FORM 10-K
                                    UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C.  20549

          (Mark One)

          [ X ]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                    SECURITIES EXCHANGE ACT OF 1934

                     For the fiscal year ended:  JANUARY 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: 0-21249
                                                   -------

                             GRAND COURT LIFESTYLES, INC.
                (Exact name of registrant as specified in its charter)

                      DELAWARE                       22-3423087
            (State or other jurisdiction          (I.R.S. Employer
                of incorporation or              Identification No.)
                   organization)

             2650 North Military Trail,
                     Suite 350
                Boca Raton, Florida                     33431
               (Address of principal                    
                 executive offices)                  (Zip code)

          Registrant's telephone number, including area code:(561) 997-0323
                                                             --------------

          Securities registered pursuant to Section 12(b) of the Act:

          Title of each class     Name of each exchange on which registered
          -------------------     -----------------------------------------

                    None                          None

          Securities registered pursuant to Section 12(g) of the Act:

                             Common Stock, $.01 par value
                                   (Title of class)


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

               Indicate by check mark if disclosure of delinquent filers
          pursuant to Item 405 of Regulation S-K (s229.405 of this chapter)
          is not contained herein, and will not be contained, to the best
          of registrant's knowledge, in definitive proxy or information
          statements incorporated by reference in Part III of this Form 10-
          K or any amendment to this Form 10-K. [    ] 

          The aggregate market value of the common stock held by
          nonaffiliates of the registrant was $22,022,420 at April 26,
          1999.

          On April 26, 1999, the Company had 17,800,000 shares of common
          stock outstanding.


<PAGE>


                             GRAND COURT LIFESTYLES, INC.
                         INDEX TO ANNUAL REPORT ON FORM 10-K
                      FOR THE FISCAL YEAR ENDED January 31, 1999


                                                                       PAGE


          PART I  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3
               ITEM 1.   BUSINESS . . . . . . . . . . . . . . . . . . . .  3
               ITEM 2.   PROPERTIES . . . . . . . . . . . . . . . . . . . 17
               ITEM 3.   LEGAL PROCEEDINGS  . . . . . . . . . . . . . . . 20
               ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY
                           HOLDERS  . . . . . . . . . . . . . . . . . . . 21

          PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
               ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND
                           RELATED STOCKHOLDER MATTERS  . . . . . . . . . 22
               ITEM 6.   SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . 22
               ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                           FINANCIAL CONDITION AND RESULTS OF
                           OPERATIONS . . . . . . . . . . . . . . . . . . 25
               ITEM 7A.  QUANTATIVE AND QUALITIVE DISCLOSURES ABOUT
                           MARKET RISK. . . . . . . . . . . . . . . . . . 44
               ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA . . . 45

          INDEX TO CONSOLIDATED FINANCIAL STATEMENTS  . . . . . . . . . . 45

          INDEPENDENT AUDITORS' REPORT  . . . . . . . . . . . . . . . . . 46

               ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH
                           ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                           DISCLOSURE . . . . . . . . . . . . . . . . . . 66

          PART III  . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
               ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE 
                           REGISTRANT . . . . . . . . . . . . . . . . . . 67
               ITEM 11.  EXECUTIVE COMPENSATION . . . . . . . . . . . . . 71
               ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                           OWNERS AND MANAGEMENT  . . . . . . . . . . . . 74
               ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED
                           TRANSACTIONS . . . . . . . . . . . . . . . . . 75

          PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
               ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
                           AND REPORTS ON Form 8-K  . . . . . . . . . . . 76

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          < PAGE >


          PART I

               This Form 10-K contains forward-looking statements within
          the meaning of Section 21E of the Securities Exchange Act of
          1934.  Forward-looking statements should be read with the
          cautionary statements and important factors included in this Form
          10-K at Item 7, "Management's Discussion and Analysis of
          Financial Conditions and Results of Operations - Safe Harbor for
          Forward-Looking Statements."  Forward-looking statements are all
          statements other than statements of historical fact, including
          without limitation those that are identified by the use of the
          words "anticipates", "estimates", "expects", "intends",
          "believes", and similar expressions.  Unless the context
          otherwise requires, (i) all references herein to a "Fiscal" year
          refer to the fiscal year beginning on February 1 of that year
          (for example, "Fiscal 1995" refers to the fiscal year beginning
          on February 1, 1995) and (ii) all references to the Company,
          include the Company, its subsidiaries and its predecessors taken
          as a whole.

          ITEM 1.  BUSINESS

          GENERAL

               Grand Court Lifestyles, Inc. (the "Company") is a Delaware
          corporation formed in 1996 to consolidate substantially all of
          the assets of its predecessors, J&B Management Company, Leisure 
          Centers, Inc. and their affiliates.  The Company is a fully
          integrated provider of senior living accommodations and services
          which acquires, develops and manages senior living communities
          which offer independent and assisted living services.  The
          Company's revenues have been and are expected to continue to be,
          primarily derived from sales of partnership interests
          ("Syndications") of partnerships it organizes to acquire existing
          senior living communities ("Syndicated Communities").  The
          Company has established a development program (the "Development
          Plan") pursuant to which it is building new senior living
          communities which offer independent and assisted living services
          ("Development Communities"), which are either wholly-owned by the
          Company or owned pursuant to joint venture arrangements or
          operated pursuant to long-term leases. The Company presently does
          not intend to Syndicate the Development Communities constructed
          pursuant to its new Development Plan.  To the extent that the
          Company continues to successfully implement the Development Plan,
          the Company anticipates that the percentage of its revenues
          derived from Syndications would decrease and the percentage of
          revenues derived from Development Communities would increase and,
          the Company believes, over time, become the primary source of the
          Company's revenues.  The Company manages both the Syndicated
          Communities and the Development Communities.  The Company is one
          of the largest managers of senior living communities in the
          United States, operating communities offering both independent
          and assisted-living services. The Company's operating objective
          is to provide high-quality, personalized living services to
          senior residents, primarily persons over the age of 75. Although
          the Company has experienced operating losses in its last three
          fiscal years, the Company expects to report a profit for the
          first quarter of Fiscal 1999.

               The Company currently manages 41 Syndicated Communities
          containing approximately 5,700 senior living apartment units in
          15 states in the Sun Belt and the Midwest.  In addition, the
          Company manages (i) three Development Communities containing 410
          units which it owns pursuant to joint venture arrangements and
          (ii) four Development Communities containing 552 units which it
          operates under long-term leases. These seven Development
          Communities were developed and constructed pursuant to the
          Company's Development Plan. The Company has entered  into joint
          venture arrangements with a third party pursuant to which it has
          sold a 50% interest in four Development Communities which  were
          previously wholly owned by the Company.  The Company intends to
          enter into similar joint venture arrangements regarding other
          Development Communities constructed pursuant to its Development
          Plan.  The Company has commenced construction on three additional
          Development Communities. The Company has approximately 2,280
          employees and directly conducts the day-to-day operations of the
          senior living communities it manages.

               Prior to 1986, the Company acquired, developed, arranged for
          the Syndication of, and in most cases managed, 170 multi-family
          properties containing approximately 20,000 apartment units,
          primarily in the Sun Belt and the Midwest.  The Company is no

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          <PAGE>


          longer engaged in the acquisition, development, Syndication or
          management of multi-family properties and the Company does not
          presently intend to do so in the future.  The Company's only
          involvement with multi-family properties is as a holder of notes
          and receivables from the partnerships that own 118 multi-family
          properties containing 12,897 apartment units (the "Multi-Family
          Properties"), which notes and receivables are to be repaid from
          the cash flow and sale or refinancing proceeds these properties
          generate.  As of January 31, 1999, the recorded value, net of
          deferred income, of these notes was $100.8 million and the
          recorded amount of these receivables was $59.9 million.

               Historically, the Company has arranged for the acquisition
          of senior living communities by utilizing mortgage financing and
          by arranging Syndications of limited partnerships ("Investing
          Partnerships") formed to acquire interests in the other
          partnerships that own the Syndicated Communities ("Owning
          Partnerships") managed by the Company.  These Syndicated
          Communities are owned by the respective Owning Partnerships and
          not by the Company.  The Company is the managing general partner
          of all but one of the Owning Partnerships. The Company is also
          the general partner of most of the Investing Partnerships.

               In a typical Syndication, the Company identifies a senior
          living community suitable for acquisition and forms an Owning
          Partnership (in which it is the managing general partner and
          initially owns all of the partnership interests) to acquire the
          community.  An Investing Partnership is also formed  ( in which
          the Company is also the general partner with a 1% interest) to
          purchase from the Company a 99% partnership interest in the
          Owning Partnership (the "Purchased Interest"), leaving the
          Company with a 1% interest in each of the Owning Partnership and
          the Investing Partnership.  The purchase price for the Purchased
          Interest is paid in part in cash and in part by a note from the
          Investing Partnership with a term of approximately five years ( a
          "Purchase Note").  Limited partners purchase partnership
          interests in the Investing Partnership by agreeing to make
          capital contributions over approximately five years to the
          Investing Partnership, which allows the Investing Partnership to
          pay the purchase price for the Purchased Interest. Limited
          Partners are typically permitted to pre-pay their scheduled
          capital contributions.  The limited partnership agreement of an
          Investing Partnership provides that the limited partners are
          entitled to receive, for a period not to exceed five years,
          distributions equal to between 11% and 12% per annum of their
          then paid-in scheduled capital contributions.  Although the
          Company incurs certain costs in connection with acquiring the
          community and arranging for the Syndication of partnership
          interests in an Investing Partnership, the Company makes a profit 
          on the sale of the Purchased Interest.  In addition, as part of
          the purchase price paid by the Investing Partnership for the
          Purchased Interest, the Company receives a 40% interest in sale
          and refinancing proceeds after certain priority payments to the
          limited partners.  

               The Company also enters into a management contract with the
          Owning Partnership pursuant to which the Company agrees to manage
          the Syndicated Community. As part of the management fee
          arrangements, the management contract requires the Company, for a
          period not to exceed five years, to pay to the Owning Partnership
          (to the extent that cash flows generated by the property are
          insufficient) amounts sufficient to fund (i) any operating cash
          deficiencies of such Owning Partnership and (ii) any part of the
          specified rate of return to limited partners not paid from cash
          flow from the related Syndicated Community (which the Owning
          Partnerships distribute to the Investing Partnerships for
          distribution to limited partners) (collectively, the "Management
          Contract Obligations").  The Company, therefore, has no direct
          obligation to pay specified returns to limited partners.  Rather,
          the Company is obligated pursuant to the management contract to
          pay to the Owning Partnership amounts sufficient to make the
          specified returns to the limited partners, to the extent the cash
          flows generated by the Syndicated Community are insufficient to
          do so.  The Owning Partnership then distributes these amounts to
          the Investing Partnership which, in turn, distributes these
          amounts to the limited partners.  As a result of the Management
          Contract Obligations, the Company essentially bears the risks of
          operations and financial viability of the related property for
          such five-year period.  The management contract, however, rewards
          the Company for successful management of the property by allowing
          the Company to retain as an incentive management fee any cash
          flow generated by the Syndicated Community in excess of the
          amount needed to satisfy the Management Contract Obligations. 
          After the initial five-year period, the limited partners are
          entitled to the same specified rate of return, but only to the
          extent there is sufficient cash flow from the Syndicated
          Community.  Any amounts of cash flow available after payment of
          the specified return to limited partners are shared as follows:


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         <PAGE>

          40% to the Company as an incentive management fee and 60% for
          distribution to the limited partners.  The management contract is
          not terminable during this five-year period and is terminable
          thereafter by either party upon thirty to sixty days notice. 

               The management contract with each Owning Partnership
          requires the Company to manage and operate the day-to-day
          operations of the Syndicated Community.  Under each management
          contract, the Company acts as an independent contractor. 
          Required services performed by the Company for each Syndicated
          Community include marketing and advertising; renting apartment
          units and collecting rents and charges; providing independent -
          and assisted - living services (including providing meals,       
          activities, transportation and, for assisted-living residents,
          assistance with activities of daily living ("ADLs")); hiring,
          paying and supervising the on-site employees; maintaining the
          property; purchasing supplies; and preparing operating budgets
          and reports.  Although the Company has the right to sub-contract
          for such services, the Company directly performs such services
          utilizing employees of the Company.

               All Syndicated Communities are managed by the Company in its
          capacity as property manager and, for all but one of the related
          Owning Partnerships, as managing general partner. Because the
          Company serves as both the managing general partner and the
          property manager, it receives partnership administration fees and
          property management fees. As the managing general partner of
          these partnerships, the Company generally has full authority and
          power to act for the partnerships as if it were the sole general
          partner. The Company has fiduciary responsibility for the
          management and administration of these partnerships and, subject
          to certain matters requiring the consent of the other partners
          such as a sale of the related property, may generally, on behalf
          of the partnerships, borrow money, execute contracts, employ
          persons and services, compromise and settle claims, determine and
          pay distributions, prepare and distribute reports, and take such
          other actions which are necessary or desirable with respect to
          matters affecting the partnerships or individual partners.

               The Company intends to continue to arrange for future
          acquisitions of existing senior living communities by utilizing
          mortgage financing and by arranging Syndications. The Company
          anticipates acquiring between six and twelve communities during
          the next two years.

               Current demographic trends suggest that demand for both
          independent-living and assisted-living services will continue to
          grow.  According to U.S. Bureau of Census data, the Company's
          target market, people over age 75, is one of the fastest growing
          segments of the U.S. population and is projected to increase by
          more than 24% to 16.3 million between 1990 and 2000.  While the
          population of seniors grows, other demographic trends suggest
          that an increasing number of them will choose senior living
          centers as their residences.  According to U.S. Bureau of Census
          data, the median net worth of householders over age 75 has
          increased to over $75,000.  At the same time, the Census shows
          that the number of seniors living alone has increased, while
          women, who have been the traditional care-givers, are more likely
          to be working and unable to provide care in the home.  The
          Company believes that many seniors find that senior living
          centers provide them with a number of services and features that
          increasingly they are unable to find at home, including security,
          nutritious food and companionship.  Furthermore, the National
          Long Term Care Surveys, a Federal study that regularly surveys
          close to 20,000 people aged 65 and older, indicate that, despite
          the growth in the elderly population, the percentage of elderly
          that are disabled and need assistance with ADLs has decreased
          substantially and is expected to continue to decrease.  This
          suggests that demand for independent living communities will
          increase in the future.

               Assisted-living supplements independent-living services with
          assistance with ADLs in a cost effective manner while maintaining
          residents' independence, dignity and quality of life.  Such
          assistance consists of personalized support services and health
          care in a non-institutional setting designed to respond to the
          individual needs of the elderly who need assistance but who do
          not need the level of health care provided in a skilled nursing
          facility.

               The Company has instituted a Development Plan pursuant to
          which it has completed construction of seven Development
          Communities, is nearing completion of the construction of one


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         <PAGE>

          additional Development Community, has commenced construction on
          three additional Development Communities and intends to commence
          construction on between 24 to 28 additional Development
          Communities over the next two years. The Company plans to own
          pursuant to joint venture arrangements or operate pursuant to
          long-term operating leases or similar arrangements the
          Development Communities that will be developed under the plan. 
          The Company will manage and operate each of the Development
          Communities.  The Company expects to complete the construction of
          one of the four Development Communities currently under
          construction by the end of the first quarter of Fiscal 1999 and
          expects to complete the construction of the remaining Development
          Communities under construction by the end of Fiscal 1999.  These
          four Development Communities, along with the seven Development
          Communities whose construction is already completed, contain an
          aggregate of approximately 1,490 senior living apartment units. 
          The 24 to 28 additional Development Communities which the Company
          intends to commence construction on over the next two years will
          contain between 3,024 and 3,528 additional senior living
          apartment units.  Each new Development Community developed by the
          Company offers both independent and assisted-living services. 

               The first Development Communities constructed pursuant to
          the Company's Development Plan are in Texas.  The Company has
          obtained development financing from Capstone Capital Corporation
          ("Capstone") pursuant to which Capstone provided $37.7 million
          for development of four Development Communities. The Company has
          completed construction on these communities which are being operated
          by the Company pursuant to long-term leases with Capstone. The 
          Company has completed construction with mortgage financing on 
          three Development Communities in Texas. The Company has commenced 
          construction on four additional Development Communities in Texas.
          The Company holds options to acquire sites in Knoxville, Tennessee
          and Jackson, Tennessee, is actively negotiating to obtain control 
          over additional sites in the Southeast and Midwest and is negotiating
          with several additional lenders to obtain financing to develop these 
          sites.

               The Company anticipates that most of its Development
          Communities will be financed with a combination of mortgage
          financing and the contribution of capital by the Company. The
          Company estimates that the cost of developing each new
          Development Community (including reserves necessary to carry the
          community through its lease-up period) will be approximately
          $10.5 million. Subsequent to Fiscal 1998, the Company has entered
          into joint venture arrangements regarding the three completed and
          one substantially completed Development Communities financed with
          mortgage financing. Pursuant to each joint venture arrangement,
          the Company sold a 50% interest in the Development Community to a
          third party. The Company realized a profit from each of the sales
          and earns a management fee for managing the communities. The
          third party has the right to terminate the Company's  management
          of the community upon 30 day's written notice. The third party
          receives a cumulative priority return on each investment from all
          cash flow generated by the community and any excess cash flow is
          shared 50% by the Company and 50% by the third party. The Company
          believes that such joint venture arrangements are beneficial
          because they generate revenues upon the sale, reward the Company
          for its continued management of the Development Community, 
          provide the Company with capital to continue to pursue its
          Development Plan and allocate 50% of the start-up losses incurred
          during the community's lease up period to the joint venturer
          rather than the Company.  However, the Company remains fully
          liable on the mortgage financing for such Development
          Communities. The Company expects to enter into similar joint
          venture arrangements for the other Development Communities that
          it will develop, although there can be no assurance that
          sufficient joint venture capital will be available to the Company
          on favorable terms. The Company may also utilize other types of
          financings including sale/leaseback or similar arrangements which
          require little or no capital on the part of the Company to
          finance its Development Plan.

               Upon the completion of construction of each of the
          Development Communities developed pursuant to the Capstone
          Development Agreement, and upon the satisfaction of certain other
          conditions, the Company  became the lessee under long-term lease
          arrangements with Capstone.  The initial term of each lease,
          which began upon the completion of a facility and meeting of
          other criteria, is 15 years with three five-year extension
          options.  Under the terms of each lease, the Company has the
          option to acquire the community after operating the community for
          four years.  The option price is equal to the sum of 100% of the
          cost incurred to develop the community and an additional 20% of
          such cost (which declines by 2 percentage points per year but in


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         <PAGE>

          no event declines below 10%).  The initial lease rate is 350
          basis points in excess of the ten-year Treasury Bill yield (but
          in no event less than 9.75% per annum).  The lease rate has an
          annual upward adjustment equal to 3% of the previous year's rent. 
          The four leases have cross-default provisions.  Each lease is a
          triple net lease, as the Company is responsible for all costs,
          including but not limited to maintenance, repair, insurance,
          taxes, utilities, and compliance with legal and regulatory
          requirements.  If a community is damaged or destroyed, the
          Company is required to restore the community to substantially the
          same condition it was in immediately before such damage or
          destruction, or acquire the facility for the option price
          described above.

               The Company generally plans to concentrate on developing
          projects in only a limited number of states at any given time. 
          The Company believes that this focus will allow it to realize
          certain efficiencies in the development and management of
          Development Communities.  The effectuation of the Development
          Plan will expose the Company to additional risk.  These risks
          include, but are not limited to, the risk that  the construction
          of each Development Community will exceed the estimated  12 month
          construction period and that each Development Community will
          incur start-up losses for more than the estimated ten  months
          after commencement of operations.  In addition, there can be no
          assurance that the Development Communities will generate positive
          cash flow or that the Company will not suffer delays or cost
          overruns in instituting its Development Plan.

               The Company's senior living communities offer personalized
          assistance, supportive services and selected health care services
          in a professionally managed group living environment.  Residents
          may receive individualized assistance which is available 24 hours
          a day, and is designed to meet their scheduled and unscheduled
          needs.  The services for independent- living generally include
          three restaurant-style meals per day served in a common dining
          room, weekly housekeeping and flat linen service, social and
          recreational activities, transportation to shopping and medical
          appointments, 24-hour security and emergency call systems in each
          unit.  The services for assisted-living residents generally
          include those provided to independent-living residents, as
          supplemented by assistance with ADLs including eating, bathing,
          dressing, grooming, personal hygiene and ambulating, health
          monitoring, medication management, personal laundry services, and
          daily housekeeping services.

               The Company focuses exclusively on "private-pay" residents,
          who pay for housing or related services out of their own funds or
          through private insurance, rather than relying on the few states
          that have enacted legislation enabling assisted-living facilities
          to receive Medicare funding similar to funding generally provided
          to skilled nursing facilities.  The Company intends to continue
          its "private-pay" focus as it believes this market segment is,
          and will continue to be, the most profitable.  This focus will
          enable the Company to increase rental revenues as demographic
          pressure increases demand for senior living communities and avoid
          potential financial difficulties it might encounter if it were
          dependent on Medicare or other government reimbursement programs
          that may suffer from health care reform, budget deficit reduction
          or other pending or future government initiatives.

          PARTNERSHIP OFFERINGS

               The Company has arranged for the acquisition of the
          Syndicated Communities that it manages by utilizing mortgage
          financing and Syndications of the Investing Partnerships formed
          to acquire investments in the Owning Partnerships that own these
          properties. The Company is the managing general partner of all
          but one of the Owning Partnerships that own the Syndicated
          Communities. The Company manages all of the Syndicated
          Communities. The Company is also the general partner of most of
          the Investing Partnerships. The Company has a participation in
          the cash flow, sale proceeds and refinancing proceeds of the
          Syndicated Communities after certain priority payments to the
          limited partners.  In a typical Syndication, an Owning
          Partnership is organized by the Company to acquire a property
          which the Company has identified and selected based on a broad
          range of factors.  Generally, 99% to 100% of the partnership
          interests in an Owning Partnership initially are owned by the
          Company.  An Investing Partnership is formed as a limited
          partnership for the purpose of acquiring all or substantially all
          of the  partnership interests in the Owning Partnership owned by
          the Company (the "Purchased Interest").  Limited partnership
          interests in the Investing Partnership are sold to investors in
          exchange for (i) all cash or (ii) a cash down payment and full
          recourse promissory notes ("Investor Notes").  In the case of an


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          investor that does not purchase a limited partnership interest
          for all cash, the investor's limited partnership interest (a
          "Limited Partnership Interest") serves as collateral security for
          that investor's Investor Note.  Under the terms of an agreement
          (a "Purchase Agreement"), the Investing Partnership purchases
          from the Company the Purchased Interest partially with cash
          raised from the cash down payment made by its investors and the
          balance by the delivery of the Investing Partnership's promissory
          note (a "Purchase Note").  The Purchase Notes executed by
          Investing Partnerships prior to 1986  (relating to the Company's
          pre-1986 Syndication of Multi-Family Properties) have balloon
          payments of principal due on maturity.  The Purchase Notes
          executed since January 1, 1987 (relating to the Company's post-
          1986 Syndication of senior living communities) are self-
          liquidating (without balloon payments).  The Investing
          Partnership, as collateral security for its Purchase Note,
          pledges to the Company the Investor Notes received from its
          investors, its interest in the Limited Partnership Interests
          securing the Investor Notes, as well as the entire Purchased    
          Interest it holds in the Owning Partnership which it purchased
          from the Company.  In addition, each Purchase Agreement provides
          that the Investing Partnership shall pay the Company an amount
          equal to a specified percentage of the Investing Partnership's
          share of the net proceeds from capital transactions (such as the
          sale or refinancing of the underlying property) in excess of
          certain amounts.

               The limited partners purchase partnership interests in the
          Investing Partnerships by agreeing to make capital contributions
          over approximately five years to the Investing Partnership, which
          allows the Investing Partnership to pay the purchase price for
          the Purchased Interest, including the Purchase Note.  Limited
          partners are typically permitted to pre-pay their scheduled
          capital contributions.  The limited partnership agreement of the
          Investing Partnership provides that the limited partners are
          entitled to receive for a period not to exceed five years
          distributions equal to between 11% and 12% per annum of their
          then paid-in scheduled capital contributions.  Pursuant to the
          management contracts with the Owning Partnerships, the Company is
          required to pay the Management Contract Obligations which support
          the Syndicated Community's operations and the payment of such
          returns to the limited partners.  As a result of the Management
          Contract Obligations, the Company essentially bears the risks of
          operations and financial viability of the related Syndicated
          Community for such five-year period.  The management contract,
          however, rewards the Company for successful management of the
          Syndicated Community by allowing the Company to retain as an
          incentive management fee any cash flow generated by the
          Syndicated Community  in excess of the amount needed to satisfy
          the Management Contract Obligations.  After the initial five-year
          period, the limited partners are still entitled to the same
          specified rate of return on their investment, but only to the
          extent there are sufficient cash flows from the related
          Syndicated Communities.  To the extent property cash flows are
          not sufficient to pay the limited partners their specified
          return, the right to receive this shortfall accrues until
          proceeds are available from a sale or refinancing of the
          property.  After the initial five-year period, the Company's
          incentive management fee is 40% of the excess of cash flow over
          the amount necessary to make the specified rate of return to the
          limited partners.  The remaining  60% of cash flows are to be
          distributed by the Owning Partnerships to the Investing
          Partnerships for distribution to limited partners.

