================================================================================
                          UNITED STATES SECURITIES AND
================================================================================
                               EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                               ------------------
                                    FORM 10-Q
                               ------------------
(Mark One)

        X      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                For the quarterly period ended September 30, 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)


              (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
                          IF CHANGED SINCE LAST REPORT)
                              ---------------------

     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
                                                         ----       ----

The number of shares outstanding of the Registrant's common stock as of November
10, 1999 was 120,031,477.
================================================================================


<PAGE>




                         HOMESTEAD VILLAGE INCORPORATED
                                TABLE OF CONTENTS
<TABLE>

                                                                                                             NUMBER
                                                                                                              PAGE
                                                                                                           -----------
<S>                                                                                                        <C>
PART I.          Condensed Financial Information

       Item 1.   Financial Statements

                 Condensed Balance Sheets (unaudited) - September 30, 1999 and December 31, 1998...........     3

                 Condensed Statements of Operations (unaudited) - Three and Nine-month Periods Ended            4
                 September 30, 1999 and 1998...............................................................

                 Condensed Statements of Cash Flows (unaudited) - Nine-month Periods Ended September 30,        5
                 1999 and 1998.............................................................................

                 Notes to Condensed Financial Statements (unaudited).......................................     6

                 Report of Independent Public Accountants..................................................     13

       Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations.....     14

       Item 3.   Quantitative and Qualitative Disclosures About Market Risk................................     20

PART II.         Other Information

       Item 6.   Exhibits and Reports on Form 8-K.........................................................      22


</TABLE>

<PAGE>


                         HOMESTEAD VILLAGE INCORPORATED

                            CONDENSED BALANCE SHEETS

                                   (UNAUDITED)

                     (IN THOUSANDS, EXCEPT PER SHARE AMOUNT)

<TABLE>
                                            ASSETS                                              SEPTEMBER 30,    DECEMBER
                                                                                                     1999        31, 1998
                                                                                                -------------- -------------
<S>                                                                                             <C>            <C>
Current assets:
     Cash and cash equivalents .............................................................    $      23,412  $    12,144
     Accounts receivable, net of allowance of $604 in 1999 and $269 in 1998.................            7,010        5,910
     Funds held in escrow...................................................................             --          1,701
     Other current assets...................................................................              929        1,132
                                                                                                -------------- -------------
          Total current assets..............................................................           31,351       20,887
                                                                                                -------------- -------------
Property and equipment......................................................................        1,176,841    1,186,652
Less accumulated depreciation...............................................................         (61,776)     (48,783)
                                                                                                -------------- -------------
Net investment in property and equipment....................................................        1,115,065    1,137,869
                                                                                                -------------- -------------
Deposits and pursuit costs, including $3,399 of funds with title companies for property
   acquisitions in 1998.....................................................................             --          7,830
Deferred loan costs, net of accumulated amortization of $36,529 in 1999 and $34,002 in
     1998                                                                                               2,278        1,063
Trademark and intangibles, net of accumulated amortization of $6,052 in 1999 and $4,190
   in 1998                                                                                             42,416       44,279
Other assets ...............................................................................           23,031        6,463
                                                                                                -------------- -------------
   Total assets.............................................................................    $   1,214,141  $ 1,218,391
                                                                                                ============== =============

                             LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Lines of credit........................................................................    $        --    $   357,080
     Capital lease obligation, current......................................................            3,744         --
     Mortgage note payable..................................................................             --        122,028
     Development costs payable, of which retainage is $4,315 in 1999 and $16,558 in
        1998                                                                                            4,315       24,330
     Due to affiliate.......................................................................              588          335
     Accrued interest payable to affiliate..................................................            6,972        1,882
     Accrued real estate taxes..............................................................            9,539        5,681
     Accrued payroll and related accrued expenses...........................................            7,293        7,969
     Accrued special charge expenses........................................................            8,687        1,528
     Accounts payable and other accrued expenses............................................           13,769       10,135
                                                                                                -------------- -------------
          Total current liabilities.........................................................           54,907      530,968
Lines of credit.............................................................................          193,050         --
Capital lease obligation, noncurrent........................................................          138,012         --
Convertible mortgage notes payable to affiliate.............................................          221,334      221,334
Other long-term liabilities.................................................................            7,903        8,064
                                                                                                -------------- -------------
          Total liabilities.................................................................          615,206      760,366
                                                                                                -------------- -------------
Commitments and contingencies (Note 8)
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.............................................................          694,822      474,337
     Accumulated deficit....................................................................         (97,004)     (16,135)
     Less deferred compensation.............................................................             (83)        (560)
                                                                                                -------------- -------------
          Total shareholders' equity........................................................          598,935      458,025
                                                                                                -------------- -------------
          Total liabilities and shareholders' equity........................................    $   1,214,141  $ 1,218,391
                                                                                                ============== =============
</TABLE>
                   The accompanying notes are an integral part
                    of these condensed financial statements.
                                       3

<PAGE>


                         HOMESTEAD VILLAGE INCORPORATED

                       CONDENSED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)

                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
                                                                                          THREE MONTHS ENDED      NINE MONTHS ENDED
                                                                                            SEPTEMBER 30,           SEPTEMBER 30,
                                                                                     -----------------------------------------------
                                                                                         1999         1998       1999        1998
                                                                                     -----------  ----------  ----------  ----------
<S>                                                                                  <C>           <C>        <C>         <C>
     Room revenue............................................................        $    60,440  $   38,345  $  163,712  $  97,781
     Other revenue...........................................................                968         638       1,644      1,566
                                                                                     -----------  ----------  ----------  ----------
          Total revenues.....................................................             61,408      38,983     165,356     99,347
                                                                                      -----------  ----------  ----------  ---------

Operating expenses:
     Property operating expenses.............................................             24,267      15,326      71,758     39,667
     Corporate operating expenses............................................              7,580       6,959      26,247     17,446
     Special charge (Note 3).................................................               --          --        65,296       --
     Depreciation and amortization...........................................             10,805       8,368      31,120     22,227
                                                                                     -----------  ----------  ----------  ----------
          Total operating expenses...........................................             42,652      30,653     194,421     79,340
                                                                                      -----------  ----------  ----------  ---------

Operating (loss) income......................................................             18,756       8,330    (29,065)     20,007

Interest income..............................................................                247         203         603        707
Interest expense, net of capitalized interest................................            (12,903)     (6,679)    (38,178)   (13,798)
                                                                                     -----------  ----------  ----------  ----------

