UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

                   Quarterly Report Under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

      For Quarter Ended: September 30, 1997 Commission File Number: 1-9646
                         ------------------

                           ASR Investments Corporation
             ------------------------------------------------------
             (Exact name of Registrant as specified in its Charter)

                                    Maryland
                  ---------------------------------------------
         (State or other jurisdiction of incorporation or organization)

                                   86-0587826
                          ----------------------------
                      (I.R.S. Employer Identification No.)

                   335 N. Wilmot, Suite 250, Tucson, AZ 85711
                   ------------------------------------------
                    (Address of principal executive offices)

                                 (520) 748-2111
                    ----------------------------------------
              (Registrant's telephone number, including area code)

                                (Not applicable)
                      -------------------------------------
              (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.
                                 X Yes     No
                                ---     ---

                      APPLICABLE ONLY TO CORPORATE ISSUERS:
   Indicate the number of shares outstanding of each of the issuer's classes
              of common stock, as of the latest practicable date.

        Common Stock (par value $.01) outstanding as of November 7, 1997:
                                4,990,057 shares.
<PAGE>
                           ASR INVESTMENTS CORPORATION
                           Consolidated Balance Sheets
                    September 30, 1997 and December 31, 1996
                             (Dollars in Thousands)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                   1997         1996
                                                                 ---------    ---------
<S>                                                              <C>          <C>      
   Assets                                                       
     Real estate investments, at cost:
        Land                                                     $  49,522    $  15,514
        Buildings and improvements                                 210,969       58,476
        Construction in progress                                                 14,694
        Land held for development                                      925          925
        Investments in joint ventures                                             2,811
        Other real estate                                              841        1,022
                                                                 ---------    ---------
            Total real estate investments                          262,257       93,442
        Accumulated depreciation                                   (11,539)      (7,504)
                                                                 ---------    ---------
            Real estate investments, net of depreciation           250,718       85,938
     Cash and cash equivalents                                      11,201        2,403
     Mortgage assets                                                              5,039
     Restricted cash                                                 7,731        2,930
     Deferred loan fees                                              2,262        1,090
     Goodwill                                                        1,373           
     Other assets                                                    2,020          396
                                                                 ---------    ---------
            Total assets                                         $ 275,305    $  97,796
                                                                 =========    =========
   Liabilities
     Real estate notes payable                                   $ 167,273    $  48,855
     Construction loan payable                                                      255
     Short-term borrowing                                                         2,014
     Construction costs payable                                                   1,581
     Security deposits and deferred rental income                    2,131          644
     Other liabilities                                               7,916        4,345
                                                                 ---------    ---------
            Total  liabilities                                     177,320       57,694
                                                                 ---------    ---------
   Stockholders' Equity
     Convertible LP Units  (Note 3)                                 19,527           
     Common Stock, par value $.01 per share, 40,000,000 shares
     authorized; 5,088,613 and 3,307,892 shares issued                  50           33
     Additional paid in capital                                    191,520      155,964
     Deficit                                                      (109,767)    (112,964)
     Stock note receivable                                            (317)        (385)
     Treasury stock - 184,742 and 160,742  shares                   (3,028)      (2,546)
                                                                 ---------    ---------
             Total  stockholders'  equity                           97,985       40,102
                                                                 ---------    ---------
        Total  liabilities  and  stockholders'  equity           $ 275,305    $  97,796
                                                                 =========    =========
</TABLE>
See Notes to Consolidated Financial Statements.
                                        2
<PAGE>
                           ASR INVESTMENTS CORPORATION
                      Consolidated Statements of Operations
            For the Quarters and Nine Months Ended September 30, 1997
                and 1996 (In thousands except per share amounts)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                     Quarters              Nine Months
                                               --------------------    --------------------
                                                 1997        1996        1997        1996
                                               --------    --------    --------    --------
<S>                                            <C>         <C>         <C>         <C>     
Real  Estate  Operations
   Rental and other income                     $  9,890    $  3,660    $ 20,777    $ 10,941
                                               --------    --------    --------    --------
   Operating and maintenance expenses             3,559       1,452       7,549       4,007
   Real estate taxes and insurance                1,024         350       2,173       1,069
   Interest expense on real estate mortgages      3,058       1,079       6,435       3,269
   Depreciation and amortization                  1,999         706       4,031       2,074
                                               --------    --------    --------    --------
     Total operating expenses                     9,640       3,587      20,188      10,419
                                               --------    --------    --------    --------
   Income from  real  estate                        250          73         589         522
                                               --------    --------    --------    --------
   Gain on sale of real estate                                              474
                                                                       --------
Mortgage  Assets
   Prospective yield income                                     604         588       2,174
   Income from redemptions and sales                          2,738      16,650       7,725
   Interest expense                                             (28)        (25)       (152)
                                                           --------    --------    --------
   Income from mortgage assets                                3,314      17,213       9,747
                                                           --------    --------    --------
 Income Before Administrative Expenses
   and Other Income (Expense)                       250       3,387      18,276      10,269
   Administrative expenses                         (616)     (1,018)     (2,560)     (2,355)
   Aquisition related expenses                                 (404)     (6,215)       (404)
   Other income (expense), net                      342         127         649         248
                                               --------    --------    --------    --------
Net Income (Loss)                              ($    24)   $  2,092    $ 10,150    $  7,758
                                               --------    --------    --------    --------

Net  Income  Per  Share of Common
   Stock and Common Stock Equivalents          $   0.00    $   0.66    $   2.28    $   2.46
                                               ========    ========    ========    ========
Average  Shares of Common Stock and
   Common Stock Equivalents                       5,448       3,155       4,447       3,155
                                               ========    ========    ========    ========
Dividends  Declared  Per  Share                $   0.50    $   0.50    $   1.50    $   1.50
                                               ========    ========    ========    ========
</TABLE>
See Notes to Consolidated Financial Statements.
                                        3
<PAGE>
                           ASR INVESTMENTS CORPORATION
                      Consolidated Statements of Cash Flows
              For the Nine Months Ended September 30, 1997 and 1996
                                 (In Thousands)
                                   (Unaudited)

