<PAGE>

================================================================================
                          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 March 31, 1999

                                       OR

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

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

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

                                    MARYLAND
                          (STATE OR OTHER JURISDICTION
                        OF INCORPORATION OR ORGANIZATION)

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

                        2100 RIVEREDGE PARKWAY, 9TH FLOOR
                             ATLANTA, GEORGIA 30328
              (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)

                                 (770) 303-2200
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)


              (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 May 14,
1999 was 38,244,546.
================================================================================



<PAGE>



                         HOMESTEAD VILLAGE INCORPORATED
                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

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

       Item 1.   Financial Statements

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

                 Condensed Statements of Operations (unaudited) - Three-month Periods Ended March 31, 1999
                 and 1998..................................................................................     4

                 Condensed Statements of Cash Flows (unaudited) - Three-month Periods Ended March 31, 1999
                 and 1998..................................................................................     5

                 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................................     21

PART II.         Other Information

       Item 6.   Exhibits and Reports on Form 8-K.........................................................      23

</TABLE>


<PAGE>


                         HOMESTEAD VILLAGE INCORPORATED

                            CONDENSED BALANCE SHEETS

                                   (UNAUDITED)

                     (IN THOUSANDS, EXCEPT PER SHARE AMOUNT)

<TABLE>
<CAPTION>
                                            ASSETS                                                MARCH 31,      DECEMBER 31,
                                                                                                     1999           1998
                                                                                                -------------- -------------
<S>                                                                                             <C>            <C>
Current assets:
     Cash and cash equivalents (including restricted cash of $167 in 1999 and 1998).........    $      16,943  $    12,144
     Accounts receivable, net of allowance of $319 in 1999 and $269 in 1998.................            6,717        5,910
     Funds held in escrow...................................................................             --          1,701
     Other current assets...................................................................            1,375        1,132
                                                                                                -------------- -------------
          Total current assets..............................................................           25,035       20,887
                                                                                                -------------- -------------
Property and equipment......................................................................        1,198,039    1,186,652
Less accumulated depreciation...............................................................         (42,444)     (48,783)
                                                                                                -------------- -------------
Net investment in property and equipment....................................................        1,155,595    1,137,869
                                                                                                -------------- -------------
Deposits and pursuit costs, including $1,985 of funds with title companies for property
   acquisitions in 1999 and $3,399 in 1998..................................................            7,142        7,830
Deferred loan costs, net of accumulated amortization of $34,996 in 1999 and $34,002 in
     1998                                                                                               2,446        1,063
Trademark and intangibles, net of accumulated amortization of $4,811 in 1999 and $4,190
   in 1998                                                                                             43,658       44,279
Other assets ...............................................................................           23,456        6,463
                                                                                                -------------- --------------
   Total assets.............................................................................    $  1,257,332   $ 1,218,391
                                                                                                ============== =============

                             LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Lines of credit........................................................................    $     200,000  $   357,080
     Capital lease obligation, current......................................................            3,331         --
     Mortgage note payable..................................................................             --        122,028
     Development costs payable, including retainage of $8,516 in 1999 and $16,558 in
        1998                                                                                           15,095       24,330
     Due to affiliate.......................................................................              714          335
     Accrued interest payable to affiliates.................................................            6,861        1,882
     Accrued real estate taxes..............................................................            5,331        5,681
     Accrued payroll and related accrued expenses...........................................            6,399        7,969
     Accounts payable and other accrued expenses............................................           12,349       11,663
                                                                                                -------------- -------------
          Total current liabilities.........................................................          250,080      530,968
Lines of credit.............................................................................          199,000         --
Capital lease obligation, noncurrent........................................................          139,929         --
Convertible mortgage notes payable to affiliates............................................          221,334      221,334
Other long-term liabilities.................................................................            7,910        8,064
                                                                                                -------------- -------------
          Total liabilities.................................................................          818,253      760,366
                                                                                                -------------- -------------
Commitments and contingencies (Note 7)
Shareholders' equity:
     Common stock,  $.01 par value,  249,823  shares  authorized,  38,245 shares
        issued and  outstanding in 1999 and 38,255 shares issued and outstanding
        in
        1998                                                                                              382          383
     Preferred stock, 177 shares authorized, none issued....................................             --           --
     Additional paid-in capital.............................................................          474,245      474,337
     Retained earnings (accumulated deficit)................................................         (35,095)     (16,135)
     Less deferred compensation.............................................................            (453)        (560)
                                                                                                -------------- -------------
          Total shareholders' equity........................................................          439,079      458,025
                                                                                                -------------- -------------
          Total liabilities and shareholders' equity........................................    $   1,257,332  $ 1,218,391
                                                                                                ============== =============

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

                                       3
</TABLE>


<PAGE>


                         HOMESTEAD VILLAGE INCORPORATED

                       CONDENSED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)

                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                         THREE-MONTHS ENDED
                                                                                              MARCH 31,
                                                                              --------------------------------------
                                                                                     1999                1998
                                                                              ------------------- ------------------
<S>                                                                           <C>                 <C>
Revenues:
     Room revenue............................................................ $          48,119   $        26,427
     Other revenue...........................................................               903             1,101
                                                                              ------------------- ------------------
          Total revenues.....................................................            49,022            27,528
                                                                              ------------------- ------------------
                                                                              ------------------- ------------------
Operating expenses:
     Property operating expenses.............................................            23,107            11,873
     Corporate operating expenses............................................             9,487             4,899
     Depreciation and amortization...........................................             9,997             6,387
                                                                              ------------------- ------------------
          Total operating expenses...........................................            42,591            23,159
                                                                              ------------------- ------------------

Operating income.............................................................             6,431             4,369

