Manager
_____________________________
J. Joseph Garrahy
 
              *                Trust Manager
_____________________________
Harold V. Gorman
 
              *                Trust Manager
_____________________________
Edmund F. Navarro
 
              *                Trust Manager
_____________________________
James F. Twaddell
 
                                            /s/ Joseph R. LaBrosse
                                         *By _________________________
                                            Joseph R. LaBrosse
                                            Attorney-in-fact
 
                                     II-6
<PAGE>
 
                                 EXHIBIT INDEX
 
<TABLE>   
<CAPTION>
 EXHIBIT
   NO.                                 DESCRIPTION
 -------                               -----------
 <C>     <S>
  1      Form of Underwriting Agreement
  2.1    Contribution Agreement, dated as of May 30, 1997, by and between Grove
         Operating, L.P., Northeast Apartments I Limited Partnership, West
         Hartford Center Associated Limited Partnership, Windsor Equity
         Partnership and Windsor Commons Corporation (incorporated by reference
         to Exhibit 2.1 to the Company's Current Report on Form 8-K dated May
         30, 1997 (Commission File No. 1-13080))
  2.2    Form of First Amendment effective as of June 1, 1997 to Agreement of
         Limited Partnership of Windsor Arbor Limited Partnership (incorporated
         by reference to Exhibit 2.2 to the Company's Current Report on Form 8-
         K dated May 30, 1997 (Commission File No. 1-13080))
  2.3    Purchase and Sale Agreement, dated May 14, 1997, between Highland
         Income Partners, L.P, as Seller, and Grove Corporation, a Purchaser
         (incorporated by reference to Exhibit 2.1 to the Company's Current
         Report on Form 8-K dated July 2, 1997 (Commission File No. 1-13080))
  2.4    Purchase and Sale Agreement, dated September 5, 1997, by and between
         Werner O. Kunzli, as Seller, and Grove Corporation, a Purchaser.
  2.5    Grove Operating, L.P., Solicitation of Consent and Offer to Exchange
         Certain Outstanding Units of Limited Partnership Interest in Grove-
         Coastal Associates L.P. for Consideration of 3,435.5 Common Units of
         Grove Operating, L.P. with an option to holders to instead receive
         cash consideration, dated June 19, 1997, as supplemented on June 19,
         1997, and Letter of Transmittal and Addendum to Letter of Transmittal
         in connection therewith.
  4.1    Form of Agreement of Limited Partnership of Grove Operating, L.P.,
         among the Company and the other partners named therein (incorporated
         by reference to Exhibit 10.2 to the Company's Current Report on Form
         8-K dated February 13, 1997 (Commission File No. 1-13080))
  4.2    Revolving Credit Agreement dated March 26, 1997, among Grove
         Operating, L.P., the Company and Rhode Island Hospital Trust National
         Bank (a Bank of Boston company) and Other Banks which may become
         parties to the Agreement and Rhode Island Hospital Trust National
         Bank, as Agent (incorporated by reference to Exhibit 4.1 to the
         Company's Quarterly Report on Form 10-QSB for the quarter ended March
         31, 1997)
  4.3    Amendment to the Agreement of Limited Partnership of Grove Operating,
         L.P., among the Company and the other partners named therein.
  5  *   Opinion of Piper & Marbury L.L.P.
  8      Opinion of Cummings & Lockwood re: Tax Matters.
 10.1    Securities Purchase Agreement, dated March 14, 1997, between the
         Company and Morgan Stanley Group Inc. (incorporated by reference to
         Exhibit 10.1 to the Company's Current Report on Form 8-K dated March
         14, 1997 (Commission File No. 1-13080))
 10.2    Securities Purchase Agreement, dated March 14, 1997, between the
         Company and ABKB/LaSalle Securities Limited (incorporated by reference
         to Exhibit 10.2 to the Company's Current Report on Form 8-K dated
         March 14, 1997 (Commission File No. 1-13080))
 10.3    Form of Securities Purchase Agreement executed by other Investors in
         the Private Placement (incorporated by reference to Exhibit 10.3 to
         the Company's Current Report on Form 8-K dated
         March 14, 1997 (Commission File No. 1-13080))
 10.4    Registration Rights Agreement between the Company and the Investors
         (incorporated by reference to Exhibit 10.4 to the Company's Current
         Report on Form 8-K dated March 14, 1997 (Commission File No. 1-13080))
</TABLE>    
<PAGE>
 
<TABLE>   
<CAPTION>
 EXHIBIT
   NO.                                 DESCRIPTION
 -------                               -----------
 <C>     <S>
 10.5    Multifamily Note, dated March 14, 1997, among Citicorp Real Estate,
         Inc., GR-Properties III Limited Partnership, Foxwoodburg, L.P., Grove-
         Westfield Associates Limited Partnership, Grove-West Springfield
         Associates Limited Partnership and GR-Westwynd Associates Limited
         Partnership (incorporated by reference to Exhibit 10.5 to the
         Company's Current Report on Form 8-K dated
         March 14, 1997 (Commission File No. 1-13080))
 10.6    Cash Management Agreement, dated as of March 14, 1997, among Citicorp
         Real Estate, Inc., GR-Properties III Limited Partnership, Foxwoodburg,
         L.P., Grove-Westfield Associates Limited Partnership, Grove-West
         Springfield Associated Limited Partnership and GR-Westwynd Associates
         Limited Partnership (incorporated by reference to Exhibit 10.6 to the
         Company's Current Report on Form 8-K dated March 14, 1997 (Commission
         File No. 1-13080))
 10.7    Form of Multifamily Open-End Mortgage Deed, Assignment of Rents and
         Security Agreement, between Citicorp Real Estate, Inc. and GR-
         Properties III Limited Partnership (incorporated by reference to
         Exhibit 10.7 to the Company's Current Report on Form 8-K dated March
         14, 1997 (Commission File No. 1-13080))
 10.8    Pledge Agreement, dated as of March 14, 1997, between Grove Operating,
         L.P. and Citicorp Real Estate, Inc. (incorporated by reference to
         Exhibit 10.8 to the Company's Current Report on Form 8-K dated March
         14, 1997 (Commission File No. 1-13080))
 10.9    Registration Rights Agreement, dated March 14, 1997, between the
         Company, Grove Operating, L.P. and certain partners of Grove
         Operating, L.P. (incorporated by reference to Exhibit 10.9 to the
         Company's Current Report on Form 8-K dated March 14, 1997 (Commission
         File No. 1-13080))
 10.10   1994 Share Option Plan (incorporated by reference to Exhibit 10.16 to
         the Company's Registration Statement on Form SB-2 (Commission File No.
         33-76732))
 10.11   1996 Share Incentive Plan (incorporated by reference to Exhibit 10.10
         to the Company's Current Report on Form 8-K dated March 14, 1997
         (Commission File No. 1-13080))
 10.12   Pledge Agreement, dated March 14, 1997, among Damon Navarro, Brian
         Navarro, Edmund Navarro, Joseph LaBrosse, Gerald McNamara, National
         Realty Services Limited Partnership, GIG, Burgundy Associates Limited
         Partnership, Grove Equity Partnership, Grove Holding Co. Inc. and the
         Company (incorporated by reference to Exhibit 10.11 to the Company's
         Current Report on Form 8-K dated March 14, 1997 (Commission File No.
         1-13080))
 10.13   Noncompetition Agreement, dated March 14, 1997, among the Company,
         Grove Operating, L.P., National Realty Services Limited Partnership,
         GIG and Burgundy Associates Limited Partnership (incorporated by
         reference to Exhibit 10.12 to the Company's Current Report on Form 8-K
         dated March 14, 1997 (Commission File No. 1-13080))
 10.14   Form of Noncompetition Agreement executed by each of Damon Navarro,
         Brian Navarro, Joseph LaBrosse, Edmund Navarro and Gerald McNamara
         (incorporated by reference to Exhibit 10.13 to the Company's Current
         Report on Form 8-K dated March 14, 1997 (Commission File No. 1-13080))
 10.15   Amendment, dated as of October 15, 1997, to Noncompetition Agreement,
         dated March 14, 1997, between the Company and Damon Navarro
 10.16   Amendment, dated as of October 15, 1997, to Noncompetition Agreement,
         dated March 14, 1997, between the Company and Brian Navarro
 10.17   Amendment, dated as of October 15, 1997, to Noncompetition Agreement,
         dated March 14, 1997, between the Company and Edmund Navarro
 10.18   Amendment, dated as of October 15, 1997, to Noncompetition Agreement,
         dated March 14, 1997, between the Company and Joseph LaBrosse
 10.19   Amendment, dated as of October 15, 1997, to Noncompetition Agreement,
         dated March 14, 1997, between the Company and Gerald McNamara
</TABLE>    
<PAGE>
 
<TABLE>   
<CAPTION>
 EXHIBIT
   NO.                                 DESCRIPTION
 -------                               -----------
 <C>     <S>
 10.20   Employment Agreement, dated March 14, 1997, between the Company and
         Damon Navarro (incorporated by reference to Exhibit 10.14 to the
         Company's Current Report on Form 8-K dated March 14, 1997 (Commission
         File No. 1-13080))
 10.21   Amendment, dated as of October 15, 1997, to Employment Agreement,
         dated March 14, 1997, between the Company and Damon Navarro
 10.22   Employment Agreement, dated March 14, 1997, between the Company and
         Brian Navarro (incorporated by reference to Exhibit 10.15 to the
         Company's Current Report on Form 8-K dated March 14, 1997 (Commission
         File No. 1-13080))
 10.23   Amendment, dated as of October 15, 1997, to Employment Agreement,
         dated March 14, 1997, between the Company and Brian Navarro
 10.24   Employment Agreement, dated March 14, 1997, between the Company and
         Edmund Navarro (incorporated by reference to Exhibit 10.16 to the
         Company's Current Report on Form 8-K dated March 14, 1997 (Commission
         File No. 1-13080))
 10.25   Amendment, dated as of October 15, 1997, to Employment Agreement,
         dated March 14, 1997, between the Company and Edmund Navarro
 10.26   Employment Agreement, dated March 14, 1997, between the Company and
         Joseph LaBrosse (incorporated by reference to Exhibit 10.17 to the
         Company's Current Report on Form 8-K dated March 14, 1997 (Commission
         File No. 1-13080))
 10.27   Amendment, dated as of October 15, 1997, to Employment Agreement,
         dated March 14, 1997, between the Company and Joseph LaBrosse
 10.28   Employment Agreement, dated March 14, 1997, between the Company and
         Gerald McNamara (incorporated by reference to Exhibit 10.18 to the
         Company's Current Report on Form 8-K dated March 14, 1997 (Commission
         File No. 1-13080))
 10.29   Amendment, dated as of October 15, 1997, to Employment Agreement,
         dated March 14, 1997, between the Company and Gerald McNamara
 10.30   Form of Contribution Agreement among the Company, Grove Operating,
         L.P. and certain other parties (incorporated by reference to Exhibit
         10.1 to the Company's Current Report on Form 8-K dated February 13,
         1997 (Commission File No. 1-13080))
 10.31   Form of Indemnification Agreement by and between the Company, the
         Trust Managers and the Executive Officers (incorporated by reference
         to Exhibit 10.18 to the Company's Registration Statement on Form SB-2
         (Commission File No. 33-76732))
 10.32   Assumption of Mortgage Deed and Security Agreement made June 23, 1994
         by and among Southington Baron Limited Partnership, Charles D.
         Gersten, Ada C Berin, the Company, Damon D. Navarro and Brian A.
         Navarro (incorporated by reference to Exhibit 10.22 to the Company's
         Annual Report on Form 10-KSB for the year ended December 31, 1994
         (Commission File No. 1-13080))
 10.33   Mortgage Note from Southington Baron Limited Partnership to Charles D.
         Gersten and Ada C. Berin dated June 8, 1994 (incorporated by reference
         to Exhibit 10.23 to the Company's Annual Report on Form 10-KSB for the
         year ended December 31, 1994 (Commission File No. 1-13080))
 10.34   Purchase and Sale Agreement between the Company and Grove Cambridge
         Associates Limited Partnership (incorporated by reference to Exhibit 1
         to the Company's Current Report on Form 8-K dated October 30, 1995
         (Commission File No. 1-13080))
 10.35   Mortgage Note from the Company to First Union Bank of Connecticut
         dated January 11, 1996 (incorporated by reference to Exhibit 10.25 to
         the Company's Annual Report on Form 10-KSB for the year ended December
         31, 1995 (Commission File No. 1-13080))
 23.1    Consent of Ernst & Young LLP
 23.2    Consent of Piper & Marbury L.L.P. (included in Exhibit 5)
 23.3    Consent of Cummings & Lockwood (included in Exhibit 8)
 24*     Power of Attorney
</TABLE>    
- --------
          
* Previously filed     

<PAGE>
 
                                                                       EXHIBIT 1

                            3,141,475 COMMON SHARES
                             of Beneficial Interest
                                        
                              GROVE PROPERTY TRUST
                                        
                             UNDERWRITING AGREEMENT
                             ----------------------


                                                               November 19, 1997


SMITH BARNEY INC.
LEHMAN BROTHERS INC.
As Representatives of the
  Several Underwriters
c/o SMITH BARNEY INC.
   388 Greenwich Street
   New York, New York  10013

Dear Sirs:

     Grove Property Trust, a Maryland real estate investment trust (the
"Company"), proposes to issue and sell an aggregate of 3,141,475 shares (the
"Firm Shares") of its Common Shares of Beneficial Interest, $0.01 par value per
share (the "Common Shares"), to the several underwriters listed on Schedule I
hereto (the "Underwriters").  The Company also proposes to sell to the
Underwriters, upon the terms and conditions set forth in Section 2 hereof, up to
an additional 675,000 Common Shares (the "Additional Shares").  The Firm Shares
and the Additional Shares are hereinafter collectively referred to as the
"Shares".

     As used herein, the term "Properties" refers to the properties listed on
Schedule II hereto which represent, as of September 30, 1997, all of the real
property in which the Company, either directly or through the Operating
Partnership (as defined herein) or through ownership of interests in any
Subsidiary Partnership (as defined herein), owns an interest.

     As used herein, the term "Concurrent Offering" means the offering by the
Company in a separate transaction at the public offering price per share to
certain investors of an aggregate of 1,358,525 Common Shares, and the term
"Concurrent Shares" means the Common Shares to be offered in the Concurrent
Offering.

     The Company wishes to confirm as follows its agreement with you (the
"Representatives") and the other Underwriters on whose behalf you are acting in
connection with the several purchases of the Shares by the Underwriters.

     1.  Registration Statement and Prospectus.  The Company has prepared and
         -------------------------------------                               
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission
<PAGE>
 
thereunder (collectively, the "Act"), a registration statement on
Form S-2 (Reg. No. 333-38183) under the Act (the "registration statement"),
including a prospectus subject to completion relating to the Shares and the
Concurrent Shares.  The term "Registration Statement" as used in this Agreement
means the registration statement (including all financial schedules and
exhibits), as amended at the time it becomes effective, or, if the registration
statement became effective prior to the execution of this Agreement, as
supplemented or amended on the date hereof.  If it is contemplated, at the time
this Agreement is executed, that a post-effective amendment to the registration
statement will be filed and must be declared effective before the offering of
the Shares may commence, the term "Registration Statement" as used in this
Agreement means the registration statement as amended by said post-effective
amendment.  If an abbreviated registration statement relating to the Common
Shares to be sold pursuant to this Agreement is prepared and filed with the
Commission in accordance with Rule 462(b) under the Act (an "Abbreviated
Registration Statement"), the term Registration Statement as used in this
Agreement includes the Abbreviated Registration Statement.  The term
"Prospectus" as used in this Agreement means the prospectus in the form included
in the Registration Statement, or, if the prospectus included in the
Registration Statement omits information in reliance on Rule 430A under the Act
and such information is included in a prospectus filed with the Commission
pursuant to Rule 424(b) under the Act, the term "Prospectus" as used in this
Agreement means the prospectus in the form included in the Registration
Statement as supplemented by the addition of the Rule 430A information contained
in the prospectus filed with the Commission pursuant to Rule 424(b).  The term
"Prepricing Prospectus" as used in this Agreement means the prospectus subject
to completion dated October 31, 1997 as such prospectus shall have been amended
from time to time prior to the date of the Prospectus.  Any reference in this
Agreement to the registration statement, the Registration Statement, the
Prepricing Prospectus or the Prospectus shall be deemed to refer to and include
the documents incorporated by reference therein pursuant to Item 12 of Form S -2
under the Act, as of the date of the registration statement, the Registration
Statement, the Prepricing Prospectus or the Prospectus, as the case may be.  As
used herein, the term "Incorporated Documents" means the documents which are
incorporated by reference into the registration statement, the Registration
Statement, the Prepricing Prospectus, the Prospectus, or any amendment or
supplement thereto.

     2.  Agreements to Sell and Purchase.  The Company hereby agrees, subject to
         -------------------------------                                        
all the terms and conditions set forth herein, to issue and sell to the
Underwriters and, upon the basis of the representations, warranties and
agreements of the Company herein contained and subject to all the terms and
conditions set forth herein, each Underwriter agrees, severally and not jointly,
to purchase from the Company, at a purchase price of $______ per Share (the
"purchase price per share"), the number of Firm Shares set forth opposite the
name of such Underwriter in Schedule I hereto (or such increased number of Firm
Shares as set forth in Section 10 hereof).

     The Company also agrees, subject to all the terms and conditions set forth
herein, to sell to the Underwriters, and, upon the basis of the representations,
warranties and agreements of the Company herein contained and subject to all the
terms and conditions set forth herein, the Underwriters shall have the right to
purchase from the Company, at the purchase price per share, pursuant to an
option (the "over-allotment option") which may be exercised by Smith Barney Inc.
on behalf of the Underwriters at any time and from time to time prior to 9:00
P.M., New York City time, on the 30th day after the date of the Prospectus (or,
if such 30th day shall be a

                                       2
<PAGE>
 
Saturday or Sunday or a day on which the American Stock Exchange is not open for
trading, then on the next business day thereafter when the American Stock
Exchange is open for trading), up to an aggregate of 675,000 Additional Shares.
Additional Shares may be purchased only for the purpose of covering over-
allotments made in connection with the offering of the Firm Shares. Upon any
exercise of the over-allotment option, each Underwriter, severally and not
jointly, agrees to purchase from the Company the number of Additional Shares
(subject to such adjustments as you may determine in order to avoid fractional
shares) which bears the same proportion to the number of Additional Shares to be
purchased by the Underwriters as the number of Firm Shares set forth opposite
the name of such Underwriter in Schedule I hereto (or such number of Firm Shares
increased as set forth in Section 10 hereof) bears to the aggregate number of
Firm Shares.

     3.  Terms of Public Offering.  The Company has been advised by you that the
         ------------------------                                               
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable and initially to offer the
Shares upon the terms set forth in the Prospectus.

                                       3
<PAGE>
 
     4.  Delivery of the Shares and Payment Therefor.  Delivery to the
         -------------------------------------------                  
Underwriters of and payment for the Firm Shares shall be made at the office of
Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, at 10:00 A.M., New
York City time, on November __, 1997 (the "Closing Date").  The place of closing
for the Firm Shares and the Closing Date may be varied by agreement between you
and the Company.

     Delivery to the Underwriters of and payment for any Additional Shares to be
purchased by the Underwriters shall be made at the aforementioned office of
Smith Barney Inc.  Such delivery and payment shall take place on such date or
dates (each an "Option Closing Date") as shall be specified in written notices
from you to the Company of your determination to purchase a number, specified in
such notice, of Additional Shares.  An Option Closing Date may be the same as
the Closing Date but shall in no event be earlier than the Closing Date nor
earlier than two nor later than ten business days after the giving of such
written notice.  The place of closing for any Additional Shares and the Option
Closing Date for such Shares may be varied by agreement between you and the
Company.

     Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as you shall request prior to 9:30 A.M., New York City time, on the second
business day preceding the Closing Date or any Option Closing Date, as the case
may be.  Such certificates shall be made available to you in New York City for
inspection and packaging not later than 9:30 A.M., New York City time, on the
business day next preceding the Closing Date or the Option Closing Date, as the
case may be.  The certificates evidencing the Firm Shares and any Additional
Shares to be purchased hereunder shall be delivered to you on the Closing Date
or the Option Closing Date, as the case may be, against payment of the purchase
price therefor in immediately available funds.

     5.  Agreements of the Company.  The Company agrees with the several
         -------------------------                                      
Underwriters as follows:

     (a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
Company will endeavor to cause the Registration Statement or such post-effective
amendment to become effective as soon as possible and will advise you promptly
and, if requested by you, will confirm such advice in writing, when the
Registration Statement or such post-effective amendment has become effective.

     (b) The Company will advise you promptly and, if requested by you, will
confirm such advice in writing: (i) of any request by the Commission for an
amendment of or a supplement to the Registration Statement, the Prepricing
Prospectus or the Prospectus or for additional information; (ii) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (iii) within the period of time referred to in the first
sentence of paragraph (f) below, of any change in the Company's condition
(financial or other), business, prospects, properties, net worth or results of
operations, or of the happening of any event, which makes any statement of a
material fact made in the Registration Statement or the Prospectus (as then
amended or supplemented) untrue

                                       4
<PAGE>
 
or which requires the making of any additions to or changes in the Registration
Statement or the Prospectus (as then amended or supplemented) in order to state
a material fact required by the Act to be stated therein or necessary in order
to make the statements therein not misleading, or of the necessity to amend or
supplement the Prospectus (as then amended or supplemented) to comply with the
Act or any other law.  If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Company will
make every reasonable effort to obtain the withdrawal of such order at the
earliest possible time.

     (c) The Company will furnish to you, without charge (i) two signed copies
of the registration statement as originally filed with the Commission and of
each amendment thereto, including financial statements and all exhibits to the
registration statement, (ii) such number of conformed copies of the registration
statement as originally filed and of each amendment thereto, but without
exhibits, as you may reasonably request, (iii) such number of copies of the
Incorporated Documents, without exhibits, as you may reasonably request, and
(iv) two copies of the exhibits to the Incorporated Documents.

     (d) The Company will not (i) file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus of which you
shall not previously have been advised or to which, after you shall have
received a copy of the document proposed to be filed, you shall reasonably
object or (ii) so long as, in the opinion of counsel for the Underwriters, a
Prospectus is required to be delivered in connection with sales by any
Underwriter or dealer, file any information, documents or reports pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act") without
delivering a copy of such information, documents or reports to you, as
Representatives of the Underwriters, prior to or concurrently with such filing.

     (e) The Company will use its best efforts to continue to meet the
requirements to qualify as a real estate investment trust (a "REIT") under the
Internal Revenue Code of 1986, as amended (the "Code") for the taxable year in
which sales of Shares hereunder occur.

     (f) As soon after the execution and delivery of this Agreement as possible
and thereafter from time to time for such period as in the opinion of counsel
for the Underwriters a prospectus is required by the Act to be delivered in
connection with sales by the Underwriters or any dealer, the Company will
expeditiously deliver to each Underwriter, without charge, as many copies of the
Prospectus (and of any amendment or supplement thereto) as you may reasonably
request.  The Company consents to the use of the Prospectus (and of any
amendment or supplement thereto) in accordance with the provisions of the Act
and with the securities or Blue Sky laws of the jurisdictions in the United
States in which the Shares are offered by the several Underwriters and by all
dealers to whom Shares may be sold, both in connection with the offering and
sale of the Shares and for such period of time thereafter as the Prospectus is
required by the Act to be delivered in connection with sales by any Underwriters
or dealer.  If during such period of time any event shall occur that in the
judgment of the Company or in the reasonable opinion of counsel for the
Underwriters is required to be set forth in the Prospectus (as then amended or
supplemented) or should be set forth therein in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it is necessary to supplement or amend the Prospectus (or to
file under the Exchange Act any

                                       5
<PAGE>
 
document which, upon filing, becomes an Incorporated Document) in order to
comply with the Act or any other law, the Company will promptly prepare and,
subject to the provisions of paragraph (d) above, file with the Commission an
appropriate supplement or amendment thereto (or to such document), and will
promptly furnish to each Underwriter a reasonable number of copies thereof.  In
the event that the Company and you agree that the Prospectus should be amended
or supplemented, the Company, if requested by you, will promptly issue a press
release announcing or disclosing the matters to be covered by the proposed
amendment or supplement.

     (g) The Company will cooperate with you and your counsel in connection with
the registration or qualification of the Shares for offering and sale by the
several Underwriters and by any dealers under the securities or Blue Sky laws of
such jurisdictions in the United States as you may designate and will file such
consents to service of process or other documents necessary or appropriate in
order to effect such registration or qualification; provided that in no event
shall the Company be obligated to qualify to do business in any jurisdiction
where it is not now so qualified or to take any action which would subject it to
service of process in suits, other than those arising out of the offering or
sale of the Shares, in any jurisdiction where it is not now so subject.

     (h) The Company will make generally available to its security holders a
consolidated earnings statement, which need not be audited, covering a twelve-
month period commencing after the effective date of the Registration Statement
and ending not later than 15 months thereafter, as soon as practicable after the
end of such period, which consolidated earnings statement shall satisfy the
provisions of Section 11(a) of the Act.

     (i) During the period of two years hereafter, the Company will furnish to
you (i) as soon as available, a copy of each report of the Company mailed to
stockholders generally or filed with the Commission, and (ii) from time to time
such other information concerning the Company as you may reasonably request.

     (j) If this Agreement shall terminate or shall be terminated after
execution pursuant to any provisions hereof (otherwise than by notice given by
you terminating this Agreement pursuant to Section 10 or Section 11 hereof) or
if this Agreement shall be terminated by the Underwriters because of any failure
or refusal on the part of the Company to comply with the terms or fulfill any of
the conditions of this Agreement, the Company agrees to reimburse you for all
out-of-pocket expenses (including fees and expenses of your counsel) incurred by
you in connection herewith.

     (k) The Company will apply the net proceeds from the sale of the Shares and
the Concurrent Shares substantially in accordance with the description set forth
in the Prospectus.

     (l) If Rule 430A of the Act is utilized, the Company will prepare and
timely file with the Commission under Rule 424(b) under the Act a Prospectus
containing information previously omitted at the time of effectiveness of the
Registration Statement.

     (m) Except as provided in this Agreement, the Company will not sell,
contract to sell or otherwise dispose of any Common Shares or any securities
convertible into or exercisable or

                                       6
<PAGE>
 
exchangeable for Common Shares, or grant any options or warrants to purchase
Common Shares, for a period of 180 days after the date of the Prospectus,
without the prior written consent of Smith Barney Inc., except for (i) options
or Common Shares issued pursuant to stock option or stock purchase plans as
described in the Registration Statement, the Prospectus or the Incorporated
Documents, (ii) Common Shares issuable upon exercise of the option for 50,000
Common Shares held by a consultant to the Company and upon exercise of the
warrant for 47,248 Common Shares originally issued to  Barclays Investments,
Inc., each described in the Prospectus, (iii) Common Shares issued upon
redemption  of units of partnership interest ("Common Units") outstanding as of
the date hereof in Grove Operating, L.P., a Delaware limited partnership (the
"Operating Partnership") and the entity through which the Company owns and
operates the Properties and (iv) Common Units issued in connection with the
acquisition of additional properties by the Operating Partnership.

     (n) The Company has furnished to you "lock-up" letters in the form attached
hereto as Annex B, signed by each of its current executive officers and Trust
Managers and each purchaser of Common Shares (assignee thereof) in the
Concurrent Offering.

     (o) Except as stated in this Agreement and in the Prospectus, the Company
has not taken, nor will it take, directly or indirectly, any action designed to
or that might reasonably be expected to cause or result in stabilization or
manipulation of the price of the Common Shares to facilitate the sale or resale
of the Shares.

     (p) The Company has made and will make such filings with, and has provided
and will provide such notices to, the American Stock Exchange ("AMEX") so that
the Shares will be listed on AMEX on or prior to the Closing Date.

     6.  Representations and Warranties of the Company and the Operating
Partnership.  The Company and the Operating Partnership represent and warrant to
each Underwriter that:

     (a) The Prepricing Prospectus complied when so filed in all material
respects with the provisions of the Act.  The Commission has not issued any
order preventing or suspending the use of the Prepricing Prospectus.

     (b) The Company and the transactions contemplated by this Agreement meet
the requirements for using Form S-2 under the Act.  The registration statement
in the form in which it became or becomes effective and also in such form as it
may be when any post-effective amendment thereto shall become effective and the
Prospectus and any supplement or amendment thereto when filed with the
Commission under Rule 424(b) under the Act, complied or will comply in all
material respects with the provisions of the Act  and will not at any such times
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except that this representation and warranty does not apply to
statements in or omissions from the registration statement or the Prospectus and
any supplement or amendment thereto made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing by
or on behalf of any Underwriter through you expressly for use therein (such
information is listed in Section 12 hereof).

                                       7
<PAGE>
 
     (c) The Incorporated Documents heretofore filed, when they were filed (or,
if any amendment with respect to any such document was filed, as amended by such
amendment), conformed in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder; and no such document when
it was filed (or, if an amendment with respect to any such document was filed,
as amended by such amendment) contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.

     (d) All the outstanding Common Shares have been duly authorized and validly
issued, are fully paid and nonassessable and are free of any preemptive or
similar rights (except that the Common Shares held by MSGI and ABKB/LaSalle, as
defined in the Prospectus, have preemptive rights which will be extinguished
upon completion of the Offerings); the Shares and the Concurrent Shares have
been duly authorized and, when issued and delivered to the Underwriters against
payment therefor in accordance with the terms hereof, or the purchasers of the
Concurrent Shares, as the case may be, will be validly issued, fully paid and
nonassessable and free of any preemptive or similar rights; and the
capitalization and the capital shares of the Company conform to the descriptions
thereof in the Registration Statement and the Prospectus.

     (e) All offers and sales of the Common Shares of the Company and the Common
Units of the Operating Partnership prior to the date hereof were at all relevant
times duly registered under the Act or exempt from the registration requirements
of the Act pursuant to Section 3(b), 4(2) or 4(6) thereof and were duly
registered pursuant to, or were issued pursuant to an available exemption from,
the registration requirements of the various state securities or Blue Sky laws.

     (f) The Company is a REIT duly formed and validly existing in good standing
under the laws of the State of Maryland, with full power and authority to own,
lease and operate its properties and to conduct its business as described in the
Registration Statement and the Prospectus, and is duly registered and qualified
to conduct its business and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify could not reasonably be expected to have a material adverse effect on
the condition (financial or other), business, properties, net worth or results
of operations of the Company and the Subsidiaries (as hereinafter defined) taken
as a whole.

     (g) The Company has no significant subsidiaries (as such term is defined in
Regulation S-X of the Commission) other than the Operating Partnership. The
Company is the sole general partner of the Operating Partnership, owns __% of
the partnership interests in the Operating Partnership and upon completion of
the transactions contemplated hereby will own __% of such interests. The Company
also owns the Subsidiary Partnerships through ownership of general partner
interests and, through the Operating Partnership, limited partner interests.
Each of the Operating Partnership and the Subsidiary Partnerships identified as
such on Schedule II hereto (the "Subsidiary Partnerships" and, together with the
Operating Partnership, the "Subsidiaries") is a limited partnership duly
organized and legally existing 

                                       8
<PAGE>
 
under the laws of its jurisdiction of organization, with full power and
authority to own, lease and operate its properties and to conduct its business
as described in the Registration Statement and the Prospectus and is duly
registered and qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the failure
so to register or qualify could not reasonably be expected to have a material
adverse effect on the condition (financial or other), business, properties, net
worth or results of operations of the Company and the Subsidiaries taken as a
whole. All partnership interests in the Subsidiaries have been duly authorized
and validly issued, are fully paid and nonassessable. All of the interests owned
or held by the Company, directly or indirectly, in any Subsidiary are free and
clear of any lien, adverse claim, security interest, equity or other
encumbrance, except for such as could not reasonably be expected to have a
material adverse effect on the condition (financial or other), business,
properties, net worth or results of operations of the Company and the
Subsidiaries, taken as a whole.

     (h) The agreement of limited partnership of each of the Subsidiaries has
been duly authorized, executed and delivered by the parties thereto and
constitutes a valid and binding agreement, enforceable in accordance with its
respective terms, except as rights to indemnity and contribution thereunder may
be limited by federal or state securities laws.

     (i) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened, against the Company or any Subsidiary, or
to which any of them or any of their respective properties is subject, that are
required to be described in the Registration Statement or the Prospectus but are
not described as required, and there are no agreements, contracts, indentures,
leases or other instruments that are required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement or any Incorporated Document that are not described or
filed as required by the Act or the Exchange Act.

     (j) Neither the Company nor any Subsidiary is in violation of its
declaration of trust, partnership agreement, by-laws or any other organizational
document, or of any law, ordinance, administrative or governmental rule or
regulation applicable thereto or of any decree of any court or governmental
agency or body having jurisdiction over any of them, or in default in any
material respect in the performance of any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of indebtedness or
in any material agreement, indenture, lease or other instrument to which the
Company or any Subsidiary is a party or by which any of them or any of their
respective properties may be bound, except for such violations or defaults
which, individually or in the aggregate, could not reasonably be expected to
have a material adverse effect on the condition (financial or other), business,
properties, net worth or results of operations of the Company and the
Subsidiaries, taken as a whole.

     (k) Neither the issuance and sale of the Shares or the Concurrent Shares,
the execution, delivery or performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby  (i)
conflicts or will conflict with or constitutes or will constitute a breach of,
or a default under, any agreement, indenture, lease or

                                       9
<PAGE>
 
other instrument to which the Company or any Subsidiary is a party or by which
any of them or any of their respective properties may be bound, or violates or
will violate any statute, law, regulation or judgment, injunction, order or
decree applicable to the Company or any Subsidiary or any of their respective
properties, or will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any Subsidiary
pursuant to the terms of any agreement or instrument to which any of them is a
party or by which any of them may be bound or to which any of the property or
assets of any of them is subject, except for such breaches, defaults, conflicts,
violations or creations or impositions which, individually or in the aggregate,
could not reasonably be expected to have a material adverse effect on the
condition (financial or other), business, properties, net worth or results of
operations of the Company and the Subsidiaries, taken as a whole, or (ii)
requires any consent, approval, authorization or other order of or registration
or filing with, any court, regulatory body, administrative agency or other
governmental body, agency or official (except such as may be required for the
registration of the Shares under the Act and the Exchange Act, all of which have
been or will be effected in accordance with this Agreement, and compliance with
the securities or Blue Sky laws of various jurisdictions) or conflicts or will
conflict with or constitutes or will constitute a breach of, or a default under,
the Declaration of Trust, partnership agreement, bylaws, or other organizational
documents of the Company or any Subsidiary.

     (l) Ernst & Young LLP, who have certified or shall certify the financial
statements included or incorporated by reference in the Registration Statement
and the Prospectus (or any amendment or supplement to the Registration Statement
or the Prospectus) are independent public accountants as required by the Act.

     (m)  (i)    The financial statements of the Company or its predecessors,
together with related schedules and notes, included or incorporated by reference
in the Registration Statement and the Prospectus (and any amendment or
supplement to the Registration Statement or the Prospectus), present fairly the
consolidated financial position, results of operations and changes in financial
position of the Company on the basis stated in the Registration Statement at the
respective dates or for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, except as disclosed therein; and the other financial and
statistical information and data included or incorporated by reference in the
Registration Statement and the Prospectus (and any amendment or supplement to
the Registration Statement or the Prospectus) are fairly presented and prepared
on a basis consistent with such financial statements and the books and records
of the Company and the Subsidiaries.

     (ii)    To the best of the Company's knowledge, the financial statements of
each   other entity included in the Prospectus, together with related schedules
and notes, included or incorporated by reference in the Registration Statement
and the Prospectus (and any amendment or supplement to the Registration
Statement or the Prospectus), present fairly the consolidated financial
position, results of operations and changes in financial position of such entity
on the basis stated in the Registration Statement at the respective dates or for
the respective periods to which they apply; such statements and related
schedules and notes have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved,
except as disclosed therein; and the other financial and statistical information

                                       10
<PAGE>
 
and data included or incorporated by reference in the Registration Statement and
the Prospectus (and any amendment or supplement to the Registration Statement or
the Prospectus) are fairly presented and prepared on a basis consistent with
such financial statements and the books and records of the Company and the
Subsidiaries.

     (iii)  The pro forma financial statements included in the Registration
Statement and the Prospectus comply in all material respects with the applicable
requirements of Rule 11-02 of Regulation S-X of the Commission, the Company
believes that the assumptions underlying the pro forma adjustments are
reasonable, and all pro forma adjustments have been properly applied to the
historical amounts in the compilation of such statements.  No other financial
statements or schedules of the Company are required by the Act to be included or
incorporated by reference in the Registration Statement or the Prospectus.

     (n) Each of the Company and the Operating Partnership has full legal right,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby.  The execution and delivery by the Company and
the Operating Partnership of, and the performance by the Company of its
obligations under, this Agreement have been duly and validly authorized by the
Company and the Operating Partnership, and this Agreement has been duly executed
and delivered by the Company and the Operating Partnership and constitutes the
valid and legally binding agreement of the Company and the Operating
Partnership, enforceable against them in accordance with its terms, except as
rights to indemnity and contribution hereunder may be limited by federal or
state securities laws.

     (o) Except as disclosed in the Registration Statement and the Prospectus
(or any amendment or supplement thereto), subsequent to the respective dates as
of which such information is given in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), neither the Company nor any
Subsidiary has incurred any liability or obligation, direct or contingent, or
entered into any transaction, not in the ordinary course of business, that is
material to the Company and the Subsidiaries taken as a whole, and there has not
been any change in the capital stock, or material increase in the short-term
debt or long-term debt, of the Company and the Subsidiaries taken as a whole
other than as a result of borrowings made by the Company under its credit
facility in the ordinary course of business, or any material adverse change, or
any development involving or which may reasonably be expected to involve, a
prospective material adverse change, in the condition (financial or other),
business, net worth or results of operations of the Company and the Subsidiaries
taken as a whole.

     (p) (i)  The Company has good and marketable fee simple title to all of the
Properties listed under the caption "Apartment Communities Owned by the
Operating Partnership" on Schedule II hereto, has good title to its interests in
the Subsidiary Partnerships, and has good title to the  other assets reflected
in the financial statements described above (or as described in or incorporated
by reference into the Registration Statement or Prospectus), subject to no lien,
mortgage, pledge, charge or encumbrance of any kind except those reflected in
such financial statements (or as described in or incorporated by reference into
the Registration Statement or Prospectus) or which are not material in amount;
(ii) the Company occupies its leased properties under valid and binding leases
conforming, to the extent such leases are described therein, to the description
thereof set forth in or incorporated by reference into the Registration
Statement or

                                       11
<PAGE>
 
Prospectus; (iii) no tenant of any of the Properties is in default under any of
the leases pursuant to which any property is leased (and the Company does not
know of any event which, but for the passage of time or the giving of notice, or
both, would constitute a default under any of such leases) other than such
defaults that could not reasonably be expected to have a material adverse effect
on the condition, financial or otherwise, or on the earnings, assets or
business of the Company and the Subsidiaries taken as a whole; (iv) no person
has an option to purchase all or part of any Property or any interest therein;
(v) each of the Properties complies with all applicable codes, laws and
regulations (including, without limitation, building and zoning codes, laws and
regulations and laws relating to access to the properties) and with all
agreements between the Company and third parties relating to the ownership or
use of any Property by the Company, except if and to the extent disclosed in the
Registration Statement or the Prospectus and except for such failures to comply
that could not reasonably be expected to have a material adverse effect on the
condition, financial or otherwise, or on the earnings, assets or business  of
the Company and the Subsidiaries taken as a whole; (vi) there is in effect for
the assets of the Company and the Properties insurance coverages that are
commercially reasonable and that are consistent with the types and amounts of
insurance typically maintained by prudent owners of similar assets, and the
Company has not received from any insurance company notice of any material
defects or deficiencies affecting the insurability of any such assets; and (vii)
the Company does not have any knowledge of any pending or threatened
condemnation proceedings, zoning change, or other similar proceeding or action
that will in any material respect affect the size of, use of, improvements on,
construction on or access to the Properties as operated on the date hereof,
except for such proceedings or actions that could not reasonably be expected to
have a material adverse effect on the condition (financial or other), business,
properties, net worth or results of operations of the Company and the
Subsidiaries, taken as a whole.

     (q) The Company has title policies in effect or binding commitments from
title insurance companies for the issuance of title insurance on each of the
Properties, except where the failure to have such title insurance could not
reasonably be expected to have a material adverse effect on the condition
(financial or other), business, properties, net worth or results of operations
of the Company and the Subsidiaries, taken as a whole.

     (r) The Company has not distributed and, prior to the later to occur of (i)
the Closing Date and (ii) completion of the distribution of the Shares, will not
distribute any offering material in connection with the offering and sale of the
Shares or the Concurrent Shares other than the Registration Statement, the
Prepricing Prospectus, the Prospectus or other materials, if any, permitted by
the Act.

     (s) The Company and each of the Subsidiaries have such permits, licenses,
franchises and authorizations of governmental or regulatory authorities
("permits") and agreements with third parties relating to ownership or use of
any Property by the Company as are necessary to own its respective properties
and to conduct its business in the manner described in the Prospectus, subject
to such qualifications as may be set forth in the Prospectus and except where
the omission to have such permits and agreements could not reasonably be
expected to have a material adverse effect on the condition (financial or
other), business, properties, net worth or results of operations of the Company
and the Subsidiaries, taken as a whole; the Company and each of the Subsidiaries
has fulfilled and performed all its material obligations with respect to

                                       12
<PAGE>
 
such permits and agreements and no event has occurred which allows, or after
notice or lapse of time would allow, revocation or termination thereof or
results in any other material impairment of the rights of the holder of any such
permit or agreement, subject in each case to such qualification as may be set
forth in the Prospectus; and, except as described in the Prospectus, none of
such permits or agreements contains any restriction that would have a material
adverse effect on the condition (financial or other), business, properties, net
worth or results of operations of the Company and the Subsidiaries, taken as a
whole.