(Loss) earnings before income taxes, extraordinary item and cumulative effect of
accounting change............................................................              6,100       1,854    (66,640)      6,916
Provision for income taxes...................................................               --          --          --         --
                                                                                     -----------  ----------  ----------  ----------
(Loss) earnings before extraordinary item and cumulative effect of accounting change       6,100       1,854    (66,640)      6,916
Extraordinary item - loss on early extinguishment of debt....................               --      (25,344)         --    (25,344)
                                                                                     -----------  ----------  ----------  ----------
(Loss) earnings before cumulative effect of accounting change................              6,100    (23,490)    (66,640)   (18,428)
Cumulative effect of accounting change for organizational, pre-opening and
   start-up activities.......................................................               --          --      (14,230)       --
                                                                                     -----------  ----------  ----------  ----------
Net (loss) earnings..........................................................        $     6,100  $ (23,490)  $ (80,870)  $(18,428)
                                                                                     ===========  ==========  ==========  ==========


(Loss) earnings  per share:
Basic earnings (loss) before extraordinary item and cumulative effect of accounting
change.......................................................................        $      0.05  $    0.05   $   (0.87)  $   0.19
Extraordinary item - loss on early extinguishment of debt....................               --        (0.66)        --       (0.68)
Cumulative effect of accounting change.......................................               --          --        (0.19)       --
                                                                                     -----------  ----------  ----------  ----------
Basic (loss) earnings........................................................        $      0.05  $   (0.61)  $   (1.06)  $(  0.49)
                                                                                     ===========  ==========  ==========  ==========

Diluted (loss) earnings before extraordinary item and cumulative effect of
accounting change............................................................        $      0.05  $     0.05  $   (0.87)  $    0.19
Extraordinary item - loss on early extinguishment of debt....................               --        (0.66)        --       (0.68)
Cumulative effect of accounting change.......................................               --          --        (0.19)       --
                                                                                     -----------  ----------  ----------  ----------
Diluted (loss) earnings......................................................        $      0.05  $   (0.61)  $   (1.06)  $(  0.49)
                                                                                     ===========  ==========  ==========  ==========



</TABLE>





                   The accompanying notes are an integral part
                    of these condensed financial statements.
                                       4

<PAGE>


                         HOMESTEAD VILLAGE INCORPORATED

                       CONDENSED STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)

                                 (IN THOUSANDS)
<TABLE>
                                                                                                NINE MONTHS
                                                                                            ENDED SEPTEMBER 30,
                                                                                       -------------------------------
                                                                                           1999             1998
                                                                                       ------------      -----------
<S>                                                                                    <C>               <C>
Operating activities:
    Net (loss) earnings...........................................................     $   (80,870)     $   (18,428)
    Adjustments to reconcile net (loss) earnings to net cash provided by operating
activities:
        Special charge write-offs and asset write-downs...........................           51,587              --
        Extraordinary item - loss on early extinguishment of debt.................             --             25,344
        Cumulative effect of accounting change....................................           14,230              --
        Depreciation and amortization.............................................           31,120           22,227
        Deferred compensation.....................................................             (62)              510
        Amortization of deferred loan costs.......................................            2,527            2,665
    Change in assets and liabilities:
        Increase in accounts receivable, net of change in allowance...............          (1,100)           (3,294)
        Decrease in funds held in escrow..........................................            1,701               --
        Decrease (increase)  in other current assets..............................              203           (4,421)
        Increase in accrued real estate taxes.....................................            3,858             3,246
        Increase in accrued interest on convertible mortgage notes................            5,090             4,432
        (Decrease) increase in accrued payroll and related accrued expenses.......             (676)            2,484
                Increase in accrued special charge expenses.......................            7,159               --
        Increase in accounts payable and other accrued expenses...................            3,634             5,139
        Increase in due to affiliate..............................................              253               206
                                                                                       --------------   --------------
            Net cash provided by operating activities.............................           38,654            40,110
                                                                                       --------------   --------------

Investing activities:
        Investment in properties..................................................         (88,715)         (393,185)
        Proceeds from sale of land................................................            6,346               --
        Decrease in deposits and pursuit costs....................................              695             1,670
        Increase in other assets..................................................          (1,527)           (1,207)
                                                                                       --------------   --------------
            Net cash used in investing activities.................................         (83,201)         (392,722)
                                                                                       --------------   --------------

Financing activities:
        Proceeds from lines of credit.............................................          41,920           325,772
        Payments on lines of credit...............................................        (205,950)         (130,000)
        Deferred loan costs for line of credit....................................          (3,742)           (3,281)
        Payments on mortgage notes payable........................................        (122,028)              --
        Sale of property and equipment, net.......................................         127,261               --
        Proceeds from sale of shares, net of expenses.............................         221,644           154,241
        Payments on capital lease obligation......................................          (3,244)              --
        Proceeds from convertible mortgage notes payable..........................             --             17,013
        Payment of convertible mortgage note payable..............................             --            (98,028)
        Proceeds from mortgage note payable.......................................             --            122,028
        Payment to extinguish debt................................................             --            (25,344)
        Payments on other long-term liabilities...................................              (9)               (3)
        Repurchase of stock.......................................................            (107)              --
        Proceeds from principal payments on notes from officers..................               70               --

                                                                                       --------------   --------------
            Net cash provided by financing activities.............................           55,815          362,398
                                                                                       --------------   --------------

Net increase in cash and cash equivalents.........................................           11,268             9,786
Cash and cash equivalents, beginning of period....................................           12,144             2,974
                                                                                       --------------   --------------
Cash and cash equivalents, end of period..........................................     $     23,412     $      12,760
                                                                                       ==============   ==============

Non-cash investing and financing transactions:

        Increase in property and equipment, and development cost payable..........     $          --    $       5,231
                                                                                       ==============   ==============

        Increase in property and equipment, from capital lease....................     $    145,000     $          --
                                                                                       ==============   ==============

        Increase in property and equipment from capitalization of loan costs......     $          --    $       1,249
                                                                                       ==============   ==============


        Increase in trademark and intangibles arising from release of  shares
         in escrow................................................................     $          --    $       2,253
                                                                                       ==============   ==============
        Loan costs resulting from issuance of convertible mortgage debt...........     $          --    $       1,251
                                                                                       ==============   ==============

</TABLE>

              The accompanying notes are an integral part of these
                        condensed financial statements.
                                       5

<PAGE>





                         HOMESTEAD VILLAGE INCORPORATED
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1999
                                   (UNAUDITED)

NOTE 1--GENERAL

   Principles of Financial Presentation

     The financial statements of Homestead Village Incorporated ("Homestead") as
of September 30, 1999 and for the three and nine month  periods ended  September
30, 1999 and 1998 are unaudited, and pursuant to the rules of the Securities and
Exchange  Commission,  certain  information  and footnote  disclosures  normally
included  in  financial  statements  have  been  omitted.  While  management  of
Homestead  believes that the disclosures  presented are adequate,  these interim
financial statements should be read in conjunction with the financial statements
and notes included in Homestead's 1998 Annual Report on Form 10-K.