Interest income..............................................................               154               289
Interest expense, net of capitalized interest................................          (11,316)            (2,970)
                                                                              ------------------- ------------------
(Loss) earnings before income taxes and cumulative effect of accounting change          (4,731)             1,688
Provision for income taxes...................................................              --                --
                                                                              ------------------- ------------------
(Loss) earnings before cumulative effect of accounting change................           (4,731)             1,688
Cumulative effect of accounting change for organizational, pre-opening and
   start-up activities.......................................................          (14,230)              --
                                                                              ------------------- ------------------
Net (loss) earnings.......................................................... $        (18,961)   $         1,688
                                                                              =================== ==================


Basic weighted average shares outstanding....................................            38,245            35,736
                                                                              =================== ==================
Diluted weighted average shares outstanding..................................            38,245            35,736
                                                                              =================== ==================


(Loss) earnings  per share:
Basic earnings (loss) before cumulative effect of accounting change.......... $          (0.12)   $          0.05
Cumulative effect of accounting change.......................................            (0.37)              --
                                                                              ------------------- ------------------
Basic (loss) earnings........................................................ $          (0.49)   $          0.05
                                                                              =================== ==================

Diluted (loss) earnings before cumulative effect of accompanying change...... $          (0.12)   $         0.05
Cumulative effect of accounting change.......................................            (0.37)              --
                                                                              ------------------- ------------------
Diluted (loss) earnings...................................................... $          (0.49)   $         0.05
                                                                              =================== ==================


</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>
<CAPTION>
                                                                                                THREE MONTHS
                                                                                              ENDED MARCH 31,
                                                                                       -------------------------------
                                                                                           1999             1998
                                                                                       --------------   --------------
<S>                                                                                    <C>              <C>
Operating activities:
    Net (loss) earnings...........................................................     $   (18,961)     $      1,688
    Adjustments to reconcile net (loss) earnings to net cash provided by operating
activities:
        Cumulative effect of accounting change....................................           14,230              --
        Depreciation and amortization.............................................            9,997            6,387
        Deferred compensation.....................................................              107              139
        Amortization of deferred loan costs.......................................              994              163
    Change in assets and liabilities:
        Increase in accounts receivable, net of change in allowance...............            (807)             (850)
        Decrease in funds held in escrow..........................................            1,701               --
        (Increase) decrease in other current assets...............................            (243)               296
        Decrease in accrued real estate taxes.....................................            (350)             (618)
        Increase in accrued interest on convertible mortgage notes................            4,979             6,871
        (Decrease) increase in accrued payroll and related accrued expenses.......          (1,570)               745
        Increase in accounts payable and other accrued expenses...................              686               112
        Increase in due to affiliate..............................................              379               372
                                                                                       --------------   --------------
            Net cash provided by operating activities.............................           11,142           15,305
                                                                                       --------------   --------------

Investing activities:
        Investment in properties..................................................         (48,782)         (125,571)
        Decrease (increase) in deposits and pursuit costs.........................              688           (4,476)
        Increase in other assets..................................................          (1,190)             (614)
                                                                                       --------------   --------------
            Net cash used in investing activities.................................         (49,284)         (130,661)
                                                                                       --------------   --------------

Financing activities:
        Proceeds from lines of credit.............................................           41,920           74,392
        Payments on lines of credit...............................................             --           (100,000)
        Deferred loan costs for line of credit....................................          (2,377)              (46)
        Proceeds from convertible mortgage notes payable..........................             --              4,000
        Payments on mortgage notes payable........................................         (122,028)             --
        Sale of property and equipment, net.......................................          127,262              --
        Proceeds from sale of shares, net of expenses.............................             --           154,241
        Payments on capital lease.................................................          (1,740)              --
        Payments on other long-term liabilities...................................              (3)              --
        Repurchase of stock.......................................................            (107)              --
        Proceeds from principal payments on notes from officers..................                14              --
                                                                                       --------------   --------------
            Net cash provided by financing activities.............................           42,941          132,587
                                                                                       --------------   --------------
Net increase in cash and cash equivalents.........................................            4,799            17,231
Cash and cash equivalents, beginning of period....................................           12,144            2,974
                                                                                       --------------   --------------
Cash and cash equivalents, end of period..........................................     $     16,943     $      20,205
                                                                                       ==============   ==============

Non-cash investing and financing transactions:

        Increase in property and equipment, and development cost payable..........     $         --     $       1,241
                                                                                       ==============   ==============
        Increase in property and equipment, from capital lease....................     $    145,000     $          --
                                                                                       ==============   ==============
        Increase in property and equipment from capitalization of loan costs......     $       --       $         798
                                                                                       ==============   ==============
        Loan costs resulting from issuance of convertible mortgage debt...........     $       --       $        314
                                                                                       ==============   ==============


</TABLE>



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

                                       5
<PAGE>


                         HOMESTEAD VILLAGE INCORPORATED
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                 MARCH 31, 1999
                                   (UNAUDITED)

NOTE 1--GENERAL

   Principles of Financial Presentation

     The financial statements of Homestead Village Incorporated ("Homestead") as
of March 31, 1999 and for the three-month  periods ended March 31, 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-month periods ended March 31, 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 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 activities costs which would have
been  expensed in the  three-month  period ended March 31, 1998 if SOP 98-5 were
applied  on a  pro  forma  basis  total  $3,641,000.  Amortization  expense  for
organizational,  pre-opening  and  start-up  costs  recorded in the  three-month
period ended March 31, 1998 was approximately $1,150,000.

     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  January 1, 2000,  are not
expected  to have an impact on  Homestead's  financial  position  or  results of
operations.  Homestead has not entered into any derivative  financial instrument
transactions.