               The initial five-year term of the management contracts and
          the related Management Contract Obligations have expired for a
          portion of the Owning Partnerships and their related Investing
          Partnerships.  Although the Company has no obligation to fund
          operating shortfalls after the five-year term of the management
          contract, as of January 31, 1999, the Company has advanced an
          aggregate of approximately $2.2 million to these Owning        
          Partnerships to fund operating shortfalls.  All such advances are
          recorded as "Other Partnership Receivables" on the Company's
          Consolidated Balance Sheet.  Although the Company does not intend
          to do so in the future, from time to time, the Company has also
          made discretionary advances to Owning Partnerships beyond the
          Management Contract Obligations period for the purpose of making
          distributions to limited partners.

               In the past, limited partners have been allowed to prepay
          capital contributions.  Prepayments of capital contributions do
          not result in the prepayment of the related Purchase Notes. 
          Instead, such amounts are loaned to the Company by the Investing
          Partnership.   The purchase agreements provide that, should any
          failure to repay any such loan occur, the Company must credit to
          the Investing Partnership the amounts loaned at the time such
          amount would be required to be paid by the Investing Partnership
          to meet its obligations then due under the Purchase Note.  As a

                                       7

<PAGE>

          result of such loans and such provisions of the purchase
          agreements, the Company records the notes receivable
          corresponding to the Purchase Notes net of such loans. 
          Therefore, these prepayments act to reduce the recorded value of
          the Company's notes receivable and reduce interest income
          received by the Company.  Pursuant to the terms of its
          Syndications, the Company has the option not to accept future
          prepayments by limited partners of capital contributions.  The
          Company has not determined to what extent  it will continue to
          accept prepayments by limited partners of capital contributions.

               All of the Syndicated Communities are managed by the Company
          pursuant to written management contracts, which generally have a
          five year term coterminous with the Company's Management Contract
          Obligations.  After the initial five-year term, the Management
          Contract Obligations terminate and the management contracts are
          automatically renewed each year, but are cancelable on 30 to 60
          days notice at the election of either the Company or the related
          Owning Partnership.  The termination of any management contracts
          would result in the loss of fee income, if any, under those
          contracts.  In general, under the terms of the Investing
          Partnerships' partnership agreements, limited partners have only
          limited rights to take part in the conduct or operation of the
          partnerships.  The partnership agreements for the Investing
          Partnerships for which the Company is the general partner provide
          that a majority in ownership interests of the limited partners
          can remove the Company as the general partner at any time.  It is
          anticipated that all future Investing Partnership agreements will
          contain the same right to remove the Company as a general
          partner.  In addition, the consent of a majority in ownership
          interests of limited partners in such Investing Partnerships is
          required to be obtained in connection with any sale or
          disposition of the underlying property.

               The Company intends to continue to arrange for acquisitions
          of existing senior living communities by utilizing mortgage
          financing and by arranging Syndications. The Company plans to
          acquire and Syndicate between six and twelve existing senior
          living communities over the next two years.  The Company is, and
          will continue to be, the managing general partner of the
          partnerships that own Syndicated Communities.

               In addition, the Company arranged for the sale of limited
          partnership interests in two partnerships organized to make
          second mortgage loans to the Company to fund approximately 20% of
          the costs of developing three Development Communities.

          STRATEGY

               Growth.  The Company's growth strategy focuses on
          Development  Communities offering both independent and assisted-
          living apartment units and on continued intensive communities
          management.  The Company believes that there are numerous markets
          that are not served or are underserved by existing senior living
          communities and intends to take advantage of these circumstances,
          plus the present availability of construction financing on
          favorable terms, to develop Development Communities of its own
          design in desirable markets.  Historically, the Company has
          expanded by the acquisition and Syndication of existing senior
          living communities.  The Company has taken advantage of the
          inexperience and operating inefficiencies of the previous owners
          of these communities and has improved the financial performance
          of these properties by implementing its own management and
          marketing techniques. 

               The Company will continue to acquire existing senior living
          communities and intends to arrange for these acquisitions, in
          part, by Syndications.  The Company believes that its continuing
          practice of arranging for the acquisition of senior living
          communities through Syndications and privately placing debt
          securities will provide additional cash flow to help the Company
          pursue its Development Plan.

               The Company rents apartment units in the senior living
          communities which it operates pursuant to annual leases on a
          strictly "private pay" basis.  The Company believes this "private
          pay" focus will allow it to increase rental revenues as
          demographic pressure increases demand for senior living
          communities and to avoid potential financial difficulties it
          might encounter if it were dependent on Medicare or other


                                       8

<PAGE>

          government reimbursement programs that may suffer from health
          care reform, budget deficit reduction or other pending or future
          government initiatives.  

               New Development.  While the acquisition and Syndication of
          existing senior living communities will continue to play a
          significant role in the Company's expansion program, the primary
          focus of the expansion program is the development of Development
          Communities.  The Company's Development Plan emphasizes a
          "prototype" senior  living community that it has designed.  The
          Company designed the prototype based upon its experience
          operating its  portfolio of acquired Syndicated  Communities. 
          Because each of its Syndicated Communities has a different
          design, and due to the Company's experience in operating such
          communities, the Company believes its Development Community
          prototype incorporates the most beneficial characteristics of the
          various communities in the industry and represents an innovative
          and "state of the art" community.

               The prototype Development Community has been developed in
          two sizes, 126 apartment units and 142 apartment units, and is
          located on sites of up to seven acres. The Company currently
          intends to build primarily 126 apartment unit Development
          Communities. The Company believes that its development prototype
          is larger than many independent-living and most assisted-living
          communities, which typically range from 40 to 80 units.  The
          Company believes that the greater number of units will allow the
          Company to achieve economies of scale in operations, resulting in
          lower operating costs per unit, without sacrificing quality of
          service.  These savings primarily are achieved through lower
          staffing, maintenance and food preparation costs per unit,
          without sacrificing quality of service.  In that the time and
          effort required to develop a community (including site selection,
          land acquisition, zoning approvals, financing, and construction)
          do not vary materially for a larger community than for a smaller
          one, developmental economies of scale also are realized in that
          more apartment units are being produced for each Development
          Community that is developed. The prototype Development Community
          is targeted to the "middle to upper income" segment of the
          elderly population, which is the broadest segment of the elderly
          population and allows the Company to provide a high quality level
          of service.

               Common areas  include recreation areas, dining rooms, a
          kitchen, administrative offices, an arts and crafts room, a
          multi-purpose room, laundry rooms for each floor, a beauty
          salon/barber shop, a library reading area, card rooms, a
          billiards room, a health center to monitor residents' medical
          needs and assigned parking.  The Company believes that the common
          areas and amenities offered by its prototype Development
          Community represent the state of the art for independent-living
          communities and are superior to those offered by smaller
          independent-living communities or by most communities that offer
          only assisted living services.  The Company believes that such
          substantial common areas, which would often be unaffordable in
          smaller communities, will provide the Company's prototype
          Development Communities with a competitive advantage over smaller
          communities.  The Company believes that these common areas will
          attract residents and promote continued stable occupancy of its
          prototype communities.  Unit sizes range from 400 square feet for
          a studio to 850 square feet for a two bedroom/two bath unit.  A
          typical Development Community contains 8 studio apartments, 112
          one bedroom/one bathroom apartments and 6 two bedroom/two
          bathroom apartments, encompassing approximately 110,000 square
          feet.  Each Development Community apartment unit is a full
          apartment, including a kitchen or kitchenette.

               Each Development  Community offers residents a choice
          between independent-living and assisted-living services.  As a
          result, the market for each community is broader than for
          communities that offer only either independent-living or
          assisted-living services.  Although the licensing requirements
          and the expense and difficulty of converting between existing
          independent-living units and assisted-living units typically make
          it impractical to accomplish such conversions, the Company's
          Development Community prototype is designed to allow, at any
          time, for conversion of units, at minimum expense, for use as
          either independent-living or assisted-living units.  Each
          Development Community therefore may adjust its mix of
          independent-living and assisted-living units as the market or
          existing residents demand.  The Company believes that this
          innovative feature distinguishes its prototype Development
          Community.  The Company believes that part of the appeal of this
          type of community is that residents will be able to "age in
          place" with the knowledge that they need not move to another

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<PAGE>

          community if they require assistance with ADLs.  The Company
          believes that the ability to retain residents by offering them
          higher levels of services will result in stable occupancy with
          enhanced revenue streams.

               The Company's prototype Development Community also
          incorporates two interior courtyards, from which the Company's
          "Grand Court"  name originates.  These courtyards allow residents
          to enjoy the outdoors while remaining in a secure environment. 
          The Company believes that this feature distinguishes its
          prototype Development Community.

               In summary, the Company believes that the size, design and
          target markets of its prototype Development Community and the
          convertibility of its apartments to either independent or
          assisted-living units results in "state of the art" senior living
          communities that provide an excellent vehicle for economic
          growth.

               Market Selection Process.  In selecting geographic markets
          for potential expansion, the Company considers such factors as a
          potential market's population, demographics and income levels,
          including the existing and anticipated future population of
          seniors who may benefit from the Company's services, the number
          of existing and anticipated long-term care communities in the
          market area and the income level of the target population.  While
          the Company does not apply its market selection criteria
          mechanically or inflexibly, it generally seeks to select
          Development Community locations that are non-urban with
          populations of no more than 100,000 people and containing 3,000
          elderly households within a 20-mile radius with an annual income
          of at least $35,000, and have a regulatory climate that the
          Company considers favorable toward development.  Communities with
          these characteristics are referred to as secondary markets as
          opposed to primary markets, which are major urban centers, or
          tertiary markets, which are smaller rural communities.  The
          Company has found that secondary markets generally have a
          receptive population of seniors who desire and can afford the
          services offered in the Company's Development Communities.  The
          Company believes that it can obtain zoning and other necessary
          approvals in secondary markets more quickly and easily than would
          be the case in primary markets.  In focusing on secondary
          markets, the Company believes it will avoid overdevelopment to
          which primary markets are prone and obtain the benefit of
          demographic concentrations that do not exist in yet smaller
          markets.  The Company believes that high-quality, affordable
          employees are easier to attract and retain in secondary markets
          than in primary markets.

               Centralized Management.  The senior living business is
          highly management intensive.  While the location of a community
          and its physical layout are extremely important, another key to
          the success of a senior living community lies in the ability to
          maximize its financial potential through sophisticated,
          experienced management.  Such success requires the establishment
          and supervision of programs involving the numerous facets of a
          senior living community, including menu planning, food and supply
          purchasing, meal preparation and service, assistance with ADLs,
          recreational activities, social events, health care services,
          housekeeping, maintenance and security. The Company's strategy
          emphasizes centralized management in order to achieve operational
          efficiencies and ensure consistent quality of services.  The
          Company has established standardized policies and procedures
          governing, among other things, social activities, maintenance and
          housekeeping, health care services, and food services.  An annual
          budget is established by the Company for each community against
          which performance is tested each month.

               Marketing.  Marketing is critical to the rent up and
          continued high occupancy of a community.  The Company's marketing
          strategy focuses on enhancing the reputation of the Company's
          senior living communities and creating awareness of the Company
          and its services among potential referral sources.  The Company's
          experience is that satisfied residents and their families are an
          important source of referrals for the Company.  In addition, the
          Company plans to use its common Development Community design and
          its "The Grand Court" [registered trademark]  trademarked name to
          promote national brand-name recognition.  The Company has adopted
          the trademarked name.  Historically, senior  living communities
          have generally been independently owned and operated and there
          has been little national brand-name recognition.  The Company
          believes that national recognition will be increasingly important
          in the senior living business.  The Company intends to
          continuously use its trademarked name in its business activities,

                                        10

<PAGE>

          and the life of this trademark will extend for the duration of
          its use.  The Company considers this trademark to be a valuable
          intangible intellectual property asset.

          THE LONG-TERM CARE MARKET

               The long-term care services industry encompasses a broad
          range of accommodations and healthcare services that are provided
          primarily to seniors.  Independent-living communities attract
          seniors who desire to be freed from the burdens and expense of
          home ownership, food shopping and meal preparation and who are
          interested in the companionship and social and recreational
          opportunities offered by such communities.  As a senior's need
          for assistance increases, the provision of assisted-living
          services in a community setting is more cost-effective than care
          in a nursing home. A community which offers its residents
          assisted-living services can provide assistance with various ADLs
          (such as bathing, dressing, personal hygiene, grooming,
          ambulating and eating), support services (such as housekeeping
          and laundry services) and health-related services (such as
          medication supervision and health monitoring), while allowing
          seniors to preserve a high degree of autonomy.  Generally,
          residents of assisted-living communities require higher levels of
          care than residents of independent-living facilities, but require
          lower levels of care than residents of skilled-nursing
          facilities.

          INDUSTRY TRENDS

               The Company believes its business benefits from significant
          trends affecting the long-term care industry.  The first is an
          increase in the demand for elder care resulting from the
          continued aging of the U.S. population.  U.S. Bureau of Census
          shows that the average age of the Company's residents (83 years
          old) places them within one of the fastest growing segments of
          the U.S. population.  While increasing numbers of Americans are
          living longer and healthier lives, many choose senior living
          communities as a cost-effective method of obtaining the services
          and life-style they desire.  Senior living communities  that
          offer both independent and assisted-living services give seniors
          the comfort of knowing that they will be able to "age in place" -
          something they are increasingly unable to do at home.

               The primary consumers of long-term care services are persons
          over the age of 65.  This group represents one of the fastest
          growing segments of the population.  According to U.S. Bureau of
          the Census data, the number of people in the U.S. age 65 and
          older increased by more than 27% from 1981 to 1994, growing from
          26.2 million to 33.2 million.  Such census data also shows that
          the segment of the population over 85 years of age, which
          comprises the largest percentage of residents at long-term care
          facilities, is projected to increase by more than 37% between the
          years 1990 and 2000, growing from 3.0 million to 4.1 million. 
          The Company believes that these trends depicted in the graph
          below will contribute to continued strong demand for senior
          living communities.

          Projected Percentage Change in the Elderly Population of the U.S.

                      1981     1990     1995      2000     2005     2010
                      ----     ----     ----      ----     ----     ----

           65-84       0       17.5%    25.2%     26.2%    27.3%    34.6%

           85+         0       28.4%    54.3%     76.3%    94.1%   112.7%

                          Source:  U.S. Bureau of the Census

                                         11
<PAGE>


               A trend benefiting the Company, and especially its provision
          of independent-living services, is that as the population of
          seniors swells, the percentage of seniors that are disabled and
          need assistance with ADLs has steadily declined.  According to
          the National Long Term Care Surveys, a federal study, disability
          rates for persons aged 65 and older have declined by 1 to 2
          percent each year since 1982, the year the study was commenced. 
          In 1982, approximately 21% of the 65 and over population was
          disabled and in 1995 only 10% was disabled.  This trend suggests
          that demand for independent living services will increase in the
          future.

               Other trends benefiting the Company include the increased
          financial net worth of the elderly population, the changing role
          of women and the increase in the population of individuals living
          alone.  As the number of elderly in need of assistance has
          increased, so too has the number of the elderly able to afford
          residences in communities which offer independent and/or
          assisted-living services.  According to U.S. Bureau of the Census
          data, the median net worth of householders age 75 or older has
          increased from $55,178 in 1984 and $61,491 in 1988 to $76,541 in
          1991.  Furthermore, according to the same source, the percentage
          of people 65 years and older below the poverty line has decreased
          from 24.6% in 1970 to 15.7% in 1980 to 12.2% in 1990. 
          Historically, unpaid women (mostly daughters or daughters-in-law)
          represented a large portion of the care givers of the non-
          institutionalized elderly.  The increased number of women in the
          labor force, however, has reduced the supply of care givers, and
          led many seniors to choose senior living communities as an
          alternative.  Since 1970, the population of individuals living
          alone has increased significantly as a percentage of the total
          elderly population.  This increase has been the result of an
          aging population in which women outlive men by an average of 6.9
          years, rising divorce rates, and an increase in the number of
          unmarried individuals.  The increase in the number of the elderly
          living alone has also led many seniors to choose to live in
          senior living communities.

               The increased financial net worth of the elderly population
          is illustrated by the following chart:


                                   Median Net Worth

                                   1988                1991
                                   ----                ----

           45-54                   57,466              56,250

           55-64                   80,032              83,041

           65+                     73,471              88,192

                          Source:  U.S. Bureau of the Census

               Another trend benefiting the Company, and especially its
          provision of assisted-living services, is the effort by the
          government, private insurers and managed care organizations to
          contain health care costs by limiting lengths of stay, services,
          and reimbursement amounts.  This has resulted in hospitals
          discharging patients earlier and referring them to nursing homes. 
          At the same time, nursing home operators continue to focus on
          providing services to sub-acute patients requiring significantly
          higher levels of skilled nursing care.  The Company believes that
          this "push down" effect has and will continue to increase demand
          for assisted-living facilities that offer the appropriate levels
          of care in a non-institutional setting in a more cost-effective
          manner.  The Company believes that all of these trends have, and
          will continue to, result in an increasing demand for senior
          living facilities which provide both independent and assisted-
          living services.

          SERVICES

               It is important to identify the specific tastes and needs of
          the residents of a senior living community, which can vary from
          region to region and from one age group to the next.  Residents
          who are 70 years old have different needs than those who are 85. 
          The Company has retained a gerontologist to insure that programs
          and activities are suitable for all of the residents in a
          community and that they are adjusted as these residents "age in


                                         12

<PAGE>

          place".  Both independent and assisted-living services will be
          offered at all of the Company's Development Communities.
                                          
               Basic Service and Care Package.  The Company provides three
          levels of service at its senior living communities:

               Level I, Independent Living, includes three meals per day,
          weekly housekeeping, activities program, 24-hour security and
          transportation for shopping and medical appointments.

               Level II, Catered Living, offers all of the amenities of
          Level I in addition to all utilities, personal laundry and daily
          housekeeping.

               Level III, Assisted Living, provides three meals per day,
          daily housekeeping, 24-hour security, all utilities, medication
          management, activities and nurse's aides to assist the residents
          with any ADLs which they might require.  Rehabilitative services
          such as physical and speech therapy are also provided by licensed
          third party home health care providers.  Each resident can design
          a package of services that will be monitored by his or her own
          physician.  Several of the Company's Syndicated Communities are
          designed to meet the needs of assisted living residents who
          suffer from the early stages of Alzheimer's or dementia.

               The Company charges an average fee of $1,400 per month for
          Level I services, $1,700 per month for Level II services, and
          $2,000 per month for Level III services, but the fee levels vary
          from community to community. Residents at the communities which
          offer services for early stages of Alzheimer's or dementia pay an
          average of an additional $500 per month for such services.  As
          the residents of the communities managed by the Company continue
          to age, the Company expects that an increasing number of
          residents will utilize Level III services.  The Company's
          internal growth plan is focused on increasing revenue by
          continuing to expand the number and diversity of its tiered
          additional assisted-living services and the number of residents
          using these services.

          OPERATIONS

               Corporate.  Over the past ten years the Company has
          developed extensive policies, procedures and systems for the
          operation of its senior living communities.  The Company also has
          adopted a formal quality assurance program. In connection with
          this program the Company conducts a minimum of two full-day
          annual quality assurance reviews at each community. The entire
          regional staff team participates in the review which thoroughly
          examines all aspects of the senior living community from the
          provision of services to the maintenance of the physical
          buildings. The reports generated from these quality assurance
          reviews are then implemented by the community administrator.
          Corporate headquarters also provides human resources services, a
          licensing facilitator, and in-house accounting and legal support
          systems.


               Regional. The Company has ten regional administrators. Each
          administrator is responsible for three to six communities.  The
          Company also has a regional administrator and a registered
          dietician who oversee the food division.  Each regional
          administrator is reported to by the manager of those communities
          he oversees.
           
               Community.  The management team at each senior living
          community consists of an administrator, who has overall
          responsibility for the operation of the community, an activity
          director, a marketing director and, at certain larger
          communities, one or two assistant administrators. Each senior
          living community which offers assisted-living services has a
          staff responsible for the assisted-living care giving services. 
          This staff consists of a lead resident aide, a medication room
          aide, certified nurse aides and trained aides, and, in those
          states which so require, registered nurses. At least one staff
          member is on duty 24 hours per day to respond to the emergency or
          scheduled 24-hour assisted-living services available to the
          residents. Each community has a kitchen staff, a housekeeping
          staff and a maintenance staff. The average community currently
          operated by the Company has 40 to 50 full-time employees

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<PAGE>

          depending on the size of the community and the extent of services
          provided in that community.  Based upon its experience in
          operating senior living communities in both primary and secondary
          markets, the Company believes that its secondary market focus
          will make it easier for the Company to attract and retain high-
          quality, affordable staff.

               The Company places emphasis on diet and nutrition, as well
          as preparing attractively presented healthy meals which can be
          enjoyed by the residents. The Company's in-house food service
          program is led by a regional administrator who reviews all menus
          and recipes for each community. The menus and recipes are
          reviewed and changed based on consultation with the food director
          and input from the residents. The Company provides special meals
          for residents who require special diets.

               Employees.  The Company emphasizes maximizing each
          employee's potential through support and training. The Company's
          training program is conducted on three levels. Approximately six
          times per year, corporate headquarters staff conduct training
          sessions for the management staff in the areas of supervision and
          management skills, and caring for the needs of an aging
          population. At the regional level, regional staff train the
          community staff on issues such as policies, procedures and
          systems, activities for the elderly, the administration and
          provision of specific services, food service, maintenance,
          reporting systems and other operational areas of the business. 
          At the community level, the administrators of each community
          conduct training sessions on at least a monthly basis relating to
          various practical areas of care-giving at the community.  These
          monthly sessions cover, on an annual basis, all phases of the
          community's operations, including special areas such as safety,
          fire and disaster procedures, resident care, and policies and
          procedures.

          COMPETITION

               The senior housing and health care industries are highly
          competitive and the Company expects that both the independent-
          living business, and assisted-living businesses in particular,
          will become more competitive in the future.  The Company will
          continue to face competition from numerous local, regional and
          national providers of long-term care whose communities and
          services are on either end of the senior care continuum.  The
          Company will compete in providing independent-living services
          with home health care providers and other providers of
          independent-living services, primarily on the basis of quality
          and cost of  services offered.  The Company will compete in
          providing assisted-living with other providers of assisted-living
          services, skilled nursing communities and acute care hospitals
          primarily on the basis of cost, quality of care, array of
          services provided and physician referrals.  The Company also will
          compete with companies providing home based health care, and even
          family members, based on those factors as well as the reputation,
          geographic location, physical appearance of communities and
          family preferences.  In addition, the Company expects that as the
          provision of long-term care receives increased attention,
          competition from new market entrants, including, in particular,
          companies focused on independent and assisted-living, will grow. 
          Some of the Company's competitors operate on a not-for-profit
          basis or as charitable organizations, while others have, or may
          obtain, greater financial resources than those of the Company. 
          However, the Company anticipates that its most significant
          competition will come from other senior living communities within
          the same geographic area as the Company's communities because
          management's experience indicates that senior citizens frequently
          elect to move into communities near their homes.

               Moreover, in the implementation of the Company's expansion
          program, the Company expects to face competition for the
          development of senior living communities.  Some of the Company's
          present and potential competitors are significantly larger or
          have, or may obtain, greater financial resources than those of
          the Company.  Consequently, there can be no assurance that the
          Company will not encounter increased competition in the future
          which could limit its ability to attract residents or expand its
          business and could have a material adverse effect on the
          Company's financial condition, results of operations and
          prospects.  In addition, if the development of new senior living
          communities outpaces demand for those communities in certain

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<PAGE>

          markets, such markets may become saturated.  Such an oversupply
          of facilities could cause the Company to experience decreased
          occupancy, depressed margins and lower operating results.

          COMPANY HISTORY

               In  April, 1996, John Luciani and Bernard M. Rodin, the
          principal stockholders of the Company (the "Principal
          Stockholders") reorganized their businesses by consolidating them
          into the Company.  Pursuant to the reorganization, substantially
          all of the assets and liabilities of such businesses were
          transferred to the Company in exchange for shares of the
          Company's Common Stock.  See "Certain Transactions".  The primary
          predecessors of Grand Court Lifestyles, Inc. are J&B Management
          Company, and Leisure Centers, Inc.  J&B Management Company is a
          private partnership founded in 1969 which specialized in the
          development and management of multi-family real estate and senior
          living communities.  Prior to the formation of the Company in
          April, 1996, the Company's property development and management
          operations were conducted through its affiliate, Leisure Centers,
          Inc., located in Boca Raton, Florida.   Leisure Centers, Inc. was
          merged with and into the Company.  Grand Court Lifestyles, Inc.,
          its subsidiaries, J&B Management Company and Leisure Centers,
          Inc. and their affiliates are collectively referred to as the
          "Company".

               Through the 1970's and early 1980's, the Company's primary
          focus was on the acquisition, development, and management of
          multi-family properties.  Senior management, collectively, has
          over 80 years of experience in multi-family housing, having had
          interests in 170 properties containing approximately 20,000
          apartment units located in 22 states, primarily in the sun-belt. 
          Beginning in the mid-1980's, the Company's sole focus has been on
          the acquisition, and management of senior living communities
          building one of the largest operating portfolios of senior living
          communities in the nation, encompassing the entire spectrum of
          the long-term care industry, from independent-living to assisted-
          living, with a limited involvement in nursing homes.  Senior
          management, collectively, has over 40 years of experience in the
          senior living field.
           