     In  the  opinion  of  management,   the  accompanying  unaudited  financial
statements  contain  all  adjustments,   consisting  only  of  normal  recurring
adjustments,   necessary  for  a  fair  presentation  of  Homestead's  financial
statements for the interim periods presented.  The results of operations for the
three  and  nine-month  periods  ended  September  30,  1999  and  1998  are not
necessarily indicative of the results to be expected for the entire year.

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

   Reclassifications

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

   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 is 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 has adopted SOP 98-5  beginning with its 1999 fiscal year and
wrote off unamortized organizational, pre-opening and start-up activity costs of
$14.2 million as a cumulative  effect of adoption of an  accounting  standard in
the first  quarter  1999.  No financial  statement  amounts were  restated  upon
adoption of the new  standard.  Pre-opening  and start-up  activity  costs which
would have been  expensed in the nine month period ended  September  30, 1998 if
SOP 98-5  were  applied  on a pro forma  basis  total  $8,625,000.  Amortization
expense for organizational,  pre-opening and start-up costs recorded in the nine
month period ended September 30, 1998 was approximately $3,855,000.

     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 for Homestead on January 1,
2001,  are not  expected  to have a  material  impact on  Homestead's  financial
position or results of operations.
                                       6

<PAGE>


NOTE 2--PROPERTY AND EQUIPMENT

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

<TABLE>
                                                                           SEPTEMBER 30,        DECEMBER 31,
                                                                                1999                1998
                                                                          -------------        -------------
                                                                            (UNAUDITED)

<S>                                                                       <C>                  <C>
            Operating properties:
               Owned properties:
                    Land                                                  $       197,179     $        191,694
                    Buildings and improvements...........................         652,355              645,235
                    Furniture, fixtures and equipment....................          92,523              108,446
               Properties under a capital lease..........................         145,000                  --
                                                                          ----------------    -----------------
                                                                                1,087,057              945,375
            Properties under construction................................            --                110,891
            Properties in planning (land owned for development)..........            --                126,054
            Land held for sale...........................................          89,784                4,332
                                                                          ----------------    -----------------
                      Total.............................................. $     1,176,841     $      1,186,652
                                                                          ================    =================
</TABLE>


     Land held for sale consists of 23 parcels at September 30, 1999. One parcel
held for sale had been sold in third  quarter  1999 and five  parcels  were sold
subsequent  to the  end of the  quarter.  The six  land  sales  resulted  in net
proceeds  of  $50.5  million  of which  $32.8  million  has  been  used to repay
outstanding balances on the lines of credit (see "Note 4 - Debt").

NOTE 3 - SPECIAL CHARGE

     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 further curtail 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.  All
land  previously  held for  development is presently held for sale, all pursuits
for  acquisition of additional  sites for development  have been abandoned,  and
Homestead  has reduced  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.  Revisions to these estimates may be required based upon
the ultimate sale of the properties.

     The $8.7 million of accrued  special charge  expenses at September 30, 1999
consist  primarily of $4.8 million of unpaid  severance  costs,  $0.8 million of
unpaid  pursuit and  development  costs,  and $3.1 million for ongoing  costs of
closed offices and discontinuing new initiatives. No changes in estimates of the
special charge liability have been made.

     Carrying costs on the land sites, such as interest and property taxes, will
be expensed until the sites are disposed of and will materially adversely affect
earnings  until  disposal.  The  majority  of the 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.  Upon sale of  encumbered  sites the proceeds will be used to repay
the  Working  Capital  Facilities.  Of the 24 land  sites, one was sold in third
quarter and five sold subsequent to the end of third quarter.

     Payment of the final  costs  accrued  for the  special  charge  recorded in
fourth quarter 1998 were made in second quarter 1999 and no additional liability
remains.


NOTE 4--DEBT

   Credit Facilities

      On March 18, 1999  Homestead  entered  into  amended and  restated  credit
agreements  to, among other things,  extend the $150 million  revolving  line of
credit  facility  secured by suburban  properties  and the $50  million  line of
credit  facility  secured by urban  properties  (together  the "Working  Capital
Facilities")  to December 31, 2000,  or in the case of the line secured by urban
sites,  to the dates of repayment of amounts  borrowed  under the line. The $150
million line was increased to $170 million total borrowing capacity,  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.   Future  additional
collateral  under the $170 million line is limited to suburban  properties  that
are  stabilized.  The $50 million  facility  was  adjusted to $30 million  total
borrowing  capacity,  subject to collateral,  and the interest terms adjusted to
3.0% over LIBOR or alternatively  2.0% over prime or 2.5% over the federal funds
rate.

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

-limiting  total  liabilities  of no more  than 55% of  gross  asset  value,  as
     defined;
-limiting  total  indebtedness  of no more  than 50% of gross  asset  value,  as
     defined;
-maintaining  a ratio of  earnings  before  interest,  taxes,  depreciation  and
     amortization,  as defined, to interest expense ranging from 1.25 to 1.0 for
     first quarter 1999 up to 1.90 to 1.0 by fourth quarter 2000;
-maintaining  a ratio of  earnings  before  interest,  taxes,  depreciation  and
     amortization,  as defined,  to debt service and preferred  stock  dividends
     ranging  from 1.0 to 1.0 for  first  quarter  1999 to 1.25 to 1.0 by fourth
     quarter 2000;
-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;
-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 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 September 30, 1999,  Homestead has an  outstanding  balance of $193.1
million under the Working Capital  Facilities,  the full amount  available under
collateral  requirements,   consisting  of  $170  million  secured  by  suburban
properties  and suburban land held for sale and $23.1  million  secured by urban
land held for sale.  Subsequent to quarter end, the Working  Capital  Facilities
balance  secured by suburban  properties  and land was reduced to $166.2 million
and the  facility  secured by urban land was paid in full with the net  proceeds
from sales of land.

     Subsequent to the end of third quarter,  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 an interest  rate of 9.25% from November 15, 1999 through
February 15, 2000.
Presently, the actual interest rate on the $70,000,000 is 8.4375%.

     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 Group  Incorporated  ("Security
Capital")  under its  subscription  agreement  for $200 million of  subordinated
debentures of Homestead expired upon repayment of the facility.
                                       8
<PAGE>

     Homestead was in compliance with all covenants under its credit  facilities
as of September 30, 1999.