                                       6

<PAGE>


NOTE 2--PROPERTY AND EQUIPMENT

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

<TABLE>
<CAPTION>
                                                                             MARCH 31,          DECEMBER 31,
                                                                                1999                 1998
                                                                          ----------------     ----------------
                                                                            (UNAUDITED)

            <S>                                                          <C>                  <C>
            Operating properties:
               Owned properties:
                    Land                                                  $       176,489     $        191,694
                    Buildings and improvements...........................         563,765              645,235
                    Furniture, fixtures and equipment....................          84,156              108,446
               Properties under a capital lease..........................         145,000                  --
                                                                          ----------------    -----------------
                                                                                  969,410              945,375
            Properties under construction................................          89,330              110,891
            Properties in planning (land owned for development)..........         134,936              126,054
            Land held for sale...........................................           4,363                4,332
                                                                          ----------------    -----------------
                      Total.............................................. $     1,198,039     $      1,186,652
                                                                          ================    =================
</TABLE>


NOTE 3--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.  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  leverage  of  borrowings
outstanding versus qualifying collateral. Future additional collateral under the
$170 million line will be 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.

                                       7
<PAGE>

     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 March 31, 1999,  Homestead has an outstanding balance of $199 million
under the Working Capital Facilities, the full amount available under collateral
requirements.

     Homestead has an additional  $200 million bank line of credit facility (the
"Bridge  Facility") which bears interest at the Eurodollar rate plus 1.25% or at
a base rate of prime  plus  0.25%.  Borrowings  outstanding  at March  31,  1999
totaled $200  million.  Homestead  has a  subscription  agreement  from Security
Capital  Incorporated   ("Security  Capital")  for  $200  million  of  Homestead
subordinated debentures which secures this obligation.  Proceeds from closing of
the rights offering, or any other issuance of equity securities, are required to
be used to repay the Bridge Facility.

     On April  22,  1999,  Homestead,  the  lenders  under the  Working  Capital
Facilities  and  Bridge  Facility,   and  Security  Capital  executed  a  letter
agreement:  (i) extending the maturity of the Bridge Facility to the earliest of
October 31, 1999, the date of any business  combination or sale of substantially
all of Homestead's assets, or 45 days after the termination of negotiations with
third parties regarding business combinations;  (ii) allowing Homestead to incur
up to $25 million of unsecured, subordinated debt to Security Capital; and (iii)
prohibiting  incurrence  of any  indebtedness  other  than the note to  Security
Capital, the lines of credit, the capital lease obligation,  and the convertible
mortgage notes. Homestead paid a fee to the banks of $494,070 in connection with
this extension and amendment.

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

   Convertible Mortgage Notes Payable

     At March 31, 1999  Homestead owed  convertible  mortgage notes to Archstone
Communities Trust ("Archstone"),  an affiliate,  of $221,333,620.  The notes are
collateralized  by  Homestead  properties  (54  Homestead  properties  at $358.4
million of historical cost mortgaged to Archstone at March 31, 1999).  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 shares of Homestead common stock
at a  conversion  ratio equal to one share of common  stock for every  $11.50 of
principal amount  outstanding.  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 due June
1999. Hospitality Properties Trust (NYSE: HPT) 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 $16 million security deposit.

     The  approximate  $350,000  gain  on  sale  will be  deferred  and  will be
recognized  over the term of the lease.  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 March 31, 1999 was $143,260,000.

     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.


                                       8
<PAGE>


   Promissory Note to Security Capital

     On May 3, 1999, Homestead issued an unsecured, subordinated promissory note
to Security  Capital in the maximum  principal  amount of $25,000,000.  The note
matures  the  earlier  of (i)  October  31,  1999 or such  later  date to  which
repayment of the outstanding  principal amount and other amounts owing under the
Bridge  Facility is extended,  (ii) the  consummation  of a change in control or
(iii)  the  consummation  of the  rights  offering  in the  aggregate  amount of
$200,000,000  or more.  Under the terms of the note,  Homestead may borrow up to
$25,000,000 from Security  Capital to provide for funding of construction  costs
of properties  under  development,  maintenance  and repair costs of properties,
personnel  expenses and other  working  capital and general  corporate  expenses
specifically approved by Security Capital.

     Borrowings under the note will bear interest at LIBOR plus 3.25%. Homestead
paid an arrangement fee of $31,944 to enter into the agreement.  Through May 14,
1999 no amounts had been borrowed under the line.

   Interest

     The following summarizes Homestead's interest expense (in thousands):
<TABLE>
<CAPTION>
                                                                                         THREE-MONTH PERIODS ENDED
                                                                                                 MARCH 31,
                                                                                       -------------------------------
                                                                                           1999             1998
                                                                                       --------------   --------------
    <S>                                                                                <C>              <C>
    Lines of credit facilities.....................................................    $      7,622     $       1,458
    Convertible mortgage notes....................................................            4,980             7,637
    Mortgage note payable..........................................................           1,282               --
    Capital lease obligation......................................................            1,407               --
    Other.........................................................................              193               197
                                                                                       --------------   --------------
        Total interest cost.......................................................           15,484             9,292
    Capitalized interest..........................................................          (4,168)           (6,322)
                                                                                       --------------   --------------
        Net interest expense......................................................     $     11,316     $       2,970
                                                                                       ==============   ==============
    Amortization of deferred financing costs included in interest cost............     $        994     $         477
                                                                                       ==============   ==============
</TABLE>


     The total interest paid in cash for the three-month periods ended March 31,
1999 and 1998 was $9,571,000 and $899,000, respectively.


