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                                                                   EXHIBIT 10.16

                               AMENDMENT NO. 1 TO
                      FIRST AMENDED JOINT VENTURE AGREEMENT

                  This Amendment No. 1 ("Amendment No. 1"), dated as of January
1, 1999, to the first amended joint venture agreement (the "First Amended
Agreement"), dated as of April 30, 1997, by and between ALTERNATIVE LIVING
SERVICES, INC., a Delaware corporation ("ALS"), and ASSISTED LIVING EQUITIES,
LLC, a New York limited liability company ("ALE").

                                   WITNESSETH:

                  WHEREAS, the parties entered into that certain joint venture
agreement (together with the several agreements and instruments entered into in
connection therewith or pursuant thereto, including without limitation the New
York Addendum executed in connection therewith, the "Original Agreement"), dated
as of September 11, 1996; and

                  WHEREAS, the parties amended and restated the Original
Agreement in the form of the First Amended Agreement (subject to certain
provisions of the Original Agreement which were stated to survive with respect
to the Original NY Facilities as described in Article 2 of the First Amended
Agreement); and

                  WHEREAS, the parties desire to amend certain provisions of the
First Amended Agreement as set forth herein; and

                  WHEREAS, simultaneously herewith, the parties are entering
into a second amended joint venture agreement (the "Second Amended Agreement"),
the terms and conditions of which will pertain to Project Entities that are not
Existing Project Entities or Grandfathered Project Entities (as each such term
is defined herein); and

                  WHEREAS, the First Amended Agreement as amended by this
Amendment No. 1 and the Second Amended Agreement will each be in full force and
effect simultaneously as integral components of the expression of the parties'
intentions and agreements, with the understanding that the First Amended
Agreement as amended by this Amendment No. 1 will have application to the
Existing Project Entities and the Grandfathered Project Entities and that the
Second Amended Agreement will have application to all other Project Entities;

                  NOW, THEREFORE, in consideration of the premises and of the
promises and agreements hereinafter set forth, the parties hereto, intending to
be legally bound, do hereby agree that the provisions of the First Amended
Agreement are hereby amended as follows:

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                  1.       Definitions

                  All terms utilized in this Amendment No. 1 without other
definition shall have the respective meanings assigned thereto in the First
Amended Agreement. In addition, (i) the term "ALS-Northeast Entity" shall be
deemed to include a Corporate Licenseholder (as such term is defined herein),
and (ii) the following terms shall have the indicated meanings:

                  "Corporate Licenseholder" shall mean any corporate entity the
stock of which is owned by an ALS employee or former employee and that holds an
"adult home" license for a Facility.

                  "Existing Project Entities" shall mean the Project Entities
known as:

                        Williamsville/6076 Main Street, LLC;
                        Perinton Sully's Trail, LLC;
                        Manlius Highbridge Street, LLC; and
                        Niskayuna Pinecrest Drive, LLC.

                  "Grandfathered Project Entities" shall mean the seven Project
Entities listed on Schedule 1 hereto plus a total of three additional Project
Entities chosen by ALE and identified in one or more notices given to ALS on or
prior to March 31, 1999, it being understood that ALE shall not have the right
to so designate a Project Entity after the date on which ALE and ALS execute an
Operating Agreement with respect to such Project Entity.

                  "Manager" shall mean ALS, ALS-New York, Inc. or such other
Affiliate of ALS that acts as the manager of a Facility the license for which is
held by a Corporate Licenseholder.

                  "MSA" shall mean the management services agreement between a
given Corporate Licenseholder and its Manager.




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                  2.       Grandfathered Project Entities

                  All of the terms and conditions of the First Amended Agreement
shall apply to the Grandfathered Project Entities except that ALE's equity
ownership percentage in, and the percentage of the Mandatory Capital Call
Contributions of the members that ALE is obligated to contribute to, each of the
Grandfathered Project Entities shall be (i) in the case of any Grandfathered
Project Entity listed on Schedule 1, the percentage figure listed on Schedule 1
opposite the name of such Grandfathered Project Entity, and (ii) in the case of
any Grandfathered Project Entity that is identified by notice given by ALE to
ALS on or prior to March 31, 1999, 35%. With the sole exception of the
percentage ownership of ALE, including the percentage of the Mandatory Capital
Call Contributions that ALE is obligated to make, each Grandfathered Project
Entity shall be deemed to be a Project Entity that is a 49% Entity for purposes
of the First Amended Agreement as amended by this Amendment No. 1 although the
actual percentage ownership interest of ALE in such Grandfathered Project Entity
shall be as set forth in the preceding sentence.

