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                         Commerzbank AG, New York Branch
                            2 World Financial Center
                            New York, New York 10038

                                                                  April 22, 1999

Homestead Village Incorporated
2100 River Edge Parkway, 9th Floor
Atlanta, Georgia 30328

Re:      Credit  Agreement  dated as of May 6,  1997,  among  Homestead  Village
         Incorporated  ("HOMESTEAD"),  Commerzbank  AG, Los Angeles  Branch ("LA
         BRANCH") and other lenders as set forth therein,  and  Commerzbank  AG,
         New York Branch ("NY BRANCH") (as heretofore,  and as may hereafter be,
         modified,  amended  and/or  restated,  from time to time, the "SUBURBAN
         FACILITY");

         Credit Agreement dated as of April 24, 1998, among Homestead, LA Branch
         and other lenders as set forth therein,  and NY branch (as  heretofore,
         and as may hereafter be, modified,  amended and/or restated,  from time
         to time,  together  with the Suburban  Facility,  the "WORKING  CAPITAL
         FACILITIES"); and

         Credit Agreement dated as of June 15, 1998, among Homestead,  LA Branch
         and other lenders as set forth therein,  and NY Branch (as  heretofore,
         and as may hereafter be, modified,  amended and/or restated,  from time
         to time, the "BRIDGE  FACILITY" and,  together with the Working Capital
         Facilities, the "CREDIT FACILITIES")

Ladies and Gentleman:

         Homestead,  NY  Branch  and  Wells  Fargo  Bank,  National  Association
("WELLS"),  executed  letters  dated as of March 15,  1999 and  March  31,  1999
(together,  the  "WAIVER"),  pursuant to which certain  provisions of the Credit
Facilities  were waived or modified.  This letter,  if agreed to and accepted by
Homestead,  shall (a)  supercede  and replace the Waiver in its entirety and (b)
modify  and amend the  Working  Capital  Facilities.  Unless  otherwise  defined
herein,  all capitalized  terms used herein shall have the meanings  assigned to
such terms in the Credit Facilities.


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         Notwithstanding  anything  to the  contrary  contained  in  the  Credit
Facilities and the Waiver,  the  signatories  hereto,  in  consideration  of Ten
Dollars  ($10.00)  and other good and  valuable  consideration,  the receipt and
sufficiency of which are hereby acknowledged, hereby agree as follows:

         1. The term  "Expiry  Date" as  defined  in  Section  1.1 of the Bridge
         Facility shall mean the earliest of (i) October 31, 1999, (ii) the date
         of the merger of Homestead with any other Person, (iii) the date of the
         sale, assignment, lease, transfer, conveyance, or other disposition (in
         one transaction or a series of transactions) to any person or group (as
         such term is used in Section  13(d)(3)  of the  Exchange  Act of all or
         substantially  all  of  Homestead's   assets,  (iv)  the  date  of  the
         acquisition  by any  Person or group  (as such term is used in  Section
         13(d)(3) of the Exchange  Act),  other than Realty or its Affiliates of
         more than 50% of the voting power of the capital  stock of Homestead by
         way of purchase, merger, consolidation or otherwise or (v) the 45th day
         following the later of (A) the termination of negotiations initiated in
         April  1999  between  Homestead  and  Party A on  Schedule  I,  (B) the
         termination of negotiations  initiated in April 1999 between  Homestead
         and Party B on Schedule I, and (C) the termination of negotiations with
         other potential merger partners commenced no later than May 15, 1999.

         2.  Homestead may incur  unsecured,  subordinated  Indebtedness  in the
         aggregate  principal amount of $25,000,000 (the "SCG Loan") to Security
         Capital  Group  Incorporated  ("Security  Capital").  Homestead may not
         create,  incur,  assume or suffer any other Indebtedness of any nature,
         other than (a) the Loan under each Credit Facility, (b) as in effect on
         March 19, 1999, the guaranty of the Sale-Leaseback Facility and (c) the
         Indebtedness  outstanding pursuant to the Funding Commitment Agreement,
         dated as of October 17, 1996,  among Homestead,  PTR Homestead  Village
         Limited  Partnership  and  Archstone  Communities  Trust in the maximum
         principal amount of $221,333,620.00.

