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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                               ------------------

                                    FORM 10-K

(Mark One)
    X             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 1999

                                       OR

            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                       SECURITIES EXCHANGE ACT OF 1934 For
                         the Transition period from to .

                         COMMISSION FILE NUMBER 1-12269
                               ------------------

                         HOMESTEAD VILLAGE INCORPORATED
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                                    MARYLAND
                          (STATE OR OTHER JURISDICTION
                        OF INCORPORATION OR ORGANIZATION)

                                   74-2770966
                                (I.R.S. EMPLOYER
                               IDENTIFICATION NO.)

                        2100 RIVEREDGE PARKWAY, 9TH FLOOR
                             ATLANTA, GEORGIA 30328
              (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
                                 (770) 303-2200
                 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA
                 CODE) SECURITIES REGISTERED PURSUANT TO SECTION
                                12(B) OF THE ACT:

                                                  NAME OF EACH EXCHANGE ON
              TITLE OF EACH CLASS                      WHICH REGISTERED

Shares of Common Stock, par value $.01 per share    New York Stock Exchange
Preferred Share Purchase Rights                     New York Stock Exchange

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

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.
                                  Yes X     No ____

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

     Based on the closing  price of the  registrant's  Common  Stock on March 8,
2000, the aggregate market value of the Common Stock held by  non-affiliates  of
the registrant was $37,987,957.

     At March 8, 2000, there were 120,031,477 shares of the registrant's  Common
Stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the registrant's definitive proxy statement for the 2000 annual
meeting of its  shareholders  are  incorporated by reference in Part III of this
report.
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<PAGE>


                                TABLE OF CONTENTS
<TABLE>
  ITEM                                          DESCRIPTION                                          PAGE

                                                   PART I

<S>                                                                                                      <C>
  1.    Business...................................................................................      1
          Overview.................................................................................      1
          Extended Stay Market.....................................................................      3
          Competition..............................................................................      4
          Seasonality..............................................................................      4
          Environmental Matters....................................................................      4
          Governmental Regulation..................................................................      5
          Trademarks...............................................................................      5
          Insurance................................................................................      5
          Agreements with Security Capital and Affiliates..........................................      5
          Employees................................................................................      7
          Directors and Officers of Homestead......................................................      8
  2.    Properties.................................................................................     10
          Geographic Distribution..................................................................     10
          Properties Portfolio.....................................................................     11
  3.    Legal Proceedings..........................................................................     17
  4.    Submission of Matters to a Vote of Security Holders........................................     17

                                                  PART II
  5.    Market for the Registrant's Common Equity and Related Stockholder Matters..................     17
  6.    Selected Financial Data....................................................................     18
  7.    Management's Discussion and Analysis of Financial Condition and Results of Operations......     21
          Overview.................................................................................     21
          Results of Operations for the Years Ended December 31, 1999, 1998 and 1997...............     22
          Liquidity and Capital Resources..........................................................     25
          Impact of Year 2000......................................................................     26
          Risk Factors.............................................................................     27
  7A.   Quantitative and Qualitative Disclosures About Market Risk.................................     29
  8.    Financial Statements and Supplementary Data................................................     29
  9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......     29

                                                  PART III

10.     Directors and Executive Officers of the Registrant.........................................     30
11.     Executive Compensation.....................................................................     30
12.     Security Ownership of Certain Beneficial Owners and Management.............................     30
13.     Certain Relationships and Related Transactions.............................................     30

                                                  PART IV

14.     Exhibits, Financial Statement Schedules and Reports on Form 8-K............................     31
</TABLE>


<PAGE>





                                     PART I

ITEM 1. BUSINESS

OVERVIEW

     Homestead  Village  Incorporated   ("Homestead")  operates  136  moderately
priced,   extended  stay  lodging  properties  under  the  Homestead  Village(R)
trademark in selected  markets in the United  States.  Homestead's  strategy has
been to identify  markets that  demonstrate  strong  demographics and to provide
extended  stay  customers  with a  consistently  high  standard  of service  and
value-conscious  pricing.  Homestead offers a carefully  designed,  custom-built
product  targeted  primarily at the business  traveler on temporary  assignment,
undergoing relocation or in training.  Homestead properties, which have all been
developed by Homestead,  are designed to offer locations with convenient  access
to major  employment  centers and retail  support  services,  and a  residential
environment that is attractive, well landscaped and secure.

     Homestead's strategy is focused on:

     o     attracting and retaining extended stay business travelers,

     o     increasing  revenue  per  available  room at the  property  level by
           matching  its product to  customers'
           expectations, and

     o     improving operating property cash flow through its proprietary
           operating systems.

     Homestead  believes  that its product,  locations,  commitment  to customer
service and value-conscious pricing will help it meet its objectives.

     Homestead is affiliated with Security Capital Group Incorporated ("Security
Capital"),  which owns 87.0% of Homestead.  Security  Capital and its affiliates
have provided  substantial  financing to Homestead and Security Capital provides
various other administrative services to Homestead.

     In 1999 Homestead brought its high growth  development  program of the last
several  years to a conclusion  and directed  its efforts to  strengthening  its
balance  sheet,  focusing  on  property  operations  and  reducing  general  and
administrative overhead.

Focus on the Business Traveler

     In an effort to capture  the  business  travelers'  extended  stay  demand,
Homestead targets both national and local businesses. Eleven sales professionals
supplement  the  marketing  effort  conducted  at the local level by the general
managers of each property by establishing  relationships  with corporate clients
which are users of the extended  stay product.  Homestead's  primary focus is on
the business traveler and on establishing a relationship with corporate accounts
which  can be  expanded  to  multiple  properties  and  increased  room  nights.
Homestead  believes  that an  emphasis  on  corporate  accounts  is  critical to
maintaining occupancy levels that exceed market averages.

     Homestead  provides  its  customers  access for making  reservations  via a
toll-free  reservations  number,  888-STAY-HSD,  and  connection  to the  Global
Distribution Systems used by travel professionals.

     Homestead's  operating history and customer-level  research provide it with
the  competitive  advantage  of  understanding  the needs of the  extended  stay
business  traveler.  In developing its extended stay lodging product,  Homestead
has relied on customer  surveys,  interviews  and focus  groups to identify  the
specific needs and  requirements of its customers.  Understanding  its customers
has  allowed  Homestead  to  design  its  properties  and  establish   operating
procedures to meet and exceed the customers' needs and requirements.

     Weekly room rates at Homestead Village properties appeal to value-conscious
business travelers. Weekly rates at Homestead properties typically range between
$250 and $475.  Weekly rates at  Homestead  properties  will vary  significantly
depending on specific market factors and the size of the room.
                                        1
<PAGE>

Proprietary Operating System

     Homestead's proprietary operating system is focused on providing a uniform,
consistently  high-quality  experience for the business traveler.  Homestead has
developed and is  continuously  refining its operating  system which  combines a
conveniently located, well-designed guest room with friendly and efficient guest
service,  and an amenity  program  designed  to meet the  specific  needs of the
extended stay business traveler all at an affordable price.  Homestead  believes
that the  operating  system will  result in a positive  lodging  experience  for
guests and  generate a  willingness  to use the  product  again and in  multiple
locations.

     Homestead's  operating  experience has provided it with the  opportunity to
standardize its operating procedures to meet the specific needs of extended stay
business travelers. This standardization is aimed at both providing a consistent
guest experience and generating operating efficiencies.

     Homestead has invested  substantially in the recruiting and training of its
personnel.  Homestead  currently  provides  training  modules,  which  have been
purchased or developed,  with topics  ranging from guest  services and safety to
personal selling  techniques and leadership  skills.  Training in these areas is
conducted on a regular basis and ensures a consistent  guest experience at every
property.  Training design and  organizational  development are  administered by
corporate  professionals  in conjunction  with field  trainers  located within a
geographic region.

     Homestead  properties  were  designed and built to uniform  plans that were
driven by the needs of the extended  stay  business  traveler.  Rooms  generally
contain  260 to 420 square feet of fully  furnished  living  space,  with a work
station/dining   area  and   kitchen   facilities   that   include  a  full-size
refrigerator,  microwave, sink and cook-top. Timely capital expenditures as well
as its preventive  maintenance program allow Homestead to maintain  high-quality
and attractive rooms and properties for its customers.

Conclusion of Development Program

     Homestead's  overall results of operations and financial position have been
significantly influenced by its development program and the financing activities
required  to support  it. The  tightening  of capital  markets  for real  estate
operating  companies and lodging  companies which began in 1998 and continued in
1999 had an adverse  effect on  Homestead's  ability to continue its high growth
program of acquisition of land sites and  construction  of properties.  In 1998,
Homestead  reorganized  its  development  effort and  recorded  a $7.24  million
special  charge.  Such  charge  primarily  related to the  severance  of certain
development  personnel and abandonment of selected pursuits of development sites
due to the limited availability of additional funds for development.

     In the second quarter of 1999, Homestead determined, based on its inability
to  obtain  financing  for  development   beyond  those  properties  already  in
construction,  to end its development program. As of the beginning of the second
quarter of 1999, Homestead had substantial  investments in ownership of land for
development as well as in pursuit costs for additional  development sites. As of
May 1999, all land  previously  held for  development  became held for sale, all
pursuits for acquisition of additional sites for development were abandoned, and
Homestead  began  reduction  of its  overhead  costs and  personnel to reflect a
company with  stabilized  operations  of 136  properties.  A special  charge was
recorded  in  the  second  quarter  of  1999  of  $65.3  million  primarily  for
write-downs  of land held for sale,  write-offs  of costs of  pursuits,  and the
costs of severance of personnel.

Strengthening Homestead's Balance Sheet

     In efforts directed to strengthening  its balance sheet,  Homestead reduced
its debt and long-term  liabilities  from $708.5 million at December 31, 1998 to
$487.6 million at December 31, 1999 by paying off a $200 million bridge facility
with proceeds received from the May 1999 common stock rights offering,  reducing
its working capital bank line of credit  facilities by $73.6 million  (primarily
by  utilizing  $72.6  million in net  proceeds  generated  by land  sales),  and
settling a $7.9 million long-term  liability through the payment of $2.1 million
in cash.  Additionally  during 1999 Homestead paid off a short-term $122 million
mortgage note with the proceeds of a sale and long-term leaseback of properties.
                                       2
<PAGE>

     Subsequent  to year end 1999  Homestead has made  payments  totaling  $31.5
million  on the bank line of credit  reducing  its line of credit  debt to $93.9
million.  On February  29, 2000  Homestead  entered into an amended and restated
bank credit facility which allows for $110 million of total  borrowings of which
$35 million is available  on a revolving  basis.  The amended and restated  line
matures  February 28, 2003,  bears interest at LIBOR plus 2.5%, is secured by 64
operating  properties,  permits  payment of dividends based upon a definition of
free cash  flow,  and  requires  maintenance  of  financial  ratio and  coverage
covenants.

Focus on Property Operations

     In early 1999 Homestead  experienced  lowered occupancy levels versus prior
periods which management believed to be indicative of increasing competition and
the result of Homestead  rate  increases.  Beginning in late second quarter 1999
Homestead lowered rates in selected markets which were experiencing  competitive
pressures,  and management  believes the  improvements  in occupancy  levels and
revenues in the latter half of 1999 were  partially  due to these  actions.  For
full  year 1999  total  portfolio  occupancy  was  70.2%  versus  full year 1998
occupancy of 70.4%,  both of which were below 1997 total portfolio  occupancy of
74.7%.  The  lower  occupancy  levels  for  1999 and  1998  reflect  competitive
pressures,  particularly in the southwestern United States where several markets
are characterized by an oversupply of extended stay lodging.

     Homestead   aggregates  its  individual   operating   properties  into  one
reportable segment,  that being the operation of extended stay properties in its
target  markets in the United  States.  For further  information  see "Note 11 -
Segment Reporting" to the financial statements included herein in Item 14.

Reduction of Overhead

     In May 1999, Homestead's management established a goal of reducing overhead
to reflect a company with stabilized operations of 136 properties.  In the first
quarter 1999, total overhead costs were $48.6 million on an annualized basis. In
the fourth quarter 1999, on an annualized basis overhead costs (exclusive of the
special  charge) had been reduced 44% to $27.2 million.  In the first quarter of
2000,  total  overhead  costs are  expected  to  approximate  $25  million on an
annualized basis.


EXTENDED STAY MARKET

     Homestead  believes  that the  extended  stay  market  represents  a unique
business  opportunity  and that the  price/value  relationship  has  enabled the
extended stay market to achieve higher than industry average occupancy rates and
operating  margins.  Demand for extended stay lodging has been stimulated by the
economic and social  changes  resulting  from the increased  volume of corporate
reorganizations   and  trends  toward  downsizing  and  outsourcing  of  various
functions,  and  technological  improvements  which have allowed  businesses  to
relocate  outside of large  metropolitan  areas.  These changes have created new
accommodation  needs for,  among  others,  corporate  executives  and  trainees,
consultants, sales representatives and relocating individuals.

     Moderately priced, extended stay lodging competes on the basis of price and
value  compared to the  extended  stay market  generally,  thereby  providing an
economic  inducement  to guests who are already  attracted to the extended  stay
concept.  In addition,  moderately  priced,  extended  stay lodging  provides an
affordable,  convenient  and efficient  lodging  alternative  for long-term stay
guests  who  would  otherwise  use a  traditional  lodging  facility.  Based  on
published  occupancy  rates for other  participants in the extended stay market,
Homestead believes that there is a strong demand for moderately priced, extended
stay  accommodations  that results in higher  occupancy  rates for extended stay
hotels than for comparable hotels competing in the same market.

                                       3


<PAGE>


COMPETITION

     Each  Homestead  property  is located  in a  developed  area that  includes
competing  properties,  including traditional hotels, other extended stay hotels
and corporate  apartments.  The number of competitors in a particular area could
have a material  adverse  effect on occupancy,  average weekly rates and revenue
for a Homestead  property in that market.  Competition  within the extended stay
lodging market has increased  substantially.  In several markets where Homestead
has  properties,  there is intense  competition  for the extended stay customer,
which has already  affected  occupancy and weekly revenue per available room for
these properties.  There is an oversupply of extended stay hotels in Homestead's
southwestern  markets,  which has adversely affected the results for Homestead's
properties in those markets.

     Competition  within the lodging  industry is based generally on convenience
of location, price, range of services and guest amenities offered and quality of
customer service.  Homestead considers the reasonableness of its room rates, the
location of its properties and the services and the guest amenities  provided by
it to be among the most important  competitive factors in the business. A number
of  other  lodging  chains  and  developers  have  developed  or are  developing
competitive extended stay properties.  In particular,  several of these entities
have targeted the moderately priced segment of the extended stay market in which
Homestead  competes.  Homestead  competes  for  guests  with  certain  of  these
established entities, which may have greater financial resources than Homestead.
These  entities  may be able to accept more risk than  Homestead  can  prudently
manage. Further, there can be no assurance that new or existing competitors will
not significantly reduce their rates or offer greater  convenience,  services or
amenities,  or  significantly  expand or improve  properties in markets in which
Homestead competes,  thereby materially adversely affecting Homestead's business
and results of operations.


SEASONALITY

     The  lodging  industry  is  seasonal  in nature,  with the second and third
quarters  generally  accounting for a greater proportion of annual revenues than
the first and fourth quarters.  Quarterly  earnings may be adversely affected by
events  beyond  Homestead's  control such as poor weather  conditions,  economic
factors and other  considerations  affecting  travel.  Based upon the  operating
history of Homestead properties, management believes that occupancy and revenues
may be lower than normal during  December and January due to the holiday season.
Because many of  Homestead's  expenses do not  fluctuate  with  occupancy,  such
declines in  occupancy  and  revenues  may cause  fluctuations  or  decreases in
Homestead's earnings during these periods.


ENVIRONMENTAL MATTERS

     Under various federal,  state and local laws and  regulations,  an owner or
operator of real estate may be liable for the costs of removal or remediation of
certain  hazardous or toxic substances on such property.  Such laws often impose
such liability  without regard to whether the owner knew of, or was  responsible
for, the presence of hazardous or toxic substances.  Furthermore,  a person that
arranges  for the disposal or  transports  for disposal or treatment a hazardous
substance at a property  owned by another may be liable for the costs of removal
or remediation  of hazardous  substances  released into the  environment at that
property.  The  costs  of  remediation  or  removal  of such  substances  may be
substantial,  and the  presence of such  substances,  or the failure to properly
remediate such substances, may adversely affect the owner's ability to sell such
real estate or to borrow  using such real estate as  collateral.  In  connection
with the  ownership and operation of its  properties,  Homestead is  potentially
liable for any such costs.

     Homestead obtained Phase I Surveys on all of its existing  properties.  The
Phase I Surveys were intended to identify potential environmental  contamination
and regulatory compliance concerns. Phase I Surveys generally include historical
reviews  of the  properties,  reviews  of certain  public  records,  preliminary
investigations  of the sites and surrounding  properties and the preparation and
issuance of written reports.  Phase I Surveys  generally do not include invasive
procedures, such as soil sampling or ground water analysis.

     While some of these assessments led to further  investigation and sampling,
none of the environmental  assessments revealed,  nor is Homestead aware of, any

                                       4
<PAGE>

environmental  liability that management  believes would have a material adverse
effect on Homestead's business,  financial position or results of operations. No
assurance  can be given,  however,  that these  assessments  and  investigations
revealed  all  potential  environmental  liabilities,  that no  prior  owner  or
operator created any material environmental  condition not known to Homestead or
the  independent  consultants  or that  future uses and  conditions  (including,
without  limitation,  guest actions or changes in applicable  environmental laws
and regulations) will not result in the imposition of environmental liabilities.


GOVERNMENTAL REGULATION

     A  number  of  states   regulate  the  licensing  of  hotels  by  requiring
registration,  disclosure  statements and compliance with specific  standards of
conduct.  Homestead  believes  that  each of its  properties  has the  necessary
permits and approvals to operate its respective business. In addition, Homestead
is subject to laws governing its relationship with employees,  including minimum
wage requirements, overtime, working conditions and work permit requirements. An
increase  in the  minimum  wage  rate,  employee  benefit  costs or other  costs
associated with employees could adversely affect Homestead.

     Under  the  Americans  with  Disabilities  Act  (the  "ADA"),   all  public
accommodations  are required to meet  certain  federal  requirements  related to
access and use by disabled persons.  Although Homestead has attempted to satisfy
ADA  requirements in the designs for its  properties,  no assurance can be given
that a material ADA claim will not be asserted  against  Homestead,  which could
result  in a  judicial  order  requiring  compliance,  and  the  expenditure  of
substantial  sums to achieve  compliance,  an imposition of fines or an award of
damages to private litigants. These and other initiatives could adversely affect
Homestead as well as the lodging industry in general.


TRADEMARKS

     The Homestead  Village name and logo have been  registered  with the United
States Patent and Trademark office.


INSURANCE

     Homestead currently has the types and amounts of insurance coverage that it
considers  appropriate for a company in its business.  While management believes
that its  insurance  coverage is  adequate,  if  Homestead  were held liable for
amounts exceeding the limits of its insurance  coverage or for claims outside of
the scope of its insurance coverage, Homestead's business, results of operations
or financial position could be materially and adversely affected.


AGREEMENTS WITH SECURITY CAPITAL AND AFFILIATES

Administrative Services Agreement

     Homestead entered into an Administrative  Services  Agreement with Security
Capital,   pursuant  to  which   Security   Capital   provides   Homestead  with
administrative  services  for certain  aspects of  Homestead's  business.  These
services  include,  but are not limited to, insurance  administration,  accounts
payable  administration,  internal  audit,  cash  management,  human  resources,
management information systems, tax administration,  shareholder  communications
and investor  relations.  Any arrangements under the agreement for the provision
of services are  required to be  commercially  reasonable  and on terms not less
favorable  than those which could be obtained from  unaffiliated  third parties.
The agreement, which expires on December 31, 2000, is automatically renewed each
year for a one-year term,  subject to approval by a majority of the  independent
members of the Homestead  Board of  Directors.  Additionally,  Security  Capital
provides legal administration  services under a separate agreement which expires
December 31, 2000.  Homestead  incurred  fees of $5,201,000  for  administrative
services provided by Security Capital during 1999.

                                       5

<PAGE>


Security Capital Investor Agreement

     Homestead  and  Security  Capital  have  entered  into an amended  investor
agreement which, among other things,  provides that, so long as Security Capital
owns 50.1% or more of Homestead's outstanding common stock, Security Capital has
the right to approve, among other things,
             (i)  Homestead's annual budget;
             (ii) incurring  expenses in any year exceeding (A) any line item in
                  the  annual  budget  by  $500,000  or 10% and  (B)  the  total
                  expenses set forth in the annual budget by 5%;
             (iii)the  offer  or sale  of any  shares  of  common  stock  or any
                  securities  convertible into or exchangeable for common stock,
                  other than  pursuant to (A) an employee  benefit plan approved
                  by Homestead's  shareholders,  (B) previously issued warrants,
                  options or rights,  (C) a dividend  reinvestment plan or share
                  purchase  plan approved by the Board of Directors of Homestead
                  or (D) an issuance of rights,  options, or warrants for common
                  stock issued to all shareholders;
             (iv) the  issuance  or sale  of  securities  that  are  subject  to
                  mandatory  redemption  or  redemption  at  the  option  of the
                  holder;
             (v)  the  adoption of any employee  benefit plan  pursuant to which
                  shares of  common  stock may be  issued  and any  action  with
                  respect to senior officers' compensation;
             (vi) the incurrence,  restructuring,  renegotiation or repayment of
                  indebtedness  for borrowed money in which the aggregate amount
                  involved exceeds $1 million;
             (vii)the declaration or payment of any dividends or other distribu-
                  tion;
             (viii)  acquisitions  or  dispositions  in a single  transaction or
                  group of related  transactions  where the  aggregate  purchase
                  price paid or received exceeds $1 million;
             (ix) service  contracts  (A) for  investment  management,  property
                  management  or  leasing  services,   or  (B)  that  reasonably
                  contemplate annual contract payments by Homestead in excess of
                  $500,000;
             (x)  the  entering  into  of  any  new   contract,   including  for
                  construction,  development, or other capital expenditure,  for
                  which  the  total  cost is  reasonably  expected  to exceed $1
                  million for any contract or $5 million in the aggregate;
             (xi) the entering into of any joint venture for the  development of
                  any  properties  owned by Homestead in which the book value of
                  any property to be contributed by Homestead exceeds $1 million
                  individually or $5 million in the aggregate;
             (xii)the entering into of any franchising or licensing  agreements;
             (xiii)   amendment  of  articles  of  incorporation  or  bylaws  of
             Homestead;  and (xiv)waiver of anti-takeover provisions of Maryland
             law or Homestead's articles of incorporation.