OPERATING ACTIVITIES                                         1997        1996
                                                           --------    --------
Net income                                                 $ 10,150    $  7,758
Principal noncash charges
    Depreciation and amortization                             4,442       2,415
    Aquisition related expenses                               5,250
    Gain on sale of real estate                                (474)
    Increase in deferred compensation                         1,271
    Increase in stock appreciation rights                       672         507
    Increase in other assets                                 (1,624)       (182)
    Increase in other liabilities                             3,720       1,147
                                                           --------    --------
Cash Provided By Operations                                  23,407      11,645
                                                           --------    --------
INVESTING  ACTIVITIES
Investment in apartments                                    (22,528)       (854)
Construction expenditures                                    (6,209)     (7,027)
Proceeds from sale of real estate                             2,830
Investment in joint ventures                                    358         (28)
Purchase of land for development                                            (60)
Other real estate assets                                        181         269
Restricted cash                                              (4,801)       (791)
Reduction in mortgage assets                                  5,039       6,350
                                                           --------    --------
Cash Used In Investing Activities                           (25,130)     (2,141)
                                                           --------    --------
FINANCING ACTIVITIES
Issuance of real estate notes payable                        10,410
Payment of loan costs                                        (1,453)        (71)
Proceeds from construction loan                              12,595         247
Repayment of real estate notes                                 (844)       (316)
Short-term borrowing                                         (2,014)     (2,541)
Construction costs payable                                   (1,581)      1,384
Stock options exercised                                          17          23
Payment of dividends                                         (6,011)     (4,734)
Payment of stock notes                                           68
Distributions on LP Units                                      (942)
Other                                                           276
                                                           --------    --------
Cash Provided By (Used In) Financing Activities              10,521      (6,008)
                                                           --------    --------
CASH
    Increase during the period                                8,798       3,496
    Balance - beginning of period                             2,403       2,421
                                                           --------    --------
    Balance - end of period                                $ 11,201    $  5,917
                                                           ========    ========
Supplemental Disclosure of Cash Flow Information
Interest paid                                              $  7,024    $  3,424
Interest capitalized                                            638         139
Stock issued for contract termination                         5,250
Non-cash transactions associated with acquisitions:
     Issuance of common stock                                30,306
     Issuance of convertible LP Units                        19,527
     Notes payable assumed                                   95,397

See Notes to Consolidated Financial Statements.
                                        4
<PAGE>
                           ASR INVESTMENTS CORPORATION
                 Consolidated Statement of Stockholders' Equity
                  For the Nine Months Ended September 30, 1997
                                 (In Thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                                               Common
                                                                          Additional                          Stock in
                              Number of  Number of      LP        Par      Paid-In                 Notes      Treasury-
                                Shares   LP Units     Units      Value     Capital    Deficit    Receivable    at Cost      Total
                              ---------  ---------  ---------  ---------  ---------  ---------   ----------   ---------   ---------
<S>                           <C>        <C>        <C>        <C>        <C>        <C>         <C>         <C>         <C>      
Balance, December 31, 1996        3,308                        $      33  $ 155,964  ($112,964)  ($    385)  ($  2,546)  $  40,102
Net income                                                                              10,150                              10,150
Dividends declared                                                                      (6,953)         68                  (6,885)
Stock issuance (repurchase)       1,781        971  $  19,527         17      35556                               (482)     54,618
                              ---------  ---------  ---------  ---------  ---------  ---------   ---------   ---------   ---------
Balance, September 30, 1997       5,089        971  $  19,527  $      50  $ 191,520  ($109,767)  ($    317)  ($  3,028)  $  97,985
                              =========  =========  =========  =========  =========  =========   =========   =========   =========
</TABLE>
See Notes to Consolidated Financial Statements.
                                       5
<PAGE>
                           ASR INVESTMENTS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       For the Quarters and Nine Months Ended September 30, 1997 and 1996


1.       BASIS OF PRESENTATION

         The accompanying interim consolidated  financial statements include the
accounts  of  the  Company  and  its  wholly  owned  subsidiaries  and  Heritage
Communities L.P. (collectively the "Company").  Investments in joint ventures in
which the Company does not own a  controlling  interest are  accounted for under
the equity method. All significant  inter-company balances and transactions have
been eliminated.  In the opinion of management,  all adjustments  (consisting of
normal recurring adjustments)  considered necessary for a fair presentation have
been  included.  They do not  include  all of the  information  and  disclosures
generally  required for annual  financial  statements.  These interim  operating
results are not  necessarily  indicative of the results that may be expected for
the entire year. These interim consolidated  financial statements should be read
in  conjunction  with the  December  31,  1996  audited  consolidated  financial
statements and notes thereto.

         Reclassification  - Certain  reclassification  has been made to conform
the prior year with the current year presentation.

         New Accounting  Standard - In February  1997, the Financial  Accounting
Standards Board issued FASB No. 128, "Earnings Per Share," which establishes new
standards for computing and presenting earnings per share (EPS). It replaces the
presentation  of primary EPS with a presentation  of basic EPS. It also requires
dual  presentation of basic and diluted EPS on the face of the income  statement
for all entities with complex capital  structures and requires a  reconciliation
of the number of shares  used for the basic EPS  computation  to the diluted EPS
computation.  The new statement is effective for financial  statements  for both
interim and annual periods ending after December 15, 1997.  Adoption of SFAS No.
128 will not result in any material change to the earnings per share amounts for
the quarters and nine months ended September 30, 1997 and 1996.