     (t) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

     (u) To the knowledge of the Company's executive officers, neither the
Company nor any of its Subsidiaries nor any employee or agent of the Company or
any Subsidiary has made any payment of funds of the Company or any Subsidiary or
received or retained any funds in violation of any law, rule or regulation,
which payment, receipt or retention of funds is of a character required to be
disclosed in the Prospectus.

     (v) The Company and each of the Subsidiaries have filed all federal, state
and foreign tax returns required to be filed, which returns are complete and
correct, and neither the Company nor any Subsidiary is in default in the payment
of any taxes which were payable pursuant to said returns or any assessments with
respect thereto, except where such failure to file or default in payment could
not reasonably be expected to have a material adverse effect on the condition
(financial or other), business, properties, net worth or results of operations
of the Company and the Subsidiaries, taken as a whole.

     (w) No holder of any security of the Company has any right that has not
been effectively exercised or waived to require registration of  Common Shares
or any other security of the Company because of the filing of the registration
statement or consummation of the transactions contemplated by this Agreement.

     (x) Except as otherwise disclosed in the Prospectus, the Company has not
authorized or conducted and does not have knowledge of the generation,
transportation, storage, presence, use, treatment, disposal, release, or other
handling of any hazardous substance, hazardous waste, hazardous material,
hazardous constituent, toxic substance, pollutant, contaminant, asbestos, radon,
polychlorinated biphenyls ("PCBs"), petroleum product or waste (including crude
oil or any fraction thereof), natural gas, liquefied gas, synthetic gas or other
material defined, regulated, controlled or potentially subject to any
remediation requirement under any environmental law (collectively, "Hazardous
Materials"), on, in, under or affecting any real property currently leased or
owned or by any means controlled by the Company, including the Properties (the
"Real Property") except as in material compliance with applicable laws; to the
knowledge of the

                                       13
<PAGE>
 
executive officers of the Company, the Real Property and the Company's
operations with respect to the Real Property are in compliance with all federal,
state and local laws, ordinances, rules, regulations and other governmental
requirements relating to pollution, control of chemicals, management of waste,
discharges of materials into the environment, health, safety, natural resources,
and the environment (collectively, "Environmental Laws"), and the Company has,
and is in compliance with, all  licenses, permits, registrations and government
authorizations necessary to operate under all applicable Environmental Laws,
except where the failure to have or comply with such license, permit,
registration or authorization could not reasonably be expected to have a
material adverse effect on the condition (financial or other), business,
properties, net worth or results of operations of the Company and the
Subsidiaries, taken as a whole.  Except as otherwise disclosed in the
Prospectus, the Company has not received any written or oral notice from any
governmental entity or any other person and to the knowledge of the executive
officers of the Company there is no pending or threatened claim, litigation or
any administrative agency proceeding that: alleges a violation of any
Environmental Laws by the Company; alleges that the Company is a liable party or
a potentially responsible party under the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S) 9601, et seq., or any state
superfund law; has resulted in or could reasonably be expected to result in the
attachment of an environmental lien on any of the Real Property; or alleges that
the Company is liable for any contamination of the environment, contamination of
the Real Property, damage to natural resources, property damage, or personal
injury based on their activities or the activities of their predecessors or
third parties (whether at the Real Property or elsewhere) involving Hazardous
Materials, whether arising under the Environmental Laws, common law principles,
or other legal standards.

     (y) The Company was organized and has operated in conformity with the
requirements for qualification and taxation as a REIT under Sections 856 through
860 of the Code for each of the taxable years ended December 31, 1994, December
31, 1995 and December 31, 1996; the Company's current organization and method of
operations will enable the Company to continue to meet the requirements for
qualification and taxation as a REIT. The Operating Partnership and each of the
Subsidiary Partnerships are properly classified as partnerships, and not as
corporations, associations taxable as corporations or "publicly traded
partnerships" under Section 7704 of the Code, for federal income tax purposes
throughout the period from April 4, 1994, the date on which the Company elected
to be taxed as a REIT, through the date hereof, or in the case of any Subsidiary
Partnerships that have terminated, through the date of termination of such
Subsidiary Partnerships.

     (z) None of the Subsidiary Partnerships is currently prohibited, directly
or indirectly, from making distributions to the Operating Partnership, and the
Operating Partnership is not currently prohibited, directly or indirectly, from
making distributions to the Company.

     (aa) Neither the Company nor any Subsidiary is or will become as a result
of the transactions contemplated hereby, or will conduct its business in a
manner in which it would become, an "investment company," or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.

                                       14
<PAGE>
 
     (bb) The statements set forth in the Prospectus under the caption "Certain
Federal Income Tax Considerations," insofar as they purport to describe the
provisions of the laws and documents referred to therein, are accurate and
complete.

     7.   Indemnification and Contribution.
          -------------------------------- 

     (a) The Company and the Operating Partnership, jointly and severally, agree
to indemnify and hold harmless each of you and each person, if any, who controls
the Underwriters within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act from and against any and all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation) arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact contained in the Prepricing Prospectus or in the Registration
Statement or the Prospectus or in any amendment or supplement thereto, or
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission which has been made therein or
omitted therefrom in reliance upon and in conformity with the information
relating to the Underwriters furnished in writing to the Company by or on behalf
of the Underwriters through you expressly for use in connection therewith (such
information is listed in Section 12 hereof); provided, however, that the
indemnification contained in this paragraph (a) with respect to the Prepricing
Prospectus shall not inure to the benefit of the Underwriters (or to the benefit
of any person controlling the Underwriters) on account of any such loss, claim,
damage, liability or expense arising from the sale of the Shares by the
Underwriters to any person if a copy of the Prospectus shall not have been
delivered or sent to such person within the time required by the Act, and the
untrue statement or alleged untrue statement or omission or alleged omission of
a material fact contained in the Prepricing Prospectus was corrected in the
Prospectus, provided that the Company has delivered the Prospectus to the
Underwriters in requisite quantity on a timely basis to permit such delivery or
sending. The foregoing indemnity agreement shall be in addition to any liability
which the Company and the Operating Partnership may otherwise have.

     (b) If any action, suit or proceeding shall be brought against the
Underwriters or any person controlling the Underwriters in respect of which
indemnity may be sought against the Company and the Operating Partnership, the
Underwriters or such controlling person shall promptly notify the Company and
the Operating Partnership and the Company and the Operating Partnership shall
assume the defense thereof, including the employment of counsel and payment of
all fees and expenses.  The Underwriters or any such controlling person shall
have the right to employ separate counsel in any such action, suit or proceeding
and to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of the Underwriters or such controlling person
unless (i) the Company and the Operating Partnership have agreed in writing to
pay such fees and expenses, (ii) the Company and the Operating Partnership have
failed to assume the defense and employ counsel, or (iii) the named parties to
any such action, suit or proceeding (including any impleaded parties) include
both the Underwriters or such controlling person and the Company and the
Operating Partnership and the Underwriters or such controlling person shall have
been advised by its counsel that representation of such indemnified

                                       15
<PAGE>
 
party and the Company and the Operating Partnership by the same counsel would be
inappropriate under applicable standards of professional conduct (whether or not
such representation by the same counsel has been proposed) due to actual or
potential differing interests between them (in which case the Company and the
Operating Partnership shall not have the right to assume the defense of such
action, suit or proceeding on behalf of the Underwriters or such controlling
person).  It is understood, however, that the Company and the Operating
Partnership shall, in connection with any one such action, suit or proceeding or
separate but substantially similar or related actions, suits or proceedings in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
the Underwriters and controlling persons not having actual or potential
differing interests with you or among themselves, which firm shall be designated
in writing by Smith Barney Inc., and that all such fees and expenses shall be
reimbursed as they are incurred.  The Company and the Operating Partnership
shall not be liable for any settlement of any such action, suit or proceeding
effected without its written consent, but if settled with such written consent,
or if there be a final judgment for the plaintiff in any such action, suit or
proceeding, the Company and the Operating Partnership agree to indemnify and
hold harmless the Underwriters, to the extent provided in the preceding
paragraph, and any such controlling person from and against any loss, claim,
damage, liability or expense by reason of such settlement or judgment.

     (c) The Underwriters agree to indemnify and hold harmless the Company and
the Operating Partnership, the Company's trust managers and its officers who
sign the Registration Statement, and any person who controls the Company or the
Operating Partnership within the meaning of Section 15 of the Act or Section 20
of the Exchange Act, to the same extent as the foregoing indemnity from the
Company and the Operating Partnership to the Underwriters, but only with respect
to information relating to the Underwriters furnished in writing by or on behalf
of the Underwriters through you expressly for use in the Registration Statement,
the Prospectus or the Prepricing Prospectus, or any amendment or supplement
thereto.  If any action, suit or proceeding shall be brought against the Company
or the Operating Partnership, any such trust manager, any such officer, or any
such controlling person based on the Registration Statement, the Prospectus or
the Prepricing Prospectus, or any amendment or supplement thereto, and in
respect of which indemnity may be sought against the Underwriters pursuant to
this paragraph (c), the Underwriters shall have the rights and duties given to
the Company and the Operating Partnership by paragraph (b) above (except that if
the Company and the Operating Partnership shall have assumed the defense thereof
the Underwriters shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the Underwriters' expense), and the Company, the
Operating Partnership, any such trust manager, any such officer, and any such
controlling person shall have the rights and duties given to the Underwriters by
paragraph (b) above.  The foregoing indemnity agreement shall be in addition to
any liability which the Underwriters may otherwise have.

     (d) If the indemnification provided for in this Section 7 is unavailable to
an indemnified party under paragraphs (a) or (c) hereof in respect of any
losses, claims, damages, liabilities or expenses referred to therein, then an
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses (i) in such proportion
as is

                                       16
<PAGE>
 
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other hand from the offering of the Shares, or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and the Operating Partnership on the one hand and the Underwriters
on the other in connection with the statements or omissions that resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations.  The relative benefits received by the
Company and the Operating Partnership on the one hand and the Underwriters on
the other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover page of the Prospectus.  The
relative fault of the Company and the Operating Partnership on the one hand and
the Underwriters on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Operating Partnership on the one hand
or by the Underwriters on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.

     (e) The Company, the Operating Partnership and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 7
were determined by a pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to in
paragraph (d) above.  The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities and expenses referred to in
paragraph (d) above shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating any claim or defending any such action,
suit or proceeding.  Notwithstanding the provisions of this Section 7, the
Underwriters shall not be required to contribute any amount in excess of the
amount by which the total price of the Shares underwritten by it and distributed
to the public exceeds the amount of any damages which the Underwriters has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.  No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.

     (f) No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action,
suit or proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such action, suit or proceeding.

     (g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 7 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred.  The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Company and the Operating Partnership set
forth in

                                       17
<PAGE>
 
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of the Underwriters or any person
controlling the Underwriters, the Company, its trust managers or officers, or
any person controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder, and (iii) any termination of this Agreement.  A successor to
the Underwriters or any person controlling the Underwriters, or to the Company,
its trust managers or officers, or any person controlling the Company, shall be
entitled to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Section 7.

     8.  Conditions of Underwriters' Obligations.  The obligations of the
         ---------------------------------------                         
Underwriters to purchase the Firm Shares hereunder are subject to the following
conditions:

     (a) If, at the time this Agreement is executed and delivered, it is
necessary for a post-effective amendment to the registration statement to be
declared effective before the offering of the Shares may commence, the
registration statement or such post-effective amendment shall have become
effective not later than 5:30 P.M., New York City time, on the date hereof, or
at such later date and time as shall be consented to in writing by you, and all
filings, if any, required by Rules 424 and 430A under the Act shall have been
timely made; no stop order suspending the effectiveness of the registration
statement shall have been issued and no proceeding for that purpose shall have
been instituted or, to the knowledge of the Company or the Underwriters,
threatened by the Commission, and any request of the Commission for additional
information (to be included in the registration statement or the Prospectus or
otherwise) shall have been complied with to your satisfaction.

     (b) Subsequent to the effective date of this Agreement, there shall not
have occurred (i) any change, or any development involving a prospective change,
in or affecting the condition (financial or other), business, properties, net
worth, or results of operations of the Company not contemplated by the
Prospectus, which in your opinion would materially, adversely affect the market
for the Shares, or (ii) any event or development relating to or involving the
Company or any officer or director of the Company which makes any statement made
in the Prospectus untrue in any material respect or which, in the opinion of the
Company and its counsel or the Underwriters and its counsel, requires the making
of any addition to or change in the Prospectus in order to state a material fact
required by the Act or any other law to be stated therein or necessary in order
to make the statements therein not misleading, if amending or supplementing the
Prospectus to reflect such event or development would in your opinion materially
adversely affect the market for the Shares.

     (c) You shall have received on the Closing Date, opinions of Cummings &
Lockwood, counsel for the Company, and Piper & Marbury, L.L.P., Maryland counsel
for the Company, dated the Closing Date and addressed to you substantially in
the form of Annex A hereto.  In rendering their opinion as aforesaid, counsel
may rely upon an opinion or opinions, each dated the Closing Date, of other
counsel retained by them or the Company as to the laws of the State of Maryland
or the State of Delaware, provided that (1) each such local counsel is
acceptable to you, (2) such reliance is expressly authorized by each opinion so
relied upon and a copy of each such opinion is delivered to you, and (3) counsel
shall state in their opinion that they believe that they and the Underwriters
are justified in relying thereon.

                                       18
<PAGE>
 
     (d) You shall have received on the Closing Date an opinion of King &
Spalding, counsel for the Underwriters, dated the Closing Date and addressed to
you with respect to the matters referred to in clauses (v), (viii), (ix), (xiii)
(excluding documents incorporated by reference) and (xviii) of Annex A hereto
and such other related matters as you may request.

     (e) You shall have received letters addressed to you and dated the date
hereof and the Closing Date from Ernst & Young LLP, independent certified public
accountants, substantially in the forms heretofore approved by you.

     (f) (i) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been taken or, to the knowledge of the Company, shall be contemplated by the
Commission at or prior to the Closing Date; (ii) there shall not have been any
change in the capital stock of the Company nor any material increase in the
short-term or long-term debt of the Company (other than in the ordinary course
of business) from that set forth or contemplated in the Registration Statement
or the Prospectus (or any amendment or Supplement thereto); (iii) there shall
not have been, since the respective dates as of which information is given in
the Registration Statement and the Prospectus (or any amendment or supplement
thereto), except as may otherwise be stated in the Registration Statement and
Prospectus (or any amendment or supplement thereto), any material adverse change
in the condition (financial or other), business, prospects, properties, net
worth or results of operations of the Company and the Subsidiaries taken as a
whole; (iv) the Company and the Subsidiaries shall not have any liabilities or
obligations, direct or contingent (whether or not in the ordinary course of
business), that are material to the Company and the Subsidiaries, taken as a
whole, other than those reflected in the Registration Statement or the
Prospectus (or any amendment or supplement thereto); and (v) all the
representations and warranties of the Company contained in this Agreement shall
be true and correct on and as of the date hereof and on and as of the Closing
Date as if made on and as of the Closing Date, and you shall have received a
certificate, dated the Closing Date and signed on behalf of the Company by the
chief executive officer and the chief financial officer of the Company (or such
other officers as are acceptable to you), to the effect set forth in this
Section 8(f) and in Section 8(g) hereof.

     (g) The Company shall not have failed at or prior to the Closing Date to
have performed or complied with any of its agreements herein contained and
required to be performed or complied with by it hereunder at or prior to the
Closing Date.

     (h) Prior to the Closing Date the Shares, the Concurrent Shares and all
other Common Shares of the Company shall have been listed, subject to notice of
issuance, on the American Stock Exchange (Regular List).

     (i) The Company shall have furnished or caused to be furnished to you such
further certificates and documents as you shall have requested.

     All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to you and your counsel.

                                       19
<PAGE>
 
     Any certificate or document signed by any officer of the Company and
delivered to you or to your counsel shall be deemed a representation and
warranty by the Company to the Underwriters as to the statements made therein.

     The obligations of the Underwriters to purchase Additional Shares hereunder
are subject to the satisfaction on and as of any Option Closing Date of the
conditions set forth in this Section 8, except that, if any Option Closing Date
is other than the Closing Date, the certificates, opinions and letters referred
to in paragraphs (c) through (f) shall be dated the Option Closing Date in
question and the opinions called for by paragraphs (c) and (d) shall be revised
to reflect the sale of Additional Shares.

     9.  Expenses.  The Company agrees to pay the following costs and expenses
         --------                                                             
and all other costs and expenses incident to the performance by it of its
obligations hereunder: (i) the preparation, printing or reproduction, and filing
with the Commission of the Registration Statement (including financial
statements and exhibits thereto), the Prospectus, the Prepricing Prospectus and
each amendment or supplement to any of them; (ii) the printing (or reproduction)
and delivery (including postage, air freight charges and charges for counting
and packaging) of such copies of the Registration Statement, the Prospectus, the
Incorporated Documents, and all amendments or supplements to any of them, as may
be reasonably requested for use in connection with the offering and sale of the
Shares; (iii) the preparation, printing, authentication, issuance and delivery
of certificates for the Shares, including any stamp taxes in connection with the
original issuance and sale of the Shares; (iv) the filing with the Commission of
this Agreement and the printing of the Blue Sky Memorandum and all other
agreements or documents printed (or reproduced) and delivered in connection with
the offering of the Shares; (v) the listing of the Shares on the AMEX; (vi) the
registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of the several states as provided in Section 5(g)
hereof (including the reasonable fees, expenses and disbursements of counsel for
the Underwriters relating to the preparation, printing or reproduction, and
delivery of the Blue Sky Memorandum and such registration and qualification),
provided, however, that expenses under this item (vi) shall not exceed $5,000;
(vii) the filing fees in connection with any filings required to be made with
the National Association of Securities Dealers, Inc.; (viii) the transportation
and other expenses incurred by or on behalf of Company representatives in
connection with presentations to prospective purchasers of the Shares; and (ix)
the fees and expenses of the Company's accountants and the fees and expenses of
counsel (including local and special counsel) for the Company.

     10.  Effective Date of Agreement.  This Agreement shall become effective:
          ---------------------------                                         
(i) upon the execution and delivery hereof by the parties hereto; or (ii) if, at
the time this Agreement is executed and delivered, it is necessary for a post-
effective amendment to the Registration Statement to be declared effective
before the offering of the Shares may commence, when notification of the
effectiveness of the registration statement or such post-effective amendment has
been released by the Commission.  Until such time as this Agreement shall have
become effective, it may be terminated by the Company, by notifying you, or by
you by notifying the Company.

                                       20
<PAGE>
 
     If any one or more of the Underwriters shall fail or refuse to purchase
Shares which it or they are obligated to purchase hereunder on the Closing Date,
and the aggregate number of Shares which such defaulting Underwriter or
Underwriters are obligated but fail or refuse to purchase is not more than one-
tenth of the aggregate number of Shares which the Underwriters are obligated to
purchase on the Closing Date, each non-defaulting Underwriter shall be
obligated, severally, in the proportion which the number of Firm Shares set
forth opposite its name in Schedule I hereto bears to the aggregate number of
Firm Shares set forth opposite the names of all non-defaulting Underwriters or
in such other proportion as you may specify in accordance with Section 20 of the
Master Agreement Among Underwriters of Smith Barney Inc., to purchase the Shares
which such defaulting Underwriter or Underwriters are obligated, but fail or
refuse, to purchase.  If any one or more of the Underwriters shall fail or
refuse to purchase Shares which it or they are obligated to purchase on the
Closing Date and the aggregate number of Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Shares which
the Underwriters are obligated to purchase on the Closing Date and arrangements
satisfactory to you and the Company for the purchase of such Shares by one or
more non-defaulting Underwriters or other party or parties approved by you and
the Company are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Company.  In any such case which does not result in termination of this
Agreement, either you or the Company shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents or arrangements may be effected.  Any action taken under
this paragraph shall not relieve any defaulting Underwriter from liability in
respect of any such default of any such Underwriter under this Agreement.  The
term "Underwriter" as used in this Agreement includes, for all purposes of this
Agreement, any party not listed in Schedule I hereto who, with your approval and
the approval of the Company, purchases Shares which a defaulting Underwriter is
obligated, but fails or refuses, to purchase.

     Any notice under this Section 10 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.

     11.  Termination of Agreement.  This Agreement shall be subject to
          ------------------------                                     
termination in your absolute discretion, without liability on the part of the
Underwriters to the Company by notice to the Company, if prior to the Closing
Date or any Option Closing Date (if different from the Closing Date and then
only as to the Additional Shares), as the case may be, (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or the
Nasdaq National Market shall have been suspended or materially limited, (ii) a
general moratorium on commercial banking activities in the States of New York or
Connecticut shall have been declared by either federal or state authorities, or
(iii) there shall have occurred any outbreak or escalation of hostilities or
other international or domestic calamity, crisis or change in political,
financial or economic conditions, the effect of which on the financial markets
of the United States is such as to make it, in your judgment, impracticable or
inadvisable to commence or continue the offering of the Shares at the offering
price to the public set forth on the cover page of the Prospectus or to enforce
contracts for the resale of the Shares by the Underwriters.  Notice of such
termination may be given to the Company by telegram, telecopy or telephone and
shall be subsequently confirmed by letter.

                                       21
<PAGE>
 
     12.  Information Furnished by the Underwriters.  The statements set forth
          -----------------------------------------                           
in the last paragraph on the cover page, the stabilization legend on the inside
front cover, and the list of underwriters and numbers of Firm Shares to be
purchased by each and the statements in the first, third and sixth paragraphs
under the caption "Underwriting" in the Prospectus, constitute the only
information furnished by or on behalf of the Underwriters through you as such
information is referred to in Sections 6(b) and 7 hereof.

     13.  Miscellaneous.  Except as otherwise provided in Sections 5, 10 and 11
          -------------                                                        
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company, at the office of the
Company at 598 Asylum Avenue, Hartford, CT 06105, Attn: Chief Executive Officer
and Chief Financial Officer; or (ii) if to you, c/o Smith Barney Inc. at 388
Greenwich Street, New York, New York 10013, Attention: Manager, Investment
Banking Division.

     This Agreement has been and is made solely for the benefit of the
Underwriters, the Company, its directors and officers, and the other controlling
persons referred to in Section 7 hereof and their respective successors and
assigns, to the extent provided herein, and no other person shall acquire or
have any right under or by virtue of this Agreement.  Neither the term
"successor" nor the term "successors and assigns" as used in this Agreement
shall include a purchaser from the Underwriters of any of the Shares in his
status as such purchaser.

     14.  Applicable Law; Counterparts.  This Agreement shall be governed by and
          ----------------------------                                          
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York, without regard
to the conflicts of laws principles of any jurisdiction.

     This Agreement may be signed in various counterparts which together
constitute one and the same instrument.  If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.

     Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Underwriters.

                                         Very truly yours,

                                         GROVE PROPERTY TRUST


                                         By:___________________________
                                             Name:
                                             Title:


                                         GROVE OPERATING, L.P.

                                       22
<PAGE>
 
                                         By:  Grove Property Trust,
                                              General Partner


                                         By:___________________________
                                             Name:
                                             Title:

Confirmed as of the date first
above mentioned.

SMITH BARNEY INC.
LEHMAN BROTHERS INC.
As Representatives of the
  Several Underwriters

By:   SMITH BARNEY INC.



     By: ___________________________
        Managing Director

                                       23
<PAGE>
 
                                   SCHEDULE I

                                  UNDERWRITERS

                                        
                                                                   No. of Common
     Underwriter                                                Shares Purchased
     -----------                                                ----------------


     Smith Barney Inc.............................................
     Lehman Brothers Inc..........................................





        Total.....................................................     3,141,475
                                                                       =========
                                       24
<PAGE>
 
                                  SCHEDULE II
                                        
                      LIST OF SUBSIDIARIES AND PROPERTIES


Apartment Communities
Owned by the Operating Partnership          Legal Name of Partnership



Apartment Communities
Owned by Subsidiary Partnerships



Retail Properties Owned by
the Operating Partnership

                                       25
<PAGE>
 
                                    ANNEX A


     The Company is a real estate investment trust duly formed and validly
existing in good standing under the laws of the State of Maryland, with full
power and authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and the Prospectus, and is
duly registered and qualified to conduct its business and is in good standing in
each jurisdiction or place where the nature of its properties or the conduct of
its business requires such registration or qualification, except where the
failure so to register or qualify could not reasonably be expected to have a
material adverse effect on the condition (financial or other), business,
properties, net worth or results of operations of the Company and the
Subsidiaries, taken as a whole.

     Each of the Subsidiaries is a limited partnership or a limited liability
company duly organized, legally existing under the laws of its jurisdiction of
organization, with full power and authority under the laws governing such
limited partnerships or limited liability companies and under such entities'
respective organizational  documents to own, lease and operate its properties
and to conduct its business as described in the Registration Statement and the
Prospectus, and is duly registered and qualified to conduct its business and is
in good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify could not
reasonably be expected to have a material adverse effect on the condition
(financial or other), business, properties, net worth or results of operations
of the Company and the Subsidiaries taken as a whole. The Company is the sole
general partner of the Operating Partnership. Either the Company or the
Operating Partnership or a wholly owned subsidiary thereof is the sole general
partner of each of the Subsidiary Partnerships. The Company's partnership
interests in the Operating Partnership and each Subsidiary Partnership are, to
the knowledge of such counsel, owned free and clear of any lien, adverse claim,
security interest, equity or other encumbrance, except for such as could not
reasonably be expected to have a material adverse effect on the condition
(financial or other), business properties, net worth or results of operations of
the Company and the Subsidiaries, taken as a whole.

     The authorized capital stock of the Company is as set forth under the
caption "Description of Shares of Beneficial Interest" in the Prospectus; the
authorized capital stock of the Company conforms in all material respects as to
legal matters to the description thereof contained in such section in the
Prospectus;.

     All the shares of capital stock of the Company outstanding prior to the
issuance of the Shares have been duly authorized and validly issued, and are
fully paid and nonassessable.

                                       26
<PAGE>
 
     The Shares and the Concurrent Shares have been duly authorized and, when
issued and delivered to the Underwriters against payment therefor in accordance
with the terms hereof, will be validly issued, fully paid and nonassessable and,
to the best knowledge of such counsel, free of any rights similar to preemptive
rights under the Declaration of Trust or By-laws of the Company or under
Maryland law that will entitle any person to acquire any Shares upon the
issuance thereof by the Company.

     To the knowledge of such counsel, the Shares and the Concurrent Shares,
when issued and delivered to the Underwriters against payment therefor in
accordance with the terms hereof, will be free of any preemptive rights or
similar rights.

     No registration under the Act or the Investment Company Act and no consent,
approval, authorization, order, registration or qualification of or with any
governmental agency or body (A) was required for the issuance of _______ Common
Units of the Operating Partnership on March 14, 1997, or (B) was required for
the Company's issuance of 3,333,333 Common Shares on March 14, 1997.

     The form of certificates for the Shares conforms to the requirements of
Maryland law.

     The Registration Statement and all post-effective amendments, if any, have
become effective under the Act and, to the knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose are pending before or contemplated by the
Commission; and any required filing of the Prospectus pursuant to Rule 424(b)
has been made in accordance with Rule 424(b).

     The Company has the power and authority to enter into this Agreement and to
issue, sell and deliver the Shares to the Underwriters as provided herein, and
this Agreement has been duly authorized, executed and delivered by the Company.

     The Operating Partnership has the power and authority to enter into this
Agreement and this Agreement has been duly authorized, executed and delivered by
the Operating Partnership.

     To the knowledge of such counsel, neither the Company nor any of the
Subsidiaries is in violation of its respective organizational documents or its
respective bylaws, or other organizational documents, and, to the best knowledge
of such counsel, is not in default in the performance of any material
obligation, agreement or condition contained in any bond, debenture, note or
other evidence of indebtedness that is listed as an exhibit to the Registration
Statement or to any Incorporated Document, where such default, individually or
in the aggregate, has had or is reasonably likely to have a material adverse
effect on the condition (financial or otherwise), business, properties, net
worth or results of operations of the Company and the Subsidiaries, taken as a
whole, except as may be disclosed in the Prospectus.Neither the offer, sale or
delivery of the Shares, the execution, delivery or performance of this
Agreement, compliance by the Company with the provisions hereof nor consummation
by the Company of the transactions contemplated hereby conflicts or will
conflict with or constitutes or will constitute a breach of, or a default under,
the charter or bylaws, or other organizational documents, of the Company or any
of the Subsidiaries or any agreement, indenture, lease or other instrument to
which the Company or any of the Subsidiaries is a party or by which any of

                                       27
<PAGE>
 
them or any of their respective properties is bound that is an exhibit to the
Registration Statement or to any Incorporated Document, or will, to the
knowledge of such counsel, result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any of the
Subsidiaries, nor will any such action result in any violation of any existing
law, regulation, ruling (assuming compliance with all applicable state
securities and Blue Sky laws), judgment, injunction, order or decree known to
such counsel, applicable to the Company, the Subsidiaries or any of their
respective properties, except for such breaches, defaults or violations that
have not had and could not reasonably be expected to have a material adverse
effect on the condition (financial or otherwise), business, properties, net
worth or results of operations of the Company and the Subsidiaries, taken as a
whole.

     No consent, approval, authorization or other order of, or registration or
filing with, any court, regulatory body, administrative agency or other
governmental body, agency, or official is required on the part of the Company
(except as has been obtained under the Act and the Exchange Act or such as may
be required under state securities or Blue Sky laws governing the purchase and
distribution of the Shares) for the valid issuance and sale of the Shares to the
Underwriters as contemplated by this Agreement.

     The Registration Statement and the Prospectus and any supplements or
amendments thereto (except for the financial statements and the notes thereto
and the schedules and other financial and statistical data included therein, as
to which such counsel need not express any opinion) comply as to form in all
material respects with the requirements of the Act; and  the Company's Quarterly
Reports on Form 10-Q for the quarters ended June 30, 1997 and September 30, 1997
(except for the financial statements and the notes thereto and the schedules and
other financial and statistical data included therein, as to which counsel need
not express any opinion) comply as to form in all material respects with the
Exchange Act and the rules and regulations of the Commission thereunder.

     To the knowledge of such counsel, (A) other than as described or
contemplated in the Prospectus (or any supplement thereto), the Registration
Statement or any Incorporated Document, there are no legal or governmental
proceedings pending or threatened against the Company or any of the
Subsidiaries, or to which the Company or any of the Subsidiaries, or any of
their property, is subject, which are required to be described in the
Registration Statement or Prospectus (or any amendment or supplement thereto)
and (B) there are no agreements, contracts, indentures, leases or other
instruments, that are required to be described in the Registration Statement or
the Prospectus (or any amendment or supplement thereto) or to be filed as an
exhibit to the Registration Statement or any Incorporated Document that are not
described or filed as required, as the case may be.

     The statements in the Registration Statement and Prospectus under the
captions "Description of Shares of Beneficial Interest," "Certain Relationships
and Transactions," "Certain Provisions of Maryland Law and the Company's Charter
and Bylaws," "The Operating Partnership Agreement"  and, under the caption "Risk
Factors," the subheadings "Adverse Tax Consequences of Failure to Qualify as a
REIT," "Possible Environmental Liabilities," "Limits on Changes in Control" and
"Changes in Investment and Financing Practices Without Shareholder Approval,"
insofar as they are descriptions of contracts, agreements or other legal
documents, or

                                       28
<PAGE>
 
refer to statements of law or legal conclusions, are accurate and present fairly
the information required to be shown.

     The Company was organized and has operated in conformity with the
requirements for qualification and taxation as a REIT under Sections 856 through
860 of the Code for each of the taxable years ended December 31, 1994, December
31, 1995 and December 31, 1996; the Company's current organization and method of
operations will enable the Company to continue to meet the requirements for
qualification and taxation as a REIT.  The discussion in the Prospectus under
the caption "Certain Federal Income Tax Considerations" is accurate and fairly
summarizes the federal income tax considerations that would be material to a
holder of Shares and, to the extent that it constitutes matters of law or legal
conclusions, has been reviewed by such counsel, is correct and presents fairly
the information required to be disclosed therein.

     The Operating Partnership and each of the Subsidiary Partnerships are
properly classified as partnerships, and not as corporations, associations
taxable as corporations or "publicly traded partnerships" under Section 7704 of
the Code, for federal income tax purposes throughout the period from April 4,
1994, the date on which the Company elected to be taxed as a REIT, through the
date of such opinion, or in the case of any Subsidiary Partnerships that have
terminated, through the date of termination of such Subsidiary Partnerships.

     None of the Company nor any Subsidiary is, or solely as a result of the
consummation of the transactions contemplated hereby, will become, an
"investment company," or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.

     Although such counsel has not undertaken to determine independently, and
does not assume any responsibility for, the accuracy or completeness of the
statements in the Registration Statement, such counsel has participated in the
preparation of the Registration Statement and the Prospectus, including review
and discussion of the contents thereof, and nothing has come to the attention
of such counsel that has caused them to believe that the Registration Statement
(including the Incorporated Documents) at the time the Registration Statement
became effective, or the Prospectus, as of its date and as of the Closing Date,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or that any amendment or supplement to the Prospectus, as of its
respective date, and as of the Closing Date, contained any untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (it being understood that such counsel need express no
opinion with respect to the financial statements and the notes thereto and the
schedules and other financial and statistical data included in the Registration
Statement or the Prospectus or any Incorporated Document).

                                       29
<PAGE>
 
                                    ANNEX B

Grove Property Trust
598 Asylum Avenue
Hartford, Connecticut 06105

Smith Barney Inc.
Lehman Brothers Inc.
 as representatives of the several underwriters
 c/o Smith Barney Inc.,
388 Greenwich Street
New York, New York 10013

Re: Lockup Agreement

Ladies and Gentlemen:

     The undersigned understands that you and certain other firms propose to
enter into an Underwriting Agreement (the "Underwriting Agreement") providing
for the purchase by you and such other firms (the "Underwriters") of Common
Shares of Beneficial Interest, par value $.01 per share (the "Shares") of Grove
Property Trust, a Maryland real estate investment trust (the "Company") and that
the Underwriters propose to reoffer the Shares to the public.

     As an inducement to the Underwriters to execute the Underwriting Agreement,
the undersigned irrevocably hereby agrees that, for a period of 180 days after
the date of the Prospectus (as defined in the Underwriting Agreement), the
undersigned will not offer, sell, contract to sell, announce the intention to
sell, pledge or otherwise dispose of, directly or indirectly, any Shares, or
securities convertible into or exchangeable or exercisable for Shares
(collectively, "Securities"), without the prior written consent of Smith Barney
Inc.  Prior to the expiration of such period, the undersigned will not announce
or disclose any intention to do anything after the expiration of such period
which the undersigned is prohibited, as provided in the preceding sentence, from
doing during such period.

                                       30
<PAGE>
 
     In furtherance of the foregoing, the Company and its transfer agent and
registrar are hereby authorized to decline to make any transfer of Securities if
such transfer would constitute a violation or breach of this Agreement.  This
Agreement shall be binding on the undersigned and the respective successors,
heirs, personal representatives and assigns of the undersigned.  It is
understood that, if the Underwriting Agreement does not become effective, or if
the Underwriting Agreement (other than the provisions thereof which survive
termination) shall terminate or be terminated prior to payment for and delivery
of the Shares, you will release the undersigned from the obligations under this
letter agreement.

                           Very truly yours,

                           Signature:_______________________________


                           Print Name:________________________________


cc:      BankBoston, N.A., as Transfer Agent

                                       31

<PAGE>
 
                                                                    EXHIBIT 2.4
                       AGREEMENT FOR PURCHASE AND SALE


                               SEPTEMBER 5, 1997



                SELLER:             WERNER O. KUNZLI

                PURCHASER:          THE GROVE CORPORATION

                PROPERTY:           HIGH MEADOW APARTMENTS
                                    110 JOBS HILL ROAD
                                    ELLINGTON, CT 06029
<PAGE>
 
                               A G R E E M E N T
                               -----------------


     THIS AGREEMENT dated this 5th day of September, 1997, by and between WERNER
O. KUNZLI, of Tolland, Connecticut (the "Seller") and THE GROVE CORPORATION, a
Connecticut corporation having its principal place of business in Hartford,
Connecticut (the "Purchaser").

                         W I T N E S S E T H   T H A T:

     WHEREAS, the Seller is the sole owner of HIGH MEADOW APARTMENTS, a 100 unit
residential apartment project located in Ellington, Connecticut; and

     WHEREAS, the Purchaser wishes to acquire the Property from the Seller, and
the Seller is willing to sell the same to the Purchaser in accordance with the
terms hereof;

     NOW, THEREFORE, for One Dollar ($1.00) and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:

     1.   Purchase and Sale.
          ----------------- 

     A.   The Purchaser agrees to purchase and the Seller agrees to sell all of
the Seller's right, title and interest in and to the Seller's property
(including all easements and appurtenances) located at Jobs Hill Road and Muddy
Brook Road, Ellington, Connecticut (the "Property") and more particularly
described on EXHIBIT A, attached hereto and made a part hereof, together with
             ---------                                                       
all buildings, structures, improvements, machinery, equipment and fixtures
attached to or affixed to the Property, and all personal property owned by the
Seller and used in connection with operation of the apartment project, except
for the following items of personal property which will remain property of the
Seller and be removed on or before the date of closing: Two box trailers
including all contents therein and one Chevy pick-up truck.

     B.   In addition, the Purchaser agrees to assume all of the Seller's
obligations and liability under and indemnify and hold the Seller harmless from
and liability under: (i) the residential leases in effect on the date of
closing, including the Seller's obligations regarding security deposits; (ii)
the contracts identified on EXHIBIT B, attached hereto and made a part hereof;
                            ---------                                         
and (iii) any other obligation or liability assumed by the Purchaser under the
terms hereof or in connection with the transaction contemplated hereby.  Seller
is responsible and will indemnify Purchaser for all obligations arising out of
such leases, contracts, etc. which obligations arise prior to the closing and
Purchaser is responsible and will indemnify Seller for all obligations arising
out of such leases, contracts, etc. which obligations arise subsequent to the
closing.


                                       1
<PAGE>
 
     2.   Purchase Price.
          -------------- 

     A.   The purchase price for the Property shall be FOUR MILLION FIFTY
THOUSAND AND NO/100 DOLLARS ($4,050,000.00), payable as follows:

          (i) TEN THOUSAND AND NO/100 DOLLARS ($10,000.00) as a deposit which
was paid on or about August 20, 1997 to Witten & Nolletti, Trustee (Escrow
Agent);

          (ii) FORTY THOUSAND AND NO/100 DOLLARS ($40,000.00) as an additional
deposit on the date of execution of this Agreement by the Purchaser, which
deposit shall also be paid to Witten & Nolletti, Trustee (Escrow Agent);

          (iii)  FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00) as a further
deposit on or before September 29, 1997, which is the date by which the
Purchaser's due diligence is to be completed.  Such additional deposit of FIFTY
THOUSAND ($50,000.00) DOLLARS, together with the previous deposits of TEN
THOUSAND ($10,000.00) DOLLARS and FORTY THOUSAND ($40,000.00) DOLLARS which were
previously held by the Witten & Nolletti, Trustee, shall be paid over to the
Seller's counsel, Kahan, Kerensky & Capossela, who shall from and after receipt
of such deposits become the new Escrow Agent;

          (iv) The balance of THREE MILLION NINE HUNDRED FIFTY THOUSAND AND
NO/100 DOLLARS ($3,950,000.00) shall be paid in full at closing by bank or
certified check or by wire transfer.

     B.   It is agreed and understood that if a closing does not occur for any
reason other than a default by the Seller, the Seller shall be entitled to a
reimbursement from the deposits being held by Escrow Agent for his actual out-
of-pocket legal expenses in connection with this transaction, up to a maximum of
Five Thousand and no/100 Dollars ($5,000.00).

     3.   Title Contingency; Conveyance; Exceptions.
          ----------------------------------------- 

     A.   (i)  The Purchaser's obligations hereunder to purchase the Property
are specifically contingent upon the Seller conveying to the Purchaser at
closing a good and marketable title to an indefeasible estate in fee simple in
and to the Property, subject only to the exceptions to title set forth in
subparagraph B of this Article 3.  Such conveyance will be made by warranty deed
in the usual form according to Connecticut practice.  The Seller will remove all
mortgages, mechanics liens and judgment liens at or prior to the closing.  The
deed shall be delivered, duly executed, to the Purchaser at closing upon the
payment of all sums to be then paid by the Purchaser and shall be prepared by
the Seller at his expense.  The Seller shall pay all Conveyance Taxes resulting
from the transfer of title to the Purchaser.  At the Closing, the Seller shall
deliver to the 

                                       2
<PAGE>
 
Purchaser all usual and customary documents for a transaction of this type.

  (ii)  In the event that the Seller cannot convey title to the Property to the
Purchaser in accordance with this Agreement, then the Seller may, at his option,
extend the date of closing for thirty (30) days in order to cure the title
defect. If the title defect is not cured within this thirty (30) day period,
then the Purchaser shall have the option of (a) accepting such title as the
Seller can convey, without a reduction in the purchase price; or (b) terminating
this Agreement, in which case neither party shall have any further rights or
obligations to purchase or sell the Property under this Agreement. In such
event, all deposits paid by the Purchaser shall be returned to the Purchaser.
Notwithstanding any provision herein to the contrary, Seller will be obligated
to correct any title problem which can be corrected for less than FIFTY THOUSAND
($50,000.00) DOLLARS.

     B.   The Property will be conveyed by the Seller and accepted by the
Purchaser subject to the following:

          (i) Any restrictions and limitations now existing or hereafter imposed
     by governmental authority, including inland wetlands, flood hazard
     regulations and building regulations and zoning and planning rules and
     regulations of the Town of Ellington, provided there are no material
     violations thereof as of closing;

          (ii) Taxes, not delinquent as of closing, of the Town of Ellington and
     any other taxing district in which the Property are situated (which taxes
     the Purchaser will assume and agree to pay in the deed of conveyance
     heretofore referred to);

          (iii)  Such easements and restrictions as of record may appear
     provided that they do not impair the marketability of the Property or
     interfere in any way with the existing use of the Property as an apartment
     project; and

          (iv)  Any state of facts which an accurate survey or personal
     inspection of the Property would reveal or discover.