NOTE 4--SHAREHOLDERS' EQUITY

   Common Stock Rights Offering

     In April 1999,  Homestead  initiated a common stock rights offering for the
sale of 76,489,092  shares for $210.3  million ($2.75 per share) or $225 million
if all  oversubscription  shares are sold. (An additional  5,329,089 shares were
authorized  for issuance  pursuant to  oversubscriptions  and for sales to third
parties.)  Security  Capital has agreed to purchase enough shares to ensure that
gross  proceeds  of the  offering  are not less than $225  million.  The  rights
offering was scheduled to expire on April 23, 1999, but has been extended to May
21,  1999.  As a  result,  the  offering  will not  close  until  May 28,  1999.
Shareholders  of record on April 5, 1999  received a dividend  of two rights for
each share of common  stock they owned.  One right is  required to purchase  one
share of common stock in the rights offering.  Proceeds from the rights offering
will be used first,  to repay the $200 million Bridge Facility and,  second,  to
provide funding for working capital and general  corporate  purposes,  which may
include  repayment of amounts owed under the Working Capital  Facilities and the
note  issued to  Security  Capital.  Security  Capital's  obligations  under the
subscription  agreement will be reduced to the extent the proceeds of the rights
offering are used to repay amounts owed under the Bridge Facility.

     In connection with Security  Capital's  agreement to purchase enough shares
in the rights  offering to ensure that gross  proceeds of the  offering  are not
less than $225  million,  Homestead  and Security  Capital  amended the investor
agreement between the two companies providing Security Capital with a variety of
rights regarding the management of Homestead.
                                       9

<PAGE>



   Per Share Data

     Basic  earnings per share is calculated by dividing net earnings  available
to common  shareholders by weighted average common shares  outstanding.  Diluted
earnings per share is  calculated  by dividing  adjusted  earnings  available to
common  shareholders,  assuming  dilution,  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 the dilutive  effect of options using the treasury
stock method and the dilutive effect of convertible debt.

     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>
<CAPTION>

                                                                           THREE MONTHS ENDED
                                                                                MARCH 31,
                                                               ------------------------------------------
                                                                       1999                   1998
                                                                       ----                   ----
         <S>                                                    <C>                    <C>
         Net (loss) earnings attributable to common shares
           before cumulative effect of accounting change.....   $         (4,731)      $           1,688
                                                                ===================    ===================

         Weighted average shares outstanding - basic.........              38,245                 35,736
                                                                ===================    ===================

         Net (loss)  earnings per share before  cumulative
           effect of accounting
         change:
         Basic...............................................   $          (0.12)      $            0.05
                                                                ===================    ===================
         Diluted.............................................   $          (0.12)      $            0.05
                                                                ===================    ===================
</TABLE>


     For the three month periods ended March 31, 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 a period of loss in 1999 and the effects were not
dilutive in 1998.

NOTE 5--INCOME TAXES

     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.

     At March  31,  1999,  Homestead  had,  for  federal  income  tax  reporting
purposes,  estimated net  operating  loss  carryforwards  of  approximately  $87
million,  which expire $4.2 million in the year 2011,  $24.8 million in the year
2017, $57 million in the year 2018, and $1 million in the year 2019.

     If, as a result of Security  Capital's  participation  in Homestead's  1999
rights offering,  Security  Capital's  ownership in Homestead  exceeds 80%, then
Security Capital would be required to include Homestead's results in its federal
income  tax  return.  If this  occurs,  Security  Capital  may  utilize  the net
operating  loss  carryforwards  generated by  Homestead,  subject to  applicable
federal income tax provisions.  To the extent Security  Capital uses Homestead's
net operating loss carryforwards,  such loss carryforwards will not be available
to Homestead in the future.

                                       10
<PAGE>



NOTE 6--ADMINISTRATIVE SERVICES AGREEMENT

     Homestead and Security Capital have an  administrative  services  agreement
(the "Administrative  Services  Agreement"),  pursuant to which Security Capital
provides Homestead with administrative  services with respect to certain aspects
of  Homestead's  business.  These  services  include,  but are not  limited  to,
insurance administration,  accounts payable administration, internal audit, cash
management,  human  resources,  management  information  systems,  tax 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  three-month  periods ended March 31, 1999 and 1998 were  $1,457,000 and
$899,000, 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 7--COMMITMENTS AND CONTINGENCIES

   Legal Proceedings

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

   Unfunded Development Commitments

     At March 31,  1999,  Homestead  had  approximately  $42 million of unfunded
commitments  for  developments   under   construction.   Homestead   anticipates
completing  development of properties under construction utilizing cash on hand,
any cash available from net proceeds of the rights  offering after  repayment of
the Bridge Facility,  proceeds from future sales, if any, of unencumbered  land,
and cash flow from operations.

   Finder's Agreement

     Homestead has a series of agreements with an unaffiliated person ("Finder")
who developed the Homestead  Village concept and has performed certain services.
The agreements which expire February 5, 2043,  provide 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)
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 3 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  three-month  periods ended March 31, 1999 and 1998 were
$180,600 and $184,400, respectively.
                                       11


<PAGE>



NOTE 8-- SUBSEQUENT EVENT - SPECIAL CHARGE

     Homestead has made  substantial  investments  in ownership of land held for
development  and in costs of pursuit of  additional  development  sites.  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.   All  land  previously  held  for
development  will be held for sale,  all pursuits for  acquisition of additional
sites for  development  will be abandoned,  and Homestead  will reduce  overhead
costs and  personnel  to reflect a company  with  stabilized  operations  of 136
properties.  Homestead  will record a special  charge in second quarter 1999 for
write-down  of the  carrying  cost of land held for sale to its  estimated  fair
value less estimated costs to dispose,  write-offs of costs of pursuits and loss
of  non-refundable  earnest  money  deposits,  and for the costs of severance of
personnel.  The  special  charge to earnings  is  expected  to  approximate  $65
million.