          GOVERNMENT REGULATION

               Regulations applicable to the Company's operations vary
          among the types of senior living communities operated by the
          Company and from state to state.  Independent-living communities
          generally do not have any licensing requirements.  Assisted-
          living communities are subject to less regulation than other
          licensed health care providers but more regulation than
          independent-living communities.  However, the Company anticipates
          that additional regulations and licensing requirements will
          likely be imposed by the states and the federal government. 
          Currently, all states except South Dakota require licenses to
          provide the assisted-living services.  The licensing statutes
          typically establish physical plant specifications, resident care
          policies and services, administration and staffing requirements,
          financial requirements and emergency service procedures.  The
          licensing process can take from two months to one year.  New
          Jersey requires Certificates of Need for assisted-living
          communities.  The Company's communities also must comply with the
          requirements of the Americans with Disabilities Act ("ADA") and
          are subject to various local building codes and other ordinances,
          including fire safety codes.  While the Company relies almost
          exclusively on private pay residents, the Company operates a
          Syndicated nursing home and one Syndicated Community operated by
          the Company contains nursing home beds in which some residents
          rely on Medicare.  As a provider of services under the Medicare
          program, the Company is subject to Medicare regulations designed
          to limit fraud and abuse, violations of which could result in
          civil and criminal penalties and exclusion from participation in
          the Medicare program.  Revenues derived from Medicare comprise
          less than 1% of the revenues of the communities operated by the
          Company. The Company does not intend to expand its nursing home
          activities and intends to pursue an exclusively "private-pay"
          clientele.  The Company believes it is in substantial compliance
          with all applicable regulatory requirements.  No actions are
          pending against the Company for non-compliance with any
          regulatory requirement.

               Under various federal, state and local environmental laws,
          ordinances and regulations, a current or previous owner or
          operator of real property may be held liable for the costs of
          removal or remediation of certain hazardous or toxic substances,
          including, without limitation, asbestos-containing materials,

                                       15

<PAGE>

          that could be located on, in or under such property.  Such laws
          and regulations often impose liability whether or not the owner
          or operator knows of, or was responsible for, the presence of the
          hazardous or toxic substances.  The costs of any required
          remediation or removal of these substances could be substantial
          and the liability of an owner or operator as to any property is
          generally not limited under such laws and regulations, and could
          exceed the property's value and the aggregate assets of the owner
          or operator.  The presence of these substances or failure to
          remediate such substances properly may also adversely affect the
          owner's ability to sell or rent the property, or to borrow using
          the property as collateral.  Under these laws and regulations, an
          owner, operator or any entity who arranges for the disposal of
          hazardous or toxic substances, such as asbestos-containing
          materials, at a disposal site may also be liable for these costs,
          as well as certain other costs, including governmental fines and
          injuries to persons or properties.  As a result, the presence,
          with or without the Company's knowledge, of hazardous or toxic
          substances at any senior living communities owned or operated by
          the Company could have an adverse effect on the Company's
          business, operating results and financial condition. Although the
          Company has not incurred any material costs for removal or
          remediation of hazardous or toxic substances, there can be no
          assurance that this will remain the case in the future.

               Under the ADA, all places of public accommodation are
          required to meet certain federal requirements related to access
          and use by disabled persons.  A number of additional federal,
          state and local laws exist which also may require modifications
          to existing and planned properties to create access to the
          properties by disabled persons.  While the Company believes that
          its senior living communities are substantially in compliance
          with present requirements or are exempt therefrom, if required
          changes involve a greater expenditure than anticipated or must be
          made on a more accelerated basis than anticipated, additional
          costs would be incurred by the Company.  Further legislation may
          impose additional burdens or restrictions with respect to access
          by disabled persons, the costs of compliance with which could be
          substantial.

          EMPLOYEES

               As of March 19, 1999, the Company employed approximately
          2,280 persons, including 57 in the Company's principal executive
          offices.  None of the Company's employees are covered by
          collective bargaining agreements. The Company believes its
          employee relations are good.

          ITEM 2.  PROPERTIES

          SYNDICATED COMMUNITIES

               The Company currently manages 41 Syndicated Communities
          containing 5,694 senior living apartment units and one Syndicated
          nursing home containing 57 beds.  One of the Company's Syndicated
          Communities contains 70 nursing home beds.  Such communities are
          owned by Owning Partnerships and not by the Company.  The Company
          generally has a 1% interest in the Owning Partnerships and a 1%
          interest in the Investing Partnerships which are formed to
          purchase a 99% partnership interest in the Owning Partnership. 
          The following chart sets forth information regarding the
          Syndicated Communities managed by the Company:

                                                            NUMBER OF
               COMMUNITY (1)                   STATE          UNITS
               -------------                   -----        ---------
               The Grand Court Mesa            Arizona         174
               The Grand Court Phoenix         Arizona         136
               The Grand Court Sacramento      California      122
               The Grand Court Fort Myers      Florida         184
               The Grand Court Lakeland        Florida         126
               The Grand Court Lake Worth      Florida         170

                                                               AVERAGE 
                                                            OCCUPANCY % AS
                                                 YEAR        OF MARCH 31,
           COMMUNITY (1)                     ACQUIRED (2)      1999(8)
           -------------                     ------------    ------------
           The Grand Court Mesa                  1997            97% 
           The Grand Court Phoenix               1991            97%
           The Grand Court Sacramento            1998            74%
           The Grand Court Fort Myers            1989            93%
           The Grand Court Lakeland              1996            80%
           The Grand Court Lake Worth            1992            75%


                                         16

<PAGE>


                                                            NUMBER OF
               COMMUNITY (1)                   STATE          UNITS
               -------------                   -----        ---------
               The Grand Court North Miami     Florida         189
               The Grand Court Pensacola       Florida          60
               The Grand Court I and II        Florida         114
                  Pompano Beach
               The Grand Court South Miami     Florida          96
               The Grand Court Tampa           Florida         165
               The Grand Court Tavares         Florida          94
               The Grand Court Winterhaven     Florida         130
               The Grand Court Carrolton       Georgia          68
               The Grand Court Belleville      Illinois         76
               The Grand Court II Kansas City  Kansas          127
               The Grand Court Overland Park   Kansas          275
               The Grand Court Adrian          Michigan        103
               The Grand Court Farmington
                  Hills                        Michigan        164

               The Grand Court Novi            Michigan        114
               The Grand Court Westland        Michigan        153
               The Grand Court I Kansas City   Missouri        173
               The Grand Court III Kansas
                  City(3)                      Missouri        217
               The Grand Court Seward          Nebraska         65
               The Grand Court Las Vegas       Nevada          152
               The Grand Court Albuquerque     New Mexico      200(7)
               The Grand Court Columbus        Ohio            120
               The Grand Court Dayton          Ohio            185
               The Grand Court Findlay         Ohio             73
               The Grand Court Springfield     Ohio             77
               The Grand Court I Chattanooga   Tennessee       143(4)
               The Grand Court II Chattanooga  Tennessee       146
               The Grand Court Memphis         Tennessee       197
               The Grand Court Morristown      Tennessee       187
               The Grand Court Bryan           Texas           180
               The Grand Court Garland         Texas           112

               The Grand Court Longview        Texas           132
               The Grand Court Lubbock         Texas           139
               The Grand Court I San Antonio   Texas           198
               The Grand Court II San Antonio  Texas            57(5)
               The Grand Court Weatherford     Texas            60
               The Grand Court Bristol         Virginia         98

                                                               AVERAGE 
                                                            OCCUPANCY % AS
                                                 YEAR        OF MARCH 31,
           COMMUNITY (1)                     ACQUIRED (2)      1999(8)
           -------------                     ------------    ------------

           The Grand Court North Miami           1995            76%
           The Grand Court Pensacola             1993            91%
           The Grand Court I and II
              Pompano Beach                      1994            73%(6)
           The Grand Court South Miami           1998            39%(6)
           The Grand Court Tampa                 1997            99%
           The Grand Court Tavares               1995            99%
           The Grand Court Winterhaven           1997            89%
           The Grand Court Carrolton             1998            96%
           The Grand Court Belleville            1993            97%
           The Grand Court II Kansas City        1994            89%
           The Grand Court Overland Park         1997            99%(6)
           The Grand Court Adrian                1998            95%
           The Grand Court Farmington
              Hills                              1993            99%
           The Grand Court Novi                  1994            96%
           The Grand Court Westland              1997            98%
           The Grand Court I Kansas City         1989            94%
           The Grand Court III Kansas
              City(3)                            1989            83%(6)
           The Grand Court Seward                1999            92%
           The Grand Court Las Vegas             1991            94%
           The Grand Court Albuquerque           1997            83%
           The Grand Court Columbus              1994            94%
           The Grand Court Dayton                1994            99%
           The Grand Court Findlay               1992            95%
           The Grand Court Springfield           1992            96%

           The Grand Court I Chattanooga         1995            77%
           The Grand Court II Chattanooga        1995            91%
           The Grand Court Memphis               1992            90%
           The Grand Court Morristown            1996            85%
           The Grand Court Bryan                 1992            93%
           The Grand Court Garland               1997            97%(6)
           The Grand Court Longview              1990            74%
           The Grand Court Lubbock               1991            80%
           The Grand Court I San Antonio         1993            93%
           The Grand Court II San Antonio        1995            79%
           The Grand Court Weatherford           1996            89%
           The Grand Court Bristol               1995            96%

                                            
          ------------------------
          (1)  In certain cases, more than one Investing Partnership owns
               an interest in one Owning Partnership.  There are therefore,
               more Investing Partnerships than there are Owning
               Partnership.  One of the Owning Partnerships owns two senior
               living communities and another Owning Partnership owns one
               Syndicated Community and one Syndicated nursing home.  As a
               result, there are 42 properties listed, which relate to 40

                                          17

<PAGE>

               Owning Partnerships. In addition, the senior living
               community to be owned by one Owning Partnership is currently
               under construction.

          (2)  Represents year in which the Owning Partnership acquired the
               community.

          (3)  A portion of the units at The Grand Court III Kansas City
               are currently rented as residential apartment units.

          (4)  Grand Court I Chattanooga's unit count includes a 70-bed
               nursing wing.

          (5)  Grand Court II San Antonio is a 57-bed licensed nursing
               facility.

          (6)  Occupancy percentage includes 1-2 units occupied by staff.

          (7)  Sixty (60) additional units were constructed during Fiscal
               1998. Such construction was substantially completed by
               October 1, 1998. The Company is in the process of renting
               these additional units.

          (8)  The average occupancy percentage of each individual
               community was determined by adding the average occupancy
               percentages as of the end of each month in which the
               individual community was managed by the Company and dividing
               that number by the total number of months the community was
               managed by the Company during the periods April 1998 through
               March 1999.  The average monthly occupancy percentage for
               each individual community was determined by dividing the
               number of occupied units in the individual community as of
               the end of the month by the total number of apartment units
               in the individual community.

               The Syndicated Communities currently operated by the Company
          are generally encumbered with mortgage financing.  While these
          mortgage loans are obligations of the Owning Partnerships rather
          than direct obligations of the Company, the Company typically
          provides a guaranty of certain obligations under the mortgages
          including, for example, any costs incurred for the correction of
          hazardous environmental conditions.  To date, the Company has
          incurred no material costs or expenses relating to the correction
          of hazardous environmental conditions. Although most of the
          mortgage loans are non-recourse, as of January 31, 1999, (i) the
          Company is liable as a general partner for approximately $12.8
          million in principal amount of mortgage debt relating to six
          Syndicated Communities and (ii) wholly-owned entities (whose only
          asset is a specific general partner interest) are liable as
          general partners for approximately $35.6 million in principal
          amount of mortgage debt relating to seven Syndicated Communities
          and one Syndicated nursing home managed by the Company as of
          January 31, 1999.  In the case of the general partner liabilities
          of the wholly-owned entities (whose only asset is a specific
          general partner interest), the only assets of the Company at risk
          of loss are the general partnership interests in the wholly-owned
          entities.  As of January 31, 1999, the aggregate principal amount
          of the mortgage debt of the Owning Partnerships was approximately
          $209.4 million and the aggregate annual debt service obligations,
          excluding any balloon amounts payable at maturity, was
          approximately $19.9 million.  Most of this debt contains
          provisions which limit the ability of the respective Owning
          Partnerships to further encumber the property.  Through January
          31, 2003, approximately $195.3 million of balloon payments under
          the mortgages will become due and payable.  The Company
          anticipates that it will continue to arrange for future
          acquisitions of existing senior living communities through
          mortgage financing and Syndications.

          DEVELOPMENT COMMUNITIES

               The Company has completed construction of and currently
          operates seven Development Communities containing 962 senior
          living apartment units which were constructed pursuant to the
          Company's Development Plan.  The Company has entered into joint
          venture arrangements with a third party pursuant to which it has
          sold 50% interests in three of these seven Development
          Communities and a fourth Development Community which is not yet
          completed. The other four completed Development Communities are
          operated by the Company pursuant to long-term leases.  The

                                        18

<PAGE>

          following chart sets forth information regarding the seven
          completed Development Communities.

                                                               NUMBER OF
            COMMUNITY                               STATE        UNITS
            ---------                               -----       --------
            The Grand Court Abilene(4)              Texas        126
            The Grand Court Corpus Christi (3)      Texas        142
            The Grand Court El Paso (4)             Texas        142
            The Grand Court San Angelo (4)          Texas        142
            The Grand Court Temple (3)              Texas        126
            The Grand Court Wichita Falls(4)        Texas        142
            The Grand Court Round Rock (3)          Texas        142

                                                   YEAR         AVERAGE
           COMMUNITY                            BUILT (1)    OCCUPANCY (2)
           ---------                            ---------    ------------
           The Grand Court Abilene(4)              1998           --
           The Grand Court Corpus Christi (3)      1998           --
           The Grand Court El Paso (4)             1998           --
           The Grand Court San Angelo (4)          1998           --
           The Grand Court Temple (3)              1998           --
           The Grand Court Wichita Falls(4)        1998           --
           The Grand Court Round Rock (3)          1998           --


          ------------------------
          (1)  Represents the year in which the property was placed into
               service.
          (2)  There is no occupancy percentage calculated as yet due to
               the properties being in their initial lease-up period.
          (3)  Represents Development Communities which are owned by the
               Company pursuant to joint venture arrangements.
          (4)  Represents Development Communities which are operated by the
               Company pursuant to long-term leases.

               The Development Communities which were wholly-owned by the
          Company as of January 31, 1999 and currently owned by the Company
          pursuant to joint venture arrangements were developed with
          mortgage financing. The Company intends to finance its future
          development of Development Communities primarily through mortgage
          financing and other types of financing, including joint venture
          arrangements. In addition, the Company may enter into long-term
          operating leases arising through sale/leaseback transactions or
          similar transactions and may issue additional debt or equity
          securities, to the extent necessary.  The mortgage financing of
          Development Communities will be direct obligations of the Company
          and, accordingly, the amount of its mortgage indebtedness is
          expected to increase and the Company expects to have substantial
          debt service, and may have substantial annual lease payment,
          requirements in the future as the Company pursues its growth
          strategy.

          ITEM 3.  LEGAL PROCEEDINGS

               The Company is involved in various lawsuits and other
          matters arising in the normal course of business, including
          employment-related claims.  In the opinion of management of the
          Company, although the outcomes of these claims and suits are
          uncertain, in the aggregate they should not have a material
          adverse effect on the Company's financial position or results of
          operations.  The Company business entails an inherent risk of
          liability.  In recent years, participants in the long-term care
          industry have become subject to an increasing number of lawsuits
          alleging malpractice or related legal claims, many of which seek
          large amounts and result in significant legal costs.  The Company
          expects that from time to time it may be subject to such suits as
          a result of the nature of its business.  The Company currently
          maintains insurance policies in amounts and with such coverage
          and deductibles as it deems appropriate, based on the nature and
          risks of its business, historical experience and industry
          standards.  There can be no assurance, however, that claims in
          excess of the Company's insurance coverage or claims not covered
          by the Company's insurance coverage will not arise.  A successful
          claim against the Company not covered by, or in excess of, the
          Company's insurance could have a material adverse effect on the
          Company's operating results and financial condition.  Claims
          against the Company, regardless of their merit or eventual
          outcome, may also have a material adverse effect on the Company's
          ability to attract residents or expand its business and would
          require management to devote time to matters unrelated to the
          operation of the Company's business.  In addition, the Company's
          insurance policies must be renewed annually, and there can be no

                                          19

<PAGE>

          assurance that the Company will be able to obtain liability
          insurance coverage in the future or, if available, that such
          coverage will be on acceptable terms.


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

               There were no matters submitted to a vote of security
          holders, through the solicitation of proxies or otherwise, during
          the fourth quarter of the fiscal year ended January 31, 1999.


                                         20

<PAGE>


          PART II

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

               The Company's common stock (the "Common Stock") is traded on
          the National Market tier of the Nasdaq Stock Market, which
          reports the daily high, low and closing transaction prices, as
          well as volume data, under the symbol "GCLI".  Trading in the
          Common Stock began on March 16, 1998.  The high and low bid
          prices of the Common Stock are as follows: 

                       3/16/98-    5/1/98-   8/1/98-    11/1/98-   2/1/99-
                        4/30/98    7/31/98  10/31/98     1/31/99   4/26/99
                      --------    -------   --------   --------   -------
           High        $11.000    $10.500   $10.250     $9.500     $9.000
           Low         $10.375    $ 9.375   $ 8.000     $8.000     $6.375
                                
          As of April 26, 1999, there were approximately 17 holders of
          record of the Common Stock.

               The Company has not declared and paid cash dividends and it
          does not anticipate paying future dividends on its Common Stock. 
          It is the present policy of the Board of Directors to retain
          earnings, if any, to finance the expansion of the Company's
          business.  The payment of dividends on its Common Stock in the
          future will depend on the results of operations, financial
          condition, capital expenditure plans and other cash obligations
          of the Company and will be at the sole discretion of the Board of
          Directors.  In addition, certain provisions of future
          indebtedness of the Company may prohibit or limit the Company's
          ability to pay dividends.

               The effective date of the registration statements (Nos. 333-
          05855 and 333-43331) for the Company's initial public offering of
          its common stock, $.01 par value, was March 13, 1998. The
          offering commenced on March 16, 1998. The managing underwriter of
          the offering was Royce Investment Group, Inc. ("Royce"). Pursuant
          to the offering, the Company sold to the public 2,800,000 shares
          of its common stock at an initial offering price of $9.50 per
          share. The aggregate price of the offering registered by the
          Company was $26.6 million. On April 29, 1998, pursuant to an
          over-allotment option granted to the underwriters, John Luciani
          and Bernard M. Rodin (the "Selling Shareholders") each sold
          173,030 shares of the Company's common stock to the public at a
          price of $9.50 per share.  The aggregate price of the shares
          offered by and registered on behalf of the Selling Shareholders
          was $3,287,600. Under the terms of the offering, the Company
          incurred underwriting discounts of $1.6 million, and the Selling
          Shareholders incurred aggregate underwriting discounts of
          $197,250. The Company incurred the following expenses in
          connection with the offering: (i) a non-accountable expense
          allowance paid to Royce in the amount of $798,000, (ii) a
          consulting fee paid to Royce in the amount of $266,000, and (iii)
          other expenses related to the offering in the amount of $1.6
          million. The net proceeds that the Company received as a result
          of this offering were $22.3 million. As of January 31, 1999, the
          Company's net proceeds have been used as follows: $11.3 million
          has been used to purchase a series of treasury bills pending
          application of the funds. $9.4 million has been used for the
          purchase of land and towards the construction of plant, building
          and facilities and $1.6 million has been used for working
          capital.

          ITEM 6.   SELECTED CONSOLIDATED FINANCIAL DATA
                    (in thousands, except per share data and other data)

               The following selected consolidated financial statement of
          operations and balance sheet data have been derived from the
          Company's consolidated financial statements and should be read in
          conjunction with the consolidated financial statements and the
          related notes thereto included herein.  All references herein to
          a "fiscal" year refer to the fiscal year beginning on February 1
          of that year (for example, "fiscal 1995" refers to the fiscal
          year beginning on February 1, 1995). See "Management's Discussion
          and Analysis of Financial Condition and Results of Operations."

                                         21
<PAGE>

                                                  YEARS ENDED JANUARY 31
                                               ---------------------------
                                                1995       1996       1997
                                                ----       ----       ----
     STATEMENT OF OPERATIONS DATA:
     Revenues:
          Sales  . . . . . . . . . . . . .   $22,532    $31,973    $36,021
          Syndication fee income . . . . .     5,587      8,603      7,690
          Deferred income earned . . . . .     4,399      9,971      5,037
          Interest income  . . . . . . . .     9,503     12,689     13,773
          Property management fees from
            related parties  . . . . . . .     4,351      4,057      2,093
          Equity in earnings from
            partnerships . . . . . . . . .       276        356        423
          Senior living revenues . . . . .        --         --         --
          Other income . . . . . . . . . .        --      1,013         --
                                              ------     ------     ------
                                              46,648     68,662     65,037
          Total Revenues . . . . . . . . .    ======     ======     ======
     Costs and expenses:
          Cost of sales  . . . . . . . . .    21,743     27,688     34,019
          Selling  . . . . . . . . . . . .     6,002      7,664      7,176
          Interest . . . . . . . . . . . .    13,610     15,808     16,394
          General and administrative . . .     6,450      7,871      7,796
          Loss on impairment of notes and
            receivables  . . . . . . . . .        --         --     18,442
          Write-off of registration costs         --         --         --
          Senior living operating expenses        --         --         --

          Officers' compensation(1)  . . .     1,200      1,200      1,200
                                               2,290      2,620      3,331
          Depreciation and amortization  .    ------     ------     ------
                                              51,295     62,851     88,358
          Total Costs and Expenses  . . . .   ======     ======     ======
          Net income (loss) . . . . . . . .   (4,647)     5,811    (23,321)
          Pro-forma income tax provision  
          (benefit)(2)  . . . . . . . . . .   (1,859)     2,324         --
                                              ------     ------     ------
                                             $(2,788)    $3,487   $(23,321)
     Pro-forma net income (loss)(2)  . . .    ======     ======     ======
    
     Pro-forma earnings (loss) per             $(.19)       $.23   $(1.55)
        common share (basic and diluted)(2)   ======     ======     ======
     Pro-forma weighted average               15,000     15,000     15,000
        common shares used . . . . . . . .    ======     ======     ======

     OTHER DATA:

     Senior living communities                    24         28         31
        operated (end of period) . . . . .    ======     ======     ======
     Number of units (end of                   3,683      4,164      4,480
        period)  . . . . . . . . . . . . .    ======     ======     ======
                                               89.3%       94.7%    91.3%
     Average occupancy percentage (3)         ======      ======   ======     

                                             YEARS ENDED JANUARY 31
                                             ----------------------
                                                 1998         1999  
                                                 ----         ----  

     STATEMENT OF OPERATIONS DATA:
     Revenues:
          Sales  . . . . . . . . . . . . .      $38,135      $58,010
          Syndication fee income . . . . .        7,923        7,283
          Deferred income earned . . . . .        7,254        3,701
          Interest income  . . . . . . . .       12,051       12,349
          Property management fees from
            related parties  . . . . . . .        3,684        3,219
          Equity in earnings from
            partnerships . . . . . . . . .          541          685
          Senior living revenues . . . . .           --        5,093
                                                  4,683        1,350
          Other income . . . . . . . . . .       ------      -------
                                                 74,271       91,690
          Total Revenues . . . . . . . . .       ======      =======
     Costs and expenses:

          Cost of sales  . . . . . . . . .       33,635       53,547
          Selling  . . . . . . . . . . . .        7,602        6,335
          Interest . . . . . . . . . . . .       19,409       22,066
          General and administrative . . .        8,437       10,388
          Loss on impairment of notes and
            receivables  . . . . . . . . .           --           --
          Write-off of registration costs         3,107           --
          Senior living operating expenses           --        6,098
          Officers' compensation(1)  . . .        1,200        1,200
                                                  3,340        5,032
          Depreciation and amortization  .       ------      -------
                                                 76,730      104,666
          Total Costs and Expenses  . . . .      ======      =======
          Net income (loss) . . . . . . . .      (2,459)     (12,976)
          Pro-forma income tax provision       
          (benefit)(2)  . . . . . . . . . .          --           --
                                                 ------      -------
                                               $(2,459)    $(12,976)
     Pro-forma net income (loss)(2)  . . .       ======      =======
     Pro-forma earnings (loss) per
        common share (basic and                  $(.16)       $(.74)
        diluted)(2)  . . . . . . . . . . .       ======      =======
     Pro-forma weighted average                  15,000       17,455
        common shares used . . . . . . . .       ======      =======

     OTHER DATA:

     Senior living communities                       37           47
        operated (end of period) . . . . .       ======      =======

     Number of units (end of                      5,261        6,591
        period)  . . . . . . . . . . . . .       ======      =======
                                                  93.3%        89.1%
     Average occupancy percentage (3)            ======      ======= 

                                      22
<PAGE>

                                                  AS OF JANUARY 31,
                                           ---------------------------
                                            1995       1996      1997
                                            ----       ----      ----
     BALANCE SHEET DATA:
       Cash and cash equivalents . . . . $ 10,950  $ 17,961   $ 14,111
       Notes and receivables-net . . . .  220,482   224,204    222,399

       Total assets  . . . . . . . . . .  248,553   260,023    261,661
       Total liabilities . . . . . . . .  217,879   225,238    229,658
       Stockholders' equity  . . . . . .   30,674    34,785     32,003

                                              AS OF JANUARY 31,
                                              -----------------
                                              1998         1999
                                              ----         ----
     BALANCE SHEET DATA:

       Cash and cash equivalents . . . .    $ 11,964     $ 22,784
       Notes and receivables-net . . . .     231,140      227,104
       Total assets  . . . . . . . . . .     295,799      319,314
       Total liabilities . . . . . . . .     269,387      283,588
       Stockholders' equity  . . . . . .      26,412       35,726


       -------------------------

          (1)  John Luciani and Bernard M. Rodin, the Chairman of the Board
               and President, respectively, of the Company received
               dividends and distributions from the Company's predecessors
               but did not receive compensation.  Officers' Compensation is
               based upon the aggregate compensation currently received by
               such officers, $600 a year for each such officer.  Amounts
               received by such officers in excess of such amounts are
               treated as distributions for purposes of the Company's
               financial statements.  In  fiscal 1994 through fiscal 1997,
               such officers also received $943; $850, $397 and $1,566 each
               respectively as a distribution.  See "Management."