          3.  Homestead  shall be permitted  to effect one or more  issuances of
          common stock, provided:

                  (a) the  first  $200,000,000  or lesser  amount  raised of net
         proceeds of such issuances are used solely to repay the Bridge Facility
         (it being agreed that the Bridge  Facility shall be repaid on or before
         the Expiry Date even if such net  proceeds are  insufficient  to effect
         such repayment in full);

                  (b) any  remaining  net proceeds of such issuance are used (i)
         to  repay  the  Working   Capital   Facilities  in  proportion  to  the
         outstanding  principal balances thereof,  (ii) to fund the construction
         and development of the Mortgaged  Properties (as defined in each of the
         Working  Capital  Facilities),  (iii) to repay the SCG Loan, or (iv) to
         provide  for  working  capital  purposes  and other  general  corporate
         purposes,

                  (c) all payments due under such stock are  subordinate  to the
         prior and full payment of the Working Capital Facilities; and

                  (d) Homestead  is, and  continues to be, in compliance  with
          the terms of both of the Working Capital Facilities.

         4. If Homestead has not repaid all amounts outstanding under the Bridge
         Facility by the Expiry Date Security  Capital may fund its  obligations
         under the Subscription Agreement by purchasing convertible subordinated
         debentures issued by Homestead, provided:

                  (a) the net proceeds of such debenture  offering are used only
         to repay the Bridge  Facility,  if not then repaid (but nothing in this
         paragraph  shall be  construed  as a consent  to the  extension  of the
         Bridge Facility's maturity or expiry date beyond the Expiry Date);

                  (b)  the  convertible  debentures  shall  automatically,   and
         pursuant to their terms,  be  converted  into common stock of Homestead
         within 90 days of their  issuance,  but in no event later than  January
         29, 2000,  unless the debentures  were  previously  refinanced with the
         proceeds  of an  equity  offering  consistent  with  the  terms of such
         debentures; and


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                 (c) Homestead is, and continues to be, in compliance  with the
terms of both of the Working Capital Facilities.

After the Expiry Date, Homestead may complete an offering of common stock and/or
convertible preferred securities, provided:

                 (w)  the aggregate gross proceeds of an offering of convertible
preferred securities do not exceed $225,000,000;

                  (x) the net  proceeds of the  offering of common  stock and/or
convertible  preferred  securities  are  first  used to retire  the  convertible
debentures and repay the SCG Loan;

                  (y) any  remaining  net proceeds of such  offering are used to
repay the Working Capital Facilities in proportion to the outstanding  principal
balances thereof; and

                  (z) Homestead is, and continues to be, in compliance  with the
terms of both of the Working Capital Facilities.

For purposes of the financial covenants in the Working Capital  Facilities,  the
convertible  debentures  issued  to  Security  Capital  Group  Incorporated  and
otherwise satisfying the conditions of this Section 4 shall, through January 29,
2000, be deemed equity, and payments made under the convertible debentures shall
be excluded from calculations made under such covenants.

         5. For  purposes of the  financial  covenants  in the  Working  Capital
         Facilities, until the Expiry Date, the principal amount of indebtedness
         under the Bridge Facility Loan shall be deemed equity and payments made
         under the Bridge  Facility  shall be excluded  from  calculations  made
         under such covenants.

         6.  Homestead  shall  provide  at least  10 days  prior  notice  of the
         consummation of any transaction described in Section 1(a)(ii), (iii) or
         (iv)  of  this  letter,   and  shall  provide   prompt  notice  of  the
         termination,   including  the  date  of  termination,  of  negotiations
         described in Section 1(a)(v) of this Letter.

         7.  Homestead  agrees  to  promptly  initiate  an  offering  of  equity
         securities in  conformity  with Section 3 of this letter upon the later
         of the  terminations  described  in Section  1(v) and agrees to use its
         best efforts to consummate  such offering  within 45 days of initiation
         or as soon as reasonably possible thereafter.