     The majority of costs of curtailment of the development  program are due to
the expected  write-downs  on land to be held for sale.  Substantial  effort and
costs have been  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. 
                                       12
<PAGE>






                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Homestead Village Incorporated:


     We have made a review of the accompanying  condensed  consolidated  balance
sheet  of  Homestead   Village   Incorporated  (a  Maryland   corporation)   and
subsidiaries  as of  March  31,  1999  and the  related  condensed  consolidated
statements of operations  for the  three-month  periods ended March 31, 1999 and
the related condensed  consolidated  statement of cash flows for the three-month
period ended March 31, 1999. 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 obtaining an understanding of the
system for the preparation of interim financial information, 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, and in our report dated February 4, 1999,
we expressed an unqualified  opinion on that balance sheet. 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
April 23, 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)  Homestead's  ability  to open new  properties  on  schedule  which may be
affected by factors  outside  the control of  Homestead,  (iv)  availability  to
Homestead  of  debt  or  equity  financing,  (v)  the  matters  described  under
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operation-Risk  Factors"  in Item 7 of the 1998  Form 10-K and (vi)  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.


OVERVIEW

     Homestead's  overall  results of  operations  and  financial  position  are
significantly  influenced by its development  activity.  The development program
and the  financing  activities  required  to support  it have had a  significant
impact on  Homestead's  operations  and financial  position.  Homestead has made
substantial  investments in ownership of land held for development as well as in
pursuit  costs for  additional  development  sites.  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 in the fourth  quarter of 1998.  Such charges
primarily  related to the severance of 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.  All land previously  held for  development  will be held for sale, all
pursuits for acquisition of additional  sites for development will be abandoned,
and Homestead will reduce overhead costs and personnel to reflect a company with
stabilized  operations of 136  properties.  A special charge will be recorded in
second quarter 1999 which is expected to approximate $65 million for write-downs
of land to be held for sale,  write-offs of costs of pursuits,  and the costs of
severance of personnel.  This is expected to have a material  adverse  effect on
Homestead's reported earnings for the second quarter 1999.

     The majority of the special charge  relates to the expected  write-downs on
land to be held for sale. Substantial effort and costs have been 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.  The estimate of the write-down on land held for sale is
summarized in the following  table using the most  recently  available  carrying
cost data (amounts in thousands):
                                       14
<PAGE>

<TABLE>
<CAPTION>
                                   THIRD PARTY
                                  EXPENSES AND
                                   CAPITALIZED           OVERHEAD                                              NEW
    LAND TYPE         COST           INTEREST           ALLOCATION         TOTAL COST       WRITE-OFF         BASIS
    ---------     -----------    ---------------    -----------------    -------------    -------------    -----------
<S>               <C>            <C>                <C>                  <C>              <C>              <C>
Suburban.......       $25,067             $2,125              $12,211          $39,403        ($16,024)        $23,379
Urban..........        73,760              8,908               13,209           95,877         (26,693)         69,184
Excess.........         4,208                  -                  139            4,347            (344)          4,003
                   -----------   ---------------     -----------------    -------------    -------------    -----------
  Total........      $103,035            $11,033              $25,559         $139,627        ($43,061)        $96,566
                   ===========    ===============    =================    =============    =============    ===========
</TABLE>


     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 are
expected to approximate $7 million,  severance costs are expected of at least $8
million and other costs such as closings of offices and overhead  reductions  is
expected to approximate $7 million.

     As of March 31, 1999,  Homestead  had 125 Homestead  Village  properties in
operation representing in the aggregate 16,852 rooms in 37 cities. Homestead had
11 Homestead Village properties under construction totaling 1,375 rooms within 6
of these cities as well as one additional  city, of which one property opened in
April 1999, and the remaining properties are scheduled to open by the end of the
third quarter 1999.

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

     As of March  31,  1999,  Homestead  had  approximately  $771.5  million  of
indebtedness outstanding,  consisting of $200 million due on its short-term bank
lines of credit, $199 million due on its long-term bank lines of credit,  $221.3
million due on a convertible  mortgage note,  $143.3 million due under a capital
lease agreement and $7.9 million due on other long-term obligations.  During the
three months ended March 31, 1999,  Homestead  reduced its short-term  debt from
$479.1  million at  December  31,  1998 to $203.3 at March 31,  1999.  Homestead
refinanced 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.

     In April 1999,  Homestead  initiated a common stock rights offering for the
sale of  76,489,092  shares for $210.3  million  ($2.75 per share) or up to $225
million if all oversubscription shares are sold. (An additional 5,329,089 shares
were  authorized  for issuance  pursuant to  oversubscriptions  and for sales to
third parties.) Security Capital agreed to purchase enough shares to ensure that
gross  proceeds  of the  offering  are not less than $225  million.  The  rights
offering was scheduled to expire on April 23, 1999, but has been extended to May
21,  1999.  Shareholders  of record on April 5, 1999  received a dividend of two
rights  for each share of common  stock they  owned.  One right is  required  to
purchase one share in the rights  offering.  Proceeds  from the rights  offering
will be used first,  to repay the $200 million Bridge Facility and,  second,  to
provide funding for working capital and general  corporate  purposes,  which may
include  repayment of amounts owed under the Working Capital  Facilities and the
note issued to Security Capital.

     With the  accomplishment  of these  reductions of  short-term  debt and the
decision to cease additional development efforts,  Homestead intends to focus on
generation  of cash from sales of land to be used to retire debt and to focus on
reduction of overhead  costs and personnel to reflect a company with  stabilized
operations of 136 properties.

                                       15

<PAGE>



RESULTS OF OPERATIONS

   Three-Months Ended March 31, 1999 and 1998

     Net (loss)  earnings,  for the three  months  ended March 31, 1999 and 1998
were  ($18.96)  million  and $1.7  million,  respectively.  The net loss for the
three-month  period  ended March 31,  1999  includes a  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"  ("SOP 98-5")
beginning with its 1999 fiscal year.  Net loss before the cumulative  effect was
$(4.7)  million for the three  months  ended March 31,  1999, a decrease of $6.4
million  from the $1.7 million net earnings for the three months ended March 31,
1998. The decrease is primarily  attributable to an increase in interest expense
of  $8.3  million  offset  by $2.1  million  increase  in  operating  income.  A
discussion of the major components of net (loss) earnings follows.