         FASB No. 129 - Disclosure of information about Capital Structure,  FASB
No. 130 - Reporting  Comprehensive  Income, and FASB No. 131 - Disclosures about
Segments of an Enterprise and Related  Information were also issued during 1997.
These new statements are effective for financial statements for both interim and
annual periods ending after December 15, 1997. Adoption of these statements will
not have any material effect on the Company's  consolidated financial statements
for the quarters and nine months ended September 30, 1997 and 1996.
                                        6
<PAGE>
                           ASR INVESTMENTS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       For the Quarters and Nine Months Ended September 30, 1997 and 1996


         Convertible  LP  Units - The  limited  partnership  units  of  Heritage
Communities  L.P. held by  non-affiliates  of the Company are accounted for as a
part of  stockholders'  equity.  Distributions  on the units are subtracted from
deficit as declared. LP units held by non-affiliates are considered common stock
equivalents  in  the  determination  of  earnings  per  share.  See  Note  3 for
additional description of the Partnership.

         Gain on Sale  of  Real  Estate  - Gains  on  sales  of  properties  are
recognized by the Company when the  recognition  criteria set forth by generally
accounting principles have been met.

         Forward-Looking   Statements   -  This   Form  10-Q   report   contains
forward-looking  statements  within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended.  The Company's actual results could differ materially from those set
forth in the forward-looking  statements as a result of, among other things, the
risk factors set forth in the Company's filings with the Securities and Exchange
Commission,   changes  in  general  economic   conditions  and  changes  in  the
assumptions used in making such forward-looking statements.

2.       REAL ESTATE ACQUISITIONS AND DEVELOPMENT

         At  December  31,  1996,   the  Company  owned  directly  18  apartment
communities (2,683 units) in operation and one community (Finisterra Apartments)
under  construction.  These  communities are located in Arizona,  Texas, and New
Mexico. The Company completed the construction of the Finisterra Apartments (356
units) in July 1997.  The Company made the  following  acquisitions  during 1997
(dollars in thousands):

                                              First         Second        Third
                                             Quarter       Quarter       Quarter
                                             -------       -------       -------
Number of communities acquired                     1            17             4
Number of units acquired                         266         3,043         1,102
Total purchase price                        $  4,450      $118,782      $ 39,996
Total mortgage loans                        $  3,700      $ 75,696      $ 26,411

         Winton  Acquisition  - On April 30,  1997,  the Company  completed  the
acquisition  of 13  apartment  communities  containing  2,260  units  located in
Houston and
                                       7
<PAGE>
                           ASR INVESTMENTS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       For the Quarters and Nine Months Ended September 30, 1997 and 1996


Dallas,  Texas and  Pullman,  Washington,  and one  office  building  located in
Seattle,  Washington  (the  "Winton  Properties").  The  acquisitions  were made
pursuant to a Master  Combination and  Contribution  Agreement dated November 8,
1996. The sellers were 15 separate  limited  partnerships in which Don W. Winton
was the  general  partner.  The  total  purchase  price  of the  properties  was
approximately $83,223,000.  The Company (i) assumed or refinanced first mortgage
loans totalling  $49,396,000,  (ii) issued 682,098 shares of common stock, (iii)
issued limited  partnership units ("LP Units")  convertible to 943,701 shares of
common  stock of the  Company  after April 30,  1998;  and (iv) paid the sellers
$1,250,000 for  transaction  costs.  As a part of the  acquisition,  the Company
issued 70,284 shares of common stock to acquire the entire interests in Winton &
Associates, the property management company for the Winton Properties.

         The acquisitions of the Winton  Properties and Winton & Associates have
been accounted for under the purchase method.  The common stock and the LP Units
are recorded at $20.038 per share,  the average  closing  price of the Company's
common stock for the ten days preceding the  announcement of the acquisitions on
November  19,  1996.  The excess of the cost of the  purchase  price of Winton &
Associates over the net tangible assets acquired is recorded as goodwill that is
amortized over 20 years.

         Merit  Acquisition  - On  September  18, 1997,  the Company  acquired a
portfolio of three apartment  communities (totaling 900 units) in Dallas, Texas,
for  approximately  $29,346,000.  The Company (i)  obtained or assumed  mortgage
loans of approximately $18,511,000 with an average fixed interest rate of 7.57%,
(ii) issued  374,581  shares of common stock and 27,721 of convertible LP units,
and (iii) paid  $2,400,000  in cash to the sellers.  The Company  plans to spend
$1,900,000 on numerous substantive improvements to the communities.

         Individual  Acquisitions  - In  March  1997,  the  Company  acquired  a
266-unit  apartment  community in northwest Houston,  Texas for $4,450,000.  The
Company  planned to spend $700,000 on numerous  substantive  improvements to the
community. The Company obtained a first mortgage loan of $3,700,000 with a fixed
rate of 8.39%. The Company issued 86,500 shares of common stock for net proceeds
of $1,622,000 to provide for the cash used in the acquisition.

         In April 1997,  the Company  acquired a 257-unit  community in Houston,
Texas,  for $6,000,000 and obtained a first mortgage loan for $4,400,000  with a
fixed interest rate
                                       8
<PAGE>
                           ASR INVESTMENTS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       For the Quarters and Nine Months Ended September 30, 1997 and 1996


of  8.57%.  The  Company  planned  to spend  $600,000  on  numerous  substantive
improvements to the community.  On May 9, 1997, the Company  acquired a 176-unit
apartment community in Seattle,  Washington, for $4,059,000 and obtained a first
mortgage loan of  $2,900,000  with a fixed  interest rate of 8.67%.  The Company
planned to spend $400,000 on numerous substantive improvements to the community.
The Company  issued  187,847  shares of common  stock for total net  proceeds of
$3,394,000 to pay for the two purchases.

         On  September  30,  1997,  the  Company  acquired a 202-unit  apartment
community  located in Kennewick,  Washington,  for $10,650,000.  The Company (i)
assumed mortgage debt of $7,900,000 with an interest rate of 7.87%,  (ii) issued
91,678 shares of the  Company's  common stock and (iii) paid $650,000 in cash to
the seller.  As the  community is  relatively  new, the Company does not plan to
incur major capital improvement expenditures.

         On  October  27,  1997,  the  Company  acquired  a  276-unit  apartment
community  in Kitsap  County,  Washington,  for  $13,249,000.  The  Company  (i)
obtained or assumed mortgage loans of  approximately  $7,825,000 with an average
fixed  interest  rate of 8.47%,  (ii) issued  86,184  shares of common stock and
(iii) paid $3,100,000 in cash to the seller. As the community is relatively new,
the Company does not plan to incur major capital improvement expenditures.