   Convertible Mortgage Notes Payable

     At  September  30,  1999  Homestead  owed  convertible  mortgage  notes  to
Archstone Communities Trust ("Archstone"), an affiliate, in the principal amount
of  $221,333,620.  The notes are  collateralized  by  mortgages  on 54 Homestead
properties with a historical  cost of $358.8 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.

   Capital Lease Obligation

     On February 23, 1999, Homestead completed a sale and leaseback 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  will continue to operate the  properties  under a long-term
lease through December 2015 and pay a minimum rent of approximately  $16 million
per year.  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.  The balance of the  obligation at September
30, 1999 was $141,756,000.

     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 a percentage of
revenues be paid to a furniture,  fixtures and equipment  reserve to be used for
capital expenditures.

   Interest

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

<TABLE>
                                                                THREE MONTH PERIOD ENDED      NINE MONTH PERIOD ENDED
                                                                     SEPTEMBER 30,                 SEPTEMBER 30,
                                                               ---------------------------  -----------------------------
                                                                   1999          1998            1999          1998
                                                               ------------  -----------    -------------- --------------
    <S>                                                        <C>           <C>            <C>            <C>
    Lines of credit facilities.................................$      4,594  $     5,742    $       19,276 $    10,174
    Convertible mortgage notes.................................       5,091        5,213            15,106      21,202
    Mortgage note payable......................................        --          2,021             1,282       2,021
    Capital lease obligation...................................       3,477         --               8,383        --
    Other......................................................         193          355               574         749
                                                               ------------  -----------    -------------- --------------

        Total interest cost....................................      13,355       13,331            44,621      34,146
    Capitalized interest.......................................       (451)      (6,652)           (6,443)    (20,348)
                                                               ------------  -----------    -------------- --------------
        Net interest expense...................................      12,904  $     6,679    $       38,178 $    13,798
                                                               ============  ===========    ============== ==============

    Amortization of deferred financing costs included in
interest cost..................................................$        449  $       954    $        2,527 $     2,665
                                                               ============  ===========    ============== ==============

</TABLE>

     The total interest paid in cash for the nine month periods ended  September
30, 1999 and 1998 was $36,976,000 and $24,100,000, respectively.


                                       9

<PAGE>


NOTE 5--SHAREHOLDERS' EQUITY

   Common Stock Rights Offering

     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).  The securities  issued in the rights offering had been registered under
Homestead's existing $356,402,600 shelf registration. 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 $221.6 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 process costs; and to provide
working capital for general corporate purposes.  Security Capital's  obligations
under a subscription  agreement which secured the Bridge Facility was terminated
as a result of Security  Capital's  participation in the rights offering and the
repayment of the Facility.

   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 per share is  equivalent  to basic  earnings 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  using the treasury  stock
method and the dilutive effect of convertible debt. For the three and nine month
periods ended September 30, 1999 and 1998  convertible debt is not assumed to be
converted   and   exercise  of  options  is  not  assumed  as  the  effects  are
anti-dilutive  in the nine month period of loss in 1999 and the effects were not
dilutive in the three month period in 1999 and the three and nine month  periods
in 1998.

     A reconciliation of the numerators and denominators used to calculate basic
and  diluted  earnings  (loss) per share for the periods  indicated  follows (in
thousands, except per share amounts):

<TABLE>
                                                                THREE MONTHS ENDED         NINE MONTHS ENDED
                                                                  SEPTEMBER 30,              SEPTEMBER 30,
                                                             ------------------------  -------------------------
                                                                 1999        1998          1999         1998
                                                                 ----        ----          ----         ----
<S>                                                          <C>          <C>           <C>          <C>
      Net (loss) earnings attributable to common shares
      before extraordinary item and cumulative effect
      of accounting change.............................      $    6,100   $   1,854    $ (66,640)   $    6,916
                                                             ============ ===========  ============ ============

      Weighted average shares outstanding - basic........        120,031      38,263        75,995       37,430
                                                             ============ ===========  ============ ============

     Net (loss)  earnings per share  before  extraordinary
     item and  cumulative effect of accounting change:
     Basic..............................................      $    0.05    $    0.05    $   (0.87)   $     0.19
                                                             ============ ===========  ============ ============
     Diluted............................................      $    0.05    $    0.05    $   (0.87)   $     0.19
                                                             ============ ===========  ============ ============
</TABLE>



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.
                                       10
<PAGE>

     Homestead  presents in its financial  statements its provision for taxes as
though Homestead filed a separate  return.  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 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 uncertainty of realization of those deferred tax assets in future years.


NOTE 7--ADMINISTRATIVE SERVICES AGREEMENT

     Homestead and Security Capital have an  administrative  services  agreement
(the "Administrative Services Agreement"), under 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 and legal
administration,   facilities  management,   and  payroll   administration.   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, 1999, is
renewable  for a  one-year  term,  subject  to  approval  by a  majority  of the
independent members of the Homestead Board. Total  administrative  services fees
for the nine month periods ended September 30, 1999 and 1998 were $4,092,000 and
$3,084,000, respectively.

     Homestead  believes  its  relationship  with  Security  Capital  under this
agreement  provides  it with  certain  advantages,  including  access to greater
quality and depth of resources, in such areas as information systems, insurance,
cash management and legal support provided at substantial economies of scale.


NOTE 8--COMMITMENTS AND CONTINGENCIES

   Legal Proceedings

     In second  quarter  1999  Homestead  recorded  an  expense  and  accrual of
approximately $1.2 million for construction related claims which were settled in
third  quarter 1999 for  approximately  $756,000,  including  legal  costs.  The
expense difference of approximately  $435,000 was reversed in third quarter 1999
as a reduction to corporate operating expenses.

     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.

   Unfunded Development Commitments

     At September 30, 1999, Homestead had approximately $4.3 million of unfunded
commitments resulting from retainage payable on recently completed developments.
Homestead  anticipates that the retainage will be paid by utilizing cash on hand
and cash flow from operations.

   Finder's Agreement

     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 payments to Finder
as follows:  (i) $535,000 annually with respect to the four properties for which
Finder  assisted in the location,  development and initial  operations;  (ii) an
annual amount of $7,500 per property  (subject to certain  conditions as defined
in the  agreements) for assistance in site location with respect to the first 35
properties  constructed  (exclusive  of the four  properties  referred to in (i)
                                       11

<PAGE>

above and reduced by the 2 properties sold in February 1999 as described below);
(iii) 20% of the net  proceeds as defined per the  agreements,  upon the sale of
the four properties noted in (i) above to an unaffiliated  third party; and (iv)
10% of the net  proceeds  as defined  per the  agreements,  upon the sale of the
additional 35 properties to an unaffiliated  third party. The sale and leaseback
of  properties  described in Note 4 included 2  properties  subject to the terms
described in (iv) above,  resulting in a payment of approximately $68,000 to the
Finder. Total payments under these agreements for amounts due under (i) and (ii)
described  above for the nine month  periods  ended  September 30, 1999 and 1998
were $551,000 and $553,000, respectively.