   Property Operations

     For analysis  purposes  Homestead  categorizes its operating  properties as
"comparable,"  "noncomparable," or "new opening."  "Comparable" means a property
open  throughout  both periods of comparison,  "noncomparable"  means a property
open for only a portion of the prior  period of  comparison,  and "new  opening"
means a property  opened in the most  recent  period.  For  additional  analysis
purposes   Homestead  also  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.

     Whether   considering  the  entire  operating  property  portfolio  or  its
categories,  Homestead's first quarter 1999 property-level  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 effect of the seasonal downturn as Homestead
has increased its number of properties  located in  Northeastern  and Midwestern
markets as compared  to prior  years  (affecting  noncomparable  properties  and
pre-stabilized properties).

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

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED
                                                                      MARCH 31,
                                                        --------------------------------------
                                                           1999          1998      CHANGE
                                                           ----          ----      ------
 <S>                                                       <C>          <C>        <C>
 Weekly RevPAR(1)....................................      $221          $201         10.0%
 Average Weekly Rate(2)..............................      $352          $282         24.8%
 Occupancy...........................................      62.8%        71.1%         (8.3)
 Number of Operating Properties at Period End........       125           82          52.4%
 Property Operating Income Margin....................      52.8%        55.9%         (3.1)
----------

                                       16
<PAGE>
<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 43 property  openings from the end of the first quarter of 1998
through the end of the first quarter of 1999 were the predominant reason for the
room revenue  increase of $21.7 million (82.1%) for the three months ended March
31,  1999 as  compared  to the same  period in 1998.  Total  property  operating
expenses  increased  from $11.9 million to $23.1  million,  an increase of $11.2
million for the three months ended March 31, 1999 over 1998. The increase is due
primarily to the increase in the number of operating properties as noted above.

   Same-Store Properties

     Homestead had 49 properties which were stabilized and operating  throughout
both   three-month   periods  ended  March  31,  1999  and  1998   ("same-store"
properties). Thirty-four such properties are located in the Southwest with 23 of
these located in Texas markets. RevPAR for the three months ended March 31, 1999
for  these 49 same  store  properties  decreased  to $209 from $218 for the same
period in 1998. The RevPAR  decrease was due to a decrease in occupancy to 68.0%
for the three month  period  ended March 31, 1999 from 79.1% for the same period
in 1998, offset in part by an increase in the average weekly rate of $31 (11.2%)
for the three  months  ended  March 31,  1999 as  compared to the same period in
1998. The decrease in occupancy is a result of  competition in the  Southwestern
markets as  discussed  above and to some extent the  increased  Homestead  rates
versus the rate levels of competitors.  The decrease in RevPAR, and increases in
property expenses primarily for payroll,  housekeeping,  security,  and property
administrative  costs,  resulted in the  same-store  property  operating  income
margin decreasing to 52.3% in 1999 from 57.8% in 1998.

   Stabilized Properties Operations

     RevPAR for the 100  stabilized  properties for the three months ended March
31, 1999  increased to $219 from $218 for the 49 stabilized  properties  for the
same period in 1998. Average weekly rates for stabilized properties increased to
$337 in 1999 from $276 in 1998 (an  increase  of  22.1%)  but was  offset by the
decline of occupancy to 65.1% for 1999 from 79.1% for 1998.  Property  operating
income margin for stabilized properties decreased to 53.5% in 1999 from 57.8% in
1998 due to increased  property  expenses as described  above for the same-store
properties.

   Corporate Operating Expenses

     Corporate  operating  expenses  increased  $4.6 million for the three month
period ended March 31, 1999 as compared to the same period in 1998. The increase
is primarily  attributed  to increases  of  approximately  $2.3 million in sales
expense and $1.5 million in incremental  development overhead expense which were
not capitalized due to declining  development activity in the three months ended
March 31, 1999.

   Depreciation and Amortization

     Depreciation and  amortization  increased $3.6 million for the three months
ended March 31, 1999 as compared to the same period in 1998 due to the increased
number of  properties  operating for the three month period ended March 31, 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.
                                       17
<PAGE>

   Interest Income

     Interest income of $154,000 for the three months ended March 31, 1999 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>
<CAPTION>
                                                                                         THREE-MONTH PERIODS ENDED
                                                                                                 MARCH 31,
                                                                                       -------------------------------
                                                                                           1999             1998
                                                                                       --------------   --------------
    <S>                                                                                <C>              <C>
    Lines of credit facilities....................................................     $      7,622     $       1,458
    Convertible mortgage notes....................................................            4,980             7,637
    Mortgage note payable.........................................................            1,282               --
    Capital lease obligation......................................................            1,407               --
    Other.........................................................................              193               197
                                                                                       --------------   --------------
        Total interest cost.......................................................           15,484             9,292
    Capitalized interest..........................................................          (4,168)           (6,322)
                                                                                       --------------   --------------
        Net interest expense......................................................     $     11,316     $       2,970
                                                                                       ==============   ==============
    Amortization of deferred financing costs included in interest cost............     $        994     $         477
                                                                                       ==============   ==============
</TABLE>


     Interest  expense on line of credit  borrowings  increased $6.2 million for
the three months ended March 31, 1999 as compared to the same period in 1998 due
primarily  to a higher  average  outstanding  balance  ($376.5  million  in 1999
compared to $35.5 million in 1998).

     Interest  expense on the convertible  mortgages  decreased $2.7 million for
the three  months ended March 31, 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  expense for the three  months  ended  March 31,  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 3 to the financial statements.  Homestead incurred $1.4 million in interest
expense in the three months ended March 31, 1999 as a result of the leaseback of
such properties under a capital lease.

     Interest expense recognized 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 $2.2 million for the three months
ended  March  31,  1999 as  compared  to the  same  period  in 1998  due to less
development activity during the first three months of 1999 as compared to 1998.