     The Security  Capital  investor  agreement  also provides  that, so long as
Security  Capital owns at least 10% of the  outstanding  shares of common stock,
Homestead  may not  increase  the  number  of  persons  serving  on the Board of
Directors to more than seven without the approval of Security Capital.  Security
Capital also will be entitled to designate one or more nominees for directors of
Homestead,  as follows:  (i) so long as Security  Capital  owns at least 10% but
less than 25% of the  outstanding  shares of common  stock,  it is  entitled  to
nominate one person;  and (ii) so long as Security  Capital owns at least 25% of
the  outstanding  shares of common stock, it is entitled to nominate that number
of  persons as shall bear  approximately  the same ratio to the total  number of
members  of the Board of  Directors  as the  number  of  shares of common  stock
beneficially  owned by Security Capital bears to the total number of outstanding
shares of common  stock,  provided  that  Security  Capital shall be entitled to
designate no more than two persons so long as the Board of Directors consists of
no more than seven  members.  The  nominee(s) of Security  Capital may, but need
not, be the same person nominated by Archstone  Communities Trust ("Archstone"),
an investee of Security Capital,  pursuant to the Archstone  investor  agreement
described below.

     The Security  Capital  investor  agreement  provides  Security Capital with
registration  rights  pursuant to which,  in specified  circumstances,  Security
Capital may request,  and on not more than three occasions,  registration of all
of Security  Capital's  shares  pursuant to Rule 415 under the  Securities  Act.
Security  Capital  currently  owns 87.0% of  Homestead's  outstanding  shares of
common stock.

Tax Allocation Agreement

     As a result of Security  Capital's  ownership  in Homestead  exceeding  80%
after the  closing of the May 1999 common  stock  rights  offering,  Homestead's
                                       6

<PAGE>

results, post rights offering,  are included in the federal income tax return of
Security Capital. Security Capital may utilize tax operating losses generated by
Homestead  subsequent to May 1999. In order for Security  Capital to utilize the
net  operating  loss  carryforwards  generated  by  Homestead  through May 1999,
Homestead must generate  future taxable  income.  To the extent  Homestead's net
operating loss  carryforwards are so utilized on Security  Capital's federal tax
return,  such loss  carryforwards  will not be  available  to  Homestead  in the
future.  Homestead  and Security  Capital  have  entered  into a tax  allocation
agreement  which  provides  for tax  liability  or refund  payments  between the
entities as determined by a defined  calculation  of  Homestead's  proportionate
share of taxable  income  versus the total of  taxable  income for all  entities
filing as part of Security  Capital's  federal tax return.  The  agreement  also
provides  that if a capital  transaction  were to occur where  Security  Capital
owned less than 50% of Homestead after the  transaction,  all net operating loss
carryforwards  generated by  Homestead  through May 1999 would inure to Security
Capital.
For 1999 no amounts were paid or due under the agreement.

Archstone Convertible Mortgages

     At  December  31,  1999,  Homestead  owed  convertible  mortgage  notes  to
Archstone,  in the  amount of  $221,333,620.  The  mortgage  notes  were  funded
pursuant  to a  mortgage  funding  commitment  to  finance  the  development  of
properties  acquired  by  Homestead  from  Archstone  in  1996.  The  notes  are
collateralized  by 54  Homestead  properties  with a  historical  cost of $359.3
million.  The notes accrue interest at 9.0% on the principal amount, and require
interest only payments every six months on May 28 and November 28. The notes are
due October 31, 2006 and are  callable on or after May 28,  2001.  The notes are
convertible,  at the option of the holder,  into 21,191,262  shares of Homestead
common  stock at a  conversion  ratio  equal to one share for every  approximate
$10.44  of  principal  amount  outstanding.  Archstone  has no  further  funding
commitment.

Archstone Investor Agreement

     Archstone has entered into an investor and  registration  rights  agreement
with Homestead  pursuant to which  Archstone is entitled to designate one person
for nomination to the Homestead  Board of Directors,  and Homestead will use its
best efforts to cause the election of such nominee, for so long as Archstone has
the right to convert in excess of $20 million in principal amount of convertible
mortgage  notes.  Such  nominee  may,  but need not,  be a person  nominated  by
Security  Capital  pursuant  to the  Security  Capital  investor  agreement.  In
addition, Homestead has granted to Archstone registration rights with respect to
the issuance upon conversion and the distribution of all of the shares of common
stock issuable upon conversion of the convertible mortgage notes.  Archstone may
request three registrations pursuant to Rule 415 under the Securities Act of all
shares of common stock issued or issuable  upon  conversion  of the  convertible
mortgage notes.  Such  registrations,  except for the fees and  disbursements of
counsel to Archstone, shall be at the expense of Homestead.

Subscription Agreement

     In June 1998, Homestead entered into a subscription agreement with Security
Capital whereby Security Capital agreed to purchase $200 million of subordinated
debentures from Homestead.  This subscription  agreement was pledged as security
for a $200 million bank line of credit  bridge  facility.  In  conjunction  with
Security Capital's entering into the subscription  agreement,  Homestead paid an
arrangement fee to Security Capital of $600,000.  Security Capital's obligations
under the subscription  agreement  terminated as a result of Security  Capital's
participation  in the May 1999 $225 million common stock rights offering and the
repayment of the bridge facility.


EMPLOYEES

     As of December 31, 1999,  Homestead employed  approximately 1,770 full-time
employees including 100 corporate professionals and administrative employees and
1,670 on-site personnel. Homestead's employees are not subject to any collective
bargaining  agreements and management  believes that its  relationship  with its
employees is good.

                                       7


<PAGE>


DIRECTORS AND OFFICERS OF HOMESTEAD

Directors

     C. RONALD  BLANKENSHIP--50--Director,  Interim Chairman and Chief Executive
Officer of Homestead since May 1999. Mr.  Blankenship  was Advisory  Director of
Homestead  from  October  1996 to May 1999.  Mr.  Blankenship  has been the Vice
Chairman,  Chief Operating  Officer and a Director of Security Capital since May
1998 and was Managing  Director of Security Capital from March 1991 to May 1998.
Mr.  Blankenship was Non-Executive  Chairman of Archstone from June 1997 to July
1998. From June 1991 to July 1997, Mr. Blankenship was Chairman of Archstone. He
became a Trustee of  Archstone  in March  2000,  and was  formerly  an  Advisory
Trustee of  Archstone.  He is also a Director of  CarrAmerica  Realty Corp.  and
Storage USA, Inc.

     JAMES C.  POTTS--53--President  and Director of Homestead  since March 2000
and Chief  Operating  Officer since December 1999,  where he is responsible  for
Homestead  operations.  Mr. Potts was Executive Vice President of Homestead from
May 1999 to March  2000.  From  July 1998 to May 1999,  Mr.  Potts was  Managing
Director of Homestead responsible for development.  Prior thereto, Mr. Potts was
Co-Chairman  and  Chief   Investment   Officer  for  Security  Capital  Atlantic
Incorporated  ("ATLANTIC")  from  January  1996 to July 1998 and a  Director  of
ATLANTIC and the management  company  responsible for the management of ATLANTIC
from  October  1993 to July 1998.  Mr.  Potts was  Chairman of ATLANTIC  and the
management  company  responsible  for its  management  from May 1994 to December
1995.

     JOHN P. FRAZEE, JR.--55--Director of Homestead since May 1996. Since August
1997, Mr. Frazee has served as Director,  Chairman,  and Chief Executive Officer
of PageNet,  Inc. (a provider of wireless  messaging  and  wireless  information
services).  Since August 1999, Mr. Frazee has been Chairman and Chief  Executive
Officer of Vast  Wireless  Solutions,  an internet  solutions  provider.  He was
President of PageNet, Inc. from August 1997 to June 1999, and formerly was Chief
Operating  Officer  of Sprint  Corporation;  prior to the March  1993  merger of
Sprint and  Centel  Corporation,  Mr.  Frazee  had been the  Chairman  and Chief
Executive  Officer of Centel  since 1972.  He is a Director of Security  Capital
Group Incorporated,  C-Span, Dean Foods Company, and Vast Wireless Solutions. He
is also an  Executive  Board  Member of The Edwin L. Cox School of  Business  at
Southern Methodist University and a Life Trustee of Rush-Presbyterian St. Luke's
Medical Center in Chicago, Illinois.

     MANUEL A.  GARCIA--56--Director  of Homestead since April 1997. Since 1992,
Mr. Garcia has been the Chief  Executive  Officer of Atlantic Coast  Management,
Inc. He is also Chief  Executive  Officer of Pebbles  Restaurants,  Inc.  and M.
Garcia's,  Inc. and a Vice  President of Culinary  Concepts,  Inc.  From 1969 to
1996, Mr. Garcia was the Chief Executive Officer of Davgar Restaurants, Inc.

     JOHN C.  SCHWEITZER--55--Director  of  Homestead  since April  1997,  and a
Trustee of Archstone since 1976.  Since 1974, Mr.  Schweitzer has been President
of Westgate Corp., general partner of Campbell Capital,  Ltd., a real estate and
investments  company in Austin,  Texas. Mr.  Schweitzer  serves as a Director of
Regency Realty Corporation, Chase Bank of Texas, and KLRU Public Television.

     EUGENE B. VESELL--60--Director of Homestead since June 1999. From December
1990 until his  retirement in April 1999,  Mr.  Vesell was Managing  Director at
Oppenheimer Capital, where he was a senior equity portfolio manager and research
analyst.  Prior to joining Oppenheimer Capital, Mr. Vesell was a partner for ten
years with David J.  Greene and  Company,  where his  responsibilities  included
research and portfolio management.


Executive Officers

     JAMES C. POTTS--See "Directors" above.

     A. RICHARD MOORE --54-- Interim Chief Financial Officer for Homestead since
May 1999 and Managing Director of the Capital Division of Security Capital since
May 1998, where he provides operating  oversight for companies in which Security
Capital has direct or indirect  ownership  positions.  Since January  2000,  Mr.
Moore has also been a Managing  Director of  Security  Capital  European  Realty
Management Limited and Security Capital (UK) Management Limited. From March 1990
to May 1998, Mr. Moore was a Vice President with Goldman, Sachs & Co., where his
most recent position was in the Equity Research Department.
                                       8
<PAGE>

     GARY A.  DELAPP--41--Managing  Director of Homestead  since March 2000 with
responsibilities  for the operations group. Mr. DeLapp was Senior Vice President
of Homestead from December 1996 to March 2000,  Vice President of Homestead from
May 1996 to November  1996, and Vice  President,  Homestead  Village  Management
Incorporated,  from February 1996 to October 1996. Prior thereto, from July 1983
to February  1996, Mr. DeLapp was with Vista Host,  Inc.,  where his most recent
position was partner and Senior Vice President of Operations.

     LAURA L. HAMILTON--36--Senior Vice President of Homestead since March 1998,
where she supervises  Homestead's legal and treasury  matters;  from May 1996 to
March 1998, Vice President of Homestead; from January 1996 to October 1996, Vice
President of Homestead Village Management Incorporated. Prior thereto, from June
1995 to January 1996, Ms.  Hamilton was Vice  President of Archstone,  where she
had been a member of the due diligence group since April 1992.

     JEFFREY A. KLOPF--51--Senior Vice President of Homestead since May 1996 and
Secretary  since January 1996;  Senior Vice  President and Secretary of Security
Capital  since  January  1996,  where he provides  legal  services  for Security
Capital.  Mr. Klopf was Senior Vice  President and  Secretary of Archstone  from
January  1996 to  September  1999 and Senior Vice  President  and  Secretary  of
ProLogis  from January 1996 to March 1999.  From January 1988 to December  1995,
Mr. Klopf was a partner of Mayer,  Brown & Platt,  where he practiced  corporate
and securities law.

     GREGG A.  PLOUFF--43--Senior  Vice President of Homestead since March 1998.
From May 1996 to March 1998,  Mr. Plouff was Vice  President of Homestead;  from
June 1995 to October 1996, he was Vice President of Homestead Village Management
Incorporated.  Prior  thereto,  from March 1995 to May 1996, Mr. Plouff was Vice
President of Archstone;  from July 1994 to March 1995, he was Vice  President of
the management  company  responsible for management of Archstone;  from November
1993 to July 1994, he was a member of the acquisitions group of Archstone.

     MARK E.  RILEY--41--Senior Vice President of Homestead since December 1998,
where he is responsible for operations for the Southeast  Region.  Mr. Riley was
Vice  President of  Homestead  from May 1996 to December  1998;  he was a Senior
Development  Manager  working on Homestead  projects  for Security  Capital from
September 1994 to May 1996.  Prior thereto,  from August 1993 to September 1994,
Mr. Riley was a Vice President with Southeast Lodges Development Company.

                                       9

<PAGE>


ITEM 2. PROPERTIES

GEOGRAPHIC DISTRIBUTION

     The table below  describes the geographic  distribution  of Homestead's 136
operating property investments at December 31, 1999:

<TABLE>
                                                                    NUMBER OF PROPERTIES
                                                    -----------------------------------------------------
                                                                                                         PERCENTAGE OF
                                                                                                           OPERATING
                                                                                                          PROPERTIES
                        CITY                              OWNED         LEASED (1)          TOTAL         INVESTMENT
                        ----                              -----         ----------          -----         ----------
     <S>                                                  <C>           <C>                 <C>           <C>
     NORTHEAST:
     Boston, MA....................................          3              --               3                  3%
     New York Metro, NJ/CT.........................          5              --               5                  6%
     Philadelphia, PA/DE...........................          3              --               3                  2%
     Washington, DC................................          2               7               9                  7%
                                                           ---             ---             ---                ---
          Subtotal.................................         13               7              20                 18%
                                                            ==             ===              ==                 ==

     SOUTHEAST:
     Atlanta, GA...................................          6               2               8                  6%
     Birmingham, AL................................          1              --               1                  1%
     Jacksonville, FL..............................          2              --               2                  1%
     Miami/Ft. Lauderdale, FL......................          4               3               7                  6%
     Orlando, FL...................................          2              --               2                  2%
     Tampa, FL.....................................         --               3               3                  2%
                                                            --             ---             ---                ---
          Subtotal.................................         15               8              23                 18%
                                                            ==             ===              ==                 ==

     WEST :
     Las Vegas, NV.................................          1              --               1                  1%
     Los Angeles, CA...............................          4              --               4                  3%
     Orange County, CA.............................          3              --               3                  2%
     Sacramento, CA................................          1              --               1                  1%
     San Diego, CA.................................          2              --               2                  2%
     San Francisco (Bay Area), CA..................          8              --               8                  7%
                                                           ---              --             ---                ---
          Subtotal.................................         19              --              19                 16%
                                                            ==              ==              ==                 ==

     MIDWEST:
     Chicago, IL...................................          5              --               5                 4%
     Cleveland, OH.................................          2              --               2                 2%
     Detroit, MI...................................          2              --               2                 2%
     Kansas City, MO/KS............................          3              --               3                 2%
     Milwaukee, WI.................................          1              --               1                 1%
     Minneapolis, MN...............................          2              --               2                 1%
     St. Louis, MO.................................          2              --               2                 1%
                                                           ---              --             -----             -----
          Subtotal.................................         17              --              17                13%
                                                            ==              ==              ==               ====

     MOUNTAIN:
     Albuquerque, NM...............................          2              --               2                 1%
     Denver, CO....................................          4              --               4                 3%
     Phoenix, AZ...................................          5              --               5                 3%
     Portland, OR..................................          2              --               2                 2%
     Salt Lake City, UT............................          3              --               3                 2%
     Seattle, WA...................................          4              --               4                 3%
                                                           ---              --              --                ---
          Subtotal.................................         20              --              20                14%
                                                            ==              ==              ==                ==

                                       10


<PAGE>



                                                                    NUMBER OF PROPERTIES
                                                    -----------------------------------------------------
                                                                                                         PERCENTAGE OF
                                                                                                           OPERATING
                                                                                                          PROPERTIES
                        CITY                              OWNED         LEASED (1)          TOTAL         INVESTMENT
                        ----                              -----         ----------          -----         ----------
     SOUTHWEST:
     Austin, TX....................................          4              --               4                  2%
     Dallas, TX....................................          9              --               9                  4%
     Houston, TX...................................          9              --               9                  4%
     San Antonio, TX...............................          3              --               3                  1%
                                                           ---              --             ---                ---
          Subtotal.................................         25              --              25                 11%
                                                            ==              ==              ==                 ==

     EAST:
     Charlotte, NC.................................          1              --               1                  1%
     Memphis, TN...................................          2              --               2                  1%
     Nashville, TN.................................          2              --               2                  2%
     Raleigh, NC...................................          2               2               4                  3%
     Richmond, VA..................................          2               1               3                  3%
                                                           ---              --             ---                ---
          Subtotal.................................          9               3              12                 10%
                                                           ===              ==            ====                 ==

          Total                                            118              18             136                100%
                                                           ===              ==             ===                ===
<FN>
------------
(1)   Indicates  properties  operated under a capital lease with an initial term
      expiring  December  2015.  Homestead  has options  under the lease for two
      extension periods of 15 years each.
</FN>
</TABLE>

PROPERTIES PORTFOLIO

     The  following  table  is as of  December  31,  1999  for  Homestead's  136
operating properties.

<TABLE>
                                                                            DATE COMPLETED        ROOMS
     <S>                                                                    <C>                   <C>
     NORTHEAST:
     Boston, Massachusetts
     Boston/Burlington (1)..............................................      August, 1998          141
     Boston/Marlborough (1).............................................      August, 1998          135
     Boston/Waltham (1).................................................   September, 1998          139
                                                                                                    ---
          Subtotal......................................................                            415
                                                                                                    ---

     New York Metro
     Hanover/Parsipanny, NJ (1).........................................    November, 1998          140
     Meadowlands, NJ (1)................................................        July, 1999          139
     Norwalk, CT (1)....................................................       April, 1999          140
     Shelton, CT (1)....................................................    December, 1998          139
     Woodbridge, NJ (1).................................................     January, 1999          140
                                                                                                    ---
          Subtotal......................................................                            698
                                                                                                    ---

     Philadelphia, Pennsylvania
     Horsham/Willow Grove (1)...........................................        July, 1998          136
     King of Prussia (1)................................................      August, 1998          141
     Newark/Christiana, DE (1)..........................................    February, 1998          141
                                                                                                    ---
          Subtotal......................................................                            418
                                                                                                    ---

     Washington, DC
     Alexandria (1).....................................................     January, 1999          130
     Baltimore Washington International Airport (2).....................      August, 1997          137
     Dulles/Chantilly (2)...............................................    December, 1997          116
     Dulles/Sterling (2)................................................      August, 1998          134
     Fair Oaks (2)......................................................    December, 1997          134
     Germantown (2).....................................................    December, 1997          130
     Merrifield (2).....................................................   September, 1998          129
     Reston-Sunset (2)..................................................      August, 1998          149
     Tyson's Corner (1).................................................      August, 1999          106
                                                                                                    ---
          Subtotal......................................................                          1,165
                                                                                                  -----

          Total Northeast Region........................................                          2,696
                                                                                                  =====

                                       11
<PAGE>

     SOUTHEAST:
     Atlanta, Georgia
     Atlanta/Cumberland (1).............................................         May, 1997          134
     Atlanta/Gwinnett Place (1).........................................     October, 1997          130
     Atlanta/Norcross (2)...............................................        July, 1996          137
     Atlanta/North Druid Hills (2)......................................      August, 1997          137
     Atlanta/Northlake (1)..............................................         May, 1998          133
     Atlanta/Perimeter (1)..............................................         May, 1997          133
     Atlanta/Roswell (1)................................................    December, 1997          141
     Atlanta/Wildwood/Powers Ferry (1)..................................   September, 1998          134
                                                                                                    ---
          Subtotal......................................................                          1,079
                                                                                                  -----

     Birmingham, Alabama
     Birmingham/Perimeter Park South (1)................................        June, 1998          137
                                                                                                    ---

     Jacksonville, Florida
     Jacksonville/Baymeadows (1)........................................       March, 1998          134
     Jacksonville/Southside (1).........................................        July, 1997          137
                                                                                                    ---
          Subtotal......................................................                            271
                                                                                                    ---

     Miami/Ft. Lauderdale, Florida
     Boca Raton/Commerce (1)............................................    December, 1998           89
     Coral Springs (1)..................................................     October, 1998          124
     Ft. Lauderdale/Tamarac (2).........................................      August, 1997          145
     Miami Airport/Doral (2)............................................     October, 1997          149
     Miami/Blue Lagoon (1)..............................................   September, 1998          149
     Plantation/Davie (2)...............................................    December, 1997          125
     West Palm Beach (1)................................................    December, 1998          137
                                                                                                    ---
          Subtotal......................................................                            918
                                                                                                    ---

     Orlando, Florida
     Orlando/Altamonte Springs (1)......................................   September, 1998          135
     Orlando/South (1)..................................................     October, 1998          135
                                                                                                    ---
          Subtotal......................................................                            270
                                                                                                    ---

     Tampa, Florida
     Tampa/Brandon (2)..................................................        July, 1997          141
     Tampa/North Airport (2)............................................       March, 1997          121
     Clearwater (2).....................................................     October, 1997          113
                                                                                                    ---
          Subtotal......................................................                            375
                                                                                                    ---

          Total Southeast Region........................................                          3,050
                                                                                                  =====

                                       12
<PAGE>




     WEST:
     Las Vegas, Nevada
     Las Vegas Midtown (1).............................................       August, 1998          123
                                                                                                    ---

     Los Angeles, California
     Glendale (1).......................................................        June, 1999           86
     Los Angeles International Airport/
        El Segundo (3).................................................     December, 1997          150
     Monrovia (3)......................................................          May, 1998          122
     Torrance (1).......................................................     January, 1999          138
                                                                                                    ---
          Subtotal......................................................                            496
                                                                                                    ---

     Orange County, California
     Brea (1)...........................................................     January, 1998          133
     Cypress (1).......................................................    September, 1998          134
     Irvine/Spectrum (3)...............................................      October, 1997          149
                                                                                                    ---
          Subtotal......................................................                            416
                                                                                                    ---

     Sacramento, California
     Sacramento/South Natomas (1).......................................    November, 1998          143
                                                                                                    ---

     San Diego, California
     San Diego/Mira Mesa (3)............................................      August, 1998          140
     San Diego/Mission Valley (3).......................................     October, 1997          140
                                                                                                    ---
          Subtotal......................................................                            280
                                                                                                    ---

     San Francisco (Bay Area), California
     Fremont (1)........................................................     January, 1999          128
     Milpitas (3).......................................................    February, 1997          118
     Mountain View (3)..................................................    December, 1997          132
     San Carlos (1).....................................................     October, 1998          116
     San Jose (3).......................................................         May, 1998          152
     San Mateo (3)......................................................       March, 1997          136
     San Ramon (3)......................................................         May, 1998          147
     Sunnyvale (3)......................................................       March, 1997          144
                                                                                                    ---
          Subtotal......................................................                          1,073
                                                                                                  -----