     On  October  25,  1999,  Homestead  paid the  Finder  $2.3  million in full
settlement of all amounts due under the agreements,  including  amounts owed for
third  quarter 1999, and the  agreements  and  Homestead's obligation to pay any
future amounts to Finder were terminated.


                                       12
<PAGE>






                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Homestead Village Incorporated:


     We have reviewed the accompanying  condensed  consolidated balance sheet of
Homestead Village  Incorporated (a Maryland  corporation) and subsidiaries as of
September  30,  1999  and  the  related  condensed  consolidated  statements  of
operations  for the three and  nine-month  periods ended  September 30, 1999 and
1998 and the related condensed consolidated statement of cash flows for the nine
month period ended September 30, 1999 and 1998.  These financial  statements are
the responsibility of the Company's management.

     We conducted our review in accordance  with  standards  established  by the
American  Institute  of  Certified  Public  Accountants.  A  review  of  interim
financial  information consists principally of applying analytical procedures to
financial  data and making  inquiries of persons  responsible  for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the  expression  of an opinion  regarding the  financial  statements  taken as a
whole. Accordingly, we do not express such an opinion.

     Based on our review,  we are not aware of any material  modifications  that
should be made to the financial  statements  referred to above for them to be in
conformity with generally accepted accounting principles.

     We have previously  audited, in accordance with generally accepted auditing
standards,  the consolidated balance sheet of Homestead Village Incorporated and
subsidiaries as of December 31, 1998 (not presented herein),  and, in our report
dated February 4, 1999, we expressed an unqualified  opinion on that  statement.
In  our  opinion,  the  information  set  forth  in the  accompanying  condensed
consolidated  balance  sheet as of December 31, 1998, is fairly  stated,  in all
material respects,  in relation to the consolidated  balance sheet from which it
has been derived.


                               ARTHUR ANDERSEN LLP

Atlanta, Georgia
October 28, 1999

                                       13

<PAGE>




ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
 OF OPERATIONS

     The following  discussion  should be read in conjunction  with  Homestead's
1998 Annual  Report on Form 10-K (the "1998 Form 10-K") as well as the financial
statements  and the notes  thereto  in Item 1 of this  report.  In  addition  to
historical  information,  this discussion  contains  forward-looking  statements
under the  federal  securities  laws.  These  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 "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Risk Factors" in Item 7 of the 1998 Form 10-K, (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 continues in
1999 has 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 $7.24
million of special charges.  Such charges  primarily related to the severance of
certain development personnel and abandonment of certain 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 further curtail 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.  All land previously held for development is presently held for sale, all
pursuits  for  acquisition  of  additional   sites  for  development  have  been
abandoned,  and Homestead has reduced  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 for  write-downs of land
to be held for sale, write-offs of costs of pursuits, and the costs of severance
of personnel.

     The majority of the special charge relates to the  write-downs on land held
for sale approximating $43.5 million. Substantial effort and costs were incurred
in the  planning  stage for  design,  engineering,  and  architectural  work and
capitalization  of carrying  costs,  all of which the company expects to be lost
upon sale of the sites.

     Carrying costs on the land sites, such as interest and property taxes, will
be expensed until the sites are disposed of and will materially adversely affect
earnings  until  disposal.  The majority of the land sites are encumbered by the
Working  Capital  Facilities  and upon sale will  require use of the proceeds to
repay the Working Capital Facilities.

     Write-offs  of pursuit  costs and  non-refundable  earnest  money  deposits
approximate  $7.1 million,  severance costs  approximate  $9.2 million and other
costs such as closings of offices, overhead reductions and discontinuance of new
investment initiatives approximate $5.5 million.

     As of September 30, 1999, Homestead had 136 Homestead Village properties in
operation  representing  in the aggregate  18,176 rooms in 28 states.  Homestead
completed its last property under construction on August 30, 1999.
                                       14
<PAGE>

     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, (iii) the  effectiveness of
property level operations, and (iv) the timing and amounts of proceeds Homestead
can generate from sales of land to repay indebtedness. Capital and credit market
conditions which affect Homestead's access to credit markets and cost of capital
will influence future operating results.

     As of September 30, 1999,  Homestead had  approximately  $564.1  million of
indebtedness outstanding, consisting of $193.1 million due on its long-term bank
lines of credit,  $221.3  million due on a  convertible  mortgage  note,  $141.8
million  due under a  capital  lease  agreement  and $7.9  million  due on other
long-term  obligations.  During  the  nine  months  ended  September  30,  1999,
Homestead  reduced its short-term  debt from $479.1 million at December 31, 1998
to $3.7 at September 30, 1999. Homestead refinanced,  extended,  and repaid  its
short-term debt as follows:

-On February 23, 1999,  Homestead  completed a sale and lease-back of 18 of the
     26  Homestead  properties  collaterizing  a  $122  million  mortgage  note.
     Hospitality  Properties  Trust  purchased the  properties for $145 million.
     Proceeds of the sale were used to repay the $122 million debt which was due
     June  1999.  Additionally,  as a result  of  payment  of the  $122  million
     mortgage  note,  eight  properties  which were used as  collateral  for the
     mortgage  note were  subsequently  pledged as  collateral  for its  Working
     Capital   Facilities  to  draw  approximately  $21  million  in  additional
     borrowings under the line.

-On  March 18, 1999,  Homestead  renewed its Working Capital  Facilities with an
     extension of the maturity date to December 31, 2000.

-On  May 28,  1999,  Homestead  completed a $225  million  common  stock  rights
     offering of which $200 million was used to pay off the Bridge Facility.

     With the  accomplishment  of these  reductions of  short-term  debt and the
decision  to cease  additional  development  efforts,  Homestead  is focusing on
generation of cash from sales of land to be used to retire debt and on operation
of a company with stabilized operations of 136 properties.

RESULTS OF OPERATIONS

   Nine Months Ended September 30, 1999 and 1998

     Net loss for the nine months ended  September  30, 1999 and 1998 were $80.9
million and $18.4 million,  respectively. The net loss for the nine month period
ended  September  30, 1999  includes a (i)  cumulative  effect of an  accounting
change of $14.2  million  relating  to  Homestead's  adoption  of  Statement  of
Position 98-5 "Reporting on the Costs of Start-Up Activities" beginning with its
1999  fiscal  year and (ii)  incurrence  of a special  charge of $65.3  million,
primarily  relating to the  write-downs  on land held for sale. The net loss for
the nine month period ended September 30, 1998 includes an extraordinary item of
$25.3 million relating to Homestead's loss on early extinguishment of debt.