         Development  - In March  1996,  the  Company  began  construction  of a
356-unit apartment community,  Finisterra Apartments, in Tempe, Arizona. In June
1997,  the  construction  was  substantially   completed  at  a  total  cost  of
approximately $21,000,000.

         Joint  Ventures - Prior to May 1997,  the Company  owned six  apartment
communities  (1,441 units) through joint ventures in which the Company was a 15%
equity partner and the managing  partner.  On May 1, 1997, the Company  acquired
the remaining  interest in one joint venture,  La Privada Apartments L.L.C., for
$8,233,000 and sold to its partner the Company's  entire  interests in the other
five joint ventures for total net proceeds of $2,062,000. The Company recorded a
gain of $474,000 on the sale. The La Privada  Apartments is a 350-unit community
in Scottsdale,  Arizona.  The Company  obtained a $3,000,000 loan to pay for the
acquisition.  The loan bears interest at 3% over LIBOR.  The purchase  increased
the Company's  investment in apartments by  approximately  $25,500,000  and real
estate notes payable by $19,000,000.
                                       9
<PAGE>
                           ASR INVESTMENTS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       For the Quarters and Nine Months Ended September 30, 1997 and 1996


         With the above  transactions,  the Company  currently owns 41 apartment
communities containing 7,725 units and an office building.

         Proforma Data - The following  selected  unaudited pro forma results of
operations  data for the quarter and nine months ended  September  30, 1997 have
been prepared as if the above  transactions had occurred at January 1, 1997. The
proforma data are provided for information  purposes only and are not indicative
of the  results  that would have  occurred  or which may occur in the future (in
thousands, except per share amounts).

                                              Quarter    Nine Months
                                              -------    -----------
            Real estate revenues              $ 11,980    $ 34,540
            Real estate operating expenses:
                 Operating expenses             (5,506)    (15,824)
                 Depreciation                   (2,489)     (7,330)
                 Interest                       (3,607)    (10,282)
                                              --------    --------
            Income from real estate                378       1,104
            Gain on sale of real estate           --           474
            Income from mortgage assets           --        17,265
            Acquisition related expenses          --        (6,215)
            Administrative expenses               (616)     (2,506)
            Other income                           267         342
                                              --------    --------
            Proforma Net Income               $     29    $ 10,464
                                              ========    ========
            Pro Forma Net Income Per  Share   $      0    $   1.76
                                              ========    ========

3.       HERITAGE COMMUNITIES L.P.

         The Company  formed  Heritage  Communities  L.P.  ("Heritage  LP"),  an
operating  partnership,  in  1997  for  the  purpose  of  acquiring  the  Winton
Properties  and other  apartment  communities.  Heritage  is a Delaware  limited
partnership  in which the Company and a wholly owned  subsidiary of the Company,
Heritage SGP, are the sole general partners.  To the extent that Heritage LP has
sufficient  operating  cash  flows,  holders of limited  partnership  units ("LP
Units") will  receive  quarterly  distributions  per unit equal to the per share
dividend on the  Company's  common  stock.  To the extent  that  Heritage LP has
insufficient  cash to pay the  distributions,  the  holders  of LP units will be
credited for the unpaid  distribution  and interest on the unpaid  distribution;
such unpaid balances will be given priority for future distributions.
                                       10
<PAGE>
                           ASR INVESTMENTS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       For the Quarters and Nine Months Ended September 30, 1997 and 1996


         Heritage LP's items of income,  gain,  loss and deduction are allocated
among its partners, subject to certain special allocations,  in a similar manner
for  purposes  of both  book  gain or loss and tax gain or loss.  Net  income is
allocated (i) first, to each limited partner to the extent that, on a cumulative
basis, net losses previously allocated to the limited partners exceed net income
previously  allocated to limited partners,  (ii) second, to each limited partner
to the extent that such  limited  partner  has been  allocated  on a  cumulative
basis,  net income  equal to the sum of the  distributions  paid to such limited
partner  and the  unreturned  balances in the  accrual  accounts  and the unpaid
distribution  accounts  maintained  with  respect  to the LP Units  held by such
limited  partner,   and  (iii)  the  general  partners  on  a  pro  rata  basis.
Notwithstanding  the  allocations in (i) and (ii) above, at least one percent of
each item of gain, loss,  income and deduction for each year is allocated to the
general partners.

         Net losses are  allocated  to the  partners  in  accordance  with their
respective  percentage  interests in Heritage LP, except that net losses are not
allocated to any limited partner to the extent that such allocation  would cause
the limited  partner to have an adjusted  capital  account deficit at the end of
the taxable year. All net losses in excess of such limitations will be allocated
to the general partners on a pro rata basis

         The LP Units are convertible to one share of the Company's Common Stock
after one year from the date of issuance.  If an LP Unit is  converted  prior to
April 30, 2007, the holder will also be paid any unpaid balances in the holder's
distribution account. An LP Unit holder who exercises the conversion after April
30,  2007  will not be paid any  unpaid  balance  in the  holder's  distribution
account if the market value of the  Company's  common stock is equal to at least
110% of the sum of the initial contribution and the unpaid balance.

         Holders  of LP  Units  do not  have  the  right  to  take  part  in the
management or control of the business or affairs of Heritage  L.P.  Amendment of
the partnership  agreement would require the consent of the general partners and
more  than  50% of the LP  Units.  Heritage  L.P.  will be  dissolved  upon  the
occurrence of certain specified and limited events or December 31, 2086.