          Total West Region.............................................                          2,531
                                                                                                  =====

     MIDWEST:
     Chicago, Illinois
     Chicago/Naperville (1).............................................    December, 1997          136
     Chicago/Schaumburg (1).............................................    December, 1997          136
     Chicago/Westmont (1)...............................................    February, 1998          140
     Oakbrook (1).......................................................      August, 1999          136
     Vernon Hills (1)...................................................        July, 1999          124
                                                                                                    ---
          Subtotal......................................................                            672
                                                                                                    ---

     Cleveland, Ohio
     Beachwood (1)......................................................        July, 1999          142
     Cleveland/North Olmstead (1).......................................       March, 1998          136
                                                                                                    ---
          Subtotal......................................................                            278
                                                                                                    ---

                                       13

<PAGE>



     Detroit, Michigan
     Auburn Hills (1)...................................................        June, 1999          134
     Southfield (1).....................................................        June, 1999          134
                                                                                                    ---
          Subtotal......................................................                            268
                                                                                                    ---

     Kansas City, Missouri/Kansas
     Kansas City/Country Club Plaza (1).................................       March, 1998          100
     Kansas City/Overland Park (1)......................................       April, 1998          131
     Kansas City/Shawnee Mission (3)....................................       April, 1997          140
                                                                                                    ---
          Subtotal......................................................                            371
                                                                                                    ---

     Milwaukee, Wisconsin
     Milwaukee/Brookfield (1)...........................................        July, 1998          137
                                                                                                    ---

     Minneapolis, Minnesota
     Minneapolis/Eagan (1)..............................................    December, 1997          130
     Minneapolis/Eden Prarie (1)........................................     January, 1998           97
                                                                                                    ---
          Subtotal......................................................                            227
                                                                                                    ---

     St. Louis, Missouri
     St. Louis Airport (1)..............................................        June, 1998          136
     Westport - Mayfield Heights (1)....................................        July, 1999           99
                                                                                                    ---
          Subtotal......................................................                            235
                                                                                                    ---

          Total Midwest Region..........................................                          2,188
                                                                                                  =====

     MOUNTAIN:
     Albuquerque, New Mexico
     Albuquerque/North (3)..............................................      March, 1996           141
     Albuquerque/Midtown (3)............................................       June, 1997           138
                                                                                                    ---
          Subtotal......................................................                            279
                                                                                                    ---

     Denver, Colorado
     Denver/Aurora (3)..................................................      April, 1996           137
     Denver/Cherry Creek (3)............................................        May, 1997           108
     Denver/Inverness (3)...............................................     August, 1997           142
     Denver/Tech Center (3).............................................      April, 1996           159
                                                                                                    ---
          Subtotal......................................................                            546
                                                                                                    ---

     Phoenix, Arizona
     Mesa (3)..........................................................     December, 1997          123
     Phoenix/Deer Valley (3)...........................................     November, 1996          141
     Phoenix/Metro (3).................................................         June, 1996          141
     Scottsdale (3)....................................................       August, 1995          120
     Tempe (3).........................................................        April, 1996          149
                                                                                                    ---
          Subtotal.....................................................                             674
                                                                                                    ---

     Portland, Oregon
     Beaverton (3).....................................................    September, 1997          142
     Lake Oswego (3)...................................................        March, 1998          146
                                                                                                    ---
          Subtotal......................................................                            288
                                                                                                    ---

                                       14

<PAGE>



     Salt Lake City, Utah
     Salt Lake City/Ft. Union (3)......................................      October, 1997          131
     Salt Lake City/South Valley (3)...................................         June, 1997          137
     Salt Lake City/Sugarhouse (1).....................................       August, 1998          103
                                                                                                    ---
          Subtotal.....................................................                             371
                                                                                                    ---

     Seattle, Washington
     Bellevue (3).......................................................    November, 1997          149
     Seattle/Redmond (3)................................................    November, 1997          162
     Seattle/Southcenter (3)............................................     January, 1998           93
     North Seattle/Mountlake Terrace (3)................................     January, 1998          118
                                                                                                    ---
          Subtotal......................................................                            522
                                                                                                    ---

          Total Mountain Region.........................................                          2,680
                                                                                                  =====

     SOUTHWEST:
     Austin, Texas
     Austin/Arboretum (3)...............................................       July, 1995           133
     Austin/Downtown/Townlake (1).......................................   December, 1998           130
     Austin/Midtown (3).................................................   February, 1996           145
     Austin/Northwest (3)...............................................    October, 1996           133
                                                                                                    ---
          Subtotal......................................................                            541
                                                                                                    ---

     Dallas, Texas
     Dallas/Las Colinas (3).............................................    January, 1996           148
     Dallas/North (Tollway) Addison (3).................................        May, 1993           119
     Dallas/North Arlington (3).........................................      March, 1995           137
     Dallas/North Central (3)...........................................    January, 1994           133
     Dallas/North Richland Hills (3)....................................    January, 1994           133
     Dallas/Northeast (3)...............................................     August, 1992           131
     Dallas/Northwest (3)...............................................               (4)          189
     Dallas/South Arlington (3).........................................      April, 1995           141
     Fort Worth (3).....................................................    January, 1996            97
                                                                                                   ----
          Subtotal......................................................                          1,228
                                                                                                  -----

     Houston, Texas
     Houston/Cypress Station (3).......................................      August, 1994          134
     Houston/Galleria Area (1).........................................   September, 1998          136
     Houston/Hobby South (3)...........................................       April, 1994          133
     Houston/Northwest (3).............................................    February, 1994          133
     Houston/Park Ten (3)..............................................   September, 1994          134
     Houston/Sugarland (3).............................................     October, 1994          133
     Houston/Westchase (3).............................................        July, 1994          133
     Houston/Willowbrook (3)...........................................        July, 1995          137
     Houston/Medical Center (3)........................................   September, 1995          165
                                                                                                   ---
          Subtotal.....................................................                          1,238
                                                                                                 -----

     San Antonio, Texas
     San Antonio/Airport (3)...........................................        July, 1995          153
     San Antonio/Medical Center (3)....................................      August, 1994          135
     San Antonio/Six Flags Fiesta (3)..................................      August, 1995          130
                                                                                                   ---
          Subtotal.....................................................                            418
                                                                                                   ---

          Total Southwest Region.......................................                          3,425
                                                                                                 =====
                                       15
<PAGE>



     EAST:
     Charlotte, North Carolina
     Charlotte/Billy Graham Parkway/Coliseum (1)........................      March, 1998          137
                                                                                                   ---

     Memphis, Tennessee
     Memphis/Airport (1)................................................       June, 1998          134
     Memphis/Poplar (1).................................................    January, 1999          134
                                                                                                   ---
          Subtotal......................................................                           268
                                                                                                   ---

     Nashville, Tennessee
     Nashville/Airport (1)..............................................   December, 1997          133
     Nashville/Cool Springs (1).........................................      April, 1998          137
                                                                                                   ---
          Subtotal......................................................                           270
                                                                                                   ---

     Raleigh, North Carolina
     Raleigh/Crabtree Valley (2)........................................       June, 1998          138
     Durham (1).........................................................        May, 1998          137
     Raleigh/North (1)..................................................   November, 1997          121
     Research Triangle Park (2).........................................        May, 1997          125
                                                                                                   ---
          Subtotal......................................................                           521
                                                                                                   ---

     Richmond, Virginia
     Gaithersburg (1)...................................................     August, 1999          134
     Richmond/Innsbrook (2).............................................       July, 1997          141
     Richmond/Midlothian (1)............................................  September, 1998          135
                                                                                                   ---
          Subtotal......................................................                           410
                                                                                                   ---

          Total East Region............................................                          1,606
                                                                                                 =====

               Total Rooms..............................................                        18,176
                                                                                                ======

<FN>

----------

(1)  Pledged as collateral  under a revolving bank line of credit agreement with
     total  borrowings of  $125,449,000  at December 31, 1999. The 64 properties
     are also  pledged as  collateral  under the  February  29, 2000 amended and
     restated   credit  facility  which  provides  for  $110  million  of  total
     borrowings.

 (2) Sold  February  23, 1999 and leased back under a  long-term  capital  lease
     agreement with the initial lease term expiring December 2015. Homestead has
     options  under the lease for two  extension  periods of 15 years each.  The
     balance  of  the  capital  lease   obligation  at  December  31,  1999  was
     $140,854,000.

(3)  Subject  to deeds of  trust  securing  convertible  mortgage  notes  due to
     Archstone of $221,333,620 at December 31, 1999.

(4)  Phase I (132  rooms)  was  developed  in 1992 and Phase II (57  rooms)  was
     developed in 1995.

</FN>
</TABLE>

                                       16

<PAGE>


ITEM 3. LEGAL PROCEEDINGS

     Homestead is not a party to any  litigation  or claims,  other than routine
matters  arising out of the ordinary  course of business that are  incidental to
the  development  process and operation of the business of Homestead.  Homestead
does not believe that the results of all claims and litigation,  individually or
in the aggregate, will have a material adverse effect on its business, financial
position or results of operations.


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

     Not applicable.


                                     PART II

ITEM 5.  MARKET  FOR THE  REGISTRANT'S  COMMON  EQUITY AND  RELATED  STOCKHOLDER
MATTERS

Market Information

     Homestead's  shares of common  stock have been listed on the New York Stock
Exchange ("NYSE") under the symbol "HSD" since April 1, 1998. Prior to that time
the shares of common stock were listed on the American Stock  Exchange  ("AMEX")
under the same symbol.  The table below  indicates the range of the high and low
sales  prices of the  shares of common  stock as  reported  on the NYSE and AMEX
Composite Tapes for the periods indicated.

<TABLE>

1998                                                  High           Low
                                                      ----           ---
<S>                                                  <C>            <C>
     First Quarter..............................     $15 3/4        $13 9/16
     Second Quarter.............................     $16            $11
     Third Quarter..............................     $13 13/16      $ 6 1/4
     Fourth Quarter.............................     $ 8 3/16       $ 3 3/8
1999
     First Quarter..............................     $ 4 3/4        $ 2 7/16
     Second Quarter.............................     $ 5 1/8        $ 2 1/8
     Third Quarter..............................     $ 2 13/16      $ 1 7/8
     Fourth Quarter.............................     $ 2 13/16      $ 2
2000
     First Quarter (through March 8, 2000)......     $ 2 9/16       $ 2
</TABLE>

     At March 8, 2000, there were  approximately  1,700 holders of record of the
shares of common stock.


Dividend Policy

     The  declaration  and payment of dividends by Homestead  are subject to the
discretion of the Board of  Directors.  Any  determination  as to the payment of
dividends will depend upon the results of operations,  capital  requirements and
financial  condition  of  Homestead  and  such  other  factors  as the  Board of
Directors  deems  relevant.  The Board of Directors in past years  retained cash
flow to finance  Homestead's  growth and for  general  corporate  purposes  and,
therefore,  has not paid any cash dividends since Homestead's formation in 1996.
In addition,  Homestead's line of credit,  as amended and restated  February 29,
2000, restricts payment of dividends to 50% of free cash flow, as defined.

                                       17

<PAGE>


ITEM 6. SELECTED FINANCIAL DATA

     The  following  table sets forth  selected  financial  data relating to the
historical  financial  condition  and results of operations of Homestead for the
years  indicated.  The  following  selected  financial  data is qualified in its
entirety  by,  and should be read in  conjunction  with,  "Item 7.  Management's
Discussion and Analysis of Financial  Condition and Results of  Operations"  and
with the financial  statements and related notes thereto  included in Item 14 to
this report.  Amounts  provided in the table are in thousands,  except per share
data and statistical data.

<TABLE>
                                                                                           YEAR ENDED DECEMBER 31,
                                                         -----------------------------------------------------------------
                                                              1999        1998            1997        1996 (1)    1995 (1)
                                                         -------------  ------------ -----------  ------------  ----------

<S>                                                      <C>           <C>          <C>           <C>           <C>
OPERATIONS SUMMARY:
Revenues:

     Room revenue......................................  $     223,500 $    139,681 $    58,397   $   33,071    $ 18,337
     Other revenue.....................................          2,137        1,638         719          492         366
                                                         -------------  ------------ -----------  ------------  ----------
          Total revenues...............................        225,637      141,319      59,116       33,563      18,703
                                                         -------------  ------------ -----------  ------------  ----------
Operating expenses:
     Property operating expenses (2)...................         98,009       57,231      23,954       16,166       9,229
     Corporate operating expenses......................         33,013       24,255      15,623        4,112       1,322
     Special charges (3)...............................         65,296        7,240         --           --          --
     Depreciation and amortization.....................         42,247       34,244      12,130        4,443       2,343
                                                         -------------  ------------ -----------  ------------  ----------
          Total operating expenses.....................        238,565      122,970      51,707       24,721      12,894
                                                         -------------  ------------ -----------  ------------  ----------
Operating (loss) income................................        (12,928)      18,349       7,409        8,842       5,809
Interest income........................................            984          952         552          211         --
Interest expense, net of capitalized interest..........        (51,264)     (23,190)     (2,190)      (5,971)     (2,958)
                                                         -------------  ------------ -----------  ------------  ----------
(Loss) earnings before extraordinary item..............        (63,208)      (3,889)      5,771        3,082       2,851
Extraordinary item - gain (loss) on early extinguishment
  of debt..............................................          5,849      (25,344)         --          --          --
                                                         -------------  ------------ -----------  ------------  ----------

(Loss) earnings before cumulative effect of
  accounting change....................................        (57,359)     (25,233)       5,771        3,082       2,851
Cumulative effect of accounting change.................        (14,230)        --           --           --          --
                                                         --------------  ------------ -----------  ------------  ----------
Net (loss) earnings....................................  $     (71,589)  $   (29,233) $      5,771 $      3,082  $    2,851
                                                         ==============  ============ ============ ============  ==========
Share Data:(4)
Weighted average shares outstanding....................         87,094       37,639      23,578          N/A         N/A
Diluted weighted average shares outstanding............         87,094       37,639      43,502          N/A         N/A
Pro forma weighted average shares outstanding..........             N/A         N/A         N/A       11,392         N/A
Basic (loss) earnings per share........................  $       (0.82)$      (0.78)$      0.24          N/A         N/A
Diluted (loss) earnings per share......................  $       (0.82)$      (0.78)$      0.18          N/A         N/A
Pro forma earnings per share...........................             N/A         N/A         N/A   $     0.27         N/A
FINANCIAL POSITION:
Property and equipment, net............................  $   1,039,991  $  1,137,869 $   715,497  $   255,608   $  105,002
Total assets  .........................................  $   1,133,440  $  1,218,391 $   783,949  $   322,968   $  108,965
Lines of credit........................................  $     125,449  $    357,080 $    96,808  $        --   $       --
Mortgage note payable..................................  $       --     $    122,028 $       --   $       --    $       --
Convertible mortgage notes payable.....................  $     221,334  $    221,334 $   301,606  $   101,309   $       --
Other debt to affiliate................................  $       --     $        --  $       --   $       --    $   80,144
Shareholders' equity...................................  $     608,337  $    458,025 $   328,931  $   204,003   $   22,971
OTHER DATA:
EBDADT - Basic(5)...................................... $     (22,052)  $     29,957 $    17,902  $     8,468   $    5,194
Dilutive convertible mortgage interest.................           --          10,988       8,483        2,319         --
                                                        --------------  ------------ -----------  ------------  ----------
EBDADT - Diluted (5)................................... $     (22,052)  $     40,945 $    19,385  $    10,787   $    5,194
EBITDA(6)                                               $      29,308   $     52,593 $    19,539  $    13,285   $    8,152
Cash provided by (used in):
     Operating activities.............................. $      43,870   $     43,818 $    25,976  $    12,261   $    6,019
     Investing activities.............................. $     (20,633)  $   (461,369)$  (398,721) $  (115,453)  $  (48,116)
     Financing activities.............................. $     (14,634)  $    426,721 $   368,304  $   108,711   $   43,065
STATISTICAL DATA (FOR ALL OPERATING PROPERTIES):
Occupancy                                                        70.2%         70.4%       74.7%        78.8%        76.6%
Average weekly rate(7)................................. $         349   $       301  $      253   $      222    $     212
Weekly RevPAR(8)....................................... $         245   $       212  $      189   $      175    $     162
Property operating income margin(9)....................          56.3%         59.2%       59.2%        51.9%        50.7%

                                       18
<PAGE>


<FN>
 .........

(1)  On October 17, 1996, Homestead acquired the Homestead Village trademark and
     operating systems from Security Capital and 54 and 26 properties  operating
     or to be operated  under the  Homestead  Village  trademark  from  Security
     Capital Pacific Trust ("PTR") and Security  Capital  Atlantic  Incorporated
     ("ATLANTIC"),  respectively.  The  acquisitions  were through the merger of
     various  wholly-owned  subsidiaries of Security Capital,  PTR and ATLANTIC.
     The mergers of subsidiaries of Security Capital and ATLANTIC were accounted
     for as  purchases  and thus their  results  are  included  only for periods
     subsequent to October 17, 1996. The merger of the  subsidiaries  of PTR was
     accounted for as a combination of entities under common control in a manner
     similar to a "pooling of interests,"  thus their results were combined with
     Homestead  for 1996 and 1995.  Prior to October 17, 1996,  Homestead had no
     significant  activities,  thus substantially all 1996 results of operations
     through the date of the mergers and all of the summary  selected  financial
     information in 1995 represents that of the subsidiaries acquired from PTR.

(2)  Property operating expenses consist of all expenses directly related to the
     operation of the  properties  and do not include an allocation of corporate
     operating expenses.  Property operating expenses include primarily salaries
     and wages, utilities, insurance,  maintenance and supply costs and property
     taxes.

(3)  The $7.24 million special charge in 1998 consists  primarily of expense for
     severance of internal  development  department personnel and abandonment of
     selected pursuits to acquire  development  sites. The $65.3 million special
     charge consists primarily of write-downs on land held for sale,  write-offs
     of pursuit  costs,  and  severance  of  personnel  related  to  Homestead's
     cessation of its development program.

(4)  Prior to the mergers  described in note (1) above,  the assets of Homestead
     were  owned by  subsidiaries  of PTR and were  managed by  subsidiaries  of
     Security  Capital.  The  shares  and  equity  interests  of these  entities
     differed  substantially from the shares,  warrants and convertible mortgage
     notes outstanding after the mergers. Therefore, management does not believe
     that  historical  earnings per share data for 1996 and prior is meaningful.
     Pro forma  earnings  per  share  for 1996  assume  issuance  of shares  for
     acquisition  of the  subsidiaries  of PTR as of the  beginning  of 1996 and
     assume  shares  issued to Security  Capital and ATLANTIC  were  outstanding
     since the closing date of the mergers.

     For the years ended  December  31, 1999 and 1998 diluted  weighted  average
     shares   outstanding  are  the  same  as  basic  weighted   average  shares
     outstanding as convertible debt is not assumed to be converted and exercise
     of options is not assumed as the effects  are  anti-dilutive  in periods of
     loss.

(5)  EBDADT means earnings before depreciation, amortization and deferred taxes.
     Basic EBDADT for Homestead is total revenues,  plus interest  income,  less
     property  operating  expenses,   corporate   overhead,   non-real  property
     depreciation, interest expense and current tax expense. Diluted EBDADT adds
     back  convertible  mortgage net  interest  expense when the effect would be
     dilutive.   EBDADT  does  not  represent   cash  generated  from  operating
     activities in accordance  with  generally  accepted  accounting  principles
     ("GAAP"),  is not to be considered as an alternative to net earnings or any
     other GAAP  measurement  of operating  performance  and is not  necessarily
     indicative of cash available to fund all cash needs. Homestead has included
     EBDADT  herein  because  Homestead  believes that it is one measure used by
     certain investors to determine  operating cash flow.  EBDADT, as calculated
     above,  may not be comparable to other  similarly  titled measures of other
     companies.

(6)  EBITDA means  earnings  before  interest,  income taxes,  depreciation  and
     amortization.  EBITDA does not  represent  cash  generated  from  operating
     activities  in  accordance  with  GAAP,  is  not  to  be  considered  as an
     alternative  to net  earnings or any other GAAP  measurement  of  operating
     performance and is not necessarily indicative of cash available to fund all
     cash needs. Homestead has included EBITDA herein because Homestead believes
     that it is one measure used by certain  investors  to  determine  operating
     cash flow.  EBITDA,  as  calculated  above,  may not be comparable to other
     similarly titled measures of other companies.

(7)  Average weekly rate is determined by dividing room revenue by the number of
     guest room days occupied for the period and multiplying by seven.

                                       19
<PAGE>

(8)  Weekly revenue per available room ("RevPAR") is determined by dividing room
     revenue  by the  number of guest  room days  available  for the  period and
     multiplying by seven.

(9)  Property  Operating  Income Margin is property  operating  income (property
     revenues less property operating expenses) divided by property revenues.

</FN>
</TABLE>

                                       20

<PAGE>


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

     The  following  discussion  should  be read in  conjunction  with  "Item 6.
Selected  Financial Data" and all of the financial  statements and related notes
thereto  appearing  in  Item  14 to  this  Form  10-K.  Historical  results  and
percentage  relationships set forth in "Item 6. Selected Financial Data" and the
Financial  Statements of Homestead may not be indicative of future operations of
Homestead.


     The statements  contained in this report that are not historical  facts are
forward-looking  statements  within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These forward-looking  statements are based on current expectations,
estimates  and  projections  about the industry  and markets in which  Homestead
operates, management's beliefs and assumptions made by management. Words such as
"expects", "anticipates",  "intends", "plans", "believes", "seeks", "estimates",
variations of such words and similar  expressions  are intended to identify such
forward-looking  statements.  These  statements  are not  guarantees  of  future
performance and involve risks, uncertainties and assumptions which are difficult
to predict.  Therefore,  actual outcomes and results may differ  materially from
what is expressed or forecasted in such  forward-looking  statements.  Among the
important  factors  that  could  cause  Homestead's  actual  results  to  differ
materially  from  those  expressed  in the  forward-looking  statements  are (i)
changes  in  general  economic  conditions  in its  target  markets  that  could
adversely  affect  demand  for  Homestead's  properties,  (ii)  the  effects  of
increased or  unexpected  competition  with  respect to one or more  properties,
(iii)  availability to Homestead of debt or equity  financing,  (iv) the matters
described under "--Risks Factors," (v) changes in financial markets and interest
rates that could adversely affect Homestead's cost of capital and its ability to
meet its financing needs and obligations, (vi) weather, and (vii) the ability of
potential buyers of land held for sale to obtain financing for such purchases.