     Net loss before the  cumulative  effect of an accounting  change  increased
$73.6  million in 1999 from the $6.9 million net earnings  before  extraordinary
item for the nine months ended  September 30, 1998.  The change is primarily due
to the special charge expense of $65.3 million in 1999. The remaining  change of
$8.3 million is due  primarily to an increase of property  operating  income and
other  revenues of $33.9  million  offset by increases in corporate  expenses of
$8.8  million,  an increase in  depreciation  of $8.9 million and an increase in
interest  expense of $24.4  million.  These  components of operating  income are
further discussed in the following.

   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.
                                       15
<PAGE>

     Whether   considering  the  entire  operating  property  portfolio  or  its
categories,  Homestead's  nine months ended  September  30, 1999  property-level
revenue  performance  compared  to the same period of 1998 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  Southwest),  (ii) the  effect on
occupancy  due to rate  increases at  Homestead  versus  competitor  rate levels
(experienced in the portfolio generally),  and (iii) the first quarter effect of
the  seasonal  downturn as  Homestead  has  increased  its number of  properties
located in the northeast and midwest as compared to prior years.

     The following table sets forth certain  information  for Homestead's  total
operating property portfolio for the periods indicated:

<TABLE>
                                                              THREE MONTHS ENDED                   NINE MONTHS ENDED
                                                                SEPTEMBER 30,                        SEPTEMBER 30,
                                                     -------------------------------------   -------------------------------------
                                                         1999         1998      CHANGE       1999        1998      CHANGE
                                                         ----         ----      ------       ----        ----      ------
<S>                                                      <C>          <C>       <C>          <C>         <C>        <C>
Weekly RevPAR(1).....................................    $261         $222       17.2%       $244        $215       13.9%
Average Weekly Rate(2)...............................    $347         $301       15.2%       $350        $296       18.2%
Occupancy.........                                       75.2%        73.9%       1.3        69.8%       72.5%      (2.7)
Number of Operating Properties at Period End.........     136          111       22.5%        136         111       22.5%
Property Operating Income Margin.....................    60.1%        60.2%      (0.1)       56.4%       59.6%      (3.2)
----------

<FN>

(1)  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.

(2)  Average weekly rate is determined by dividing room revenue by the number of
     guest room days occupied for the period and multiplying by seven.
</FN>
</TABLE>

     Homestead's  25 new  openings  from the end of the  third  quarter  of 1998
through the end of the third quarter of 1999 were the predominant reason for the
room  revenue  increase  of $65.9  million  (67.4%)  for the nine  months  ended
September  30,  1999 as  compared  to the same  period in 1998.  Total  property
operating  expenses  increased  $32.1 million  (80.9%) for the nine months ended
September  30, 1999 over 1998.  The increase is due primarily to the increase in
the  number  of  operating  properties  as noted  above and  secondarily  due to
increased  expenses for additional  services such as longer  operating hours and
travel agent commissions.

     Beginning  in the  latter  part  of  second  quarter  1999,  management  of
Homestead reduced room rates in selected markets to improve occupancy. Occupancy
for the total  portfolio  for  third  quarter  1999 was  75.2%,  which  compares
favorably to both third quarter 1998 total  portfolio  occupancy of 73.9% and to
second quarter  occupancy of 70.9%  Management is also reviewing  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.

   Same-Store Properties

     Homestead had 79 properties which were stabilized and operating  throughout
both  nine  month  periods  ended  September  30,  1999 and  1998  ("same-store"
properties).  Thirty-seven  such  properties are located in the Southeast and in
Texas markets.  RevPAR for the nine months ended September 30, 1999 for these 79
same store  properties  was $232 versus  $222 for the same  period in 1998.  The
increase  in RevPAR was due to an  increase  in the  average  weekly rate of $29
(9.9%) for the nine  months  ended  September  30,  1999 as compared to the same
period in 1998 offset in part by a decrease in  occupancy  to 72.1% for the nine
month  period ended  September  30, 1999 from 75.6% for the same period in 1998.
The decrease in occupancy is a result of competition  in the same-store  markets
which are characterized by over supply and to some extent Homestead rates versus
the rate  levels of  competitors.  The  increase  of 4.5% in  RevPAR,  offset by
increases in property expenses  primarily for payroll,  housekeeping,  security,
and property administrative costs (primarily related to increasing services such
as longer office hours),  resulted in the same-store  property  operating income
margin decreasing to 56.8% in 1999 from 60.2% in 1998.

                                       16

<PAGE>


   Stabilized Properties Operations

     RevPAR  for  the  125  stabilized  properties  for the  nine  months  ended
September 30, 1999 increased to $243 from $222 for the 79 stabilized  properties
in 1998.  Average  weekly rates for stabilized  properties  increased to $348 in
1999 from $293 in 1998 (an  increase  of 18.8%) but was offset by the decline of
occupancy  to 69.9% for 1999 from  75.6% for  1998.  Property  operating  income
margin for stabilized  properties  decreased to 57.5% in 1999 from 60.2% in 1998
due to  increased  property  expenses  as  described  above  for the  same-store
properties.

   Corporate Operating Expenses

     Corporate  operating  expenses,  after  capitalization  of  costs  directly
associated with Homestead's development activity, increased $8.8 million for the
nine month  period  ended  September  30, 1999 as compared to the same period in
1998. The increase is attributed to increases of  approximately  $1.3 million in
sales and  marketing  expenses,  approximately  $1.0  million in  administrative
services  related  to the  increases  in  operating  sites,  and  the  loss  for
construction  related claims of approximately $0.75 million,  with the remainder
of the increase related primarily to incremental  development  overhead expenses
which were not capitalizable due to declining  development  activity in the nine
months ended  September  30, 1999 and expenses of efforts to dispose of the land
held for sale and land holding costs.

     Corporate  operating  expenses,  after  capitalization  of  costs  directly
associated  with  Homestead's  development  activity,   increased  approximately
$600,000 for the three months ended  September  30, 1999 as compared to the same
period in 1998 but  decreased  approximately  $1.4  million  versus  the  second
quarter of 1999 and  decreased  approximately  $2.1  million as  compared to the
first quarter of 1999.  The three month  comparisons  reflect the changes in the
organization  of the company and the  reductions  of  personnel  and other costs
occurring in fourth quarter 1998 and second quarter 1999.