         Heritage  LP  issued  943,701  LP Units to the  sellers  of the  Winton
Properties  and  27,721 LP Units to the  sellers of the three  Dallas  apartment
communities  acquired in September.  As of September  30, 1997,  Heritage LP had
2,632,426 LP Units outstanding,
                                       11
<PAGE>
                           ASR INVESTMENTS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       For the Quarters and Nine Months Ended September 30, 1997 and 1996


of which 1,661,004 Units (63.1%) were owned by the Company. Heritage LP declared
a  distribution  of $0.50 per Unit for each of the quarters  ended June 30, 1997
and September 30, 1997. In October 1997,  Heritage LP issued 226,411 LP Units to
the Company in connection with an acquisition.

4.       MORTGAGE ASSETS

         In June 1997, the Company sold all of its remaining mortgage assets for
$13,350,000  and a gain  of  $10,970,000.  The  Company  paid  off  the  related
short-term  borrowing of $500,000.  The Company  received a total of $20,880,000
from the sale or redemption  of mortgage  assets and realized  total  redemption
income of  $16,650,000  during 1997.  During the first nine months of 1996,  the
Company  received a total of $6,000,000  from the sale or redemption of mortgage
assets and realized total redemption income of $4,987,000.

5.       NOTES PAYABLE

         During the first nine months of 1997, the Company obtained new mortgage
loans or assumed  existing  mortgage loans totalling  $105,807,000 in connection
with its  apartment  acquisitions.  At September 30, 1997,  the total  permanent
mortgage loans had a weighted average stated rate of 8.2%.

         In  addition,   the  Company  has  converted  the   construction   loan
($12,850,000 outstanding at September 30, 1997) to a three-month loan that bears
interest at 2.5% over the one-month LIBOR. The Company is working on refinancing
it to a permanent loan at a lower interest rate.

6.       RELATED PARTY TRANSACTIONS

         From the inception of the Company through April 30, 1997, Pima Mortgage
L.P.  (the  "Manager"),  managed the  operations  of the  Company  pursuant to a
management agreement.  The Company also had a property management agreement with
Pima Realty  Advisors,  Inc. (the "Property  Manager") for each of its apartment
communities.  The Manager and the Property Manager were owned by three principal
executive officers of the Company.  On April 30, 1997,  pursuant to the approval
of the Company's stockholders,  the Company acquired the entire interests in the
Manager and the Property
                                       12
<PAGE>
                           ASR INVESTMENTS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       For the Quarters and Nine Months Ended September 30, 1997 and 1996


Manager  for  262,008  shares of  common  stock and  terminated  the  management
agreements.  The common stock issued was recorded at $20.038 per share which was
the average  closing  price of the common stock for the ten days  preceding  the
public announcement of the acquisition.  In addition, the Company paid the three
principal  executive officers $802,700 in connection with the acquisition of the
Winton  Properties.  As the contracts  with the Pima  entities were  effectively
terminated,  the cost of the Pima entities and the amounts paid to the executive
officers were recorded as an  acquisition  related  expense in the  accompanying
statements of income.

         The Company paid the Manager  management fee and  administrative fee of
$219,000 for 1997 and  $430,000  for the first nine months of 1996.  The Company
paid the Property  Manager  $190,000 for 1997 and  $329,800,  for the first nine
months of 1996.
                                       13
<PAGE>
                           ASR INVESTMENTS CORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
       For the Quarters and Nine Months Ended September 30, 1997 and 1996


General

         ASR Investments Corporation (the "Company") is a real estate investment
trust  engaged   primarily  in  the   acquisition  and  operation  of  apartment
communities in the southwestern United States. At December 31, 1996, the Company
owned  directly 18 apartment  communities  (2,683  units) in  operation  and one
community  (Finisterra  Apartments)  under  construction.  These communities are
located  in  Arizona,   Texas,  and  New  Mexico.   The  Company  completed  the
construction  of the  Finisterra  Apartments  (356  units) in July 1997 and made
substantial  amounts  of  acquisitions  in  1997.  See  Note  2 to  consolidated
financial statements for certain detailed information on the acquisitions. Below
is a summary of the 1997 acquisitions (dollars in thousands):

                                                 First       Second      Third
                                                Quarter     Quarter     Quarter
                                                -------     -------     -------
Number of communities acquired                         1          17           4
Number of units acquired                             266       3,043       1,102
Total purchase price                            $  4,450    $118,782    $ 39,996
Total mortgage loans                            $  3,700    $ 75,696    $ 26,411
Number of common stock issued                     86,500     869,945     466,259
Number of convertible LP Units issued               --       943,701      27,721

         In May 1997,  the  Company  sold to its partner  the  Company's  entire
interests in five joint ventures for total net proceeds of $2,062,000.

         At September 30, 1997, the Company owned 40 apartment  communities with
a total of 7,449 units and an office building.

         In June 1997,  the Company sold all its remaining  mortgage  assets for
$13,350,000  for a gain  of  $10,970,000.  During  1997,  the  Company  received
$22,277,000  from the sale or  redemption  of  mortgage  assets.  The Company is
re-investing a majority of the proceeds in additional apartment communities.  As
a result of the sale of all of its mortgage assets, the Company will not realize
any mortgage asset cash flows or income in future periods.
                                       14
<PAGE>
                           ASR INVESTMENTS CORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
       For the Quarters and Nine Months Ended September 30, 1997 and 1996


Results of Operations

Comparison of Quarters Ended September 30, 1997 and 1996

         Real Estate  Operations  - Real estate  operating  income and  expenses
increased  substantially  primarily due to acquisitions  made in 1997. Below are
the operating results of the new communities for the period owned by the Company
during the third quarter of 1997 (in thousands):

                Rental and other income                  $6,222
                Property management income                   68
                                                         ------
                Total real estate revenues                6,290
                                                         ------
                Operating & maintenance expenses          2,080
                Property management expenses                 61
                Real estate taxes & insurance expenses      678
                Interest expense                          1,940
                Depreciation expense                      1,291
                                                         ------
                Total real estate operating expenses      6,050
                                                         ------
                Income from real estate                  $  240
                                                         ======

         On the "same store" basis (i.e.,  for  properties  owned by the Company
during the third quarter of 1996),  the Company  realized a 0.1% increase in net
operating  income  ("NOI").  Below are the rates of  increase or decrease in the
components of the NOI:

                                     Oper. &          Taxes
                       Rental         Maint.        Insurance
                       Income        Expense         Expense           NOI
                       ------        -------         -------           ---
Total                  (1.0%)         (2.3%)          (1.2%)           0.1%
Tucson                 (7.5%)         (3.9%)           9.4%          (12.9%)
Phoenix                11.0%           0.0%           12.5%           21.7%
Houston                 3.6%          (3.9%)          (4.9%)          14.3%
Albuquerque            (1.8%)          6.0%           (8.2%)          (4.8%)

         The operating results of the Company's portfolio for the third quarters
generally are lower than the other quarters because (i) the Tucson,  Phoenix and
Albuquerque markets are slower in the summer months and (ii) the Company has two
communities in
                                       15
<PAGE>
                           ASR INVESTMENTS CORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
       For the Quarters and Nine Months Ended September 30, 1997 and 1996


Pullman,  Washington that have significantly lower occupancy rates in the summer
months because they are occupied primarily by college students.

         Mortgage Assets - There was no income from mortgage assets in the third
quarter of 1997 as the Company sold the entire  mortgage asset portfolio in June
1997.

         Administrative Expenses,  Acquisition Related Expenses and Other Income
Administrative  expenses  decreased  by  $402,000  primarily  as a result  of an
expense   accrual  of  $507,000  made  in  the  third  quarter  1996  for  stock
appreciation  rights  while no similar  expense was made in the same  quarter of
1997.  Acquisition  related  expenses  decreased  by  $404,000  (related  to the
acquisition  of the  Winton  properties)  as there were no  acquisition  related
expenses recorded in the 1997 quarter. Other income increased by $215,000 due to
higher  interest  income  earned on the  proceeds  from the sale of the mortgage
assets.

         Common  Stock and Common  Stock  Equivalents  - The  average  shares of
common  stock and common  stock  equivalents  outstanding  increased  due to the
issuance  of the  common  stock  and  convertible  LP Units in  connection  with
apartment acquisitions and the acquisition of the management companies (see Note
6 to consolidated financial statements).

Comparison of Nine Months Ended September 30, 1997 and 1996

         Real Estate  Operations  - Real estate  operating  income and  expenses
increased  substantially  primarily due to acquisitions  made in 1997. Below are
the operating results of the new communities for the period owned by the Company
during the first nine months of 1997 (in thousands):

             Rental and other income                         $9,802
                                                             ------
             Operating & maintenance expenses                 3,333
             Property management expenses                       124
             Real estate taxes & insurance expenses           1,129
             Interest expense                                 3,081
             Depreciation expense                             1,953
                                                             ------
             Total real estate operating expenses             9,620
                                                             ------
             Income from real estate                         $  182
                                                             ======
                                       16
<PAGE>
                           ASR INVESTMENTS CORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
       For the Quarters and Nine Months Ended September 30, 1997 and 1996


         On the "same store" basis (i.e.,  for  properties  owned by the Company
during the first nine months of 1996),  the Company  realized a 0.1% increase in
net operating income ("NOI"). Below are the rates of increase or decrease in the
components of the NOI:

                                    Oper. &          Taxes
                      Rental         Maint.        Insurance
                      Income        Expense         Expense           NOI
                      ------        -------         -------           ---
Total                  1.0%           2.1%           (2.3%)           0.1%
Tucson                (3.2%)         (2.4%)           0.7%           (4.2%)
Phoenix                6.3%           3.3%           (0.2%)           8.5%
Houston                6.1%           4.0%           (7.4%)          12.6%
Albuquerque           (3.6%)          9.5%           12.0%          (10.7%)

         The gain on sale of real estate of $474,000  resulted  from the sale of
the  Company's  interest in the joint  ventures in May of 1997.  Income from the
joint ventures for the 1996 quarter was $23,000.

         Mortgage  Assets - Decreases in income from mortgage assets and related
interest  expense were due to the sale of the entire mortgage asset portfolio in
June 1997.

         Administrative Expenses,  Acquisition Related Expenses and Other Income
Administrative  expenses  increased  by  $205,000  for  the  nine  months  ended
September 30, 1997 primarily as a result of an increase in expense  accruals for
stock appreciation rights of $165,000 due to an increase in the Company's common
stock price. Acquisition related expenses increased by $5,811,000 as a result of
the acquisition of the Company's Manager and Property Manager and the payment of
certain bonuses in connection with the acquisition of the Winton properties (see
Note 6 to the  consolidated  financial  statements).  Other income  increased by
$401,000 due to interest  earned on the  proceeds  from the sale of the mortgage
assets in 1997.

Funds From Operations

         Funds  from  operations  ("FFO")  is  one  of the  common  measures  of
performance in the equity REIT industry.  FFO is generally defined as net income
plus certain non-cash charges (primarily  depreciation and  amortization),  less
gains from sales of assets and after adjustments for unconsolidated partnerships
and joint ventures. The Company has made
                                       17
<PAGE>
                           ASR INVESTMENTS CORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
       For the Quarters and Nine Months Ended September 30, 1997 and 1996


the following  adjustments in calculating its FFO, as modified:  (i) income from
redemptions  and sales of mortgage  assets is excluded as the Company  considers
such  income to be similar in nature to gains  from sales of real  estate;  (ii)
certain  non-recurring charges are added back as the charges relate to a defined
and  limited  period;  and (iii)  while the stock  options  that carry  dividend
equivalent rights ("DERs") are  anti-dilutive,  they are included in the FFO per
share calculation as the Company believes the options are likely to be exercised
by their  expiration  date of December 16, 1998  because the  exercise  price is
substantially below the current stock price.