OVERVIEW

     Homestead's  overall results of operations and financial position have been
significantly influenced by its development program and the financing activities
required  to support  it. The  tightening  of capital  markets  for real  estate
operating  companies and lodging  companies which began in 1998 and continued in
1999 had an adverse  effect on  Homestead's  ability to continue its high growth
program of acquisition of land sites and construction of properties.  In October
1998, Homestead  reorganized its development effort and recorded a $7.24 million
special  charge.  Such  charge  primarily  related to the  severance  of certain
development  personnel and abandonment of selected pursuits of development sites
due to the limited availability of additional funds for development.  Payment of
the final costs accrued for this special charge were made in second quarter 1999
and no additional liability remains.

     In the second quarter of 1999, Homestead determined, based on its inability
to obtain financing for development of sites beyond those properties  already in
construction,  to end its development program. As of the beginning of the second
quarter of 1999, Homestead had substantial  investments in ownership of land for
development and in costs of pursuits of additional  development sites. As of May
1999, all land previously  held for  development  became land held for sale, all
pursuits for acquisition of additional sites for development were abandoned, and
Homestead  began  reduction of overhead costs and personnel to reflect a company
with  stabilized  operations  of 136  properties.  Homestead  recorded a special
charge  of  $65.3  million  in  the  second   quarter  of  1999   consisting  of
approximately  $43.5 million for  write-downs  of the carrying cost of land held
for  sale  to  its  estimated  fair  value  less  estimated  costs  to  dispose,
approximately  $7.1  million  of  write-offs  of costs of  pursuits  and loss of
non-refundable earnest money deposits, approximately $5.5 million for closing of
administrative offices and discontinuing new initiatives, and approximately $9.2
million for the costs of severance of personnel.

     The $5.4 million of accrued  special  charge  expenses at December 31, 1999
consist of $2.8 million of unpaid  severance  costs and $2.6 million for ongoing
costs of closed offices and  discontinuing  new initiatives.  There have been no
changes  in  estimates  of  the  special  charge  and  management  believes  the
write-downs  of the carrying cost of land held for sale are adequate.  Revisions
to these estimates may be required based primarily upon the ultimate disposition
of land held for sale.

                                       21
<PAGE>

     Carrying costs on the land sites,  such as interest and property taxes, are
expensed  until the sites are  disposed of and will  continue to have a material
adverse affect on earnings until disposal.  Of the 24 land sites originally held
for sale as of May 1999, one was sold in third quarter 1999 and ten were sold in
the fourth quarter 1999.  Sales of these parcels  generated $72.6 million in net
proceeds  which was the primary  source of the $73.6 million in pay downs on the
working  capital bank lines of credit secured by properties in 1999.  Subsequent
to year end 2 of the 13  remaining  parcels  were sold for total net proceeds of
approximately  $9.3 million.  Upon amendment of the bank line of credit facility
on February 29, 2000 all remaining land held for sale became unencumbered.

     As of December 31, 1999,  Homestead had 136 Homestead Village properties in
operation representing in the aggregate 18,176 rooms in 28 states. Homestead had
31  properties  operating at the  beginning of 1997 and opened an  additional 40
properties  during 1997.  In 1998  Homestead  opened 49  properties  and in 1999
opened 16  properties.  Homestead  completed  its last  development  property on
August 30, 1999.

     Homestead's  operating  results  are  substantially  influenced  by (i) the
demand for and  supply of  extended  stay  lodging in  Homestead's  markets  and
submarkets,  (ii) occupancy and average weekly rate, and (iii) the effectiveness
of property level operations.  Capital and credit market conditions which affect
Homestead's  access  to and  cost of  capital  may  influence  future  operating
results.


RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

     Net earnings  (loss) for the years ended  December 31, 1999,  1998 and 1997
were ($71.6) million, ($29.2) million, and $5.8 million,  respectively.  The net
loss in 1999  includes (i) a  cumulative  effect of  accounting  change of $14.2
million  relating to Homestead's  adoption in 1999 of Statement of Position 98-5
"Reporting on the Costs of Start-Up  Activities",  (ii)  incurrence of a special
charge of $65.3 million,  and (iii) the gain on  extinguishment  of debt of $5.8
million recorded as an extraordinary item in the fourth quarter of 1999. The net
loss in 1998  includes  (i) a third  quarter loss on  extinguishment  of debt of
$25.3 million recorded as an extraordinary item and (ii) incurrence of a special
charge of $7.24 million.  Net loss before the extraordinary  item and cumulative
effect of an  accounting  change  increased  $59.3 million in 1999 from the $3.9
million net loss before extraordinary item in 1998. This change is primarily due
to the special  charge  expense of $65.3  million in 1999. A discussion of other
major components of net earnings or loss follows.


Property Operations

     For analysis  purposes  Homestead  categorizes its operating  properties as
either "stabilized" or  "pre-stabilized."  For purposes of this report, the term
"stabilized"  means those properties which obtained 80% occupancy for a one-week
period or have been  opened  for 24 weeks and  "pre-stabilized"  means all other
operating properties.  For comparisons of full year data the properties included
as stabilized are those  stabilized as of the beginning of the fourth quarter of
each year.

     Whether   considering  the  entire  operating  property  portfolio  or  its
categories,  Homestead's property-level revenue performance for 1999 as compared
to 1998 and  1997 is  characterized  by  higher  weekly  rates  offset  by lower
occupancy levels. The occupancy decreases are attributable to (i) competition in
markets characterized by an oversupply of extended stay hotels (predominantly in
the  southwestern  United  States) and (ii) the effect on occupancy  due to rate
increases in early 1999 at Homestead versus competitor rate levels  (experienced
in the portfolio  generally).  Beginning in late second  quarter 1999  Homestead
lowered rates in selected markets which were experiencing  competitive pressures
and believes the  increases  in  occupancies  and revenues in the latter half of
1999 were partially due to these actions.

                                       22


<PAGE>


     The following table sets forth operating performance  information for 1999,
1998 and 1997.  The  information is for  Homestead's  total  operating  property
portfolio.

<TABLE>
                                                                CHANGE                CHANGE
                                                                (1999                 (1998
                                                      1999    OVER 1998)    1998    OVER 1997)     1997
                                                    - ------  ----------- -------   -----------  ------
<S>                                                <C>        <C>          <C>      <C>          <C>
            Weekly RevPAR.........................       $245       15.6%   $212           12.2%     $189
            Average Weekly Rate...................       $349       16.0%   $301           19.0%     $253
            Occupancy.............................       70.2%      (0.2)   70.4%          (4.3)     74.7%
            Property Operating Income Margin......       56.3%      (2.9)   59.2%           --       59.2%
</TABLE>

     Homestead's new property  openings were the primary reason for room revenue
increases of $83.8 million (60%) in 1999 over 1998 and $81.3 million (139.2%) in
1998 over 1997.  Properties open for their first full year in 1999 and 1998 were
the next most  significant  reason for room revenue  increases.  The increase in
room revenue was also due to  increases in the average  weekly rate of $48.06 in
1999 and $47.86 in 1998. The average weekly rate increases in 1999 and 1998 were
partially  offset by slightly lower overall  occupancies in 1999 versus 1998 and
in 1998 versus 1997. The occupancy  decreases in 1999 and 1998 are  attributable
to the  effect of  competition  in  markets  described  below  for  "same-store"
properties for 1999 and 1998.

     Total property  operating  expenses increased $40.8 million (71.3%) in 1999
over 1998 and $33.3  million  (138.9%) in 1998 over 1997,  primarily  due to the
increase  in the number of  operating  properties  as noted  above.  A secondary
reason for the 1999 increase in property operating expenses over 1998 was due to
additional services such as longer operating hours and travel agent commissions.


Same-Store Properties

     Homestead had 89 properties  which were operating  throughout both 1999 and
1998, and classified as stabilized  ("same store  properties").  RevPAR for 1999
for  same-store  properties  increased  to $233  from $218 in 1998.  The  RevPAR
increase was due primarily to an average  weekly rate growth of 9.7%. The slight
decrease in occupancy is attributed to competition  in markets  primarily in the
southwestern  United States and an increase in Homestead's average weekly rates.
Beginning  in the latter part of second  quarter  1999  management  reduced room
rates in selected markets to improve occupancy.  Management  continues to review
property level  expenses in areas such as the number of new operating  programs,
extended  operating  hours, job definitions and scheduling of personnel in order
to improve the property operating income margin.

     Homestead had 39 properties  which were operating  throughout both 1998 and
1997, and classified as  stabilized.  RevPAR for 1998 for same-store  properties
increased to $214 from $200 in 1997. The RevPAR increase was due primarily to an
average  weekly rate  increase of 9.2%  offset by a decrease in  occupancy  from
79.5% in 1997 to 77.9% in 1998.  The  decrease in  occupancy  is  attributed  to
competition in markets primarily in the southwestern United States characterized
by an oversupply of extended stay lodging and an increase in Homestead's average
weekly rates.


Stabilized Properties Operations

     RevPAR for the 133  stabilized  properties  in 1999  increased to $245 from
$218 for the 89  stabilized  properties  in 1998,  an increase  of 12.5%.  These
improvements  are primarily  attributable  to a 17.8% increase in average weekly
rate offset in part by a decrease in occupancy to 70.3% from 73.6%.  Again,  the
decrease in  occupancy  is  attributable  to  competition  in markets  primarily
located in the southwestern United States and an increase in Homestead's average
weekly rates.

     RevPAR for the 89 stabilized properties in 1998 increased to $218 from $200
for  the  39  stabilized   properties  in  1997,  an  increase  of  9.0%.  These
improvements  are primarily  attributable  to a 17.9% increase in average weekly
rate offset in part by a decrease in occupancy to 73.6% from 79.5%. The decrease
in  occupancy  is  attributable  to the effect of  competition  in  markets  and
increases in average weekly rates noted above for "same-store" properties.


                                       23
<PAGE>



Corporate Operating Expenses

     Corporate  operating  expenses (in all cases after  capitalization of costs
directly  associated  with  Homestead's  development  activity)  increased  $8.8
million in 1999 over 1998 and $8.6  million in 1998 over 1997.  The  increase in
1999 over 1998 is attributed to increases of approximately $1.5 million in sales
and marketing expenses, $1.3 million in additional reservation system costs upon
full   implementation  for  full  year  1999,   approximately  $2.5  million  in
administrative  services related to the increases in operating sites, a loss for
construction  related claims of approximately $0.75 million,  approximately $1.5
million  of   incremental   development   overhead   expenses   which  were  not
capitalizable due to declining development activity in 1999 and the remainder of
the increase related  primarily to expenses incurred to dispose of the land held
for sale and land holding costs.

     Corporate operating expenses decreased approximately $814,000, $2.2 million
and $2.9 million for the three  months ended  December 31, 1999 versus the third
quarter  of 1999,  the  second  quarter  of 1999 and the first  quarter of 1999,
respectively.  The decreases in corporate operating expenses reflect the changes
in the  organization  of the company and the  reductions  of personnel and other
costs initiated in fourth quarter 1998 and second quarter 1999.

     The increased  corporate  operating expense in 1998 over 1997 is attributed
to the  continued  growth  of the  company  since  the  first  half of 1997 when
Homestead  was still  developing  a  corporate  infrastructure  in  support of a
rapidly growing entity and includes increases in costs for additional  personnel
in operations, marketing and finance.


Depreciation and Amortization

     Depreciation and  amortization  increased $8.0 million (23.4%) in 1999 over
1998 and $22.1 million  (182.3%) in 1998 over 1997.  Depreciation of the cost of
properties and improvements is provided using the straight-line  method over the
estimated useful lives of owned assets and over the lease term for capital lease
assets.  Depreciation  and amortization  expense  (exclusive of amortization for
trademark and intangibles) increased  approximately $8.0 million (25.0%) in 1999
over  1998 and $21.3  million  (202.0%)  in 1998 over 1997 due to the  increased
number of properties operating each year.

     Amortization  expense  increased  $42,000  (1.7%)  in 1999  over  1998  and
$843,000  million  (52.8%) in 1997 over 1996.  Amortization of the trademark and
other  intangibles  is calculated on a  straight-line  basis over a period of 20
years. The increase in amortization in 1998 over 1997 was due to amortization of
increases in the total  recorded  cost of the  Homestead  Village  trademark and
other intangible assets.


Interest Income

     Interest income of $984,000, $952,000 and $552,000 for 1999, 1998 and 1997,
respectively, resulted from investment of excess cash on hand.


                                       24

<PAGE>


Interest Expense

     The following summarizes Homestead's interest expense (in thousands):

<TABLE>

                                                                         YEAR ENDED DECEMBER 31,
                                                                        1999       1998      1997
                                                                     ---------- ---------- ---------

            <S>                                                      <C>        <C>        <C>
            Lines of credit facilities.............................  $   23,816 $  16,929  $   2,137
            Convertible mortgage notes.............................      20,197    26,293     69,791
            Capital lease obligation...............................      11,838       --         --
            Mortgage note payable..................................       1,282     4,394        --
            Convertible debentures.................................         --        157        --
            Other   ...............................................         574       732          9
                                                                     ---------- ---------- ---------
                 Total interest cost...............................      57,707    48,505     71,937
            Capitalized interest...................................     (6,443)   (25,315)   (69,747)
                                                                     ---------- ---------- ----------
                 Net interest expense..............................  $   51,264 $  23,190  $   2,190
                                                                     ========== =========  =========

            Amortization of deferred financing costs included in
               interest cost.......................................  $    3,289 $   2,994  $  50,923
                                                                     -========= =========  =========
</TABLE>

     Interest costs on lines of credit borrowings increased $6.9 million in 1999
over 1998 and $14.8  million in 1998 over 1997 due  primarily to higher  average
outstanding  balances of $264.6 million in 1999 as compared to $179.9 million in
1998 and $17.5 million in 1997.

     Interest cost on the  convertible  mortgage notes decreased $6.1 million in
1999 as compared to 1998 as a result of the early  extinguishment of $98 million
of Homestead  convertible  mortgage  notes in the third quarter 1998.  Homestead
incurred $1.3 million in interest cost in 1999 and $4.4 million in interest cost
in 1998  relating  to the  mortgage  note which  funded the  extinguishment.  On
February 23, 1999,  this mortgage note was repaid with proceeds from the sale of
properties  discussed in "Note 4 - Debt" to the  financial  statements  included
herein in Item 14. Homestead  incurred $11.8 million in interest cost in 1999 as
a result of the leaseback of such properties under a capital lease.

     Interest cost on convertible  mortgages  decreased $43.5 million in 1998 as
compared to 1997 due to the  inclusion in 1997 of the  amortization  of non-cash
mortgage  financing  costs  arising  from the issuance of warrants to obtain the
convertible  mortgage  financing  commitments and the  differential  between the
conversion price of the mortgages and the value of Homestead's stock.

     Interest cost on borrowings is offset by interest  capitalized with respect
to  Homestead's  development  activities.  Capitalized  interest  levels reflect
Homestead's  cost of funds and the level of  development  activity.  Capitalized
interest  decreased  by $18.9  million  in 1999 as  compared  to 1998 due to the
curtailment  of  development  activity in 1999. By the end of third quarter 1999
all development  had been completed and Homestead had no further  capitalization
of  interest  for  the  remainder  of  1999.  For  1997,  Homestead's  level  of
construction and development activity versus the level of debt financing was the
reason for capitalization of nearly all interest incurred.

LIQUIDITY AND CAPITAL RESOURCES

Investing and Financing Activities

     During  the years  ended  December  31,  1999,  1998,  and 1997,  Homestead
invested $93.7  million,  $461.4 million and $398.7  million,  respectively,  in
Homestead Village properties and completed development of 16 properties in 1999,
49 properties in 1998 and 40  properties in 1997.  The amounts  invested in 1999
were financed primarily from bank lines of credit and cash flow from operations.
Financing  in 1998 was  primarily  from  proceeds  from bank lines of credit,  a
January 1998 rights offering of common stock,  cash flow from operations and the
final  funding  of  the  convertible   mortgage  notes  commitments.   The  1997
investments were financed primarily by proceeds of the convertible mortgage note
funding commitments, proceeds from bank lines of credit and exercise of warrants
to purchase common stock.
                                       25
<PAGE>

     Homestead reduced its debt and long-term liabilities from $708.5 million at
December 31, 1998 to $487.6  million at December 31, 1999 by paying off the $200
million  Bridge  Facility with proceeds  received from the May 1999 common stock
rights  offering,  reducing  its Working  Capital  Facilities  by $73.6  million
(primarily by utilizing $72.6 million in net proceeds  generated by land sales),
and  settling a $7.9  million  long-term  liability  through the payment of $2.1
million in cash.  Additionally  Homestead paid off the  short-term  $122 million
mortgage note with the proceeds of a sale and long-term leaseback of properties.

     Subsequent  to year end 1999  Homestead has made  payments  totaling  $31.5
million  on the bank line of credit  reducing  its line of credit  debt to $93.9
million.  On February  29, 2000  Homestead  entered into an amended and restated
bank credit facility which allows for $110 million of total  borrowings of which
$35 million is available  on a revolving  basis.  The amended and restated  line
matures  February 28, 2003,  bears interest at LIBOR plus 2.5%, is secured by 64
operating  properties,  permits  payment of dividends based upon a definition of
free cash  flow,  and  requires  maintenance  of  financial  ratio and  coverage
covenants.

     With the completion of development of all sites which were in construction,
termination  of plans to  develop  other  land  owned,  no  further  pursuit  of
acquisition of sites for  development,  and the debt  reductions and refinancing
described  above,  Homestead's  needs for financing are  substantially  reduced.
Homestead  believes it will have adequate cash  resources  from cash on hand and
cash  flow  from  operations  to fund its needs  for debt  service,  payment  of
severances  and other special charge  liabilities,  and payment of the remaining
construction  retainage. In addition Homestead may generate additional cash flow
by the sale of the remaining  land held for sale,  but no assurance can be given
that such sales will occur or provide significant net proceeds.  While Homestead
believes it will continue to generate  positive cash flow from  operation of its
properties,  there  can be no  assurance  of  generation  of  cash  from  future
operations  due to the  risks of  operations  of  lodging  properties  including
competitive pressures, rates, occupancies, and costs of operation. Additionally,
Homestead's  ability to meet its  obligations  could be  adversely  affected  by
increases in interest rates.

Operating Activities

     Net cash flow provided by operating activities increased by $52,000 for the
year ended  December 31, 1999 as compared to 1998 and $17.8 million  (68.7%) for
1998 as compared  to 1997.  These  increases  are due  primarily  to the growing
number of Homestead  operating  properties  as  described  under  "--Results  of
Operations for the Years ended December 31, 1999, 1998, 1997", with the increase
from 1998 to 1999 largely  offset by components of the special  charge  expenses
requiring cash.


IMPACT OF YEAR 2000

     The Year 2000 issue arose as many existing computer programs and chip-based
embedded technology systems use only the last two digits to refer to a year, and
therefore, did not properly recognize a year that began with "20" instead of the
familiar "19." Homestead adopted a Year 2000 compliance program in an attempt to
minimize or prevent the number and  seriousness  of any  disruptions  that could
have occurred as a result of the Year 2000 issue. Homestead's compliance program
included  an   assessment  of  its  hardware  and  software   computer   systems
("information   technology"  systems)  and  embedded  systems  ("non-information
technology"  systems  such as  lighting,  security,  fire,  card  keys,  phones,
irrigation,  elevators, and heating, ventilation, and air conditioning systems),
as well as an assessment of the Year 2000 issues  relating to third parties with
which  Homestead had a material  relationship  or whose systems were material to
the operations of Homestead's properties.

     As a result of Homestead's and its vendors' due diligence and preparations,
no significant  Year 2000 related  problems or failures have been experienced by
Homestead to date.

                                       26


<PAGE>


RISK FACTORS

Significant  influence of principal  shareholder may impact Homestead management
and operations

     Security  Capital owns  approximately  87.0% of the issued and  outstanding
common  shares of Homestead and therefore  controls  approximately  87.0% of the
vote on matters  submitted  for  shareholder  action,  including the election of
directors.  Pursuant to an investor  agreement with Homestead,  Security Capital
currently  has  the  right  to  nominate  up  to  two  directors  of  Homestead.
Additionally, so long as Archstone owns at least $20 million principal amount of
convertible  mortgage notes, it is entitled to nominate one person as a director
of Homestead. The directors so elected are in a position to exercise significant
influence  over the  affairs of  Homestead  if they were to act  together in the
future. C. Ronald Blankenship,  Interim Chairman and Chief Executive Officer and
a Director  is the  nominee  of  Security  Capital  under the  Security  Capital
investor agreement.  John C. Schweitzer, a director of Homestead, is the nominee
of Archstone under the investor agreement. Further, John P.
Frazee, a director of Homestead, is also a Director of Security Capital.

     For so long as Security Capital beneficially owns at least 50.1% or more of
Homestead's  outstanding  common  shares,  Security  Capital  has the  right  to
approve, among other significant matters:

     (1)  Homestead's annual operating budget and substantial deviations there-
          from;
     (2)  acquisitions  or  dispositions  in a single  transaction  or group of
          related transactions where the purchase price exceeds $1 million;
     (3)  property management arrangements;
     (4)  the declaration or payment of any dividend or other distribution;
     (5)  the  offer  or  sale  of any  shares  of  stock  of  Homestead  or any
          securities convertible into shares of stock of Homestead;
     (6)  the   incurrence,   restructuring,   renegotiation   or  repayment  of
          indebtedness which exceeds $1 million;
     (7)  entering into  contracts of $1 million  individually  or $5 million in
          the aggregate,
     (8)  entering into joint  ventures for  development  of properties in which
          Homestead  contributes  properties  of $1 million  individually  or $5
          million in the aggregate,
     (9)  entering into franchising or licensing agreements,
     (10) amendment of the articles of incorporation or bylaws of Homestead, and
     (11) waiver of  anti-takeover  provisions  of Maryland  law or  Homestead's
          articles of incorporation.

     Additionally so long as Security Capital owns at least 10% of the shares of
Homestead's common stock,  Homestead may not increase of the number of directors
to more than seven.

     Accordingly,  due  to  the  foregoing,  for  so  long  as it  continues  to
beneficially  own at  least  50.1% of  Homestead's  outstanding  common  shares,
Security Capital will retain significant influence over the affairs of Homestead
which may result in decisions  that do not fully  represent the interests of all
shareholders of Homestead.

     Additionally,  as a result of Security  Capital's  ownership  in  Homestead
exceeding  80% after the closing of the May 1999 common stock  rights  offering,
Homestead's  results,  post rights offering,  are included in the federal income
tax return of Security  Capital.  Security  Capital  may  utilize tax  operating
losses  generated by  Homestead  subsequent  to May 1999.  In order for Security
Capital to utilize the net operating loss  carryforwards  generated by Homestead
through May 1999,  Homestead must generate future taxable income.  To the extent
Homestead's  net  operating  loss  carryforwards  are so  utilized  on  Security
Capital's federal tax return,  such loss  carryforwards will not be available to
Homestead in the future.  Homestead and Security Capital have entered into a tax
allocation agreement which provides for tax liability or refund payments between
the entities as determined by a defined calculation of Homestead's proportionate
share of taxable  income  versus the total of  taxable  income for all  entities
filing as part of Security  Capital's  federal tax return.  The  agreement  also
provides  that if a capital  transaction  were to occur where  Security  Capital
owned less than 50% of Homestead after the  transaction,  all net operating loss
carryforwards  generated by  Homestead  through May 1999 would inure to Security
Capital. For 1999 no amounts were paid or due under the agreement.