LIQUIDITY AND CAPITAL RESOURCES

   Investing and Financing Activities

     During the three month  periods  ended  March 31, 1999 and 1998,  Homestead
invested  $48.8 million and $125.6  million,  respectively  in  properties.  The
amounts  invested  in the  three  months  ended  March 31,  1999  were  financed
primarily from proceeds from borrowings  under the lines of credit.  The amounts
invested in the three months ended March 31, 1998 were financed  primarily  from
borrowings  under the line of credit and  proceeds  from the January 1998 rights
offering.

     During the first three  months of 1999,  Homestead  reduced its  short-term
debt from  $479.1  million at December  31, 1998 to $203.3  million at March 31,
1999. Homestead reduced its short-term debt by (i) paying off the $122.0 million
mortgage note due June 1999 with  proceeds  received from the sale and leaseback
and (ii) amending its Working Capital Facilities to, among other things,  extend
the maturity date to December 31, 2000.
                                       18
<PAGE>

     With the decision to cease development of all land sites owned,  other than
those already in construction, and to cease pursuit of acquisition of additional
sites for development,  Homestead's needs for financing are drastically reduced.
The immediate need to repay the Bridge  Facility is expected to be  accomplished
with the proceeds of the rights  offering which is scheduled to close funding by
May 28, 1999.  Other  funding  needs are  primarily  for the  completion  of the
properties in  construction,  funding of the  severance of  personnel,  and debt
service.

     Homestead  had at March 31, 1999  unfunded  commitments  for  properties in
construction of approximately $42 million.

     Based upon the commitment of Security  Capital to participate in the rights
offering to assure gross  proceeds of $225  million,  Homestead  expects to have
approximately $21 million net cash proceeds available from closing of the rights
offering  after use of  proceeds  to repay  the $200  million  Bridge  Facility.
Homestead  believes it will have adequate cash  resources from cash on hand, net
proceeds from the rights  offering after repayment of the Bridge  Facility,  and
cash  flow  from  operations  to fund its needs  for debt  service,  payment  of
severances, and completion of properties in construction.  In addition Homestead
may  generate  cash  inflows  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 incurrence of unexpected construction costs for those properties not
yet open and by increases in interest rates.

   Operating Activities

     Net cash flow  provided by operating  activities  decreased by $4.2 million
for the three months  ended March 31, 1999 as compared to 1998.  The decrease is
due  primarily  to an  increase  in cash  used for new  corporate  expenses  and
interest  paid during the three  months  ended March 31, 1999 as compared to the
same period in 1998 and changes in the timing of the payment of accrued  payroll
and  related  accrued  expenses  offset  in part by  additional  cash  resources
provided  from the growth in the number of  operating  properties  as  described
under "Results of Operations."


AMENDMENT TO INVESTOR AGREEMENT WITH SECURITY CAPITAL

     In connection with Security  Capital's  agreement to purchase enough shares
in the rights  offering to ensure that gross  proceeds of the  offering  are not
less than $225  million,  Homestead  and Security  Capital  amended the investor
agreement  ("Investor  Agreement")  between the two companies providing Security
Capital with a variety of rights  regarding the  management of Homestead.  Under
the Investor Agreement, as amended, for so long as Security Capital beneficially
owns at least  50.1% of  Homestead's  outstanding  shares  ("Shares"),  Security
Capital has the right to approve,  among other things:  (i)  Homestead's  annual
budget;  (ii) the incurrence of expenses in any year exceeding (A) any line item
in the annual budget by $500,000 or 10% and (B) the total  expenses set forth in
the annual budget by 5%; (iii) the offer or sale of any Shares or any securities
convertible  into or  exchangeable  for  Shares  other than  pursuant  to (A) an
employee  benefit plan  approved by  Homestead's  shareholders,  (B)  previously
issued warrants,  options or rights,  (C) a dividend  reinvestment plan or share
purchase plan approved by Homestead's  Board of Directors (the Board") or (D) an
issuance of rights,  options, or warrants for shares issued to all shareholders;
(iv) the issuance or sale of securities that are subject to mandatory redemption
or  redemption  at the option of the holder;  (v) the  adoption of any  employee
benefit plan  pursuant to which Shares may be issued and any action with respect
to  senior   officers'   compensation;   (vi)  the  incurrence,   restructuring,
renegotiation  or  repayment  of  indebtedness  in which  the  aggregate  amount
involved exceeds $1,000,000; (vii) the declaration or payment of any dividend or
other   distribution;   (viii)  the  acquisition  or  disposition  in  a  single
transaction or group of related transactions where the purchase price exceeds $1
million;   (ix)  the  entering  into  of  service  contracts  (A)  for  property
                                       19
<PAGE>

management,  investment  management or leasing services, or (B) that contemplate
annual  payments  in  excess  of  $500,000;  (x)  the  entering  into of any new
contract,  including for construction,  development,  other capital expenditure,
for which the total cost is  reasonably  expected to exceed  $1,000,000  for any
contract or  $5,000,000  in the  aggregate;  (xi) the entering into of any joint
venture for the  development of any  properties  owned by Homestead in which the
book value of any property to be  contributed  by Homestead  exceeds  $1,000,000
individually  or  $5,000,000  in the  aggregate;  (xii) the entering into of any
franchising  or licensing  agreements;  (xiii) the  amendment of the articles of
incorporation  or bylaws of  Homestead;  and (xiv) the  waiver of  anti-takeover
provisions of Maryland law or Homestead's Charter.

     In addition,  so long as Security  Capital owns at least 50% of the Shares,
Homestead  will  maintain an operating  committee  consisting  of the two senior
Homestead officers and two nominees of Security Capital that will meet weekly to
review all operations of Homestead.