   Depreciation and Amortization

     Depreciation  and  amortization  increased $8.9 million for the nine months
ended  September  30,  1999 as  compared  to the same  period in 1998 due to the
increased  number  of  properties  operating  for the nine  month  period  ended
September 30, 1999 as compared to the same period in 1998.  Depreciation  of the
cost of properties and improvements is provided using the  straight-line  method
over the estimated useful lives of the assets. Amortization of the trademark and
other  intangibles  is calculated on a  straight-line  basis over a period of 20
years.

   Interest Income

     Interest  income  of  $603,000  and  $707,000  for the  nine  months  ended
September 30, 1999 and 1998 was a result of interest  earned from  investment of
excess cash on hand.

   Interest Expense

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

                                                                      THREE MONTHS ENDED           NINE MONTHS ENDED
                                                                        SEPTEMBER 30,                SEPTEMBER 30,
                                                                  --------------------------  -----------------------------
                                                                       1999          1998          1999          1998
                                                                  ------------   -----------  -------------   -------------
<S>                                                               <C>            <C>          <C>             <C>
    Lines of credit facilities....................................$      4,594   $     5,742  $      19,276   $    10,174
    Convertible mortgage notes....................................       5,091         5,213         15,106        21,202
    Mortgage note payable.........................................          --         2,021          1,282         2,021
    Capital lease obligation......................................       3,477            --          8,383            --
    Other.........................................................         193           355            574           749
                                                                  ------------   -----------  -------------   -------------
        Total interest cost.......................................      13,355        13,331         44,621        34,146
    Capitalized interest..........................................        (451)       (6,652)        (6,443)      (20,348)
                                                                  ------------   -----------  -------------   -------------
        Net interest expense......................................      12,904   $     6,679         38,178   $    13,798
                                                                  ============   ===========  =============   =============
    Amortization of deferred financing costs included in interest          449   $       954          2,527 $       2,665
    cost
                                                                  ============   ===========  =============   =============
</TABLE>
                                       17
<PAGE>

     Interest cost on lines of credit borrowings  increased $9.1 million for the
nine months ended  September 30, 1999 as compared to the same period in 1998 due
primarily  to a higher  average  outstanding  balance  ($297.7  million  in 1999
compared to $132.8 million in 1998).

     Interest cost on the convertible  mortgages  decreased $6.1 million for the
nine months ended September 30, 1999 as compared to the same period in 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 for the nine months  ended  September  30,  1999  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 to the financial statements.  Homestead incurred $8.4 million in interest
cost in the nine months ended September 30, 1999 as a result of the leaseback of
such properties under a capital lease.

     Interest cost on borrowings is offset by interest  capitalized with respect
to  Homestead's   development   activities.   Capitalized  interest  levels  are
reflective of Homestead's  cost of funds and the level of development  activity.
Capitalized  interest  decreased  by $13.9  million  for the nine  months  ended
September  30,  1999  as  compared  to the  same  period  in  1998  due to  less
development  activity  during the first nine months of 1999 as compared to 1998.
By the end of  third  quarter  1999  all  development  has  been  completed  and
Homestead does not anticipate any additional  capitalization of interest for the
remainder of 1999.


LIQUIDITY AND CAPITAL RESOURCES

   Investing and Financing Activities

     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).  The securities  issued in the rights offering had been registered under
Homestead's existing $356,402,600 shelf registration. 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 $221.6 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 process costs; and to provide
working capital for general corporate purposes.  Security Capital's  obligations
under a subscription  agreement which secured the Bridge Facility was terminated
as a result of Security  capital's  participation in the rights offering and the
repayment of the Facility.

     During the nine month periods ended September 30, 1999 and 1998,  Homestead
invested  $88.7 million and $393.2  million,  respectively  in  properties.  The
amounts  invested  in the nine months  ended  September  30, 1999 were  financed
primarily from proceeds from borrowings  under the Working  Capital  Facilities.
The amounts  invested in the nine months ended  September 30, 1998 were financed
primarily  from  borrowings  under  the lines of credit  and  proceeds  from the
January 1998 rights offering.

     During the first nine months of 1999, Homestead reduced its short-term debt
from $479.1  million at December 31, 1998 to $3.7 million at September  30, 1999
by refinancing, repayment, and extensions of its debt as follows: (i) paying off
the $122.0 million  mortgage note due June 1999 with proceeds  received from the
sale and leaseback of properties  under a long-term  capital lease,  (ii) paying
off the $200 million  Bridge  Facility  with  proceeds  received from the rights
offering,  and (iii)  amending its Working  Capital  Facilities  to, among other
things, extend the maturity date to December 31, 2000.

     In third  quarter  1999  Homestead  sold one urban parcel held for sale and
used the net proceeds of $5.95 million to pay down
its line of credit.

     Subsequent to the end of third quarter 1999, Homestead generated additional
net proceeds of $44.5  million  from the sale of two suburban  parcels and three
urban parcels. Homestead used $26.9 million of these net proceeds to further pay
down its lines of credit. Thus, subsequent to the end of the quarter the balance
on the $170 million revolving line of credit secured by suburban  properties and
land has been reduced to an outstanding  balance of $166.2 million and the $23.1
million  balance of the line secured by urban  properties has been paid in full.
                                       18

<PAGE>

Homestead may re-borrow on the line secured by suburban  properties,  subject to
collateral  and covenant  requirements.  Repayment of all borrowings on the line
secured by urban land terminated the facility.

     Homestead  had at September 30, 1999 unfunded  commitments  resulting  from
retainage  payable on recently  completed  developments  of  approximately  $4.3
million.

     With the completion of development of all sites which were in construction,
termination  of plans to  develop  all other  land  owned,  and with no  further
pursuit of acquisition of sites for development, 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 payment of the remaining construction
retainage.  In  addition  Homestead  may  generate  cash  flow  by the  sale  of
unencumbered  land  sites,  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 operation 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  decreased by $1.5 million
for the nine months ended  September 30, 1999 as compared to 1998.  The decrease
is due primarily to an increase in corporate  expenses,  special charge expenses
and interest  during the nine months ended September 30, 1999 as compared to the
same period in 1998 offset in part by additional cash from  operations  provided
by the growth in the number of operating  properties as described under "Results
of Operations."


YEAR 2000

     The Year 2000  issue has  arisen as many  existing  computer  programs  and
chip-based  embedded technology systems use only the last two digits to refer to
a year,  and  therefore do not  properly  recognize a year that begins with "20"
instead of the familiar "19." If not corrected, many computer applications could
fail or create erroneous  results.  Homestead has adopted a Year 2000 compliance
program in an attempt to minimize or prevent the number and  seriousness  of any
disruptions  that may  occur as a result  of the Year  2000  issue.  Homestead's
compliance  program includes 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  has a material  relationship  or whose
systems are material to the operations of Homestead's properties.