          (2)  The Company's predecessors were Sub-chapter S corporations
               and a partnership.  The pro forma statement of operations
               data reflects provisions for federal and state income taxes
               as if the Company had been subject to federal and state
               income taxation as a C corporation during the years ended
               January 31, 1995 and January 31, 1996.

          (3)  Average occupancy percentages were determined by adding all
               of the occupancy percentages of the individual communities 
               and dividing that number by the total number of communities. 
               The average occupancy percentage for each particular
               community was determined by dividing the number of occupied
               apartment units in the particular community on the given
               date by the total number of apartment units in the
               particular community.

                                          23

<PAGE>


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

          SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

               The Company is including the following cautionary statements
          to make applicable and take advantage of the safe harbor
          provisions of the Private Securities Litigation Reform Act of
          1995 for any forward-looking statements made by, or on behalf, of
          the Company in this Annual Report on Form 10-K.  Forward-looking
          statements include statements concerning plans, objectives,
          goals, strategies, future events or performance and underlying
          assumptions and other statements which are other than statements
          of historical facts.  Such forward-looking statements may be
          identified, without limitation, by the use of the words
          "anticipates", "estimates", "expects", "intends", "believes" and
          similar expressions.  From time to time, the Company or one of
          its subsidiaries individually may publish or otherwise make
          available forward-looking statements of this nature.  All such
          forward-looking statements, whether written or oral, and whether
          made by or on behalf of the Company or its subsidiaries, are
          expressly qualified by these cautionary statements and any other
          cautionary statements which may accompany the forward-looking
          statements.  In addition, the Company disclaims any obligation to
          update any forward-looking statements to reflect events or
          circumstances after the date hereof.

               Forward-looking statements made by the Company are subject
          to risks and uncertainties that could cause actual results or
          events to differ materially from those expressed in, or implied
          by, the forward-looking statements.  These forward-looking
          statements include, among others, statements concerning the
          Company's revenue and cost and expense trends, the number and
          economic impact of anticipated acquisitions and new developments,
          planned capital expenditures and financing needs and
          availability.  Investors or other users of the forward-looking
          statements are cautioned that such statements are not a guarantee
          of future performance by the Company and that such forward-
          looking statements are subject to risks and uncertainties that
          could cause actual results to differ materially from those
          expressed in, or implied by, such statements.  In addition to
          other factors and matters discussed elsewhere herein, the
          following are some, but not all, of the important factors that,
          in the view of the Company, could cause actual results to differ
          materially from those discussed in the forward looking
          statements:

               1.   The ability of the Company to service its substantial
                    debt obligations.

               2.   The ability of the Company to pay Management Contract
                    Obligations from the cash flow generated by the
                    Syndicated Communities and the impact of the terms of
                    future Syndications.

               3.   The need for the Company to utilize cash from
                    operations and obtain additional financing to pursue
                    its  Development Plan.

               4.   The Company's ability to identify and Syndicate
                    suitable acquisition opportunities, a significant
                    source of revenues for the Company.

               5.   The Company's ability to identify suitable development
                    opportunities, pursue such opportunities, complete
                    development, lease-up and effectively operate the
                    Development Communities.

               6.   The ability of the Company to obtain sufficient joint
                    venture capital for its Development Program on
                    favorable terms, anticipated to be a significant source
                    of revenues for the Company.

               7.   The impact of mortgage defaults and/or foreclosures
                    relating to Multi-Family Properties (as defined below)
                    on the Company's ability to collect on its Multi-Family
                    Notes (as defined below).


                                         24

<PAGE>

               8.   Governmental regulatory actions and initiatives,
                    including without limitation, those relating to
                    healthcare laws, benefitting disabled persons,
                    government mortgage insurance and subsidy programs,
                    environmental requirements and safety requirements.
               9.   The ability to attract seniors with sufficient
                    resources to pay for the Company's services.

               10.  Changes in anticipated construction costs, operating
                    expenses and start-up losses relating to the Company's
                    new Development Plan.

               11.  Unanticipated delays in the Company's Development Plan
                    including, without limitation, permitting, licensing
                    and construction delays.

               12.  Changes in general economic conditions, including, but
                    not limited to, factors particularly affecting real
                    estate and the capital markets including, but not
                    limited to, changes in interest rates.

               13.  Changes in operating costs of senior living
                    communities, including without limitation, staffing and
                    labor costs.

               14.  The Company's ability to attract and retain qualified
                    personnel.

               15.  Competitive factors affecting the long-term care
                    services industry.

               16.  The potential recourse and guarantee obligations of the
                    Company, including, without limitation, the correction
                    of hazardous environmental conditions relating to the
                    mortgage financing of the senior living communities.

               17.  The potential liabilities arising from the Company's
                    status as the general partner of Syndicated
                    Communities.

               18.  The potential impact of recent net losses.

               19.  The potential impact of computer related Year 2000
                    problems on the Company's operations, including the
                    ability of the Company and material third parties to
                    identify and/or address all  material Year 2000 issues
                    and implement contingency plans.

          OVERVIEW

               The Company is a fully integrated provider of senior living
          accommodations and services which acquires, develops and manages
          senior living communities which provide independent and assisted-
          living services.  The Company's revenues have been, and are
          expected to continue to be, primarily derived from the sales of
          partnership interests ("Syndications") of partnerships it
          organizes to acquire existing senior living communities
          ("Syndicated Communities") .  The Company has established a new
          development program (the "Development Plan") pursuant to which it
          is building new senior living communities which offer independent
          and assisted living services ("Development Communities"). The
          Company currently owns the Development Communities pursuant to
          joint venture arrangements or operates such communities pursuant
          to long-term leases. To the extent that the Company's Development
          Plan  is successfully implemented, the Company anticipates that
          the percentage of its revenues derived from Syndications would
          decrease and the percentage of its revenues derived from the
          Development Communities  would increase and, the Company
          believes, over time, become the primary source of the Company's
          revenues. Although the Company has experienced operating losses
          in the last three fiscal years, the Company expects to report a
          profit for the first quarter of Fiscal 1999.

                                         25
<PAGE>


                    Historically, the Company has arranged for the
          acquisition and development of senior living communities and
          multi-family properties by utilizing mortgage financing and
          Syndications. The multi-family properties, which were Syndicated
          by the Company prior to 1986, are not owned or managed by the
          Company. Such properties are owned by their respective Owning
          Partnerships and are managed by third party managing agents. The
          senior living communities Syndicated by the Company since 1986
          are managed by the Company but are owned by the respective Owning
          Partnerships and not by the Company.

               Future revenues, if any, of the Company relating to
          previously Syndicated Communities would primarily arise in the
          form of (i) deferred income earned on the sale of the Purchased
          Interests in the related Owning Partnerships, (ii) management
          fees, (iii) amounts payable by the Investing Partnerships to the
          Company in the event of the subsequent sale or refinancing of
          such communities, (iv) interest income on purchase notes
          receivable, and (v) earnings derived from the Company's equity
          interests in Owning Partnerships and Investing Partnerships. 
          Future revenues, if any, of the Company relating to future
          Syndicated Communities would primarily arise from any initial
          profit recognized upon completion of the Syndication and from the
          same items listed in the previous sentence.  

               The Company intends to continue to arrange for future
          acquisitions of existing senior living communities by utilizing
          mortgage financing and by arranging Syndications, and anticipates
          that between six and twelve communities will be acquired and
          Syndicated in this manner during the next two years.  Future
          Syndications will require the allocation of funds generated by
          the Company to cover the Company's initial costs relating to the
          Syndication transactions (primarily any funds required to acquire
          the property above the amounts received from the mortgage
          financing obtained, the costs of any improvements to the property
          deemed necessary and the costs associated with arranging for the
          sale of the partnership interests).  The Company typically pays
          these costs from the proceeds it receives from its sale of the
          Purchased Interests to the Investing Partnership.  In addition,
          future Syndications may require the allocation of the Company's
          funds to satisfy any associated Management Contract Obligations
          (including payment of required returns for distribution to
          limited partners) that are not funded from the respective
          property's operations.  

               The Company continually seeks senior living communities
          which it deems are good acquisition prospects.  In deciding which
          properties it has and will acquire, the Company's senior
          management exercises its business judgement to determine which
          properties are good acquisition candidates and what constitutes
          an acceptable purchase price.  There are no fixed criteria for
          these decisions, but rather, a number of factors are considered,
          including the size, location, occupancy history, physical
          condition, current income and expenses, quality of current
          management, local demographic and market conditions, existing
          competition and proposed entrants to the market.  

           .   Sales.  Income from sales of general partnership interests
          in Owning Partnerships is recognized when the profit on the
          transaction is determinable, that is, the collectibility of the
          sales price is reasonably assured and the earnings process is
          virtually complete.  The Company determines the collectibility of
          the sales price by evidence supporting the buyers' substantial
          initial and continuing investment in the purchased property as
          well as other factors such as age, location and cash flow of the
          underlying property.

           .   Syndication Fee Income.  The Company earns Syndication fee
          income equal to the expenses of the Syndication which include
          commissions.

           .   Deferred Income Earned.  The Company has deferred income on
          sales to Investing Partnerships of interests in Owning
          Partnerships.  The Company has arranged for the Syndications of
          Investing Partnerships which were formed to acquire controlling
          interests in Owning Partnerships which own senior living
          communities ("Senior Living Owning Partnerships").  In a typical
          Syndication, the Company enters into a management contract with
          the Senior Living Owning Partnership, pursuant to which the
          Company is required to pay, for a five-year period, any
          Management Contract Obligations not paid from cash flow from the

                                       26
<PAGE>
          related property.  The amount of deferred income for each
          property is calculated in a multi-step process.  First, based on
          the property's cash flow in the previous fiscal year, the
          probable cash flow for the property for the current fiscal year
          is determined and that amount is initially assumed to be constant
          for each remaining year of the Management Contract Obligations
          period (the "Initial Cash Flow").  The Initial Cash Flow is then
          compared to the Management Contract Obligations for the property
          for each remaining year of the five-year period.  If the Initial
          Cash Flow exceeds the Management Contract Obligations for any
          fiscal year, the excess Initial Cash Flow is added to the assumed
          Initial Cash Flow for the following fiscal year and this adjusted
          Initial Cash Flow is then compared to the Management Contract
          Obligations for said following fiscal year.  If the Initial Cash
          Flow is less than the Management Contract Obligations for any
          fiscal year, a deferred income liability is created in an amount
          equal to such shortfall and no adjustment is made to the Initial
          Cash Flow for the following year.  As this process is performed
          for each property on a quarterly basis, changes in a property's
          actual cash flow will result in changes to the assumed Initial
          Cash Flow utilized in this process and will result in increases
          or decreases to the deferred income liability for the property. 
          Any deferred income liability created during a period increases
          the cost of sales for that period.  The payment of the Management
          Contract Obligations, however, will generally not result in the
          recognition of expense unless the property's actual Cash Flow for
          the year is less than the Initial Cash Flow for the year, as
          adjusted, and as a result thereof, the amount paid by the Company
          in respect of the Management Contract Obligations is greater than
          the amount assumed in establishing the deferred income liability
          (such excess amount expended during any period is included as a
          component of cost of sales for that period).  If, however, the
          property's actual cash flow is greater than the Initial Cash Flow
          for the period, as adjusted, the Company's earnings will be
          enhanced by the recognition of deferred income earned and, to the
          extent cash flow exceeds Management Contract Obligations,
          incentive management fees.  The Company recognized such incentive
          management fees in the amount of $1.2 million, $2.8 million and
          $2.2 million for the years ended January 31, 1997, 1998 and 1999,
          respectively.  

               The Company accounts for the pre-1986 Syndication of
          Investing Partnerships which were formed to acquire controlling
          interests in Owning Partnerships which own Multi-Family
          Properties ("Multi-Family Owning Partnerships") under the
          installment method.  Under the installment method the gross
          profit was determined at the time of sale.  The revenue recorded
          in any given year would equal the cash collections multiplied by
          the gross profit percentage.  At the time of the sale, the
          Company deferred all future income to be recognized on each of
          these transactions.  Losses on these properties are recognized
          immediately upon sale.  Syndications relating to Multi-Family
          Owning Partnerships account for 86% of the Company's deferred
          income.

           .   Interest Income.  The Company has notes receivable with
          respect to Purchase Notes arising from the post-1986 Syndication
          of senior living communities ("Senior Living Notes").  Such
          Senior Living Notes have stated interest rates ranging from 11%
          to 13.875% per annum and are due in installments over five years
          from the date the Investing Partnership acquired its interest in
          the Senior Living Owning Partnership.  Each Senior Living Note
          represents senior indebtedness of the related Investing
          Partnership and is collateralized by the Investing Partnership's
          interest in the Senior Living Owning Partnership that owns the
          related senior living community.  These properties generally are
          encumbered by mortgages.  The mortgages generally bear interest
          at rates ranging from 7.27% to 10.50% per annum.  The mortgages
          generally are collateralized by a mortgage lien on the related
          senior living communities. Principal and interest payments on
          each Senior Living Note also are collateralized by the investor
          notes payable to the Investing Partnership to which the limited
          partners are admitted. The Company also recognizes interest
          income relating to interest earned on cash and government
          securities. 

               The Company also has notes receivable with respect to
          Purchase Notes ("Multi-Family Notes") arising from the pre-1986
          Syndication of multi-family properties (the "Multi-Family
          Properties").  Such Multi-Family Notes generally have maturity
          dates ranging from ten to fifteen years from the date the
          partnership interests were sold.  Eighty-four of the 157 Multi-
          Family Notes have reached their final maturity dates and, due to
          the inability, in view of the current cash flows of the Multi-
          Family Properties, to maximize the value of the underlying
          property at such maturity dates, either through a sale or
          refinancing, these final maturity dates have been extended by the


                                         27

<PAGE>

          Company.  The underlying Multi-Family Properties relating to two
          extended Multi-Family Notes were refinanced and the underlying
          properties relating to eight previously extended Multi-Family
          Notes were sold as of January 31, 1999.  During the period such
          notes are extended, the Company will continue to receive the cash
          flow and sale or refinancing proceeds, if any, generated by the
          underlying properties.  The Company expects that it may need to
          extend maturities of other Multi-Family Notes.  The notes
          represent senior indebtedness of the related Investing
          Partnership and typically are collateralized by a 99% partnership
          interest in the Multi-Family Owning Partnership that owns the
          related Multi-Family Property.  These properties are encumbered
          by mortgages, which generally bear interest at rates ranging from
          7% to 12% per annum.  The mortgages are typically collateralized
          by a mortgage lien on the related Multi-Family Property. 
          Interest payments on each Multi-Family Note also are
          collateralized by the related investor notes.

           .   Property Management Fees.  Property management fees earned
          for services provided to related parties are recognized as
          revenue when related services have been performed.

           .   Equity in Earnings from Partnerships.  The Company accounts
          for its interests in limited partnerships under the equity method
          of accounting.  Under this method the Company records its share
          of income and loss of the entity based upon its general
          partnership interest. Fifty percent interests in four of the
          Development Communities owned by the Company on January 31, 1999,
          have subsequently been sold to a third party pursuant to joint
          venture arrangements. The Company intends to enter into similar
          joint venture arrangements regarding the other Development
          Communities developed pursuant to its Development Plan. As of
          January 31, 1999, all of the Company's Development Communities
          were wholly-owned and consolidated into its consolidated
          financial statements. To the extent that the Company enters into
          such joint venture arrangements, such Development Communities
          will no longer be so consolidated. Instead, the Company's
          investment in such Development Communities will be reflected
          under the equity basis of accounting. 

           .   Senior Living Revenues. Senior living revenues represent the
          income earned from consolidated or leased Development
          Communities. 


          RESULTS OF OPERATION

           .   Revenues - Overview

               Total revenues for the year ended January 31, 1999 ("Fiscal
          1998") were $91.7 million as compared to $74.3 million for the
          year ended January 31, 1997 ("Fiscal 1997"), representing an
          increase of $17.4 million or 23.4%.  Total revenues for Fiscal
          1997 were $74.3 million compared to $65.0 million for the year
          ending January 31, 1997 ("Fiscal 1996"), representing an increase
          of $9.3 million or 14.3%. 

           .   Syndication Communities

               Revenues from this segment are derived from sales of general
          partnership interests in Owning Partnerships to Investing
          Partnerships, recognition of deferred income with respect to such
          sales of general partnership interests, interest on Purchase
          Notes received by the Company from such Investing Partnerships as
          part of the purchase price paid for such general partnership
          interests, property management fees received by the Company and
          the Company's share of income and loss of the entities based upon
          its retained general partnership interest.  

                                                     JANUARY 31,
                                            -----------------------------
                                             1997       1998       1999
                                             ----       ----       ----

           Sales . . . . . . . . . . . .    $36,021    $38,135    $31,616


                                        28
<PAGE>

                                                     JANUARY 31,
                                            -----------------------------

           Syndication fee income  . . .      7,690      7,923      7,283
           Deferred income earned  . . .      4,093      6,140      2,913
           Interest income . . . . . . .      7,054      4,768      4,204
           Property management fees from
              related parties  . . . . .      2,093      3,684      3,219
           Equity in earnings from              423        541        685
              partnerships . . . . . . .     ------     ------     ------
                                             57,374     61,191     49,920
           Total revenues  . . . . . . .     ======     ======     ======
           Cost of sales . . . . . . . .     34,019     33,635     31,019
           Selling . . . . . . . . . . .      6,634      6,945      5,656
           Interest expense  . . . . . .      3,493      4,945      4,152

           General and administrative  .      6,877      6,951      5,656
           Officers' compensation  . . .      1,059        989        653
                                                319        363        490
           Depreciation and amortization     ------     ------     ------
                                             52,401     53,828     47,626
           Total costs and expenses  . .     ------     ------     ------
                                            $ 4,973    $ 7,363    $ 2,294
           Net income  . . . . . . . . .     ======     ======     ======

               Sales for Fiscal 1998 were $31.6 million as compared to
          $38.1 million for Fiscal 1997, representing a decrease of  $6.5
          million, or 17.1%.  The decrease was attributable to the sale of
          fewer partnership units in Fiscal 1998 as compared to Fiscal
          1997.  Sales for Fiscal 1997 was $38.1 million as compared to
          $36.0 million in Fiscal 1996, representing an increase of $2.1
          million, or 5.8%.  The increase was attributable to the sale of a
          greater number of partnership units in Fiscal 1997 as compared to
          Fiscal 1996.

               The primary factors that affect the number of partnership
          units available for sale are ( i) the availability of senior
          living communities for Syndications, (ii) the terms of the
          Syndications and (iii) the initial cash flow of the senior living
          communities being Syndicated.  More favorable Syndication terms
          along with a greater initial cash flow of the Syndicated
          Communities will yield a greater number of units available to be
          sold.  Syndication terms become more favorable for the Company if
          there is an increase in the ratio of (a) the purchase price paid
          to the Company by the Investing Partnership for its interest in
          the Operating Partnership, to (b) the initial cash flow of the
          Syndicated Community.  The Syndications completed in Fiscal 1998
          had less favorable terms, as offset by greater initial cash flows
          of the Syndicated Communities, than the Syndications completed in
          Fiscal 1997.  The Syndications completed in Fiscal 1997 had more
          favorable terms, as offset by slightly less initial cash flows of
          the Syndicated Communities than the Syndications completed in
          Fiscal 1996. 

               Syndication fee income for Fiscal 1998 was $7.3 million as
          compared to $7.9 million for Fiscal 1997, representing a decrease
          of $600,000 or 7.6%.  The decrease was attributable to less
          commissions and professional fees paid on a lower sales volume in
          Fiscal 1998 as compared to Fiscal 1997. Syndication fee income
          for Fiscal 1997 did not materially change as compared to Fiscal
          1996.

               Deferred income earned in Fiscal 1998 was $2.9 million as
          compared to $6.1 million in Fiscal 1997, representing a decrease
          of  $3.2 million, or 52.5%.  The decrease is attributable to the
          cash flows generated by Syndicated Communities during Fiscal 1998
          exceeding  the estimates used to establish deferred income
          liabilities in Fiscal 1998 to a lesser degree than such cash
          flows exceeded estimates in Fiscal 1997. Deferred income earned
          for Fiscal 1997 was $6.1 million as compared to $4.1 million for
          Fiscal 1996, representing an increase of $2.0 million or 48.8%. 
          The increase is attributable to the cash flows generated by
          Syndicated Communities during Fiscal 1997 exceeding the estimates
          used to establish deferred income liabilities in Fiscal 1997 to a
          greater degree than such cash flow exceeded estimates in Fiscal
          1996. 

                                       29

<PAGE>

               Interest income for Fiscal 1998 was $4.2 million as compared
          to $4.8 million in Fiscal 1997, representing a decrease of
          $600,000, or 12.5%.  The decrease is attributable to less
          interest recognized on Senior Living Notes in Fiscal 1998 as
          compared to Fiscal 1997 due to (i) sale of fewer partnership
          units and (ii) an increase in percentage of prepayments received
          from the purchasers of limited partnership units. Interest income
          for Fiscal 1997 was $4.8 million as compared to $7.1 million for
          Fiscal 1996, representing a decrease of $2.3 million or 32.4%. 
          The decrease is attributable to (i) the accelerated receipt of
          interest payments on Senior Living Notes in Fiscal 1996 due to
          the receipt of proceeds from the refinancing of a number of
          Syndicated Communities (which includes the initial mortgage
          financing of certain Syndicated Communities that had been
          previously acquired without a mortgage) in March 1996, which
          reduced interest payments that otherwise would have been received
          in Fiscal 1997, and (ii) a reduction of interest income due to
          the refinancings of certain Syndicated Communities which resulted
          in the prepayment of mortgages which were previously assets of
          the Company.  

               Property management fees from related parties for Fiscal
          1998 was $3.2 million as compared $3.7 million in Fiscal 1997,
          representing a decrease of $500,000, or 13.5%.  The decrease was
          attributable to the cash flows from the Syndicated Communities
          exceeding the cash flow necessary to pay the specified rate of
          return to the limited partners to a lesser extent in Fiscal 1998
          as compared to Fiscal 1997. Property management fees from related
          parties for Fiscal 1997 was $3.7 million as compared to $2.1
          million for Fiscal 1996, representing an increase of $1.6 million
          or 76.2%.  The increase is primarily attributable to the cash
          flows from the Syndicated Communities exceeding cash flow
          necessary to pay the specified rate of return to the limited
          partners in Fiscal 1997 to a greater extent than in Fiscal 1996. 

               Cost of sales (which includes (i) the cash portion of the
          purchase price for Syndicated Communities plus related
          transaction costs and expenses, (ii) any payments with respect to
          Management Contract Obligations other than payments relating to
          previously established deferred income liabilities and (iii) any
          increases in deferred income liabilities established in the
          relevant periods) for Fiscal 1998 was $31.0 million as compared
          to $33.6 million for Fiscal 1997, representing a decrease of $2.6
          million, or 7.7%. The decrease is attributable to a reduction in
          the aggregate cash portion of the purchase price plus related
          transaction costs and expenses paid for the Syndicated
          Communities due to more favorable terms for the acquisition of
          the Syndicated Communities (in view of the relationship between
          the cumulative initial cash flows generated by the properties and
          the cumulative purchase prices paid for such properties) as
          partially offset by increased funding of Management Contract
          Obligations in Fiscal 1998 as compared to Fiscal 1997. Cost of
          sales for Fiscal 1997 did not materially change as compared to
          Fiscal 1996.  Cost of Sales and selling expenses (as described
          below) as a percentage of sales and syndication fee income was
          94.3% in Fiscal 1998 as compared to 88.1% in Fiscal 1997. The
          increase is attributable to sales and syndication fee income
          decreasing more than the decrease  in cost of sales and selling
          expenses. Cost of sales and selling expenses as a percentage of
          sales and syndication fee income was 88.1% in Fiscal 1997 as
          compared to 93.0% in Fiscal 1996. The decrease is attributable to
          sales and syndication fee income increasing and cost of sales and
          selling expenses decreasing.