     The Investor Agreement also provides that, so long as Security Capital owns
at least 10% of the outstanding Shares, homestead may not increase the number of
directors  on the Board to more than seven  without  the  approval  of  Security
Capital.  Security  Capital also is entitled to designate one or more persons as
directors of Homestead,  as follows:  so long as Security  Capital owns at least
10% but less than 25% of the outstanding  Shares, it is entitled to nominate one
person;  and  (ii)  so  long  as  Security  Capital  owns  at  least  25% of the
outstanding  shares,  it is entitled to nominate that number of persons as shall
bear approximately the same ratio to the total number of members of the Board as
the number of Shares  beneficially  owned by Security Capital bears to the total
number of outstanding  Shares,  provided that Security Capital shall be entitled
to designate no more than two persons so long as the Homestead Board consists of
no more than seven members.  C. Ronald  Blankenship  is Security  Capital's only
current designee on the Board.


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  are  being
inventoried  and are being  assessed for Year 2000  compliance by contacting the
vendors of the systems.  All non-information  technology systems are expected to
be in compliance by the end of the second quarter 1999.

     Homestead  has surveyed its  financial  institutions  and major  vendors to
determine the extent to which Homestead is vulnerable to third parties'  failure
to resolve  their Year 2000 issues.  Homestead  will be able to more  adequately
assess its third party risk when responses are received from the majority of the
entities contacted.

     Management  believes its planning  efforts are adequate to address the Year
2000  issue and that its  risks  are  primarily  those  that it cannot  directly
control,   including   the   readiness  of  its  major   vendors  and  financial
institutions.  Homestead's  most  reasonably  likely worst case  scenario is the
failure on the part of these entities to become Year 2000 compliant  which could
result in disruption in the Homestead's cash receipt and disbursement functions,
utilities and the failure of the reservation systems. There can be no guarantee,
however,  that the  systems of  unrelated  entities  upon which the  Homestead's
operations rely will be corrected on a timely basis and will not have a material
adverse effect on the company.

     Homestead  does not  have a  formal  contingency  plan or a  timetable  for
implementing  one.  Contingency  plans will be  established,  if they are deemed
necessary,  after  Homestead  has  adequately  assessed the impact on operations
should third parties fail to properly respond to their Year 2000 issues.
                                       20
<PAGE>

     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
$500,000.  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  problem,
which depends on numerous  uncertainties 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. Due to the general uncertainty  inherent in the Year 2000 problem and the
company's dependence on third parties,  Homestead is unable to determine at this
time whether the  consequences of Year 2000 failures will have a material impact
on the  company.  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.


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

                                       21
<PAGE>

<TABLE>
<CAPTION>
                                                          EXPECTED MATURITY/PRINCIPAL REPAYMENT DECEMBER 31,
                                                          --------------------------------------------------

                                        Nominal
                                       Interest                                                              Total       Fair
                                         Rate     1999 (2)     2000     2001    2002    2003    Thereafter  Balance    Value(2)
                                         ----     --------     ----     ----    ----    ----    ----------  -------    --------


<S>                                     <C>       <C>          <C>      <C>    <C>     <C>      <C>        <C>         <C>
Interest-Sensitive Liabilities:
   Lines of Credit Facilities -
   variable rate (1).................     8.10%  $200,000   $199,000  $ --    $ --    $ --     $    --     $399,000    $399,000
Convertible Mortgage Notes - fixed
rate.................................     9.00%  $  --      $    --   $ --    $ --    $ --     $221,334    $221,334    $218,363
Capital Lease Obligation - fixed
rate ................................      9.8%  $  2,630   $  3,821  $4,213  $4,647  $5,124   $122,825    $143,260    $143,260
Other Long-Term Obligation - fixed
rate.................................     9.74%  $      9   $    13   $   14  $   16  $   17   $  7,853    $  7,922    $  7,910


<FN>
     (1)  On March 18, 1999,  Homestead  obtained an extension  and amendment of
          its Working Capital Facilities ($199 million  outstanding in the above
          amounts)  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.

          The $200 million of borrowings  outstanding  under the Bridge Facility
          presently bear interest at 1.25% over LIBOR. In April 1999,  Homestead
          initiated a common stock rights  offering,  the proceeds of which will
          be used to repay the Bridge Facility.

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

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

</FN>
</TABLE>

                                       22
<PAGE>



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K


     (a)          Exhibits:

 10.1     $30,000,000 Amended and Restated Credit Agreement dated March 18, 1999
          among  Homestead  Village  Incorporated  and  Commerzbank AG, New York
          Branch, as agent for the Lenders

 10.2     $170,000,000  Amended and Restated  Credit  Agreement  dated March 18,
          1999 among Homestead  Village  Incorporated,  Commerzbank AG, New York
          Branch and Wells Fargo Bank, National  Association,  as Administrative
          Agent for the Lenders

 10.3     $25,000,000  Promissory  Note  dated  May 3,  1999  between  Homestead
          Village Incorporated and Security Capital Group Incorporated

 10.4     Letter Agreement,  dated April 22, 1999, among Homestead,  Commerzbank
          AG, New York Branch,  Commerzbank AG, Los Angeles Branch,  Wells Fargo
          Bank, National  Association,  Chase Bank of Texas, N.A. and BankBoston
          N.A.

 10.5     Letter Agreement,  dated March 18, 1999, among Homestead,  Commerzbank
          AG, New York Branch,  Commerzbank AG, Los Angeles Branch,  Wells Fargo
          Bank, National  Association,  Chase Bank of Texas, N.A. and BankBoston
          N.A.

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


 15      Letter regarding unaudited interim financial information

 27      Financial Data Schedules

     (b)           Reports on Form 8-K.

               Date                Items Reported        Financial Statements
          ----------------         ---------------       --------------------
         February 23, 1999         Item 2, Item 7                 No
         April 5, 1999             Item 5, Item 7                 No
         May 3, 1999               Item 2, Item 7                 No
         May 4, 1999               Item 5, Item 7                 No




                                   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:  May 14, 1999
                                       23