                                       27

<PAGE>


Competition and overdevelopment could adversely affect Homestead's operations

     Each  Homestead  property  is located  in a  developed  area that  includes
competing  properties,  including  traditional hotels,  extended stay hotels and
corporate apartments.  The number of competitors in a particular area could have
a material adverse effect on occupancy,  average weekly rates and weekly revenue
per available room in that market.  Competition within the extended stay lodging
market has  increased  substantially.  In several  markets  where  Homestead has
properties,  there is intense  competition  for the extended stay customer which
has already  affected  occupancy and weekly revenue per available room for these
properties.  Further, there can be no assurance that new or existing competitors
will not significantly reduce their rates or offer greater convenience, services
or amenities or significantly  expand or improve  properties in markets in which
Homestead competes,  thereby materially adversely affecting Homestead's business
and results of operations.

Illiquidity of real estate investments

     Equity real estate  investments  are relatively  illiquid and therefore may
tend to limit the ability of Homestead to react  promptly to changes in economic
or other  conditions.  In addition,  significant  expenditures  associated  with
equity real estate investments, such as mortgage payments, real estate taxes and
maintenance  costs,  are  generally  not  reduced  when  circumstances  cause  a
reduction in income from the investments.  Further,  various agreements to which
Homestead  is  a  party,   including  the  terms  of   Homestead's   outstanding
indebtedness,  place  limitations  on the  ability  of  Homestead  to  sell  its
properties.  Thus,  Homestead's ability to sell assets at any time to change its
asset base may be restricted.

Homestead is subject to a substantial amount of indebtedness

     At December 31, 1999,  Homestead's  total  indebtedness  was  approximately
$487.6 million,  which  subsequent to year end 1999 has been reduced by payments
totaling  $31.5 million on the bank line of credit.  If Homestead is at any time
unable to generate  sufficient  cash flow from operations to service its debt or
satisfy other covenants under its loan agreements,  which include limitations on
the amount of additional  indebtedness that Homestead can incur, Homestead would
be required to seek refinancing or amendment of its debt arrangements. There can
be no assurance that any such refinancing or amendment would be possible or that
any  additional  financing  could be  obtained  on terms that are  favorable  or
acceptable to Homestead.  The amount of Homestead's  indebtedness  may also make
Homestead  more  vulnerable  to economic  downturns and may limit its ability to
withstand adverse changes or to capitalize on business opportunities.

     Additionally,  all of  Homestead's  owned  operating  properties  have been
pledged as  collateral  to secure the payment of  Homestead's  indebtedness.  If
Homestead  were to default in the  payment of any of the  secured  indebtedness,
Homestead  could  lose  the  properties  securing  such  debt.  The loss of such
properties  could  have a  material  adverse  effect  on  Homestead's  financial
condition and results of operations.



                                       28


<PAGE>


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Homestead's  exposure to market risk for changes in interest  rates relates
primarily to its line of credit facility.

     The  table  below  provides   information   about   Homestead's   financial
instruments that are sensitive to changes in interest rates, including estimated
fair values for Homestead's  interest rate sensitive  liabilities as of December
31,  1999.  As the table  incorporates  only  those  exposures  that exist as of
December 31, 1999, it does not consider  exposures  which could arise after that
date.  Moreover,  because  there were no firm  commitments  to actually sell the
obligations at fair value as of December 31, 1999, the information presented has
limited  predictive  value. As a result,  Homestead's  ultimate realized gain or
loss with respect to interest  rate  fluctuations  will depend on the  exposures
that arise during a future period and prevailing  interest rates. Dollar amounts
in the following table are in thousands.

<TABLE>

                                                   EXPECTED MATURITY/PRINCIPAL REPAYMENT
                                        NOMINAL                  DECEMBER 31,
                                       INTEREST                  ------------                          TOTAL     FAIR
                                         RATE     2000    2001    2002     2003     2004  THEREAFTER  BALANCE  VALUE(1)
                                         ----    ------  ------  -------   ----     ----  ----------  -------  --------
<S>                                      <C>    <C>      <C>     <C>     <C>      <C>     <C>       <C>       <C>
Interest-Sensitive Liabilities:
    Line of credit facility--variable
      rate (2)........................    8.98% $125,449 $  --   $    -- $  --    $  --   $    --   $ 125,449 $ 125,449
    Convertible mortgage notes--fixed
      rate............................    9.00% $    --  $  --   $    -- $  --    $  --   $ 221,334 $ 221,334 $ 217,953
    Capital lease obligation--fixed rate   9.8% $  3,837 $ 4,230 $ 4,663 $ 5,141  $ 5,667 $ 117,316 $ 140,854 $ 143,351

<FN>
------------

(1)  The  estimated  fair  value of  obligations  extending  beyond  a  one-year
     maturity as of December 31, 1999 were  calculated by discounting the stream
     of cash payments of each  obligation  using a rate which,  in  management's
     judgement,  represents  an interest  rate  obtainable  by  Homestead  as of
     December 31, 1999 on a similar instrument.

(2)  On February  29,  2000,  Homestead  amended and restated its line of credit
     facility  which  included an extension of the maturity date to February 28,
     2003.

</FN>
</TABLE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Homestead's  Balance  Sheet  as of  December  31,  1999 and  1998,  and its
Statements  of  Operations,  Shareholders'  Equity  and Cash Flows for the years
ended  December  31,  1999,  1998 and 1997,  together  with the report of Arthur
Andersen LLP,  independent  auditors,  are included under Item 14 of this report
and are incorporated  herein by reference.  Selected quarterly financial data is
presented  in "Note 10 - Selected  Quarterly  Financial  Data" to the  financial
statements included herein in Item 14.

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

     None.


                                       29

<PAGE>


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     For information regarding the executive officers of Homestead, see "Item 1.
Business--Directors  and Officers of Homestead." The  information  regarding the
directors of Homestead is  incorporated  herein by reference to the  description
under the  captions  "Election  of  Directors"  and  "Section  16(a)  Beneficial
Ownership  Reporting  Compliance" in Homestead's  definitive proxy statement for
its 2000 annual meeting of shareholders (the "2000 Proxy Statement").


ITEM 11. EXECUTIVE COMPENSATION

     Incorporated  herein by  reference  to the  description  under the captions
"Director   Compensation"  and  "Executive   Compensation"  in  the  2000  Proxy
Statement.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Incorporated  herein by  reference  to the  description  under the  caption
"Principal Shareholders" in the 2000 Proxy Statement.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Incorporated  herein by  reference  to the  description  under the  caption
"Certain Relationships and Transactions" in the 2000 Proxy Statement.

                                       30
<PAGE>



                                     PART IV

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

     The following documents are filed as a part of this report:

          (a) Financial Statements and Schedules:

               1.  Financial Statements:

                    See Index to Financial Statements on page 32 of this report

               2. All other  schedules  have  been  omitted  since the  required
                  information  is presented in the financial  statements and the
                  related notes or is not applicable.

               3. Exhibits:

                    See  Index to  Exhibits,  which is  incorporated  herein  by
                    reference.

          (b) Reports on Form 8-K: The following  reports on Form 8-K were filed
     during the last quarter of the period covered by this report

                 Date                Items Reported         Financial Statements
            October 7, 1999          Item 5, Item 7                  No


          (c) Exhibits:

               The Exhibits required by Item 601 of Regulation S-K are listed in
          the Index to Exhibits, which is incorporated herein by reference.

                                       31
<PAGE>



                          INDEX TO FINANCIAL STATEMENTS
<TABLE>

<S>                                                                                                 <C>
Reports of Independent Public Accountants.......................................................    33


Balance Sheets as of December 31, 1999 and 1998.................................................    34


Statements of Operations for the Years Ended December 31, 1999, 1998 and 1997...................    35


Statements of Shareholders' Equity for the Years Ended December 31, 1999, 1998 and 1997.........    36


Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997...................    37


Notes to Financial Statements...................................................................    38

</TABLE>
                                       32
<PAGE>



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Homestead Village Incorporated:

     We have audited the accompanying  consolidated  balance sheets of Homestead
Village Incorporated and subsidiaries,  a Maryland  corporation,  as of December
31,  1999 and 1998,  and the  related  consolidated  statements  of  operations,
shareholders'  equity and cash  flows for each of the three  years in the period
ended December 31, 1999. These financial  statements are the  responsibility  of
Homestead Village Incorporated's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

     We conducted our audits in accordance  with  auditing  standards  generally
accepted in the United States.  Those standards require that we plan and perform
the 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  financial  position  of  Homestead  Village
Incorporated  and subsidiaries as of December 31, 1999 and 1998, and the results
of its  operations  and its cash flows for each of the three years in the period
ended  December 31, 1999, in conformity  with  accounting  principles  generally
accepted in the United States.



                                                           ARTHUR ANDERSEN LLP

Atlanta, Georgia
January 28, 2000
                                       33

<PAGE>


                                          HOMESTEAD VILLAGE INCORPORATED

                                                  BALANCE SHEETS
                                      (IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<TABLE>

                                                                                                    DECEMBER 31,
                                           ASSETS                                               1999           1998
                                                                                            ------------  -------------
<S>                                                                                         <C>           <C>
Current assets:
     Cash and cash equivalents............................................................  $     20,747  $      12,144
     Accounts receivable, net of allowance................................................         5,767          5,910
     Funds held in escrow.................................................................            --          1,701
     Other current assets.................................................................         1,821          1,132
                                                                                            ------------  -------------
          Total current assets............................................................        28,335         20,887
                                                                                            ------------  -------------
Property and equipment....................................................................     1,111,999      1,186,652
   Less accumulated depreciation..........................................................       (72,008)       (48,783)
                                                                                            ------------- --------------
Net investment in property and equipment..................................................     1,039,991      1,137,869
                                                                                            ------------  -------------
Deferred loan costs, net of accumulated amortization......................................         1,588          1,063
Trademark and intangibles, net of accumulated amortization................................        41,796         44,279
Deposits and pursuit costs................................................................            --          7,830
Other assets .............................................................................        21,730          6,463
                                                                                            ------------  -------------
          Total assets....................................................................  $  1,133,440  $   1,218,391
                                                                                            ============  =============

                           LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Lines of credit......................................................................  $    125,449  $     357,080
     Capital lease obligation, current....................................................         3,837            --
     Development costs payable, including retainage.......................................         1,101         24,330
     Due to affiliate.....................................................................           882            335
     Accrued interest payable to affiliate................................................         1,882          1,882
     Mortgage note payable................................................................            --        122,028
     Accrued real estate taxes............................................................         7,628          5,681
     Accounts payable and other accrued expenses..........................................        12,269         10,135
     Accrued payroll and related accrued expenses.........................................         8,332          7,969
     Accrued special charge expenses......................................................         5,372          1,528
                                                                                            ------------  -------------
          Total current liabilities.......................................................       166,752        530,968
Capital lease obligation, noncurrent......................................................       137,017            --
Convertible mortgage notes payable to affiliate...........................................       221,334        221,334
Other long-term liabilities...............................................................           --           8,064
                                                                                            ------------- -------------
          Total liabilities...............................................................       525,103        760,366
                                                                                            ------------  -------------
Commitments and contingencies (Note 12)
Shareholders' equity:
     Common stock, $.01 par value, 249,823 shares authorized, 120,031 shares issued
        and outstanding in 1999 and 38,255 shares issued and outstanding in 1998..........         1,200            383
     Preferred stock, 177 shares authorized, none issued..................................            --            --
     Additional paid-in capital...........................................................       694,930        474,337
     Accumulated deficit..................................................................       (87,724)       (16,135)
     Less deferred compensation...........................................................           (69)          (560)
                                                                                            ------------  -------------
          Total shareholders' equity......................................................       608,337        458,025
                                                                                            ------------  -------------
          Total liabilities and shareholders' equity......................................  $  1,133,440  $   1,218,391
                                                                                            ============  =============

</TABLE>

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

                                       34
<PAGE>



                                          HOMESTEAD VILLAGE INCORPORATED

                                             STATEMENTS OF OPERATIONS
                                     (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>

                                                                                   YEAR ENDED DECEMBER 31,
                                                                             1999           1998          1997
                                                                       -------------    -----------    ----------
<S>                                                                    <C>              <C>            <C>
Revenues:
     Room revenue..................................................... $     223,500    $  139,681     $   58,397
     Other revenue....................................................         2,137         1,638            719
                                                                       -------------    -----------    ----------
          Total revenues..............................................       225,637       141,319         59,116
                                                                       -------------    -----------    ----------
Operating expenses:
     Property operating expenses......................................        98,009        57,231         23,954
     Corporate operating expenses.....................................        33,013        24,255         15,623
     Special charges (Note 3).........................................        65,296         7,240            --
     Depreciation and amortization....................................        42,247        34,244         12,130
                                                                       -------------    -----------    ----------
          Total operating expenses....................................       238,565       122,970         51,707
                                                                       -------------    -----------    ----------
Operating (loss) income...............................................       (12,928)       18,349          7,409
Interest income.......................................................           984           952            552
Interest expense, net of capitalized interest.........................       (51,264)      (23,190)        (2,190)
                                                                       --------------   -----------    -----------
(Loss) earnings before income taxes, extraordinary item
   and cumulative effect of accounting change.........................       (63,208)       (3,889)         5,771
Provision for income taxes............................................           --            --             --
                                                                       --------------   -----------    -----------
(Loss) earnings before extraordinary item
   and cumulative effect of accounting change.........................       (63,208)       (3,889)         5,771
Extraordinary item-gain (loss) on early extinguishment of debt........         5,849       (25,344)           --
                                                                       --------------   -----------    -----------
(Loss) earnings before cumulative effect of accounting change.........       (57,359)      (29,233)         5,771
Cumulative effect of accounting change for organizational,
   pre-opening and start-up activities................................       (14,230)          --             --
                                                                       --------------   -----------    -----------
Net (loss) earnings................................................... $     (71,589)   $  (29,233)    $    5,771
                                                                       ==============   ===========    ===========

Basic weighted average shares outstanding.............................        87,094        37,639         23,578
                                                                       =============    ===========    ===========
Diluted weighted average shares outstanding...........................        87,094        37,639         43,502
                                                                       =============    ===========    ===========

Net (loss) earnings per share:
     Basic (loss) earnings before extraordinary item
        and cumulative effect of accounting change.................... $       (0.73)   $    (0.11)    $     0.24
     Extraordinary item - gain (loss) on early extinguishment
       of debt........................................................          0.07         (0.67)           --
     Cumulative effect of accounting change...........................         (0.16)          --             --
                                                                       --------------   -----------    -----------
     Basic (loss) earnings per share.................................. $       (0.82)   $    (0.78)    $     0.24
                                                                       ==============   ===========    ===========

     Diluted (loss) earnings before extraordinary item
        and cumulative effect of accounting change.................... $       (0.73)   $    (0.11)    $     0.18
     Extraordinary item - gain (loss) on early extinguishment
        of debt.......................................................          0.07         (0.67)           --
     Cumulative effect of accounting change...........................         (0.16)          --             --
                                                                       --------------   -----------    -----------
     Diluted (loss) earnings per share................................ $       (0.82)   $    (0.78)    $     0.18
                                                                       ==============   ===========    ===========
</TABLE>



               The accompanying notes are an integral part of the
                             financial statements.
                                       35

<PAGE>



                                          HOMESTEAD VILLAGE INCORPORATED

                                        STATEMENTS OF SHAREHOLDERS' EQUITY
                                   YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                         (IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>

                                                                               RETAINED
                                               COMMON STOCK       ADDITIONAL   EARNINGS   SHARES
                                            NUMBER        PAR      PAID-IN   (ACCUMULATED   IN      DEFERRED      TOTAL
                                           OF SHARES     VALUE     CAPITAL    DEFICIT)    ESCROW  COMPENSATION   EQUITY
                                          -----------  --------- ----------  ---------   --------- ----------- ---------
<S>                                       <C>          <C>       <C>         <C>         <C>       <C>         <C>
Balances at December 31, 1996...........   19,689,130  $     197 $  224,352  $   7,327   $(26,477) $    (1,396)$ 204,003
    Repurchase of restricted common stock     (12,600)       --        (126)       --        --            --       (126)
    Amortization of deferred compensation         --         --         --         --        --            459       459
    Deferred compensation adjustment for
      forfeitures.......................          --         --         (78)       --        --             78       --
    Release of shares from escrow.......          --         --         --         --     24,224           --     24,224
    Other issuance of common stock......          750        --          14        --        --            --         14
    Issuance of common stock for
exercise of                                 8,127,626         81     81,195        --        --            --     81,276
      warrants..........................
    Financing costs for issuance of
      convertible mortgage notes........          --         --      13,310        --        --            --     13,310
    Net earnings........................          --         --         --       5,771       --            --      5,771
                                         -----------   --------- ----------  ---------   --------- ----------- ---------
Balances at December 31, 1997...........   27,804,906        278    318,667     13,098    (2,253)         (859)  328,931
    Sale of common stock--rights offering. 10,426,840        104    154,137        --        --            --    154,241
    Sale of restricted stock to officer.       31,250          1        499        --        --           (500)      --
    Repurchase of restricted common stock      (8,450)       --         (85)       --        --            --        (85)
    Amortization of deferred compensation         --         --         --         --        --            667       667
    Deferred compensation adjustment for
      forfeitures.......................          --         --        (132)       --        --            132       --
    Release of shares from escrow.......          --         --         --         --      2,253           --      2,253
    Financing costs for issuance of
      convertible mortgage notes........          --         --       1,251        --        --            --      1,251
    Net loss............................          --         --         --     (29,233)      --            --    (29,233)
                                          -----------  --------- ----------   ---------  --------- ----------- ---------
Balances at December 31, 1998...........   38,254,546        383    474,337    (16,135)      --           (560)  458,025
    Sale of common stock--rights offering. 81,818,181        818    220,933        --        --            --    221,751
    Repurchase of restricted common stock    (41,250)         (1)      (107)       --        --            --      (108)
    Amortization (reversal) of deferred
      compensation......................          --         --        (444)       --        --            202     (242)
    Deferred compensation adjustment
      for forfeitures...................          --         --        (289)       --        --            289       --
    Principal payments on notes
      receivable from officers..........          --         --          70        --        --            --         70
    Forgiveness of principal on notes
      receivable from officers..........          --         --         430        --        --            --        430
    Net loss............................          --         --         --    (71,589)       --            --    (71,589)
                                         -----------  --------- ----------   ---------  --------- -----------  ---------
Balances at December 31, 1999........... 120,031,477 $    1,200 $  694,930   $(87,724)  $    --   $       (69) $ 608,337
                                         ============  ========= ==========  =========  ========= ===========  ==========

</TABLE>



               The accompanying notes are an integral part of the
                             financial statements.
                                       36

<PAGE>



                                          HOMESTEAD VILLAGE INCORPORATED

                                             STATEMENTS OF CASH FLOWS
                                                  (IN THOUSANDS)
<TABLE>

                                                                                       YEAR ENDED DECEMBER 31,
                                                                                       1999      1998      1997
                                                                                    --------- --------- -------

Operating activities:
<S>                                                                                 <C>       <C>       <C>
    Net earnings (loss)...........................................................  $(71,589) $ (29,233)$  5,771
    Adjustments  to  reconcile  net  earnings  (loss)  to net cash  provided  by
      operating activities:
        Special charge write-offs and asset write-downs...........................     51,587     2,077       --
        Extraordinary item - (gain) loss on early extinguishment of debt..........    (5,849)    25,344       --
        Cumulative effect of accounting change....................................     14,230       --        --
        Depreciation and amortization.............................................     42,247    34,244    12,130
        Deferred and other compensation...........................................       (48)       667       459
        Amortization of prepaid rent..............................................       --         --        250
        Amortization of deferred loan costs.......................................      3,289     3,685       632
    Change in assets and liabilities:
        Decrease (increase) in accounts receivable, net of change in allowance....        143    (3,940)   (1,160)
        Decrease (increase) in funds held in escrow...............................      1,701    (1,701)      --
        Increase in other current assets..........................................      (689)      (400)     (246)
        Increase in accounts payable and other accrued expenses...................      2,147     5,994     1,229
        Increase in accrued real estate taxes.....................................      1,947     2,781       835
        (Decrease) increase in accrued interest on convertible mortgage notes.....       --        (658)    1,687
        Increase in accrued payable and related accrued expenses..................        363     3,228     4,472
        Increase in accrued special charge........................................      3,844     1,528       --
        Increase (decrease) in due to affiliate...................................        547       202       (83)
                                                                                    --------- ---------- --------
            Net cash provided by operating activities.............................     43,870    43,818    25,976
                                                                                    --------- ---------- --------
Investing activities:
    Investment in properties, excluding development costs payable.................   (93,722)  (461,831) (388,103)
    Proceeds from sale of land....................................................     72,995       --        --
    Decrease (increase) in deposits and pursuit costs.............................        695     2,994    (7,366)
    Increase in other assets......................................................      (600)   (2,532)    (3,252)
                                                                                    --------- ---------- --------
            Net cash used in investing activities.................................   (20,633)  (461,369) (398,721)
                                                                                    --------- ---------- --------
Financing activities:
    Proceeds from lines of credit.................................................     41,920   390,272    96,808
    Payments on lines of credit...................................................  (273,551)  (130,000)      --
    Deferred loan costs for lines of credit.......................................    (3,814)    (3,370)   (1,404)
    Sale of property and equipment, net...........................................    127,360       --        --
    Payments on capital lease obligation..........................................    (4,146)       --        --
    Proceeds from convertible mortgage notes payable..............................       --      17,013   191,750
    Payment of convertible mortgage notes payable.................................       --     (98,028)      --
    Payment to extinguish debt....................................................       --     (25,344)      --
    Proceeds from mortgage note payable...........................................       --     122,028       --
    Payment of mortgage note payable..............................................  (122,028)       --        --
    Proceeds from sale of shares, net of expenses.................................    221,751   154,241       --
    Repurchase of restricted common stock.........................................      (108)       (85)     (126)
    Exercise of warrants for common stock.........................................       --         --     81,276
    Payments on other long-term liabilities.......................................    (2,088)        (6)      --
    Principal payments on notes receivable from officers..........................         70       --        --
                                                                                    --------- ---------- --------

            Net cash (used in) provided by financing activities...................   (14,634)   426,721   368,304
                                                                                    --------- ---------- --------

Net increase (decrease) in cash and cash equivalents..............................      8,603     9,170    (4,441)
Cash and cash equivalents, beginning of year......................................     12,144     2,974     7,415
                                                                                    --------- ---------- --------
Cash and cash equivalents, end of year............................................  $  20,747 $  12,144 $   2,974
                                                                                    ========= ========= =========

Non cash investing and financing transactions:
    Increase in property and equipment and lease obligation from capital lease....  $ 145,000 $    --   $     --
                                                                                    ========= ========= =========
    Loan costs resulting from issuance of warrants and convertible mortgage debt..  $    --   $  1,251  $  13,310
                                                                                    ========= ========= =========
    Increase in property and equipment, and increase in development cost payable..  $    --   $    --   $  22,752
                                                                                    ========= ========= =========
    Increase in property and equipment, and other long term liabilities...........  $    --   $    --   $   8,070
                                                                                    ========= ========= =========
    Increase in trademark and intangibles arising from release of shares in escrow  $    --   $  2,253  $  24,224
                                                                                    ========= ========= =========
    Increase in property and equipment from capitalization of loan costs..........  $    --   $  1,249  $  51,703
                                                                                    ========= ========= =========
</TABLE>

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

                                       37
<PAGE>


                         HOMESTEAD VILLAGE INCORPORATED

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 1999

NOTE 1--DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business and Organization

     Homestead Village Incorporated ("Homestead"), a Maryland corporation formed
January 26, 1996, operates  moderately priced,  extended stay lodging properties
under the Homestead  Village trademark in selected markets in the United States.
Homestead's  extended stay lodging rooms are designed to appeal primarily to the
corporate business traveler.  Homestead and its predecessor entities, which have
purpose-built all Homestead Village  properties,  have targeted infill locations
proximate to major business  centers and  convenient to services  desired by its
customers. As of December 31, 1999, Homestead had 136 properties in operation in
28 states representing a total of 18,176 rooms.