         As not all  REITs  and  financial  analysts  calculate  FFO in the same
manner,  FFO as  reported  herein  may not be  comparable  to  similarly  titled
measures as reported by other REITs. FFO, as modified,  should not be considered
as an  alternative  to net  income  (determined  in  accordance  with  generally
accepted  accounting   principles)  as  an  indication  of  Company's  financial
performance.  FFO also should not be considered as an  alternative  to cash flow
from  operating  activities  determined in accordance  with  generally  accepted
accounting principles because (i) FFO excludes income from sales and redemptions
of mortgage assets that are included in cash flow through operating  activities,
(ii) FFO is adjusted to exclude certain non-recurring  charges, and (iii) FFO is
not adjusted for changes in accrual as is cash flow from  operating  activities.
FFO is not  necessarily  indicative  of  available  cash flow to fund all of the
Company's  needs.  The  Company  believes  that in order to  facilitate  a clear
understanding of the consolidated  historical  operating results of the Company,
FFO should be  considered  in  conjunction  with net income as  presented in the
consolidated financial statements.

         As described in Note 2 to the consolidated  financial  statements,  the
Company has made numerous  acquisitions  in 1997. The Company has also presented
the proforma FFO data assuming that all of the acquisitions were completed as of
the  beginning  of the period.  The proforma  data are provided for  information
purposes only and are not  indicative of the results that would have occurred or
which may occur in the future.  Actual and proforma FFO data,  as modified,  for
the  quarter  and nine  months  ended  September  30,  1997,  are as follows (in
thousands except per share amounts):
                                       18
<PAGE>
                           ASR INVESTMENTS CORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
       For the Quarters and Nine Months Ended September 30, 1997 and 1996


Quarter:
                                                      Actual          Pro Forma
                                                    --------           --------
Net Income (loss)                                   $    (24)          $     29
Depreciation and amortization                          2,017              2,507
Certain non-recurring charges (*)                         30                 30
Dividend equivalent rights                               170                170
                                                    --------           --------
Funds from operations                               $  2,193           $  2,736
                                                    ========           ========

Average shares of common stock and
         common stock equivalents                      5,448              5,961
Effect of assumed exercise of stock options              188                188
                                                    --------           --------
Assumed number of shares                               5,636              6,149
                                                    ========           ========

FFO per share                                       $   0.39           $   0.45
                                                    ========           ========

Nine Months:
                                                     Actual           Pro Forma
                                                    --------           --------
Net Income                                          $ 10,150           $ 10,464
Depreciation and amortization                          4,174              7,456
Certain non-recurring charges (*)                      7,043              7,043
Dividend equivalent rights                               510                510
Income from redemptions and sales of
      mortgage assets                                (16,650)           (16,650)
Gain on sale of real estate                             (474)              (474)
                                                    --------           --------
Funds from operations                               $  4,753           $  8,349
                                                    ========           ========

Average shares of common stock and
         common stock equivalents                      4,447              5,961
Effect of assumed exercise of stock options              188                188
                                                    --------           --------
Assumed number of shares                               4,635              6,149
                                                    ========           ========

FFO per share                                       $   1.03           $   1.36
                                                    ========           ========

         (*) -  Non-recurring  charges relate to stock  appreciation  rights for
certain  employees,   acquisition-related   expenses  and  contract  termination
expense.
                                       19
<PAGE>
                           ASR INVESTMENTS CORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
       For the Quarters and Nine Months Ended September 30, 1997 and 1996


         The operating results of the Company's portfolio for the third quarters
generally are lower than the other quarters because (i) the Tucson,  Phoenix and
Albuquerque markets are slower in the summer months and (ii) the Company has two
communities in Pullman, Washington that have significantly lower occupancy rates
in the summer months  because they are occupied  primarily by college  students.
The  Company  expects  its  FFO to  increase  as (i) the  Finisterra  Apartments
achieved  stabilization  (90%  occupancy  rate) in August,  (ii) it invests  the
remaining  proceeds from the sale of the mortgage  assets and (iii) it completes
substantial capital  improvements to certain  communities  acquired in 1997. The
above FFO data are not  necessarily  indicative  of the FFO  amounts  for future
periods  as they  will  depend  on the  performance  of the  existing  apartment
communities and as well as new communities.

Liquidity, Capital Resources and Commitments

         Comparison  of Nine  Months  Ended  September  30, 1997 and 1996 - Cash
provided  by  operations  for the  nine  months  ended  September  30,  1997 was
$23,407,000  compared with $11,645,000 for the same period in 1996. The increase
was primarily a result of (i) higher net income,  (ii) higher  non-cash  charges
relating to depreciation  and contract  termination  expense  ($5,250,000),  and
(iii) higher expense accruals.

         Cash used in investing  activities for the nine months ended  September
30, 1997 was  $25,130,000  compared with $2,141,000 for the same period in 1996.
The  increase  in  cash  usage  of  $22,989,000  reflects  (i)  an  increase  of
$21,674,000 in investments in apartments primarily and an increase of $4,010,000
in restricted cash as a result of the acquisitions made in 1997, while making no
acquisitions  in 1996,  (ii) a decrease  of  $1,311,000  from the  reduction  in
mortgage  assets as the Company sold its remaining  portfolio in June 1997,  and
(iii) a decrease of $88,000 in cash  provided by other real estate  assets.  The
increase  in cash usage was  mitigated  by (i)  $3,216,000  from  joint  venture
distributions and proceeds  resulting from the sale of the Company's interest in
such joint ventures and (ii) a decrease of $878,000 in construction expenditures
for the Finisterra Apartments community and land held for development.

         Cash  provided  by  financing  activities  for the  nine  months  ended
September  30,  1997  was  $10,521,000  compared  with  cash  used in  financing
activities  of  $6,008,000  for  the  same  period  in  1996.  The  increase  of
$16,529,000  reflects  (i) an  increase in the  issuance  of real  estate  notes
payable of $10,410,000 related to the acquisitions made in
                                       20
<PAGE>
                           ASR INVESTMENTS CORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
       For the Quarters and Nine Months Ended September 30, 1997 and 1996


1997,  with no similar  purchases in 1996,  (ii) an increase of  $12,348,000  in
proceeds from the Finisterra Apartment's  construction loan, (iii) a decrease of
$527,000 in  repayments  of  short-term  borrowing,  and (iv) a net  increase of
$338,000  from the payment of stock notes,  the exercise of stock  options,  and
other  financing  activities.  The increase was  mitigated by (i) an increase of
$1,277,000 in payments of dividends due to the stock  issuance in 1997,  (iv) an
increase in  distributions on LP Units of $942,000 as the LP Units did not exist
in 1996, (iii) a decrease in the accrued construction cost payable of $2,965,000
for the Finisterra Apartments community,  (iv) an increase of $1,382,000 in loan
fees  related to the  acquisitions  in 1997,  and (v) an increase in payments on
real estate loans of $528,000.