     Homestead's  computer  hardware,  operating  systems,  general  accounting,
property management systems and principal desktop software applications are Year
2000 compliant as certified by the various  vendors.  Homestead has tested these
information  technology systems, and based on this testing,  management does not
anticipate  any Year 2000  issues  that will  materially  impact  operations  or
operating results.

     Homestead's   critical   non-information   technology   systems  have  been
inventoried  and have been assessed for Year 2000  compliance by contacting  the
vendors  of  the  systems.   All  non-information   technology  systems  are  in
compliance.

     Homestead  has surveyed its  financial  institutions  and major  vendors to
determine  the  extent to which  Homestead  is  vulnerable  to  failure by those
institutions  and vendors to make their systems Year 2000  compliant.  Homestead
has received responses indicating these institutions and vendors are either Year
2000  compliant or have plans in place to be compliant by year end.  Homestead's
most  reasonably  likely worst case scenario is the failure on the part of these
entities to be or become Year 2000 compliant which could result in disruption in
Homestead's cash receipt and disbursement  functions,  utilities and the failure
of reservation  systems.  Homestead management does not believe that the company
faces a material  adverse  financial  impact from Year 2000 problems in the most
likely worst case scenario.
                                       19
<PAGE>

     Homestead  expects to complete by the end of  November  1999 a  contingency
plan to deal with unforeseen problems caused directly or indirectly by Year 2000
issues. The plan will address temporary  procedures  required due to failures in
internal systems or by service providers due to Year 2000 issues.

     Homestead's  historical  costs for  addressing  the Year 2000 issue are not
material and  management  does not anticipate  that its future costs  associated
with the Year 2000  issue  will be  material.  Third-party  costs  and  software
upgrades  or  replacements  for Year  2000  issues  are not  expected  to exceed
$50,000.  Homestead  does not  separately  track the internal costs incurred for
Year 2000  compliance  issues.  Such costs are  principally  the related payroll
costs  of its  information  technology  group.  Although  the  cost of  recently
replacing  Homestead's key information  technology systems was substantial,  the
replacements  were  made  to  improve   operational   efficiency  and  were  not
accelerated  due to the Year 2000 issue.  Homestead has not delayed any material
projects as a result of the Year 2000 issue. Funds expended to address Year 2000
issues have been made from operating cash flow.

     There can be no assurances that Year 2000 remediation by Homestead or third
parties will be properly and timely completed, and failure to do so could have a
material adverse effect on Homestead,  its business and its financial condition.
Homestead cannot predict the actual effects to it of the Year 2000 issue,  which
depends on numerous  uncertainties,  many of which are outside its control, such
as: (i) whether  significant  third parties properly and timely address the Year
2000 issue;  and (ii)  whether  broad-based  or systemic  economic  failures may
occur.  Failures  could  include  disruptions  in  passenger  transportation  or
transportation  systems  generally,  loss of utility  and/or  telecommunications
services,  the loss or  disruption  of hotel  reservations  made on  centralized
reservation systems and errors or failures in financial  transactions or payment
processing  systems  such as credit  cards.  Homestead's  Year  2000  compliance
program is expected to significantly  reduce the level of uncertainty  about the
Year 2000 issue and  management  believes that the  possibility  of  significant
interruptions of normal operations should be reduced.
Homestead will continue to monitor these issues through its Year 2000 compliance
program.


ENVIRONMENTAL MATTERS

    Homestead is not aware of, nor does it expect,  any environmental  condition
on its properties to have a material  adverse effect upon its business,  results
of operations or financial position.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   Interest Rate Risk

     Homestead's  exposure to market risk for changes in interest  rates relates
primarily to its lines of credit  facilities.  Homestead has no involvement with
derivative financial instruments.

     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 September
30,  1999.  As the table  incorporates  only  those  exposures  that exist as of
September 30, 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 September 30, 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.
                                       20

<PAGE>



<TABLE>
                                                          EXPECTED MATURITY/PRINCIPAL REPAYMENT DECEMBER 31,
                                        Nominal
                                       Interest                                                              Total       Fair
                                         Rate     1999 (2)     2000     2001    2002    2003    Thereafter  Balance    Value(3)
                                         ----     --------     ----     ----    ----    ----    ----------  -------    --------


<S>                                     <C>       <C>         <C>       <C>    <C>      <C>     <C>         <C>       <C>
Interest-Sensitive Liabilities:
Lines of Credit Facilities -            8.54%     $          $193,050  $       $ --    $  --    $           $193,050  $
variable rate (1)                                    --                --                            --                  193,050
Convertible Mortgage Notes - fixed
rate.................................   9.00%        --      $    --   $  --   $   --  $  --    $  221,334  $221,334  $   218,363
Capital Lease Obligation - fixed
rate ................................   9.8%      $     902  $ 3,837   $4,230  $4,663  $5,141   $  122,983  $141,756  $  141,756
Other Long-Term Obligation - fixed
rate (4).............................   9.74%     $       3  $    13   $    14 $   16  $   17   $    7,850  $  7,913  $    7,904
<FN>

     (1)  On March 18, 1999,  Homestead  obtained an extension  and amendment of
          its Working  Capital  Facilities to a December 31, 2000 due date.  The
          Working Capital  Facilities  interest terms were amended  resulting in
          the  borrowings  under the lines,  based on the present  borrowings to
          collateral leverage ratio, bearing interest at 3% over LIBOR.

     (2)  Amounts represent expected  maturities and principal repayment for the
          three months remaining for 1999.

     (3)  The estimated  fair value of obligations  extending  beyond a one-year
          maturity as of September 30, 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 September 30, 1999 on a similar instrument.

     (4)  On October 25, 1999,  this  obligation was discharged with the payment
          of  $2.3  million.  See  "Note 8 -  Commitments  and  Contingencies  -
          Finder's  Agreement."
</FN>
</TABLE>
                                       21


<PAGE>


                            PART II OTHER INFORMATION


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K


 (a)          Exhibits:

10.1     Amendment to Secured Promissory Note

15       Letter regarding unaudited interim financial information

27       Financial Data Schedules

 (b)          Reports on Form 8-K.

    Form              Date            Items Reported        Financial Statements

    8-K         October 7, 1999      Item 5, Item 7                 No
   8-K/A        October 7, 1999      Item 5, Item 7                 No

                                       22


<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




                                             /S/   BRYAN J. FLANAGAN
                                        Bryan J. Flanagan, Senior Vice President
                                        And Chief Accounting Officer
                                        (Principal Financial Officer and
                                         Principal Accounting Officer)


Date:  November 12, 1999


                                       23