     Homestead  acquired the Homestead  Village  trademark and operating systems
necessary to develop and operate the  properties  from  Security  Capital  Group
Incorporated ("Security Capital"),  and acquired 80 extended stay lodging assets
operating  or to be operated  under the  Homestead  Village  trademark  from two
investees  of Security  Capital,  Security  Capital  Pacific  Trust  ("PTR") and
Security Capital Atlantic  Incorporated  ("ATLANTIC") through a series of merger
transactions  (the  "Mergers")  on October 17,  1996.  The  acquisitions  of the
trademark,  operating  system and  properties  was through the merger of various
wholly-owned  subsidiaries of Security Capital, PTR and ATLANTIC in exchange for
common stock of Homestead.

     PTR and ATLANTIC agreed to provide convertible mortgage funding commitments
(see Note 4), and Security Capital provided interim financing to Homestead prior
to the  Mergers  and the lease of office  space for one year  subsequent  to the
Mergers,  all in exchange for warrants to purchase  Homestead  common stock (see
Note 5).

     Security Capital owns 87.0% of Homestead's  outstanding  common stock as of
December 31, 1999.  Homestead has received  significant  financing from Security
Capital through Security  Capital's exercise of Homestead warrants from the date
of the Mergers  through  October 1997 (the  expiration date of the warrants) and
Security  Capital's  participation in the January 1998 and May 1999 common stock
rights  offerings.  Security Capital also provides certain services to Homestead
under an administrative services agreement described in Note 7.

Principles of Financial Presentation

     The accompanying financial statements include the accounts of Homestead and
its  wholly-owned   subsidiaries.   All  material   intercompany   accounts  and
transactions have been eliminated in consolidation.

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


                                       38


<PAGE>


                         HOMESTEAD VILLAGE INCORPORATED

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

New Accounting Rules

     In April  1998  Statement  of  Position  98-5  "Reporting  on the  Costs of
Start-Up   Activities"  ("SOP  98-5")  was  issued  which  requires  that  costs
associated with organizational, pre-opening, and start-up activities be expensed
as incurred.  SOP 98-5 was effective for fiscal years  beginning  after December
15, 1998. Through the end of 1998,  Homestead  capitalized costs associated with
pre-opening  and start-up  activities  and amortized  such costs over a two-year
period.  Homestead  adopted  SOP 98-5  beginning  with its 1999  fiscal year and
wrote-off  unamortized  organizational,  pre-opening and start-up costs of $14.2
million as a cumulative  effect of adoption of an  accounting  standard in first
quarter 1999. No financial  statement amounts were restated upon adoption of the
new standard.  Depreciation  and  amortization for the years ended 1998 and 1997
include $5.5 million and $2.3 million, respectively for the amortization of such
start-up costs.

     In  June  1998,  Statement  of  Financial  Accounting  Standards  No.  133,
"Accounting  for  Derivative  Instruments  and Hedging  Activities"  was issued,
establishing   standards  for  the   accounting  and  reporting  for  derivative
instruments. The new rules, which become effective January 1, 2001 as amended by
Statement of Financial  Accounting Standards No. 137, are not expected to have a
material impact on Homestead's financial position or results of operations.

Cash and Cash Equivalents

     Homestead  considers  all  cash on hand,  demand  deposits  with  financial
institutions and short-term,  highly liquid investments with original maturities
of three months or less to be cash equivalents.

Property and Equipment and Depreciation  - Owned Properties

     Property  and  equipment  are stated at cost.  Incremental  costs  directly
related to the acquisition, development or improvement of real estate, including
interest and salaries and related costs for site  acquisition and supervision of
construction,  have been  capitalized.  Maintenance  and  repairs are charged to
operations as incurred;  major renewals and improvements are capitalized.  Costs
incurred in connection  with the pursuit of successful  site  acquisitions  were
capitalized,  while costs associated with  unsuccessful  site  acquisitions have
been expensed at the time the pursuit is abandoned.

     Depreciation is computed by the straight-line  method  principally over the
following estimated useful lives:

      Buildings and improvements.............................20-40 years
      Furniture, fixtures and equipment...................... 3-10 years

     Pre-opening  and  start-up  costs  incurred  related to the  opening of new
properties up to December 31, 1998 were  capitalized  and were  amortized by the
straight-line method over two years. During 1999, pre-opening and start-up costs
were expensed as incurred.

     Land held for sale is stated at the lower of cost or  estimated  fair value
less estimated costs to dispose.

Property and Equipment Under Capital Lease

     Property  and  equipment  under the  capital  lease  are  stated at the net
present value of minimum lease payments,  not exceeding fair market value at the
original date of the lease. Leased property and equipment assets of $145 million
are being  amortized over the  approximate 17 year lease term.  Maintenance  and
repairs are charged to operations  as incurred.  Renewals and  improvements  are
funded by monies paid into an escrow account for that purpose, and, as ownership
of the leased properties and equipment and the renewals and improvements  escrow
account  remain  with the lessor at the end of the lease,  no such  amounts  are
capitalized.


                                       39
<PAGE>


                         HOMESTEAD VILLAGE INCORPORATED

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)


Long-Lived Assets and Long-Lived Assets To Be Disposed Of

     Statement of Financial  Accounting  Standards No. 121,  Accounting  for the
Impairment  of  Long-Lived  Assets and for  Long-Lived  Assets To Be Disposed Of
("SFAS 121"),  requires that long-lived  assets to be held and used by an entity
be reviewed for impairment  whenever the carrying  amount of an asset may not be
recoverable.  SFAS  121 also  requires  that  certain  long-lived  assets  to be
disposed of be reported at the lower of carrying  amount or estimated fair value
less cost to sell.  Homestead  reviews its long-lived assets for impairment on a
quarterly basis. Based on the provisions of SFAS 121, Homestead  determined that
no  impairment  provision  of the  carrying  cost  of its  properties  or  other
long-lived assets is necessary at December 31, 1999.

Trademarks and Intangibles

     In the Mergers,  Homestead  acquired the  Homestead  Village  trademark and
certain operating systems for the development and operation of Homestead Village
properties from Security  Capital.  These intangible assets were valued at $48.5
million.  Homestead's  issuance of shares for the  acquisition  of the  Security
Capital  subsidiaries  in the Mergers  were issued in part  directly to Security
Capital  and in part to an escrow  agent in  proportion  to the  actual  funding
commitments  fulfilled by PTR and ATLANTIC.  The amount initially recorded as an
asset by Homestead of $22 million represented the pro rata portion of the actual
funding  provided by PTR and ATLANTIC as of the date of the Mergers to the total
expected funding to be provided under their funding  commitment  agreements.  As
shares were released from escrow in proportion to additional  fundings received,
additional  intangible assets have been recorded.  All remaining escrowed shares
were released in 1998.  Homestead is  amortizing  the  intangible  assets on the
straight-line  basis over a period of 20 years.  Trademark and  intangibles  are
presented net of  accumulated  amortization  of $6,673,000  and $4,190,000 as of
December 31, 1999 and 1998, respectively.

Deferred Costs

     Homestead has incurred certain costs in obtaining its lines of credit.  The
deferred  financing  costs related to the lines of credit have been deferred and
are being amortized over the terms of the respective  lines of credit.  Deferred
line of credit  loan costs are  presented  net of  accumulated  amortization  of
$1,480,000 and $3,712,000 as of December 31, 1999 and 1998, respectively.

     Deferred  financing costs recorded in conjunction  with the issuance of the
warrants in the Mergers and  fundings  under the  convertible  mortgage  funding
commitments have been fully amortized.

Interest

     The following summarizes Homestead's interest expense (in thousands):

<TABLE>
                                                                         YEAR ENDED DECEMBER 31,
                                                                        1999       1998       1997
                                                                     ---------- ---------- -------

            <S>                                                      <C>        <C>        <C>
            Lines of credit facilities.............................  $  23,816  $  16,929  $   2,137
            Convertible mortgage notes.............................     20,197     26,293     69,791
            Capital lease obligation...............................     11,838        --         --
            Mortgage note payable..................................      1,282      4,394        --
            Convertible debentures.................................         --        157        --
            Other   ...............................................        574        732          9
                                                                     ---------  ---------- ---------
                 Total interest cost...............................     57,707     48,505     71,937
            Capitalized interest...................................     (6,443)   (25,315)   (69,747)
                                                                     ---------- ---------- ----------
                 Net interest expense..............................  $  51,264  $  23,190  $   2,190
                                                                     =========  =========  =========

            Amortization of deferred financing costs included in
               interest cost.......................................  $   3,289  $   2,994  $  50,923
                                                                     =========  =========  =========

</TABLE>
                                       40

<PAGE>


                         HOMESTEAD VILLAGE INCORPORATED

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)



     During  1999,   1998  and  1997,  the  total  interest  paid  in  cash  was
$54,705,000, $41,873,000 and $18,134,000, respectively.

Income Taxes

     Income taxes for Homestead  are  determined  using the liability  method in
which deferred income taxes are provided for temporary  differences  between the
carrying amounts of assets and liabilities used for financial reporting purposes
and income tax reporting  purposes  calculated using the income tax rates, under
existing  legislation,  expected  to be in  effect  at the date  such  temporary
differences are expected to reverse.

Revenue Recognition

     Room revenue and other income are  recognized  when earned,  utilizing  the
accrual  method of  accounting.  A provision for possible bad debts is made when
collection  of  receivables  is considered  doubtful.  Accounts  receivable  are
presented net of allowances of $604,000 and $269,000 as of December 31, 1999 and
1998, respectively.

Per Share Data

     Basic  earnings  (loss) per share is  calculated  by dividing  net earnings
(loss)  available  to common  shareholders  by weighted  average  common  shares
outstanding.  Diluted  earnings (loss) per share is equivalent to basic earnings
(loss) per share  unless  dilution  results  from a  calculation  which  divides
adjusted earnings available to common  shareholders by adjusted weighted average
common shares  outstanding.  Adjusted earnings available for common shareholders
adds back all net interest  expense from  convertible  debt.  Adjusted  weighted
average shares outstanding  includes any dilutive effect of options and warrants
using the treasury stock method and the dilutive effect of convertible debt. For
the years ended December 31, 1999 and 1998 exercise of options and conversion of
debt is not assumed as the effects are anti-dilutive in loss periods.

     A reconciliation of the numerators and denominators used to calculate basic
and diluted earnings (loss) per share before  extraordinary items and cumulative
effect of an accounting change follows (in thousands, except per share amounts):

<TABLE>
                                                                           1999      1998      1997
                                                                        --------- ---------- ---------

            <S>                                                         <C>       <C>        <C>
            Net earnings (loss) attributable to common shares
               before extraordinary items and cumulative effect of
               accounting change......................................  $ (63,208)$  (3,889) $   5,771
            Net convertible mortgage interest.........................        --        --       1,922
                                                                        --------- ---------- ---------
            Adjusted earnings (loss) before extraordinary items and
               cumulative effect of accounting charge.................  $ (63,208)$  (3,889) $   7,693
                                                                        ========= ========== =========

            Weighted average shares outstanding--basic.................     87,094    37,639     23,578
            Incremental options and warrants..........................        --        --       2,000
            Conversion of convertible mortgage notes..................        --        --      17,924
                                                                        --------- ---------- ---------
            Adjusted weighted average shares outstanding--diluted......     87,094    37,639    43,502
                                                                        ========== ========== =========

            Net  earnings  (loss)  per  share  before  extraordinary  items  and
               cumulative effect of accounting change:
                 Basic................................................  $   (0.73)$   (0.11) $    0.24
                                                                        ========== ========== =========
                 Diluted..............................................  $   (0.73)$   (0.11) $    0.18
                                                                        ========== ========== =========

</TABLE>
                                       41

<PAGE>


                         HOMESTEAD VILLAGE INCORPORATED

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)


Reclassifications

     Certain  of the  1998 and  1997  financial  statements  amounts  have  been
reclassified to conform to the 1999 presentation.

NOTE 2--PROPERTY AND EQUIPMENT

     Property and equipment consist of the following (dollars in thousands):

<TABLE>
                                                                               DECEMBER 31,
                                                          -------------------------------------------------
                                                                     1999                     1998
                                                          -----------------------  ------------------------
                                                           NUMBER OF               NUMBER OF
                                                          PROPERTIES/  CARRYING   PROPERTIES/   CARRYING
                                                            PARCELS     AMOUNT      PARCELS      AMOUNT
                                                          ----------  ----------  ----------- ------------
            <S>                                           <C>         <C>         <C>         <C>
            Operating properties:
               Owned properties:
                 Land...................................              $  197,226               $  191,694
                 Buildings and improvements.............                 658,668                  645,235
                 Furniture, fixtures and equipment......                  88,145                  108,446
                                                                      ----------               ----------
               Subtotal, owned properties...............       118       944,039       120        945,375
               Properties under a capital lease.........        18       145,000        --             --
                                                             -----    ----------      ----     ----------
                                                               136     1,089,039       120        945,375
                                                              ====                    ====
            Properties under construction...............        --            --        16        110,891
                                                              ====                   =====
            Properties in planning (land owned for
               development).............................        --            --        18        126,054
                                                              ====                   =====
            Land held for sale, including excess
               parcels..................................        13        22,960         4          4,332
                                                             =====    ----------      ====     ----------
                 Total..................................              $1,111,999               $1,186,652
                                                                      ==========               ==========
</TABLE>

     Land held for sale at December 31, 1999  consists of one urban site,  eight
suburban sites, and four excess parcels located adjacent to operating properties
(see "Note 3 - Special Charges").

NOTE 3--SPECIAL CHARGES

     In fourth  quarter 1998, in light of the difficult  environment  in capital
markets for real  estate  operating  companies  and  lodging  companies  and the
resulting limited  availability of new financing for additional  commitments for
developments,  Homestead  reorganized  its internal  development  department and
terminated approximately 40 full-time persons. In conjunction with the severance
of  development  personnel and changed  expectations  to pursue  development  of
selected  sites under  contract for  acquisition,  Homestead  recorded a special
charge primarily for severance of personnel and abandonment of pursuits totaling
$7.24  million.  Payment of the final costs accrued for this special charge were
made in second quarter 1999 and no additional liability remains.

     In the second quarter of 1999, Homestead determined, based on its inability
to  obtain   financing  for   development  of  sites  beyond  those  already  in
construction,  to end its development program. As of the beginning of the second
quarter,  Homestead  had  substantial  investments  in  ownership  of  land  for
development and in costs of pursuit of additional  development  sites. As of May
1999,  all land  previously  held for  development  became  held for  sale,  all
pursuits for acquisition of additional sites for development were abandoned, and
Homestead  began  reduction of overhead costs and personnel to reflect a company
with  stabilized  operations  of 136  properties.  Homestead  recorded a special
charge  of  $65.3  million  in  the  second   quarter  of  1999   consisting  of

                                       42

<PAGE>


                         HOMESTEAD VILLAGE INCORPORATED

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)


approximately  $43.5 million for  write-downs  of the carrying cost of land held
for  sale  to  its  estimated  fair  value  less  estimated  costs  to  dispose,
approximately  $7.1  million  of  write-offs  of costs of  pursuits  and loss of
nonrefundable earnest money deposits,  approximately $5.5 million for closing of
administrative offices and discontinuing new initiatives, and approximately $9.2
million for the costs of severance of approximately 110 full-time persons.

     The $5.4 million of accrued  special  charge  expenses at December 31, 1999
consist of $2.8 million of unpaid  severance  costs and $2.6 million for ongoing
costs of closed offices and  discontinuing  new initiatives.  There have been no
changes  in  estimates  of  the  special  charge  and  management  believes  the
write-downs  of the carrying cost of land held for sale are adequate.  Revisions
to these estimates may be required based primarily upon the ultimate disposition
of land held for sale.

     Carrying costs on the land sites,  such as interest and property taxes, are
expensed  until the sites are  disposed of and will  continue to have a material
adverse affect on earnings until disposal.  Of the 24 land sites originally held
for sale as of May 1999, one was sold in third quarter 1999 and ten were sold in
the fourth quarter 1999.  Sales of these parcels  generated $72.6 million in net
proceeds.  Six of the  remaining  13 land  sites  are  subject  to the  security
interests of the lenders under the Working  Capital  Facilities  (see "Note 4 --
Debt") and any sale of the encumbered sites requires the consent of the lenders.
Proceeds  from the sale of  encumbered  sites will be used to repay the  Working
Capital Facilities.

NOTE 4--DEBT

     The  following  table  summarizes  Homestead's  outstanding  debt and other
long-term liabilities as of December 31, 1999 and 1998.

<TABLE>
                                                                                   DECEMBER 31,
                                                                         ----------------------------------
                                                                               1999              1998
                                                                               ----              ----
       <S>                                                               <C>                <C>
       Lines of credit facilities:
          Secured by suburban properties and land......................  $    125,449       $  128,080
          Secured by urban land........................................            --           29,000
          Secured by a subscription receivable from
            Security Capital...........................................            --          200,000
                                                                         ------------       ----------
            Total lines of credit facilities...........................       125,449          357,080
       Capital lease obligation........................................       140,854               --
       Convertible mortgage notes......................................       221,334          221,334
       Mortgage note payable...........................................            --          122,028
       Other long-term liabilities.....................................            --            8,064
                                                                         ------------       ----------
           Total debt and other long-term liabilities..................  $    487,637       $  708,506
                                                                         ============       ==========
</TABLE>

Credit Facilities

     On March 18,  1999  Homestead  entered  into  amended and  restated  credit
agreements to, among other things,  extend the revolving line of credit facility
secured by suburban properties and land to December 31, 2000 and extend the line
of  credit  facility  secured  by urban  land  (together  the  "Working  Capital
Facilities")  to the earlier of December 31, 2000,  or the dates of repayment of
amounts  borrowed  under the line.  The line secured by suburban  properties and
land was increased to $170 million total borrowing capacity (from $150 million),
subject to  collateral  requirements,  and the interest  terms  adjusted to be a
margin of 2.0% to 3.0% over  LIBOR or  alternatively  1.0% to 2.0% over prime or
1.5% to 2.5% over the  federal  funds  rate,  with the margin  dependent  on the
percentage of borrowings outstanding versus qualifying  collateral.  At December
31, 1999 the line was secured by 64  operating  properties  (historical  cost of
$584.6  million)  and six land parcels  (carrying  value of $9.3  million).  Any
future additional collateral under the $170 million line was limited to suburban
properties that are stabilized.  The facility secured by urban land was adjusted
to  $30  million  total  borrowing  capacity  (from  $50  million),  subject  to
collateral requirements, and the interest terms adjusted to 3.0% over 43 LIBOR
                                       43
<PAGE>



                         HOMESTEAD VILLAGE INCORPORATED

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)


or  alternatively  2.0% over prime or 2.5% over the federal funds rate. The line
secured by urban sites was paid in full during the fourth quarter of 1999,  thus
terminating the facility.

     The amended and restated Working Capital Facilities require  maintenance of
the following financial covenants effective with first quarter 1999:

          o    limiting  total  liabilities  to no more than 55% of gross  asset
               value, as defined;

          o    limiting  total  indebtedness  to no more than 50% of gross asset
               value, as defined;

          o    maintaining  a  ratio  of  earnings   before   interest,   taxes,
               depreciation  and amortization to interest  expense,  as defined,
               ranging from 1.25 to 1.0 for first quarter 1999 up to 1.90 to 1.0
               by fourth quarter 2000;

          o    maintaining  a  ratio  of  earnings   before   interest,   taxes,
               depreciation and amortization to debt service and preferred stock
               dividends, as defined,  ranging from 1.0 to 1.0 for first quarter
               1999 to 1.25 to 1.0 by fourth quarter 2000;

          o    maintaining a ratio of net property  operating  income to implied
               debt  service,  as  defined,  ranging  from 1.4 to 1.0 for  first
               quarter 1999 to 2.25 to 1.0 by fourth quarter 2000;

          o    maintaining  minimum  tangible net worth, as defined,  of no less
               than 85% of the year end 1998  amount,  as defined,  adjusted for
               net proceeds of equity offerings;  and

          o    maintaining positive net sources and uses of funds.

     In addition, under the renewed Working Capital Facilities, distributions or
dividends  on equity are  prohibited;  total cost,  as  defined,  of projects in
development  cannot exceed 25% of gross asset value, as defined,  in 1999 or 15%
in 2000; and  Homestead's  business  activities  will be limited to development,
ownership and operation of extended stay hotels.

     As of December 31, 1999,  Homestead  had an  outstanding  balance of $125.4
million under the Working  Capital  Facilities,  all of which was outstanding on
the line secured by suburban properties and land. Homestead reduced its lines of
credit debt by $73.6 million from the $199 million outstanding under the Working
Capital  Facilities  as of the end of the first  quarter  of 1999  primarily  by
utilizing the $72.6 million in net proceeds generated by land sales.

     In November 1999,  Homestead entered into an interest rate cap agreement on
$70,000,000 of the line of credit which capped this portion of the debt at LIBOR
of 6.25%,  before applicable margin, from November 15, 1999 through February 15,
2000.  At December 31,  1999,  the actual  LIBOR on the  $70,000,000  was 6.48%,
before applicable margin.