                Several factors, including the decline of the real estate
          market in the late 1980's and early 1990's, which resulted in a
          number of distressed property sales and limited competition from
          other prospective purchasers, allowed the Company to acquire
          existing senior living communities at such time on relatively
          favorable terms. Mortgage financing, however, was generally
          either not available or available only on relatively unattractive
          terms during this period, which made acquisitions more difficult
          because they either required large outlays of cash or the use of
          mortgage financing on relatively unfavorable terms. Several
          factors have contributed towards a trend to less favorable terms
          for acquisitions of senior living communities, including a
          recovery in the market for senior living communities and
          increased competition from other prospective purchasers of senior
          living communities. Although the Company acquired senior living
          communities on more favorable terms in Fiscal 1998 as compared to
          Fiscal 1997, the Company acquired senior living communities on
          less favorable terms in Fiscal 1997 as compared to Fiscal 1996
          and the Company believes that the general trend towards less
          favorable acquisition terms experienced in the years immediately
          prior to Fiscal 1998 will continue in the future. In recent
          years, however, the Company has been able to obtain mortgage
          financing for a greater percentage of the purchase price and with

                                        30
<PAGE>

          more favorable terms (i.e., lower interest rates and longer
          amortization periods) than in previous years. This factor,
          combined with an overall reduction of interest rates, has
          partially offset the factors that have led to more unfavorable
          acquisition terms. A significant change in these or other factors
          (including, in particular, a significant rise in interest rates)
          could prevent the Company from acquiring and Syndicating senior
          living communities on terms favorable enough to offset the start-
          up losses of the Development Communities as well as the Company's
          debt service obligations, Management Contract Obligations and
          overhead expenses.

               Selling expenses for Fiscal 1998 was $5.7 million as
          compared to $6.9 million for Fiscal 1997, representing a decrease
          of $1.2 million, or 17.3%. The decrease is attributable to lower
          commissions paid on a lower sales volume for Syndications
          completed in Fiscal 1998 as compared to Fiscal 1997. Selling
          expenses for Fiscal 1997 did not materially change as compared to
          Fiscal 1996.  

           .   Multi-Family Properties

               Revenues from this segment are comprised of sales of the
          underlying Syndicated Multi-Family Properties or controlling
          interests therein,  interest income on the Multi-Family Notes and
          recognition of deferred income from such Syndications, which
          income is being recognized on the installment method. 


                                                    JANUARY 31,
                                            ---------------------------
                                             1997      1998        1999
                                             ----      ----        ----
           Sales . . . . . . . . . . . .  $    --  $     --     $26,394
           Deferred income earned  . . .      944     1,114         788
           Interest income . . . . . . .    6,719     7,283       7,317
           Other Income  . . . . . . . .      --      4,683          --
                                            -----    ------      ------
           Total Revenues  . . . . . . .    7,663    13,080      34,499
                                            =====    ======      ======
           Cost of Sales . . . . . . . .       --        --      22,528
           Selling . . . . . . . . . . .      542       657         679
           Interest expense  . . . . . .   12,752    13,778      14,887
           General and administrative  .      919     1,486       3,908
           Officers compensation . . . .      141       211         452
           Loss on impairment of notes
             and receivables . . . . . .   18,442        --          --

           Depreciation and amortization    2,947     2,770       3,591
                                           ------    ------      ------
           Total costs and expenses  . .   35,743    18,902      46,045
                                           ------    ------      ------
           Net loss  . . . . . . . . . . $(28,080)  $(5,822)   $(11,546)
                                           ======    ======      ======

               In Fiscal 1998, one Multi-Family Property and controlling
          interests in eight Multi-Family Owning Partnerships were sold to
          third parties, resulting in the Company recognizing sales
          proceeds of $26.4 million. The costs associated with these sales
          were $22.5 million. The Company succeeded to these interests by
          acquiring the collateral securing the related Multi-Family Note
          upon such Notes becoming due without being paid and concurrently
          selling such collateral to third parties. A significant portion
          of the sales proceeds were generated from the sales to a single
          unrelated third party. There were no such sales in Fiscal 1997 or
          Fiscal 1996. 

               Interest income in Fiscal 1998 did not change as compared to
          Fiscal 1997.  Interest income in Fiscal 1997 was $7.3 million as
          compared to $6.7 million in Fiscal 1996, representing an increase
          of  $600,000, or 8.9%.  The increase is primarily attributable to 
          increased interest payments received as a result of the receipt
          of excess proceeds from the refinancing of the mortgage debt on
          four Multi-Family Properties in Fiscal 1997 as compared to the
          interest payment received as a result of excess proceeds received
          as a result of a mortgage debt restructuring on one Multi-Family
          Property in Fiscal 1996.

                                         31
<PAGE>


               The Company realized non-cash other income of $4.7 million
          in Fiscal 1997 as compared to no other income in Fiscal 1998 or
          Fiscal 1996. Two Protected Partnerships (as defined below)
          successfully emerged from their bankruptcy proceedings in Fiscal
          1997 by paying off their mortgages at a discount with the
          proceeds of new mortgage financings, resulting in these
          properties having current, fully performing mortgages. This
          allowed the Company to recognize other income of $3.1 million.
          Approximately $1.0 million of this non-cash income resulted from
          the reduction of certain previously established reserves
          associated with the Company's notes and receivables. The
          remaining $600,000 of this income resulted from the write-off of
          liabilities which are no longer required.

               The Company realized a non-cash loss on impairment of notes
          and receivables of $18.4 million in Fiscal 1996 as compared to no
          such loss for Fiscal 1998 or Fiscal 1997. This loss is based upon
          a reduction in the recorded value, net of deferred income and
          reserves, of the Multi-Family Notes and the "Other Partnership
          Receivables" relating to the Protected Partnerships, as defined
          below. As a result of the transfers by the Principal Stockholders
          and one of their affiliates of additional assets to the Investing
          Partnerships which  issued such Multi-Family Notes, the Company
          recorded a contribution to capital of $21.3 million in Fiscal
          1996. 

               In Fiscal 1996, nine Multi-Family Owning Partnerships, which
          were in default on their mortgages, filed petitions seeking
          protection from foreclosure under Chapter 11 of the U.S.
          Bankruptcy Code.  In addition, one Multi-Family Owning
          Partnership surrendered its property pursuant to an uncontested
          foreclosure sale of such property (this Multi-Family Owning
          Partnership, along with the nine Multi-Family Owning Partnerships
          that filed bankruptcy petitions, are referred to herein as the
          "Protected Partnerships").  Seven of the Chapter 11 petitions
          resulted in the respective Protected Partnerships losing their
          properties through foreclosure or voluntary conveyances of their
          properties.  The remaining two Protected Partnerships
          successfully emerged from their bankruptcy proceedings by paying
          off their mortgages at a discount with the proceeds of new
          mortgage financings, resulting in these properties having
          current, fully performing mortgages. Fourteen Multi-Family Owning
          Partnerships are currently in default on their mortgages.  HUD
          has recently taken steps to foreclose on four of the defaulted
          mortgages, but the relevant Multi-Family Owning Partnerships are
          negotiating with HUD to obtain workout agreements or mortgage
          restructurings to cure those defaults.  It is possible that the
          fourteen Multi-Family Owning Partnerships currently in default on
          their mortgages will also file Chapter 11 Petitions or lose their
          properties through foreclosure.  In addition, there can be no
          assurance that other Multi-Family Owning Partnerships will not
          default on their mortgages, file Chapter 11 Petitions, and/or
          lose their properties through foreclosure.  As of January 31,
          1999, the recorded value, net of deferred income, of the Multi-
          Family Notes and the related advances held by the Company
          relating to these fourteen Multi-Family Owning Partnerships was
          $29.7 million.  The Company has established reserves of $10.1
          million to address the possibility that these Multi-Family Notes
          and related advances may not be collected in full.  One of these
          fourteen remaining Multi-Family Owning Partnerships whose
          mortgage is in default has had its application to refinance its
          mortgage loan accepted and believes that the refinancing will
          close. Other Multi-Family Owning Partnerships intend to cure
          their mortgage defaults by refinancing their mortgages in the
          future, although there can be no assurance that this will be the
          case . The Company neither owns nor manages the Multi-Family
          Properties, nor is it the general partner of any Multi-Family
          Owning Partnerships but rather merely holds the related Multi-
          Family Notes and other receivables relating to Multi-Family
          Properties as receivables.  The Company, therefore, has no
          liability in connection with these mortgage defaults or
          bankruptcy proceedings. Furthermore, it should be noted that in
          Fiscal 1998 and previous years, six Multi-Family Owning
          Partnerships whose mortgages had been in default cured these
          defaults by refinancing their mortgage debt with new mortgages
          and now have fully performing mortgages.  

                                       32
<PAGE>


           .   DEVELOPMENT COMMUNITIES

                                                     JANUARY 31,
                                             --------------------------
                                             1997        1996      1999
                                             ----        ----      ----
           Senior living revenues  . . .      $--         $--    $5,093
           Other income  . . . . . . . .       --          --     1,350
           Interest income . . . . . . .       --          --       828
                                             ----       -----    ------
           Total revenues  . . . . . . .       --          --     7,271
                                             ====       =====   =======
           Senior living operating
             expenses  . . . . . . . . .       --          --     6,098
           Interest expense  . . . . . .      149         686     3,027
           General and administrative  .       --          --       824
           Write off of registration
             costs . . . . . . . . . . .       --       3,107        --
           Officers compensation . . . .       --          --        95
           Depreciation and amortization       65         207       951
                                             ----       -----    ------
           Total costs and expenses  . .      214       4,000    10,995
                                             ----       -----    ------
           Net loss  . . . . . . . . . .    $(214)    $(4,000)  $(3,724)
                                             ====       =====    ======


               Pursuant to the Company's Development Plan, seven
          Development Communities were placed in service during Fiscal
          1998. The Company recognized senior living revenues and operating
          expenses of $5.1 million and $6.1 million, respectively.  None of
          the Development Communities had been completed in Fiscal 1997 or
          Fiscal 1996. 

               Other income was $1.4 million in Fiscal 1998. In Fiscal
          1998,  the Company earned developer's fees in connection with the
          four Development Communities which are owned by a third party and
          which the Company operates pursuant to long-term leases. There
          was no other income in Fiscal 1997 or Fiscal 1996.  

               Interest income of $800,000 for Fiscal 1998 represents
          interest earned on the Company's net proceeds from its initial
          public offering, which proceeds are being used primarily for the
          Company's Development Plan.  There was no interest income in
          Fiscal 1996 or Fiscal 1997. 

               The Company expensed approximately $3.1 million of costs
          relating to a proposed initial public offering of equity
          securities in Fiscal 1997.  Such costs were incurred prior to
          April 30, 1997.  

          Expenses-Overview

               The following expenses were allocated to each segment for
          reporting purposes based upon gross revenues or gross assets
          based upon the particular expense. The Company, however, does not
          view these expenses as segment related but rather on a Company
          wide basis.

               General and administrative expenses for Fiscal 1998 was
          $10.4 million as compared to $8.4 million for Fiscal 1997,
          representing an increase of $2.0 million or 23.8%. The increase
          is primarily attributable to increases in salary costs,
          professional fees and other office costs in arranging for the
          acquisition of the Company's portfolio of Syndicated Communities,
          in managing the Company's portfolio of Syndicated Communities and
          in developing and managing the Company's portfolio of Development
          Communities which portfolios, in the aggregate, were larger in
          Fiscal 1998 than in Fiscal 1997. General and administrative
          expenses were $8.4 million in Fiscal 1997 as compared to $7.8
          million for Fiscal 1996, representing an increase of $600,000 or
          7.6%. The increase is attributable to increases in professional
          fees, salary costs and other office expenses in managing and

                                      33
<PAGE>

          arranging for the acquisition of the Company's portfolio of
          Syndicated Communities which increased in Fiscal 1997, as
          partially offset by the capitalization of expenses relating to
          the implementation of the Company's Development Plan.

               Interest expenses was $22.1 million in Fiscal 1998 as
          compared to $19.4 million in Fiscal 1997, representing an
          increase of $2.7 million or 13.9% The increase is primarily
          attributable to (i) the increase in principal amount of debt and
          the interest rates related to such debt in Fiscal 1998 as
          compared to Fiscal 1997, and (ii) interest on construction loans
          payable on the three Development Communities placed in service in
          Fiscal 1998 (which the Company owned directly as of January 31,
          1999, but which the Company now owns pursuant to joint venture
          arrangements) which construction loan interest was capitalized in
          Fiscal 1997 as these communities were under construction in
          Fiscal 1997.  Interest expense for Fiscal 1997 was $19.4 million
          as compared to $16.4 million in Fiscal 1996, representing an
          increase of $3.0 million or $18.2%. The increase is attributable
          to an increase in principal amount of debt and an increase in
          interest rates for such debt during Fiscal 1997 as compared to
          Fiscal 1996, as partially offset by the elimination of certain of
          the Company's mortgage debt due to the refinancing of three
          Syndicated Communities in Fiscal 1996. Interest expense includes
          interest on debentures ("Debenture Debt") which are secured by
          Multi-Family Notes (the "Purchase Note Collateral"). During
          Fiscal 1998 and Fiscal 1997, the Debenture Debt had an average
          interest rate of 11.8% and 12.05%, respectively. Interest expense
          with respect to such debt for Fiscal 1998 and Fiscal 1997 was
          $8.0 million and $8.4 million, respectively. During Fiscal 1997
          and Fiscal 1996, the Debenture Debt had an average interest rate
          of 12.05%. Interest expense with respect to such debt for Fiscal
          1997 and Fiscal 1996 was $8.4 million and $9.2 million,
          respectively. In structuring the Debenture Debt, the cash flow
          generated by the Purchase Note Collateral was not expected to
          fully fund the amount necessary to pay interest on the Debenture
          Debt. During Fiscal 1996 through Fiscal 1999, the cash flow
          generated by the Purchase Note Collateral was less than the
          amount required to pay interest on the Debenture Debt. 

               Depreciation and amortization consists of (i) amortization
          of deferred loan costs incurred in connection with debt
          issuances, (ii) amortization of leasehold costs incurred in
          connection with four Development Communities which the Company
          operates pursuant to long-term leases, and (iii) depreciation of
          building, furniture and equipment of three Development
          Communities the Company owned directly at January 31, 1999 but
          which the Company now owns pursuant to joint venture
          arrangements. Depreciation and amortization was $5.0 million in
          Fiscal 1998 as compared to $3.3 million in Fiscal 1997,
          representing an increase of $1.7 million or 51.5%. The increase
          is attributable to (i) the increase in amortization of deferred
          loan costs due to additional Debenture Debt and unsecured debt
          incurred by the Company, (ii) the amortization of leasehold costs
          associated with the four Development Communities operated by the
          Company pursuant to long-term leases, and (iii) the depreciation
          of buildings, furniture and equipment associated with the three
          Development Communities owned directly by the Company as of
          January 31, 1999, but which the Company now owns pursuant to
          joint venture arrangements, which communities were not completed
          in Fiscal 1997. Depreciation and amortization for Fiscal 1997 did
          not change as compared to Fiscal 1996.  

          LIQUIDITY AND CAPITAL RESOURCES

               The Company historically has financed operations through
          cash flow generated by operations, Syndications and borrowings
          consisting of Investor Note Debt, Unsecured Debt, Mortgage Debt
          and Debenture Debt.  Now that the Company has completed
          development of seven Development Communities, the ownership
          and/or operation of these communities is an additional source of
          cash flow.  The Company's principal liquidity requirements are
          for payment of operating expenses, costs associated with
          development of  Development Communities, debt service
          obligations, and Management Contract Obligations.

               Cash flow used by operating activities for Fiscal 1998 was
          $9.1 million and were comprised of ( i ) net loss of $13.0
          million, plus (i) adjustments for non-cash items of $1.3 million
          plus (iii) the net change in operating assets and liabilities of
          $2.6 million.  The adjustments for non-cash items is comprised of
          depreciation and amortization of $5.0 million  offset by deferred
          income earned of $3.7 million.  Cash flows used by operating

                                       34
<PAGE>

          activities for Fiscal 1997 were $11.3 million and were comprised
          of (i) net loss of $2.5 million less (ii) adjustments for non-
          cash items of $5.0 million less (iii) the net change in operating
          assets and liabilities of $3.8 million.  The adjustments for non-
          cash items is comprised of depreciation and amortization of $3.3
          million, plus write-off of registration costs of $3.1 million,
          offset by deferred income earned of $7.3 million, the reduction
          of impairment reserves on notes and receivables of $1.0 million
          and non-cash other income of $3.1 million. Cash flows provided by
          operating activities for Fiscal 1996 were $2.5 million and were
          comprised of: (i) net loss of $23.3 million plus (ii) adjustments
          for non-cash items of $16.7 million plus (iii) the net change in
          operating assets and liabilities of $9.1 million.  The
          adjustments for non-cash items is comprised of depreciation and
          amortization of $3.3 million and loss on impairment of
          receivables of $18.4 million less deferred income earned of $5.0
          million. 

               Net cash used by investing activities for fiscal 1998 of
          $22.0 million was comprised of an increase of building, furniture
          and equipment of $10.8 million, an increase in the cost of the
          Development Communities the Company is constructing of $10.2
          million and the increase in investments in general partner
          interests  in Syndicated Communities of  $1.0 million. Net cash
          used by investing activities for Fiscal 1997 of $20.4 million was
          comprised of the increase in the cost of Development Communities
          the Company is currently constructing of $19.5 million and the
          increase in investments in general partner interests in
          Syndicated Communities of $900,000.  Net cash used by investing
          activities for Fiscal 1996 of $7.2 million was comprised of the
          increase in the cost of the Development Communities the Company
          is currently constructing of $6.7 million and the increase in
          investments and general partner interests in Syndicated
          Communities for the period offset by a decrease in investments
          due to the receipt of distributions of refinancing proceeds by
          the Company based upon its general partner interests in
          Syndicated Communities. 

               Net cash provided by financing activities for Fiscal 1998 of
          $41.9 million was comprised of (i) proceeds from the issuance of
          new debt of $49.2 million less debt repayments of $41.3 million,
          plus (ii) the proceeds from construction mortgage financing of
          $12.7 million less (iii) payments of notes payable of $1.5
          million, plus (iv) the proceeds of notes payable of $300,000 plus
          (v) the decrease in other assets of $200,000 plus ( vi) the net
          proceeds of the initial public offering of $22.3 million. Net
          cash provided by financing activities for Fiscal 1997 of $29.5
          million was comprised of (i) proceeds from the issuance of new
          debt of $63.4 million less debt repayments of $44.2 million plus
          (ii) proceeds from construction mortgage financing of $19.8
          million less (iii) payments of notes payable of $400,000 plus
          (iv) increase in notes payable of $4.5 million less (v) the
          increase in other assets of $13.6 million.  Net cash used by
          financing activities for Fiscal 1996 of $900,000 was comprised
          of: (i) proceeds from the issuance of new debt of $57.8 million
          less debt repayments of $55.3 million plus (ii) proceeds from
          construction mortgage financing of $2.8 million less (iii)
          payments of notes payable of $200,000 less (iv) distributions
          paid of $800,000 and less (v) the increase in other assets of
          $3.4 million due to the capitalization of costs relating to the
          development and construction of new properties and the issuance
          of new debt offset by the amortization of loan costs primarily in
          connection with Debenture Debt. 

               At  January 31, 1999, the Company had total indebtedness,
          excluding accrued interest and construction mortgage indebtedness
          on the Development Communities of $168.8 million, consisting of
          $69.8 million of Debenture Debt, $72.5 million of Unsecured Debt,
          $5.0 million of Mortgage Debt and $21.5 million of Investor Note
          Debt, and the Company had cash and cash equivalents at January
          31, 1999 of $22.8 million.

               Of the principal amount of total indebtedness at January 31,
          1999 described above, $29.4 million becomes due in the fiscal
          year ending January 31, 2000; $35.3 million becomes due in the
          fiscal year ending January 31, 2001; $38.3 million becomes due in
          the fiscal year ending January 31, 2002; $22.1 million becomes
          due in the fiscal year ending January 31, 2003; $10.1 million
          becomes due in the fiscal year ending January 31, 2004, and the
          balance of $33.6 million becomes due thereafter.  Of the amount
          maturing in the fiscal year ending January 31, 2000, $1.9 million
          is Investor Note Debt which the Company expects to repay through
          the collection of investor notes.  The balance, approximately
          $27.5 million, includes $7.9 million of Debenture Debt and $19.6
          million of Unsecured Debt. The Company expects to repay (i) a
          portion of this debt with  funds generated by the Company's
          business operations, and (ii) the balance of the indebtedness
          through the issuance of new debt. 



                                        35

<PAGE>

               During the fiscal years ended January 31, 1998 and January
          31, 1999, respectively, first mortgage loans were obtained to
          finance approximately 80% of the cost of developing six
          Development Communities. The interest rate on four of the loans
          equals the 30-day LIBOR plus 2 3/4% per annum. The fifth loan
          bears interest at the lender's prime rate plus 1.5% per annum.
          The sixth loan bears interest at the lender's prime rate for the
          first fifteen months and then converts to LIBOR plus 2 3/4% per
          annum for the following twenty-four months. These loans mature
          between November, 1999 and February, 2001.  As of January 31,
          1998 and January 31, 1999, respectively, total funding under such
          first mortgage loans amounted to $13.3 million and $26.0 million,
          respectively. As a result of the Company entering into joint
          venture arrangements regarding four of the Development
          Communities, the Company will not reflect such mortgages on its
          consolidated financial statements in future periods. The Company
          intends to pursue similar joint venture arrangements regarding
          the additional Development Communities to be developed. The
          Company intends to increase its construction loans payable as it
          pursues its Development Plan.

               Pursuant to the Company's Development Plan, two limited
          partnerships, in each of which the Company holds a 1% general
          partnership interest, have issued limited partnership interests
          for aggregate capital contributions of $9.3 million, the net
          proceeds of which have been used to make second mortgage loans to
          the Company to fund approximately 20% of the cost of developing
          three Development Communities. Such second mortgage loans were
          entered  into in 1996 and bear interest at the rate of 13.125%.
          These second mortgage loans mature between November 2001 and
          March 2002. The Company intends to repay these second mortgage
          loans from a portion of the proceeds from three of the four joint
          venture arrangements which the Company  recently entered into
          regarding four Development Communities.

               The Company's debt obligations contain various covenants and
          default provisions, including provisions relating to, in some
          obligations, certain Partnerships, Owning Partnerships or
          affiliates of the Company.  The Company has experienced
          fluctuations in its net worth over the last several years. At
          January 31, 1996, the Company had a net worth of $34.8 million,
          at January 31, 1997, the Company had a net worth of $32.0
          million, at January 31, 1998, the Company has a net worth of
          $26.4 million, and at January 31, 1999, the Company had a net
          worth of $35.7 million.  Pursuant to one Obligation, the Company
          is required to maintain a net worth of no less than $35.3
          million.  Certain obligations of the Company contain covenants
          requiring the Company to maintain maximum ratios of the Company's
          liabilities to its net worth.  As of January 31, 1998, the most
          the most restrictive covenant requires that the Company maintain
          a ratio of "loans and accrued interest payable" to consolidated
          net worth of no more than 7 to 1. As of January 31, 1999, the
          most restrictive covenant requires that the Company maintain a
          ratio of liabilities to consolidated net worth of no more than 10
          to 1.  At January 31, 1998 and January 31, 1999, the Company's
          respective ratios were 6.1 to 1 and 8.2 to 1. In addition,
          certain obligations of the Company provide that an event of
          default will arise upon the occurrence of a material adverse
          change in the financial condition of the Company or upon a
          default in other obligations of the Company.

               The Company has utilized mortgage financing and Syndications
          to arrange for the acquisitions of the Syndicated Communities
          which it operates. It intends to continue this practice for
          future acquisitions of Syndicated Communities. The limited
          partnership agreements of the Investing Partnerships provide that
          the limited partners are entitled to receive for a period not to
          exceed five-years specified distributions equal to 11% to 12% per
          annum of their then paid-in scheduled capital contributions. 
          Pursuant to the management contracts with the Owning
          Partnerships, for such five-year period, the Company has
          Management Contract Obligations.  During Fiscal 1997 and 1998,
          the Syndicated Communities with respect to which the Company had
          such Management Contract Obligations distributed to the Company,
          after payment of all operating expenses and debt service, an
          aggregate of $11.0 million and $9.6 million, respectively, for
          application to the Company's Management Contract Obligations. 
          During such periods, the Company's Management Contract
          Obligations exceeded such distributions by an aggregate of  $6.4
          million and $9.3 million, respectively. The $6.4 million the
          Company paid in respect to Management Contract Obligations for
          Fiscal 1997 was attributable to (i) operating expenses (including
          maintenance and repair costs) increasing at a greater rate than
          historically, as partially offset by increases in rental
          revenues, (ii) the decrease in the average occupancy of the
          Company's portfolio of Syndicated Communities, and (iii) 
          difficulties the Company experienced in renting apartment units

                                       36

<PAGE>

          relating to one Syndicated Community which had been converted
          from a multi-family property (which community is currently 82%
          occupied by senior living residents) and one underperforming
          Syndicated Community. The $9.3 million of funding that was
          required in respect to Management Contract Obligations in Fiscal
          1998 was primarily attributable to (i) an increase in the
          scheduled capital contributions by the limited partners on which
          the Company is required to pay the specified rate of return, (ii)
          a decrease in the average occupancy of certain Syndicated
          Communities in the Company's portfolio, and (iii) an increase in
          operating expenses of the same Syndicated Communities. 