          Seller agrees that he will not further encumber the property prior to
closing.

     4.   Due Diligence Contingency.
          ------------------------- 

          A.   It is expressly understood and agreed that the Purchaser's
obligations to complete the closing of the purchase of the Property are subject
to and contingent on the Purchaser completing its due diligence regarding the
structural, mechanical and environmental condition of the Property and the
financial condition of the apartment project on or before September 29, 

                                       3
<PAGE>
 
1997, and the results of such due diligence being satisfactory to the Purchaser
in its sole discretion.

          B.   Specifically, but without limitation, the Purchaser's due
diligence may include the following:

          (i) An environmental audit of the Property, including any tests
and inspections the Purchaser elects to undertake;

          (ii) A structural, mechanical and engineering review of the
buildings and improvements situated on the Property; and

          (iii) A full financial review of the operation of the Property,
including rental histories, repair records, management records and financial
statements;

          C.   The Seller agrees to cooperate fully with the Purchaser and its
agents, representatives and employees at all times and in all manner during the
Purchaser's due diligence.  The Seller will provide the Purchaser and his
agents, representatives and employees with access to the property during the due
diligence period, and will make available all financial information and all
other relevant information within September 10, 1997.

          D.   The Purchaser agrees to indemnify, defend, and hold the Seller
harmless from and against any and all losses, costs, claims, damages,
liabilities, and expenses, including reasonable attorney's fees and other costs
and expenses incurred, sustained by, or asserted against the Seller arising from
the actions of the Purchaser, or any of its agents, representatives or
employees, during the Purchaser's due diligence as provided herein.

          E.   If the Purchaser determines that the result of any portion of its
due diligence is unacceptable to it in its sole  discretion, it shall have the
right to notify the Seller, in writing, on or before September 29, 1997 that it
is exercising its right to terminate this Agreement.  The Purchaser hereby
agrees that upon such termination, it will execute and deliver a Non-Disclosure
Agreement in form and content reasonably satisfactory to the Seller.  In the
event the Purchaser does not notify the Seller, in writing, on or before
September 29, 1997 that the result of a portion of its due diligence is
unacceptable, then the due diligence contingency of this   Article 4 shall be
deemed to have been met.

     5.   Adjustments.  At closing, adjustments shall be made in accordance with
          -----------                                                           
the custom of the Tolland County Bar Association for the following:

                                       4
<PAGE>
 
          A.   Town of Ellington real and personal property taxes;

          B.   Rents (on an as and when collected basis) and security deposits
(together with any interest thereon); rents collected by Purchaser after the
month of Closing shall be applied first to current rents;

          C.   Water, fuel and sewer charges;

          D.   The contracts and obligations set forth on EXHIBIT B; and
                                                          ---------     

          E.   Any other item customarily adjusted for in transactions such as
this one.

     6.   Seller's Representations, Warranties and Covenants.
          -------------------------------------------------- 

     A.   The Seller hereby represents, warrants and covenants to the Purchaser
as follows:

          (i) There are no judgments, actions, suits, proceedings, orders,
investigations or claims pending, existing or to the best of the Seller's
knowledge, threatened against the Property, at law or in equity, or before any
governmental agency, nor is the Property the subject of any governmental
investigations or inquiries, and, to the best of the Seller's knowledge, there
is no basis for any of the foregoing, except as respects ongoing landlord/tenant
legal proceedings in the ordinary course of the Seller's operation of the
apartment project at the Property.

          (ii) There are no employment contracts, service contracts, or other
agreements or obligations affecting the Property or the operation of the
apartment project other than those listed on EXHIBIT B, attached hereto and made
                                             ---------                          
a part hereof and those executed between the date hereof and the closing which
shall be executed in the ordinary course of business after the consent of
Purchaser is obtained, which consent will not be unreasonably withheld, and
which shall be added to EXHIBIT B at closing.  As of the date of the closing,
                        ---------                                            
all such contracts and agreements are in full force and effect and there are no
existing material defaults thereof.

          (iii)  Prior to and through the date of closing, the Seller shall
cause the Property to be operated and maintained diligently and the ordinary
business of the activities of the Property conducted in a manner that has been
customary in his ordinary course of business.  During this period, without the
prior approval of the Purchaser, which approval will not be unreasonably
withheld, the Seller shall not enter into any new leases at less than the posted
"street rent" or any restrictive operational contracts for the Property.
Furthermore, Seller will 

                                       5
<PAGE>
 
not amend any existing lease or existing contract in any material manner.

          (iv) All documents, materials, contracts and financial information
reviewed by or delivered to the Purchaser in connection with this transaction
are true and accurate in all material respects and will be true and accurate in
all material respects as of the closing.

          (v)  The Seller has good and marketable title in fee simple to the
Premises and to the appurtenant rights and the personal property subject only to
permitted encumbrances.

          (vi)  To the best of the Seller's knowledge, with respect to the
current use of the Premises, the Premises presently comply and will at the time
of the Closing in all material respects with all applicable restrictive
covenants, zoning and subdivision ordinances, building and fire codes, health
and environmental laws and regulations, and all other applicable municipal,
state or Federal laws, rules and regulations ("Laws").  The transactions
contemplated herein will create no violations of any Laws affecting the Premises
or any part thereof (including, without limitations, subdivision regulations.)

          (vii)  The Seller has received no notice of any condemnation or
eminent domain proceedings or negotiations for the purchaser or any of the
Premises in lieu of condemnation and, to the best of the Seller's knowledge, no
condemnation or eminent domain proceedings or negotiations have been commenced
or threatened in connection with the Premises or any portion of it.

          (viii)  The Commercial Property Damage Insurance and Commercial
General Liability Insurance presently carried by the Seller respecting the
Property (and the premium therefor) is as follows:  $3,330,000.00 of property
coverage on a replacement cost basis; $1,000,000.00 of liability coverage; one
years's actual loss of rent coverage; all for an annual premium of $13,633.00.

          (ix)  To the best of the Seller's knowledge, there has been no
Hazardous Waste" (as such term is defined in the Connecticut General Statutes
Section 22a-115, as amended) and/or "Spill" (as such term is defined in
Connecticut Public Act 85-443, Section 1, as amended) and/or "Hazardous
Substance" (as such term is defined in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C.(S)9061 eq seq.
and/or any environmental contamination (including, but not limited to asbestos
and polychlorinated biphenyl fluids ("PBC's) released on or onto or contained
with the Premises.

                                       6
<PAGE>
 
          (x)  The Premises legally include (i) a total of 100  residential
apartment units including 98 one-bedroom apartments consisting of about 600
square feet each, and 2 two-bedroom apartments consisting of about 700 square
feet each and (ii) adequate parking for all said units.

          (xi)  The Premises are structurally sound and all systems of the
Property (including without limitation, septic systems, electrical systems,
heating systems, air conditioning systems and plumbing systems) are in good
working order and condition.  To the best of the Sellers knowledge, the Premises
are free of vermin and termites and other wood ingesting insects.

          (xii)  There are four 2,000 gallon underground fuel oil storage tanks
located at the Premises.  These tanks were installed when the buildings were
constructed approximately 20 years ago. The Seller believes that these tanks
comply with all environmental regulations and has no knowledge that the tanks
pose any environmental risk.

          (xiii)  OTHER.  Other than those representations and warranties
specifically made herein, the Seller is making no representations or warranties
of any kind or nature regarding the Property or any buildings, structures,
improvements, machinery, equipment and fixtures attached to or affixed to the
Property.

     B.   All representations, warranties and covenants made by the Seller
herein, expressed or implied, shall survive for a period of six months following
the closing.  Any claims to be made by the Purchaser for a breech of any such
representations, warranties or covenants shall be made, if at all, prior to the
expiration of such six months.

     7.   Purchaser's Representations, Warranties and Covenants.
          ----------------------------------------------------- 
The Purchaser hereby represents, warrants and covenants to the Seller as
follows:

          A.   It is a validly formed Connecticut corporation in good standing
with the State of Connecticut.

          B.   All corporate action necessary to authorize and approve the
execution of this Agreement and the purchase provided for herein has been
properly taken.

     8.   Closing.  The closing of the purchase and sale of the  Property shall
          -------                                                              
be held at the offices of Kahan, Kerensky & Capossela, Vernon, Connecticut, on
or before November 15, 1997.

     9.   Broker.  The Purchaser represents to the Seller that it has not dealt
          ------                                                               
with any broker in connection with the purchase of the Property, except Witten &
Nolletti whose commission will be paid by the Purchaser.  The Seller and the
Purchaser shall each indemnify and hold the other free and harmless from all
losses, 

                                       7
<PAGE>
 
damages, costs and expenses (including attorneys fees) that either may suffer as
a result of any claim or suit brought by any other broker or finder who claims
that he participated with the Seller or the Purchaser, as the case may be, in
this transaction.

     10.  Termination.  This Agreement shall terminate in accordance with the
          -----------                                                        
following:

          A.   At the Seller's option, if the Purchaser shall not be ready,
willing and able to close in accordance with the terms hereof, or has otherwise
breached a material term of this Agreement and has not cured such breach by the
date of the closing as provided herein.  The parties agree that the damages that
the Seller would sustain as a result thereof would be substantial but would be
costly and difficult to establish or ascertain.  The parties therefore agree
that in the event of such a breach or default, the Seller shall be entitled to
receive and retain all deposits paid by the Purchaser as liquidated damages as
his sole remedy, at law or in equity, against the Purchaser for such breach.

          B.   At the Purchaser's option, if the results of its due diligence
are unsatisfactory to the Purchaser in its sole  discretion, if a contingency or
condition precedent to the Purchaser's obligations is not satisfied, if the
Seller has breached a material term of this Agreement, or if any representation
or warranty of the Seller shall be materially untrue or inaccurate as of the
closing. In the event of the Purchaser's termination, all deposits paid by the
Purchaser shall be promptly returned to the Purchaser, subject to the provisions
of Article 2B (unless termination is due to Seller's default), and if the
termination is as a result of the Seller's default, Purchaser shall have all
remedies available at law or in equity.

     11.  Risk of Loss.  All risk of loss to the Property shall remain upon the
          ------------                                                         
Seller prior to closing.  In the event of damage by fire or other casualty to
the Premises prior to the Closing, the Purchaser shall have the option to
terminate this Agreement.  If the Purchaser shall exercise its right to
terminate this Agreement pursuant to this Section 11 the Seller shall return the
Deposit to the Purchaser, and all parties shall be relieved of all further
liabilities and obligations hereunder.  If the Purchaser does not elect to
terminate this Agreement, this Agreement shall remain in full force and effect
and in such event the Seller shall pay over and assign or cause to be paid over
and assigned to the Purchaser at the Closing any and all proceeds and claims
under any casualty insurance policies insuring the damaged property.
Notwithstanding the foregoing, in the event that the cost of restoration of any
casualty is less than FIFTY THOUSAND ($50,000.00) DOLLARS, in lieu of
terminating the Agreement or accepting insurance proceeds, the Purchaser may
require the Seller to restore the Premises to substantially its former
condition, in which case the Seller shall be entitled to retain any insurance
proceeds on account of such casualty. In such 

                                       8
<PAGE>
 
event, the Closing shall be adjourned until the restoration is complete,
provided that if the restoration is not complete within sixty (60) days after
the Purchaser notifies the Seller that it has elected to have the Seller restore
the damage, the Purchaser shall have the right to terminate this Agreement, in
which event the Deposit shall be returned to the Purchaser and either the
Purchaser nor the Seller shall have any further rights or obligations hereunder.
The Purchaser shall give written notice to the Seller of any election pursuant
to this paragraph within fifteen (15) business days following receipt by the
Purchaser of written notice of any such casualty.

     12.  Condemnation.  If, prior to the Closing, all or any part of the
          ------------                                                   
Premises is taken by eminent domain, the Purchaser shall have the option either
(i) to elect not to acquire the Premises, in which case the Seller shall return
the Deposit to the Purchaser, this Agreement shall terminate and the parties
shall be relieved of all further rights and obligations with respect thereto, or
(ii) to acquire the Premises, subject to such action, without adjustment in the
Purchase Price and otherwise in accordance with the terms and provisions of this
Agreement, but the Purchaser shall upon Closing be entitled to the proceeds of
all awards made on account of such taking which would otherwise accrue to the
Seller.  The Purchaser shall give written notice to the Seller of any election
pursuant to this Section within five (5) business days following receipt by the
Purchaser of any written notice of such taking or proposed taking.  Failure of
the Purchaser to make such election within said period shall be deemed an
election to proceed to Closing pursuant to clause (i) above.

     13.  Escrow Agent's Powers.  The Seller and the Purchaser acknowledge and
          ---------------------                                               
agree that the Escrow Agent shall hold the Deposit pursuant to the terms and
conditions of this Agreement subject to the following:

          (a)  The Escrow Agent shall act as a depository only and, pending
settlement of the transaction contemplated by this Agreement, the Deposit shall
be invested in a non-interest bearing account, and shall be disbursed in
accordance with the terms of this Agreement, or as directed in writing by the
Seller and the Purchaser.

          (b)  In the event either the Seller or the Purchaser shall claim
default under the terms of this Agreement, the Escrow Agent will not be required
to deliver the Deposit to either of the parties without the written consent of
the other, or upon failure thereof, until the right of either of the parties to
receive the Deposit shall be fully determined by a court of proper jurisdiction.

          (c)  the Seller and the Purchaser hereby release and discharge the
Escrow Agent from all matters with respect to the subject matter hereof (except
for gross negligence or intentional 

                                       9
<PAGE>
 
wrongdoing), and agree to indemnify and hold the Escrow Agent harmless from and
against all costs, damages, judgments, attorney's fees, expenses, obligations,
and liabilities of any kind or nature which, in good faith, the Escrow Agent may
incur or sustain in connection with this Agreement, and without limiting the
generality of the foregoing, the Escrow Agent shall not incur any liability due
to a delay in the electronic wire transfer of funds or with respect to any
action taken or omitted in reliance upon any instrument, including any written
notice or instructions provided for this Agreement, not only as to its due
execution and the validity and effectiveness of its provision, but also as to
the trust and accuracy of any information contained therein, which the Escrow
Agent shall in good faith believe to be genuine, to have been signed or
presented by a proper person or persons and to conform with the provisions of
this Agreement.

     14.  Miscellaneous.
          ------------- 

          A.   TIME IS OF THE ESSENCE.  TIME IS OF THE ESSENCE to all terms of
this Agreement, except where otherwise provided herein.

          B.   COUNTERPARTS.  This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

          C.   ATTORNEYS' FEES.  In the case of any dispute under this
Agreement, the prevailing party shall be entitled to recover all its costs and
reasonable attorney's fees, including costs and fees in connection with
arbitration, litigation and any appeal.

          D.   NOTICES.  Any notices required or permitted hereunder shall be
effective when and if in writing and personally presented to and receipted by
the opposite party (or its authorized agent) or sent either by United States
Mail, Certified or Registered, return receipt requested, or by a nationally
recognized overnight courier service (also with documented receipt of delivery
to the opposite party or its authorized agent); or by facsimile transmission
where Fax numbers are indicated below, with a copy simultaneously sent by
regular mail together with a transmission receipt to the address indicated.

     All such notices shall be effective as of the documented date of receipt or
when delivery is refused and shall be addressed as follows:

          To Seller:     Werner O. Kunzli
                         60 Hartford Turnpike
                         Tolland, CT  06084
                         FAX: (860) 872-3033

                                       10
<PAGE>
 
          Copy to:       Joseph P. Capossela, Esq.
                         Kahan, Kerensky & Capossela
                         45 Hartford Turnpike
                         P.O. Box K
                         Vernon, CT  06066
                         FAX: (860) 647-8302

          To Purchaser:  The Grove Corporation
                         598 Asylum Street
                         Hartford, CT

          Copy to:       Peter Sorokin, Esq.
                         Rogin, Nassau, Caplan, Lassman &
                         Hirtle, LLC
                         CityPlace I, 22nd Floor
                         Hartford, CT  06103
                         FAX:  (860) 278-2179

          E.   ENTIRE AGREEMENT.  This Agreement contains all of the terms
agreed upon between the parties with respect to the subject matter hereof, and
all prior agreements between the parties are deemed to be null and void.

          F.   AMENDMENTS.  The Agreement may not be changed, modified or
terminated, except by an instrument executed by the parties hereto who are or
will be affected by the terms of such instrument.

          G.   WAIVER.  No waiver by any party of any failure or refusal to
comply with obligations of any other party shall be deemed a waiver of any other
or subsequent failure or refusal to so comply.

          H.   SUCCESSORS AND ASSIGNS.  The provisions of this Agreement shall
inure to the benefit of, and shall bind, the heirs, executors, administrators,
successors and assigns of the parties.  In no event, however, shall the
Purchaser assign or delegate to any person or party any of its rights or
obligations hereunder, except to an entity in which Brian Navarro has a direct
or indirect interest.

          I.   PARTIAL INVALIDITY.  If any term or provision of this Agreement
or the application thereof to any person or circumstances shall, to any extent,
be invalid or unenforceable, the remainder of this Agreement, or the application
of such term or provision to persons or circumstances other than those as to
which it is held invalid or unenforceable, shall not be affected thereby, and
each term and provision of this Agreement shall be valid and be enforced to the
fullest extent permitted by law.

          J.   SECTION HEADINGS.  The headings of the various sections of this
Agreement have been inserted only for the purposes of convenience, and are not
part of this Agreement and 

                                       11
<PAGE>
 
shall not be deemed in any manner to modify, expand or restrict any of the
provisions of this Agreement.

          K.   GOVERNING LAW; INTERPRETATION.  This Agreement shall be construed
and enforced in accordance with the laws of the State of Connecticut, and this
Agreement shall not be construed more strictly against one party than against
the other, merely by virtue of the fact that it may have been prepared by
counsel for one of the parties, it being recognized that all of the parties have
contributed substantially and materially to the preparation of this Agreement.

          L.   PLURAL, SINGULAR.  Where appropriate, the use of the singular
herein shall include and be deemed to be the plural and the use of the plural
herein shall include and be deemed to be the singular.

          M.   NON-RECORDATION.  The parties agree that neither this Agreement,
nor any other notice or document whatsoever, shall be recorded on the Land
records of the Town of Ellington.  In the event the Purchaser records any such
document on the Land Records in violation of this Article, then at the Seller's
option, this Agreement shall terminate.  By its execution of this Agreement, the
Purchaser irrevocably appoints the Seller as the Purchaser's Attorney-in-Fact to
execute any releases necessary for recordation purposes.


     IN WITNESS WHEREOF, the undersigned parties do hereby set their hands and
seals on the day first above written.

Signed, Sealed and Delivered
in the presence of:                         SELLER:


/s/ Peter Sorokin                           /s/ Werner O. Kunzli          
- -----------------------------               ----------------------------- 
Peter Sorokin                               Werner O. KUNZLI              
                                                                          
/s/ Barbara L. Keeney                                                       
- -----------------------------                                               
Barbara L. Keeney                           PURCHASER:                     
                                            THE GROVE CORPORATION           
                               
/s/ Peter Sorokin                           By /s/ Joseph LaBrosse, Treasurer 
- -----------------------------                  ------------------------------ 
Peter Sorokin                                  Joseph LaBrosse, Treasurer 
                                  
/s/ Barbara L. Keeney             
- -----------------------------     
Barbara L. Keeney                 

                           

ESCROW AGENT:                               ESCROW AGENT:
WITTEN & NOLLETTI                           KAHAN, KERENSKY & CAPOSSELA


By /s/ Victor Nolletti                      By /s/ Joseph P. Capossela, Esq. 
  ---------------------------                 -------------------------------
   Victor Nolletti                             Joseph P. Capossela, Esq. 

                                      12
<PAGE>
 
                                  SCHEDULE A
                                  ---------- 


FIRST PIECE:
- -----------

Commencing at a point in the general Westerly line of Jobs Hill Road, which
point marks the Northeasterly corner of the premises herein described and the
Southeasterly corner of land now or formerly of Edward and Shirley Wandzy;
thence running in a general Southerly direction along the general Westerly line
of Jobs Hill Road for a distance of 123.36 feet to an iron pin; thence N 81
degrees 40' 32" W for a distance of 197.24 feet to an iron pin; thence running S
15 degrees 44' 20" W for a distance of 150 feet to an iron pin; thence running S
81 degrees 38' 10" E for a distance of 195.57 feet to an iron pin set in the
general Westerly line of Jobs Hill Road, the last three courses being along land
now or formerly of R. & K. Cronsell; thence running S 16 degrees 50' 00" W,
174.70 feet to a point; thence running S 20 degrees 20' 00" W for a distance of
30 feet to a point, the last two courses being along the general Westerly line
of Jobs Hill Road; thence running N 69 degrees 40' 00" W for a distance of
125.00 feet to a point; thence running S 54 degrees 20' W for a distance of
314.55 feet to a point; thence running S 89 degrees 26' W for a distance of
505.92 feet to a point, the last three courses being along the SECOND PIECE
hereinafter described; thence running N 88 degrees 05' 50" W for a distance of
175.00 feet along land now or formerly of J. & T. DeCarli to a point which marks
the Northwesterly corner of land now or formerly of said DeCarli and the
Southwesterly corner of the premises herein described; thence running N 03
degrees 25' 50" E for a distance of 638.19 feet to a point; thence running S 88
degrees 11' 20" E for a distance of 127.84 feet to a point, the last two courses
and distances being along land now or formerly of Peter and Delores Skipper;
thence running S 88 degrees 09' 50" E for a distance of 1009.44 feet along land
now or formerly of Edward and Shirley Wandzy to the point and place of
beginning, containing in all, 13.90 acres, more or less.


SECOND PIECE:
- ------------

Commencing at a point in the general Northerly line of Muddy Brook Road, which
point marks the Southwesterly corner of the premises herein described and
Southeast corner of land now or formerly of J. & T. DeCarli; thence running N 03
degrees 25' 50" E along the general Easterly line of J. & T. DeCarli, 250.00
feet to a point; thence running N 89 degrees 26' E, 505.92 feet; thence running
N 54 degrees 20' E, 314.55 feet; thence running S 69 degrees 40' 00" E, 125.00
feet to a point in the general Westerly line of Jobs Hill Road, the last three
courses being along the FIRST PIECE above described; thence S 20 degrees 20' 00"
W along the general Westerly line of Jobs Hill Road, 293.84 feet to a point;
thence N 83 degrees 00' 00" W along the general Northerly line of J. & T.
DeCarli, 162.78 feet to a point; thence S 14 degrees 28' 00" W along the general
Westerly line of said DeCarli, 163.58 feet to a point in the general Northerly
line of Muddy Brook Road; thence N 88 degrees 05' 50" W along the general
Northerly line of Muddy Brook Road, 589.44 feet to the point and place of
beginning, containing in all, 5.1 acres, more or less.



Said premises are subject to any and all provisions of any ordinance, municipal 
regulation, or public or private law.
<PAGE>
 
                                   EXHIBIT B
                                   ---------


1.      Lease agreement for heat monitoring system with Ireland Oil Co.

2.      Bulk billing agreement with United Cable Television Corp. of Eastern 
        Connecticut d/b/a TCI Cablevision of Central, CT

3.      Rental agreement for laundry equipment with Mac-Gray Company, Inc.


<PAGE>
 
                                                                     EXHIBIT 2.5

                             GROVE OPERATING, L.P.
                                        
                          SOLICITATION OF CONSENT AND
                               OFFER TO EXCHANGE
                              CERTAIN OUTSTANDING
                     UNITS OF LIMITED PARTNERSHIP INTEREST
                                       IN
                  GROVE-COASTAL ASSOCIATES LIMITED PARTNERSHIP
                              FOR CONSIDERATION OF
                 3,435.5 COMMON UNITS OF GROVE OPERATING, L.P.
        with an option to holders to instead receive cash consideration

             THIS EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
   AT 5:00 P.M., NEW YORK TIME, ON FRIDAY, AUGUST 15, 1997, UNLESS EXTENDED.
                                        
     Grove Operating, L.P., a recently formed Delaware limited partnership (the
"OPERATING PARTNERSHIP"), is offering to exchange certain outstanding units of
limited partnership interest ("UNITS") in Grove-Coastal II Associates Limited
Partnership (the "PROPERTY PARTNERSHIP"), for consideration per Unit of 3,435.5
COMMON UNITS of the Operating Partnership or, at the option of the holder of a
limited partnership interest in the Property Partnership who votes in favor of
the transactions described herein but is either not qualified or elects not to
tender its Units for Common Units, consideration per Unit of $33,476 (the "CASH
CONSIDERATION") in cash, in each case to be pro rated in respect of fractional
Units, upon the terms and subject to the conditions set forth in this Exchange
Offer dated June 19, 1997 (including the annexes hereto, the "OFFER TO
EXCHANGE") and in the related Letter of Transmittal, as each may be supplemented
or amended from time to time (all of which constitute the "EXCHANGE OFFER").
The Exchange Offer is made to all limited partners of record of Grove-Coastal
Associates Limited Partnership (the "LIMITED PARTNERS") as of the date of this
Exchange Offer.

     A LIMITED PARTNER MUST TENDER ALL OF THE UNITS OWNED BY IT IN THE PROPERTY
PARTNERSHIP IF IT WISHES TO TENDER ANY UNITS.  A Limited Partner must also
complete and return an Accredited Investor Questionnaire in order to participate
in the Exchange Offer.  See "THE EXCHANGE OFFER" Section 3. Procedures for
Tendering Property Partnership Units."

     The General Partner of the Operating Partnership is Grove Property Trust, a
Maryland real estate investment trust.  See "THE EXCHANGE OFFER" Section 8.
Certain Information Concerning the Purchaser" and "Section 9. Interests of
Certain Persons and Certain Transactions."

     The Operating Partnership expressly reserves the right, in its sole
discretion, at any time and from time to time: (i) to extend the period of time
during which this Exchange Offer is open

JUNE 19, 1997
<PAGE>
 
and thereby delay the acceptance for payment of, and the payment for, any Units;
(ii) to terminate this Exchange Offer and not accept for payment any Units not
theretofore accepted for payment or paid for if any of the conditions referred
to in Section 11 have not been satisfied or upon the occurrence of the events
specified in Section 12; (iii) upon the occurrence of any of the conditions
specified in Section 11, to delay the acceptance for payment of, or payment for,
any Units not theretofore accepted for payment or paid for, and (iv) to amend
this Exchange Offer. See "THE EXCHANGE OFFER."

THE COMMON UNITS IN THE OPERATING PARTNERSHIP OFFERED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR UNDER THE
SECURITIES LAWS OF ANY STATE, AND ARE BEING OFFERED AND SOLD IN RELIANCE ON
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
LAWS.  THIS OFFER TO EXCHANGE HAS NOT BEEN FILED WITH OR REVIEWED BY THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION PRIOR TO ITS ISSUANCE AND USE.
NEITHER THE COMMISSION NOR ANY STATE'S SECURITIES LAW ADMINISTRATOR HAS REVIEWED
THE ACCURACY OR ADEQUACY OF THE INFORMATION PRESENTED HEREBY OR ENDORSED THE
MERITS OF THIS OFFERING.  ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

THE COMMON UNITS IN THE OPERATING PARTNERSHIP ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.


EACH LIMITED PARTNER IS URGED TO READ CAREFULLY THIS ENTIRE OFFER TO EXCHANGE,
THE LETTER OF TRANSMITTAL AND RELATED DOCUMENTS.

                                       ii
<PAGE>
 
                               TABLE OF CONTENTS
                                        
<TABLE>
<CAPTION>
                                                                                                        PAGE
<S>                                                                                                    <C>
     INTRODUCTION                                                                                           1
     FORWARD LOOKING STATEMENTS                                                                             5
     DISCLOSURE MATERIALS                                                                                   6
     THE CONSOLIDATION TRANSACTIONS                                                                         7
          Background                                                                                        7
          The Consolidation                                                                                 7
          Reasons for the Consolidation                                                                    10
          Opportunity for Growth                                                                           13
          Increased Marketability/Liquidity                                                                13
          Alternatives to the Consolidation                                                                13
          Valuation of Properties and Other Assets; Allocation of Common Units                             14
     SPECIAL FACTORS                                                                                       16
          Ownership of Common Units                                                                        16
          Risk Factors Common Units                                                                        18
     RISK FACTORS                                                                                          20
          Generally                                                                                        20
          Potential Adverse Effects of the Exchange Offer; Risk Factors                                    22
     BENEFITS TO RELATED PARTIES                                                                           29
     CONFLICTS OF INTEREST                                                                                 31
     THE COMPANY                                                                                           33
          The Grove Companies                                                                              33
          Grove Property                                                                                   33
          Trust Managers and Executive Officers                                                            34
          Common Units Issued to Executive Officers in Connection with Consolidation                       39
          Security Ownership of Certain Beneficial Owners and Management                                   40
          Compensation of the Trust Managers                                                               45
          Non-Competition Agreements                                                                       45
          Property Management Services                                                                     46
          Management Division Operations                                                                   47
          Accounting Services                                                                              47
          Property Marketing                                                                               47
          Construction Services                                                                            48
          Business Operations and Operating Strategies                                                     48
          Acquisition and Development Strategy                                                             49
          Redevelopment                                                                                    50
          Future Acquisitions                                                                              50
          Markets                                                                                          51
          Multifamily                                                                                      51
          Rental Rates and Occupancy                                                                       52
          Competition                                                                                      52
     PROPERTY INFORMATION                                                                                  52
          Description of the Properties                                                                    52
          New Acquisitions                                                                                 53
</TABLE>

                                      iii
<PAGE>
 
<TABLE>
<S>                                                                                                    <C>
     FINANCIAL INFORMATION                                                                                 55
          Selected Financial and Operating Data                                                            55
     VALUATION OF PARTNERSHIP UNITS                                                                        55
     SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES                                                            57
          Gain or Loss on the Exchange for Common Units                                                    57
          Gain or Loss on an Exchange for Cash Consideration                                               59
          Federal Income Tax Consequences of Holding Common Units in the Operating                         60
           Partnership
          State and Other Tax Considerations                                                               61
     SUMMARY OF ERISA CONSIDERATIONS                                                                       61
          Plan Assets---In General                                                                         62
          Application of DOL Regulation to GROVE PROPERTY                                                  62
          Application of DOL Regulation to the Purchaser                                                   63
     THE OP PARTNERSHIP AGREEMENT                                                                          64
          Management                                                                                       64
          Indemnification                                                                                  64
          Transferability of Interests                                                                     65
          Issuance of Additional Common Units                                                              66
          Capital Contribution                                                                             66
          Awards Under Stock Incentive Plan                                                                66
          Distributions                                                                                    67
          Limited Partner Redemption/Exchange Rights                                                       67
          Tax Matters                                                                                      67
          Operations                                                                                       67
          Certain Limited Partner Approval Rights                                                          67
          Term                                                                                             68
     ADDITIONAL INFORMATION                                                                                68
     GLOSSARY                                                                                              68
     THE EXCHANGE OFFER                                                                                    76
          Section  1.  Terms of this Exchange Offer                                                        76
          Section  2.  Acceptance of and Payment for Property Partnership Units                            76
          Section  3.  Procedures for Tendering Property Partnership Units                                 77
          Section  4.  Withdrawal Rights                                                                   79
          Section  5.  Extension of Tender Period; Termination; Amendments                                 80
          Section  6.  Certain Federal Income Tax Consequences                                             81
          Section  7.  Certain Information Concerning the Property Partnership                             81
          Section  8.  Certain Information Concerning the Purchaser                                        81
          Section  9.  Interests of Certain Persons and Certain Transactions                               82
          Section 10.  Sources of Funds                                                                    83
          Section 11.  Conditions of this Exchange Offer                                                   83
          Section 12.  Certain Legal Matters                                                               84
          Section 13.  Fees and Expenses                                                                   85
          Section 14.  Other Matters                                                                       85
 
</TABLE>

                                       iv
<PAGE>
 
     APPENDIX A.    TEXT OF AMENDMENTS TO THE AMENDED AND RESTATED LIMITED
PARTNERSHIP AGREEMENT OF GROVE-COASTAL ASSOCIATES LIMITED PARTNERSHIP, TOGETHER
WITH LEGAL OPINION

     APPENDIX I.    FINANCIAL INFORMATION RELATING TO GROVE PROPERTY TRUST, ITS
FORM 10-QSB FOR THE QUARTER ENDED MARCH 31, 1997, ITS FORM 8-K DATED MAY 30,
1997, AND OTHER MATERIALS AVAILABLE UPON REQUEST

                                       v
<PAGE>
 
                                  INTRODUCTION

          One of the purposes of this offer is to solicit the consent of limited
partners of Grove-Coastal Associates Limited Partnership ("GROVE-COASTAL") to a
series of transactions which, if approved, ultimately would divide Grove-
Coastal's assets into two separate limited partnerships, with one of such
partnerships being liquidated and either cash or Common Units being distributed
to, or exchanged with, partners in the liquidating partnership.  The other
limited partnership would continue to own four of Grove-Coastal's existing seven
properties, and would continue to list all four properties for sale.

          Grove-Coastal Associates Limited Partnership is a Connecticut limited
partnership, formed in 1990, which currently owns seven properties.  The general
partner of Grove-Coastal is seeking limited partner approval to do a tax free
division of Grove-Coastal into two separate Connecticut limited partnerships.
One of these partnerships, which could be named Grove-Coastal Associates I
Limited Partnership, would own the Bridge Building located in Mystic,
Connecticut, the Holdridge Building in Mystic, Connecticut, the Sailways
Building in Mystic, Connecticut and the Larkin Square building in Watch Hill,
Rhode Island (collectively, the "MYSTIC PROPERTIES").  The second limited
partnership, which could be named Grove-Coastal Associates II Limited
Partnership (hereinafter sometimes referred to as the "PROPERTY PARTNERSHIP"),
would own the Wharf Building in Martha's Vineyard, Massachusetts, the Corner
Block Building in Martha's Vineyard, Massachusetts and the Harbor View
Apartments in Warwick, Rhode Island (collectively, the "VINEYARD PROPERTIES").
Each existing partner in Grove-Coastal would have a limited partnership interest
in each of these two partnerships, with allocations and cash distributions
identical to their sharing percentages currently in Grove-Coastal.  Limited
Partners would also have the same number of limited partnership units ("UNITS")
in each of these new partnerships as they have in Grove-Coastal.

          Grove Operating, L.P., a Delaware limited partnership (the "OPERATING
PARTNERSHIP" or the "PURCHASER") is hereby offering to exchange 3,435.5 units of
limited partnership interests ("COMMON UNITS") in the Operating Partnership for
certain of the limited partnership Units in the Property Partnership that would
be issued to existing limited partners of Grove-Coastal if these transactions
are approved by the requisite vote of the Limited Partners.  In order to qualify
for such exchange, a limited partner must qualify as an "ACCREDITED INVESTOR,"
as defined under Regulation D.  Limited partners of the Property Partnership who
either do not qualify as an accredited investor or whom elect to receive cash in
liquidation for their respective interest in the Property Partnership would
receive CASH OF $33,476 for each limited partnership Unit owned by such partner
in the Property Partnership.

          In order to accomplish the transactions contemplated above, the
Operating Partnership intends to form a new Connecticut limited partnership
named Wharf Holdings Limited Partnership.  The general partner of Wharf Holdings
Limited Partnership would be Wharf Holdings, Inc., a Connecticut corporation in
the process of formation, which will be wholly-owned by Grove Property Trust.
The sole limited partner of Wharf Holdings Limited 
<PAGE>
 
Partnership would be the Operating Partnership. If accredited limited partners
of the Property Partnership exchange their limited partnership interest in the
Property Partnership for Common Units, the Operating Partnership would
contribute such limited partnership interests, together with sufficient cash to
accomplish the other transactions contemplated herein, to Wharf Holdings Limited
Partnership. If this proposed transaction is approved, Wharf Holdings Limited
Partnership would then contribute additional cash to the Property Partnership in
consideration for the issuance of additional limited partnership interests in
the Property Partnership. Provided the general partner of the Property
Partnership and limited partners owning at least 66-2/3% of the limited
partnership interests necessary to liquidate the Property Partnership consent to
a liquidation of the Property Partnership, the Property Partnership would then
be liquidated. Nonaccredited limited partners of the Property Partnership, as
well as accredited limited partners who elect to receive cash for their interest
in the Property Partnership, would receive cash in the amount of $33,476 per
Unit for their interest in the Property Partnership. In connection with the
liquidation of the Property Partnership, the Vineyard Properties would be
distributed in kind to Wharf Holdings Limited Partnership.

          All existing limited partners of Grove-Coastal would remain as
partners of Grove-Coastal Associates I Limited Partnership, which would own the
Mystic Properties, and would continue to list such properties for sale.  When
and if the Mystic Properties are sold, the proceeds would be distributed to the
limited partners of Grove-Coastal Associates I Limited Partnership.  The
partnership agreements for the two partnerships resulting from the tax free
division would be substantially identical to the existing limited partnership
agreement of Grove-Coastal.

          In order to accomplish these transactions, all limited partners of
Grove-Coastal will be asked to vote on a number of actions and amendments to the
limited partnership agreement of Grove-Coastal (the "GROVE-COASTAL PARTNERSHIP
AGREEMENT"), as follows:

1.   To approve a tax free division of Grove-Coastal into two partnerships, one
of which would own the Mystic Properties and one of which would own the Vineyard
Properties;

2.   To approve the amendment of the Partnership Agreement of Grove-Coastal to
permit the sale of additional limited partnership interests to Wharf Holdings
Limited Partnership, which would contribute sufficient cash to pay $33,476 per
Unit to Limited Partners other than Wharf Holdings Limited Partnership upon the
liquidation of the Property Partnership; and

3.   To approve the liquidation of the Property Partnership, the distribution of
$33,476 per Unit for limited partners who are non-accredited or who elect the
cash alternative described below, and the distribution of the Vineyard
Properties, in kind, to Wharf Holdings Limited Partnership.

          The remainder of this Exchange Statement describes the proposed
exchange of Common Units for limited partnership Units in the Property
Partnership, premised upon the assumption that the proposed amendments to Grove-
Coastal's Partnership Agreement will be approved by the requisite number of
limited and general partners.  There can be no assurance that 

                                       2
<PAGE>
 
the limited and general partners of Grove-Coastal will approve the amendments
described herein, which will be a condition precedent to the Exchange of Common
Units for Partnership Units.

  PURPOSE OF THIS EXCHANGE OFFER.  The Exchange Offer by the Operating
Partnership is being made to the limited partners of Grove-Coastal who would
become limited partners of Grove-Coastal II Associates Limited Partnership
(each, a "LIMITED PARTNER" and, collectively, the "LIMITED PARTNERS").  On March
14, 1997, the Operating Partnership completed the "Consolidation Transactions"
described below.  As a result of the Consolidation Transactions, Grove Property
Trust, a Maryland real estate investment trust ("GROVE PROPERTY"), became a
self-administered and self-managed real estate investment trust ("REIT") with
control over a portfolio of 26 multifamily residential projects and a
neighborhood shopping center in the Northeastern United States.  Grove Property
is the sole general partner of the Operating Partnership.  The properties that
would be owned by the Property Partnership appear attractive to the Operating
Partnership and satisfy the Operating Partnership's growth strategy to acquire
additional multifamily housing in the Northeastern United States.  This Exchange
Offer provides Limited Partners of the Property Partnership with an opportunity
to either currently liquidate their interest in the Property Partnership, or to
acquire an interest in the Operating Partnership on a tax-free basis, which may
provide greater risk diversification and enhance the opportunity for additional
growth, with an enhanced ability to liquidate their interest in the Operating
Partnership within one year following the completion of this Exchange Offer.

  CONDITIONS.  The Exchange Offer is conditioned upon the approval of the
transactions contemplated herein by the holders of 66-2/3% of the outstanding
Units of Grove-Coastal and/or the receipt of proxies representing 66-2/3% of the
outstanding Units so that, together with the Units the Purchaser is acquiring
concurrently with the expiration of the Exchange Offer, the Purchaser has
obtained the requisite consent of Limited Partners to liquidate the Property
Partnership as described in this Exchange Offer.  See "--Liquidation of Property
Partnership."  A Limited Partner must tender all of its Units in the Partnership
if it wishes to tender Units, and may not tender only a portion of its Units.

  EQUITY CONSIDERATION.  Each tendering Limited Partner other than a Non-
Accredited Participant will receive, upon consummation of the Exchange Offer,
3,435.5 COMMON UNITS for each Unit so tendered in total consideration for the
exchange of such Unit, unless such holder elects to receive Cash Consideration.
Notwithstanding the foregoing, if a tendering Limited Partner is a "BENEFIT PLAN
INVESTOR," as defined in 29 CFR Section 2510.3-101, and the Purchaser
determines, in its sole discretion, that the ownership of Common Units by
benefit plan investors should be restricted to avoid having its assets deemed to
be "plan assets" for purposes of the fiduciary requirements of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or the prohibited
transaction provisions of ERISA and/or Internal Revenue Code ("CODE") Section
4975, (a) the number of Common Units received by such tendering Limited Partner
will be limited to the extent that the Purchaser, in its sole discretion, deems
necessary or appropriate, and (b) such Limited Partner will receive Cash
Consideration (described below) for any Units tendered pursuant to the Exchange
Offer for which it does not receive Common Units.

                                       3
<PAGE>
 
  CASH CONSIDERATION.  If the Partnership Amendments are approved by the
requisite vote specified above, each Limited Partner which is not an Accredited
Investor, and each Accredited Investor which otherwise elects, will receive,
upon consummation of the Exchange Offer and the transactions contemplated above,
$33,476 IN CASH CONSIDERATION for each Unit. The amount of Cash Consideration
represents the value placed on the Equity Consideration, assuming $10.50 per
Common Unit, less 7.2%, which the Purchaser estimates is its cost attributable
to the New Equity Investment.