     Homestead had an additional  $200 million bank line of credit facility (the
"Bridge Facility") which bore interest at the Eurodollar rate plus 1.25% or at a
base rate of prime plus  0.25%.  Proceeds  from the  consummation  of the rights
offering  (see  "Note 5 -  Shareholders'  Equity")  were  used to repay the $200
million Bridge Facility on May 28, 1999. The bank's  commitment under the Bridge
Facility and the obligation of Security Capital under its subscription agreement
for $200 million of subordinated  debentures of Homestead expired upon repayment
of the facility.

     Homestead's  weighted  average stated  interest rate was 8.98% and 7.30% on
lines of  credit  borrowings  outstanding  as of  December  31,  1999 and  1998,
respectively.

     Homestead was in compliance with all covenants under its credit  facilities
as of December 31, 1999.

                                       44

<PAGE>


                         HOMESTEAD VILLAGE INCORPORATED

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)


Convertible Mortgage Notes Payable

     At December 31, 1999 Homestead owed convertible mortgage notes to Archstone
Communities Trust ("Archstone"), formerly PTR, in the principal amount of $221.3
million.  The notes are  collateralized by mortgages on 54 Homestead  properties
with a historical cost of $359.3  million.  The notes accrue interest at 9.0% on
the principal amount, and require interest only payments every six months on May
28 and  November 28 of each year.  The notes are due October 31,  2006,  and are
callable on or after May 28, 2001. The notes are  convertible,  at the option of
the holder, into 21,191,262 shares of Homestead common stock (a conversion ratio
equal to one share of common  stock for every  approximate  $10.44 of  principal
amount  outstanding).  The conversion  ratio was adjusted in accordance with the
terms of the notes upon the issuance of shares in the May 1999 rights  offering.
Previously,  the  conversion  ratio was  $11.50  (19,246,402  shares).  Deferred
financing  costs and the  discount on the  respective  fundings  have been fully
amortized. No further funding commitment is available under the mortgage notes.

Mortgage Note

     On July 6, 1998,  Homestead entered into a mortgage loan purchase agreement
with ATLANTIC and Merrill Lynch Mortgage  Capital Inc.  ("MLMC") whereby the $98
million of Homestead  convertible  mortgage notes held by ATLANTIC were modified
to, among other things, eliminate their convertibility feature in exchange for a
payment of $21.4 million from Homestead to ATLANTIC. The amount paid to ATLANTIC
was based on trailing  market  prices of Homestead  common stock at the time the
agreement  was  entered  into,  which  exceeded  the  conversion  price  of  the
convertible  mortgage notes at that date.  Homestead funded the payment with the
proceeds received from the sale of $24 million of 7.5% convertible  subordinated
debentures.  Also pursuant to the mortgage loan purchase agreement ATLANTIC sold
the  amended  notes  to MLMC for $98  million.  On  August  7,  1998,  Homestead
converted  the $98  million  of  mortgage  notes  and the  $24  million  of 7.5%
convertible  subordinated  debentures  into a $122  million  mortgage of a newly
formed special purpose subsidiary of Homestead.  The transaction  resulted in an
early  extinguishment of debt measured as the difference between the $98 million
carrying  amount of the original  mortgage notes to ATLANTIC and the amount paid
to extinguish the debt, including transaction costs. Such loss on extinguishment
of debt and  transaction  costs amounted to $25.3 million and was recorded as an
extraordinary item in the third quarter 1998.

     The mortgage note payable was repaid with the proceeds of a sale lease-back
transaction on February 23, 1999.

Capital Lease Obligation

     On February 23, 1999,  Homestead  completed a sale and  lease-back of 18 of
the 26 Homestead  properties  collaterizing the $122 million mortgage note which
was due June 1999.  Hospitality  Properties  Trust  purchased the properties for
$145 million.  Homestead operates the properties under a long-term lease through
December 2015 and pays a minimum rent of approximately  $16 million per year and
a minimum $1.5 million per year payment to a furniture,  fixtures and  equipment
reserve.  Homestead  posted a security  deposit  equal to one year's  rent.  The
majority  of the  proceeds  from the sale were  used to repay  the $122  million
mortgage note and post the approximate $16 million security deposit.

     The lease is considered a capital lease for  financial  reporting  purposes
and  thus  the  present  value  of the  minimum  lease  payments  discounted  at
approximately  9.8%  has  been  recorded  as an  asset  of  $145,000,000,  to be
amortized over the lease term, and an obligation, which will be reduced over the
term of the lease by  allocating  rent  payments  between  interest  expense and
reduction of the lease obligation. Future minimum payments aggregate $17,460,000
per year, or a total of $279,360,000  over the years 2000 through 2015, of which
$138,506,000  represents interest. The balance of the obligation at December 31,
1999 was $140,854,000.

                                       45

<PAGE>


                         HOMESTEAD VILLAGE INCORPORATED

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)


     The lease also provides for two  extension  periods of 15 years each at the
option of Homestead,  requires  payment of percentage  rents beginning July 2000
based on increases in revenues over a base period, and requires the greater of a
minimum  of  $125,000  per  month  or a  percentage  of  revenues  be  paid to a
furniture, fixtures and equipment reserve to be used for capital expenditures.

Other Long-Term Liabilities

     Homestead had a series of agreements with an unaffiliated person ("Finder")
who developed the Homestead Village concept and performed certain services.  The
agreements extended through February 5, 2043 and provided for quarterly payments
to  Finder  for  assistance  in  the  site  location,  development  and  initial
operations of the first 39 Homestead Village properties.

     On  October  25,  1999,  Homestead  paid the  Finder  $2.1  million in full
settlement  of all  amounts due under the  agreements,  and the  agreements  and
Homestead's obligation to pay any future amounts to Finder were terminated.  The
difference  between the $7.9 million carrying amount of the long-term  liability
at the  time of  repayment  and the  amount  paid to  terminate  the  agreements
resulted in a gain of $5.8 million which was recorded as an  extraordinary  item
in the fourth quarter 1999.

NOTE 5--SHAREHOLDERS' EQUITY

Common Stock Rights Offerings

     On May 28, 1999,  Homestead  completed a common stock rights  offering with
the sale of  81,818,181  shares for $225  million in gross  proceeds  ($2.75 per
share).  Security Capital purchased  77,749,220 shares in the rights offering at
the same  price  paid by the  public.  Following  the  completion  of the rights
offering,  Security Capital owns 87.0% of Homestead's outstanding common shares.
Net  proceeds  of $221.7  million  were used to repay  the $200  million  Bridge
Facility and accrued interest; payment of interest on the convertible mortgages,
Working  Capital  Facilities,  and  other  long-term  liabilities;   payment  of
construction  in  progress  costs;  and to provide  working  capital for general
corporate  purposes.   Security  Capital's   obligations  under  a  subscription
agreement  which  secured  the Bridge  Facility  wer  terminated  as a result of
Security Capital's participation in the rights offering and the repayment of the
Bridge Facility.

     On January 15, 1998,  Homestead  completed a rights offering  consisting of
10,426,840  common  shares  at $15 per  share  resulting  in gross  proceeds  of
$156,402,600.  After costs of the  offering,  which include a fee of 1% of gross
proceeds  to  Security  Capital  Markets  Group  Incorporated,   a  wholly-owned
subsidiary of Security  Capital,  net proceeds to Homestead  were  approximately
$154.2  million.  Security  Capital  purchased  8,429,225  shares in the  rights
offering (80.8% of the offered shares) at the same price paid by the public.

Shelf Registration

     In November 1998,  Homestead filed a shelf registration  statement with the
Securities and Exchange  Commission for up to $356,402,600 of any combination of
preferred stock, debt securities and securities  warrants,  and up to a total of
$500,000,000  including  common  stock not  previously  issued from  Homestead's
November  1997  shelf   registration.   The   securities   issuable   under  the
registration,  which was declared  effective  November 23, 1998,  may be offered
from time to time,  at  amounts,  at prices  and on terms to be set forth at the
time of the offerings.  As of December 31, 1999, $275,000,000 of securities were
available to be issued under the November 1998 shelf registration.
                                       46


<PAGE>


                         HOMESTEAD VILLAGE INCORPORATED

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)


Stock Based Compensation Plans

In 1996, Homestead  established two stock compensation plans, the 1996 Long-Term
Incentive Plan (the "1996 Incentive Plan") and the 1996 Outside  Directors Plans
(the "Outside  Directors Plan"). On June 23, 1999 the shareholders  approved the
adoption of the 1999  Long-Term  Incentive Plan (the "1999  Incentive  Plan" and
together with the 1996 Incentive Plan, the "Incentive Plans"). Homestead elected
to account for these  plans  under  Accounting  Principle  Board  Opinion No. 25
Accounting  for Stock Issued to Employees,  under which  compensation  costs are
recognized  as equal to the  difference  between the fair value of the Homestead
stock  at the  date of  grant or sale  and the  exercise  or sale  price.  Total
stock-based compensation expense (credit) related to these plans for 1999, 1998,
and 1997 is $(242,000),  $346,000, and $158,000, respectively, which is included
in corporate operating expenses in the accompanying statements of operations.

     The following  summarizes the pro forma effect on Homestead's  net earnings
for 1999,  1998 and 1997 had  compensation  cost for the grants of stock options
been determined  consistent with Statement of Financial Accounting Standards No.
123 "Accounting for Stock-Based  Compensation"  (in thousands,  except per share
amounts):

<TABLE>
                                                                  1999       1998       1997
                                                              ----------- ---------- ---------
            <S>                                               <C>         <C>        <C>
            Net earnings (loss) before  extraordinary item and cumulative effect
                of accounting change:
                 As reported................................. $  (63,208) $  (3,889) $    5,771
                                                              =========== =========  ==========
                 Pro forma................................... $  (63,643) $  (5,445) $    5,392
                                                              =========== =========  ==========
            Basic earnings (loss) per share:
                 As reported................................. $    (0.73) $   (0.11) $     0.24
                                                              =========== =========  ==========
                 Pro forma................................... $    (0.73) $   (0.14) $     0.23
                                                              =========== =========  ==========
            Diluted earnings (loss) per share:
                 As reported................................. $    (0.73) $   (0.11) $     0.18
                                                              =========== =========  ==========
                 Pro forma................................... $    (0.73) $   (0.14) $     0.17
                                                              =========== =========  ==========
</TABLE>

     Homestead  may  grant up to  10,000,000  shares  of stock to its full  time
employees  under the Incentive Plans and up to 100,000 shares of stock under the
Outside  Directors  Plan.  At December 31, 1999,  4,925,602  and 64,000  shares,
respectively,  were  available  for future grant under the  Incentive  Plans and
Outside  Directors  Plan. The Incentive  Plans options granted vest over four to
five years and the Outside  Directors Plan options vest upon grant. A summary of
the status of  Homestead's  fixed stock  compensation  plans as of December  31,
1999, 1998 and 1997 and changes during those years is presented below:

<TABLE>

                                                    1999                    1998                   1997
                                            ---------------------- -----------------------  ----------------------
                                                         Weighted-               Weighted-               Weighted-
                                                         Average                 Average                 Average
                                                         Exercise                Exercise                Exercise
     INCENTIVE PLAN & OUTSIDE DIRECTORS        Shares     Price       Shares      Price       Shares      Price
----------------------------------------   ------------  -------   ------------ ----------  ----------  ----------
     <S>                                   <C>          <C>       <C>           <C>        <C>         <C>
     Outstanding at beginning of year....     3,701,373 $  11.33     2,721,561  $   15.39     584,000  $    11.18
          Granted........................     3,562,018 $   2.28     1,791,482  $    6.88   2,180,061  $    16.42
          Exercised......................          --   $    --            --   $     --          --   $     --
          Forfeited......................   (2,370,163) $  10.50      (811,670) $   15.13     (42,500) $    10.71
                                           ------------           -------------            ------------
     Outstanding at end of year..........     4,893,228 $   5.14     3,701,373  $   11.33   2,721,561  $    15.39
                                           =============          =============           =============
     Exercisable at end of year.........        377,345 $  12.60        54,250  $   12.19      10,000  $    14.35
                                           =============          =============           =============
</TABLE>

     The  weighted  average  fair  value of options  granted in the years  ended
December 31, 1999, 1998 and 1997 were $1.47, $3.42, and $6.12, respectively.

                                       47

<PAGE>


                         HOMESTEAD VILLAGE INCORPORATED

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)


     The  following  table  summarizes  information  about fixed  stock  options
outstanding at December 31, 1999:
<TABLE>

                                                   OPTIONS OUTSTANDING              OPTIONS EXERCISABLE
                                              -------------------------------     -----------------------
                                                          WEIGHTED-
                                                           AVERAGE      WEIGHTED-                WEIGHTED-
                                              OPTION      REMAINING     AVERAGE      OPTION      AVERAGE
                                              SHARES     CONTRACTUAL    EXERCISE     SHARES      EXERCISE
     RANGE OF EXERCISE PRICES               OUTSTANDING      LIFE        PRICE    EXERCISABLE     PRICE
     ------------------------               -----------      ----        -----    -----------     -----
     <S>                                    <C>          <C>          <C>         <C>         <C>
     $2.19................................   2,865,984       9.5      $    2.19          --         --
     $ 2.31 to $3.00......................     421,000       9.6      $    2.88          --         --
     $4.28................................     579,393       9.0      $    4.28       89,342  $    4.28
     $7.72 to $15.00......................     377,489       7.63     $   11.88       72,000  $   11.10
     $16.00 to $18.19.....................     649,362       7.71     $   16.45      216,003  $   16.54
                                           -----------                            ----------
     Totals...............................   4,893,228       9.1      $    5.14      377,345  $   12.60
                                           ===========                            ==========
</TABLE>

     The fair  value of each  option  grant on the date of grant  was  estimated
using the Black-Scholes option pricing model with the following weighted average
assumptions  used for  grants in 1999,  1998 and 1997,  respectively;  risk-free
interest rates of 6.55%, 4.66% and 5.76%; no expected dividend yields;  expected
lives of 4.5, 4.5, and 5.0 years; expected volatility of 96%, 53% and 30%.

Warrants

     Homestead issued a total of 10,000,000  warrants on the date of the Mergers
which  entitled  the holders to buy one share of  Homestead  common stock at the
exercise  price of $10 per share.  Warrants  were issued to PTR and  ATLANTIC in
exchange  for  entering  into  the  convertible   mortgage  funding   commitment
agreements.  Security Capital received 817,694 Homestead  warrants for providing
financing  to  Homestead  during the time  between the  execution  of the merger
agreement  and the  closing  date and for the use of office  facilities  for one
year.

     The fair value of the warrants  exceeded the exercise  price at the date of
issuance.  The difference  between the fair value of the Homestead  stock at the
date of issuance and the warrant  exercise price of $10 for the warrants  issued
to PTR and ATLANTIC has been recorded as interest cost.  The value  attributable
to the interim financing provided by Security Capital to Homestead of $1,589,000
has been  charged to  interest  expense in 1996.  The value of the use of office
facilities  for one year was  determined  by  management  to be $300,000 and was
charged to corporate  operating  expense over a period of one year ended October
1997.

     After the  initial  issuance  of warrants  to PTR,  ATLANTIC  and  Security
Capital,  both PTR and ATLANTIC  distributed the warrants to their  shareholders
which resulted in Security  Capital holding a total of 4,730,022  warrants after
the distribution.  Homestead had the right under the investor  agreement entered
into with Security  Capital at the merger closing to request Security Capital to
exercise its warrants in minimum increments of $5,000,000. Security Capital also
acquired  additional  warrants in open market purchases.  Upon expiration of the
warrants on October 29, 1997 Security Capital had exercised  8,121,628  warrants
resulting  in total  proceeds  of  $81,216,000.  Third party  holders  exercised
1,760,273  warrants  resulting in total proceeds of $17,603,000  through October
29, 1997. A total of 118,099 warrants expired unexercised.

Rights Agreement

     On May 16,  1996,  the  Homestead  Board of  Directors  declared and paid a
dividend of one purchase right as defined per a rights  agreement for each share
of Homestead  common stock  outstanding to the holders of Homestead common stock
of record on that date.  The shares of  Homestead  common stock issued after May
16, and before the expiration of the purchase  rights (May 16, 2006),  will also
be entitled to one purchase  right for each share issued.  Each  purchase  right
entitles the holder to purchase one-hundredth of a participating preferred share
of Homestead at $50,  subject to  adjustment  as defined in the  agreement.  The

                                       48

<PAGE>


                         HOMESTEAD VILLAGE INCORPORATED

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)


Board  of  Directors  of  Homestead  through  Homestead's  Restated  Charter  is
authorized  to issue one or more series and to determine the number of preferred
shares of each series and the rights of each series. The purchase rights will be
exercisable  only  after a person or group of  affiliated  persons  (other  than
Security Capital or Archstone) acquires 20% or more of the outstanding shares of
common stock or offers to acquire 25% or more.


NOTE 6--INCOME TAXES

     As a result of Security  Capital's  ownership  in Homestead  exceeding  80%
after the closing of the May 1999 rights  offering,  Homestead's  results,  post
rights  offering,  will be included in the federal income tax return of Security
Capital.  Security  Capital  may  utilize  tax  operating  losses  generated  by
Homestead  subsequent to May 1999. In order for Security  Capital to utilize the
net  operating  loss  carryforwards  generated  by  Homestead  through May 1999,
Homestead must generate  future taxable  income.  To the extent  Homestead's net
operating loss  carryforwards are so utilized on Security  Capital's federal tax
return,  such loss  carryforwards  will not be  available  to  Homestead  in the
future.  Homestead  and Security  Capital  have  entered  into a tax  allocation
agreement  which  provides  for tax  liability  or refund  payments  between the
entities as determined by a defined  calculation  of  Homestead's  proportionate
share of taxable  income  versus the total of  taxable  income for all  entities
filing as part of Security  Capital's  federal  tax return.  For 1999 no amounts
were paid or due under the agreement.

     At December  31, 1999,  Homestead  had,  for federal  income tax  reporting
purposes,  net operating loss carryforwards of approximately $127 million, which
expire $4 million in the year 2011, $25 million in the year 2012, $50 million in
the year 2018, and $48 million in the year 2019.

     Homestead  presents in its financial  statements its provision for taxes as
though Homestead filed a separate return.  Significant components of Homestead's
deferred  tax assets and  liabilities  as of  December  31, 1999 and 1998 are as
follows (in thousands):

<TABLE>
                                                                               1999              1998
                                                                            -----------        ---------
            Deferred tax assets:
            <S>                                                               <C>               <C>
                 Deferred financing costs................................     $ 18,329          $ 17,322
                 Lease obligation, mortgages and other liabilities.......        64,294            6,274
                 Net operating loss......................................        50,904           29,144
                                                                              ----------
                                                                              $ 133,527         $ 52,740
            Deferred tax liabilities:
                 Depreciable assets......................................       (92,835)         (23,078)
                                                                              ----------       ----------
            Valuation allowance..........................................       (40,692)         (29,662)
                                                                              ----------       ----------
            Net noncurrent deferred tax asset............................     $       --       $       --
                                                                              ==========       ==========
</TABLE>

     Deferred tax assets relate primarily to: (1) the difference in the carrying
amount of deferred  financing  costs  recognized  at formation and in connection
with  subsequent  fundings of  convertible  mortgage notes payable for financial
reporting  purposes  and  the  amount  recognized  for  tax  purposes;  (2)  the
difference in the carrying amount of the lease obligation,  convertible mortgage
notes and other  liabilities  for  financial  reporting  purposes and the amount
recognized  for tax  purposes;  and (3) tax net  operating  loss.  Deferred  tax
liabilities  relate  primarily to the difference in the carrying  amount and the
methods of depreciation of certain  depreciable  assets for financial  reporting
purposes and the amount recognized for tax purposes.  A valuation  allowance has
been recognized to offset the net deferred tax assets, due to the uncertainty of
the ultimate realization of those deferred tax assets in future years.

                                       49

<PAGE>


                         HOMESTEAD VILLAGE INCORPORATED

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)


     The  difference  between  the  provision  for income  taxes and the amounts
computed by applying the statutory  federal income tax rate to net income (loss)
before income taxes and extraordinary item are (in thousands):

<TABLE>
                                                                            1999      1998     1997
                                                                         --------- --------- ------

            <S>                                                          <C>       <C>       <C>
            Statutory rate applied to income (loss) before income
               taxes...................................................  $(25,283) $  (1,322)$  1,962
            Effect of permanent differences............................     1,030      1,065      616
                                                                         --------- ---------  -------
                                                                           (24,253)     (257)   2,578
            Provision of valuation allowance...........................     24,253       257   (2,578)
                                                                         --------- ---------  -------
            Income tax expense.........................................  $     --  $      --  $    --
                                                                         ========= =========  =======

</TABLE>


NOTE 7--ADMINISTRATIVE SERVICES AGREEMENT

     Homestead and Security Capital have an  administrative  services  agreement
(the "Administrative  Services  Agreement"),  pursuant to which Security Capital
provides Homestead with administrative  services with respect to certain aspects
of  Homestead's  business.  These  services  include,  but are not  limited  to,
insurance administration,  accounts payable administration, internal audit, cash
management, human resources, management information systems, tax administration,
research,  shareholder  communications and investor relations.  Any arrangements
under the  Administrative  Services  Agreement for the provision of services are
required to be  commercially  reasonable  and on terms not less  favorable  than
those  which  could  be  obtained   from   unaffiliated   third   parties.   The
Administrative Services Agreement, which expires December 31, 2000, is renewable
for a one-year  term,  subject to  approval  by a  majority  of the  independent
members of the  Homestead  Board of  Directors.  Additionally  Security  Capital
provides legal administration  services under a separate agreement which expires
December 31, 2000. Total  administrative  services fees for 1999, 1998, and 1997
were $5,201,000, $4,213,000, and $2,320,000, respectively.


NOTE 8--FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following  disclosures of estimated fair value of financial instruments
were determined by Homestead based on available market information and valuation
methodologies  believed  to be  appropriate  for  these  purposes.  Considerable
judgement and a high degree of  subjectivity  are involved in  developing  these
estimates and accordingly  they are not  necessarily  indicative of amounts that
Homestead could realize upon disposition.

     Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Value of Financial Instruments, defines the fair value of a financial instrument
as  the  amount  at  which  the  instrument  could  be  exchanged  in a  current
transaction  between  willing  parties.   The  carrying  values  of  Homestead's
financial  instruments,  which  include  cash  and  cash  equivalents,  accounts
receivable,  other  assets,  development  costs  payable,  accounts  payable and
accrued expenses approximate fair value as of December 31, 1999 and 1998 because
of the short  maturity of these  instruments.  Similarly,  the carrying value of
lines of credit balances approximate fair value at the balance sheet dates since
the interest rates fluctuate based on published market rates.

     At December  31, 1999,  the  estimated  fair value and the actual  carrying
value of the Homestead  convertible  mortgage notes payables were $218.0 million
and $221.3 million, respectively.