               The refinancings of a number of Syndicated Communities in
          Fiscal 1996 resulted in over $43 million being returned to
          limited partners, which reduced the amount of capital upon which
          the Company is obligated to make payments in respect of the
          Management Contract Obligations.  The amount paid by the Company
          with respect to its Management Contract Obligations for Fiscal
          1996 was partially offset by an increase in interest income
          received by the Company for Fiscal 1996, which was also the
          result of the refinancings.  While the refinancings increased the
          Company's funding of Management Contract Obligations in the short
          term, the long term effect will be a reduction of the Company's
          Management Contract Obligations relating to the refinanced
          Syndicated Communities.  The capital that was returned to the
          limited partners (which causes the reduction in the Company's
          Management Contract Obligations) was applied first to the later
          years in which their capital contributions are due and then to
          the earlier years.  The refinancings, therefore, reduce the
          Company's Management Contract Obligations more in Fiscal 1999 and
          subsequent years than in Fiscal  1996 through 1998. The aggregate
          gross amount (before considering the cash flow from the
          properties) of Management Contract Obligations relating solely to
          returns to limited partners based on existing management
          contracts is $19.8 million for Fiscal 1999, which will increase
          to $19.9 million in Fiscal 2000, and decrease to $15.8 million in
          Fiscal 2001, decrease to $8.0 million in Fiscal 2002 and decrease
          to $2.0 million in Fiscal 2003.  Such amounts of Management
          Contract Obligations are calculated based upon all remaining
          scheduled capital contributions with respect to fiscal years 1999
          through 2003.  Actual amounts of Management Contract Obligations
          in respect of such contracts will vary based upon the timing and
          amount of such capital contributions. Furthermore, such amounts
          of Management Contract Obligations are calculated without regard
          to Management Contract Obligations relating to future
          Syndications.

               The aggregate amount of the Company's Management Contract
          Obligations will depend upon a number of factors, including,
          among others, the expiration of such obligations for certain
          partnerships, the cash flow generated by the Syndicated
          Communities and the terms of future Syndications.  The Company
          anticipates that for at least two years the Management Contract
          Obligations with respect to existing and future  Syndications
          will exceed the cash flow generated by the related Syndicated
          Communities, which will result in the need to utilize funds
          generated by the Company from sources other than the operations
          of the Syndicated Communities to make Management Contract
          Obligations payments. In general, the payment of expenses arising
          from obligations of the Company, including Management Contract
          Obligations, have priority over earnings that might otherwise be
          available for distribution to shareholders. The Company intends
          to structure future Syndications to minimize the likelihood that
          it will be required to utilize the cash it generates to pay
          Management Contract Obligations, but there can be no assurance
          that this will be the case.

               The initial five-year term of the management contracts and
          the related Management Contract Obligations have expired for 13
          Owning Partnerships and their seventeen related Investing
          Partnerships. Although the Company has no obligation to fund
          operating shortfalls after the five-year term of the management
          contracts, as of January 31, 1999, the Company had advanced an
          aggregate of approximately  $2.2 million to seven of these Owning
          Partnerships to fund operating shortfalls.   All such advances
          are recorded as "Other Partnership Receivables" on the Company's
          Consolidated Balance Sheet.  Although the Company does not intend
          to do so in the future, from time to time, the Company has also
          made discretionary payments to Owning Partnerships beyond the
          Management Contract Obligations period for the purpose of making
          distributions to limited partners.


                                        37

<PAGE>

               In the past, limited partners have been allowed to prepay
          capital contributions.  The percentage of the prepayments
          received upon the closings of the sales of limited partnership
          interests in Investing Partnerships averaged 65.7% in Fiscal
          1996, 78.8% in Fiscal 1997 and 75.4% for Fiscal 1998. 
          Prepayments of capital contributions do not result in the
          prepayment of the related Purchase Notes held by the Company. 
          Instead, such amounts are loaned to the Company by the Investing
          Partnership.  As a result of such loans and the crediting
          provisions of the related purchase agreements, the Company
          records the Purchase Notes net of such loans.  Therefore, these
          prepayments act to reduce the recorded value of the Company's
          note receivables and reduce interest income received by the
          Company.  Pursuant to the terms of the Syndication offerings, the
          Company has the option not to accept future prepayments by
          limited partners of capital contributions.  The Company has not
          determined to what extent it will continue to accept prepayments
          by limited partners of capital contributions.

               As of January 31, 1999, the Company holds 157 Purchase Notes
          ("Multi-Family Notes") which are secured by controlling interests
          in Multi-Family Owning Partnerships which own 118 multi-family
          properties that were Syndicated by the Company prior to 1986 (the
          "Multi-Family Properties").  Although it has no obligation to do
          so, the Company has also made advances to various Multi-Family
          Owning Partnerships to support the operation of their properties,
          which advances are included in the "Other Partnership
          Receivables" recorded on the Company's Consolidated Balance
          Sheet.  The Multi-Family Notes and the Other Partnership
          Receivables entitle the Company to receive all cash flow and sale
          or refinancing proceeds generated by the respective Multi-Family
          Property until the Multi-Family Note and Other Partnership
          Receivables  are satisfied. As of January 31, 1999, the recorded
          value, net of deferred income, of Multi-Family Notes was $100.8
          million.  All but approximately $3.4 million of the $63.3 million
          of Other Partnership Receivables recorded on the Company's
          Consolidated Balance Sheet as of January 31, 1999 relate to
          advances to Multi-Family Owning Partnerships.

               Fourteen of the Multi-Family Owning Partnerships are in
          default on their respective mortgages.  The Company neither owns
          nor manages these properties, nor is it the general partner of
          any Multi-Family Owning Partnerships, but rather, merely holds
          the related Multi-Family Notes and related advances as
          receivables.  The Company, therefore, has no liability in
          connection with these mortgage defaults.  In that these mortgages
          were insured by the United States Department of Housing and Urban
          Development ("HUD"), HUD became the holder of these mortgages
          after they went into default.  In the past, HUD has instituted
          initiatives to deal with its portfolio of defaulted mortgages,
          such as selling such mortgages at auction.  Although HUD has
          discontinued this auction program, these auctions resulted in one
          of the fourteen defaulted mortgages being sold to a third party,
          subject to an existing workout agreement.  The remaining thirteen
          defaulted mortgages are held by HUD, with workout agreements in
          place regarding three of them with terms of from one to nine
          years.  HUD's policies regarding the granting of workout
          agreements have become more restrictive in recent years and there
          can be no assurance that HUD will renew these workout agreements
          or restructure the related mortgage debt when these workout
          agreements expire.  Similarly, there can be no assurance that the
          related Multi-Family Owning Partnerships can obtain workout
          agreements or restructure the related mortgage debt for the ten
          defaulted mortgages without workout agreements currently in
          place.  HUD has recently taken steps to foreclose on four of the
          defaulted mortgages without workouts. Notwithstanding these
          steps, the relevant Multi-Family Owning Partnerships are
          negotiating with HUD to obtain workout agreements or mortgage
          restructurings (which are now possible pursuant to new HUD
          policies) to cure the defaults.  In view of the foregoing, it is
          possible that the fourteen Multi-Family Owning Partnerships which
          are in default of their mortgages will file bankruptcy petitions
          or take similar actions seeking protection from the creditors
          and/or lose their properties through foreclosure. As of January
          31, 1999, the recorded value, net of deferred income, of the
          Multi-Family Notes and the related advances held by the Company
          relating to these fourteen Multi-Family Owning Partnerships was
          $29.7 million.  The Company has established reserves of $10.1
          million to address the possibility that these Multi-Family Notes
          and related advances may not be collected in full.  One of these
          fourteen remaining Multi-Family Owning Partnerships whose
          mortgage is in default has had its application to refinance its
          mortgage loan accepted and believes that the refinancing will
          close. Other Multi-Family Owning Partnerships intend to cure
          their mortgage defaults by refinancing their mortgages in the
          future, although there can be no assurance that this will be the
          case. Furthermore, in Fiscal 1998 and previous years, six Multi-
          Family Owning Partnerships whose mortgages had been in default

                                       38

<PAGE>
          cured those defaults by refinancing their mortgages with new
          mortgage financings and now have fully performing mortgages.

                The Multi-Family Properties were typically built or
          acquired with the assistance of programs administered by HUD that
          provide mortgage insurance, favorable financing terms and/or
          rental assistance payments to the owners.  As a condition to the
          receipt of assistance under these and other HUD programs, the
          properties must comply with various HUD requirements, including
          limiting rents on these properties to amounts approved by HUD. 
          Most of the rental assistance payment contracts relating to the
          Multi-Family Properties will expire over the next few years. In
          view of the foregoing, there can be no assurance that other
          Multi-Family Owning Partnerships will not default on their
          mortgages, file bankruptcy petitions, and/or lose their
          properties through foreclosure.  The Company neither owns nor
          manages these properties, nor is it the general partner of any
          Multi-Family Owning Partnerships, but rather, holds the Multi-
          Family Notes and related advances as receivables.  Any such
          future mortgage defaults could, and any such future filings of
          bankruptcy petitions or the loss of any such property through
          foreclosure would, cause the Company to realize a non-cash loss
          equal to the recorded value of the applicable Multi-Family Note
          plus any related advances, net of any deferred income recorded
          and any reserves for such Multi-Family Note and advances
          previously established by the Company, which would reduce such
          loss.  In addition, the Company could be required to realize such
          a non-cash loss even in the absence of mortgage defaults,
          bankruptcy petitions or the loss of any such property through
          foreclosure if such note is considered impaired.  Such impairment
          would be measured under applicable accounting rules.  Such
          losses, if any, while non-cash in nature, could adversely affect
          the Company's business, operating results and financial
          condition.

               HUD has introduced various initiatives to restructure its
          housing subsidy programs by increasing reliance on prevailing
          market rents, and by reducing spending on future rental
          assistance payment contracts by, among other things, not renewing
          expiring contracts and by restructuring mortgage debt on those
          properties where a decline in rental revenues is anticipated. 
          Due to uncertainty regarding the final policies that will result
          from these initiatives and numerous other factors that affect
          each property, which can change over time (including the local
          real estate market, the provisions of the mortgage debt
          encumbering the property, prevailing interest rates and the
          general state of the economy), the Company cannot determine
          whether these initiatives will have an impact on the Multi-Family
          Properties and, if there is an impact, whether the impact will be
          positive or negative.

               Certain of the Multi-Family Owning Partnerships intend to
          take advantage of the new HUD initiatives and/or improving market
          conditions to (i) either refinance their HUD-insured mortgages
          with conventional mortgage financing or restructure their HUD-
          insured mortgage debt, or (ii) sell their Multi-Family
          Properties.  In some cases, the Multi-Family Owning Partnerships
          will make certain improvements to the properties and may not
          renew rental assistance contracts as part of a strategy to
          reposition those Multi-Family Properties as market-rate, non-
          subsidized properties.  Seventeen of such Multi-Family Owning
          Partnerships have refinanced their HUD-insured mortgages with
          conventional mortgage financing and a number of others have
          applications for commitments pending.  To the extent that any of
          these Multi-Family Owning Partnerships complete such actions, the
          Company believes that the ability of the Investing Partnerships
          relating to the Multi-Family Properties (the "Multi-Family
          Investing Partnerships") to make payments to the Company on their
          respective Multi-Family Notes will be enhanced and accelerated. 
          In Fiscal 1998, the Company received $2.6 million of excess
          refinancing proceeds as holder of the related Multi-Family Notes
          and expects to receive excess refinancing proceeds from the
          refinancing of other Multi-Family Properties in Fiscal 1999.
          However, there can be no assurance that these additional Multi-
          Family Owning Partnerships will be able to refinance their
          mortgages or will be able to successfully reposition any of the
          Multi-Family Properties.

               In addition, one Multi-Family Property and controlling
          interests in eight Multi-Family Owning Partnerships were sold to
          third parties in Fiscal 1998. The Company succeeded to these
          controlling interests by acquiring the collateral securing the
          related Multi-Family Notes upon such Notes becoming due without
          being paid and concurrently selling such collateral to third
          parties.  The Company recognized $26.4 million in sale proceeds
          as a result of these sales in Fiscal 1998.  A significant portion
          of sales proceeds were generated from the sales to a single

                                        39

<PAGE>

          unrelated third party. Due to the fact that Contracts of Sale
          have been entered into regarding one additional Multi-Family
          Property, letters of intent have been executed for the sale of
          two additional Multi-Family Properties, and other Multi-Family
          Owning Partnerships are currently negotiating the terms of offers
          to purchase their properties, the Company expects to receive
          additional sale proceeds from such transactions which occur in
          Fiscal 1999. There can be no assurance, however, that additional
          sale transactions will actually close.

               The future growth of the Company will be based upon the
          continued acquisition and Syndication of existing senior living
          communities and the construction of Development Communities,
          which the Company presently does not intend to Syndicate.  The
          Company anticipates that it will acquire between six and twelve
          existing senior living communities over the next two years.  It
          is anticipated that acquisitions of existing senior living
          communities will be arranged by utilizing a combination of
          mortgage financing and Syndications. The Company holds contracts
          to acquire senior living communities in Las Vegas, Nevada,
          Radcliff, Kentucky and Denver, Colorado respectively. The Company
          regularly obtains acquisition mortgage financing from two
          different commercial mortgage lenders and, in view of its ready
          access to such mortgage financing, has not sought any specific
          commitments or letters of intent with regard to future,
          unidentified acquisitions. Similarly, the Company believes that
          it has sufficient ability to arrange for acquisitions of existing
          senior living communities in part by Syndications.

               In a typical Syndication, limited partners agree to pay
          their capital contributions over a five-year period, and deliver
          notes representing the portion of their capital contribution that
          has not been paid in cash.   The Company borrows against the
          notes delivered by limited partners to generate cash when needed,
          including to pursue its Development Plan and to repay debt.

               The Company anticipates that the proceeds of the Company's
          initial public offering, funds generated by its business
          operations and construction mortgage financing will provide
          sufficient funds to pursue its Development Plan (as described
          above) for at least 6 months at the projected rate of
          development.  The Company will use the proceeds of (i)
          anticipated joint venture arrangements of  Development
          Communities, (ii) refinancings or sale-leasebacks of stabilized
          Development Communities at higher principal amounts than the
          original construction financing, (iii) additional long-term
          leases or similar forms of financing which require the investment
          of little or no capital on the part of the Company, and/or (iv)
          may use funds raised through the issuance of securities, to
          continue with its Development Plan for more than the next 6
          months at its projected rate of development. There can be no
          assurance that funds generated by these potential sources will be
          available or sufficient to complete the Company's Development
          Plan.  In addition, there are a number of circumstances beyond
          the Company's control and which the Company cannot predict that
          may result in the Company's financial resources being inadequate
          to meet its needs.  A lack of available funds may require the
          Company to delay, scale back or eliminate some of the Development
          Communities that are currently contemplated in its Development
          Plan.  

               The first new Development Communities developed pursuant to
          the Company's Development Plan are in Texas.  The Company has
          completed construction with mortgage financing on three
          Development Communities in Texas. The Company has commenced
          construction with mortgage financing on four Development
          Communities in Texas. The Company  has options to acquire sites
          in Knoxville, Tennessee and Jackson, Tennessee, and is actively
          negotiating to obtain control of additional sites in the
          Southeast and Midwest. The Company is negotiating with several 
          lenders to obtain financing to develop these sites. The Company
          has entered into joint venture arrangements with a third party
          pursuant to which it has sold 50% interests in four Development
          Communities located in Texas.  The Company intends to enter into
          similar joint venture arrangements with regard to future
          Development Communities it develops with mortgage financing. 

               The Company has, and may in the future, utilize long-term
          lease financing arrangements to develop and operate new
          Development Communities.  The Company has obtained financing of
          $37.7 million from Capstone for 100% of the development cost of
          four Development Communities that are being operated by the
          Company pursuant to long-term leases with Capstone.

                                       40

<PAGE>

               The Company is actively engaged in negotiations with other
          mortgage and long-term lease lenders to provide additional
          construction financing.  The Company anticipates that most of the
          construction mortgage loans it obtains to finance the development
          and lease-up costs of new Development Communities will contain
          terms where the lender will fund at least 80% of such costs,
          requiring the Company to contribute approximately 20% of such
          costs.

               STOCK BUYBACK

               On March 22, 1999, the Board of Directors authorized the
          Company to purchase up to 300,000 shares of the Company's common
          stock.  As of April 30, 1999, the Company had purchased 25,600
          shares at an average price of $6.796 per share.

               Other than as described herein, management is not aware of
          any other trends, events, commitments or uncertainties that will,
          or are likely to, materially impact the Company's liquidity.

               YEAR 2000 UPDATE

               Year 2000 Overview - The Year 2000 issue is the result of
          many computer systems and non-information technology systems
          which rely upon embedded computer technology using only the last
          two digits to refer to a year and therefore being unable to
          distinguish between the years 1900 and 2000.  If not corrected,
          many computer applications that are date sensitive could fail or
          create erroneous results.   As part of the process of upgrading
          its internal computer hardware and software and in anticipation
          of the Year 2000 issue, the Company began to audit, inventory,
          modify and replace its mission critical software and hardware
          (including personal computers, spread sheets, and word
          processing) in its Fort Lee, New Jersey and Boca Raton, Florida
          corporate offices in 1997 ("Year 2000 Project").  During 1998,
          the Company's Year 2000 Project was extended to include software
          and hardware located at the Syndicated Communities and the
          Development Communities, "embedded technology" (such as
          telephones, fax machines, copiers and postage machines), property
          and corporate facilities (such as security/fire systems,
          emergency call systems, elevators, and HVAC systems) and business
          relationships with governmental agencies, utilities and material
          third party vendors, and service providers.

               The Company has separate computer hardware and software
          systems at each of its Fort Lee, New Jersey and Boca Raton,
          Florida offices.  Each office has an intra-office network.  None
          of the Syndicated Communities or Development Communities are part
          of a computer network.  The Company is using a multi-step
          approach in conducting its Year 2000 Project.  These steps are:
          inventory, assessment, remediation and testing, and contingency
          planning.  The first step, an inventory of all systems and
          devices with potential year 2000 problems has been completed. 
          The next step, an assessment of such inventory to determine the
          state of year 2000 readiness for material systems and devices has
          also been completed for the Company's two offices and it has been
          completed at the majority of the Syndicated Communities and
          Development Communities.  A majority of the remediation and
          testing of the Company's software and hardware has already been
          completed and full completion is anticipated to occur by July 31,
          1999.  To date, the Company has updated or replaced  the
          following financial and accounting systems with Year 2000
          compliant systems:  accounting servers and related hardware,
          accounts payable systems, accounts receivable systems, general
          ledgers, cash management programs and payroll systems.  In
          addition, the Company has updated its construction server and 
          data base as well as the network software located in the
          Company's two offices and replaced substantially all of the desk-
          top personal computers located therein.

               However, even if the Company is successful in becoming year
          2000 compliant, the Company remains at risk from year 2000
          failures caused by key third parties.  The Company has therefore
          initiated efforts with key third parties to assess and wherever
          possible remediate Year 2000 issues.  In most cases, the Company
          will be relying upon statements from such entities as to the Year
          2000 readiness of their systems and will not attempt any
          independent verification.  To date, the Company has not received
          sufficient information from such entities to complete its

                                        41

<PAGE>

          assessment of their year 2000 compliance.  In addition, the
          Company cannot predict the outcome of other companies'
          remediation efforts.

               Year 2000 Costs - The total cost associated with the Year
          2000 Project to become Year 2000 compliant is not expected to be
          material to the Company's financial position.   The Company
          currently plans to complete the Year 2000 Project by July 31,
          1999.   The cost of the Company's total Year 2000 Project is
          based on presently available information.  The Company does not
          separately track the internal costs incurred for the Year 2000
          Project.  Such costs are principally the related payroll costs
          for its information systems group.  The total remaining cost of
          the year 2000 Project is estimated at approximately $50,000. 
          Substantially all of this $50,000 is related to the cost to 
          replace  software and computers.  To date, the Company incurred
          approximately $25,000 related to the Year 2000 Project. 
          Substantially all of this $25,000 is related to the cost to
          replace software and computers.  The costs of the project and the
          date on which the Company plans to complete the Year 2000
          modifications are based on management's best estimates, which
          were derived utilizing numerous assumptions of future events
          including the continued availability of certain resources, third
          parties' Year 2000 preparedness and other factors.

               Risks - The failure to correct a material Year 2000 problem
          could result in an interruption in, or a failure of, certain
          normal business activities or operations.  The Company believes
          that all material Year 2000 problems which are within its control
          will be corrected by July 31, 1999 and therefore such problems
          are not anticipated to have a material adverse affect on the
          Company's financial position and results of operations.  Even if
          the Company successfully remediates its year 2000 issues, it can
          be materially and adversely affected by failures of third parties
          to remediate their own Year 2000 issues.  The Company believes
          that the most reasonably likely worst case scenario is the loss
          of utility service (telecommunications and power) at the
          Company's corporate offices, and all or some of the senior living
          communities it operates. Based upon procedures which are
          currently in place and the contingency plans which are being
          prepared and anticipated to be put in place, such a scenario is
          not expected to have a material adverse affect on the Company's
          financial position and results of operations.

               Contingency Plans - Contingency plans are anticipated to be
          prepared so that the Company's critical business processes can be
          expected to continue to function on January 1, 2000 and beyond. 
          Such plans are anticipated to be developed by July 31, 1999.  These
          plans will attempt to mitigate both internal risks as well as 
          potential risks due to business relationships with third parties.  

               NEW ACCOUNTING PRONOUNCEMENTS

               In June of 1998, the FASB issued Statement No. 133,
          "Accounting for Derivative Instruments and Hedging Activities." 
          This statement establishes accounting and reporting standards for
          derivative instruments, including certain derivative instruments
          embedded in other contracts, and for hedging activities.  It is
          effective for all fiscal quarters of fiscal years beginning after
          June 15, 1999. The Company's use of derivative instruments has
          consisted of  treasury bill locks related to two specific
          mortgage debt financings. While the Company has not completed its
          analysis of Statement No. 133 and has not made a decision
          regarding the timing of adoption, it does not believe that
          adoption will have a material effect on its financial position
          and results of operations based on its current use of derivative
          instruments.


                                        42

<PAGE>

          ITEM 7A.  QUANTATIVE AND QUALITIVE DISCLOSURES ABOUT MARKET
          RISK.

          Interest Rate Risk

               The Company is subject to market risk from fluctuations in
          interest rates related to its borrowing activities.  The majority
          of the Company's debt is fixed rate debt.  For fixed rate
          debt, changes in interest rates do not affect the Company's
          earnings or cash flow.  Since the Company does not have an
          obligation to prepay fixed rate debt until maturity, interest
          rate risk should not have a material affect on the fixed rate
          debt until the Company is required to refinance such debt.  The
          table below details the principal cash repayments and the related
          weighted average interest rates of the Company's fixed rate and
          variable rate debt based upon expected maturity dates and
          principal balances as of the first day of each fiscal year.  The 
          weighted average interest rate for the variable rate debt is based 
          on the interest rates in effect at January 31, 1999.

                  
                                              Principal Amounts by
                                             Expected Maturity Dates
                                     1999        2000        2001       2002
                                     ----        ----        ----       ----
      Long-Term Variable Rate Debt      16.2        19.8         6.1        4.2
          (millions)
      Weighted Average Interest
        Rate                           9.24%       9.58%       9.97%      9.97%

      Long-Term Fixed Rate
        Debt (millions)                 27.5       29.9         35.3       21.2
      Weighted Average Interest
        Rate                          12.51%      12.38%      12.38%      12.32%
                                        43.8        49.7        41.4        25.4
                                  ==========  ==========  ==========  ==========

   
   
                                                Principal Amounts by
                                               Expected Maturity Dates
                                             2003     Thereafter        Total
                                             ----     ----------        -----
      Long-Term Fixed Rate Debt                 1.1             0          47.5
      Weighted Average Interest Rate          10.06

      Long-Term Variable Rate Debt              9.0          33.7         156.6
      Weighted Average Interest Rate         12.03%        11.78%
                                               10.1          33.7         204.1
                                         ==========    ==========   ===========
      

               The Company's long term fixed rate debt was issued in
          private placements at par and no public or secondary market
          exists for such debt.  In the Company's estimation, the fair
          value of its debt is to equal the outstanding principal amount
          of such debt.

               Except as described in this paragraph, the Company does not
          hedge its interest rate risk.  As of January 31, 1999, the
          Company has entered into a treasury bill lock under the terms of
          one of the first mortgage loans incurred as part of the
          Development Plan.  The treasury bill lock was intended to reduce
          the impact of interest rate risk on the ability of the Company to
          refinance the relevant mortgage loan.  As of such date, the
          notional amount of such financial instrument was $8,475,000 and
          its market value as calculated by the counterparty to the
          transaction was ($330,000).  The maturity date of such financial
          instrument is February 15, 2012.  The Company does not enter into
          financial instruments transactions for trading purposes.