  THE EQUITY CONSIDERATION AND THE CASH CONSIDERATION ASSUME THAT THE VALUE OF A
COMMON SHARE IN GROVE PROPERTY WILL BE $10.50, THEREBY PLACING A VALUE OF $10.50
ON A COMMON UNIT.  PLEASE NOTE THAT THE VALUE OF A COMMON UNIT IS FIXED FOR
PURPOSES OF THIS EXCHANGE OFFER, AND THE AMOUNT OF EQUITY CONSIDERATION AND THE
CASH CONSIDERATION TO BE RECEIVED BY THE PARTICIPANTS WILL NOT DECREASE OR
INCREASE IF THE ACTUAL MARKET PRICE OF GROVE PROPERTY COMMON SHARES IS MORE OR
LESS THAN $10.50 PER COMMON SHARE.

  LIQUIDATION OF PROPERTY PARTNERSHIP.  Each limited partner of Grove-Coastal is
being asked to vote on a number of amendments that would ultimately, if approved
by the requisite vote of Limited Partners and the general partner of the
Property Partnership, result in the liquidation of the Property Partnership.  In
connection with the Exchange Offer, Limited Partners of the Property Partnership
are being asked to  consent to (i) an amendment to the Property Partnership
Agreement to permit the "in-kind" distribution of the Partnership Property to
Wharf Holdings Limited Partnership and its affiliates in connection with the
liquidation of the Property Partnership, and (ii) authorize the liquidation and
dissolution of the Property Partnership.

  See Appendix A to this Exchange Offer for the complete text of the proposed
amendment to the Grove-Coastal's Partnership Agreement.

     PROPERTY PARTNERSHIP'S POSITION WITH RESPECT TO THIS EXCHANGE OFFER.

The general partner of Grove-Coastal, Grove Investment Group, Inc., and the
general partner of the Property Partnership, Wharf Holdings, Inc., are
Connecticut corporations wholly owned by Grove Property Trust, Affiliates of
Grove Companies and the general partner of the Operating Partnership.  Because
of affiliations between the Purchaser and the general partner of the Property
Partnership, Grove-Coastal and the Property Partnership has advised the
Purchaser that Grove-Coastal, the Property Partnership and the respective
general partners of Grove-Coastal and the Property Partnership make no
recommendation, and are remaining neutral, as to whether a Limited Partner of
Grove-Coastal and the Property Partnership should approve the transactions
contemplated herein or tender its Units in this Exchange Offer. See "THE
EXCHANGE OFFER-Section 9. Interests of Certain Persons and Certain Transactions"
and "CONFLICTS OF INTEREST."  However, the general partner of Grove-Coastal and
the Property Partnership hereby recommends that each Limited Partner vote in
favor of the Partnership Amendments, regardless of whether such Limited Partner
participates in the Exchange Offer, so that Limited Partners which elect to do
so are able to participate in this Exchange Offer and receive the benefits
thereof.

                                       4
<PAGE>
 
     In the event the transactions contemplated in this Exchange Offer are
approved by the requisite partner vote, Springfield Development Corporation, the
existing co-general partner of Grove-Coastal, also an affiliate of the Grove
Companies, intends to resign as a general partner of the Property Partnership,
convert its general partner interest to that of a limited partner, and
subsequently accept the offer of the Operating Partnership to tender such
limited partnership interest for Common Units in the Operating Partnership.

          Limited Partners who vote against the proposed Partnership Amendments
or who elect not to tender their Units should be aware that there are certain
potential detriments to this Exchange Offer.  In addition to the risk factors
described elsewhere in this Exchange Offer Statement relating to an investment
in Common Units and Common Shares, Limited Partners who elect not to tender
their Units should consider the following:  Wharf Holdings Limited Partnership
will vote (i) to amend the Property Partnership Agreement to permit an "in-kind"
distribution to Wharf Holdings Limited Partnership in connection with the
liquidation of the Property Partnership, and (ii) to liquidate the Property
Partnership and distribute its assets.  Wharf Holdings Limited Partnership or
its affiliates will contribute funds to the Property Partnership to enable it to
make cash distributions to the other Limited Partners upon liquidation, and the
Vineyard Properties will then be distributed to Wharf Holdings Limited
Partnership or its affiliate and a cash distribution will be made to the other
Limited Partners.

  LIMITED PARTNERS WHO ELECT NOT TO TENDER THEIR UNITS SHOULD BE AWARE THAT THE
GENERAL PARTNER OF THE PROPERTY PARTNERSHIP AND WHARF HOLDINGS LIMITED
PARTNERSHIP, AS A LIMITED PARTNER OF THE PROPERTY PARTNERSHIP, INTEND TO VOTE IN
FAVOR OF THE ABOVE-DESCRIBED AMENDMENT TO THE PROPERTY PARTNERSHIP AGREEMENT AND
TO LIQUIDATE THE PROPERTY PARTNERSHIP.  LIMITED PARTNERS OTHER THAN WHARF
HOLDINGS LIMITED PARTNERSHIP WILL RECEIVE A CASH DISTRIBUTION OF APPROXIMATELY
$33,476 PER UNIT WHEN THE PROPERTY PARTNERSHIP IS LIQUIDATED.  THE OPERATING
PARTNERSHIP EXPECTS THAT THIS CASH DISTRIBUTION AND LIQUIDATION WILL OCCUR
PROMPTLY AFTER CONSUMMATION OF THIS EXCHANGE OFFER AND THE TRANSACTIONS
CONTEMPLATED HEREIN.

                           FORWARD LOOKING STATEMENTS
                                        
     THIS EXCHANGE OFFER, INCLUDING MATERIALS ATTACHED, OR REFERENCED IN
APPENDIX I HERETO, CONTAINS CERTAIN FORWARD LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE PROJECTED IN THE FORWARD LOOKING STATEMENTS AS A RESULT OF CERTAIN
UNCERTAINTIES SET FORTH BELOW AND ELSEWHERE IN THIS EXCHANGE OFFER STATEMENT.

     THE FORWARD LOOKING STATEMENTS INCLUDED IN THIS EXCHANGE OFFER, INCLUDING
MATERIALS ATTACHED, OR REFERENCED IN APPENDIX I HERETO, CONCERNING, AMONG OTHER
THINGS, FUTURE RESULTS OF OPERATIONS, CASH AVAILABLE FOR DISTRIBUTION, SOURCES
OF GROWTH, ECONOMIC CONDITIONS AND TRENDS AND PLANS AND OBJECTIVES OF MANAGEMENT
FOR FUTURE OPERATIONS ARE NECESSARILY SUBJECT TO 

                                       5
<PAGE>
 
VARIOUS RISKS AND UNCERTAINTIES. ACTUAL OUTCOMES ARE DEPENDENT UPON THE
COMPANY'S SUCCESSFUL PERFORMANCE OF INTERNAL PLANS, ECONOMIC CONDITIONS IN THE
SUBMARKETS IN WHICH THE COMPANY'S PROPERTIES ARE LOCATED SUCH AS OVERSUPPLY OF
RESIDENTIAL MULTIFAMILY HOUSING OR A REDUCTION IN THE DEMAND FOR SUCH HOUSING,
THE AVAILABILITY OF ACQUISITION FINANCING, COMPLIANCE WITH APPLICABLE LAWS AND
REGULATIONS AND THE SUCCESSFUL MANAGEMENT OF OTHER ECONOMIC, LEGAL, FINANCIAL
AND GOVERNMENTAL RISKS AND UNCERTAINTIES.

                              DISCLOSURE MATERIALS
                                        
     Included with this Exchange Offer Statement are certain disclosure
materials attached, referenced or identified on Appendix I hereto (together with
the materials in this Exchange Offer Statement under the captions
"Introduction," "The Consolidation Transactions," "Special Factors," "The
Company," "Property Information," "Financial Information," "Summary of Federal
Income Tax Consequences" and "Summary of ERISA Considerations," the "DISCLOSURE
MATERIALS") which contain descriptions of the Operating Partnership, the Common
Units, Grove Property Trust, the Redemption/Exchange Rights (defined below) and
other matters.  The information in this Exchange Offer Statement is qualified in
its entirety by the more detailed information in Grove Property's Proxy
Statement, dated February 13, 1997 (the "PROXY STATEMENT").  A Limited Partner
should review the Disclosure Materials with regard to the Property Partnership,
and to the business, properties and financial condition of the Operating
Partnership which are subsumed generally in the descriptions of Grove Property,
including the sections entitled "Selected Financial and Operating Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the pro forma and historical financial statements of Grove
Property, the Property Partnerships and the former management company and the
notes thereto included in the Proxy Statement.  With respect to the Common
Units, a Limited Partner should review carefully the sections in the Proxy
Statement entitled "The Company General," "The Company Policies with Respect to
Certain Activities," "Approval of the Consolidation Transactions (Proposal
1) Potential Adverse Effects of the Consolidation Transactions; Risk Factors,"
"Federal Income Tax Considerations Tax Aspects of the Operating Partnership" and
"ERISA Considerations."  The information regarding the Common Shares is
important in relation to the Redemption/Exchange Rights.  This information is
found principally in the Proxy Statement, particularly in the sections thereof
entitled "Description of Capital Stock," "Certain Provisions of Maryland Law and
of the Company's Declaration of Trust and Bylaws," "Shares Available for Future
Sale," "Federal Income Tax Considerations" and "ERISA Considerations." The
Disclosure Materials set forth certain aspects of various agreements entered
into as of the closing of the Consolidation Transactions, including the
Operating Partnership's Partnership Agreement. Copies of these agreements are
available upon request. Limited Partners should refer to such documents for more
complete information and this Exchange Offer Statement is qualified in its
entirety by this reference. See "ADDITIONAL INFORMATION."

                                       6
<PAGE>
 
                         THE CONSOLIDATION TRANSACTIONS
                                        
BACKGROUND

     Grove Property Trust (formerly Grove Real Estate Asset Trust, "GREAT") is a
self-administered real estate investment trust formed pursuant to the Maryland
Real Estate Investment Act, engaged principally in multifamily property
management, acquisition and redevelopment.  Since the end of 1996, the Company
has undergone significant changes in its business and operations, as described
below under "The Consolidation," in order to seek to maximize future growth
potential.

     GREAT owned and operated three multifamily properties (the "ORIGINAL
PROPERTIES") since its inception and acquired a fourth property ("CAMBRIDGE") in
January of 1996 (collectively, the "GREAT PROPERTIES").  The GREAT Properties
are comprised of the Dogwood Hills Apartments comprising 46 multifamily
apartment homes on Evergreen Avenue in Hamden, Connecticut, the Hamden Center
Apartments comprising 65 multifamily apartment homes on School Street in Hamden,
Connecticut, the Baron Apartments comprising 54 multifamily apartment homes on
Queen Street in Southington, Connecticut, and Cambridge Estates, comprising 92
multifamily apartment homes located in Norwich, Connecticut.  The GREAT
Properties had an aggregate weighted average occupancy rate of 97.6% during
1996.

     Grove Property was formed in 1994 to continue the multifamily property
acquisition, management and marketing operations and related business objectives
and strategies of Grove Investment Group, Inc., a Southern New England real
estate company formed in 1980 by Damon and Brian Navarro, and the three limited
partnerships from which Grove Property acquired the Original Properties upon
completion of Grove Property's initial public offering in June 1994.


THE CONSOLIDATION

       On March 14, 1997, Grove Property completed the Consolidation
Transactions described below.  As a result of the Consolidation Transactions,
Grove Property is now a self-administered and self-managed REIT which management
believes to be one of the largest public owners of multifamily residential
properties in Southern New England.  Grove Property is the sole general partner
of the Operating Partnership.  The Operating Partnership was formed to act as
the vehicle for the Consolidation Transactions and is the entity through which
Grove Property conducts substantially all of its business and owns (either
directly or indirectly through subsidiaries) all of its assets.  Grove Property
currently holds approximately 61% of the Operating Partnership partnership
units.  This structure is commonly referred to as an umbrella partnership REIT
or UPREIT.  The Operating Partnership is governed by the Operating Partnership
Agreement.

     Grove Property owns, directly or indirectly, 100% of the interests in the
four GREAT Properties, in each of eight properties acquired from certain limited
partnerships through the Consolidation Transactions, and in each of two
properties acquired in June 1997.  Further, Grove Property controls thirteen
additional properties as general partner or through ownership of 100% 

                                       7
<PAGE>
 
of the general partner of the limited partnerships that own such properties,
twelve of which were acquired in the Consolidation Transactions, and one of
which was acquired in June 1997. All such properties are collectively referred
to as the "PROPERTIES," all such limited partnerships are collectively referred
to as the "PROPERTY PARTNERSHIPS," and all the properties owned by such Property
Partnerships are collectively referred to as the "PARTNERSHIP PROPERTIES." Grove
Property provides property management services to the Properties and other real
property controlled by certain companies and individuals which are affiliated
with Grove Property (the "GROVE COMPANIES") using certain acquired assets and
liabilities of Grove Property Services, L.P. ("GPS"). National Realty Services,
L.P., an affiliate of Grove Property, is the exclusive provider of real estate
brokerage services to Grove Property.

     An exchange offer was made (the "INITIAL EXCHANGE OFFER") by the Operating
Partnership for the tender of any or all of the limited partnership interests of
eighteen of the Property Partnerships (the "PROPERTY PARTNERSHIP UNITS") in
exchange for limited partnership units in the Operating Partnership.  A total of
1,091,521 Common Units were issued pursuant to the Initial Exchange Offer.
These Common Units are redeemable, at the option of the holders thereof,
commencing one year after their issuance for cash, based on the fair market
value of Grove Property's Common Shares, or, at Grove Property's option, it may
exchange Common Shares for Common Units on a one-for-one basis, subject to
certain antidilution adjustments and exceptions.

     The Grove Companies, pursuant to a contribution agreement among Grove
Property, certain individuals including affiliates of Grove Property and the
Operating Partnership (the "CONTRIBUTION AGREEMENT"), then contributed to Grove
Property and/or the Operating Partnership certain assets and liabilities of GPS
arising from or used in connection with property management related services,
and their general and limited partnership interests in each Property Partnership
(or the assets thereof), in exchange for an aggregate of 904,867 Common Units
issued by the Operating Partnership and the payment of $177,669 by Grove
Property to the Grove Companies.

     A private placement of equity securities (the "NEW EQUITY INVESTMENT") took
place, pursuant to which Grove Property sold to a group of investors (the "NEW
EQUITY INVESTORS") Common Shares totaling, in the aggregate, 3,333,333 Common
Shares, in exchange for total gross proceeds to Grove Property of $30.0 million.

     Grove Property contributed to the Operating Partnership: (a) the GREAT
Properties and related assets in exchange for a partnership interest in the
Operating Partnership represented by 620,102 Common Units; and (b) the gross
proceeds of the New Equity Investment received by Grove Property, in exchange
for a number of Common Units equal to the number of Common Shares issued by
Grove Property in the New Equity Investment.

     The Operating partnership issued a total of 6,067,875 Common Units in the
Consolidation Transactions.  As a result of the Consolidation, Grove Property
acquired approximately 65% of the Common Units.  In connection with the June
1997 acquisition of two additional properties and 100% of the general
partnership interest and certain limited partnership interests in a third

                                       8
<PAGE>
 
property, the Operating Partnership issued an additional 426,188 Common Units,
and as a result, Grove Property currently holds approximately 61% of the Common
Units.

     In conjunction with the Consolidation Transactions, Grove Property and
certain Property Partnerships have entered into two new credit facilities
(together, the "Credit Facility") consisting of (a) a three-year secured
revolving acquisition and working capital facility of approximately $25.0
million and (b) an approximately $15.1 million ten-year term mortgage loan.  The
Operating Partnership used the net proceeds of the New Equity Investment and
borrowings under the Credit Facility to refinance the outstanding mortgage
indebtedness of certain of the Property Partnerships and to acquire certain
minority interests in certain of the Property Partnerships.

     Persons receiving Common Units in the Initial Exchange Offer are restricted
from transferring such Common Units for a period of one year from the completion
of the Consolidation Transactions (March 14, 1997).  Persons receiving Common
Units pursuant to the Contribution Agreement (including the Grove Companies and
the Executive Officers) are restricted from transferring such Common Units for a
period of two years from the completion of the Consolidation Transactions.  Each
Common Unit is redeemable, at the option of the holder thereof, commencing March
15, 1998 for cash (based on the fair market value of the Common Shares at the
time of such redemption) or, at Grove Property's option, it may exchange Common
Shares for Common Units on a one-for-one basis, subject to certain antidilution
adjustments and exceptions.  Grove Property has granted certain entities and
individuals receiving Common Units in connection with the Consolidation
Transactions certain registration rights with respect to the Common Shares which
such holders of Common Units may receive upon the exchange of their Common
Units.  Pursuant to a registration rights agreement with certain holders of
Common Units, Grove Property has agreed to file and generally keep continuously
effective, beginning one year after the completion of the Consolidation
Transactions, a registration statement covering the issuance of Common Shares
upon exchange of Common Units and the resale of such Common Shares.

     Grove Property declared a 5% stock dividend to shareholders of record March
10, 1997, payable March 28, 1997 and declared a 1.125 to 1.0 stock split with
respect to all Common Shares outstanding on March 10, 1997, effective March 14,
1997 (together, the "Stock Split"). As a result of the Stock Split, Grove
Property issued, on a pro rata basis, a total of 95,102 Common Shares to the
holders of the issued and outstanding 525,000 Common Shares.  Grove Property did
not issue fractional shares in connection with the Stock Split, but rather paid
cash in lieu of fractional shares.

     In connection with the Consolidation Transactions, Grove Property changed
its distribution policy.  The Board concluded that enhancement of shareholder
value could better be achieved through growth in Grove Property's asset value,
which management believes will be reflected in the market price of the Common
Shares, rather than by maintaining or increasing the distribution yield on the
Common Shares.  Therefore, the Board voted to reduce the annual cash
distributions to shareholders, from $.78 per Common Share to $.63 per Common
Share ($.92 and $.74 respectively  per Common Share prior to giving effect to
the Stock Split).  Grove Property intends to continue to comply with the REIT
requirements under the Internal Revenue Code of 

                                       9
<PAGE>
 
1986, as amended, that 95% of the Company's REIT taxable income be distributed
annually, while retaining for reinvestment in Grove Property the maximum amount
permitted under the Code.

REASONS FOR THE CONSOLIDATION AND THE EXCHANGE OFFER

     Grove Property's decision to pursue the Consolidation, and the Exchange
Offer to Grove-Coastal II Associates Limited Partnership is based, among other
things, upon their belief that the benefits of the Consolidation Transactions
and similar acquisitions outweigh the detriments to the Limited Partners.

     The benefits of the Consolidation Transactions and this Exchange Offer,
including the benefits of Grove Property's REIT status and structure as opposed
to the status and structure of the Property Partnerships, include the following:

     .    ACCESS TO CAPITAL. Grove Property's structure will, in the judgment of
          Grove Property, provide Grove Property with greater access to capital
          for refinancing and growth. Sources of capital include the securities
          sold in the New Equity Investment and possible future issuances of
          debt or equity through public offerings or private placements. The
          financial strength of Grove Property should enable it to obtain
          financing at better rates and on better terms than would otherwise be
          available to the Property Partnership which owns seven parcels.

     .    GROWTH OF GROVE PROPERTY.  Grove Property's structure will allow
          shareholders, including the Equity Participants through their
          ownership of Common Units, an opportunity to participate in the growth
          of the real estate market through an ongoing business enterprise.  In
          addition to the existing portfolio of Properties, Grove Property gives
          shareholders an interest in all future acquisitions by Grove Property
          and in the fee-producing service businesses being contributed by the
          Grove Companies to Grove Property. The availability of Common Units
          for future acquisitions will enable potential sellers of properties to
          Grove Property to defer taxable gain, if any.

     .    RISK DIVERSIFICATION.  The Company's structure provides holders of
          Common Units of the Operating Partnership a diversification of risk
          not available in single asset entities by providing them with an
          equity interest in an Operating Partnership in which there has been a
          pooling together of similar properties and by consolidating the
          operating business and future acquisitions.

     .    DELEVERAGING.  The consummation of the Consolidation Transactions has
          substantially reduced the debt encumbering the Properties. This
          reduction, with a consequent reduction in debt service, will increase
          the aggregate amount of cash available for distribution to Unit
          holders and shareholders and to fund the Company's future growth.
          Grove Property also believes that the Consolidation 

                                       10
<PAGE>
 
          Transactions will permit the Company to refinance its existing
          indebtedness at more favorable rates.

     .    LIQUIDITY.  The equity interests in the Property Partnerships are
          typically not marketable.  Grove Property's structure allows
          shareholders, including the Equity Participants, the opportunity to
          liquidate their capital investment through the disposition of Common
          Shares or Common Units for cash (based on the fair market value of an
          equivalent number of Common Shares at the time of such redemption) or,
          at Grove Property's option, it may exchange Common Units for Common
          Shares on a one-for-one basis, subject to certain antidilution
          adjustments and exceptions. See "The OP Partnership Agreement Limited
          Partner Redemption/Exchange Rights."

     .    PUBLIC MARKET VALUATION OF REAL ESTATE ASSETS.  Grove Property's
          structure may allow investors to benefit potentially from the current
          public market valuation of REITs, which Grove Property believes is
          favorable in light of the current private market valuation of
          comparable assets.

     .    TAX DEFERRAL.  The Consolidation Transactions and Exchange Offers like
          this offer provide to the Equity Participants the opportunity to defer
          the tax consequences that would arise from a sale of their respective
          properties or contribution of their interests in the Partnership
          Properties to the Company.

     The detriments of the Consolidation Transactions and exchange offers like
this Exchange Offer, including the detriments of Grove Property's REIT status
and structure as opposed to the status and structure of the Property
Partnership, include the following (see also "SPECIAL FACTORS" and "RISK
FACTORS"):

     .    CONFLICTS OF INTEREST.  Management of the Company has been and will
          continue to be subject to a number of conflicts of interest in the
          operation of the Operating Partnership, as well as the formation of
          Grove Property and the current Exchange Offer.  Among other conflicts,
          there was no independent valuation or appraisal of the Consolidated
          Assets or of the property owned by the Property Partnership, and there
          can be no assurance that the value given by the Operating Partnership
          for such assets in connection with the Consolidation Transaction, the
          current Exchange Offer or future acquisitions from related
          partnerships, are or will be equal to their fair market value.
          Because certain owners of the Grove Companies are trust managers or
          officers of Grove Property, they will have a conflict of interest with
          respect to enforcing the agreements transferring their interests in
          certain assets to the Company.  In addition, because the Grove
          Companies and officers of the Company may suffer different tax
          consequences than other limited partners of the Operating Partnership
          upon the sale or refinancing of any of the Partnership Properties,
          their interests regarding the timing and pricing of such sale or
          refinancing may conflict with those of such other partners and the
          Operating Partnership.

                                       11
<PAGE>
 
     .    LOSS OF INDIVIDUAL ASSET GROWTH OPPORTUNITY. Any given asset may over
          time outperform the Common Shares and Common Units.  Any investor who
          exchanges an interest in a single asset for a smaller interest in a
          group of assets will receive a lower return on investment if the asset
          from which the investor traded outperforms the Common Shares and
          Common Units.

     .    NO ANTICIPATED DISTRIBUTIONS FROM ASSET SALES. Unlike the Property
          Partnerships, in which the net proceeds from the sale of assets were
          generally to be distributed to the partners, the Operating Partnership
          is not expected to have significant asset sales.  Moreover, the
          Operating Partnership may decide to reinvest the proceeds from asset
          sales rather than distribute them to holders of Common Units. Although
          shareholders will have the ability to sell their Common Shares
          (subject to certain restrictions discussed herein), they would not be
          able to rely upon the mere passage of time to realize their share of
          the gains, if any, that might be recognized at any point in time from
          a liquidation of all or part of the assets of the Operating
          Partnership.

     .    PUBLIC MARKET VALUATION. Although the Company has been advised that
          the public market currently values real estate assets on a basis that
          is attractive in relation to private market real estate values, there
          is no assurance that this will be a permanent condition. In the 1980s,
          REIT shares generally traded at a discount to the underlying private
          market values of the REIT properties, rather than at a premium. This
          condition could return. In addition, an increase in interest rates
          could adversely affect the market value of the Common Shares.

     .    COSTS OF THE TRANSACTION. Both the Operating Partnership and the
          Property Partnership will incur transaction costs in connection with
          the Exchange Offer, which will impact the valuation of the Property
          Partnership's properties for purposes of this Exchange Offer.

     .    COSTS OF OPERATING A PUBLIC COMPANY. Grove Property expects to incur
          increased expenses in connection with the requirements of being a
          public company, including, without limitation, preparation of
          financial statements and proxies, printing and filing costs and fees
          paid to the Company's certified public accountants. The Property
          Partnerships, including Grove-Coastal Associates Limited Partnership,
          have not had similar expenses.

     One or more of the Grove Companies is also a general partner of 6 limited
partnerships which were not included in the Consolidation or subsequent offers
similar to this Exchange Offer.  Although each of these partnerships owns a
multifamily project or a retail project in Connecticut, Massachusetts or Rhode
Island, the Grove Companies and the Company have concluded that these properties
are not attractive acquisitions for the Operating Partnership at this time
because of the property type, the condition of the project, the high degree of
leverage or the volatility of occupancy applicable to such properties.  The
Operating Partnership may seek to 

                                       12
<PAGE>
 
acquire interests in one or more of these partnerships in the future, and may
offer cash, Common Units or other consideration therefor. The Operating
Partnership is currently seeking to exchange Common Units in the Operating
Partnership with three other related partnerships, Farmington Summit Associates
Limited Partnership, Heritage Court Associates Limited partnership, and River
Grove Associates Limited partnerships. See "SPECIAL FACTORS Conflicts of
Interest."

OPPORTUNITY FOR GROWTH

     As a result of the Consolidation Transactions and the June 1997
acquisitions, the Company has become a fully integrated, diversified real estate
company, with a controlling interest in a portfolio of 26 multifamily properties
containing a total of 2,347 apartments and a neighborhood shopping center, and
should be provided with access to new capital. In addition, the structure of the
Consolidation Transactions may facilitate additional property acquisitions
through the ability to acquire properties with Common Units and thereby defer
all or a portion of the seller's taxable gain.

INCREASED MARKETABILITY/LIQUIDITY

     A number of Limited Partners have expressed a desire to achieve greater
marketability and liquidity with respect to their investments in the Property
Partnership.  Limited Partners who exchange their Units for Common Units will,
following the first anniversary of the consummation of the Consolidation
Transactions or their respective Exchange Offer, be able to redeem those Common
Units for cash (or, at the option of Grove Property, such Common Units will be
exchanged for Common Shares). Following this one-year period, Equity
Participants will have the flexibility of maintaining an interest in multifamily
projects and continuing to defer the federal income tax on the transfer of their
Units, or redeeming their Common Units for cash (or, at the option of the
Company, receiving Common Shares in exchange for Common Units). The Exchange
Offer provide immediate liquidity to Limited Partners who receive cash on the
exchange of their Units.

     Notwithstanding the possibility for improved marketability, the Common
Units should still be viewed as an illiquid investment, particularly for the
first year following the consummation of this Exchange Offer.  The Common Units
have not been registered under the Securities Act or any state securities or
"blue sky" laws, nor is any registration rights agreement in effect with respect
to the Common Units.  The Common Units are subject to significant restrictions
on transfer, including a one year holding period prior to exercising redemption
rights, and it is not expected that any market for the sale of Common Units will
develop.  The Common Shares issued in exchange for Common Units will also be
subject to restrictions on resale under the Securities Act.  See "SPECIAL
FACTORS Ownership of Common Units."

ALTERNATIVES TO THE CONSOLIDATION

     The Grove Companies examined several alternatives to the Consolidation and
this Exchange Offer, each of which they rejected. The first alternative,
maintaining the status quo, 

                                       13
<PAGE>
 
was not pursued because it would not provide any additional liquidity or
opportunity for diversification of the Grove Companies or the Limited Partners.
A second alternative, refinancing of the Partnership Properties, would not
create material distributable proceeds for Limited Partners in the Property
Partnership, and the balance of the invested capital in the other Property
Partnerships would continue to remain as a long-term, illiquid and relatively
less marketable investment. The Grove Companies believed that none of the
Property Partnerships would be able at such time to refinance their Properties
on the more favorable basis that is available to Grove Property because of the
New Equity Investment and the cross-collateralization of the Properties, and
therefore would not be able to increase cash available for distribution to
Limited Partners. The Grove Companies did not explore a complete liquidation of
the various Property Partnerships because of their belief that, because of the
continuing slow recovery of the real estate markets in which the Partnership
Properties are located, the valuations that would be placed on the Partnership
Properties in a liquidation would be less than the values that can be achieved
through the continued ownership of the Partnership Properties as part of a fully
integrated multifamily investment and management company.

VALUATION OF PROPERTIES AND OTHER ASSETS; ALLOCATION OF COMMON UNITS

     Allocation of Common Units.  Set forth below is a description of the
methods used by the Company and the Grove Companies to determine the value of
the Properties and other assets (the "CONSOLIDATED ASSETS") contributed to the
Operating Partnership in connection with the Consolidation Transactions (the
"CONSOLIDATION VALUATIONS").  The Consolidation Valuations were used to
determine the allocation of Common Units (or cash, in the case of Non-Accredited
Participants and Cash Election Participants) among the owners of the
Consolidated Assets, with the Common Units being allocated based upon the value
of each party's contribution as a percentage of the value of the total
contribution.  A similar but not identical method was used by the Operating
Partnership to determine the value of the Properties to be distributed by Grove-
Coastal II Associates Limited Partnership to Wharf Holdings Limited Partnership.
See "VALUATION OF PARTNERSHIP UNITS."  Although the General Partner of the
Operating Partnership has the discretion and right to alter such valuation
method in connection with future acquisitions, it is anticipated that a similar
method will be used in connection with future acquisitions.

     Property Partnerships.  The Consolidation Valuations for the Property
Partnerships were determined by valuing their respective Properties using the
direct capitalization method. Under this approach, a single year's income is
converted into a market value for a property through the application of a
market-derived capitalization rate (the lower the capitalization rate applied to
a property's income, the higher its value). The Consolidation Valuation for each
Partnership Property was determined by (i) capitalizing pro forma net operating
income for that partnership, less a reserve for capital expenditures, as of
September 30, 1996, at a capitalization rate ranging from 9.0% to 11.0%, (ii)
deducting the amount of debt on the Partnership Property, (iii) adding other
assets of the Property Partnership, net of liabilities (such as cash, accounts
receivable, accounts payable and security deposits), and (iv) deducting any
transfer taxes due upon the restructuring of the Property Partnership. The
Company and the Grove Companies determined the appropriate capitalization rate
for each Partnership Property based upon their experience in 

                                       14
<PAGE>
 
real estate matters. They sought local market sales information for comparable
properties, estimated actual capitalization rates (net operating income less
capital reserves divided by sales price) and then evaluated the Partnership
Property in light of its relative competitive position, taking into account
property location, occupancy rate, overall property condition and other relevant
factors. The Company and the Grove Companies believe that arm's-length
purchasers would base their purchase offers on capitalization rates
substantially similar to those used to calculate the above Consolidation
Valuations. The Grove Companies owned from less than 1.0% to 32.0% of the
interests in the Property Partnerships prior to the Consolidation Transactions.

     The number of Common Units to be issued in exchange for a limited
partnership interest in each Property Partnership was determined on the basis of
the applicable Property Partnership Agreement, assuming (i) that the underlying
Partnership Property was sold on September 30, 1996 for an amount equal to the
Consolidation Valuation of that Property and (ii) a valuation of $9.00 per
Common Unit. The Cash Consideration (as defined in the Exchange Offer) payable
to Limited Partners who are not Accredited Investors (and certain other Limited
Partners) for each Property Partnership Unit is an amount equal to the number of
Common Units per Property Partnership Unit to which the Limited Partner would
otherwise be entitled times $9.00 per Unit, less 7.2%, which the Company
estimates to be its costs attributable to raising the requisite capital for the
cash purchase.

     The number of Common Units to be issued in connection with the
Consolidation Transactions in exchange for a Property Partnership Unit, as well
as the Cash Consideration and the cash distribution to Limited Partners of the
Liquidating Partnerships upon the liquidation thereof, was subject to adjustment
if the purchase price per Common Share in the New Equity Investment was less
than or more than $9.00.  In connection with this Exchange Offer, the number of
Common Units to be issued in exchange for a limited partnership unit in Grove-
Coastal Associates Limited Partnership has been determined upon an assumed value
of $10.50 per Common Share, but will not be adjusted in the event the market
value of such Common Shares are greater or less than $10.50 at the time this
Exchange Offer is consummated.  See "VALUATION OF PARTNERSHIP UNITS".

     GREAT Properties Valuation.  The Company established approximately
$5,581,000 as the Consolidation Valuation of the net GREAT Assets for the
purposes of the Consolidation Transactions. This Consolidation Valuation is
equivalent to the number of Common Shares which were outstanding immediately
prior to consummation of the Consolidation Transactions (giving effect to the
Stock Split) times the $9.00 purchase price per Common Share in the New Equity
Investment.  The Company believed that this aggregate Consolidation Valuation
for the GREAT Assets at such time was consistent with what aggregate valuations
for the GREAT Properties would be, applying the direct capitalization method
used for valuing the Partnership Properties, together with a "going concern"
value of the Company itself.

     Management Company Valuation.  The Company established a Consolidation
Valuation of approximately $6,184,000 for the Management Company. The
Consolidation Valuation for the Management Company was also determined by the
direct capitalization method, determined by capitalizing pro forma net operating
income for the Management Company as of 

                                       15
<PAGE>
 
September 30, 1996, with pro forma adjustments to give effect to the
Consolidation Transactions, at a capitalization rate of 13.0%. All of the
Management Company's income was generated by property management agreements with
the Company, the Property Partnerships and other limited partnerships controlled
by the Grove Companies or their affiliates (which own the properties not
acquired in either the Consolidation Transactions or the June 1997
acquisitions). Accordingly, the Company believes that the proper capitalization
rate to be applied to value the Management Company was the rate applicable to
the properties managed by it, which would be a capitalization rate of 9.0% to
11.0%. However, the Company and the Grove Companies agreed to apply a 13.0%
capitalization rate, resulting in a more favorable purchase price to the REIT.



     No independent real estate appraisals or other third-party valuations were
obtained with respect to any of the Consolidated Assets. See "RISK FACTORS -
Generally." The Company and the Grove Companies believe that the Consolidation
Valuations were fair and consistently applied among all of the Properties and
other assets contributed to the Operating Partnership pursuant to the
Consolidation Transactions (directly or through acquisition of Property
Partnership interests). The income approach to valuation involves converting the
anticipated economic benefits of a property or other asset into a value estimate
through capitalization; because this approach is based on investor expectations
for income producing properties, the Company and the Grove Companies believe
that it provides the best value indication for multifamily residential projects
and neighborhood retail centers, and the related property management services.
The value of the Common Units will depend on the value of the Common Shares
generally.


                                SPECIAL FACTORS
                                        
OWNERSHIP OF COMMON UNITS

     The business in which an Equity Participant will be investing by
participating in the Exchange Offer is the business of the Operating Partnership
described in the Disclosure Materials.  The partnership agreement for the
Operating Partnership (the "OP PARTNERSHIP AGREEMENT") is available upon request
from the Purchaser.  See "ADDITIONAL INFORMATION" and "The OP PARTNERSHIP
AGREEMENT."  The OP Partnership Agreement will govern the rights and
restrictions relating to Common Units. Among the significant features of owning
Common Units are the following:

       TRANSFERABILITY.  The Common Units will be issued to Equity Participants
     in a private placement transaction, without registration or qualification
     under federal or state securities laws.  Accordingly, the Common Units may
     not be resold except in a transaction registered with the Securities and
     Exchange Commission (the "SEC") or pursuant to an exemption from such
     registration.  The Operating Partnership has no intention or obligation to
     effect such a registration.  In addition, there will be substantial
     restrictions on the transfer of the Common Units. SEE "SUMMARY OF ERISA
     CONSIDERATIONS."  It is extremely unlikely that any market will develop for
     the Common Units.  In the enclosed Letter of Transmittal, each Equity
     Participant will 

                                       16
<PAGE>
 
     represent, among other things, its intention to acquire the Common Units
     for investment purposes and acknowledge its awareness of these limitations
     on transferability. An Equity Participant's principal source of liquidity
     will be its exercise of the Redemption/Exchange Rights as described in the
     Disclosure Materials and in the OP Partnership Agreement.

       DISTRIBUTIONS.  Grove Property has made, and intends to continue to make,
     regular quarterly distributions to its shareholders.  In connection with
     the Consolidation Transactions, Grove Property reduced the amount of its
     quarterly distribution. The principal source of cash for such distributions
     will be distributions to Grove Property as general partner of the Operating
     Partnership.  The principal source of cash for distributions by the
     Operating Partnership will be distributions to it from the Property
     Partnerships. Generally speaking, each such distribution to Grove Property
     will be accompanied by a concurrent pro rata distribution to the Equity
     Participants and the other limited partners of the Operating Partnership.
     The distribution rate per Common Unit is expected to be the same as the
     distribution rate per Common Share. Although there can be no assurance that
     operations will generate sufficient cash flow to permit periodic
     distributions to its limited partners, the Operating Partnership currently
     expects to make an annual distribution of $.63 per Common Unit. Grove
     Property's long term goal is to distribute the minimum amount of cash
     required to qualify as a REIT under the Code. See "The Company - Business
     Objectives and Operating Strategies."

       MANAGEMENT OF THE OPERATING PARTNERSHIP.  Grove Property is the sole
     general partner of the Operating Partnership. As such, it exercises
     virtually complete control over the Operating Partnership and has the
     authority to enter into a wide range of transactions, as described in the
     OP Partnership Agreement.  Accordingly, the matters described in "Risk
     Factors- Potential Adverse Effects of the Exchange Offer" will generally
     apply to the Operating Partnership as well.  Grove Property has fiduciary
     duties to the holders of Common Units as a general partner, but it will
     also have duties to Grove Property's shareholders.  While the consent of a
     majority of the limited partners is required with respect to a limited
     number of types of actions by the Operating Partnership, Grove Property
     will, for the foreseeable future, control a majority of the Common Units
     and thereby effectively be able to control the granting or withholding of
     such consent.

       REDEMPTION/EXCHANGE RIGHTS; REGISTRATION RIGHTS.  As noted above, the
     principal source of liquidity for holders of Common Units will be the
     exercise of the right to redeem Common Units pursuant to the OP Partnership
     Agreement (the "REDEMPTION/EXCHANGE RIGHTS") and the registration rights to
     be granted to Equity Participants.  Each limited partner of the Operating
     Partnership will have the right to require the Operating Partnership to
     redeem part or all of their Common Units for cash (based on the fair market
     value of an equivalent number of Common Shares at the time of such
     redemption) or, at the election of Grove Property, to exchange such Common
     Units for Common Shares, at any time beginning March 15, 1998 (one year
     after the consummation of this Exchange Offer for Limited Partners of the
     Property Partnership) subject, in the case of the Grove Companies, to the
     obligation of the Grove Companies to 

                                       17
<PAGE>
 
     indemnify the Company in connection with the Consolidation Transactions. As
     described above, the Redemption/Exchange Rights will not be immediately
     exercisable by the holder of Common Units and will be subject to the
     restrictions on ownership referred to in "Risk Factors  Potential Adverse
     Effects of the Exchange Offer." The Redemption/Exchange Rights are subject
     to certain restrictions. See "The OP Partnership Agreement - Limited
     Partner Redemption/Exchange Rights." Pursuant to the Registration Rights
     Agreement, holders of Common Units may have the right to receive the Common
     Shares issued in exchange for Common Units pursuant to a registration with
     the SEC, and may have the resale of such Common Shares registered if
     necessary. This will result in such Common Shares being freely transferable
     on the open market upon receipt. Such registration rights will be subject
     to certain significant conditions and restrictions, including, but not
     limited to, Grove Property's ability to effect and maintain such
     registration, customary blackout provisions and any procedures and
     limitations which may be imposed by the staff of the SEC. In addition,
     there may be additional contractual limitations with respect to the
     transfer of such Common Shares, as may be agreed to by Grove Property, and
     an Equity Participant's agreement to tender in the Exchange Offer will
     represent an agreement to any such restrictions.

RISK FACTORS-COMMON UNITS

     The investment in the Common Units involves certain risks, including those
referred to elsewhere herein.  In addition, a Limited Partner should carefully
consider the following:

       UNCERTAIN PORTFOLIO AT TIME OF ELECTION.  The exact portfolio of
     Properties to be owned by the Company has not been finally determined, and
     is dependent, in part, on the success of this Exchange Offer and three
     other pending exchange offers, including the satisfaction of the Minimum
     Percentage Condition as to each Property Partnership.  The Operating
     partnership also intends to acquire additional properties which are either
     not yet identified or are undergoing due diligence investigation.  The
     portfolio of Properties of Grove Property will therefore be uncertain at
     the time of a Limited Partner's commitment to participate in this Exchange
     Offer.

       LOWER DISTRIBUTIONS AND MARKET PRICE AFTER TENDER.  The distributions by
     the Operating Partnership with respect to the Common Units issued to a
     Limited Partner with respect to its Property Partnership Units may be lower
     than the cash flow of the Property Partnership would have been if the
     Property Partnership properties were not distributed to the Operating
     Partnership.  In addition, no assurance can be given that the value upon
     disposition of the Common Units acquired in exchange for a Limited
     Partner's Units will equal the amount that would have been realized by the
     Limited Partner in a sale of the underlying Partnership Property to a third
     party for cash.  Pursuant to the Redemption/Exchange Rights, Grove Property
     may redeem Common Units for cash rather than exchange Common Units for
     Common Shares.  Both the redemption of Common Units for cash and the
     exchange of Common Units for Common Shares are likely to be taxable
     transactions.  There can be no assurance that the market value of the
     Common Shares will not be adversely affected by future acquisitions,
     exchange offers 

                                       18
<PAGE>
 
     similar to this Exchange Offer, or by general market conditions. There is a
     possibility that the Common Shares will trade at prices below amounts that
     would have been received in exchange for a Limited Partner's Units if the
     Property Partnership had been liquidated and its assets distributed, partly
     due to the fact that the fair market value of Grove Property's equity
     securities may be based on, among other things, anticipated net earnings or
     cash flow.

       FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT.  Equity Participants
     will have fundamentally changed the nature of their investment. Each Equity
     Participant will exchange direct or indirect Property Partnership interests
     that own two properties for an interest in a consolidated company in the
     business of acquiring, marketing, managing and operating multiple real
     properties. While diversification of assets may reduce certain risks of
     investment attributable to a single property or entity, there can be no
     assurance as to the value or performance of the Company or its portfolio of
     properties as compared to the value of the specific Partnership Property or
     Property Partnership in which a Limited
     Partner holds an interest. In addition, while the Property Partnerships,
     including Grove-Coastal Associates Limited Partnership, were formed as
     finite-life investments, with partners to receive regular cash
     distributions out of the Property Partnership's net cash flow and final
     distributions to be made upon liquidation (generally of a single
     Partnership Property), Grove Property intends to operate for an indefinite
     period of time and has no specific intention to liquidate or to sell any
     substantial part of its assets other than in the ordinary course of its
     business. Nor are any special distributions of liquidation proceeds
     expected to be made, although quarterly cash distributions from operations
     are expected to be made. Instead of having their investments liquidated
     through the liquidation of the Operating Partnership or its assets, Equity
     Participants in this Exchange Offer should expect to be able to liquidate
     their investment in the Operating Partnership only through the
     Redemption/Exchange Rights. However, holders of Common Units and/or Common
     Shares of Grove Property will be subject to the market risks of all public
     companies, particularly in that the value of their equity securities may
     fluctuate from time to time depending upon general market conditions and
     the Company's future performance.

       TAX RISKS FROM THE EXCHANGE AND RELATED TRANSACTIONS.  The Internal
     Revenue Service may contest the tax-deferred nature to the Equity
     Participants of this Exchange Offer. If any such contest were successful,
     some or all of the Equity Participants would be subject to tax with respect
     to this Exchange Offer. The amount of such tax could be significant, and
     because the Common Units are subject to resale restrictions, Equity
     Participants in this Exchange Offer cannot rely on the resale of Common
     Units to generate funds to pay such taxes.  See "SUMMARY OF FEDERAL INCOME
     TAX CONSEQUENCES."

                                       19
<PAGE>
 
                                  RISK FACTORS
                                        
GENERALLY

     Subject to certain conditions, following the first anniversary of the
completion of this Exchange Offer, each Common Unit issued to Limited Partners
will be redeemable for cash equal to the fair market value of a Common Share at
the time of the redemption or, at the option of Grove Property, exchangeable for
one Common Share (subject to adjustment).  Limited Partners considering a tender
of Units in exchange for Common Units should carefully consider the risk factors
applicable to an investment in Common Units and Common Shares.  Such risks,
among others, include:

      .   conflicts of interest, particularly with the Grove Companies'
          affiliates who are executive officers of Grove Property, in connection
          with (i) the Consolidation Transactions and this Exchange Offer, (ii)
          operation of the Company's on-going businesses, including conflicts
          associated with tax consequences to the Grove Companies of sales or
          refinancings of any of the Partnership Properties, which may influence
          the Company's decision to sell or refinance the Partnership Properties
          or prepay debt secured by certain Properties, and the other business
          activities of the executive officers, (iii) Grove Property's role as
          property manager for the Excluded Properties, (iv) the Company's
          agreement to use National Realty for all real estate brokerage
          services, and (v) enforcement of agreements with affiliates of the
          Company, any one of which could result in decisions that do not fully
          represent the interests of all shareholders of Grove Property;

     .    the valuation of the Consolidated Assets and Property Partnership
          assets was not based on third-party appraisals and there have not been
          arm's-length negotiations with respect to such valuations, resulting
          in the risk that the purchase price of the Grove Companies' assets and
          of the limited partnership interests of the Property Partnerships'
          Properties exceeds the fair market value thereof, or the valuation of
          the Partnership's Properties may be less than the fair market value
          thereof;

     .    risks associated with borrowing, such as the possibility that the
          Company will not have sufficient funds available to make balloon or
          other payments of principal on debt on certain Properties, including
          the Credit Facility, which could result in the loss of one or more of
          the Properties in the event of a foreclosure upon default and the
          possibility that such indebtedness might be refinanced at higher
          interest rates, all of which could adversely affect Grove Property's
          ability to make expected distributions to shareholders and its ability
          to qualify as a REIT;

     .    geographic concentration of a majority of the Properties in a single
          state, Connecticut, and all of the Properties in the Southern New
          England region, creating a dependence on demand for housing in that
          market and increasing the risk that the Company will be materially
          adversely affected by general economic conditions in a limited market;

                                       20
<PAGE>
 
     .    possibility that the Operating Partnership may, in the future, acquire
          properties in geographic markets in which the Company has little or no
          prior experience, and the accompanying risk that the Company's
          operations and financial statements may be adversely affected;

     .    ability of the Board of Trust Managers of Grove Property to change the
          investment, financing, borrowing and other policies of the Operating
          Partnership and Grove Property at any time without shareholder
          approval, including the ability to revoke Grove Property's REIT
          election, thereby limiting shareholder control over these decisions;

     .    absence of a limitation in the Company's organizational documents on
          the amount of indebtedness that the Company may incur, which may
          increase the risks associated with borrowing;

     .    potential anti-takeover effect of limiting ownership of Common Shares
          to 5.0% of the outstanding Common Shares and certain other provisions
          contained in the organizational documents of Grove Property and the
          Operating Partnership, such as the ability to issue preferred shares
          of beneficial interest, staggered terms for the Board of Trust
          Managers and the super-majority voting requirements to, among other
          things, remove trust managers, any of which may discourage a change in
          control and limit the opportunity for shareholders to receive a
          premium for their Common Shares;

     .    taxation of Grove Property as a corporation if it fails to qualify as
          a REIT for federal income tax purposes, taxation of the Operating
          Partnership as a corporation if it fails to qualify as a partnership
          for federal income tax purposes (and the resulting failure of Grove
          Property to qualify as a REIT), the Company's liability for certain
          federal, state and local income taxes in any such event and the
          resulting decrease in cash available for distribution;

     .    triggering of a taxable event to Equity Participants if a
          restructuring or refinancing of the Operating Partnership results in
          the repayment of outstanding debt or a reduction in the amount of non-
          recourse indebtedness;

     .    the distribution requirements for REITs under federal income tax laws
          may limit the Company's ability to finance future acquisitions,
          developments and expansions without additional debt or equity
          financing and may limit cash available for distribution;

     .    risks associated with the redevelopment of multifamily properties,
          including the risks that the selection of particular capital
          improvements or new residents will not further the Company's long-
          range plan for achieving its profitability objectives;

                                       21
<PAGE>
 
     .    real estate investment considerations, such as the ability of tenants
          to make rent payments, the ability of a property to generate revenues
          sufficient to meet operating expenses and the illiquidity of real
          estate investments, all of which may affect the Company's ability to
          make expected distributions;

     .    potential liability of the Company for unknown or future environmental
          liabilities;

     .    dependence of the Company on the services of its executive officers
          which could adversely affect the operations of the Company in the
          event of loss of services of any of such officers;

     .    potential dilution in the market price and the intrinsic value of the
          Common Shares upon issuance of preferred shares of beneficial
          interest, which may have preferences over, and superior voting rights
          to, the Common Shares;

     .    potential adverse effect that the availability of Common Shares for
          future sale, including Common Shares issued in the New Equity
          Investment and Common Shares issued upon exchange of Common Units, may
          have on the market price of Common Shares;

     .    increase in market interest rates, which may lead prospective
          purchasers of the Common Shares to seek a higher anticipated annual
          yield from future dividends, which in turn may adversely affect the
          market price of the Common Shares;

     .    potential losses in the event of casualty or other liability that is
          not insured, insurable or economically insurable; and

     .    costs of compliance with the Americans with Disabilities Act of 1990
          and similar legislation.

POTENTIAL ADVERSE EFFECTS OF THE EXCHANGE OFFER; RISK FACTORS

          The consummation of the Exchange Offer, as well as future acquisitions
made by similar exchange offers, involve various risks.  Limited Partners should
consider, among other things, the following factors when making a decision with
respect to the acceptance of the Exchange Offer and approval of the proposed
Property Partnership Agreement amendment.

     RISKS OF EQUITY REAL ESTATE INVESTMENTS; ADVERSE IMPACT ON ABILITY
     TO MAKE DISTRIBUTIONS; EFFECT ON VALUE OF PROPERTIES

          General.  Real property investments are subject to varying degrees of
risk.  The financial returns available from equity investments in apartment
properties depend on the amount of revenue generated and expenses incurred in
operating the properties.  If the Company's properties do not generate revenue
sufficient to meet operating expenses, debt service and capital 

                                       22
<PAGE>
 
expenditures, the ability to make distributions to holders of Common Units and
Common Shares will be adversely affected. An apartment property's income and
value may be adversely affected by national and regional economic climates,
local real estate conditions such as the oversupply of apartments or a reduction
in demand for apartments, availability of "for purchase" housing, the
attractiveness of the properties to tenants, competition from other apartment
properties, the ability of the owner to provide adequate maintenance and to
obtain adequate insurance, and increased operating costs (including real estate
taxes). In addition, the income and value of an apartment property are affected
by such factors, among others, as changes in zoning, building, environmental,
rent control and other laws and regulations, changes in real property taxes and
interest rates, the availability of financing and acts of God (such as
earthquakes and floods) and other factors beyond the control of the Company. The
Company is exposed to the various types of litigation that may be brought
against a property owner or manager in the ordinary course.

          Illiquidity of Real Estate.  Equity real estate investments are
relatively illiquid and, therefore, will tend to restrict the Company's ability
to vary its portfolio of apartment properties promptly in response to changes in
economic or other conditions; consequently, if the Operating Partnership were to
be liquidated, the proceeds realized at such time might be less than the total
investment in the Operating Partnership.  In addition, the Code places limits on
the amount of gross income the Company may realize from sales of real property
assets held for fewer than four years, which may affect the Company's ability to
sell its properties without adversely affecting returns to holders of Common
Shares.

          Future Property Acquisitions.  The Operating Partnership has not
identified any specific properties for acquisition other than the Properties
described elsewhere herein.  In the normal course of its business, and in the
pursuit of its growth strategy, the Operating Partnership intends to continually
evaluate a number of potential acquisitions in the Northeast and Mid-Atlantic
regions, including the Excluded Properties.  No assurance can be given, however,
that the Operating Partnership will have the opportunity to make suitable
acquisitions on terms favorable to it, or will be able to integrate successfully
more properties into the Company's portfolio.

          Risks of Renovation and Acquisitions.  The Company intends to renovate
certain Properties and other properties it may acquire in the future.  In
connection with any renovation project, the Company will bear certain risks,
including the risks of construction delays or cost overruns that may increase
project costs and could make such projects uneconomical, and the risk that
occupancy or rental rates at a completed project will not be sufficient to
enable the Company to pay operating expenses or earn its targeted rate of return
on its investment.  In case of an unsuccessful renovation project, the Company's
loss could exceed its investment in such project.  The Company intends to
actively continue to acquire multifamily residential properties and neighborhood
retail properties.  Acquisitions entail risks that investments will fail to
perform in accordance with expectations and that judgments with respect to the
costs of improvements to bring an acquired property up to standards established
for the market position intended for that property will prove inaccurate, as
well as general investment risks associated with any new real estate investment.
See "THE COMPANY - Acquisition Strategy."

                                       23
<PAGE>
 
          Regulation.  A number of federal, state and local laws exist, such as
the Americans with Disabilities Act ("ADA"), which may require modifications to
existing buildings or restrict certain renovations by requiring access to such
buildings, and apartments in the buildings, by disabled persons. Additional
legislation may impose further burdens or restrictions on owners with respect to
access by disabled persons. The costs of compliance with such laws may be
substantial, and limits or restrictions on completion of certain renovations may
limit application of the Company's investment strategy in certain instances or
reduce overall returns on its investments. The Company believes that all of the
Properties are in substantial compliance with laws currently in effect, and will
review periodically its apartment properties to determine continuing compliance
with existing laws and any additional laws that are hereafter promulgated.

          In addition, the Fair Housing Amendments Act of 1988 ("FHAA") requires
apartment communities first occupied after March 13, 1990 to be accessible to
the handicapped.  Failure to comply with the FHAA could result in the imposition
of fines or an award of damages to private litigants.  The Company believes that
those Properties that are subject to the FHAA are in substantial compliance with
such law.

          Competition.  There are numerous real estate companies, including
those which operate in the areas in which the Properties are located, which
compete with the Company in seeking apartment properties for acquisition and
development, and for tenants to occupy such properties.  The Company may be
competing with companies that have greater resources than the Company and whose
officers and directors or trustees have more experience than the Company's
officers and trust managers.  In addition, the availability of single-family
housing and other forms of multifamily residential properties, such as
manufactured housing communities, provide alternatives to potential tenants of
apartment properties.  These competitive factors could adversely affect the
income generated by the Properties.

          REAL ESTATE FINANCING RISKS

          Refinancing Risks.  Because the Company anticipates that only a small
portion of the Company's mortgage indebtedness will be repaid prior to maturity
and the Company may not have on hand funds sufficient to repay such indebtedness
at maturity, it may be necessary for the Company to refinance debt through
additional debt financing or equity offerings.  If the Company were unable to
refinance its indebtedness on acceptable terms, or at all, the Company might be
forced to dispose of one or more of the Properties upon disadvantageous terms,
which might result in losses to the Company and might adversely affect the cash
available for distribution.  To the extent the Company needs consent of limited
partners in various Property Partnerships to sell or refinance certain
Partnership Properties, its flexibility will be limited.  If prevailing interest
rates or other factors at the time of refinancing result in higher interest
rates on refinancings, the Company's interest expense would increase, which
would adversely affect the Company's cash available for distributions and its
ability to pay expected distributions to Shareholders.

          No Limitation on Debt.  The Company has adopted a policy to limit its
ratio of debt-to-total market capitalization (i.e., total debt of the Company as
a percentage of total market 

                                       24
<PAGE>
 
capitalization, defined as the sum of the aggregate market value of the
outstanding Common Shares assuming the full exchange of Common Units for Common
Shares) and the total debt of the Company, to less than 60%. The organization
documents of the Company, however, do not limit the amount or percentage of
indebtedness that it may incur. Therefore, the Board may change this policy of
the Company and the Operating Partnership regarding indebtedness, without the
vote of the holders of Common Shares or Common Units. If these policies are
changed, the Company and the Operating Partnership could become more highly
leveraged, resulting in an increased risk of default on the obligations of the
Company and the Operating Partnership and an increase in debt service
requirements which could affect adversely the financial condition and results of
operations of the Company and, consequently, the Company's and Operating
Partnership's ability to make expected distribution to Shareholders and
Unitholders.

          DEPENDENCE ON KEY PERSONNEL; LIMITED EXPERIENCE OF MANAGEMENT

          The Company is dependent on the efforts of all of the Executive
Officers.  The loss of their services could have a material adverse effect on
the operations of the Company.  Currently, the Company has no intention to
secure key-man life insurance for the Executive Officers in the near future.

          Grove Property Trust was formed in 1994.  Management of Grove Property
has only three years experience in the operation of a REIT and the operation of
a public company, although management and the Grove Companies have substantial
experience in the acquisition and management of multifamily residential and
mixed-use properties.  See "MANAGEMENT - Trust Managers and Executive Officers."
This relative lack of experience in REIT management and operation of a public
company could adversely affect the operation and financial results of the
Company.

          ADVERSE TAX CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT

          Grove Property currently intends to continue operating so as to
qualify as a REIT under the Code.  A REIT generally is not taxed at the
corporate level on income it currently distributes to shareholders so long as it
distributes at least 95% of its REIT taxable income.  No assurance can be given
that Grove Property will be able to operate in a manner so as to remain so
qualified.  Qualification as a REIT involves the application of highly technical
and complex Code provisions for which there are only limited judicial or
administrative interpretations.  The determination of various factual matters
and circumstances not entirely within Grove Property's control may affect its
ability to continue to qualify as a REIT.  The complexity of these provisions
and of the applicable income tax regulations that have been promulgated under
the Code is greater in the case of a REIT that holds its assets through a
partnership.  In addition, no assurance can be given that legislation, new
regulations, administrative interpretations or court decisions will not change
tax laws with respect to qualification as a REIT or the federal income tax
consequences of such qualification.  Grove Property, however, is not aware of
any pending tax legislation that would adversely affect its ability to operate
as a REIT.

                                       25
<PAGE>
 
          If Grove Property fails to qualify as a REIT in any taxable year,
Grove Property will not be allowed a deduction for distributions to Shareholders
in computing its taxable income and will be subject to federal income tax
(including any applicable alternative minimum tax) on its taxable income at the
applicable corporate rate. In addition, unless it were entitled to relief under
certain statutory provisions, Grove Property also would be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification is lost. This disqualification would reduce the funds of Grove
Property available for investment or distribution to Shareholders because of the
additional tax liability to Grove Property for the year or years involved. If
Grove Property were to fail to qualify as a REIT, it no longer would be subject
to the distribution requirements of the Code, and to the extent that
distributions to Shareholders would have been made in anticipation of Grove
Property's qualifying as a REIT, Grove Property might be required to borrow
funds or to liquidate certain of its assets to pay the applicable corporate tax.

          Although Grove Property currently intends to operate in a manner
designed to continue to qualify as a REIT, it is possible that future economic
market, legal, tax or other considerations may cause the Board, without the
approval of the Shareholders, to decide to revoke the REIT election.

     CERTAIN ANTI-TAKEOVER PROVISIONS MAY INHIBIT A CHANGE IN CONTROL
     OF THE COMPANY

          Certain provisions of the Charter, the Bylaws and the OP Partnership
Agreement may have the effect of discouraging a third party from making an
acquisition proposal for the Company and may thereby inhibit a change in control
of the Company under circumstances that could give the holders of the Common
Shares the opportunity to realize a premium over the then-prevailing market
prices of such Common Shares.  Such provisions include the requirements
regarding the staggered terms of the Board and removal of trust managers set
forth in the Charter and the advance notice requirements for certain Shareholder
proposals set forth in the Bylaws.

          Preferred Shares.  The Charter permits the Board to issue up to 4.0
million preferred shares of beneficial interest, par value $.01 per share
("PREFERRED SHARES"), and to establish the preferences and rights (including the
right to vote and the right to convert into Common Shares) of any such Preferred
Shares issued.  Thus, the Board could authorize the issuance of Preferred Shares
with terms and conditions which could have the effect of discouraging a takeover
or other transaction in which holders of some, or a majority, of Common Shares
might receive a premium for their Common Shares over the then-prevailing market
price of such Common Shares.

          Ownership Limit.  The Ownership Limit imposed by the Charter for the
purpose of preserving Grove Property's REIT qualification may also have the
effect of precluding an acquisition of control of Grove Property without the
approval of the Board.  The Ownership Limit might deter tender offers for Common
Shares, which offers may be advantageous to Shareholders, and might limit the
opportunity for Shareholders to receive a premium for the 

                                       26
<PAGE>
 
Common Shares that might otherwise exist if an investor were attempting to
assemble a block of Common Shares in excess of 5.0% of the outstanding Common
Shares or otherwise effect a change of control of Grove Property.

          POSSIBLE ENVIRONMENTAL LIABILITIES

          Under various federal, state and local environmental laws, ordinances
and regulations, a current or previous owner or operator of real property may be
required to investigate and clean up hazardous or toxic substances or petroleum
product releases on, under, in or emitting from such property and may be held
liable to a governmental entity or to third parties for property damage and for
investigation and clean-up costs incurred by such parties in connection with the
contamination.

          Federal legislation requires owners and landlords of residential
housing constructed prior to 1978 to disclose to potential residents or
purchasers of the properties any known lead-paint hazards, and impose treble
damages for failure to so notify.  In addition, lead-based paint in any of the
properties may result in lead poisoning in children residing in the property if
chips or particles of such lead-based paint are ingested, and the Company may be
held liable under state laws for any such injuries caused by ingestion of lead-
base paint by children living at the properties.  Lead paint tests have been
conducted at most of the Properties over the past five years and have
established compliance with all applicable federal and state regulations for
such Properties.

     POSSIBLE ADVERSE EFFECTS ON COMMON SHARE PRICE ARISING FROM SHARES
       AVAILABLE FOR CURRENT AND FUTURE SALE

          No prediction can be made as to the effect, if any, that future sales
of Common Shares or the availability of such shares for future sale will have on
the market price of the Common Shares.  Sales of substantial amounts of Common
Shares (including shares issued pursuant to the exchange of Common Units for
Common Shares), or the perception that such sales would occur, may adversely
affect prevailing market prices for the Common Shares.  The Board has the
authority, without Shareholder approval, to issue additional Common Shares and
other Equity Shares, or to cause the Operating Partnership to issue additional
Common Units or other classes of units of interest in the Operating Partnership
in any manner it deems appropriate, including in exchange for property.  Except
for Morgan Stanley Group Inc. and ABKB/LaSalle Securities Limited, as agent for
Oregon Public Employees' Retirement Fund, existing Shareholders will have no
preemptive right to purchase shares or units issued in any such offerings, and
any such offerings might cause a dilution of the Shareholders' investment in
Grove Property.

          The Company has granted certain entities and individuals receiving
Common Units in connection with the Consolidation Transactions certain
registration rights with respect to the Common Shares which they may receive
upon the exchange of Common Units.  Pursuant to a Registration Rights Agreement
with certain holders of Common Units, the Company has agreed to file and
generally keep continuously effective beginning one year after the completion 

                                       27
<PAGE>
 
of the Consolidation Transactions a registration statement covering the issuance
of shares upon exchange of Common Units and the resale thereof. Pursuant to the
Registration Rights Agreement with New Equity Investors, the Company has agreed
to file and generally keep continuously effective beginning six months after the
completion of the Consolidation Transaction a registration statement covering
the sale of Common Shares issued in the New Equity Investment. The Company will
also grant individuals receiving Common Units in connection with this Exchange
Offer certain registration rights with respect to the Common Shares which they
may receive upon the exchange of Common Units. See "THE OP PARTNERSHIP 
AGREEMENT - Limited Partner Redemption/Exchange Rights."

          CHANGES IN INVESTMENT AND FINANCING POLICIES WITHOUT SHAREHOLDER
APPROVAL

          The Board will determine the Company's investment and financing
policies, its growth strategy, and its debt, capitalization, distribution and
operating policies.  Although the Board has no present intention to revise or
amend these strategies and policies, the Board may do so at any time without a
vote of the Shareholders.  Accordingly, Shareholders will have no control over
changes in strategies and policies of the Company, and such changes may not
serve the interests of all Shareholders and could adversely affect the Company's
financial condition or results of operations.

          Issuance of Additional Securities.  Grove Property has authority to
offer its Common Shares or other equity or debt securities in exchange for
property or otherwise.  Similarly, Grove Property may cause the Operating
Partnership to offer additional Common Units or preferred units of the Operating
Partnership, including offers in exchange for property to sellers who seek to
defer certain of the tax consequences relating to a property transfer.  Existing
Shareholders and holders of Common Units will have no preemptive right to
acquire any such securities, and any such issuance of equity securities could
result in dilution in an existing Shareholder's investment in Grove Property.

          Risks Involved in Acquisitions Through Partnerships or Joint Ventures.
In addition to its investments in the Property Partnerships, the Company may
invest in apartment properties through partnership or joint ventures instead of
purchasing apartment properties directly or through wholly-owned subsidiaries.
Partnership or joint venture investments may, under certain circumstances,
involve risks not otherwise present in a direct acquisition of properties.
These include the risk that the Company's co-venturer or partner might become
bankrupt; a co-venturer or partner might at any time have economic or business
interests or goals which are inconsistent with the business interests or goals
of the Company; and a co-venturer or partner might be in a position to take
action contrary to the instructions or the requests of the Company or contrary
to the Company's policies or objectives.  The consent of Outside Partners who
did not tender in the Consolidation Transactions and remain in the Property
Partnerships may be required to approve certain major decisions of the Property
Partnerships, thereby reducing the Company's flexibility in dealing with the
Partnership Properties.  There is no limitation in the Charter as to the amount
of investment the Company may make in joint ventures or partnerships.

                                       28
<PAGE>
 
     ADVERSE EFFECT ON TRADING MARKET FOR COMMON SHARES; REDUCTION
     IN PUBLIC FLOAT

          Reduction in Periodic Distributions.  In response to the investment
interests of certain potential investors in Grove Property, and Grove Property's
evaluation of what it perceives to be a changing philosophy in REIT investments
generally, Grove Property decided, in connection with the Consolidation, to
reduce periodic cash distributions per Common Share and to increase the
reinvestment of its cash flow in the Company. The Company believes that this
will enable it to achieve greater long-term capital appreciation for investors
in the Company. However, there can be no assurance that the Company will be able
to identify favorable investments in the future or that any capital appreciation
will result from this strategy. Also, an adverse perception by the investing
public of the reason for such decision, and the continuing interest of certain
investors in owning relatively high-yield REIT common stock, may adversely
affect the market price of the Common Shares and may cause reduced trading
activity in the Common Shares on the AMEX. Such a reduction would reduce the
liquidity of an investment in the Common Shares. One of the factors that
currently may influence the price of the Common Shares in public markets is the
amount of Grove Property's annual dividend distributions and the yield such
distributions represent; accordingly, an increase in market interest rates may
lead purchasers of Common Shares to demand a higher annual yield, which could
affect adversely the market price of the Common Shares.

          ADVERSE CONSEQUENCES OF ELECTION TO REVOKE REIT ELECTION BY THE
COMPANY

          The Board has the authority to revoke Grove Property's REIT election
at any time without Shareholder approval.  Although Grove Property currently
intends to operate in a manner designed to continue to qualify as a REIT, Grove
Property is aware that certain institutional investors have questioned whether
it is preferable for a company to elect to be taxed as a corporation that is not
qualified as a REIT so that the entity is not required to distribute to
shareholders 95% of its REIT taxable income.  These investor preferences, as
well as economic, market, legal, tax or other considerations, may cause the
Board at some time in the future to revoke Grove Property's REIT election.  Such
an election may be made by the Board, without any Shareholder vote.

                          BENEFITS TO RELATED PARTIES
                                        
     In addition to the benefits received by the Grove Companies from the
Consolidation Transactions in connection with the exchange of their Property
Partnership interests pursuant to the Contribution Agreement, the Grove
Companies (including certain executive officers of the Company) have or will
realize certain other benefits from the Consolidation Transactions and this
Exchange Offer, including the following:

     .    In connection with the transfer of certain assets and liabilities of
          the Management Company to the Operating Partnership and the transfer
          of its interests in the Property Partnerships to the Operating
          Partnership, the Grove Companies received an aggregate of 904,867
          Common Units and a cash payment of $177,669.

                                       29
<PAGE>
 
     .    Guarantees of approximately $26.8 million of mortgage indebtedness by
          Messrs. Damon Navarro and Brian Navarro were released in connection
          with the repayment of indebtedness on the Partnership Properties as
          part of the Refinancing. It is likely that other loan guarantees given
          by the Navarros in connection with three of the four pending Exchange
          Offers will also be released in connection with the eventual payoff or
          refinancing of mortgage indebtedness that encumbers such properties.

     .    Each Executive Officer entered into a new employment agreement with
          Grove Property, pursuant to which he will receive (i) a 10-year option
          pursuant to the 1996 Plan, to purchase Common Shares at a price per
          share equal to the market price of a Common Share on the date of
          grant, (ii) 1997 base salaries of: $50,000-Damon Navarro;
          $50,000-Brian Navarro; $50,000-Edmund Navarro; $50,000-Joseph
          LaBrosse; and $25,000-Gerald McNamara and (iii) annual Deferred Stock
          Grants (if earned) in accordance with the 1996 Plan.  If an Executive
          Officer's employment with the Company is terminated "without cause" by
          the Company or by the Executive Officer following a "change in
          control" or for "good reason" (as such terms are defined in the
          employment agreements), such Executive Officer will be entitled to a
          lump sum payment equal to 200 percent of his annual base salary plus
          an amount equal to the aggregate value of all bonuses, whether cash,
          stock, options or otherwise (but specifically excluding the Deferred
          Stock Grants), paid to such Executive Officer for the previous year.

     .    The Grove Companies and certain of its Affiliates will no longer be
          liable as a general partner of the Property Partnerships, including
          Grove-Coastal Associates Limited Partnership if this Exchange Offer is
          successful, for future operations of the Partnership Properties.

     .    Upon the successful completion of the Consolidation Transactions, the
          Property Partnerships repaid their outstanding indebtedness to NAVAB
          Associates (approximately $1.19 million at September 30, 1996), and
          received payment from NAVAB for outstanding receivables (approximately
          $0.7 million at September 30, 1996). NAVAB is a partnership owned by
          Damon and Brian Navarro and George and Ronald Abdow. NAVAB Associates,
          in turn, used the net proceeds of approximately $0.5 million to repay
          its outstanding bank indebtedness of approximately the same amount,
          which debt was guaranteed by the Navarros and the Abdows.

     .    To the extent they received Common Units rather than cash pursuant to
          the Contribution Agreement, the Grove Companies experienced a partial
          deferral of the federal income tax consequences associated with their
          contribution of assets to the Operating Partnership.

                                       30
<PAGE>
 
     .    The Grove Companies obtained improved liquidity of their investments
          as a result of the Consolidation Transactions. The Grove Companies
          received Common Units, which may be redeemed for cash or, at the
          option of the Company, exchanged for Common Shares. Unlike interests
          in real estate or a property management company, the Common Shares
          will be freely transferable (subject to applicable securities laws and
          certain agreements restricting transfer).

     .    In connection with the acquisition of three additional properties in
          June 1997, as well as this Exchange Offer and three similar exchange
          offers that are currently pending, the Operating Partnership will
          reimburse Grove Companies for certain overhead costs related to such
          transactions.

                             CONFLICTS OF INTEREST
                                        
     The Executive Officers have interests that conflict with the interests of
the other Grove Property shareholders, the limited partners of the Operating
Partnership (including the Limited Partners who elect to participate in the
Exchange Offer) and the persons who acquired Common Shares in the New Equity
Investment.  Grove Property and the Grove Companies have been represented by the
same legal counsel and, therefore, neither Grove Property nor the Property
Partnerships has been advised by separate legal counsel in connection with the
Consolidation Transactions or this Exchange Offer.

     Following the consummation of the Consolidation, the Grove Companies
continued to hold limited and general partner interests in 15 limited
partnerships that owned, in the aggregate, 14 multifamily residential projects
with a total of approximately 1,600 apartments and seven retail and mixed-use
projects with a total of approximately 125,000 rentable square feet (such
properties comprise the "EXCLUDED PROPERTIES"), and the five Executive Officers
remain officers or directors of the Grove Companies, including entities that
have interests in the limited partnerships that own the Excluded Properties, and
will therefore have conflicts of interest in allocating their time between the
Company and such entities.  In June 1997, the Operating Partnership acquired two
of the Excluded Properties and acquired the general partnership interest and
certain limited partnership interests of a third Excluded Property.  The Company
may seek to acquire one or more of the remaining Excluded Properties from time
to time when and if conditions are favorable to do so, such as this current
Exchange Offer to the Limited Partners.  The Executive Officers will have
conflicts of interest in establishing the terms of such acquisitions, including
this Exchange Offer, which will not be based on independent third party
appraisals.  In addition to this Exchange Offer, there are three additional
exchange offers currently pending for limited partnership interests in three
additional Excluded Properties partnerships.  Moreover, certain of the Excluded
Properties are located near or adjacent to one or more of the Properties
acquired during the Consolidation Transactions, and therefore may compete with
one or more of such Properties for prospective tenants, resulting in potential
conflicts of interest for the Executive officers.  In addition, Brian Navarro,
Vice President-Acquisition of Grove Property, will continue to serve as the
President of National Realty, which will be the exclusive provider of real
estate brokerage services to the Company (including the Property Partnerships)
and the limited partnerships that own the Excluded 

                                       31
<PAGE>
 
Properties. The Grove Companies and each of the Executive Officers have entered
into agreements with the Company which, among other things, will require each of
the Executive Officers to allocate a substantial amount of his working time to
the Company.

     The Management Owners may have conflicts of interest as a result of their
ownership of National Realty, which continues to provide real estate brokerage
services to the Company (including the Property Partnerships), the limited
partnerships that own the Excluded Properties and third parties following the
Consolidation Transactions.

     Following the consummation of the Consolidation Transactions, the Operating
Partnership, pursuant to management services contracts, has provided certain
real estate management services to the Property Partnerships and to the Grove
Companies (including to the limited partnerships that own the Excluded
Properties), which services were previously provided by the Management Company.
Certain Executive Officers may have conflicts of interest in the negotiation and
enforcement of such management services contracts as a result of their ownership
of the Grove Companies and interests in the Excluded Properties.

     The Executive Officers had and will have conflicts of interest in
establishing the terms of the Consolidation Transactions, this Exchange Offer
and similar offers to related partnerships, and the provisions of the employment
agreements with the Executive Officers and the non-competition agreements. They
will also have a conflict of interest with respect to their obligations as Trust
Managers and Executive Officers to enforce the terms of various agreements, and
their objectives with respect to the sale of, or repayment of indebtedness on,
any of the Partnership Properties may differ from those of other Limited
Partners of those partnerships and/or the shareholders of Grove Property. Any
decision regarding the enforcement of contracts between the Company and the
Grove Companies or any Executive Officer, individually, and the sales or
refinancings of Partnership Properties, will be made by a majority of the
members of the Board that are not employed by or affiliated with the Grove
Companies (the "INDEPENDENT TRUST MANAGERS"). The Executive Officers may,
however, use their positions as executive officers and trust managers to
influence the Independent Trust Managers in this regard.

     Holders of Common Units may suffer different and more adverse tax
consequences than the Company or its shareholders upon the sale of, or repayment
of indebtedness on, any of the Partnership Properties and, therefore, Common
Unit holders, including the Executive Officers of the Company, and the Company
may have different objectives regarding the appropriate pricing and timing of
any such sale or repayment of indebtedness.  Limited Partners who remain in
certain Property Partnerships following the Consolidation may also have
different objectives from those of the Company.

                                       32
<PAGE>
 
                                  THE COMPANY
                                        
THE GROVE COMPANIES

     Grove Investment Group was formed in 1980 as a Southern New England real
estate company based in Hartford, Connecticut.  Damon and Brian Navarro, co-
founders of the Company, began business operations by buying and managing small,
multifamily properties with limited partners as equity investors.  From its
formation, Grove Property's executive officers have been shared with the Grove
Companies.

     As used herein, the "GROVE COMPANIES" means Grove Investment Group, Inc.
and its affiliates (including certain companies and individuals) that own
interests (directly or indirectly) in the Management Company, any Property
Partnership or any limited partnership which owns any Excluded Property. The
Grove Companies include, without limitation, the Management Owners and Gerald
McNamara, each an executive officer and, in the case of Damon Navarro and Joseph
LaBrosse, a Trust Manager of Grove Property, and Ronald and George Abdow.

     At September 30, 1996, the Grove Companies owned general partnership
interests in 42 limited partnerships, including the Property Partnerships (which
owned the Partnership Properties prior to the Consolidation) and 15 other
limited partnerships which own the Excluded Properties. The remaining limited
partnerships (other than the Property Partnerships and the partnerships that own
the Excluded Properties) in which the Grove Companies own general and limited
partnership interests do not own properties, but rather are limited purpose
partnerships formed by the Grove Companies for various other purposes.


GROVE PROPERTY

     Grove Property is a self-administered REIT formed pursuant to the Maryland
REIT Act engaging in multifamily property acquisition and redevelopment.  Grove
Property was formed in 1994 to continue the multifamily property acquisition,
management and marketing operations and related business objectives and
strategies of Grove Investment Group, formed in 1980 by Damon and Brian Navarro.
Upon completion of the IPO in June 1994 and the concurrent completion of the
various transactions that occurred simultaneously therewith, Grove Property
purchased its three initial properties from affiliates of Grove: Dogwood Hills
Apartments, Hamden Center Apartments and Baron Apartments. In 1996, Grove
Property purchased its fourth property, Cambridge Estates, from an affiliate of
Grove.

     Grove Property is operated under the direction of Damon Navarro, Chairman
of the Board of Trust Managers, President and Chief Executive Officer, and a
management team consisting of substantially all of the former personnel of
Grove, being Damon, Brian and Edmund Navarro, Joseph R. LaBrosse and Gerald A.
McNamara, each an Executive Officer, and the Trust Managers of Grove Property,
Messrs. Damon Navarro, Edmund Navarro, Joseph R. LaBrosse, James Twaddell,
Theodore R. Bigman, J. Joseph Garrahy and Harold Gorman.  Grove 

                                       33
<PAGE>
 
Property's executive officers are substantially shared with the Grove Companies
and, as described below, the Grove Companies have been providing property
management and other support services to Grove Property from its inception. See
"-The Grove Companies" and "-Property Management Services."

     As a result of the Consolidation Transactions, Grove Property became a
self-administered and self-managed REIT.  Grove Property will conduct
substantially all of its operations through the Operating Partnership.  Grove
Property currently owns an interest in the Operating Partnership of
approximately 61% and will control the Operating Partnership as the sole general
partner.  Grove Property owns, directly or indirectly, 100% of the interests in
the four GREAT Properties, each of the eight properties acquired from certain
liquidating limited partnerships through the Consolidation transactions and each
of the two properties acquired in June 1997, and controls the remaining thirteen
Properties through a general partnership interest in the Property Partnerships
that own such Properties.

     Grove Property believes that it is of the largest public owners of
multifamily properties in Southern New England. The multifamily properties that
are owned or controlled by Grove Property include 2,347 residential apartments
located in Connecticut, Massachusetts and Rhode Island and a neighborhood retail
complex in Longmeadow, Massachusetts with net rentable square feet of
approximately 79,012. In addition, three of the residential properties include
leased office space with total leasable office space of approximately 15,200
square feet.

     Grove Property believes that it is the only publicly traded multifamily
apartment REIT conducting operations exclusively in the Northeast. Management
believes that this concentration in a single geographic area and the Company's
reputation in the Northeast as a superior property management company with
approximately 170 employees, coupled with a sound performance as a public
company since June 1994, will be attractive to potential investors in Grove
Property, including owners of multifamily properties that might be acquired by
the Operating Partnership for Common Units, thereby deferring the owner's
federal income tax liability, if any, on a sale.

     Grove Property's executive offices are located at 598 Asylum Avenue,
Hartford, Connecticut 06105, (860) 520-4789.

TRUST MANAGERS AND EXECUTIVE OFFICERS

          The Trust Managers and Executive Officers of Grove Property Trust, and
other key employees of Grove Property Trust, their ages (at May 31, 1997) and
their positions and offices with Grove Property Trust are as follows:

<TABLE>                                                       
                                                              
<S>                                         <C>           <C>  
Name                                        Age           Positions and Offices Held     
- ----                                        ---           --------------------------

Trust Managers and Executive Officers
- -------------------------------------
Damon D. Navarro                             43        Chairman of the Board of Trust Managers,
                                                       President and Chief Executive Officer

</TABLE> 

                                       34
<PAGE>
 
<TABLE>                                                       
                                                              
<S>                               <C>       <C>  
Joseph R. LaBrosse                34        Chief Financial Officer, Secretary, Treasurer and
                                            Trust Manager
Edmund F. Navarro                 36        Vice President - Property Management and Trust Manager     
James F. Twaddell                 56        Trust Manager                                   
Harold Gorman                     53        Trust Manager                                   
Theodore R. Bigman                34        Trust Manager                                   
J. Joseph Garrahy                 66        Trust Manager                                   
Brian A. Navarro                  42        Vice President - Acquisitions                  
Gerald A. McNamara                56        Vice President - Marketing and Strategic Planning           
Key Employees          
- -------------          
Andy Mazur                        46        Director of Site Operations - Regional Property Manager   
Karen McHugh                      39        Director of Marketing - Regional Property Manager           
Paul Bengtson                     36        Director of Landscaping - Regional Property Manager          
Steven Splain                     35        Controller                                                   
Leanne Bruder                     28        Accounting Manager                                            

</TABLE>

          Pursuant to the terms of the Charter and Bylaws, the Board must
consist of not less than two nor more than 15 persons, of which a majority must
be Independent Trust Managers (who are neither executive officers nor affiliates
of Grove Property).  Trust Managers are divided into three classes serving
staggered three-year terms.  Messrs. Damon Navarro's, Bigman's and Gorman's
terms of office will expire at the Annual Meeting of Shareholders to be held on
June 18, 1997; Messrs. Twaddell's and Edmund Navarro's term of office will
expire at the Annual Meeting of Shareholders to be held in 1998; and Messrs.
Garrahy's and LaBrosse's terms of office will expire at the Annual Meeting of
Shareholders to be held in 1999.  Messrs. Damon Navarro, Bigman and Gorman have
been nominated for re-election as Trust Managers at the June 18, 1997 Annual
Meeting.  Trust Managers hold office until their successors are duly elected and
qualified.

          The Charter requires majority approval by the Independent Trust
Managers of Grove Property Trust for all Board decisions relating to
transactions with Affiliates.  Currently, the Independent Trust Managers are
Messrs. Twaddell, Gorman and Garrahy.

          Damon Navarro is Chairman of the Board of Trust Managers, President
and Chief Executive Officer of Grove Property Trust.  Mr. Navarro previously
served as President of all of the Grove Companies, except GPS.  Co-founder of
Grove in 1980, he is responsible for investor relations, marketing, new business
development and organizational management for the Company and its affiliates.
Mr. Navarro is currently, or has previously served as, a general partner or
principal of the general partner for 42 of the limited partnerships affiliated
with the Grove Companies, including each of the Property Partnerships, and is
the Chief Executive 

                                       35
<PAGE>
 
Officer for 27 corporations affiliated with those limited partnerships. Mr.
Navarro is a graduate of the University of Rhode Island with a degree in
Finance.