         Financing and Capital  Transactions - During 1997, the Company used (i)
the proceeds from the sale and redemption of mortgage assets, (ii) mortgage debt
financing,  (iii) issuance of the Company's  common stock, and (iv) the issuance
of  convertible  LP Units of  Heritage  Communities  L.P.  to acquire  apartment
communities.  In that  connection,  the Company (i) obtained or assumed mortgage
loans of $105,807,000,  (ii) issued a total of 1,508,888 shares of common stock,
and (iii) issued a total of 971,422 convertible LP Units of Heritage Communities
L.P. In addition,  the Company  issued 262,008 shares of common stock to acquire
the entire  interests in the Pima  Entities and 70,284 shares of common stock to
acquire the property management company for the Winton properties.

         With the above  acquisitions,  the total monthly principal and interest
payments on the real estate mortgage loans are approximately $1,330,000, and the
monthly  deposits to loan escrow  accounts for  property  taxes,  insurance  and
capital replacements are approximately  $530,000.  The Company estimates that it
will  spend  approximately  $783,000  during  the  remainder  of 1997 in capital
replacement and improvement expenditures.

         The Company  anticipates that the above acquisitions will result in (i)
significant increases in the Company's gross income and operating expenses, (ii)
an increase in interest expenses on real estate mortgages,  and (iii) a decrease
in  administrative  expenses  resulting from the  replacement of management fees
previously  paid to the Pima Entities by Company with salaries that are now paid
to the owners of the managers  who became  employees of the Company as of May l,
1997.
                                       21
<PAGE>
         Cash  Balances  - At  September  30,  1997,  the  Company  had  cash of
$11,201,000.  The  Company  intends  to use such funds for  acquiring  apartment
communities,  making capital  improvements  on existing  apartment  communities,
paying dividends and other corporate uses.

Other Information

         Apartment  leases  generally  are  for  terms  of  six  to  12  months.
Management  believes that such short-term  leases lessen the impact of inflation
as a result of the  ability to adjust  rental  rates to market  levels as leases
expire.
                                       22
<PAGE>
                           ASR INVESTMENTS CORPORATION
                          QUARTERLY REPORT ON FORM 10-Q
                    For the Quarter Ended September 30, 1997


                                     PART II

                                OTHER INFORMATION

Item 1.  Legal Proceedings - None
         ------------------------

Item 2.  Changes in Securities - Not applicable
         --------------------------------------

Item 3.  Defaults Upon Senior Securities - Not applicable
         ------------------------------------------------

Item 4.  Submission of Matters to a Vote of Security Holders
         ---------------------------------------------------

         (a) The  Annual  Meeting of  Stockholders  of the  Company  was held on
August 20, 1997 at 9:00 a.m., at the Williams Center Courtyard  Marriot,  201 S.
Williams Blvd., Tucson,  Arizona. There were 4,437,611 shares outstanding on the
date of record for the annual meeting.

         (b) The  Board of  Directors  as  listed  in the June  20,  1997  proxy
statement  were duly  elected to serve  until the next  annual  meeting or until
their successors are duly elected and ratified. The votes are as follows:

                                 FOR               AGAINST
                                 ---               -------
Earl M. Baldwin               4,025,069             41,326
Joseph C. Chan                4,024,234             42,161
Stephen G. Davis              4,012,932             53,463
John J. Gisi                  4,025,869             40,526
Jon A. Grove                  4,024,069             42,326
Raymond L. Horn               4,025,529             40,866
Frederick C. Moor             4,025,349             41,046
Frank S. Parise, Jr           4,025,069             40,906
Don W. Winton                 4,027,129             39,326

         (c)  The  appointment  of  Deloitte  &  Touche  LLP  as  the  Company's
independent  accountants  for the  fiscal  year  ending  December  31,  1997 was
ratified. The votes were as follows:
                                       23
<PAGE>
           FOR              AGAINST           ABSTAIN
           ---              -------           -------
         4,030,196           11,615            24,584

         (d) The Company's  Articles of Incorporation  was amended to change the
name of the  Company  to  Heritage  Residential  Corporation.  The votes were as
follows:

           FOR              AGAINST           ABSTAIN
           ---              -------           -------
         3,958,303           69,940            38,152

Item 5.  Other Information - Not applicable
         ----------------------------------

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

         (a)  Exhibits - 27.1 Financial Data Schedule (For SEC use only)

         (b) Reports on Form 8-K:

         A report on Form 8-K,  dated August 25,  1997,  was filed on August 28,
1997,  reporting the Company entering into agreements to acquire three apartment
communities (totaling 900 units) in Dallas Texas.

         A report on Form 8-K, dated  September 18, 1997, was filed on September
29, 1997, announcing the completion of the acquisition described in the Form 8-K
filed by the Company on August 28, 1997.

         A report on Form 8-K,  dated  September 30, 1997,  was filed on October
15, 1997,  announcing the acquisition of a 202-unit apartment  community located
in Kennewick, Washington.

                         * * * * * * * * * * * * * * * *
                                       24
<PAGE>
                                   SIGNATURES

         Pursuant to the  requirements  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.


                                        ASR INVESTMENTS CORPORATION


/s/ Mary C. Clements                    /s/ Joseph C. Chan
----------------------------            ----------------------------------------
Mary C. Clements                        Joseph C. Chan
Controller                              Executive Vice President,
November 12, 1997                       Chief Operating Officer,
                                        Chief Financial and Accounting Officer
                                        November 12, 1997
                                       25