                                        43
          <PAGE >


          ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA


                      INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                                      ----------

                                                                          PAGE

          Independent Auditors' Reports                                  45, 46

          Consolidated Balance Sheets as of January 31, 1998
          and 1999                                                           47

          Consolidated Statements of Operations for the Years
          Ended January 31, 1997, 1998 and 1999                              48

          Consolidated Statements of Changes in Stockholders'
          Equity for the Years Ended January 31, 1997, 1998
          and 1999                                                           49

          Consolidated Statements of Cash Flows for the Years
          Ended January 31, 1997, 1998 and 1999                              50

          Notes to Consolidated Financial Statements                         51


                                         44

<PAGE>


          INDEPENDENT AUDITORS' REPORT


          To the Board of Directors and Stockholders of
          Grand Court Lifestyles, Inc.
          Boca Raton, Florida

          We have audited the accompanying consolidated balance sheet of
          Grand Court Lifestyles, Inc. and subsidiaries as of January 31,
          1999 and the related consolidated statements of operations,
          stockholders' equity and cash flows for the year then ended.
          These consolidated financial statements are the responsibility of
          the Company's management.  Our responsibility is to express an
          opinion on these consolidated financial statements based on our
          audit.

          We conducted our audit in accordance with generally accepted
          auditing standards.  Those standards require that we plan and
          perform the audit to obtain reasonable assurance about whether
          the financial statements are free of material misstatement.  An
          audit includes examining, on a test basis, evidence supporting
          the amounts and disclosures in the financial statements.  An
          audit also includes assessing the accounting principles used and
          significant estimates made by management, as well as evaluating
          the overall financial statement presentation.  We believe that
          our audit provides a reasonable basis for our opinion.

          In our opinion, the consolidated financial statements referred to
          above present fairly, in all material respects, the financial
          position of Grand Court Lifestyles, Inc. and subsidiaries as of
          January 31, 1999, and the results of their operations and their
          cash flows for the year then ended in conformity with generally
          accepted accounting principles.

          /s/ BDO Seidman, LLP

          BDO Seidman, LLP
          New York, New York
          April 16, 1999

                                         45

<PAGE>


          INDEPENDENT AUDITORS' REPORT


          To the Board of Directors and Stockholders of
          Grand Court Lifestyles, Inc.
          Boca Raton, Florida

          We have audited the accompanying consolidated balance sheet of
          Grand Court Lifestyles, Inc. and subsidiaries as of January 31,
          1998 and the related consolidated statements of operations,
          stockholders' equity and cash flows for each of the two years in
          the period ended January 31, 1998. These consolidated financial
          statements are the responsibility of the Company's management. 
          Our responsibility is to express an opinion on these consolidated
          financial statements based on our audits.

          We conducted our audits in accordance with generally accepted
          auditing standards.  Those standards require that we plan and
          perform the audit to obtain reasonable assurance about whether
          the financial statements are free of material misstatement.  An
          audit includes examining, on a test basis, evidence supporting
          the amounts and disclosures in the financial statements.  An
          audit also includes assessing the accounting principles used and
          significant estimates made by management, as well as evaluating
          the overall financial statement presentation.  We believe that
          our audits provide a reasonable basis for our opinion.

          In our opinion, the consolidated financial statements referred to
          above present fairly, in all material respects, the financial
          position of Grand Court Lifestyles, Inc. and subsidiaries as of
          January 31, 1998, and the results of their operations and their
          cash flows for each of the two years in the period ended January
          31, 1998 in conformity with generally accepted accounting
          principles.



     

          /s/ DELOITTE & TOUCHE LLP
          New York, New York
          April 27, 1998

                                        46

<PAGE>



         GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES

          CONSOLIDATED BALANCE SHEETS
          (In Thousands, except per share data)
          ----------------------------------------------------------------

                                                          JANUARY 31,
                                                       ---------------
                                                      1998        1999
                                                      ----        ----
           ASSETS
           Cash and cash equivalents . . . . . .    $11,964    $22,784
           Notes and receivables - net . . . . .    231,140    227,104
           Investments in partnerships . . . . .      3,924      4,945
           Construction in progress  . . . . . .     26,241     11,617
           Property, buildings and equipment -    
             net . . . . . . . . . . . . . . . .         --     35,294
           Other assets - net  . . . . . . . . .     22,530     17,570
                                                    -------    -------
           Total assets  . . . . . . . . . . . .   $295,799   $319,314
                                                    =======    =======
           LIABILITIES AND STOCKHOLDERS' EQUITY
           Loans and accrued interest payable  .   $161,850   $169,781
           Construction and mortgage loans           22,595     35,286
             payable . . . . . . . . . . . . . .
           Notes and commissions payable . . . .      5,299      4,158
           Other liabilities . . . . . . . . . .      3,531      5,767
           Deferred income . . . . . . . . . . .     76,112     68,596
                                                    -------    -------
           Total liabilities . . . . . . . . . .    269,387    283,588
                                                    -------    -------
           Commitments and contingencies . . . .
           Stockholders' equity  . . . . . . . .
           Preferred Stock, $.001 par value -     
             authorized, 15,000 shares; none
             issued and outstanding  . . . . . .         --         --
           Common Stock, $.01 par value -             
             authorized, 40,000 shares; issued
             and outstanding, 15,000 and 17,800
             shares, respectively  . . . . . . .        150        178
           Paid-in capital . . . . . . . . . . .     51,189     73,451
           Accumulated deficit . . . . . . . . .    (24,927)   (37,903)
                                                    -------     ------
           TOTAL STOCKHOLDERS' EQUITY  . . . . .     26,412     35,726
                                                    -------    -------
           Total liabilities and stockholders'     $295,799   $319,314
             equity  . . . . . . . . . . . . . .    =======    =======


          See Notes to Consolidated Financial Statements.

                                        47

<PAGE>
      

         GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES

          CONSOLIDATED STATEMENTS OF OPERATIONS
          (In Thousands, except per share data)
          ----------------------------------------------------------------

                                               YEARS ENDED JANUARY 31,
                                            ----------------------------
                                            1997         1998       1999
                                            ----         ----       ----
           Revenues:
                Sales  . . . . . . .       $36,021    $38,135    $58,010
                Syndication fee 
                  income . . . . . .         7,690      7,923      7,283
                Deferred income
                  earned . . . . . .         5,037      7,254      3,701
                Interest income  . .        13,773     12,051     12,349
                Property management
                  fees from related
                  parties  . . . . .         2,093      3,684      3,219
                Equity in earnings
                  from partnerships            423        541        685
                Senior living
                  revenues . . . . .            --         --      5,093
                Other income . . . .            --      4,683      1,350
                                             -----     ------     ------

                                            65,037     74,271     91,690
                                            ------     ------     ------
          Cost and Expenses:
                Cost of sales  . . .        34,019     33,635     53,547
                Selling  . . . . . .         7,176      7,602      6,335
                Interest . . . . . .        16,394     19,409     22,066
                General and
                  administrative . .         7,796      8,437     10,388
                Loss on impairment of
                  notes and
                  receivables  . . .        18,442         --         --
                Write-off of
                  registration costs            --      3,107           
                Officers'compensation        1,200      1,200      1,200
                Senior living
                  operating expenses.           --         --      6,098
                Depreciation and            
                  amortization . . .         3,331      3,340      5,032
                                            ------     ------    -------
                                            88,358     76,730    104,666
                                            ------     ------    -------
           Net loss  . . . . . . . .      $(23,321)   $(2,459)  $(12,976)
                                            ======    =======    =======
           Loss per common share           $(1.55)     $(0.16)    $(0.74)
                (basic and diluted)         ======    =======    ======= 
           Weighted average                 15,000     15,000     17,455
                common shares used .        ======    =======    =======

          See Notes to Consolidated Financial Statements.

                                       48

<PAGE>
      
         GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES

          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
          YEARS ENDED JANUARY 31, 1997, 1998 AND 1999
          (In Thousands)

          ----------------------------------------------------------------


                                        COMMON       COMMON
                                         STOCK       STOCK      PAID-IN-
                                       (SHARES)    (DOLLARS)     CAPITAL
                                        ------      -------      -------

           Stockholders' equity          15,000        $150     $34,635
                January 31, 1996 . .
           Net loss  . . . . . . . .                             (1,647)
           Capital contribution  . .                             21,333

           Distributions . . . . . .
                                         ------      ------      ------
           Stockholders' equity
                January 31, 1997 . .     15,000         150      54,321
           Net loss  . . . . . . . .
           Distributions . . . . . .                             (3,132)
                                         ------      ------      ------
           Stockholder's equity
                January 31, 1998 . .     15,000         150      51,189
           Net loss  . . . . . . . .
           Sale of 2,800 shares, net
                of expenses of            2,800          28      22,262
                $4,310 . . . . . . .     ------      ------      ------
           Stockholders' equity          17,800        $178     $73,451
                January 31, 1999 . .     ======      ======      ======


                                                     

                                           ACCUMULATED
                                             DEFICIT         TOTAL
                                             -------         -----

           Stockholders' equity                  $ --        $34,785
                January 31, 1996 . . .
           Net loss  . . . . . . . . .        (21,674)       (23,321)
           Capital contribution  . . .                        21,333
           Distributions . . . . . . .           (794)          (794)
                                               ------         ------
           Stockholders' equity
                January 31, 1997 . . .        (22,468)        32,003

           Net loss  . . . . . . . . .         (2,459)        (2,459)
           Distributions . . . . . . .                        (3,132)
                                               ------         ------
           Stockholder's equity
                January 31, 1998 . . .        (24,927)        26,412
           Net loss  . . . . . . . . .        (12,976)       (12,976)
           Sale of 2,800 shares, net                          22,290
                of expenses of $4,310          ------         ------
           Stockholders' equity              $(37,903)       $35,726
                January 31, 1999 . . .         ======        =======


                                       
          See Notes to Consolidated Financial Statements.

                                     49
<PAGE>


     GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES

     CONSOLIDATED STATEMENTS OF CASH FLOWS
     (In Thousands)
     --------------------------------------------------------------------------

                                                      YEARS ENDED JANUARY 31,
                                                      -----------------------
                                                      1997     1998      1999
                                                      ----     ----      ----
     Cash flows provided (used) from operating
          activities:
          Net loss . . . . . . . . . . . . . . .  $(23,321) $(2,459)  $(12,976)
                                                    ------   ------     ------
          Adjustments to reconcile net loss to
               net cash provided by (used)
               operating activities:
          Depreciation and amortization  . . . .     3,331    3,340      5,032
          Loss on impairment of notes and
               receivables . . . . . . . . . . .    18,442       --         --
          Reduction to allowance for
               uncollectible notes receivable  .        --   (1,023)        --
          Deferred income earned . . . . . . . .    (5,037)  (7,254)    (3,701)
          Write-off of registration costs  . . .        --    3,107         --
          Other income (non-cash)  . . . . . . .        --   (3,132)        --
          Adjustment for changes in assets and
               liabilities:
          Accrued interest on notes and
               receivables                             715   (3,611)    (1,780)
          Notes and receivables  . . . . . . . .     3,981   (4,107)     5,816
          Commissions payable  . . . . . . . . .       211     (503)        62
          Other liabilities  . . . . . . . . . .       375     (862)     2,236
          Deferred income  . . . . . . . . . . .     3,766    5,195     (3,815)
                                                    ------   ------     ------
                                                    25,784   (8,850)     3,850
                                                    ------   ------     ------
          Net cash provided (used) by operating  
               activities  . . . . . . . . . . .     2,463  (11,309)    (9,126)
                                                    ------   ------     ------
     Cash flows used by investing activities:
          Increase in investments  . . . . . . .      (449)    (868)    (1,021)
          Property, buildings and equipment  . .        --       --    (10,803)
          Increase in construction in progress      (6,742) (19,499)   (10,170)
                                                    ------   ------     ------
          Net cash used by investing                
               activities  . . . . . . . . . . .    (7,191) (20,367)   (21,994)
                                                    ------   ------     ------
     Cash flows from financing activities:
          Payments on loans payable  . . . . . .   (55,340) (44,178)   (41,290)
          Proceeds from loans payable  . . . . .    57,874   63,400     49,221
          Proceeds from construction and
               mortgage loans payable  . . . . .     2,750   19,845     12,691
          Increase in other assets . . . . . . .    (3,433) (13,624)       231
          Payments of notes payable  . . . . . .      (179)    (434)    (1,521)
          Proceeds from notes payable  . . . . .        --    4,520        318
          Net proceeds from initial public
               offering                                 --       --     22,290
          Distributions  . . . . . . . . . . . .      (794)      --         --
                                                    ------   ------     ------
          Net cash provided by financing          
               activities  . . . . . . . . . . .       878   29,529     41,940
                                                    ------   ------     ------
     Increase (decrease) in cash and cash
       equivalents . . . . . . . . . . . . . . .    (3,850)  (2,147)    10,820
     Cash and cash equivalents, beginning of      
       period  . . . . . . . . . . . . . . . . .    17,961   14,111     11,964
                                                    ------   ------     ------
     Cash and cash equivalents, end of period  .   $14,111  $11,964    $22,784
                                                    ======   ======    =======
     Supplemental information:
          Interest paid  . . . . . . . . . . . .   $16,739  $19,396     21,482
                                                    ======   ======    =======
          Non cash capital contribution  . . . .   $21,333  $    --    $    --
                                                    ======   ======    =======

     See Notes to Consolidated Financial Statements.

                                        50

<PAGE>


          GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES
 
           See Notes to Consolidated Financial Statements.
       
                                       51

<PAGE>

          GRAND COURT LIFESTYLES INC. AND SUBSIDIARIES
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          FOR THE YEARS ENDED JANUARY 31, 1997, 1998, AND 1999
          (IN THOUSANDS, EXCEPT PER SHARE DATA)
          ----------------------------------------------------------------


          1.   ORGANIZATION AND BASIS OF PRESENTATION

          Grand Court Lifestyles, Inc. and subsidiaries (the "Company") was
          formed pursuant to the merger of various Sub-chapter S
          corporations which were wholly-owned by certain principal
          stockholders of the Company (the "Principal Stockholders") and
          the transfer of certain assets by and assumption of certain
          liabilities of (i) a partnership that was wholly-owned by the
          Principal Stockholders and (ii) the Principal Stockholders
          individually.  In exchange for the transfer of such stock, assets
          and liabilities, the Principal Stockholders received shares of
          the Company's common stock.  These transactions are collectively
          called the "reorganization".  All of the assets and liabilities
          were transferred at historical cost.  The reorganization was
          effective as of April 1, 1996 and accordingly, accumulated
          deficit represents results of operations subsequent to that date. 
          Prior to the reorganization, the various Sub-chapter S
          corporations and the partnership, which were wholly-owned by the
          Principal Stockholders, were historically reported on a combined
          basis.

          The Company (i) filed a Restated Certificate of Incorporation on
          March 13, 1997 that provides for, among other things, the
          authorization of 40,000 shares of Common Stock and 15,000 shares
          of Preferred Stock, (ii) on March 13, 1997 effected an
          approximate 1,626.19-for-1 stock split of the issued and
          outstanding Common Stock (all shares have been restated for prior
          periods) and (iii) adopted a Stock Option Plan reserving for
          issuance up to 2,500 shares of Common Stock pursuant to stock
          options and other stock awards.  (See Footnote 15).

          LINES OF BUSINESS - The Company, a fully integrated provider of
          senior living accommodations and services, acquires, develops and
          manages senior living communities in 15 states in the Sun Belt
          and the Midwest.  The Company's revenues have been and are
          expected to continue to be primarily derived from sales of
          partnership interests ("Syndications") in partnerships it
          organizes to acquire existing senior living communities
          ("Syndicated Communities").  As a result of the Company's
          Syndication activities, limited partnerships ("Senior Living
          Investing Partnerships") are formed whereby the Company retains a
          1% to 1.5% general partnership interest.  Investing Partnerships
          generally own a 98.5% to 99% interest in partnerships that own
          senior living communities ("Senior Owning Partnerships").  The
          Company also arranges for the mortgage financing of the
          Syndicated Communities and is involved in the development and
          management of senior living communities.  The Company has
          established a development program (the "Development Plan")
          pursuant to which it (i) is building new senior living
          communities ("Development Communities") of which seven are
          complete and in their initial lease up phase (individually a
          "Development Community and cumulatively the "Development
          Communities") and (ii) has commenced construction on three
          additional Development Communities all of which are in Texas. The
          Company owns the completed Development Communities or operates
          them pursuant to long-term leases. Another source of income is
          interest income on notes receivable.

          2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          CASH AND CASH EQUIVALENTS - The Company considers cash and cash
          equivalents to include cash on hand, demand deposits and highly
          liquid investments with maturities of three months or less.

          REVENUE RECOGNITION - Revenue from Syndications is recognized
          under the full accrual method of accounting when the profit on
          the transaction is determinable, that is, the collectibility of
          the sales price is reasonably assured and the earnings process is
          virtually complete.  The profit recognized has been reduced by
          the estimated maximum reasonably possible exposure to loss. 
          Revenue from Syndications includes any syndication fees earned by
          the Company.  The Company determines the collectibility of the
          sales price by evidence supporting the buyers' substantial

                                        52

<PAGE>
          initial and continuing investment in the Syndicated Communities
          as well as other factors such as age, location and cash flow of
          the underlying property. In addition, three of the Syndications
          have involved the construction of additional apartment units and
          common space at the acquired Syndicated Communities. The Owning
          Partnerships hire independent third party contractors to do the
          construction pursuant to maximum price contracts. The new
          construction generates additional risks, such as increased costs
          due to change orders, which the Company believes are not
          material. 

               The Company has deferred income on sales to Investing
          Partnerships of interests in Owning Partnerships.  The Company
          has arranged for the private placement of limited partnership
          interests in Investing Partnerships.  Offerings of interests in
          Investing Partnerships which were formed to acquire controlling
          interests in Owning Partnerships which own senior living
          properties ("Senior Living Owning Partnerships") provide that the
          limited partners are entitled to receive for a period not to
          exceed five years distributions equal to between 11% and 12% of
          their then paid-in scheduled capital contributions.  Pursuant to
          management contracts with the Senior Living Owning Partnerships,
          for such five-year period, the Company is required to pay to the
          Senior Living Owning Partnerships, amounts sufficient to fund (i)
          any operating cash deficiencies of such senior living Owning
          Partnership and (ii) any part of such 11% and 12% return not paid
          from cash flow from the related property (which the Senior Living
          Owning Partnerships distribute to the Investing Partnerships for
          distribution to limited partners) (collectively, "Management
          Contract Obligations").  The amount of deferred income for each
          property is calculated in a multi-step process.  First, based on
          the property's cash flow in the previous fiscal year, the
          probable cash flow for the property for the current fiscal year
          is determined and that amount is initially assumed to be constant
          for each remaining year of the Management Contract Obligations
          period (the "Initial Cash Flow").  The Initial Cash Flow is then
          compared to the Management Contract Obligations for the property
          for each remaining year of the five-year period.  If the Initial
          Cash Flow exceeds the Management Contract Obligations for any
          fiscal year, the excess Initial Cash Flow is added to the assumed
          Initial Cash Flow for the following fiscal year and this adjusted
          Initial Cash Flow is then compared to the Management Contract
          Obligations for said following fiscal year.  If the Initial Cash
          Flow is less than the Management Contract Obligations for any
          fiscal year, a deferred income liability is created in an amount
          equal to such shortfall and no adjustment is made to the Initial
          Cash Flow for the following year.  Such deferred income liability
          represents the estimated maximum reasonably possible exposure to
          loss as discussed above.  As this process is performed for each
          property on a quarterly basis, changes in a property's actual
          cash flow will result in changes to the assumed Initial Cash Flow
          utilized in this process and will result in increases or
          decreases to the deferred income liability for an individual
          property. Any increase in deferred income liabilities increases
          the cost of sales relating to the sale.  The payment of the
          Management Contract Obligations, however, will generally not
          result in the recognition of expense unless the property's actual
          cash flow for the year is less than the expected Initial Cash
          Flow for that year, as adjusted, and as a result thereof, the
          amount paid by the Company in respect of the Management Contract
          Obligations is greater than the amount assumed in establishing
          the deferred income liability.  Such expense amounted to $2,500,
          $5,900 and $8,300 for the years ended January 31, 1997, 1998,
          1999, respectively, and such expense is included as a component
          of cost of sales.  Although the Company does not intend to do so
          in the future, from time to time, the Company has made
          discretionary payments to Owning Partnerships beyond the
          Management Contract Obligations period for the purpose of making
          distributions to limited partners.  If, however, the property's
          actual cash flow is greater than the Initial Cash Flow for the
          year, as adjusted, the Company's earnings will be enhanced by the
          recognition of deferred income earned and, to the extent cash
          flow exceeds Management Contract Obligations, incentive
          management fees.  The Company recognized such incentive
          management fees in the amount of $1,200, $2,800 and $2,200 for
          the years ended January 31, 1997, 1998 and 1999 respectively.

               The Company accounted for the sales of interests in Owning
          Partnerships which own multi-family properties ("Multi-Family
          Owning Partnerships") under the installment method.  Under the
          installment method the gross profit is determined at the time of
          sale.  The revenue recorded in any given year would equal the
          cash collections multiplied by the gross profit percentage.  At
          the time of sale, the Company deferred all future income to be
          recognized on these transactions until cash is received.  

                                       53

<PAGE>

          ALLOWANCE ON NOTES RECEIVABLE - In the event that the facts and
          circumstances indicate that the collectibility of a note may be
          impaired, an evaluation of recoverability is performed. If an
          evaluation is performed, the Company compares the recorded value
          of the note and other partnership receivables, if any, to the
          value of the underlying property less any encumbrances to
          determine if an allowance is required for impairment.  A
          significant portion of the interest income on multi-family notes
          is recognized as cash is collected.

          ACCOUNTING ESTIMATES - The preparation of financial statements in
          accordance with generally accepted accounting principles requires
          management to make significant estimates and assumptions that
          affect the reported amount of assets and liabilities at the date
          of the financial statements and the reported amount of revenues
          and expenses during the reported period.  Actual results could
          differ from those estimates.

          PRINCIPLES OF CONSOLIDATION - The consolidated financial
          statements include those of the Company and its subsidiaries. 
          The effects of all significant intercompany transactions have
          been eliminated.

          DEFERRED LOAN COSTS - Costs incurred in connection with obtaining
          long-term financing have been deferred and are amortized over the
          term of the financing.

          CONSTRUCTION IN PROGRESS - Costs incurred in connection with the
          construction and development of Development Communities prior to
          the completion of construction are capitalized.  Such costs
          include the capitalization of interest during the construction
          period.  If a project is discontinued or capitalized costs are
          deemed not recoverable, the applicable capitalized project costs
          are expensed.


          INITIAL LEASE-UP COSTS - The Company has capitalized the initial
          lease-up costs associated with the Development Communities placed
          in service based upon units unavailable for rental.

          DEPRECIATION AND AMORTIZATION - The Company depreciates and/or
          amortizes the costs associated with its Development Communities
          using the straight line method over the life of the applicable
          asset. 

          INVESTMENTS - The Company accounts for its interests in
          Syndicated senior living limited partnerships under the equity
          method of accounting.  The Company uses this method because as
          the general partner it can exercise significant influence over
          the operating and financial policies of such partnerships.  Under
          this method, the Company records its share of income and loss of
          the entity as well as any distributions or contributions as an
          increase or decrease to the investment account.  The carrying
          amount of the investments in limited partnerships differs from
          the Company's underlying equity interest based upon its stated
          ownership percentages.  Such differences are attributable to the
          disproportionate amount of money and notes invested in the
          entities by the Company for its equity interest as compared to
          the other investors.  This difference is being amortized over the
          estimated life of the underlying partnership.  The unamortized
          portion of such difference is $2,515 and $3,425 as of January 31,
          1998 and 1999 respectively.

          PROPERTY MANAGEMENT FEES  - Property management fees earned for
          services provided to related parties are recognized as revenue
          when related services have been performed.

          RECLASSIFICATION - Certain amounts in prior years have been
          reclassified to conform with current year presentation.

          EARNINGS PER SHARE - Earnings per share on a basic and diluted
          basis, as required by Statement of Financial Accounting Standards
          ("SFAS") No. 128, "Earnings Per Share", is calculated based upon
          the average shares outstanding during the periods. The effect of
          stock options outstanding during fiscal 1998 is anti-dilutive. 

                                       54

<PAGE>

          COMPREHENSIVE INCOME - Statement of Financial Accounting
          Standards No. 130, "Reporting Comprehensive Income", requires the
          reporting of all items which are required to be recognized under
          generally accepted accounting principles as components of
          comprehensive income in the financial statements. The Company has
          no items of comprehensive income.

          STOCK OPTIONS AND COMPENSATION - Effective January 1, 1996, the
          Company adopted SFAS No. 123, "Accounting for Stock-Based
          Compensation". The Company applies the intrinsic value-based
          methodology permitted by SFAS No. 123 in accounting for stock
          options issued to employees. Under the intrinsic value-based
          methodology, stock-based compensation cost is the excess of the
          quoted market price of the Company's common stock at the grant
          date over the amount the employee must pay for the stock
          (exercise price). The Company generally grants stock options with
          an exercise price equal to the stock price at the date of grant
          and accordingly, no compensation cost is recognized. 

          NEW ACCOUNTING PRONOUNCEMENTS - In June of 1998, the Financial
          Accounting Standards Board ("FASB") issued SFAS No. 133,
          "Accounting for Derivative Instruments and Hedging Activities".
          This statement established accounting and reporting standards for
          derivative instruments, including certain derivative instruments
          embedded in other contracts, and for hedging activities. It is
          effective for all fiscal quarters of fiscal years beginning after
          June 15, 1999. The Company's use of derivative instruments has
          consisted of a treasury bill lock related to two specific debt
          financings.  While the Company has not completed its analysis of
          SFAS No. 133 and has not made a decision regarding the timing of
          adoption, it does not believe that adoption will have a material
          effect on its financial position and results of operations based
          on its current use of derivative instruments.