          Joseph LaBrosse is Chief Financial Officer, Secretary and Treasurer,
as well as a Trust Manager of Grove Property Trust.  Mr. LaBrosse was Chief
Financial Officer for the Grove Companies and their affiliates.  He is
responsible for financing, loan portfolio management, financial reporting, tax
planning, cash management, strategic budgeting and planning.  Prior to joining
the Grove Companies in 1988, Mr. LaBrosse was a real estate tax consultant at
Arthur Andersen & Company in Hartford, Connecticut.  He is a magna cum laude
graduate of the University of Connecticut with a degree in Accounting.  He is a
licensed Certified Public Accountant and a member of the American Institute of
Certified Public Accountants, the Connecticut Society of Certified Public
Accountants and the Real Estate Finance Association.

          James F. Twaddell is a Trust Manager of Grove Property Trust.  Mr.
Twaddell is a member of the investment banking group of Schnieder Securities,
Inc., located in Providence, Rhode Island.  From 1974 through 1995, Mr. Twaddell
served as Chairman of Barclay Investments, Inc., a member firm of the National
Association of Securities Dealers, Inc. (the "NASD").  Mr. Twaddell also served
as Chairman of Regional Investment Brokers, Inc., a 125-member cooperative
association of regional investment bankers and broker/dealers conducting
business throughout the United States.  For the 1993-1995 term, he was elected
to serve on both the NASD District 11 Committee and the District Business
Conduct Committee.  He has served as Chairman of the Board of First Mutual Fund,
a 30-year old publicly-traded mutual fund, since 1979.  Mr. Twaddell received
his B.A. degree from Brown University in 1961.

          Harold Gorman is a Trust Manager of Grove Property Trust.  From 1968
to 1993, Mr. Gorman served as Vice President and Assistant General Counsel of
Heublein, Inc.  From October 1993 to March 31, 1995, he served as Vice
President/General Counsel to the Paddington Corporation.  Since April 1, 1995,
Mr. Gorman has served as Vice President and Senior Regulatory Counsel for
Heublein, Inc., located in Hartford, Connecticut.  He received his B.A. from
Wesleyan University in 1965 and his J.D. from the University of Connecticut Law
School.  Mr. Gorman is a member of each of the Connecticut Bar Association, the
American Bar Association and the Board of Directors of the Connecticut Arthritis
Society.

          J. Joseph Garrahy is a Trust Manager of Grove Property Trust.  Mr.
Garrahy began his career in public service in 1962 as a Rhode Island State
Senator.  In 1968, he was elected Lieutenant Governor of The State of Rhode
Island, where he served four two-year terms.  In 1976, Mr. Garrahy was elected
Governor of the State, and was reelected to that office in 1978, 1980 and 1982.
He served as Chairman of the National Governors' Association's Subcommittee on
Health Policy in 1977 and the National Governors' Association's Human Services
Committee as Chairman of the Coalition of Northeast Governors' Committee on
Transportation.  Mr. Garrahy was a Senior Vice President with the merchant
banking firm of G. William Miller & Company, Inc. of Washington, D.C. from 1985
to 1990.  Mr. Garrahy has served as President of J. Joseph Garrahy & Associates,
Inc., a consulting firm, in Providence, Rhode Island, since its formation in
1990.  Mr. Garrahy attended the University of Buffalo and the University of
Rhode Island.

                                       36
<PAGE>
 
          Theodore R. Bigman has been a Trust Manager of Grove Property since
April, 1997.  From 1987 to 1995, he was a Director at CS First Boston in the
real estate group, establishing and managing their REIT effort. He had primary
responsibility for $2.5 billion of initial public offerings by REITs.
Previously, he had extensive real estate experience in a wide variety of
transactions involving the financing and sale of both individual assets and
portfolios of real estate assets, as well as the acquisition of several real
estate companies. Since 1995, he has been a Principal of Morgan Stanley Asset
Management Inc., a subsidiary of Morgan Stanley Group Inc., responsible for its
real estate securities investment management business. He graduated from
Brandeis University in 1983 with a B.A. in Economics and received an M.B.A. from
Harvard University in 1987.

          Brian Navarro is Vice President-Acquisitions of Grove Property Trust.
Mr. Navarro also served as a vice president of all of the Grove Companies.  Mr.
Navarro is responsible for the acquisition and disposition of property and
financing for the Company and its affiliates.  Prior to co-founding Grove in
1980, Brian Navarro acquired, renovated and resold over 30 two-, three- and six-
family houses in the Hartford, Connecticut, Springfield, Massachusetts and
Westerly, Rhode Island areas.  Mr. Navarro is a graduate of the University of
Connecticut with a degree in Finance and a special concentration in real estate.

          Gerald A. McNamara is Vice President - Marketing and Strategic
Planning of Grove Property Trust.  Mr. McNamara has been a principal and vice
president of the Grove Companies and their affiliates since 1985.  He is
currently, or has previously served as, a general partner in many of the 42
limited partnerships sponsored by the Grove Companies.  Mr. McNamara is involved
in all aspects of property acquisition and financing, and is responsible for the
long range planning and new product/concept development of Grove Property Trust.
Prior to his association with the Grove Companies, Mr. McNamara was Senior Vice
President of Heublein International where he was in charge of Food and Beverage
Operations overseas.  Mr. McNamara is a graduate of Trinity College with a
degree in History and Economics.

          Edmund Navarro is Vice President - Property Management of Grove
Property Trust and a Trust Manager.  Prior to the Consolidation Transactions,
Edmund Navarro wholly-owned Grove Services Inc., the general partner of GPS, and
served as President of GPS.  At GPS, he was responsible for the management of
approximately 45 properties and 180 employees and the marketing and supervision
of construction projects.  Mr. Navarro became a principal of Grove in 1983.
Prior to his employment with the Grove Companies, Mr. Navarro was a Media
Marketing Planner with Vitt Median International in New York City.  Mr. Navarro
is a graduate of the University of Rhode Island with a degree in Marketing.

          Andy Mazur is Director of Site Operations and a Regional Property
Manager for Grove Property Trust.  He has been with Grove since 1988.  Mr. Mazur
is responsible for the Service Technician Training Program and Continuing
Development of Grove Property Trust maintenance systems and supervising the
management of several properties.  Mr. Mazur has a Masters Degree from
Springfield College and a Bachelors Degree from Central Connecticut State
College.

                                       37
<PAGE>
 
          Karen McHugh is Director of Marketing and a Regional Property Manager
for Grove Property Trust.  She has been with Grove since 1991.  She develops and
oversees training programs for property leasing directors.  Prior to joining
GPS, Ms. McHugh worked for a real estate developer in the property management
area for seven years.  Ms. McHugh graduated from Mount Holyoke College with a
B.A. in English and a B.A. in Political Science.

          Paul Bengtson is Director of Landscaping and a Regional Property
Manager for Grove Property Trust.  He has been with Grove since 1993.  Mr.
Bengtson gained his landscaping expertise while working for a landscaping
contractor throughout high school and college.  Prior to joining Grove he worked
for four years for a property management company based in Boston.  Mr. Bengtson
is a graduate of Worcester State College with a B.A. degree in Business
Management.

          Steven A. Splain is the Controller for Grove Property Trust and all
the Grove Companies.  He has been with Grove since 1994 and is in charge of the
financial and tax reporting and day-to-day accounting functions.  Between 1984
and 1994, Mr. Splain was Tax Manager at Blum, Shapiro, a regional accounting
firm in West Hartford, Connecticut.  Mr. Splain is a graduate of Southern
Connecticut State University with a B.S. in Accounting.  He is a licensed
Certified Public Accountant, and a member of the American Institute of Certified
Public Accountants and the Connecticut Society of Certified Public Accountants.

          Leanne Bruder is the Accounting Manager for the corporate division of
the Accounting Division of Grove Property Trust.  She began working for Grove
full-time in January 1996 and worked part time for Grove in 1991 and 1992.
Prior to joining Grove full-time, Leanne was a senior accountant at the
Hartford, Connecticut office of KPMG Peat Marwick.  While at KPMG, Ms. Bruder
was a member of the Real Estate Industry Focus Group and was responsible for the
audits of multi-billion dollar mortgage loan and real estate-owned portfolios of
several prominent insurance companies.  She was also instrumental in the
securitization of a large portfolio of loans and in organizing the first REIT to
be offered by one of these companies.  Ms. Bruder is a graduate of the
University of Connecticut with a B.S. in accounting, and is a Certified Public
Accountant.

          Damon Navarro, Brian Navarro and Edmund Navarro are brothers.  No
family relationships exist among any of the other trust managers or executive
officers of Grove Property.  No arrangement or understanding exists between any
Trust Manager or Executive Officer or any other person pursuant to which any
Trust Manager or Executive Officer was selected as a Trust Manager or Executive
Officer, except that Mr. Twaddell was elected to the Board at the closing of the
IPO in 1994, for a term of one year, pursuant to the terms of the Underwriting
Agreement between Grove Property Trust and the underwriters in connection with
the IPO, Barclay Investments, Inc., and Mr. Bigman was elected to the Board at
the closing of the New Equity Investment pursuant to the terms of the Securities
Purchase Agreement entered into with Morgan Stanley.  Subject to the provisions
of their respective employment agreements, if any, executive officers are
elected for and serve at the discretion of the Board.

                                       38
<PAGE>
 
COMMON UNITS ISSUED TO EXECUTIVE OFFICERS IN CONNECTION WITH CONSOLIDATION

          In connection with the Consolidation Transactions, pursuant to the
Contribution Agreement, the Executive Officers received the number of Common
Units and the dollar amounts set forth opposite their names below in exchange
for their respective interests in the Property Partnerships and certain assets
and liabilities of GPS.  The cash payments to the Navarros represent the
purchase price for their respective general partnership interests in certain
Property Partnerships.  The balance of the Grove Companies' interests in the
Property Partnerships, including the economic interests in their general
partnership positions in certain of the Property Partnerships, were acquired by
the Operating Partnership in exchange for Common Units.  No member of the Board
of Trust Managers who is not also an Executive Officer transferred any assets to
Grove Property in connection with the Consolidation Transactions.  The Common
Units received by such Executive Officers carry redemption rights and
registration rights.
 
        Executive Officer          Common Units/(1)/    Cash  
        -----------------          ---------------     -------
        Damon D. Navarro               289,874         $85,797
        Brian A. Navarro               282,322         $85,797
        Edmund F. Navarro              247,174         $ 6,075
        Joseph R. LaBrosse              65,833            --
        Gerald A. McNamara              23,912            -- 

          Following the consummation of the Consolidation Transactions, National
Realty, which is 100% owned by Messrs. Damon, Brian and Edmund Navarro and
Joseph LaBrosse, has provided real estate brokerage and related services to
Grove Property and the Operating Partnership.  The real estate brokerage
services performed by National Realty for Grove Property and the Operating
Partnership include the funding, underwriting and negotiation of purchase
contracts with respect to properties to be acquired by the Company, the
negotiation of the contracts with respect to properties to be sold by the
Company, and certain commercial leasing services.  In connection with such
services, National Realty will receive a 4% commission on purchases or sales
arranged by National Realty which are valued at up to $5.0 million and a 3%
commission on purchases or sales arranged by National Realty which are valued in
excess of $5.0 million.  The brokerage services contracts provide that the
Operating Partnership will indemnify National Realty and the Grove Companies for
any liability incurred in performing such services, except in certain
circumstances.  Such agreements have terms of one to two years, subject to
either party's right to cancel upon at least 30 days' notice.  The brokerage
services contracts were not negotiated on an arm's-length basis and the owners
of National Realty may have conflicts of interest (due to their ownership of
National Realty) in connection with the 

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


/(1)/  Includes Common Units an Executive Officer may be deemed to own
       beneficially as a result of his ownership of entities included in the
       Grove Companies, based solely on his pro rata ownership of the equity of
       that entity. One or more of the Executive Officers may have acquired
       additional Common Units as a result of the Operating Partnership's
       acquisition of interests in three of the Excluded Properties in June,
       1997. One or more of the Executive Officers may be deemed to own
       beneficially additional Common Units held by the Grove Companies pursuant
       to Rule 13d-3 under the Securities Exchange Act of 1934, as amended, as a
       result of such Executive Officer's ability to exercise control over
       voting and/or investment decisions with respect to one or more of the
       entities included in the Grove Companies.

                                       39
<PAGE>
 
brokerage services contracts and the provision of real estate brokerage services
by National Realty to the Company.

          The Operating Partnership owns certain of the assets and liabilities
of GPS used by GPS prior to the Consolidation in connection with the provision
of real estate management services to the Grove Companies and Grove Real Estate
Asset Trust.  Following the consummation of the Consolidation Transactions,
pursuant to management services agreements, the Operating Partnership provides
such property management services to certain limited partnerships whose General
Partner is one of the Grove Companies.  Such management services agreements will
provide that the Operating Partnership shall receive in exchange for its
provision of property management services, with respect to each property, a fee
equal to from 4% to 6% of gross income (excluding interest income).  Such
management services agreements have terms of one year, and will automatically
renew for successive one-year terms if neither party thereto give notice of
termination within 90 days prior to the end of the then current term.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

          The following table sets forth information as of June 1, 1997
regarding the beneficial ownership of Common Units and Common Shares by each
person known by Grove Property to be the beneficial owner of more than five
percent of the Common Units and Common Shares, by each Trustee of Grove
Property, by each Executive Officer of Grove Property named in the table below,
and by all Trustees and Executive Officers of Grove Property as a group.  Each
person named in the table has the sole voting and investment power with respect
to all units and shares shown as beneficially owned by such person, except as
otherwise set forth in the notes to the table.

<TABLE>
<CAPTION>

Name and Business        Common Units        Common Shares         Percent of       Percent of      Pro forma
Address                  Benefically      Beneficially Owned      Common Units       Class of       Percent of
Of Beneficial Owner          Owned        ------------------          Owned        Common Shares   Common Units/
- -------------------      -----------                               -----------         Owned        Shares (14)
                                                                                   -------------   ------------
<S>                     <C>               <C>                    <C>               <C>             <C>
DAMON D. NAVARRO
Grove Property Trust     310,406          38,837/(1)(2)/              5.12               *           5.74
598 Asylum Avenue
Hartford, CT  06105

BRIAN A. NAVARRO
Grove Property Trust     302,853          36,001/(1)(3)/              4.99               *           5.57
598 Asylum Avenue
Hartford, CT  06105

</TABLE> 

                                       40
<PAGE>
 
<TABLE> 

<S>                     <C>               <C>                    <C>               <C>             <C>
EDMUND F. NAVARRO
Grove Property Trust     267,705          36,001/(1)(4)/              4.41               *           4.99
598 Asylum Avenue
Hartford, CT  06105

JOSEPH R. LABROSSE
Grove Property Trust     72,676            9,164/(1)(5)/              1.20               *           1.35
598 Asylum Avenue
Hartford, CT  06105

GERALD A. MCNAMARA
Grove Property Trust     33,795/(13)/      6,790/(6)/                 *                  *           *
598 Asylum Avenue
Hartford, CT  06105

JAMES F. TWADDELL
Schneider Securities,         0           43,311/(7)(8)/              0                  1.1         *
Inc.
2 Charles Street
Providence, Rhode
Island  02904

HAROLD V. GORMAN
Heublein, Inc.                0            3,542/(9)/                 0                  *           *
450 Columbus Boulevard
Hartford, CT  06103

J. JOSEPH GARRAHY
220 South Main Street         0            3,542/(10)/                 0                  *          *
Providence, Rhode
Island  02903

THEODORE R. BIGMAN
Morgan Stanley Group          0          777,778/(11)/                 0                 19.7       12.82
Inc.
1221 Avenue of the
Americas
22nd Floor
New York, NY  10020

</TABLE> 

                                       41
<PAGE>
 
<TABLE> 

<S>                             <C>                    <C>                 <C>              <C>            <C> 
All Trustees and
Executive Officers              987,435                954,766             16.27            23.7           31.65
as a group (8
persons)
 
MORGAN STANLEY GROUP
INC.                                  0          777,778/(11)/                 0            19.7           12.82
1221 Avenue of the
Americas
22nd Floor
New York, NY  10020

OREGON PUBLIC
EMPLOYEES'                            0          391,392/(12)/                 0             9.9            6.45
RETIREMENT FUND, by
ABKB/LaSalle
Securities Limited,
as agent for Oregon
Public Employees'
Retirement Fund
100 East Pratt Street
20th Floor
Baltimore, MD  21202

</TABLE>

*   less than one percent

(1)  Includes Common Shares owned by Grove Equity Partnership, a partnership
     whose general partners are Messrs. Damon Navarro, Brian Navarro, Edmund
     Navarro and Joseph LaBrosse, which beneficially owns 35,849 Common Shares
     (less than 1% of the Common Shares).  Each partner's pro rata shares of the
     partnership's Common Shares has been included in the Common Shares owned by
     such partner.

(2)  Includes 18,231 Common Shares subject to options to purchase Common Shares
     granted pursuant to the 1994 Plan.

(3)  Includes 16,830 Common Shares subject to options to purchase Common Shares
     granted pursuant to the 1994 Plan.
     
(4)  Includes 16,830 Common Shares subject to options to purchase Common Shares
     granted pursuant to the 1994 Plan.
     
(5)  Includes 4,210 Common Shares subject to options to purchase Common Shares
     granted pursuant to the 1994 Plan.
      

                                       42
<PAGE>
 
(6)  Includes 2,951 Common Shares pursuant to the 1994 Plan, McNamara's
     daughter, with subject to options to purchase including 1,181 Common Shares
     respect to which he disclaims Common Shares granted beneficially owned by
     Mr. beneficial ownership.

(7)  Includes 3,542 Common Shares subject to options to purchase Common Shares
     granted pursuant to the 1994 Plan, including 3,071 Common Shares
     beneficially owned by Mr. Twaddell's spouse, with respect to which he
     disclaims beneficial ownership.

(8)  At the time of Grove Property's initial public offering in 1994 (the
     "IPO"), Mr. Twaddell was a principal of Barclay Investments, Inc., the
     managing underwriter of the IPO, which was issued warrants to purchase
     Common Shares at a price of $11.31 per share (the "UNDERWRITER WARRANTS").
     On February 21, 1996, Barclay Investments, Inc. transferred 11,221 of the
     Underwriter Warrants to Mr. Twaddell, which Underwriter Warrants are
     included in the Common Shares owned by Mr. Twaddell.  The Underwriter
     Warrants became exercisable on the first anniversary date of the IPO and
     terminate on the fourth anniversary date of the IPO.

(9)  Includes 3,542 Common Shares subject to options to purchase Common Shares
     granted pursuant to the 1994 Plan.

(10) Includes 3,148 Common Shares subject to options to purchase Common Shares
     granted pursuant to the 1994 Plan.

(11) The Common Shares beneficially owned by Morgan Stanley include Common
     Shares held in investor accounts or entities with respect to which Morgan
     Stanley shares discretionary voting and dispositive authority.  Morgan
     Stanley Asset Management Inc.  ("MSAM"), a wholly-owned subsidiary of
     Morgan Stanley, shares discretionary voting and dispositive power over
     707,071 of such Common Shares (17.9% of the Common Shares) which are held
     in investor accounts or entities, including the Morgan Stanley Real Estate
     Special Situations Fund I, L.P. (214,264 Common Shares, 5.4% of the Common
     Shares), and The Morgan Stanley Real Estate Special Situations Fund II,
     L.P. (285,686 Common Shares, 7.2% of the Common Shares), for which MSAM is
     an investment advisor.  By reason of his relationship with Morgan Stanley
     and MSAM, Mr. Bigman may be deemed to have beneficial ownership of such
     shares pursuant to Rule 13d-3 under the Securities Exchange Act of 1934.
     Pursuant to the Securities Purchase Agreement entered into with Morgan
     Stanley in connection with its purchase of Common Shares in the New Equity
     Investment, Grove Property has (i) agreed to permit Morgan Stanley to
     designate one person to be a member of the Board of Grove Property and to
     nominate that person for election by the Shareholders and (ii) granted to
     Morgan Stanley certain preemptive rights in connection with future
     issuances (with certain exceptions) by Grove Property of Common Shares and
     other securities convertible into Common Shares ("CONVERTIBLE SECURITIES");
     the preemptive rights is to purchase (a) in the case of the issuance by
     Grove Property of Convertible Securities, up to the Percentage Amount of
     such Convertible Securities and (b) in the case of the issuance by Grove
     Property of Common Shares, a number of Common Shares up to that number of
     Common Shares such that Morgan Stanley's 

                                       43
<PAGE>
 
     ownership, following such issuance, would continue to be the Percentage
     Amount of the issued and outstanding Common Shares plus the-exercisable 
     "in-the-money" employee stock options. For the purposes of Morgan Stanley's
     Securities Purchase Agreement and the preemptive rights described in the
     preceding sentence, "Percentage Amount" means 20%, except in the case of
     any proposed issuance of Common Shares for less than $9.00 per share or any
     Convertible Securities where the initial conversion, exchange or exercise
     price, as the case may be, is less than $9.00 per Common Share, in which
     case the "Percentage Amount" means 25%. Morgan Stanley will retain the
     right to nominate a director and the preemptive rights described above
     until the earlier of (i) Morgan Stanley and its affiliates ceasing to own
     at least 10% of the issued and outstanding Common Shares and (ii) Grove
     Property consummating an underwritten public offering of Common Shares
     yielding gross proceeds of at least $40.0 million. Pursuant to a
     Registration Rights Agreement entered into among Grove Property, Morgan
     Stanley and other purchasers in the New Equity Investment, Grove Property
     is required to effect a shelf registration under the Securities Act of
     1933, subject to certain conditions, of the Common Shares beneficially
     owned by Morgan Stanley promptly after September 14, 1997. Moreover,
     subject to certain conditions, the Common Shares beneficially owned by
     Morgan Stanley may be included in the registration of Common Shares when
     Grove Property registers its Common Shares or the Common Shares of other
     holders.

(12) Pursuant to the Securities Purchase Agreement entered into with the Oregon
     Public Employees' Retirement Fund, by ABKB/LaSalle Securities Limited, as
     agent for the Oregon Public Employees' Retirement Fund ("ABKB/LASALLE") in
     connection with its purchase of Common Shares in the New Equity Investment,
     Grove Property has granted to ABKB/LaSalle certain preemptive rights in
     connection with future issuances (with certain exceptions) by Grove
     Property of Common Shares and Convertible Securities; the preemptive right
     is to purchase (a) in the case of the issuance by Grove Property of
     Convertible Securities, up to 9.9% of such convertible Securities and (b)
     in the case of the issuance by Grove Property of Common Shares, a number of
     Common Shares up to that number of Common Shares such that ABKB/LaSalle's
     ownership would continue to be 9.9% of the issued and outstanding Common
     Shares following such issuance.  ABKB/LaSalle will retain the preemptive
     rights described above until the earlier of (i) ABKB/LaSalle and its
     affiliates ceasing to own at least 5.0% of the issued and outstanding
     Common Shares and (ii) Grove Property consummating an underwritten public
     offering of Common Shares yielding gross proceeds of at least $40.0
     million.  Pursuant to a Registration Rights Agreement entered into among
     Grove Property, ABKB/LaSalle and the other purchasers in the New Equity
     Investment, Grove Property is required to effect a shelf registration under
     the Securities Act of 1933, subject to certain conditions, of the Common
     Shares beneficially owned by ABKB/LaSalle promptly after September 14,
     1997.  Moreover, subject to certain conditions, the Common Shares
     beneficially owned by ABKB/LaSalle may be included in the registration of
     Common Shares when Grove Property registers its Common Shares or the Common
     Shares of other holders.

(13) Includes 8,886 Common Units beneficially owned by Mr. McNamara's spouse,
     with respect to which he disclaims beneficial ownership.

                                       44
<PAGE>
 
(14) This column illustrates the proforma percent of Common Shares that would be
     owned in the event all Common Units owned by holders of Common Units were
     redeemed for Common Shares.

COMPENSATION OF THE TRUST MANAGERS

          Grove Property Trust pays its trust managers who are not employees of
Grove Property Trust ("NON-EMPLOYEE TRUST MANAGERS") a fee of $1,000 for
attending each meeting of the Board.  In addition, Grove Property may continue
to reimburse the Trust Managers for travel expenses incurred in connection with
their activities on behalf of Grove Property Trust.  Each Non-Employee Trust
Manager in office at the time of the IPO received options to purchase 2,000
Common Shares at the IPO price ($11 per Common Share) under Grove Property
Trust's 1994 Plan.  Thereafter, beginning with the Annual Meeting held in 1995,
each Non-employee Trust Manager then in office has received an annual grant of
options to purchase 1,000 Common Shares, in each case at the then-current market
price.

          Upon the consummation of the Consideration Transactions, each Non-
employee Trust Manager received a grant of a non-qualified stock option to
purchase 10,000 Common Shares under the 1996 Share Incentive Plan (the "1996
PLAN").  The 1996 Plan provides that each Non-Employee Trust Manager who is
first elected or appointed after the Consolidation Transactions would receive an
automatic initial grant of a nonqualified stock option to purchase 10,000 Common
Shares.  In addition, promptly following the date of each Annual Meeting of
Shareholders (including the 1997 Annual Meeting), each Non-Employee Trust
Manager elected by the Shareholders will receive an additional automatic grant
of an option to purchase 5,000 Common Shares; provided, however, that no Non-
Employee Trust Manager will receive more than one such automatic grant in any
calendar year.  The exercise price for grants to Non-Employee Trust Managers
will be 100% of the Fair Market Value of the Common Shares on the date of grant.
Each such option will expire ten years from the grant date (subject to earlier
termination).  Upon the consummation of the Consolidation Transactions, each
Non-Employee Trust Manager received a grant of options to purchase 10,000 Common
Shares at an exercise price equal to the Fair Market Value of the Common Shares
on the date of grant.  Trust Managers who are employees of Grove Property are
not paid any trust manager fees.

NON-COMPETITION AGREEMENTS

          The Executive Officers have entered into non-competition agreements
with the Company (the "NON-COMPETITION AGREEMENTS").  The Non-Competition
Agreement of each Executive Officer precludes him from directly or indirectly
developing, redeveloping, acquiring, managing or operating multifamily or retail
mixed-use properties, other than the Excluded Properties, which compete with
Grove Property Trust Properties or with properties acquired by Grove Property
Trust in the future (including the Partnership Properties) for so long as he is
an Executive Officer, Trust Manager, significant Shareholder (5% or more of the
outstanding Common Shares) or employee of, or consultant to, Grove Property, and
for a period of twenty-

                                       45
<PAGE>
 
four months after termination thereof other than in the event of termination of
his employment by Grove Property without cause or by the Executive Officer in
the event of a "change in control" or "for good reason" (as defined therein).
Grove Property also has entered into a Non-Competition Agreement with the Grove
Companies which will remain in effect until such time as no person who serves as
a director, general partner or executive officer of the Grove Companies also
serves as a Trust Manager or Executive Officer of Grove Property. Except for the
Executive Officers, no other Trust Manager has an interest in any of the Grove
Companies and no direct or indirect investor in the Grove Companies, other than
the Executive Officers, will be bound by the Non-Competition Agreements.

          The Executive Officers control or share control, and have substantial
economic interest in, the limited partnerships that own the Excluded Properties;
ownership and management of the Excluded Properties are specifically exempted
from the provisions of the Non-Competition Agreement.  Certain of the Excluded
Properties compete with Properties that are in close proximity thereto.



PROPERTY MANAGEMENT SERVICES

   Grove Property Services Limited Partnership  was a Connecticut limited
partnership, wholly owned, directly or indirectly, by the Management Owners.  In
connection with the Consolidation Transactions, Grove Property succeeded to the
property management activities of GPS, and the Operating Partnership has
acquired all of the assets and liabilities of GPS related to property management
activities.  Following the consummation of the Consolidation Transactions, the
Operating Partnership and National Realty provide to the Company and to the
Grove Companies (including the limited partnerships that own Excluded
Properties) the real estate related services previously provided by the
Management Company.  The assets utilized to carry out such property management
services constitute the "Management Division" of Grove Property Trust.  Edmund
F. Navarro, Vice President/Property Management of Grove Property Trust, heads
Grove Property Trust's property management team, and substantially all of the
employees of GPS have become employees of the Operating Partnership in
connection with the Consolidation Transactions.

   The Management Division generates all of its fee income from the Properties
and the Excluded Properties.  In addition to managing the 2,347 multifamily
apartment units and the commercial space in the Properties, the Management
Division manages the remaining Excluded Properties, pursuant to management
services contracts between Grove Property Trust and the affiliated limited
partnerships that own the Excluded Properties.  These properties include 912
apartments in 12 multifamily residential projects, and 8 properties consisting
of 113,300 square feet of commercial space.  The management services agreements
provide that the Operating Partnership receives in exchange for its provision of
property management services, with respect to each Property or Excluded
Property, a fee equal to from 4% to 6% of collected income (excluding interest
income).  Such management services agreements have terms of one year, and 

                                       46
<PAGE>
 
will automatically renew for successive one-year terms if neither party thereto
gives notice of termination within 90 days prior to the end of the then current
term.

MANAGEMENT DIVISION OPERATIONS

   The Management Division manages properties utilizing its staff of
professional and support personnel, including certified regional property
managers, apartment managers, apartment maintenance technicians and leasing
agents, and the services of the Accounting Division of the Management Division.
As of December 31, 1996, the Management Division's property management personnel
consisted of approximately 170 employees. The depth of the Management Division's
organization is intended to enable it to deliver quality services on an
uninterrupted basis, thereby promoting resident satisfaction and improving
resident retention. The services of the Management Division are important to
Grove Property Trust's implementation of its objective to overhaul management
procedures of prior owners of the properties acquired pursuant to its growth
strategy. The Management Division has developed, and continues to improve, on-
site management programs, accounting systems, marketing systems and resident
quality control and retention procedures.

   The Management Division's property management staff are employees of the
Operating Partnership.  The property management team for each Property includes
on-site management and maintenance personnel as well as off-site support staff.
Property management teams perform leasing and rent collection functions and
coordinate resident services.  Substantially all personnel are trained
extensively and are encouraged, and in certain cases required, to continue their
education through Company-designed in-house courses and participation in outside
seminars.  The focus of the Management Division's on-site management program is
to provide prompt, courteous and responsive service to its residents.  The
Management Division monitors the responsiveness of its on-site management
through various resident surveys.  Service request response cards are left in
residents' apartments after any maintenance is performed, soliciting resident
feedback of the service provided.

ACCOUNTING SERVICES

   The Accounting Division of the Management Division is managed by Steven
Splain, Controller of the Company.  The accounting staff audits and monitors
each property's financial records, including monthly income and expense reports,
bank statement reconciliations, rent rolls and economic occupancy reports and
budget compliance.  Staff members visit each site on a regular basis to conduct
on-site audits and supervise on-site bookkeeping.  The information generated
during these visits is used by the Management Division's on-site management
staff at each site to set personal and team goals which relate to budget and
fiscal matters, on a weekly and monthly basis, subject to the supervision of the
Management Division.

PROPERTY MARKETING

   The rental marketing personnel of the Management Division are trained to
assure that each property is marketable, priced realistically and promoted
aggressively.  The Management 

                                       47
<PAGE>
 
Division uses a full range of promotional tools in its marketing programs: 
point-of-purchase materials, high quality curb appeal, targeted advertising and
resident referrals. Instead of waiting until vacancies occur, the Management
Division markets the properties in its management portfolio on a continuous
basis. It takes steps necessary to avoid move-outs by quality residents, which
include quality customer service throughout the lease term and renewal
incentives.

   The Management Division has established specific reporting requirements and
management guidelines to be applied at each of the Properties.  Marketing
reports are prepared by on-site property management staff to track each
Property's occupancy, lease expiration, prospective resident traffic, unit
availability, renewal and rental rates and resident profile information.  The
Management Division's on-site staff, which consists of property managers,
leasing agents, service technicians, porters and landscapers, participates in
weekly goal setting sessions to evaluate these marketing reports and examine
issues relating to resident underwriting, to evaluate progress, to set the next
week's goals and to review financial results.  These sessions are supervised by
the Management Division's marketing director and regional managers.  In this
way, the Management Division encourages customer service and team empowerment.

   Marketing and leasing procedures established by the Management Division are
designed to ensure compliance with all federal, state and local laws and
regulations.  Individual property marketing plans have been structured by the
Management Division to respond to local market conditions.  Resident
underwriting guidelines for prospective residents comply with the FHA and ADA
regulations and are designed to stabilize service levels and cash flow through
lower resident turnover.  None of the Properties is currently subject to rent
control or rent stabilization regulation or deed restrictions.  Grove Property
Trust's standard 12-month lease contracts facilitate uniform lease
administration relating to rent collections, security deposit dispositions,
evictions, repairs and renewals.

CONSTRUCTION SERVICES

   An employee of the Operating Partnership functions as a general contractor,
supervising the various sub-contractors who perform construction and related
services in connection with the redevelopment of the Properties and the Excluded
Properties.

BUSINESS OBJECTIVES AND OPERATING STRATEGIES

     Grove Property's primary business objective is to pursue a growth strategy
which centers on acquisitions and property redevelopment in the Northeastern
United States.  This growth strategy, in turn, is intended to increase
shareholder value through maximizing investment returns with the use of retained
cash in connection with acquisitions to be made by Grove Property.  Toward this
end, Grove Property's distribution policy was changed as described above.  Grove
Property plans to reinvest the retained balance of its cash flow in its
properties, including property redevelopment and additional property
acquisitions, the reduction of outstanding indebtedness and, when  appropriate,
the repurchase of outstanding Common Shares.  Grove Property's decision to
reduce its quarterly cash distribution to Shareholders is not in response to a
reduction in earnings (Grove Property has experienced no such reduction), nor is
such decision in 

                                       48
<PAGE>
 
response to any other adverse occurrence with respect to the business or
operations of Grove Property. Rather, Grove Property believes that focusing its
distribution and investment philosophy on total return to shareholders, rather
than focusing principally on the amount of periodic cash distributions to
shareholders, will enhance long-term shareholder value and could reduce the
volatility of the market price of the Common Shares.

     Management intends to implement its growth strategy by acquiring additional
properties which offer solid and steady growth  opportunities from affiliates of
the Grove Companies or from third party sellers. Management intends to implement
its  growth strategy by acquiring properties at prices below estimated
replacement cost which can generate increased cash flow and long-term investment
value from pre-acquisition  levels through strategic capital improvements
and aggressive property management.  It will seek to acquire properties that (i)
meet an  identified market demand; (ii) are well located and under-performing in
improving rental markets; and (iii) are capable of producing a high component of
current income through value added/return oriented capital improvements to
individual apartment units and property sites, such as adding new amenities,
including fitness centers and community rooms, upgrading landscaping and signage
and improving the overall curb appeal of the property.

     Management believes that its operating strategy will result in growth in
Shareholder value through: (i) maximizing investment returns as quickly as
possible; (ii) maximizing investment returns through rigorous on-site management
which implements an individualized marketing plan for each property responsive
to the character of each site, on both a short and long term basis; and (iii)
increasing investment yields by making return-oriented capital improvements,
which upgrade individual apartment units and property sites and, in turn,
promote stable occupancy rates and justify increased rents.  Management believes
that the use of retained cash in connection with acquisitions to be made by
Grove Property will enhance Shareholder value and return on equity.

ACQUISITION AND DEVELOPMENT STRATEGY

     Management believes that Grove Property, through its common management with
the Grove Companies, has available to it an established network of relationships
with real estate owners, developers, brokers, lenders, and other institutions,
which may provide Grove Property with access to potential acquisitions prior to
them being widely marketed.

     An acquisition target should furnish Grove Property with significant
opportunity for increasing property value through rental increases, reducing
expenses or a combination of such strategies. Local demographics and economics
in the target location should be stable and strong or showing continuing
improvement.  When analyzing acquisition targets, Grove Property conducts market
surveys consisting of a study of the region, community and trading area. A
physical inspection, a review of the resident mix, an assessment of the current
vacancies, and a complete rental analysis is performed.

     Properties held by affiliates of Grove Property may satisfy the economic
and other criteria which form the basis for Grove Property's acquisition
strategy.  Grove Property expects from 

                                       49
<PAGE>
 
time to time to seek to acquire one or more of such properties at such time as
it is able to negotiate a fair price. See "RISK FACTORS - Generally," and
"CONFLICTS OF INTEREST."

REDEVELOPMENT

     The Grove affiliates that previously owned the Original Properties
renovated and upgraded such Properties at the time of the purchase, and the
Operating Partnership has since completed additional renovations.  At all of the
Properties, unit interiors are renovated and upgraded as apartments turn over,
including carpet and appliance replacement and new lighting fixtures as
necessary.  Additionally, at some of the Partnership Properties amenities have
been added, including fitness centers, community rooms with large screen
televisions and kitchen facilities for entertaining residents and guests, and
billiard rooms. Grove Property intends to undertake and/or continue similar
renovations and upgrades in connection with the Partnership Properties.

FUTURE ACQUISITIONS

     In the pursuit of its growth strategy, the Operating Partnership intends
and continues to engage in preliminary discussions with potential sellers of
multifamily properties, whether affiliates of the Company or third-party
sellers. Management believes that an important strategic target for growth
opportunities in Grove Property's primary market are portfolios of multi-unit
apartment communities owned and operated by individuals.  The Company believes
that a significant portion of New England's multi-unit housing properties is
older, and that ownership is very fragmented.  Owners of 75- to 150-unit
complexes in the Company's market area have advised management of the Company
that they would be interested in selling their properties, but they have little
or no tax basis remaining in such properties, and such owners have concluded
that the potential tax liability which may be incurred by them upon outright
sale is prohibitive.  By utilizing the Operating Partnership structure, Grove
Property can offer competitive purchase prices to such owners and make payment
of such purchase prices in Common Units, thereby deferring all or a portion of
an owner's federal income tax liability.

     In the event the Company desires to purchase a property from an affiliate,
Grove Property's investment policies require majority approval of the proposed
purchase by the Trust Managers  independent of the Company (i.e., those who are
neither executive officers of the Company nor affiliates of the Grove Companies,
the "Independent Trust  Managers").  The Charter requires a majority of
Independent Trust Managers on the Board at all times.

     There can be no assurance that the Company will be able to identify
acquisition opportunities, that definitive contracts will be entered into with
respect to any prospective acquisitions, or that the Operating Partnership will
acquire any property as to which it enters into a definitive contract.

                                       50
<PAGE>
 
MARKETS

   Grove Property Trust believes that the existing conditions in the Northeast
market present a substantial barrier to new development.  The Northeast is
defined to include the New England and Mid-Atlantic states.  The existing
density in the Northeast marketplace limits the amount of developable land.  In
addition, zoning is administered at the local level, thereby allowing the
individual localities to impose their own often restrictive policies within the
existing zoning and environmental laws.  The lack of developable land as well as
the current zoning environment contribute to the overall high cost of
construction of apartment communities and corresponding low level of multifamily
development.

   Grove Property Trust's Properties are located in in-fill locations which have
experienced occupancy rates 200 basis points better than the regional average
and approximately 300 basis points better than the national average for 1994 and
1995.  Grove Property Trust expects that the very low vacancy rate of the
Properties, combined with relatively low vacancy rates in its markets as a
whole, will enable the Company to raise rents at the rate of inflation or higher
over the next several years.  The rental revenues of Grove Property Trust's
Properties increased 3.5% for the twelve months ended December 31, 1996 as
compared with the same period in 1995 and 4.4% for the year ended December 31,
1995 as compared to the year ended December 31, 1994.  The following table shows
the 1994, 1995 and 1996 vacancy rates of the Company's Properties as compared
with the Northeast and the United States.

                                 VACANCY RATES

                                Company
                                Properties   Northeast * United States *

                          1994     3.8%         7.1%         7.2%  
                          1995     3.6%         6.9%         7.5%  
                          1996     3.0%         7.1%         7.7%   

    .  Source: Hanley-Wood, U.S.  Housing Markets

   Grove Property Trust believes that occupancy levels at its Properties are
increasing principally because few new apartment communities are being built in
its markets.  For the year ended December 31, 1995, the occupancy rate of the
Properties was 96.4%, and the rate increased to 97.0% for the year ended
December 31, 1996.  Grove Property Trust believes that the lack of new multi-
unit housing properties, the low ratio of rental costs relative to income in two
of its primary markets and its high occupancy rates should result in higher
rental rates and increased appreciation in the value of Grove Property Trust's
assets over the next several years.

MULTIFAMILY

   Management believes that the real estate capital shortage resulting from the
national and regional banking crisis and from residential property over-building
in the 1980's has severely 

                                       51
<PAGE>
 
limited the supply of new multifamily properties entering the Northeast
marketplace since 1991. Grove Property Trust expects that the high land costs
and high construction costs experienced by many Northeast residential property
developers and owners will continue to inhibit new construction in the near
term. Grove Property Trust's resident leases are generally for a one-year term,
so that Grove Property Trust is in a position to increase rents annually if the
market is favorable.

RENTAL RATES AND OCCUPANCY

   The average physical occupancy rate of Grove Property Trust's multifamily
Properties for the twelve months ended December 31, 1996 was 97.0%.  The average
monthly rental rate for the multifamily Properties has increased to $.73 per
square foot per month for the twelve months ended December 31, 1996 from an
average of $.72 per square foot per month for the twelve months ended December
31, 1995.  The total commercial rentable space associated with the Properties is
94,255 square feet.  The average physical occupancy of Grove Property Trust's
commercial Properties for the twelve months ended December 31, 1996 was 98.0%.
The average rent per square foot per month for Grove Property Trust's commercial
Properties has increased to $0.98 per square foot per month for the twelve
months ended December 31, 1996 from an average of $0.78 per square foot per
month for the twelve months ended December 31, 1995.

COMPETITION

   There are numerous housing alternatives that compete with the Properties in
attracting residents.  The Properties compete directly with other multifamily
properties and single family homes that are available for rent in the markets in
which the Properties are located.  The Properties also compete for residents
with the new and existing home market.  In addition, Grove Property Trust
competes with other investors for acquisitions and redevelopment projects, and
some of these competitors have greater resources than Grove Property Trust.