                                       50


<PAGE>


                         HOMESTEAD VILLAGE INCORPORATED

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)


NOTE 9--SAVINGS PLANS

     Homestead has a savings plan which  qualifies  under Section  401(k) of the
Internal  Revenue Code. The plan allows  eligible  employees to contribute up to
20% of their pretax  salary,  subject to the Internal  Revenue  Services  annual
deferral limit ($10,000 in 1999).  Beginning in 1997,  Homestead matched half of
the  first 6% of the  employee's  contribution.  The  matching  contribution  is
invested  in shares of  Homestead  common  stock  and vests  over an  employee's
initial five-year period of service. In 1999, 1998 and 1997 Homestead's matching
contribution totaled $355,000, $397,000, and $223,000, respectively.

     Homestead also has a Nonqualified  Savings Plan ("NSP") to provide benefits
for a select group of  management  or highly  compensated  employees,  which was
established  effective  January 1, 1998.  The purpose of the NSP is to allow the
employee the  opportunity to defer the receipt and income  taxation of a portion
of compensation in excess of the amount  permitted under the 401(k) Plan.  Under
the NSP, these  employees may defer up to 35% of their annual salary and 100% of
their annual target  bonus.  Under the NSP and in  coordination  with the 401(k)
Plan,  Homestead  will  match  half of the  first  6% of the  employee's  annual
compensation  since highly  compensated  employees were limited to a 4% and a 3%
contribution  in the 401(k) Plan in 1999 and 1998,  respectively.  The  matching
contribution  is invested in shares of  Homestead  common stock and vests in the
same manner as the 401(k) Plan.


NOTE 10--SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

     Selected quarterly financial data (in thousands,  except per share amounts)
for 1999 and 1998 is as follows:

<TABLE>
                                                                   THREE MONTHS ENDED               TOTAL
                                                  ----------------------------------------------  ----------
                                                   MARCH 31    JUNE 30 SEPTEMBER 30  DECEMBER 31
                                                  ---------- --------- ------------- -----------

     1999:
<S>                                               <C>        <C>       <C>          <C>           <C>
          Revenues............................... $  48,151  $  55,802 $     61,414 $     60,270  $   225,637
                                                  ---------- --------- ------------ ------------  -----------
          Earnings (loss) before extraordinary
             item and cumulative effect of
             accounting change................... $  (4,732) $ (68,008)$      6,100 $      3,432  $   (63,208)
          Extraordinary item..................... $      --  $      -- $         -- $      5,849  $     5,849
          Cumulative effect of accounting
            change............................... $ (14,230) $      -- $         -- $         --  $   (14,230)
                                                  ---------- --------- ------------ ------------  -----------
          Net earnings (loss).................... $ (18,962) $ (68,008)$      6,100 $      9,281  $   (71,589)
                                                  ========== ========= ============ ============  ============
          Basic earnings (loss) per share........ $   (0.49) $   (0.99)$       0.05 $       0.08  $     (0.82)
                                                  ========== ========= ============ ============  ============
          Diluted earnings (loss) per share...... $   (0.49) $   (0.99)$       0.05 $       0.08  $     (0.82)
                                                  ========== ========= ============ ============  ============

     1998:
          Revenues............................... $  27,165  $  33,199 $     38,991 $     41,964  $   141,319
                                                  ========== ========= ============ ============  ============
          Earnings (loss) before extraordinary
             item................................ $   1,688  $   3,375 $      1,854 $    (10,806) $    (3,889)
          Extraordinary item..................... $      --  $      -- $    (25,344)$        --   $   (25,344)
                                                  ---------- --------- ------------ ------------  -----------
          Net earnings (loss).................... $   1,688  $   3,375 $    (23,490)$    (10,806) $   (29,233)
                                                  ========== ========= ============ ============  ============
          Basic earnings (loss) per share........ $    0.05  $    0.09 $      (0.61)$      (0.28) $     (0.78)
                                                  ========== ========= ============ ============  ============
          Diluted earnings (loss) per share...... $    0.05  $    0.09 $      (0.61)$      (0.28) $     (0.78)
                                                  ========== ========= ============ ============  ============
</TABLE>
                                       51





<PAGE>


                         HOMESTEAD VILLAGE INCORPORATED

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)


NOTE 11--SEGMENT REPORTING

     During 1998, Homestead adopted SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related  Information" which established  standards for the way
that public business  enterprises report information about operating segments in
audited financial  statements,  as well as related disclosures about product and
services, geographic areas and major customers.

     Homestead defines each of its properties as individual  operating  segments
that have similar economic characteristics and, therefore,  have been aggregated
into  one  reportable  segment,  that  being  the  operation  of  extended  stay
properties  in its  target  markets  in the  United  States.  Homestead's  chief
operating  decision maker relies on the net property  operating income generated
from its properties for purposes of making decisions about allocating  resources
and assessing segment performance.

     Reportable  segment  information is as follows:  (i) revenues  derived from
external  customers,  (ii) a  reconciliation  of net property  operating  income
derived  from  external   customers  to  Homestead's   earnings   (loss)  before
extraordinary  item and  cumulative  effect of  accounting  change,  and (iii) a
reconciliation of assets to Homestead's total assets,  for the periods indicated
(in thousands):
<TABLE>

                                                                                 YEAR ENDED DECEMBER 31,
                                                                   -------------------------------------------------
                                                                          1999            1998           1997
                                                                      -----------      -----------     -----------

     <S>                                                              <C>              <C>             <C>
     Extended stay segment revenues................................   $   225,637      $   141,319     $   59,116
                                                                      ===========      ===========     ==========
     Extended stay segment net property operating income...........   $   127,628      $    84,088     $   35,162
     Reconciling items:
         Interest income...........................................           984              952            552
         Depreciation and amortization.............................      (42,247)          (34,244)       (12,130)
         Interest expense, net of capitalized interest.............      (51,264)          (23,190)        (2,190)
         Corporate operating expenses..............................      (33,013)          (24,255)       (15,623)
         Special charges...........................................      (65,296)           (7,240)           --
                                                                      -----------      ------------    -----------
     Earnings (loss) before extraordinary item and
       cumulative effect of accounting change......................   $  (63,208)      $    (3,889)    $    5,771
                                                                      ===========      ============    ==========


                                                                                                DECEMBER 31,
                                                                                    --------------------------------
                                                                                          1999           1998
                                                                                       ------------   -----------

     <S>                                                                               <C>            <C>
     Extended stay segment assets..................................................    $  1,045,837   $ 1,145,311
     Reconciling items:
         Cash and cash equivalents.................................................          20,586        11,942
         Deferred loan costs, net of accumulated amortization......................           1,588         1,063
         Trademark and intangibles, net of accumulated amortization................          41,796        44,279
         Deposits and pursuit costs................................................            --           7,830
         Other assets..............................................................          23,633         7,966
                                                                                       ------------   -----------
     Total assets..................................................................    $  1,133,440   $ 1,218,391
                                                                                       ============   ===========

</TABLE>
                                       52


<PAGE>


                         HOMESTEAD VILLAGE INCORPORATED

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)


NOTE 12--COMMITMENTS AND CONTINGENCIES

Legal Proceedings

     Homestead is not a party to any  litigation  or claims,  other than routine
matters  arising out of the ordinary  course of business that are  incidental to
the  development  process and operation of the business of Homestead.  Homestead
does not believe that the results of all claims and litigation,  individually or
in the aggregate, will have a material adverse effect on its business, financial
position or results of operation.

NOTE 13--SUBSEQUENT EVENTS (UNAUDITED)

     Subsequent  to year end 1999  Homestead has made  payments  totaling  $31.5
million  on the bank line of credit  reducing  its line of credit  debt to $93.9
million.  On February  29, 2000  Homestead  entered into an amended and restated
bank credit facility which allows for $110 million of total  borrowings of which
$35 million is available  on a revolving  basis.  The amended and restated  line
matures  February 28, 2003,  bears interest at LIBOR plus 2.5%, is secured by 64
operating  properties,  permits  payment of dividends based upon a definition of
free cash  flow,  and  requires  maintenance  of  financial  ratio and  coverage
covenants.

     In January 2000 Homestead  sold an excess parcel of land for  approximately
$425,000 net proceeds.  On February 28, 2000  Homestead  sold its sole remaining
urban site for net proceeds of approximately $8.9 million.


                                       53



<PAGE>



                                POWER OF ATTORNEY

     KNOW  ALL  MEN  BY  THESE   PRESENTS,   that  each  of  Homestead   Village
Incorporated, a Maryland corporation, and the undersigned Directors and officers
of Homestead  Village  Incorporated,  hereby  constitutes  and appoints James C.
Potts,  Laura L.  Hamilton,  and  Jeffrey  A.  Klopf its or his true and  lawful
attorney-in-fact  and  agents,  for it or him and in its or his name,  place and
stead, in any and all capacities,  with full power to act alone, to sign any and
all  amendments to this report,  and to file each such amendment to this report,
with all exhibits  thereto,  and any and all documents in connection  therewith,
with  the  Securities  and  Exchange  Commission,   hereby  granting  unto  said
attorneys-in-fact  and agents,  and each of them, full power and authority to do
and perform any and all acts and things  requisite  and  necessary to be done in
and about the  premises,  as fully to all intents and purposes as it or he might
or  could  do  in  person,   hereby  ratifying  and  confirming  all  that  said
attorneys-in-fact and agents, or any of them may lawfully do or cause to be done
by virtue hereof.
                                       54

<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                      HOMESTEAD VILLAGE INCORPORATED



                                      By:        /s/   C. RONALD BLANKENSHIP

                                                     C. Ronald Blankenship
                                                Director, Interim Chairman and
                                                    Chief Executive Officer

Date: March 8, 2000

     Pursuant to the  requirements  of the  Securities and Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.


           SIGNATURE                           TITLE                      DATE

 /S/ C. RONALD BLANKENSHIP     Director, Interim Chairman and      March 8, 2000
        -------------------
     C. Ronald Blankenship      Chief Executive Officer


    /S/ JAMES C. POTTS.        President, Director and Chief       March 8, 2000
        -------------------
        James C. Potts          Operating Officer


    /S/ A. RICHARD MOORE       Interim Chief Financial Officer     March 8, 2000
        -------------------
      A Richard Moore          (Principal Financial Officer)


    /S/ F. JOSEPH ROGERS       Vice President                      March 8, 2000
        -------------------
        F. Joseph Rogers       (Principal Accounting Officer)


  /S/ JOHN P. FRAZEE, JR.      Director                            March 8, 2000
      -------------------
      John P. Frazee, Jr.


    /S/ MANUEL A. GARCIA       Director                            March 8, 2000
        -------------------
         Manuel A. Garcia


  /S/ JOHN C. SCHWEITZER       Director                            March 8, 2000
     -----------------------
      John C. Schweitzer


      -------------------      Director
         Eugene B. Vesell



                                       55
<PAGE>


                                INDEX TO EXHIBITS

     Certain of the following documents are filed herewith. Certain other of the
following  documents have been previously filed with the Securities and Exchange
Commission and, pursuant to Rule 12b-32, are incorporated herein by reference.

          4.1  Restated Homestead Charter  (incorporated by reference to Exhibit
               3.1 to  Homestead's  Form S-4  Registration  Statement  (File No.
               333-4455, the "Homestead S-4"))

          4.2  Amended  and  Restated  Bylaws  of  Homestead   (incorporated  by
               reference to Exhibit 3.2 to the Homestead S-4)

          4.3  Rights Agreement, dated as of May 16, 1996, between Homestead and
               The First  National Bank of Boston,  as Rights  Agent,  including
               form of rights certificate  (incorporated by reference to Exhibit
               4.2 to the Homestead S-4)

          4.4  Amended and Restated  Promissory  Note by PTR  Homestead  Village
               Incorporated  in favor of Security  Capital Pacific Trust ("PTR")
               (incorporated  by  reference to Exhibit 4.3 to  Homestead's  Form
               10-Q for the quarter ended September 30, 1996)

          4.5  Amended and Restated  Promissory  Note by PTR  Homestead  Village
               Limited Partnership in favor or PTR (incorporated by reference to
               Exhibit  4.4 to  Homestead's  Form  10-Q  for the  quarter  ended
               September 30, 1996))

          4.6  Form of stock certificate for shares of common stock of Homestead
               (incorporated  by reference to Exhibit 4.8 to the Homestead  Form
               S-4)

          10.1 Protection of Business  Agreement,  dated as of October 17, 1996,
               by and among ATLANTIC,  PTR, Security Capital Group  Incorporated
               ("Security Capital") and Homestead  (incorporated by reference to
               Exhibit  10.1 to  Homestead's  Form  10-Q for the  quarter  ended
               September 30, 1996))

          10.2 Investor Agreement,  dated as of October 17, 1996, by and between
               Homestead  and  Security  Capital  (incorporated  by reference to
               Exhibit  10.2 to  Homestead's  Form  10-Q for the  quarter  ended
               September 30, 1996))

          10.3 Guaranty of Completion and Payment, dated as of October 17, 1996,
               from Homestead to PTR  (incorporated by reference to Exhibit 10.5
               to  Homestead's  Form 10-Q for the quarter  ended  September  30,
               1996))

          10.4 Guaranty of Completion and Payment, dated as of October 17, 1996,
               from Homestead to ATLANTIC  (incorporated by reference to Exhibit
               10.10 to  Homestead's  Form 10-Q for the quarter ended  September
               30, 1996))

          10.5 Investor and Registration  Rights Agreement,  dated as of October
               17, 1996, between Homestead and PTR (incorporated by reference to
               Exhibit  10.8 to  Homestead's  Form  10-Q for the  quarter  ended
               September 30, 1996))

          10.6 Escrow Agreement,  dated as of October 17, 1996, among Homestead,
               Security  Capital  and State  Street Bank and Trust  Company,  as
               escrow  agent  (incorporated  by  reference  to  Exhibit  10.9 to
               Homestead's Form 10-Q for the quarter ended September 30, 1996))

          10.7 Homestead  Village  Incorporated  1996  Long-Term  Incentive Plan
               (incorporated  by reference to Exhibit 4 to Homestead's  Form S-8
               Registration Statement (File No. 333-17243))

          10.8 Homestead  Village   Incorporated  1996  Outside  Directors  Plan
               (incorporated  by reference to Exhibit 4 to Homestead's  Form S-8
               Registration   Form  S-8   Registration   Statement   (File   No.
               333-17245))

          10.9 Form of Indemnification  Agreement entered into between Homestead
               and each of its directors  (incorporated by references to Exhibit
               10.10 to  Homestead's  Form 10-K for the year ended  December 31,
               1998 (File No.1-12269))

                                       56

<PAGE>


          10.10   $50,000,000   Credit   Agreement   among   Homestead   Village
                  Incorporated,  the Lenders named therein,  and Commerzbank AG,
                  New York Branch,  as Agent for the Lenders  dated as of May 6,
                  1997 (incorporated by reference to Exhibit 10.1 to Homestead's
                  Form 10-Q for the quarter ended March 31, 1997)

          10.11   First  Amendment to Credit  Agreement and other Loan Documents
                  among  Homestead  Village  Incorporated,   the  Lenders  named
                  therein, and Commerzbank AG, New York Branch, as Agent for the
                  Lenders dated as of August 25, 1997 (incorporated by reference
                  to Exhibit 10.1 to Homestead's Form 10-Q for the quarter ended
                  September 30, 1997)

          10.12   Second  Amendment to Credit Agreement and Other Loan Documents
                  Among  Homestead  Village  Incorporated,   the  Lenders  Named
                  Therein, and Commerzbank AG, New York Branch, as Agent for the
                  Lenders dated as of April 24, 1998  (incorporated by reference
                  to exhibit 10.1 to Homestead's Form 10-Q for the quarter ended
                  June 30, 1998)

          10.13   $50,000,000   Credit   Agreement   Among   Homestead   Village
                  Incorporated,  the Lenders Named Therein,  and Commerzbank AG,
                  New York Branch, as Agent to the Lenders dated as of April 24,
                  1998 (incorporated by reference to exhibit 10.2 to Homestead's
                  Form 10-Q for the quarter ended June 30, 1998)

          10.14   $200,000,000   Credit   Agreement  Among   Homestead   Village
                  Incorporated,  the Lenders Named Therein,  and Commerzbank AG,
                  New York Branch, as Agent for the Lenders dated as of June 15,
                  1998 (incorporated by reference to exhibit 10.3 to Homestead's
                  Form 10-Q for the quarter ended June 30, 1998)

          10.15   Subscription   Agreement   Between   Security   Capital  Group
                  Incorporated and Homestead Village Incorporated  (incorporated
                  by reference to exhibit 10.4 to Homestead's  Form 10-Q for the
                  quarter ended June 30, 1998)

          10.16   Agreement  of Merger by and among  Homestead  Village  Limited
                  Partnership,  and  certain  of  its  affiliates  and  HPT  HSD
                  Properties Trust dated as of February 4, 1999 (incorporated by
                  reference to Exhibit 2.1 to  Homestead's  Form 8-K dated March
                  9, 1999)

          10.17   Agreement to Lease by and between HPT HSD Properties Trust and
                  Homestead  Village  Incorporated  dated as of February 4, 1999
                  (incorporated by reference to Exhibit 99.1 to Homestead's Form
                  8-K dated March 9, 1999)

          10.18   Lease  Agreement by and between HPT HSD Properties  Trust,  as
                  Landlord,  and HVI (2)  Incorporated,  as Tenant,  dated as of
                  February 23, 1999  (incorporated  by reference to Exhibit 99.2
                  to Homestead's Form 8-K dated March 9, 1999)

          10.19   Guaranty  Agreement by Homestead Village  Incorporated for the
                  benefit of HPT HSD Properties Trust and Hospitality Properties
                  Trust dated as of February 23, 1999 (incorporated by reference
                  to Exhibit 99.3 to Homestead's Form 8-K dated March 9, 1999)
                                       57
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          10.20   $30,000,000  Amended and Restated Credit Agreement dated March
                  18, 1999 among Homestead Village  Incorporated and Commerzbank
                  AG, New York Branch, as agent for the Lenders (incorporated by
                  reference  to Exhibit  10.1 to  Homestead's  Form 10-Q for the
                  quarter ended March 31, 1999)

          10.21   $170,000,000 Amended and Restated Credit Agreement dated March
                  18, 1999 among Homestead Village Incorporated, Commerzbank AG,
                  New York Branch and Wells Fargo Bank, National Association, as
                  Administrative   Agent  for  the  Lenders   (incorporated   by
                  reference  to Exhibit  10.2 to  Homestead's  Form 10-Q for the
                  quarter ended March 31, 1999)

          10.22   $25,000,000   Promissory   Note  dated  May  3,  1999  between
                  Homestead  Village  Incorporated  and Security  Capital  Group
                  Incorporated  (incorporated  by  reference  to Exhibit 10.3 to
                  Homestead's Form 10-Q for the quarter ended March 31, 1999)

          10.23   Letter  Agreement,  dated  April 22,  1999,  among  Homestead,
                  Commerzbank  AG, New York Branch,  Commerzbank AG, Los Angeles
                  Branch, Wells Fargo Bank, National Association,  Chase Bank of
                  Texas, N.A. and BankBoston N.A.  (incorporated by reference to
                  Exhibit 10.4 to  Homestead's  Form 10-Q for the quarter  ended
                  March 31, 1999)

          10.24   Letter  Agreement,  dated  March 18,  1999,  among  Homestead,
                  Commerzbank  AG, New York Branch,  Commerzbank AG, Los Angeles
                  Branch, Wells Fargo Bank, National Association,  Chase Bank of
                  Texas, N.A. and BankBoston N.A.  (incorporated by reference to
                  Exhibit 10.5 to  Homestead's  Form 10-Q for the quarter  ended
                  March 31, 1999)

          10.25   Amendment  No.  1,  dated  as of  April  5,  1999 to  Investor
                  Agreement by and between  Homestead  Village  Incorporated and
                  Security  Capital  Incorporated  (Incorporated by reference to
                  Homestead's current report on Form 8-K dated April 5, 1999)

          10.26   Administrative   Services  Agreement  dated  January  1,  1999
                  between   Homestead    Village    Incorporated   and   SCGroup
                  Incorporated  (incorporated  by  reference  to Exhibit 10.1 to
                  Homestead's Form 10-Q for the quarter ended June 30, 1999)

          10.27   Separation  Agreement and General  Release  between  Robert C.
                  Aldworth and Homestead  (incorporated  by reference to Exhibit
                  10.2 to  Homestead's  Form 10-Q for the quarter ended June 30,
                  1999)

          10.28   Separation  Agreement and General  Release  between Michael D.
                  Cryan and Homestead (incorporated by reference to Exhibit 10.3
                  to Homestead's Form 10-Q for the quarter ended June 30, 1999)

          10.29   Separation  Agreement and General  Release  between  Robert J.
                  Morse and Homestead (incorporated by reference to Exhibit 10.4
                  to Homestead's Form 10-Q for the quarter ended June 30, 1999)

          10.30   Separation   Agreement  and  General  Release  between  David
                  C. Dressler, Jr. and Homestead Village Incorporated

          10.31   Consulting Agreement between David C. Dressler, Jr. and
                  Homestead Village Incorporated

          10.32   Change in Control  Agreement  between David C. Dressler,  Jr.
                  and Homestead  (incorporated by reference to Exhibit 10.5 to
                  Homestead's Form 10-Q for the quarter ended June 30, 1999)

          10.33   Change  in  Control  Agreement  between  Gary  A.  DeLapp  and
                  Homestead  (incorporated  by  reference  to  Exhibit  10.6  to
                  Homestead's Form 10-Q for the quarter ended June 30, 1999)
                                       58
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          10.34   Amendment  to  Secured   Promissory  Note   (incorporated   by
                  reference to Exhibit 10.1 to Homestead's Form 10-Q for quarter
                  ended September 30, 1999)

          10.35   Homestead  Village  Incorporated 1999 Long-Term Incentive Plan
                  (incorporated  by reference to Exhibit 5 to Homestead's Form
                  S-8 Registration Statement (File No. 333-92279))

          10.36   Tax Allocation  Agreement between  Homestead  Village
                  Incorporated and Security Capital Group Incorporated

          10.37   Administrative   Services   Agreement  dated  January  1, 2000
                  between   Homestead   Village   Incorporated   and   SCGroup
                  Incorporated

          10.38   $110,000,000   Second  Amended  and  Restated Credit Agreement
                  among  Homestead  Village  Incorporated,  the Lenders  Named
                  Therein, and Commerzbank AG, as Administrative Agent for the
                  Lenders Dated as of February 29, 2000

          12      Computation of Ratio of Earnings to Fixed Charges

          21      Subsidiaries of the Registrant

          23      Consent of Arthur Andersen LLP, Atlanta, Georgia

          24      Power of Attorney (included on page 54)

          27      Financial Data Schedule

                                       59