                  3.       Deal Flow Standard Met for 1998 and 1999

                  ALS and ALE agree that the Deal Flow Standard shall be deemed
to have been met for the Joint Venture Agreement Years ended September 30, 1998
and September 30, 1999.

                  4.       Additional Governance Matters

                  A new paragraph (d) is hereby added to Section 3.8 of the
First Amended Agreement reading as follows:

                  "(d) In the case of a Corporate Licenseholder with respect to
a Facility, so long as ALE has an interest in such Facility or in such Corporate
Licenseholder:

                           (i)      ALS shall not, without first obtaining the
         express written consent of ALE, cause the Manager to enter into or
         amend any subcontract with respect to any of the functions of the
         Manager to any third party on any basis that places an additional
         expense burden on the Facility not anticipated in the applicable
         Approved Business Plan (as such term is defined in the applicable
         Management Agreement) or the annual operating budget for such Facility
         that has been approved by ALE.

                           (ii)     ALS shall cause the Manager to keep ALE
         informed and advised of any reports of inspection or investigation by
         any governmental agency and of any actual or threatened enforcement
         actions or other governmental citations which could result in fines or
         the revocation or suspension of the operating certificate of the
         Operator with respect to the Facility, and shall cause the Manager to
         consult with ALE in advance with respect to any response to any of the
         foregoing.


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                           (iii)    ALS shall not, without first obtaining the
         express written authorization of ALE, cause the Manager to draw on the
         Facility Account to pay any amounts that are not Facility Expenses,
         such consent not to be unreasonably withheld.

                           (iv)     ALS shall cause the Manager to provide to
         ALE its calculation of all amounts paid or payable, pursuant to the
         MSA, as Base Management Fees.

                           (v)      In the circumstances described in Section
         6.4(b) of the MSA, ALS shall not permit the Manager to engage a
         submanager unless ALE shall have given its prior written consent to the
         identity and terms of engagement of such submanager, such consent not
         to be unreasonably withheld.

                           (vi)     With respect to each Facility and each
         fiscal period, ALS shall cause the Manager to adopt for such Facility
         and for such period, and to abide by, in all material respects, an
         annual operating budget with respect to such Facility and for such
         period that has been consented to by ALE, such consent not to be
         unreasonably withheld."

         5.       Cash Flow Distributions

                  A new first sentence is hereby added to Section 3.15(e) of the
First Amended Agreement reading as follows:

                  "Each Project Entity shall determine on a quarterly basis its
         cash flow after the payment of scheduled debt service and operating
         expenses and after the payment of scheduled management fees for such
         quarter, and shall distribute such cash flow in proportion to the
         parties' respective Percentage Interests."

                  A new final sentence is hereby added to Section 3.15(e) of the
First Amended Agreement reading as follows:

                  "The Project Agreements of each Project Entity (including the
         Project Agreements of the Grandfathered Project Entities) shall be
         amended or be prepared so as to conform to the provisions of this
         Section 3.15(e)."

         6.       Cross Default

                  Any breach or default by a party under the Second Amended
Agreement which extends beyond the applicable grace or cure period, if any,
shall also constitute a breach or default by such party beyond any applicable
grace or cure period under the First Amended Agreement as amended by this
Amendment No. 1.


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                  7.       Counterparts

                  This Amendment No. 1 may be executed in counterparts each of
which shall be considered an original and all of which together shall constitute
one and the same instrument.

                  8.       No Further Amendments

                  Except as expressly amended hereby, the First Amended
Agreement is hereby ratified and confirmed in all respects.

                  IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the day and year first written above.

                              ALTERNATIVE LIVING SERVICES, INC.



                              BY:    /s/ Mark W. Ohlendorf
                                  ------------------------------------------
                              ITS:   Senior Vice President
                                  ------------------------------------------


                              ASSISTED LIVING EQUITIES, LLC



                              BY:    /s/ Neil A. Rube
                                  ------------------------------------------
                              ITS:   Executive Committee Member
                                  ------------------------------------------







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                                   SCHEDULE 1

                         GRANDFATHERED PROJECT ENTITIES



<TABLE>
<CAPTION>
                                                   ALE Percentage
                    Facility                           Ownership
                    --------                           ---------

               <S>                                 <C>
               Greece II, NY                             35%
               Saratoga Springs, NY                      35%
               Orchard Park, NY                          49%
               Ithaca I, NY                              35%
               Ithaca II, NY                             35%
               Farmington, CT                            35%
               Glastonbury Clare Bridge, CT              35%
</TABLE>








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