                              PROPERTY INFORMATION
                                        
DESCRIPTION OF THE PROPERTIES

     Set forth below is certain information concerning the GREAT Properties and
the Partnership Properties owned or, in the case of the Partnership Properties,
controlled, directly or indirectly, by Grove Property and the Operating
Partnership following the consummation of the Consolidation Transactions, as
reported in Form 10-KSB filed by Grove Property for the fiscal year ended
December 31, 1996.  For additional financial information relating to the
Company's Properties and results of operations, please see Form 10-QSB and Form
8-K appended as part of Appendix "I" to this Exchange Offer Statement.

   The GREAT Properties consist of four multifamily apartment complexes located
in Hamden, Norwich and Southington, Connecticut, with a total of 257 residential
apartments.  

                                       52
<PAGE>
 
Tenant leases are generally for one year or less, and require security deposits.
The GREAT Properties averaged a 97.6% occupancy rate in 1996. No single tenant
accounts for more than 10% of the GREAT Properties' total revenues.

   In connection with the purchase of the Southington Apartments, the Company
assumed a mortgage note which is secured by the Southington Apartments.  The
acquisition of the Cambridge property was financed by a first mortgage from a
Bank which is secured by a blanket first mortgage lien on the Cambridge
property, the Dogwood Hills and Hamden Center properties.

<TABLE>
<CAPTION>
 
                                                                                 Avg.
                                 Approx.            Avg.   1996    Occupancy    Rental
                          Number Rental             Unit   Avg.       at        Rates
Location and               of     Area     Year     Size   Occup-   2/28/97    Per Unit
Property Name             Units  (Sq.Ft.)  Built    (Sf)   ancy (%)  ($)         ($)
- -------------             -----  --------  -----    ----   -----    --------   --------
<S>                       <C>     <C>      <C>       <C>    <C>      <C>       <C> 
Norwich, CT                                       
  Cambridge Estates                               
  Apartments                92    78,684   1977      855    98.3     100.0     682.27
Hamden, CT                                                          
  Dogwood Hills             46    35,512   1978      772    98.2      97.8     724.16
  Apartments                                                        
  Hamden Center             65    49,140   1968      756    96.7      93.9     639.23
  Apartments                                                        
Southington, CT                                                     
  Baron Apartments          54    48,600   1970      900    96.8      98.2     686.25
                            --   -------   ----      ---    ----      ----   --------
                                                                    
Total/Weighted Avg.        257   211,936             825    97.6      97.8     680.22
                           ===   =======             ===    ====      ====   ========
 
      The following is a summary by apartment type for each of the GREAT
       Properties:
 
                                     1 Bedroom  2 Bedroom   Total
                                     ---------  ---------   -----
Cambridge Estates Apartments            42         50        92
Dogwood Hills Apartments                23         23        46
Hamden Center Apartments                31         34        65
Baron Apartments                        16         38        54
                                        --         --        --
      Total                            112        145       257
 
</TABLE> 

NEW ACQUISITIONS

   The Consolidation Transactions resulted in the consolidation of the holdings
and/or control by the Company of 19 multifamily residential properties and one
neighborhood shopping center, and certain assets and liabilities of GPS.  Three
acquisitions in June, 1997 added three multifamily properties.

                                       53
<PAGE>
 
   The following table sets forth certain information with respect to the
Partnership Properties acquired, controlled, directly or indirectly, by the
Company, as a result of the Consolidation Transactions and the June, 1997
acquisitions:

<TABLE> 
<CAPTION>  
                                                 NO. OF APARTMENTS
                                                 AND/OR COMMERCIAL   OCCUPANCY
NAME OF PROPERTY                 LOCATION         SQUARE FOOTAGE    AT 12/31/96
- -------------------------  --------------------  -----------------  ------------
<S>                        <C>                   <C>                <C>
 
Avonplace Condominiums     Avon, CT                 145                    95.8%
Burgundy Studios Apts      Middletown, CT           102                    99.0%
Arbor Commons              Ellington, CT            28/4,016 sf.          100.0%
Fox Hill Apartments        Enfield, CT              168                    95.2%
The Longmeadow Shops       Longmeadow, MA           79,012 sf.            100.0%
208-210 Main Street        Manchester, CT           28/9,597 sf            96.4%
Loomis Manor               West Hartford, CT         43                   100.0%
Dean Estates II Apts       Cranston, RI              48                    95.8%
Woodbridge Apartments      Newington, CT             73                    97.3%
Royale Apartments          Cranston, RI              76                    94.7%
Colonial Village Apts      Plainville, CT           104                    98.1%
Bradford Commons           Newington, CT             64                    92.2%
Dean Estates Apartments    Taunton, MA               58                    96.6%
Fox Hill Commons           Vernon, CT                74                    94.6%
Park Place West            West Hartford, CT         63                    96.8%
Van Deene Manor            West Springfield, MA     109/1,630 sf          100.0%
Security Manor             Westfield, MA             63                   100.0%
Westwynd Apartments        West Hartford, CT         46                    97.8%
Ocean Reef Apartments      New London, CT           163                    93.9%
Sandalwood Apartments      New London, CT            39                    89.7%
Brook-Syde Apartments      West Hartford, CT         80                    98.0%
Four Winds Apartments      Fall River, MA           168                    99.0%
River's Bend Apartments    Windsor, CT              347                    97.5%
                                                    ---
Total                                            2,090/113,320 sf
</TABLE> 

     In addition to the Properties listed above, the Operating Partnership is
currently making an exchange offer similar to this Exchange Offer to Grove-
Coastal II Associates Limited Partnership, to three other affiliated
partnerships identified below which also own one or more of the Excluded
Properties.  Farmington Summit Associates Limited Partnership owns a total of 64
apartment units at Birch Hill Apartments, Farmington, CT, and 121 apartment
units at Summit Apartments, Farmington, CT.  Heritage Court Associates Limited
Partnership owns a total of 104 apartment units at Heritage Court Apartments,
Glastonbury, CT.  River-Grove Associates Limited Partnership owns a total of 48
apartment units at River-Grove Apartments, Fall River, Massachusetts.  Grove-
Coastal Associates Limited Partnership owns a total of 31 apartment units at
Harbor View Apartments, Warwick, Rhode Island, as well as (i) a building known
as the Wharf Building with three retail leases totaling 10,565 square feet in
Edgartown, Massachusetts, and (ii) a building known as the Corner Block Building
containing approximately 4,000 square 

                                       54
<PAGE>
 
feet of retail space and 1,400 square feet of office space, in Edgartown,
Massachusetts. Grove-Coastal Associates Limited Partnership also owns four
additional retail properties that would not be contributed to either the
Operating Partnership or Wharf Holdings Limited Partnership. If all four of
these exchange offers are accepted, this will result in the addition of 368
apartment units, 14,565 square feet of neighborhood retail space and 4,000
square feet of neighborhood office space. There can be no assurances that any of
these four exchange offers will be accepted by the respective limited partners
of such partnerships. See "SPECIAL FACTORS- Risk Factors-Common Units -
Uncertain Portfolio at Time of Election."


                             FINANCIAL INFORMATION

Selected Financial and Operating Data

     For Condensed Consolidated Financial Statements and Management's Discussion
and Analysis of Financial Condition and Results of Operations, please refer to
Form 10-QSB, filed by Grove Property with the SEC for the quarterly period ended
March 31, 1997, which is appended as part of Appendix "I" attached hereto.


                        VALUATION OF PARTNERSHIP UNITS

  See  "The Consolidation Transactions -- Valuation of the Properties and Other
Assets; Allocation of Common Units" for a description of the valuation of the
Properties acquired by the Operating Partnership in connection with the
Consolidation Transactions.  The Property valuation for the Property Partnership
was determined using the direct capitalization method.  Under this approach, a
single year's income is converted into a market value for a property through the
application of a market derived capitalization rate (the lower the
capitalization rate applied to a property's income, the higher its value).  The
valuation of the Partnership's Property was determined by (i) capitalizing the
estimated net operating income for the Property for the period September 1, 1997
to August 31, 1998, less a reserve for capital expenditures, at a weighted
average capitalization rate of 9.05% (9.00% for the two properties in Martha's
Vineyard, and 9.25% for the Harbor View Apartments in Warwick, Rhode Island),
(ii) deducting the amount of debt on the Partnership Property, (iii) adding the
other assets of the Property Partnership, net of liabilities (such as cash,
accounts receivable, loans receivable, accounts payable and security deposits)
and (iv) deducting any transfer taxes due upon the restructuring of the Property
Partnership, as well as estimated closing costs.  The Operating Partnership and
the Grove Companies determined the appropriate capitalization rate for the
Partnership Property based upon their experience in real estate matters.  They
sought local market sales information for comparable properties, estimated
actual capitalization rates (net operating income less capital reserves divided
by sales price) and then evaluated the Partnership Property in light of its
relative competitive position, taking into account property location, occupancy
rate, overall property condition and other relevant factors.  The Operating
Partnership and the Grove Companies believe that arm's-length purchasers would
base their purchase offers on capitalization rates 

                                       55
<PAGE>
 
substantially similar to those used to calculate the below valuation. The
following table summarizes the amounts used to arrive at the net valuation of a
Partnership Unit:

Estimated gross property valuation                                  $ 5,480,160
Plus: other Partnership assets, net of security deposits               (18,751)
Plus: loans receivable-partners                                          82,260
Plus: affiliates loans receivable                                        59,579
Less: Partnership liabilities (1)                                    (2,795,655)
                                                                   ------------
   Partnership valuation before taxes                                 2,807,989
Less: municipal transfer taxes                                         (13,641)
Less: Closing costs                                                   (109,603) 
                                                                   ------------
     Net Partnership valuation                                      $ 2,684,348
                                                                   ============
 
         Allocation of net Partnership valuation among partners and number of
         Common Units per Partnership Unit:
 
General Partners                                                    $    26,843
Limited Partners                                                      2,657,505
Number of Partnership Units                                               73.67
                                                                   ------------
     Valuation per Partnership Unit                                      36,073
Valuation of one Common Unit                                              10.50
                                                                   ------------
     Number of Common Units per Partnership Unit                        3,435.5
                                                                   ============
                                                              
Cash Consideration per Partnership Unit:                   
Valuation per Partnership Unit                                      $    36,073
Less:  estimated cost of New Equity Investment (7.2%)                   (2,597)
                                                                   ------------
       (cost of funds used to acquire Units)               
     Cash Consideration per Partnership Unit                        $    33,476
                                                                   ============
                                                           
(1) Partnership liabilities include the following:         
    Mortgage debt, including accrued interest                        $2,756,267 
    loans payable, Affiliates                                            15,953 
    Accounts payable, accrued expenses                                   23,435 
                                                                    -----------
           Total Partnership liabilities                             $2,795,655
                                                                    =========== 

                                       56
<PAGE>
 
                   SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES
                                        
     The following is a summary of certain of the federal income tax
consequences of the Exchange Offer, and of the ownership and disposition of
Common Units, that may be relevant to a Limited Partner as a prospective
participant in the Exchange Offer. It is impractical, however, to set forth in
this Exchange Offer Statement all aspects of federal tax law or all tax
consequences resulting from the Exchange Offer that may be relevant to a
particular Participant. This summary is intended to address only some of the
federal income tax considerations that are generally applicable to all
Participants. In addition, this summary does not address aspects of federal
income taxation that may be relevant to certain types of Participants subject to
special treatment under the federal income tax laws (such as certain financial
institutions, tax-exempt organizations, life insurance companies, dealers in
securities or currencies, stockholders holding stock as part of a conversion
transaction, as part of a hedge or hedging transaction, or as a position in a
straddle for tax purposes or foreign corporations or partnerships or persons who
are not citizens or residents of the United States).  Furthermore, the
discussion of various aspects of federal income taxation discussed herein is
based on the Internal Revenue Code of 1986, as amended, existing and proposed
Treasury Regulations thereunder, judicial decisions and administrative rulings
and practice, all of which are subject to change at any time.  Additional
changes in the tax law may be enacted in the future which could affect the tax
aspects of the Exchange Offer or an investment in the Operating Partnership.
Any such changes may be retroactive. Consequently, no assurance can be given
that the federal income tax consequences to a Participant described herein will
not be altered in the future.  This summary is not intended to be a complete
discussion of all tax consequences of the Exchange Offer or the operation of the
Operating Partnership or a substitute for careful tax planning, and does not
address the possible consequences to Participants under the tax laws of the
countries (other than the United States), states or localities where they reside
or otherwise do business or where the Property Partnership or the Operating
Partnership may operate.  Further, the federal income tax consequences to
Participants may be affected by matters not discussed below.  The discussion set
forth below is based upon the assumption that Property Partnership interests
held by Participants and Common Units to be received by Equity Participants in
the Exchange Offer constitute capital assets in the hands of such investors.  In
addition, this discussion assumes that the Property Partnership is classified
for federal income tax purposes as a partnership rather than as an "association"
taxable as a corporation or a publicly traded partnership.  EACH PARTICIPANT IS
URGED TO CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE FEDERAL, STATE, LOCAL
AND FOREIGN TAX CONSEQUENCES TO IT OF PARTICIPATING IN THE EXCHANGE OFFER AND
BECOMING AN OWNER OF COMMON UNITS.

GAIN OR LOSS ON THE EXCHANGE FOR COMMON UNITS

     As a general rule, the exchange of Common Units for a Participant's Units
in the Property Partnership (the "EXCHANGE") should not result in the
recognition of taxable gain or loss to Equity Participants for Federal income
tax purposes.  However, there are a number of exceptions to this general rule
and, depending on the facts associated with any particular Equity Participant or
Partnership Property, an Equity Participant may be required to recognize gain
under one or 

                                       57
<PAGE>
 
more of the rules described below. The basis to an Equity Participant of the
Common Units should be equal to such an Equity Participant's adjusted basis in
its Property Partnership Units, increased by any gain recognized upon the
Exchange, as described below.

     (1) Deemed Cash Distributions.  To the extent the transactions constituting
         -------------------------                                              
the Exchange result in a decrease in an Equity Participant's share of
liabilities (taking into account that a holder of Common Units may be entitled
to a share of Operating Partnership liabilities after the Exchange), by reason
of the assumption or repayment by the Operating Partnership of such liabilities,
such decrease will be treated as a deemed distribution of cash to the Equity
Participant.  An Equity Participant will be required to recognize gain to the
extent that this deemed distribution of cash exceeds its tax basis in its
interest in the Operating Partnership.  In general, a holder of Common Units
should initially have a tax basis in its interest in the Operating Partnership
equal to such holder's adjusted tax basis in the Property Partnership interest
contributed to the Operating Partnership.

     (2) Disguised Sales. The Code and Treasury Regulations regarding "disguised
         ---------------                                                        
sales" generally provide that, unless one of the prescribed exceptions apply, a
partner's contribution of property to a partnership, and the partnership's
simultaneous or subsequent transfer of money (including deemed cash
distributions due to a reduction in liabilities and cash paid to a partner
pursuant to redemption rights) or other property to the partner, will be
presumed to be a taxable sale, in whole or in part, of such property to the
partnership.  Exceptions to the "disguised sale" rules include distribution of
"operating cash flow" of the partnership as defined in Treasury Regulations and
deemed distributions of cash attributable to "qualified liabilities" as defined
in Treasury Regulations.  Accordingly, an Equity Participant will be required to
recognize gain to the extent the deemed distribution of cash described above or
other cash distributions constitute a "disguised sale" of its interest in a
Property Partnership to the Operating Partnership.

     (3) At-Risk Rules. An Equity Participant who is an individual will, subject
         -------------                                                          
to certain limitations, be required to recognize income to the extent the
transactions constituting the Exchange cause such Participant to have a negative
amount "at-risk" in an activity at the close of the taxable year. While not free
from doubt, this provision should not apply to an Equity Participant who
acquired an interest in a Partnership Property (either directly or indirectly
through a Property Partnership) prior to 1987. In addition, these rules apply at
the individual partner level, on an activity-by-activity basis, and not with
respect to an investment in any particular partnership. As a result, individual
Equity Participants must consider their other investments in reviewing the
impact of the "at-risk" rules.

     (4) Section 751 Assets.  To the extent an Equity Participant's interest in
         ------------------                                                    
the Property Partnership is attributable to "substantially appreciated
inventory" or "unrealized receivables" (within the meaning of Section 751 of the
Code) (including the Property Partnership's previously allowed depreciation and
cost recovery deductions subject to recapture) of the Property Partnership, the
Equity Participant may be required to recognize ordinary income on the
contribution of such interest to the Operating Partnership to the extent the
decrease in his ownership interest in such assets is not offset by an increase
in his ownership interest in similar assets of the Operating Partnership.  In
addition, a non-pro rata distribution of money (including 

                                       58
<PAGE>
 
the deemed distributions described above) or property to an Equity Participant
may result in ordinary income to such Participant if such distribution reduces
the Participant's share of the Property Partnership's "unrealized receivables"
or "substantially appreciated inventory" items. To that extent, the Equity
Participant will be treated as having exchanged such assets with the Operating
Partnership in return for a portion of the distribution made to him equal to the
fair market value of his proportionate share of the "unrealized receivables" and
"substantially appreciated inventory." This latter deemed exchange will
generally result in the Equity Participant's recognition of ordinary income
under Section 751(b) of the Code.

     The gain (if any) described in paragraphs (1) through (4) above will
(except as described in paragraph (4)) be taxable as long-term or short-term
capital gain depending on whether the Equity Participant has held its interest
in a Property Partnership for more than one year.

     THE TAX CONSEQUENCES OF THE EXCHANGE TO AN EQUITY PARTICIPANT WILL DEPEND
UPON SUCH PARTICIPANT'S PARTICULAR TAX SITUATION. ACCORDINGLY, PARTICIPANTS ARE
URGED TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES TO
THEM OF THE EXCHANGE.

GAIN OR LOSS ON LIQUIDATION FOR CASH CONSIDERATION

     The liquidation of the Property Partnership and the distribution to Non-
Accredited Participants and Cash Election Participants for Cash Consideration
should result in the recognition of taxable gain for federal income tax
purposes, in the amount of approximately $19,000 per Unit.  Gain realized by a
Non-Accredited Participant or a Cash Election Participant will generally be a
long-term capital gain, except for the portion thereof which is taxable as
ordinary income due to the recapture of certain types of accelerated
depreciation, if any.  Any gain attributable to a Non-Accredited Participant's
or a Cash Election Participant's share of depreciation recapture will be taxed
at ordinary income rates.  The estimated amount of gain specified above is based
on the assumption that the Limited Partner became a partner upon formation of
Grove-Coastal.  Limited Partners should consult their tax advisers to determine
the proper treatment of this item.

     Assuming that a Non-Accredited Participant or a Cash Election Participant
does not "materially participate" in the activities of the Property Partnership,
the taxable income realized by a Non-Accredited Participant or a Cash Election
Participant by reason of the Exchange Offer should be characterized as income
from a "passive activity" and may be offset by a Non-Accredited Participant's or
a Cash Election Participant's available "passive activity losses" (including
suspended losses).  Losses from passive activities may only be offset against
income from passive activities or may be deducted in full when the taxpayer
disposes of the passive activity from which the loss arose.  The amount of each
Non-Accredited Participant's and each Cash Election Participant's available
"passive activity losses" depends, in part, on the amount of losses previously
allocated to such Non-Accredited Participant or Cash Election Participant from
Grove-Coastal and the amount of such losses that were previously applied by such
Non-Accredited Participant or Cash Election Participant to offset its taxable
income from other sources.

                                       59
<PAGE>
 
FEDERAL INCOME TAX CONSEQUENCES OF HOLDING COMMON UNITS IN THE OPERATING
PARTNERSHIP

     Because all of the Equity Participants are already partners in Grove-
Coastal, the tax consequences generally of being a partner in a partnership
(e.g., taxation of partnerships generally, allocations of partnership income or
loss, adjustments to, and calculation of tax basis in a partnership interest,
treatment of cash distributions from the partnership, limitations on the
deductibility of partnership losses or of a partner's share of interest expense
incurred by the partnership, and recognition of gain or loss on the liquidation
of a partnership) are not discussed in this Exchange Offer Statement.
Nevertheless, certain tax consequences of holding Common Units relating directly
to the Exchange Offer are discussed below.

     Code Section 704(c) Allocations.  Pursuant to Section 704(c) of the Code,
income, gain, loss and deductions attributable to appreciated or depreciated
property that is contributed to a partnership in exchange for an interest in the
partnership (such as the contribution by the Equity Participants of their
interests in the Property Partnerships) must be allocated in a manner such that
the contributing partner is charged with, or benefits from, respectively, the
unrealized gain or unrealized loss associated with the property at the time of
the contribution.  In addition, Treasury Regulations under Section 704(c)
provide a partnership with several methods for the treatment of such tax items.
As general partner of the Operating Partnership, Grove Property will have the
authority to select such method.  The OP Partnership Agreement will require that
allocations be made in a manner consistent with Section 704(c) of the Code. As a
result, for federal income tax purposes, the Equity Participants (as partners in
the Operating Partnership) may be allocated lower amounts of the depreciation
deductions of the Operating Partnership (and Grove Property may be allocated
higher amounts of such depreciation deductions) than such deductions would be if
determined on a pro rata basis. Furthermore, any gain recognized by the
Operating Partnership on the disposition of such contributed Properties
generally will be allocated to the Equity Participants to the extent
attributable to the difference between the fair market value of the contributed
Property at the time of contribution, and the adjusted tax basis of such
Property at the time of contribution, and Grove Property will be allocated only
its share of gains attributable to appreciation in the Properties, if any,
occurring after the Exchange Offer.

     Sale or Exchange of Common Units.  A holder of Common Units generally will
recognize gain or loss on the sale or exchange of a Common Unit (whether
pursuant to the Redemption/ Exchange Rights or otherwise) equal to the
difference between the amount realized on the disposition (generally the amount
of cash and the fair market value of Common Shares or other property received,
plus the holder's allocable share of the liabilities of the Operating
Partnership) and the holder's adjusted tax basis in the Common Unit. Such gain
or loss generally will be capital gain or loss and will be long-term or short-
term, depending upon whether the holder has held such Common Units for more than
one year. Nevertheless, to the extent that the consideration received upon such
sale or exchange is attributable to a holder's allocable share of the value of
the Operating Partnership's "substantially appreciated inventory" items and
"unrealized receivables" (including previously allowed depreciation and cost
recovery deductions subject to recapture) within the meaning of Code Section
751, such consideration would be 

                                       60
<PAGE>
 
treated as having been realized from the sale or exchange of a non-capital
asset, and the difference between such amount and the portion of the holder's
tax basis in its Common Units attributable to such items would be treated as
ordinary income (even if a loss otherwise would be recognized upon the sale of
Common Units).

STATE AND OTHER TAX CONSIDERATIONS

     The Operating Partnership and the holders of Common Units may be subject to
other taxes, such as state and local income taxes, transfer taxes,
unincorporated business taxes, gift taxes and state inheritance or intangible
taxes that may be imposed by various jurisdictions. Each person considering
participating in the Exchange Offer is urged to consult with their own tax
advisor for advice as to state, local or other taxes which may be payable in
connection with their participation in the Exchange Offer, or their investment
in Common Units.

     The Operating Partnership may subsequently request Equity Participants to
provide certain certifications, including certifications signed under penalty of
perjury, as to their non-foreign status for federal income tax purposes or as to
their residency or status under similar provisions of applicable state law. The
Operating Partnership may be required to withhold a portion of the consideration
otherwise payable to any Participant who fails to provide such certifications.

     THE FOREGOING IS MERELY A SUMMARY OF CERTAIN ASPECTS OF THE FEDERAL INCOME
TAX CONSEQUENCES TO PARTICIPANTS IN THE EXCHANGE. IT DOES NOT PURPORT TO BE
EITHER A COMPLETE ANALYSIS OR A COMPLETE LISTING OF ALL POTENTIAL TAX
CONSIDERATIONS OR TAX RISKS INHERENT IN THE EXCHANGE OFFER OR IN THE OWNERSHIP
OR DISPOSITION OF COMMON UNITS IN THE OPERATING PARTNERSHIP, AND IS NOT A
SUBSTITUTE FOR CAREFUL TAX PLANNING.  ACCORDINGLY, PERSONS CONSIDERING
PARTICIPATING IN THE EXCHANGE OFFER ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
PARTICIPATING IN THE EXCHANGE OFFER AND AN INVESTMENT IN THE OPERATING
PARTNERSHIP.

                        SUMMARY OF ERISA CONSIDERATIONS
                                        
     The following section sets forth a summary of certain material
considerations arising under ERISA and the provisions of Code Section 4975 that
a Participant that is a Plan Fiduciary (as defined in the Glossary) should
consider before deciding whether to invest in Common Units.

     A DESCRIPTION OF ALL ASPECTS OF THE APPLICABLE RULES IN ERISA AND THE CODE
AND, TO THE EXTENT NOT PRE-EMPTED, STATE LAW THAT COULD AFFECT SUCH AN
INVESTMENT IS BEYOND THE SCOPE OF THIS EXCHANGE OFFER STATEMENT.  THEREFORE,
EACH PARTICIPANT THAT IS A PLAN FIDUCIARY IS URGED TO SEEK ADVICE FROM HIS OR
HER OWN ADVISORS REGARDING ITS INVESTMENT IN COMMON UNITS.

                                       61
<PAGE>
 
     ERISA generally requires that the assets of an Employee Benefit Plan (as
defined in the Glossary) be held in trust, and that the trustee or a duly
authorized investment manager (within the meaning of Section 3(38) of ERISA)
have the exclusive authority and discretion to manage and control the assets of
the Plan. As discussed below, the Purchaser believes that its assets will not be
deemed to be "plan assets" of any Employee Benefit Plan owning Common Units. In
the event that the assets of the Purchaser are nevertheless deemed to be plan
assets, the Trust Managers and Executive Officers of the Company could be deemed
to be fiduciaries with respect to certain of such Employee Benefit Plans. As
such, they would be held to the fiduciary standards of ERISA in all investments
and the Plan Fiduciary of each affected Employee Benefit Plan could be liable
for investments that do not conform to such standards. In addition, if the Trust
Managers and Executive Officers are considered fiduciaries under ERISA and the
Code, they would also be "parties in interest" under ERISA (and "disqualified
persons" under the Code) with respect to the affected Employee Benefit Plans,
and one or more of their affiliates also could be so characterized. ERISA and
the Code specifically prohibit an Employee Benefit Plan from engaging in certain
transactions ("PROHIBITED TRANSACTIONS") involving plan assets with parties in
interest or disqualified persons unless an exemption applies. Under these rules,
certain of the contemplated transactions between Grove Property, the Trust
Managers and the Executive Officers (and certain of their affiliates) and the
Purchaser could constitute prohibited transactions. In such event, certain of
the parties involved in the transaction could be required to undo the
transaction, restore to the Plan any profit (or make up for any loss) realized,
and pay an excise tax. If an individual retirement account (an "IRA") engaged in
a prohibited transaction, it could lose its tax-exempt status but, in that case,
the other penalties for prohibited transactions would not apply.

PLAN ASSETS-IN GENERAL

     The United States Department of Labor (the "DOL") has promulgated the DOL
Regulation defining the term "plan assets" for purposes of the fiduciary
requirements of ERISA and the prohibited transaction provisions of ERISA and the
Code. Under the DOL Regulation, when an Employee Benefit Plan makes an equity
investment in another entity, the underlying assets of the entity generally will
not be considered plan assets if (i) the equity interest is a "publicly offered
security" or a security issued by an investment company registered under the
Investment Company Act of 1940, (ii) the entity is an "operating company,"
including a "real estate operating company" (a "REOC"), or (iii) equity
participation in such entity by Benefit Plan Investors is not significant (the
"INSIGNIFICANT PARTICIPATION TEST").

APPLICATION OF DOL REGULATION TO GROVE PROPERTY

     Grove Property believes that its assets should not be considered to be plan
assets of any Employee Benefit Plan that owns Common Shares within the meaning
of the DOL Regulation at the time of the Exchange Offer, and intends to use its
best efforts to restrict the ownership by Benefit Plan Investors of Common
Shares that are not registered under the Securities Act at all times so that it
continues to meet the Insignificant Participation Test.

                                       62
<PAGE>
 
APPLICATION OF DOL REGULATION TO THE PURCHASER

     Even if the assets of Grove Property are not deemed to be plan assets, the
assets of the Purchaser could be if any Employee Benefit Plan owns Common Units
unless the Purchaser meets the Insignificant Participation Test or is a REOC.

     The DOL Regulation provides that a "publicly offered security" is a
security that is (i) freely transferable, (ii) part of a class of securities
that is owned by 100 or more investors who are independent of the issuer and one
another, and (iii) either part of a class of securities registered under Section
12(b) or (g) of the Securities Exchange Act of 1934 or is sold to the plan as
part of an offering of securities to the public pursuant to an effective
registration statement under the Securities Act and the class of securities of
which such security is a part is registered under the Securities Exchange Act of
1934 within 120 days (or such later time as may be allowed by the SEC) after the
end of the fiscal year of the issuer during which the offering of such
securities to the public occurred. Since the Common Units are not publicly
offered securities within the meaning of the DOL Regulation, the Purchaser must
meet the Insignificant Participation Test or qualify as a REOC.

     An entity will meet the Insignificant Participation Test if, immediately
after the most recent acquisition of any equity interest in the entity, less
than 25% of each class of its equity interests is held in the aggregate by
Benefit Plan Investors. For this purpose, Benefit Plan Investors include
Employee Benefit Plans (and any other employee benefit plans whether or not
subject to ERISA), and entities the underlying assets of which include plan
assets as a result of a Plan's investment therein. In computing the percentage
of a class of equity interests that is owned by Benefit Plan Investors, equity
interests owned by non-Benefit Plan Investors who have discretionary authority
over, or who provide investment advice for a fee (direct or indirect) with
respect to, the assets of the entity being tested, or any affiliate of such a
person ("ENTITY MANAGERS"), are disregarded. The Insignificant Participation
Test must be met on the date a Benefit Plan Investor first owns an equity
interest and at all times thereafter.

     The Purchaser will use its best efforts to ensure that less than 25% of the
Common Units owned by persons other than Entity Managers will be owned by
Benefit Plan Investors within the meaning of the DOL Regulation at the time of
the effectuation of the Exchange Offer, and will not admit any person as a
limited partner (or permit the exchange of any limited partnership interest)
unless the Insignificant Participation Test will be met immediately thereafter
or it has received an opinion of counsel that the Purchaser is a REOC or that
another exception in the DOL Regulation applies. Based on the foregoing, and
assuming that the assets of Grove Property are not deemed to be plan assets, the
Purchaser believes that its assets will not be considered plan assets under the
DOL Regulation.

     An entity that does not meet the Insignificant Participation Test may still
be exempt from plan asset treatment if it is a REOC. In order to qualify as a
REOC, from the date of its first investment, and thereafter on any date in each
"annual valuation period" (as defined in the DOL Regulation), the entity seeking
REOC status must (i) invest at least 50% of its assets, valued at cost and
without regard to short-term investments pending long-term commitment or
distribution 

                                       63
<PAGE>
 
to investors, in "real estate" which is "managed" or "developed," and with
respect to which the entity has the right to substantially participate directly
in the management or development activities and (ii) engage, in the ordinary
course of its business, directly in real estate management and development
activities with respect to such real estate investments. No determination has
been made whether the Purchaser can qualify as a REOC.

     A plan established and maintained by a state, any political subdivision of
a state, or by any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees ("A GOVERNMENTAL PLAN") that is
not subject to ERISA or Section 4975 of the Code is subject to state statutes
regulating its investments and the obligations of its fiduciaries. NO ATTEMPT
HAS BEEN MADE IN THIS SECTION TO DISCUSS ANY OF THE SPECIAL CONSEQUENCES THAT
ARE RELEVANT TO A GOVERNMENTAL PLAN UNDER SUCH STATE STATUTES. ANY FIDUCIARY OF
A GOVERNMENTAL PLAN THAT OWNS UNITS IS URGED TO SEEK ADVICE FROM HIS OR HER
ADVISORS REGARDING THE MATTERS SET FORTH IN THIS EXCHANGE OFFER.

                          THE OP PARTNERSHIP AGREEMENT
                                        
          The following summary of the OP Partnership Agreement and the
description of certain provisions set forth elsewhere in this Exchange Offer,
are qualified in their entirety by reference to the OP Partnership Agreement,
which has been filed with the SEC, and is available for review by Limited
Partners.  See "AVAILABLE INFORMATION."

MANAGEMENT.  The Operating Partnership is a Delaware limited partnership.  Grove
- ----------                                                                      
Property is the sole general partner of, and currently owns approximately 61% of
the economic interests in, the Operating Partnership.  Grove Property will
conduct substantially all of its business through the Operating Partnership.
Generally, pursuant to the OP Partnership Agreement, Grove Property, as the sole
general partner of the Operating Partnership will have full, exclusive and
complete responsibility and discretion in the management and control of the
Operating Partnership, including the ability to cause the Operating Partnership
to enter into certain major transactions including acquisitions, dispositions
and refinancings and to cause changes in the Operating Partnership's line of
business and distribution policies.

          The limited partners of the Operating Partnership have no authority to
transact business for, or participate in the management activities or decisions
of, the Operating Partnership, except as provided in the OP Partnership
Agreement and as required by applicable law.

INDEMNIFICATION.  To the extent permitted by law, the OP Partnership Agreement
- ---------------                                                               
provides for indemnification of Grove Property, as general partner, its officers
and trust managers and such other persons as Grove Property may designate to the
same extent indemnification is provided to officers and trust managers of Grove
Property in its Charter, and limits the liability of Grove Property and its
officers and trust managers to the Operating Partnership to the same extent
liability of officers and trust managers of Grove Property is limited under the
Charter.

                                       64
<PAGE>
 
TRANSFERABILITY OF INTERESTS.  Except for a transaction described in the
- ----------------------------                                            
following two paragraphs, the OP Partnership Agreement provides that Grove
Property may not voluntarily withdraw from the Operating Partnership, or
transfer or assign its interest in the Operating Partnership, without the
consent of holders of 66% of the limited partner interests. Pursuant to the OP
Partnership Agreement, the limited partners have agreed not to transfer, assign,
sell, encumber or otherwise dispose of, without the consent of Grove Property,
their interest in the Operating Partnership, other than to family members or
accredited investors who agree to assume the obligations of the transferor under
the Partnership Agreement subject to a right of first refusal for the benefit of
the Company.

           The Operating Partnership may not engage in any merger, consolidation
or other combination with or into another person, sale of all or substantially
all of its assets or any reclassification, recapitalization or change of its
outstanding equity interests (a "TERMINATION TRANSACTION"), unless the
Termination Transaction has been approved by holders of at least 66% of the
Common Units (including Common Units held by Grove Property, which currently
represents approximately 61% of all Common Units outstanding) and in connection
with which all holders of Common Units will receive, or will have the right to
elect to receive, for each Common Unit an amount of cash, securities, or other
property equal to the product of the number of Common Shares for which each
Common Unit is then exchangeable and the greatest amount of cash, securities, or
other property paid to the holder of one Common Share in consideration of one
Common Share pursuant to the Termination Transaction. If, in connection with the
Termination Transaction, a purchase, tender or exchange offer shall have been
made to and accepted by the holders of more than 33% of the outstanding Common
Shares, each holder of Common Units will receive, or will have the right to
elect to receive, the greatest amount of cash, securities or other property
which such holder would have received had it exercised its right to redemption
and received Common Shares in exchange for its Common Units immediately prior to
the expiration of such purchase, tender or exchange offer, and had thereupon
accepted such purchase, tender or exchange offer.

          The Operating Partnership may also merge or otherwise combine its
assets with another entity if the following conditions are met: (i)
substantially all of the assets directly or indirectly owned by the surviving
entity are held directly or indirectly by the Operating Partnership or another
limited partnership or limited liability company which is the survivor of a
merger, consolidation or combination of assets with the Operating Partnership
(in each case, the "SURVIVING PARTNERSHIP"); (ii) the limited partners of the
Operating Partnership own a percentage interest of the Surviving Partnership
based on the relative fair market value of the net assets of the Operating
Partnership and the other net assets of the Surviving Partnership immediately
prior to the consummation of such transaction; (iii) the rights, preferences and
privileges of the limited partners of the Operating Partnership in the Surviving
Partnership are at least as favorable as those in effect immediately prior to
the consummation of such transaction and as those applicable to any other
limited partners or non-managing members of the Surviving Partnership; and (iv)
such rights of the limited partners of the Operating Partnership include the
right to exchange their interests in the Surviving Partnership for at least one
of the following: (a) the consideration available to such persons pursuant to
the preceding paragraph, or (b) if the ultimate controlling person of the
Surviving Partnership has publicly traded common equity 

                                       65
<PAGE>
 
securities, such common equity securities, with an exchange ratio based on the
relative fair market value of such securities and the Common Shares. For
purposes of this paragraph, the determination of relative fair market values
shall be reasonably determined by Grove Property as of the time of the
Termination Transaction and, to the extent applicable, shall be no less
favorable to the limited partners of the Operating Partnership than the relative
values reflected in the terms of the Termination Transaction.


          In respect of any transaction described in the preceding two
paragraphs, Grove Property is required to use its commercially reasonable
efforts to structure such transaction to avoid causing the limited partners of
the Operating Partnership to recognize gain for federal income tax purposes by
virtue of the occurrence of or their participation in such transaction. The
Operating Partnership will also use commercially reasonable efforts to cooperate
with the limited partners of the Operating Partnership to minimize any taxes
payable in connection with any repayment, refinancing, replacement or
restructuring of indebtedness, or any sale, exchange, or any other disposition
of assets, of the Operating Partnership, including, without limitation, amending
the OP Partnership Agreement to provide obligations on the part of any affected
partner to restore deficit balances in its capital accounts as of the time of
liquidation of the Operating Partnership and to maintain a corresponding level
of recourse debt to match such obligations or maintaining a level of non-
recourse debt that can be allocated to, and included in the tax basis of, such
partners, pursuant to the regulations under Section 752 of the Code.

ISSUANCE OF ADDITIONAL COMMON UNITS.  As sole general partner of the Operating
- -----------------------------------                                           
Partnership, Grove Property has the ability to cause the Operating Partnership
to issue additional Common Units representing general and limited partnership
interests in the Operating Partnership, including preferred common units
representing limited partnership interests.

CAPITAL CONTRIBUTION.  The OP Partnership Agreement provides that if the
- --------------------                                                    
Operating Partnership requires additional funds at any time or from time to time
in excess of funds available to the Operating Partnership from borrowings or
capital contributions, Grove Property may borrow such funds from a financial
institution or other lender or through public or private debt offerings and lend
such funds to the Operating Partnership on the same terms and conditions as are
applicable to Grove Property's borrowing of such funds.  As an alternative to
borrowing funds required by the Operating Partnership, Grove Property may
contribute the amount of such required funds as an additional capital
contribution to the Operating Partnership.  If Grove Property so contributes
additional capital to the Operating Partnership, Grove Property's partnership
interest in the Operating Partnership will be increased on a proportionate
basis.  Conversely, the partnership interests of the limited partners will be
decreased on a proportionate basis in the event of additional capital
contributions by Grove Property.

AWARDS UNDER SHARE INCENTIVE PLAN.  If Common Shares are issued pursuant to an
- ---------------------------------                                             
award granted under the 1996 Plan, the OP Partnership Agreement and the 1996
Plan require Grove Property to contribute to the Operating Partnership, as an
additional contribution, any consideration received by Grove Property Trust upon
such issuance.  Upon such contribution Grove Property will be issued a number of
Common Units in the Operating Partnership equal to the number of Common Shares
so issued.

                                       66
<PAGE>
 
DISTRIBUTIONS.  The OP Partnership Agreement sets forth the manner in which the
- -------------                                                                  
net cash flow of the Operating Partnership (which includes operating revenues
and proceeds from sales or refinancings less certain expenditures) will be
distributed with respect to the Common Units.

LIMITED PARTNER REDEMPTION/EXCHANGE RIGHTS.  Commencing one year following the
- ------------------------------------------                                    
closing of this Exchange Offer, Limited Partners who acquire Common Units in the
Operating Partnership will have the right to require the Operating Partnership
to redeem part or all of their Common Units for cash (based on the fair market
value of an equivalent number of Common Shares at the time of such redemption)
or, at the election Grove Property Trust, to exchange such Common Units for
Common Shares. If Grove Property Trust elects to exchange Common Units for
Common Shares, each Common Unit will be exchangeable for one Common Share,
subject to adjustment in the event of stock splits, distribution of rights,
extraordinary dividends and similar events.

          In order to protect Grove Property's status as a REIT, a holder of
Common Units is prohibited from exchanging such Common Units for Common Shares
to the extent that, as a result of such exchange, any person would own or would
be deemed to own, actually or constructively, Equity Shares in excess of the
Ownership Limit, or the Executive Officer Ownership Limit, as applicable, except
to the extent such holder has been granted an exception to the Ownership Limit,
or would otherwise cause Grove Property to fail to continue to qualify as a
REIT.

TAX MATTERS.  Pursuant to the OP Partnership Agreement, Grove Property will be
- -----------                                                                   
the "tax matters partner" of the Operating Partnership and, as such, will have
authority to make tax elections under the Code on behalf of the Operating
Partnership.

          The net income or net loss of the Operating Partnership generally will
be allocated to Grove Property and the limited partners in accordance with their
percentage interests, subject to compliance with the provisions of Sections
704(b), respecting allocations generally, and 704(c), respecting allocations
with respect to contributed properties, of the Code and the applicable Treasury
Regulations.

OPERATIONS.  The OP Partnership Agreement requires that the Operating
- ----------                                                           
Partnership be operated in a manner that will enable Grove Property to satisfy
the requirements for qualification as a REIT and to avoid any federal income or
excise tax liability.

CERTAIN LIMITED PARTNER APPROVAL RIGHTS.  The OP Partnership Agreement provides
- ---------------------------------------                                        
that if the limited partners own at least 5% of the outstanding Common Units
(including Common Units held by Grove Property Trust), Grove Property Trust
shall not, on behalf of the Operating Partnership, take any of the following
actions without the prior consent of the holders of more than 50% (excluding
Common Units held by Grove Property Trust) of the Common Units representing
limited partner interests: (i) dissolve the Operating Partnership, other than
incident to a merger or sale of substantially all of the Company's assets; or
(ii) prior to the fifth anniversary of the consummation of the Consolidation
Transactions, sell in a taxable transaction 

                                       67
<PAGE>
 
the Fox Hill Commons, Colonial Village Apartments or Woodbridge Apartments
Properties, other than incident to a merger or sale of substantially all of the
Company's assets.