         8. Until the Bridge  Facility is repaid in full and  terminated,  if an
         Event  of  Default  under  the  Bridge  Facility  has  occurred  and is
         continuing,  Security  Capital  authorizes NY Branch,  as agent for the
         Banks under the Bridge Facility,  to notify Wells Fargo Bank,  National
         Association  ("Wells Fargo"), as agent for the Lenders under the Credit
         Agreement,  dated as of June 5, 1998,  among  Security  Capital,  Wells
         Fargo, as agent, and the financial institutions party thereto from time
         to time (as amended from time to time, the "SCG Credit Agreement"),  to
         fund  amounts to the  lenders  under the Bridge  Facility  to repay the
         outstanding  Indebtedness  under the Bridge Facility,  provided that NY
         Branch shall not request a funding of greater than  $200,000,000  under
         the SCG Credit Facility. Upon any such funding,  Homestead shall, as of
         the  date of such  funding,  issue  convertible  debentures  under  the
         Subscription  Agreement to Security  Capital in the principal amount of
         such  funding.  Until  the  Bridge  Facility  is  repaid  in  full  and
         terminated, Security Capital shall keep at least $200,000,000 available
         for  borrowing  under  the SCG  Facility  and  shall  take all  actions
         necessary and appropriate to provide for any funding authorized by this
         Section 8. Security  Capital's  obligations  to purchase  securities of
         Homestead  under the  Subscription  Agreement  shall be  reduced to the
         extent of the  principal  amount of any funding  requested by NY Branch
         and funded from proceeds of the SCG Facility.

          9. This letter shall constitute a Loan Document for all purposes under
          each of the Credit Facilities.

         10. Except as expressly  modified herein,  all provisions of the Credit
         Facilities  and of  all  other  instruments,  documents  or  agreements
         delivered by Homestead in  connection  therewith,  including all letter
         agreements incorporated therein, shall remain in full force and effect.


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         11. Except as otherwise  specifically set forth herein,  the failure of
         NY Branch and other lenders to insist upon strict  compliance  with any
         terms or conditions of the Credit  Facilities shall not be considered a
         waiver or release of such terms or conditions nor limit the right of NY
         Branch and other  lenders to insist  upon strict  compliance  with such
         terms and  conditions  and any other terms and conditions of the Credit
         Facilities and any other instruments, documents or agreements delivered
         in connection  therewith.  No provision of the Credit Facilities may be
         amended or modified,  except by an instrument in writing  signed by the
         party to be charged.

         If this  letter  correctly  sets  forth your  understanding,  please so
indicate by signing below.

                                   Very truly yours,

                                   with respect to all of the Credit Facilities:

                         Commerzbank AG, New York Branch


                        By:______________________________
                                      Name:
                                     Title:

                        And by: _________________________
                                      Name:
                                     Title:

                       Commerzbank AG, Los Angeles Branch



                        By:______________________________
                                      Name:
                                     Title:



                       And by: __________________________
                                      Name:
                                     Title:



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              with respect to the Suburban Working Capital Facility
                             and the Bridge Facility only:

                     Wells Fargo Bank, National Association


                        By:______________________________
                                      Name:
                                     Title:

           with respect to the Suburban Working Capital Facility only:


                            Chase Bank of Texas, N.A.


                        By:______________________________
                                      Name:
                                     Title:


                                 BankBoston N.A.


                       By:________________________________
                                      Name:
                                     Title:

AGREED TO AND ACCEPTED
WITH RESPECT TO ALL OF THE CREDIT FACILITIES:

Homestead Village Incorporated


By:_______________________________
      Name:  David C. Dressler, Jr.
      Title:    Co-Chairman


AGREED TO AND ACCEPTED
WITH RESPECT TO ALL OF THE CREDIT FACILITIES:

Security Capital Group Incorporated



By:______________________
     Paul E. Szurek
     Chief Financial Officer