TERM.  The Operating Partnership will continue in full force and effect until
- ----                                                                         
December 31, 2056 or until sooner dissolved and terminated pursuant to the terms
of the OP Partnership Agreement.


                             ADDITIONAL INFORMATION
                                        

     The Purchaser will provide any other relevant information reasonably
requested which may provide assistance in making a decision whether to
participate in the Exchange Offer. For additional information or copies of any
of the transaction documents referred to in this Exchange Offer Statement, or to
arrange for a meeting to discuss in detail any of the Disclosure Materials or
any other matters relating to the Exchange Offer, please contact Damon Navarro,
Grove Investment Group, 598 Asylum Avenue, Hartford, Connecticut 06105
(telephone: (860) 246-1126).

     If a Limited Partner has not completed and returned the Accredited Investor
Questionnaire sent to all Limited Partners with the Letter of Transmittal, it
must do so in order to participate in the Exchange Offer. A completed and signed
Questionnaire can be returned to the Purchaser together with the enclosed Letter
of Transmittal.  An additional copy of the Questionnaire can be obtained as
described above.



                                    GLOSSARY
                                        
     Unless the context otherwise requires, the following capitalized terms
shall have the meanings set forth below for the purposes of this Exchange Offer:

     "Accounting Division" means the accounting division of Grove Property.

     "Accredited Investor" means an "Accredited Investor" as defined in
Regulation D, promulgated under the Securities Act, and any applicable state
securities laws.

     "AMEX" means the American Stock Exchange, Inc.

     "Benefit Plan Investor" means a "benefit plan investor" as defined in the
DOL Regulation.

     "Board" means the Board of Trust Managers of Grove Property.

     "Bylaws" means Grove Property's Bylaws.

                                       68
<PAGE>
 
     "Cash Consideration" means the amount of cash that would be distributed to
any Cash Election Participants.

     "Cash Election Participants" means Non-Accredited Participants and Limited
Partners which do not elect to exchange their Partnership Units for Common Units

     "Charter" means, as amended from time to time, Grove Property's Second
Amended and Restated Declaration of Trust.

     "Code" means the Internal Revenue Code of 1986, as amended from time to
time.

     "Common Shares" means Grove Property's common shares of beneficial
interest, $0.01 par value per share.

     "Common Units" means units representing ownership interests in the
Operating Partnership.

     "Company" means Grove Property and its subsidiaries (including the Property
Partnerships and the Operating Partnership) on a consolidated basis, giving
effect to the consummation of the Consolidation Transactions.

     "Consolidated Assets" means, collectively, the GREAT Assets, certain assets
and liabilities of the Management Company acquired by the Operating Partnership
in connection with the Consolidation and the Partnership Properties.

     "Consolidation" means the consolidation of (i) the GREAT Assets, (ii)
ownership and/or control of the Partnership Properties and (iii) certain assets
and liabilities of the Management Company used or arising in connection with the
provision of real estate management related services, in the Operating
Partnership, in connection with the Consolidation Transactions.

     "Consolidation Transactions" means the consolidation transactions more
fully described in "The Consolidation Transactions - The Consolidation".

     "Consolidation Valuations" means the value assigned to the Property
Partnerships, the other Consolidated Assets contributed to the Operating
Partnership and the Operating Partnership in connection with the Consolidation
Transactions.

     "Contribution Agreement" means the contribution agreement among Grove
Property, the Grove Companies and the Operating Partnership.

     "Credit Facility" means, together, the Long-Term Facility and the Revolving
Credit Facility.

                                       69
<PAGE>
 
     "Deferred Stock Grants" means annual grants of restricted Common Shares to
be granted (if earned) to the Executive Officers pursuant to the 1996 Plan, as
incentive compensation upon the achievement by the Company of certain enumerated
goals.

     "Disclosure Materials" has the meaning set forth in this Exchange Offer
under the caption "Disclosure Materials", and includes those materials
identified, attached or referenced in Appendix I hereto.

     "DOL Regulation" means 29 CFR Section 2510.3-101.

     "Employee Benefit Plan" or "Plan" means an "employee benefit plan," as
defined in and subject to ERISA Section 3(3), or a "plan," as defined in Code
Section 4975, including any plan that provides welfare benefits or retirement
benefits to an individual or to an employer's employees and their beneficiaries,
such as a corporate pension or profit-sharing plan, a "simplified employee
pension plan," a so-called "Keogh" plan for self-employed individuals (including
partners), a funded health insurance plan, an individual retirement account
described in Code Section 408 ("IRAS") and any entity, such as a group trust or
separate account of an insurance company, that is treated as holding the assets
of any such plan.

     "Equity Consideration" means the number of Common Units for each Property
Partnership Unit tendered.

     "Equity Participant" means a tendering Limited Partner which receives
Common Units in the Exchange Offer.

     "Equity Shares" means Common Shares and/or Preferred Shares of Grove
Property.

     "ERISA" means the Employee Retirement Income Security Act of 1974, as it
may be amended from time to time.

     "Excess Shares" means, pursuant to the Charter, any Equity Shares
purportedly transferred which would otherwise violate the Ownership Limit in the
hands of the purported transferee, or any Equity Shares sold, transferred,
assigned, devised or otherwise disposed of by a Grove Property shareholder which
result in (i) Common Shares and/or Preferred Shares being owned by less than 100
shareholders; (ii) the Company being "closely held" within the meaning of
Section 856(h) of the Code or (iii) the Company's failing to qualify as a REIT.

     "Exchange" means the exchange of Property Partnership Units for Common
Units pursuant to this Exchange Offer.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     "Exchange Offer" means this Offer to Exchange, dated June 19, 1997, by the
Operating Partnership to accredited Limited Partners, for any and all Property
Partnership Units in 

                                       70
<PAGE>
 
exchange for Common Units, as set forth in this Offer to Exchange and the Letter
of Transmittal, as each may be amended or supplemented from time to time.

     "Excluded Properties" means 14 multifamily residential projects with an
aggregate of approximately 1,600 apartments and approximately 125,000 square
feet of commercial and mixed use property owned by 15 limited partnerships in
which the Grove Companies own limited and general partnership interests, which
properties were not acquired by the Company in connection with the Consolidation
Transactions.

     "Executive Officers" means the executive officers of Grove Property, Damon,
Brian and Edmund Navarro, Joseph R. LaBrosse and Gerald A. McNamara.

     "Expiration Date" means 5:00 p.m., New York time, on Friday, August 15,
1997 unless the Purchaser shall have extended this Exchange Offer, in which
event it shall mean the latest time and date on which this Exchange Offer, as so
extended, shall expire.

     "FFO" means Funds from Operations which is defined as follows: The White
Paper approved by the Board of Governors of NAREIT in March 1995 defines FFO as
net income (loss) (computed in accordance with GAAP), excluding gains (or
losses) from debt restructuring and sales of property, plus real estate related
depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures. Management considers FFO an appropriate measure
of performance of an equity REIT because it is predicated on cash flow analyses.
The Company computes FFO in accordance with standards established by the White
Paper which may differ from the methodology for calculating FFO utilized by
other equity REITs and, accordingly, may not be comparable to such other REITs.
FFO should not be considered as an alternative to net income (determined in
accordance with GAAP) as an indicator of the Company's financial performance or
to cash flow from operating activities (determined in accordance with GAAP) as a
measure of the Company's liquidity, nor is it indicative of funds available to
fund the Company's cash needs, including its ability to make distributions.

     "GAAP" means generally accepted accounting principles in the United States.

     "GDC" means Grove Development Corporation (which is owned by Grove
Companies) and facilitates the provision of construction services to the
Property Partnerships, the GREAT Properties and the Excluded Properties in
connection with the redevelopment of such properties.

     "GPS" means Grove Property Services Limited Partnership.

     "GREAT" means Grove Real Estate Asset Trust, a Maryland real estate
investment trust.

     "GREAT Assets" means the GREAT Properties, together with certain related
assets.

     "GREAT Properties" means four multifamily residential projects in
Connecticut owned by Grove Property, with an aggregate of 257 units.

                                       71
<PAGE>
 
     "Grove" means Grove Investment Group, Inc.

     "Grove Companies" means certain companies and individuals which are
affiliated with Grove Property (including the Executive Officers) and which own
general and limited partnership interests in the Property Partnerships and the
limited partnerships that own the Excluded Properties.

     "Grove Property" means Grove Property Trust, the name by which GREAT is
known following the consummation of the Consolidation Transactions.

     "Identified Persons" means, collectively, the Trust Managers and the
Executive Officers of Grove Property.

     "Independent Trust Managers" means Messrs. James Twaddell, J. Joseph
Garrahy and Harold Gorman, the members of the Board who are neither employed by,
nor affiliated with, the Grove Companies or Grove Property.

     "Initial Exchange Offer" means the exchange offer made in December, 1996 by
the Operating Partnership for the tender of any or all of the limited
partnership interests of the Property Partnerships in exchange for limited
partnership units in the Operating Partnership

     "IPO" means the initial public offering of GREAT'S Common Shares, in June
1994.

     "Limited Partners" means the limited partners of the Property Partnership.

     "Liquidating Partnerships" means those Property Partnerships which
liquidated and made a distribution "in-kind" of the Partnership Property or
Properties owned by such Property Partnerships to the Operating Partnership or
its affiliates, in connection with the Consolidation Transactions.

     "Long-Term Facility" means the approximately $15.1 million ten-year term
mortgage loan facility entered into by the Company in connection with the
Refinancing and the consummation of the Consolidation Transactions.

     "Management Company" means Grove Property Services Limited Partnership,
which provided real estate management services to the Properties prior to the
Consolidation Transactions.

     "Management Owners" means Brian, Damon and Edmund Navarro and Joseph
LaBrosse.

     "Maryland REIT Act" means the Maryland Real Estate Investment Trust Act, as
amended from time to time.

     "Minimum Percentage Condition" means the minimum number of Property
Partnership Units that must be tendered in the Exchange Offer or voted in favor
of the Property Partnership 

                                       72
<PAGE>
 
Amendments in order for the Property Partnership Amendments to be adopted with
respect to the Property Partnership and the Exchange Offer to be effected with
respect to such Property Partnership.

     "NAREIT" means the National Association of Real Estate Investment Trusts.

     "National Realty" means National Realty Services, L.P., a  Delaware limited
partnership formerly known as Grove Property Services Limited Partnership,
wholly owned by the Management Owners, which provides real estate brokerage
services.

     "NAVAB" means NAVAB Associates, a company owned one-quarter each by Brian
and Damon Navarro and Ronald and George Abdow.

     "New Equity Investment" means the issuance, in connection with the
consummation of the Consolidation Transactions, by Grove Property and the
Operating Partnership of 3,333,333 Common Shares to the New Equity Investors in
return for gross proceeds of $30.0 million.

     "New Equity Investors" means one or more investors in the New Equity
Investment.

     "1996 Plan" means the 1996 Share Incentive Plan of the Company adopted in
connection with the consummation of the Consolidation Transactions.

     "Non-Accredited Participant" means a tendering Limited Partner which is not
an Accredited Investor.

     "Non-Competition Agreements" means the non-competition agreements entered
into between each Executive Officer and the Company and between the Grove
Companies and the Company, in connection with the consummation of the
Consolidation Transactions.

     "Operating Partnership" means Grove Operating, L.P., a Delaware limited
partnership formed on November 1, 1996, which is the operating partnership of
Grove Property.

     "OP Partnership Agreement" means the Agreement of Limited Partnership of
the Operating Partnership, as amended from time to time, which governs the
Operating Partnership.

     "Ownership Limit" means the maximum number of Equity Shares which any
holder of Grove Property's Equity Shares is permitted to own or be deemed to own
by virtue of the attribution provisions of the Code, which is equal to 5.0% (of
the number or value, whichever is more restrictive) of the issued and
outstanding Equity Shares, subject to certain exceptions.

     "Partnership Property" means, with respect to the Property Partnership, the
Vineyard Properties owned by such Property Partnership.

     "Participants" means tendering Limited Partners.

                                       73
<PAGE>
 
     "Plan Fiduciary" means a fiduciary of an Employee Benefit Plan which has
investment discretion with respect to the assets of such Plan.

     "Preferred Shares" means up to 4.0 million preferred shares of beneficial
interest of Grove Property, par value $.01 per share, which the Board of Trust
Managers of Grove Property is permitted to issue pursuant to the Charter.

     "Property Partnership" means Grove-Coastal II Associates Limited
Partnership, a Connecticut Limited Partnership.

     "Property Partnerships" means the following limited partnerships involved
in the Consolidation Transactions: (i) Avonplace Associates Limited Partnership,
(ii) Burgundy Associates Limited Partnership, (iii) Grove-Ellington Associates
Limited Partnership, (iv) Grove-Enfield Associates Limited Partnership, (v)
Grove Longmeadow Associates Limited Partnership, (vi) Grove-Manchester
Associates Limited Partnership, (vii) Grove-Newington Associates Limited
Partnership, (viii) Grove Opportunity Fund II Limited Partnership, (ix) Grove-
Plainville Associates Limited Partnership, (x) Grove Properties III Limited
Partnership, (xi) Grove Taunton Associates Limited Partnership, (xii) Grove-
Vernon Associates Limited Partnership, (xiii) Grove-West Hartford Associates
Limited Partnership, (xiv) Grove-West Springfield Associates Limited
Partnership, (xv) Grove-Westfield Associates Limited Partnership, (xvi) Grove
Westwynd Associates Limited Partnership, (xvii) Nautilus Properties Limited
Partnership and (xviii) Shoreline London Associates Limited Partnership.

     "Property Partnership Agreement" means, with respect to each of the
Property Partnerships, the agreement of limited partnership of such Property
Partnership.

     "Partnership Amendment" means, with respect to Grove-Coastal, certain
amendments to such Partnership's Partnership Agreement which will authorize the
Partnership to divide, issue additional limited partnership interests to Wharf
Holdings Limited Partnership, and liquidate and dissolve and  to permit an "in-
kind" distribution of the related Partnership Property to Wharf Holdings Limited
partnership in connection with the liquidation of the Property Partnership.

     "Property Partnership Units" or "Units" means, with respect to any Property
Partnership, units representing limited partnership interests in that Property
Partnership.

     "Properties" means the 27 properties owned and/or controlled by the Company
following the Consolidation Transactions, which include the 26 multifamily
residential projects and one neighborhood shopping center previously owned by
the Property Partnerships and the four multifamily residential projects which
constituted the GREAT Properties.

     "Proxy Statement" means the Proxy Statement of Grove Property, dated
February 13, 1997, filed with the Securities and Exchange Commission, a copy of
which is available upon request.

     "Purchaser" means the Operating Partnership.

                                       74
<PAGE>
 
     "Redemption/Exchange Rights" means the right of Common Unit holders, under
certain circumstances, to have Common Units redeemed for cash or, at the
Company's option, exchanged for Common Shares.

     "Refinancing" means the refinancing of $39.8 million of mortgage
indebtedness of 17 Partnership Properties in connection with the consummation of
the Consolidation Transactions.

     "Registrable Shares" means any Common Shares which are subject to
Registration Rights.

     "Registration Rights" means, collectively, certain registration rights that
the Company has granted certain persons receiving Common Units in connection
with the Consolidation Transactions pursuant to the Registration Rights
Agreement.

     "Registration Rights Agreement" means the Registration Rights Agreement
entered into among GREAT, the Operating Partnership, certain holders of the
Common Units and the New Equity Investors.

     "REIT" means a real estate investment trust.


     "Revolving Credit Facility" means a three-year secured revolving
acquisition and working capital facility of up to $25.0 million entered into by
the Company in connection with the Refinancing and the consummation of the
Consolidation Transactions.

     "Rule 144" means Rule 144 promulgated under the Securities Exchange Act of
1934, as amended.

     "SEC" means the Securities and Exchange Commission.

     "Securities Act" means the Securities Act of 1933, as amended.

     "Service" means the Internal Revenue Service.

     "Shareholders" means the holders of Grove Property's issued and outstanding
Common Shares.

     "Stock Split" means the stock dividend declared and issued by Grove
Property immediately prior to the consummation of the Consolidation
Transactions, together with the concurrent effectuation by Grove Property of a
1.125 to 1.0 stock split with respect to Grove Property's 525,000 currently
issued and outstanding Common Shares, resulting in the issuance of a total of
95,102 Common Shares.

     "Trust Managers" means the Trust Managers of Grove Property: Messrs. Damon
Navarro, Joseph R. LaBrosse, James Twaddell, J. Joseph Garrahy and Harold
Gorman.

                                       75
<PAGE>
 
                               THE EXCHANGE OFFER
                                        
SECTION 1.  TERMS OF THIS EXCHANGE OFFER.

     The Exchange Offer.  Under the terms of this Exchange Offer, the Purchaser
will pay for Units validly tendered on or prior to the Expiration Date and not
withdrawn in accordance with Section 4. "Withdrawal Rights" of this Offer to
Exchange. The term "Expiration Date" shall mean 5:00 p.m., New York time, on
Friday, August 15, 1997, unless the Purchaser shall have extended this Exchange
Offer and, in such event, the term "Expiration Date" shall mean the latest time
and date on which this Exchange Offer, as so extended, shall expire.

     If, prior to the Expiration Date, the Purchaser shall increase the Equity
Consideration (and Cash Consideration) offered to Limited Partners pursuant to
this Exchange Offer, such increased consideration will be delivered in respect
of all Units of the Property Partnership accepted pursuant to this Exchange
Offer, whether or not they were tendered prior to such increase.

     This Exchange Offer is conditioned on satisfaction of certain conditions.
See Section 11. "Conditions of this Exchange Offer", which sets forth in full
the conditions of this Exchange Offer. The Purchaser reserves the right (but
shall not be obligated), in its sole discretion, to waive any or all of such
conditions.

     This Solicitation of Consent and Offer to Exchange and the related Letter
of Transmittal are being mailed by the Purchaser to Limited Partners or
beneficial owners (in the case of Individual Retirement Accounts and qualified
plans) of Grove-Coastal Units of record as of the date of the Offer to Exchange.

     Each tendering Limited Partner will receive, upon consummation of this
Exchange Offer, the consideration for each Property Partnership Unit (or a pro
rata portion thereof for each fractional Unit) so tendered set forth in the
Exchange Offer.

     This Exchange Offer does not give rise to appraisal rights and such rights
will not be voluntarily afforded to the Limited Partners.

          THE PURCHASER RESERVES THE RIGHT TO TERMINATE THIS EXCHANGE OFFER OR
          TO AMEND THE TERMS AND CONDITIONS OF THIS EXCHANGE OFFER.

SECTION 2.  ACCEPTANCE OF AND PAYMENT FOR PROPERTY PARTNERSHIP UNITS.

     The Purchaser will pay for Property Partnership Units validly tendered and
not withdrawn in accordance with Section 4. "Withdrawal Rights", as promptly as
practicable following the Expiration Date. Under no circumstances will
distributions be made with respect to any Common 

                                       76
<PAGE>
 
Units or interest be paid on the Cash Consideration by reason of any delay in
making such payment.

     In all cases, exchange or payment for Property Partnership Units exchanged
or purchased pursuant to this Exchange Offer will be made only after timely
receipt by the Purchaser of a properly completed and duly executed Accredited
Investor Questionnaire, a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), and any other documents required by the
Letter of Transmittal. See Section 3. "Procedures for Tendering Property
Partnership Units."

     If for any reason acceptance of, or payment for, any Property Partnership
Units tendered is delayed or if the Purchaser is unable to accept, purchase or
pay for Property Partnership Units tendered, then the Purchaser may retain
tendered Property Partnership Units and such Property Partnership Units may not
be withdrawn except to the extent that the tendering Limited Partners are
entitled to withdrawal rights as described in Section 4. "Withdrawal Rights";
provided, however, that the Purchaser will pay Limited Partners (by exchange for
Common Units) the Equity Consideration, as the case may be, in respect of
Property Partnership Units tendered, or return such Property Partnership Units
promptly after termination or withdrawal of this Exchange Offer.

SECTION 3.   PROCEDURES FOR TENDERING PROPERTY PARTNERSHIP UNITS.


     Valid Tender.  In order for a tendering Limited Partner to participate in
this Exchange Offer, Property Partnership Units must be validly tendered and not
withdrawn on or prior to the Expiration Date. A valid tender requires that a
properly completed and duly executed Letter of Transmittal and any other
documents required by the Letter of Transmittal be actually received by the
Purchaser on or prior to the Expiration Date.  A LIMITED PARTNER MUST ALSO
COMPLETE AND RETURN AN ACCREDITED INVESTOR QUESTIONNAIRE IN ORDER TO PARTICIPATE
IN THE EXCHANGE OFFER.

     A Limited Partner must tender all of its Property Partnership Units if it
wishes to tender any Property Partnership Units. A Limited Partner which is an
Accredited Investor must indicate its option to receive the Equity Consideration
or the Cash Consideration for Units tendered. Pursuant to the Property
Partnership Agreement, the general partner of the Property Partnership has
agreed in writing to permit the transfer of Property Partnership Units pursuant
to this Exchange Offer, and has approved the admission of the Purchaser as a
substitute Limited Partner.

     THE OFFER AND THE WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
TIME, ON FRIDAY, AUGUST 15, 1997, UNLESS EXTENDED.

     Signature Requirements.  The Letter of Transmittal must be signed by the
registered holder of the Property Partnership Units, exactly as the name appears
on the register of the Property Partnership, and payment is to be made directly
to that holder at the address indicated on the register.

                                       77
<PAGE>
 
     The method of delivery of the Letter of Transmittal and all other required
documents is solely at the option and risk of the tendering Limited Partner, and
delivery will be deemed made only when actually received by the Purchaser. Thus,
overnight courier service is recommended.

     Backup Federal Income Tax Withholding.  To prevent the possible application
of backup Federal income tax withholding with respect to payment of the Cash
Consideration, a tendering Non-Accredited Participant and a tendering Cash
Election Participant must provide its correct taxpayer identification number by
completing the Substitute Form W-9 included in the Letter of Transmittal. See
the Instructions to the Letter of Transmittal and Section 6. "Certain Federal
Income Tax Consequences and ERISA Consequences."

     FIRPTA Withholding.  To prevent the withholding of Federal income tax in an
amount equal to 10% of the amount of the Cash Consideration plus Property
Partnership liabilities allocable to the Property Partnership Units purchased or
liquidated, each Non-Accredited Participant and each Cash Election Participant
must complete the FIRPTA Affidavit included in the Letter of Transmittal
concerning its taxpayer identification number and address and stating that it is
not a foreign person. See the Instructions to the Letter of Transmittal and
Section 6. "Certain Federal Income Tax Consequences and ERISA Consequences."

     ERISA Certification. In order to avoid having the assets of the Purchaser
deemed to be "plan assets" for purposes of the fiduciary requirements of ERISA
or the prohibited transaction provisions of ERISA and/or Code Section 4975, the
Purchaser has determined to qualify for the "insignificant participation"
exception contained in the DOL Regulation. Therefore, (a) the number of Common
Units received by Benefit Plan Investors will be limited to the extent that the
Purchaser, in its sole discretion, deems necessary or appropriate to qualify for
such exception, and (b) Benefit Plan Investors will receive Cash Consideration
for each Property Partnership Unit tendered pursuant to this Exchange Offer for
which they do not receive Common Units. In order to permit the Purchaser to
comply with this restriction, each tendering Limited Partner that is not a
natural person, and which is an Accredited Investor tendering any Units for
Equity Consideration, must complete the ERISA Certification contained in the
Letter of Transmittal. See the Instructions to the Letter of Transmittal and
Section 6. "Certain Federal Income Tax Consequences and ERISA Consequences."

     Other Requirements.  By executing a Letter of Transmittal, a Limited
Partner irrevocably constitutes and appoints the Purchaser as the true and
lawful agent and attorney-in-fact of such Limited Partner with respect to
Property Partnership Units tendered by such Limited Partner, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest) to deliver such Property Partnership Units and
transfer ownership thereof on the Property Partnership books maintained by the
general partner of the Property Partnership, together with all accompanying
evidences of transfer and authenticity, to or upon the order of the Purchaser
and upon receipt by the Equity Participant Limited Partner of the Common Units,
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such Property Partnership Units, all in accordance with the terms
of this Exchange Offer. Upon the transfer of such Property Partnership Units
pursuant to this Exchange Offer, all prior 

                                       78
<PAGE>
 
proxies and consents given by such Limited Partner with respect thereto will be
revoked and no subsequent proxies or consents may be given (and if given will
not be deemed effective).

     Determination of Validity; Rejection of Property Partnership Units; Waiver
of Defects; No Obligation to Give Notice of Defects.  All questions as to the
validity, form, eligibility (including time of receipt) and acceptance for
payment of any tender of Property Partnership Units pursuant to the procedures
described above will be determined by the Purchaser, in its sole discretion,
which determination shall be final and binding. The Purchaser reserves the
absolute right to reject any or all tenders if not in proper form or if the
acceptance of, or payment for, the Property Partnership Units tendered may, in
the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the right to waive any defect or irregularity in any tender with respect to any
particular Property Partnership Unit of any particular Limited Partner, and the
Purchaser's interpretation of the terms and conditions of this Exchange Offer
(including the Letter of Transmittal and the Instructions thereto) will be final
and binding. No tender will be deemed validly made until all defects and
irregularities have been cured or waived. Neither the Purchaser nor any other
person will be under any duty to give notification of any defects or
irregularities in the tender of any Property Partnership Units or will incur any
liability for failure to give any such notification.

     A tender of Property Partnership Units pursuant to any of the procedures
described above and the acceptance for payment of such Property Partnership
Units will constitute a binding agreement between the tendering Limited Partner
and the Purchaser on the terms and conditions of this Exchange Offer.

SECTION 4.  WITHDRAWAL RIGHTS.


     Except as otherwise provided in this Section 4, all tenders of Property
Partnership Units pursuant to this Exchange Offer are irrevocable, provided that
Property Partnership Units tendered pursuant to this Exchange Offer may be
withdrawn at any time prior to the Expiration Date.

     For withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Purchaser at the address set forth
on the last page of this Offer to Exchange. Any such notice of withdrawal must
specify the name of the person(s) who tendered the Property Partnership Units to
be withdrawn and must be signed by the person(s) who signed the Letter of
Transmittal in the same manner as the Letter of Transmittal was signed.

     If exchange or purchase of, or exchange or payment for, Property
Partnership Units is delayed for any reason or if the Purchaser is unable to
exchange or purchase or pay for Property Partnership Units for any reason, then,
without prejudice to the Purchaser's rights under this Exchange Offer, tendered
Property Partnership Units may be retained by the Purchaser and may not be
withdrawn except to the extent that tendering Limited Partners are entitled to
withdrawal rights as set forth in this Section 4. "Withdrawal Rights"; provided,
however, that the Purchaser will issue the Equity Consideration or pay
Participants the Cash Consideration, as the case may 

                                       79
<PAGE>
 
be, in respect of Property Partnership Units tendered or return such Property
Partnership Units promptly after termination or withdrawal of this Exchange
Offer.

     Any Property Partnership Units properly withdrawn will be deemed not to be
validly tendered for purposes of this Exchange Offer. Withdrawn Property
Partnership Units may be tendered, however, by following any of the procedures
described in Section 3. "Procedures for Tendering Property Partnership Units" at
any time prior to the Expiration Date.

     All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. Neither the Purchaser
nor any other person will be under any duty to give notification of any defects
or irregularities in any notice of withdrawal or incur any liability for failure
to give such notification.

SECTION 5.  EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS.

     The Purchaser expressly reserves the right, in its sole discretion, at any
time and from time to time, (i) to extend the period of time during which this
Exchange Offer is open and thereby delay acceptance for payment of, and the
payment for, any Property Partnership Units, (ii) to terminate this Exchange
Offer and not accept for payment any Property Partnership Units not already
accepted for payment or paid for if any conditions referred to in Section 11.
"Conditions of this Exchange Offer" have not been satisfied or upon the
occurrence of the events specified in Section 12. "Certain Legal Matters," (iii)
upon the occurrence of any of the conditions specified in Section 11.
"Conditions of this Exchange Offer", to delay the acceptance for exchange or
payment of, or payment for, any Property Partnership Units not already accepted
for payment or paid for and (iv) to amend this Exchange Offer.

     If the Purchaser makes a material change in the terms of this Exchange
Offer or the information concerning this Exchange Offer or waives a material
condition of this Exchange Offer, the Purchaser will extend this Exchange Offer
and disseminate additional tender offer materials to the extent required by Rule
14(e)-1 under the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT") as if this Exchange Offer were governed by the Exchange Act. The
requirement to extend the offer will not apply to the extent that the number of
business days remaining between the occurrence of the change and the then-
scheduled Expiration Date equals or exceeds the minimum extension period that
would be required because of such amendment. As used in this Offer to Exchange,
"business day" means any day other than a Saturday, Sunday or a federal holiday,
and consists of the time period from 12:01 a.m. through 12:00 midnight, New York
time.

                                       80
<PAGE>
 
SECTION 6.  CERTAIN FEDERAL INCOME TAX CONSEQUENCES AND ERISA CONSEQUENCES.

     For a description of certain federal income tax consequences, see "SUMMARY
OF FEDERAL INCOME TAX CONSEQUENCES." Plan Fiduciaries should also see "SUMMARY
OF ERISA CONSIDERATIONS."

SECTION 7.  CERTAIN INFORMATION CONCERNING THE PROPERTY PARTNERSHIP.

     The address of the principal executive office of the Property Partnership
is c/o Grove Investment Group, 598 Asylum Avenue, Hartford, Connecticut 06105.
Limited Partners are referred to "The Consolidation Transactions" and to the
financial and other information included in the Property Partnership's (i)
financial statements for the fiscal years ended December 31, 1994, 1995 and 1996
previously sent to Limited Partners and (ii) the other financial statements
which are included in Appendix "I" hereto.

SECTION 8.  CERTAIN INFORMATION CONCERNING THE PURCHASER.

     The Purchaser is a Delaware limited partnership formed on November 1, 1996,
the general partner of which is Grove Property.

     For certain information concerning the trust managers and executive
officers of Grove Property (collectively, the "Identified Persons"), see "THE
COMPANY - Trust Managers and Executive Officers"

     Except as otherwise set forth in this Offer to Exchange or in the Proxy
Material and except for the provisions of the Contribution Agreement and the
Property Partnership Agreements, (i) neither the Purchaser, Grove Property nor,
to the best of the Purchaser's knowledge, any of the Identified Persons nor any
affiliate of the foregoing beneficially owns or has a right to acquire any
Property Partnership Units; (ii) neither the Purchaser, Grove Property, nor, to
the best of the Purchaser's knowledge, any of the Identified Persons nor any
affiliate thereof has effected any transaction in the Property Partnership
Units; (iii) neither the Purchaser, Grove Property nor, to the best of the
Purchaser's knowledge, any of the Identified Persons has any contract,
arrangement, understanding or relationship with any other person with respect to
any Property Partnership Units, including, but not limited to, contracts,
arrangements, understandings or relationships concerning the transfer or voting
thereof, joint venture, loan or option arrangements, puts or calls, guarantees
or loans, guarantees against loss or the giving or withholding of proxies; (iv)
there have been no transactions or business relationships which would be
required to be disclosed under the rules and regulations of the SEC between any
of the Purchaser, Grove Property nor, to the best of the Purchaser's knowledge,
the Identified Persons, on the one hand, and the Property Partnership or its
affiliates, on the other hand; and (v) there have been no contracts,
negotiations or transactions between the Purchaser, Grove Property nor, to the
best of the Purchaser's knowledge, the Identified Persons, on the one hand, and
the Property Partnership or its affiliates, on the other hand, concerning a
merger, consolidation or acquisition, tender offer or other acquisition of
securities, an election of trust managers or a sale or other transfer of a
material amount of assets.

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SECTION 9.  INTERESTS OF CERTAIN PERSONS AND CERTAIN TRANSACTIONS.

     Because of the affiliations between the Purchaser, the general partners of
Grove-Coastal and the Property Partnership, and the Grove Companies, Grove
Coastal has advised the Purchaser that Grove-Coastal and its general partner are
making no recommendation, and are remaining neutral, as to whether a Limited
Partner should accept this Exchange Offer. See "BENEFITS TO RELATED PARTIES" and
"CONFLICTS OF INTEREST." The general partner of Grove-Coastal may also have a
conflict of interest in evaluating certain alternatives available to Grove-
Coastal, such as the sale or liquidation of Grove-Coastal's assets, in that such
transactions may result in a reduction or termination of fees payable to the
general partner's affiliates pursuant to the Grove-Coastal Partnership Agreement
or otherwise.

     Voting by the Purchaser.  By virtue of the Consolidation Transactions, the
Purchaser is in a position to significantly influence or control the result of
any vote by Limited Partners. See "SPECIAL FACTORS-Ownership of Common
Units-Management of the Operating Partnership."

     Financing Arrangements.  The Purchaser expects to fund its obligations in
respect of this Exchange Offer (including funds for the purchase of tendered
Property Partnership Units of Non-Accredited Participants and Cash Election
Participants, to fund cash distribution requirements of the Liquidating
Partnerships and the out-of-pocket costs of the Purchaser in connection with
this Exchange Offer) from the proceeds of the Credit Facility.

     Transactions with Affiliates.  Pursuant to the Property Partnership
Agreement, the general partner of the Property Partnerships and their affiliates
receive various fees from the Property Partnerships. Certain of the Property
Partnerships are required to pay Grove Property, as successor to the Management
Company an annual fee ranging from $5,000 to $7,500.

     In addition, one or more of the Grove Companies, as general partners of
each Property Partnership or as special limited partners, receives a percentage
of net profits, losses and distributions of cash flow of such Property
Partnership of between 0.5% and 15% and increasing to 25% to 40% of residuals,
after payment of priority items. Each Property Partnership has retained Grove
Property, as successor to the Management Company, to manage its respective
Partnership Properties for a fee equal to 4% to 6% of gross collections (the
"PROPERTY MANAGEMENT FEE").

     Except as described above concerning the Consolidation Transactions, there
were no material transactions between the general partner of any Property
Partnership or its affiliates, on the one hand, and any Property Partnership, on
the other hand, during 1994, 1995 or 1996 or the five-month period ended May 31,
1997.

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SECTION 10.  SOURCE OF FUNDS.

     The Purchaser expects that up to approximately $2,466,164 in Cash
Consideration will be required in connection with this Exchange Offer if all of
the outstanding Property Partnership Units are tendered by Limited Partners whom
the Purchaser believes are not Accredited Investors and all Accredited Limited
Partners elect to tender for Cash Consideration.  None of the required funds
will be paid by the Property Partnership. The Purchaser will obtain such funds
from sources described in Section 9. "Interests of Certain Persons and Certain
Transactions."

SECTION 11.  CONDITIONS OF THIS EXCHANGE OFFER.

     Notwithstanding any other term of this Exchange Offer, the Purchaser shall
not be required to accept for exchange or payment or to exchange or pay for any
Property Partnership Units tendered if all authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations of waiting periods
imposed by, any court, administrative agency or commission or other governmental
authority or entity, domestic or foreign, necessary for the consummation of the
transactions contemplated by this Exchange Offer shall not have occurred, been
filed or obtained. Furthermore, notwithstanding any other term of this Exchange
Offer, the Purchaser shall not be required to accept for exchange or payment or
to exchange or pay for any Property Partnership Units not theretofore accepted
for payment or paid for, and may terminate or amend this Exchange Offer as to
such Property Partnership Units if, at any time on or after the date of this
Exchange Offer and before the acceptance of such Property Partnership Units for
exchange or payment or the exchange or payment therefor, any of the following
conditions exists: (a) a preliminary or permanent injunction or other order of
any federal or state court, government or governmental authority or agency shall
have been issued and shall remain in effect which (i) makes illegal, delays or
otherwise directly or indirectly restrains or prohibits the making of this
Exchange Offer or the acceptance for payment of or payment for any Property
Partnership Units by the Purchaser, (ii) imposes or confirms limitations on the
ability of the Purchaser effectively to exercise full rights of ownership of any
Property Partnership Units purchased; including, without limitation, the right
to vote any Property Partnership Units acquired by the Purchaser pursuant to
this Exchange Offer or otherwise on all matters properly presented to each
Property Partnership's Limited Partners, (iii) requires divestiture by the
Purchaser of any Property Partnership Units, (iv) causes any material diminution
of the benefits to be derived by the Purchaser as a result of the transactions
contemplated by this Exchange Offer or (v) might materially adversely affect the
business, properties, assets, liabilities, financial condition, operations,
results of operations or prospects of the Purchaser or any Property Partnership;
(b) there shall be any action taken, or any statute or rule, regulation or order
proposed, enacted, enforced, promulgated, issued or deemed applicable to this
Exchange Offer by any federal or state court, government or governmental
authority or agency, which might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (a) above; (c)
any change or development shall have occurred or been threatened since the date
hereof, in the business, properties, assets, liabilities, financial condition,
operations, results of operations or prospects of the Property Partnership
which, in the sole judgment of the Purchaser, is or may be materially adverse to
the Property Partnership, or the Purchaser shall 

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have become aware of any fact that in the sole judgment of the Purchaser, does
or may have a material adverse effect on the value of the Property Partnership
Units; (d) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange or
in the over-the-counter market in the United States, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) any limitation by any governmental authority on, or other
event which might affect, the extension of credit by lending institutions or
result in any imposition of currency controls in the United States, (iv) a
commencement of a war or armed hostilities or other national or international
calamity directly or indirectly involving the United States, (v) a material
change in United States or other currency exchange rates or a suspension of a
limitation on the markets thereof or (vi) in the case of any of the foregoing
existing at the time of the commencement of this Exchange Offer, a material
acceleration or worsening thereof; or (e) it shall have been publicly disclosed
or the Purchaser shall have otherwise learned that more than five percent of the
outstanding Property Partnership Units of any Property Partnership have been or
are proposed to be acquired by another person (including a "group" within the
meaning of Section 13(d)(3) of the Exchange Act).

     The foregoing conditions are for the sole benefit of the Purchaser and may
be asserted by the Purchaser regardless of the circumstances giving rise to such
conditions, or may be waived by the Purchaser in whole or in part at any time
and from time to time in its sole discretion. Any determination by the Purchaser
concerning the events described above will be final and binding upon all
parties.

SECTION 12.  CERTAIN LEGAL MATTERS.

     General.  Except as set forth in this Section 12, the Purchaser is not
aware of any filings, approvals or other actions by any domestic or foreign
governmental or administrative agency that would be required prior to the
acquisition of Property Partnership Units by the Purchaser pursuant to this
Exchange Offer. Should any such approval or other action be required, it is the
Purchaser's present intention that such additional approval or action would be
sought. While there is no present intent to delay the purchase of Property
Partnership Units tendered pursuant to this Exchange Offer pending receipt of
any such additional approval or the taking of any such action, there can be no
assurance that any such additional approval or action, if needed, would be
obtained without substantial conditions or that adverse consequences might not
result to any Property Partnership's business, any of which could cause the
Purchaser to elect to terminate this Exchange Offer without purchasing Property
Partnership Units thereunder. The Purchaser's obligation to purchase and pay for
Property Partnership Units is subject to certain conditions, including
conditions related to the legal matters discussed in this Section 12.

     Antitrust.  The Purchaser does not believe that the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, is applicable to the acquisition
of Property Partnership Units contemplated by this Exchange Offer.

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     Margin Requirements.  The Property Partnership Units are not "margin
securities" under the regulations of the Board of Governors of the Federal
Reserve System and, accordingly, such regulations are not applicable to this
Exchange Offer.

     State Takeover Laws.  A number of states have adopted anti-takeover laws
which purport, to varying degrees, to be applicable to attempts to acquire
securities of corporations or other entities which are incorporated in such
states or which have substantial assets, security holders, principal executive
offices or principal places of business therein. If any state anti-takeover
statute is applicable to this Exchange Offer, the Purchaser might be unable to
accept for payment or purchase Property Partnership Units tendered pursuant to
this Exchange Offer or be delayed in continuing or consummating this Exchange
Offer. In such case, the Purchaser may not be obligated to accept for purchase
or pay for any Property Partnership Units tendered.

SECTION 13.  FEES AND EXPENSES.

     The Purchaser will pay all costs and expenses of printing and mailing this
Exchange Offer and its legal and accounting fees and expenses, including
reimbursement to Grove Companies for the overhead cost of personnel directly
involved in this Exchange Offer. The Property Partnership will not pay for any
of these costs. The Purchaser will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of Units pursuant to this
Exchange Offer. However, certain trust managers, officers and employees of the
Purchaser and its affiliates will answer questions regarding this Exchange Offer
and assist Limited Partners in completing the Letter of Transmittal if they
request such help. Such trust managers, officers and employees will not be
additionally compensated by the Purchaser or its affiliates for answering such
questions.

SECTION 14.  OTHER MATTERS.

     This Exchange Offer is not being made to (nor will tenders be accepted from
or on behalf of) Limited Partners residing in any jurisdiction in which the
making of this Exchange Offer or the acceptance thereof would not be in
compliance with the securities, blue sky or other laws of such jurisdiction.
However, the Purchaser may, in its discretion, take such action as it may deem
necessary to make this Exchange Offer in any jurisdiction and extend this
Exchange Offer to Limited Partners in such jurisdiction.

     The Property Partnership and its General Partner have advised the Purchaser
that they are not making any recommendation to any Limited Partners as to
whether to tender Property Partnership Units pursuant to this Exchange Offer. No
person has been authorized to make any recommendation or representation on
behalf of the Purchaser, any general partner of the Property Partnership, the
Property Partnership or any of their respective affiliates or to provide any
information other than as contained herein or in the Letter of Transmittal and,
if given or made, such information or representation must not be relied upon as
having been authorized.

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     Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal and any other required
documents should be sent or delivered to the Purchaser at its address set forth
below.

     Any questions or requests for assistance or for additional copies of this
Offer