          3.   FAIR VALUE OF FINANCIAL INSTRUMENTS

          The Company is unable to determine the fair value of its notes
          and receivables as such instruments do not have a ready market. 
          Other financial instruments are believed to be stated at
          approximately their fair value.

          4.   NOTES AND RECEIVABLES

          Notes and other receivables are from related parties, primarily
          Syndicated partnerships, and consist of the following:

                                                         JANUARY 31,
                                                      ----------------
                                                      1998       1999
                                                      ----       ----
           Notes receivable   multi-family
             (a)(e)  . . . . . . . . . . . . . .  $173,598   $166,562
           Notes and accrued interest receivable
             -- adult living (b) . . . . . . . .     6,503      6,776
           Other partnership receivables (c)(e)     60,265     63,313
           Accrued interest receivable . . . . .       883        562
                                                   -------    -------
                                                   241,249    237,213
           Less allowance for uncollectible         
             receivables (d) . . . . . . . . . .    10,109     10,109
                                                   -------    -------
                                                  $231,140   $227,104
                                                   =======    =======

          At January 31, 1998 and 1999, the carrying value of impaired
          notes receivable, net of related deferred income, was
          approximately $41,106 and $29,721, respectively.  Interest income
          on impaired notes is recognized on the cash basis.  Such income
          recognized was $1,261, $1,342 and $826 for the years ended
          January 31, 1997, 1998 and 1999 respectively.

          (a)  The Company has notes receivable from the Syndicated
          Investing Partnerships which were formed to acquire controlling
          interests in Owning Partnerships which own multi-family
          properties ("Multi-Family Notes").  The Multi-Family Notes

                                     55

<PAGE>

          generally have maturity dates ranging from ten to fifteen years
          from the year of syndication. At January 31, 1999, 84 of the 157
          notes (approximate face value $80,386) have reached their final
          maturity dates and these final maturity dates have been extended
          by the Company. Two multi-family properties relating to two
          extended Multi-Family Notes were refinanced, five Multi-Family
          properties relating to eight previously extended Multi-Family
          Notes were sold in Fiscal 1998 and a contract to sell one Multi-
          Family Property and letters of intent to sell two Multi-Family
          Properties whose notes have been extended have been executed. It
          is the Company's intention to collect the principal and interest
          payments on the Multi-Family notes from the cash flows
          distributed by the related multi-family properties and the
          proceeds in the event of a sale or refinancing.  The Company
          expects to extend maturities of other multi-family notes. 
          Interest income on all of the Multi-Family Notes amounted to
          $6,949, and $7,481 and $7,449 for the years ended January 31,
          1997, 1998 and 1999, respectively.

          (b)  The Company has notes receivable from the Syndicated
          Investing Partnerships which were formed to acquire controlling
          interests in Owning Partnerships which own senior living
          communities.  Such notes generally have interest rates ranging
          from 11% to 13.875% and are due in installments over five years
          from the date of acquisition of the respective partnership
          interests.  The notes represent senior indebtedness of the
          related Investing Partnerships, and are collateralized by the
          respective interests in the Owning Partnerships.  Principal and
          interest payments on each note are also collateralized by the
          investor notes payable to the Investing Partnerships to which the
          investors are admitted.  Limited Partners are allowed to prepay
          their capital contributions.  These prepayments of capital
          contributions do not result in the prepayment of the related
          purchase notes held by the Company.  Instead, such amounts are
          loaned to the Company at a rate of between 11% and 12% by the
          Investing Partnerships.  As a result of such loans and the
          crediting provisions of the related purchase agreements, the
          Company records the notes receivable corresponding to the
          purchase notes net of such loans.  Therefore, these prepayments
          act to reduce the recorded value of the Company's notes
          receivable.

          (c)  Other partnership receivables substantially represent
          reimbursable expenses and advances made to the multi-family
          partnerships.  These amounts do not bear interest and have no
          specific repayment date.  It is the Company's intention to
          collect these receivables from the excess cash flows distributed
          by the related multi-family properties and  the proceeds in the
          event of a sale or refinancing.

          (d)  Allowance for Uncollectible Notes Receivable:


                                                  Charged               Balance
                                      Balance at  to Costs  Reductions  at End
                                      Beginning     and         to        of
                                      of Period   Expenses  Allowance   Period
                                      ---------   --------  ---------   ------

      Year Ended January 31, 1997
      Allowance for notes receivable   $14,023     18,442     21,333    $11,132

      Year Ended January 31, 1998
      Allowance for notes receivable   $11,132       --       1,023     $10,109

      Year Ended January 31, 1999
      Allowance for notes receivable   $10,109       --         --      $10,109


          The Multi-Family Notes relating to nine Owning Partnerships that
          filed petitions under Chapter 11 of the U.S. Bankruptcy Code (the
          "Chapter 11 Petitions") and the one Owning Partnership which lost
          its property pursuant to an uncontested foreclosure sale of its
          property (said ten Owning Partnerships are, collectively, the
          "Protected Partnerships") were first deemed impaired when the
          mortgages on their respective properties went into default, which
          defaults occurred between August 1989 and June 1994.  Once in
          default, the holders of these mortgages assigned them to the

                                      56

<PAGE>

          United States Department of Housing and Urban Development
          ("HUD").  The Protected Partnerships then attempted to negotiate,
          and in some cases obtained, workout agreements with HUD. 
          Although it could temporarily lower or suspend debt service
          payments during the term of a workout agreement, HUD, unlike a
          conventional lender, did not have the legal authority to
          restructure the defaulted mortgages it holds by permanently
          lowering interest rates or reducing the principal amount of such
          mortgages.  HUD then sold the mortgages (subject to those workout
          agreements which were in place) at auctions in September 1995 and
          June 1996.  Since the new mortgage holders did not have HUD's
          legal constraints as to the restructuring of mortgages they hold,
          the Protected Partnerships began negotiations with the new
          holders to restructure their mortgages or purchase them at a
          discount.  The Protected Partnerships could not reach an
          agreement with the new mortgage holders and the new mortgage
          holders began to threaten and institute foreclosure proceedings. 
          The Principal Stockholders and one of their affiliates
          transferred the partnership interests they owned personally in
          various partnerships that own multi-family properties (the
          "Assigned Interests") to the Investing Partnerships that owned
          interests in the Protected Partnerships in July 1996.  Seven of
          the Protected Partnerships filed Chapter 11 Petitions in August
          1996, two of the Protected Partnerships filed Chapter 11
          Petitions in February 1997, and one of the Protected Partnerships
          did not file a Chapter 11 Petition and allowed the holder of the
          mortgage to foreclose on its property due to the unlikelihood of
          confirming a plan of reorganization.  The Company established
          appropriate reserves during these time periods to reflect the
          varying extent of impairment of these Multi-Family Notes in view
          of the state of facts at such time.  In that the Principal
          Stockholders transferred the Assigned Interests in July 1996, the
          Company recorded a $21,300  capital contribution in Fiscal 1996.
          The bankruptcy petitions and risk of loss faced by the Protected
          Partnerships resulted in the Company recording a non-cash loss of
          $18,400 in the year ending January 31, 1997 (representing the
          recorded value of the notes receivable relating to the Protected
          Partnerships, net of deferred income and net of any previously
          established reserves) due to the deemed full impairment of these
          notes receivable.  Seven of the Chapter 11 petitions resulted in
          the respective Protected Partnerships losing their properties
          through foreclosure or voluntary conveyances of their properties. 
          The remaining two Protected Partnerships successfully emerged
          from their bankruptcy proceedings in January, 1998 by paying off
          their mortgages at a discount with the proceeds of new mortgage
          financings, resulting in these properties having current, fully
          performing mortgages. This allowed the Company to recognize non-
          cash other income of $3,100 in fiscal 1997.  The two Investing
          Partnerships related to these Protected Partnerships have
          transferred the respective Assigned Interests back to the
          Principal Stockholders and their affiliate.  This transfer is
          recorded as a non-cash distribution to the Principal Stockholders
          for the release of the previously assigned collateral of $3,100. 
          The Company neither owns nor manages these properties, nor is the
          general partner of these Owning Partnerships, but, rather, holds
          the related Multi-Family Notes as receivables.  The Company,
          therefore, has no liability in connection with these mortgage
          defaults or bankruptcy proceedings.

               Fourteen of the Multi-Family Owning Partnerships remain in
          default on their respective mortgages.  These Multi-Family Owning
          Partnerships have been negotiating with the respective mortgage
          lenders and, in some cases, have obtained workout agreements with
          terms of from one to nine years, pursuant to which the lenders
          generally agree during the term of the agreement not to take any
          action regarding the mortgage default and to accept reduced debt
          service payments for a period of time, with the goal of
          increasing property cash flow to enable the property to fully
          service its mortgage. One of these fourteen remaining Multi-
          Family Owning Partnerships whose mortgage is in default has had
          its application to refinance its mortgage loan accepted and
          believes that the refinancing will close. Other Multi-Family
          Owning Partnerships intend to cure their mortgage defaults by
          refinancing their mortgages in the future, although there can be
          no assurance that this will be the case. Furthermore, it should
          be noted that in fiscal 1998 and previous years, six Multi-Family
          Owning Partnerships whose mortgages had been in default, cured
          these defaults by refinancing their mortgage debt with new
          mortgages and now have fully performing mortgages. As of January
          31, 1999, the recorded value, net of deferred income, of the
          Multi-Family Notes and "Other Partnership Receivables" held by
          the Company relating to these fourteen Multi-Family Owning
          Partnerships was $29,721. The Company has established reserves of
          $10,100 to address the possibility that these notes and
          receivables may not be collected in full.


                                      57

<PAGE>

          (e) The Multi-Family properties were typically built or acquired
          with the assistance of programs administered by HUD that provide
          mortgage insurance, favorable financing terms and/or rental
          assistance payments to the owners.  As a condition to the receipt
          of assistance under these and other HUD programs, the properties
          must comply with various HUD requirements including limiting
          rents on these properties to amounts approved by HUD.  Various
          initiatives have been instituted by HUD, including a program to
          restructure its housing assistance programs. Due to uncertainty
          regarding the final policies that will result from these
          initiatives and numerous other factors that affect each property,
          which can change over time (including the local real estate
          market, the provisions of the mortgage debt encumbering the
          property, prevailing interest rates and the general state of the
          economy) the Company cannot determine whether these initiatives
          will have an impact on the Multi-Family Properties and, if there
          is an impact, whether the impact will be positive or negative.
          Further, there can be no assurance that changes in federal
          subsidies will not be more restrictive than those currently
          proposed or that other changes in policy will not occur.  Any
          such changes could have an adverse effect on the Company's
          ability to collect its receivables relating to the Multi-Family
          Properties.

          5.   CONSTRUCTION IN PROGRESS

          The Company has capitalized costs which include interest
          associated with its construction and development of properties it
          is building.  If a project is discontinued, all capitalized
          project costs are expensed.  Such interest capitalized for years
          ended January 31, 1998 and 1999 was $1,551 and $1,849,
          respectively.

          6.   PROPERTY, BUILDINGS AND EQUIPMENT-NET

          Property, buildings and equipment are comprised as follows:

                                                  Life            Cost
                                                  ----            ----
           Land  . . . . . . . . . . . . .         --         $ 4,774
           Buildings . . . . . . . . . . .       40 yrs        25,562
           Equipment . . . . . . . . . . .       4-7 yrs        1,244
           Leasehold improvements  . . . .    life of lease     4,017
           Accumulated depreciation and                          
             amortization  . . . . . . . .                       (303)
                                                               ------
           Net property, building and                         $35,294
             equipment . . . . . . . . . .                     ======


          7.   OTHER ASSETS

          Other assets are comprised as follows:

                                                         JANUARY 31,
                                                     ------------------
                                                     1998          1999
                                                     ----          ----

           Deferred loan costs (a) . . . . .        $9,681      $11,642
           Investment in cooperative
           apartment building (b)  . . . . .         1,782        1,782
           Unsold subscription units (c) . .           111           --

           Deferred registration costs (d) .           397           --
           Investment held for resale (e)  .         7,140           --
           Other assets  . . . . . . . . . .         3,419        4,146
                                                    ------       ------
                                                   $22,530      $17,570
                                                    ======       ======

                                       58

<PAGE>

          (a)  Financing costs of $5,325 and $6,501 were deferred during
          the years ended January 31, 1998 and 1999, respectively.  These
          costs are being amortized over the term of the related debt using
          the straight-line method over periods ranging from one to ten
          years.

          (b)  The Company owns shares in a cooperative apartment building
          and owns interests in a second mortgage collateralized by such
          cooperative apartment building.

          (c)  The Company had deferred $111 of remaining costs associated
          with the financing of the acquisition of senior living
          communities by arranging for the sale of partnership interests,
          which were substantially sold at January 31, 1998. Upon
          completion of these transactions such costs were charged to cost
          of sales.

          (d)  The Company had capitalized costs relating to the initial
          public offering.  These costs were charged against additional
          paid-in capital upon the close of the initial public offering in
          March, 1998. 

          (e)  The Company purchased a senior living community in December
          1997 for Syndication and Syndicated such property in the first
          and second quarters of Fiscal 1998.

          8.   LOANS AND ACCRUED INTEREST PAYABLE

          Loans payable consists of the following:
                                                        JANUARY 31,
                                                    -------------------

                                                    1998            1999
                                                    ----            ----
           Banks (including mortgages) (a) (b)   $ 35,706        $ 32,435

           Other, principally debentures (c)      126,144         137,346
                                                  -------         -------

                                                 $161,850        $169,781
                                                  =======         =======

          (a)  The bank loans bear interest per annum at the banks' prime
          rates plus 1% to 3%.  The bank loans generally have terms of at
          least one year, but in the event a particular bank elects not to
          renew or extend the credit, the entire unpaid balance is
          converted to a term loan which is payable in four to five years. 
          Generally the bank loans are collateralized by the Company's
          interests in the assigned limited partner investor notes which
          serve as collateral for the respective purchase notes.  The prime
          rate of interest at January 31, 1998 and 1999 was 8.5% and 7.75%,
          respectively.

          (b)  The Company's debt obligations contain various covenants and
          default provisions, including provisions relating to, in the case
          of certain of such obligations, certain Investing Partnerships,
          Owning Partnerships or affiliates of the Company.  Pursuant to
          one obligation, the Company is required to maintain a net worth
          of no less than  $35,300. Certain obligations of the Company
          contain covenants requiring the Company to maintain maximum
          ratios of the Company's liabilities to its net worth.. As of
          January 31, 1999, the most restrictive covenant requires that the
          Company maintain a ratio of liabilities to consolidated net worth
          of no more than 10 to 1. In addition, certain obligations of the
          Company provide that an event of default will arise upon the
          occurrence of a material adverse change in the financial
          condition of the Company or upon default in other obligations of
          the Company. 
           
          (c)  Debentures are collateralized by various purchase notes and
          investor notes related to pre-1986 Syndication of Multi-Family
          Properties.  All loans mature in 1999 through 2005 and bear
          interest rates of 11% to 12% per annum.


                                       59

<PAGE>

               Future annual maturities of all of the Company's loans
          payable, excluding interest, over the next five years and
          thereafter, are as follows:

          2000  . . . . . . . . . .                $29,406

          2001  . . . . . . . . . .                 35,253

          2002  . . . . . . . . . .                 38,266
 
          2003  . . . . . . . . . .                 22,076
 
          2004  . . . . . . . . . .                 10,058
 
          Thereafter  . . . . . . .                 33,725
                                                   -------
                                                   168,784
          Accrued interest  . . . .                    997
                                                   -------
                                                  $169,781
                                                   =======


          9.   CONSTRUCTION AND MORTGAGE LOANS PAYABLE

          During the years ended January 31, 1998 and 1999, pursuant to the
          Company's development plan, first mortgage loans were obtained to
          finance approximately 80% of the costs of developing six new
          senior living communities.  The interest rate on four of the
          loans equals the 30 day LIBOR plus 2 3/4% per annum. The 30-day
          LIBOR rate was 5.63% at January 31, 1999. The fifth loan bears
          interest at the rate of the prime rate plus 1.5% per annum.  The
          sixth loan bears interest at the bank's prime rate for fifteen
          months then converts to LIBOR plus 2 3/4% per annum for the
          following twenty four months. These loans mature between
          November, 1999 and February, 2001.  As of January 31, 1998 and
          1999, total funding under such first mortgage loans amounted to
          $13,345 and $26,036, respectively.

          Pursuant to the Company's development program, two limited
          partnerships, in each of which the Company holds a 1% general
          partnership interest, have issued limited partnership interests
          for aggregate capital contributions of $9,250, the net proceeds
          of which have been used to make second mortgage loans to the
          Company to fund approximately 20% of the costs of developing
          three Development Communities.  Such second mortgage loans bear
          interest at the rate of 13.125% per annum.  These second mortgage
          loans mature between November 2001 and March 2002.

          10.  DEFERRED INCOME

          Deferred income is comprised of:
                                               JANUARY 31,
                                         ----------------------

                                         1998              1999
                                         ----              ----
           Multi-family  . . . . .     $66,342           $58,760

           Senior living(a)  . . .       9,770             9,836
                                        ------            ------

                                       $76,112           $68,596
                                        ======            ======

          (a)  The aggregate gross amount (before considering the cash flow
          from the properties) of Management Contract Obligations relating
          solely to returns to limited partners for each of the Fiscal
          Years 1999 through 2003 based on existing management contracts is
          $19,776, $19,881, $15,790, $8,045 and $1,971, respectively. Such

                                       60

<PAGE>

          amounts of Management Contract Obligations are calculated based
          upon scheduled capital contributions with respect to Fiscal Years
          1999 through 2003. Actual amounts of Management Contract
          Obligations in respect of such contracts will vary based upon the
          timing and amount of such capital contributions. The cash flow
          generated by the related properties is applied against the total
          Management Contract Obligations and any remaining balance is
          established as deferred income at year end.

          11.  STOCKHOLDERS' EQUITY

               In March 1998, in an initial public offering of its common
          stock, the Company sold 2,800 shares of its common stock at a
          price of $9.50 per share. The net proceeds, after deducting for
          all offering expenses, that the Company received as a result of
          this offering was $22,300. The Company intends to use
          approximately $19,300 of the net proceeds to finance the
          development of new senior living communities and the remaining
          $3,000 for working capital. As of January 31, 1999, $9,400 had
          been used to finance the development of new senior living
          communities and $1,600 has been used for working capital. The
          Company has purchased a series of treasury bills with the
          remaining net proceeds pending application of such funds.

               In March 1999, the Board of Directors authorized the Company
          to purchase up to 300 shares of the Company's common stock at
          prevailing market rates.

          12.  INCOME TAXES

               The Company became a taxable entity as of April 1, 1996, and
          has incurred losses since that date. The Company believes it is
          more likely than not that deferred tax assets in excess of
          deferred tax liabilities may not be realizable in future years.
          Accordingly, the Company has increased the valuation allowance
          from $11,340 to $13,850. Deferred income taxes reflect the net
          tax effects of temporary differences between the carrying amount
          of assets and liabilities for financial reporting purposes and
          the amount used for income taxes purposes.  The tax effects of
          temporary differences that give rise to significant portions of
          the deferred tax assets and deferred tax liabilities are
          presented below:

                                                      JANUARY 31,
                                                   -----------------
          Deferred tax assets:                      1998        1999
                                                    ----        ----
               Notes and receivables  . . . . .  $ 6,092     $ 6,260
               Loans payable  . . . . . . . . .    2,000       2,000
               Investment in partnerships . . .    5,045       6,974
               Net operating loss carryforward     3,847       7,441
               Other  . . . . . . . . . . . . .      147         136
                                                  ------      ------
          Total gross deferred tax assets . . .   17,131      22,811
               Less valuation allowance . . . .  (11,340)    (13,850)
                                                  ------      ------
          Deferred tax assets net of valuation   
            allowance . . . . . . . . . . . . .    5,791       8,961
                                                  ------      ------
          Deferred tax liabilities:
          Fixed Assets                                --         313
            Deferred income . . . . . . . . . .    4,562       7,016
            Other   . . . . . . . . . . . . . .    1,229       1,632
                                                  ------      ------
          Total gross deferred tax liabilities     5,791       8,961
                                                  ------      ------
          Net deferred tax assets (liabilities)  $    --     $    --
                                                  ======      ======


                                     61

<PAGE>

          The net operating loss carry forward as of January 31, 1999 was
          approximately $19,000. A substantial portion of such loss carry
          forward will expire January 31, 2013 and the remainder thereof
          will expire through January 31, 2019.

          13.  COMMITMENTS AND CONTINGENCIES

               The Company rents office space under a lease expiring
          February 2000.  Annual rent under such lease is approximately
          $206. The Company entered into a ten year lease for additional
          office space, commencing September 1, 1991.  The annual rent is
          approximately $330.

               The Company is a general partner of all but one of the
          Senior Living Owning Partnerships and the general partner of 37
          of 46 senior living Investing Partnerships.  The mortgage
          financing of the Syndicated Communities and Syndicated Multi-
          Family Properties are generally without recourse to the general
          credit or assets of the Company except with respect to certain
          specified obligations, including, for example, costs incurred for
          the correction of hazardous environmental conditions.  However,
          except for such non-recourse obligations, as a general partner,
          the Company, or a wholly-owned entity formed solely to be the
          general partner, is fully liable for all partnership obligations,
          including those presently unknown or unobserved, and unknown or
          future environmental liabilities.  The cost of any such
          obligations or claims, if partially or wholly borne by the
          Company, could adversely affect the Company's business, operating
          results and financial condition.  Although most of the mortgage
          loans are non-recourse, (i) the Company is liable as a general
          partner for approximately $12,808  in principal amount of
          mortgage debt relating to six Syndicated Communities and (ii)
          wholly-owned entities (whose only asset is a specific general
          partner interest) are liable as general partners for
          approximately $35,580 in principal amount of mortgage debt
          relating to seven Syndicated Communities managed by the Company
          as of January 31, 1999.  In the case of the general partner
          liabilities of the wholly-owned entities (whose only asset is a
          specific general partner interest), the only assets of the
          Company at risk of loss are the  interests in the wholly-owned
          entities.

               As part of the Company's development program, on September
          18, 1996 the Company entered into a master development agreement
          with Capstone Capital Corporation ("Capstone") pursuant to which
          Capstone will fund 100% of the development cost of four
          Development Communities. The maximum amount Capstone will fund
          per such agreement is approximately $37,764 of which $35,864 had
          been funded as of January 31, 1999.

               The Capstone arrangement provides that the Company will
          operate these four Development Communities pursuant to long-term
          operating leases with Capstone, which leases were entered into
          upon the completion of construction and the satisfaction of
          certain other conditions. The initial term of each lease is 15
          years with five-year extension options. The cumulative annual
          base rent which the Company is obligated to pay to Capstone for
          the four Development Communities placed in service is $3,682 with
          3% per annum annual increases. 

               The Company is involved in legal proceedings which have
          arisen in the ordinary course of business.  The Company intends
          to vigorously defend itself in these matters and does not believe
          that the outcome of these matters will have a material effect on
          its financial statements.

          14.  RELATED PARTY TRANSACTIONS

          The Company has transactions with related parties, primarily
          Syndicated partnerships that are unconsolidated affiliates of the
          Company.  The Company provides management, accounting and
          bookkeeping services to such affiliates. The Company receives a
          monthly fee in return for such  management services rendered on
          behalf of its affiliates for each of their senior living
          communities.  

          In addition, the Company has amounts due from unconsolidated
          affiliates of $1,600 and $3,400 as of January 31, 1998 and 1999,
          respectively.


                                        62

<PAGE>

          The Chairman of the Board and President of the Company and
          entities controlled by them serve as general partners of
          partnerships directly and indirectly owning multi-family
          properties and on account of such general partner status have
          personal liability for recourse partnership obligations. These
          two individuals also own small equity ownership interests in the
          partnerships.  The Company held notes receivable, aggregating
          $100,838 net of deferred income, and receivables of $59,900 at
          January 31, 1999 that were collateralized by the equity interests
          in such partnerships.  These individuals have provided personal
          guarantees for certain of the Company's Investor Note Debt and
          Unsecured Debt, and the obligations thereunder may continue.  The
          aggregate amount of such debt personally guaranteed by each is
          approximately $32,493.  In addition, such officers and certain
          employees will devote a portion of their time to overseeing the
          third-party managers of multi-family properties in which the
          Company has financial interests in that it holds the related
          Multi-Family Notes, but in which such officers have equity
          interests and the Company does not.  These activities, ownership
          interests and general partner interests create actual or
          potential conflicts of interest on the part of these officers.

          The Company is the managing general partner for most of the
          Senior Living Owning Partnerships which own the Syndicated
          Communities managed by the Company.  The Company also is the
          general partner for most of the senior living Investing
          Partnerships that own equity interests in these Owning
          Partnerships. In addition, the Company is the managing agent for
          all of the Syndicated Communities in the Company's portfolio. 
          The Company has arranged for the acquisition of Syndicated
          Communities and other properties through the sales of limited
          partnership interests in the Investing Partnerships.  By serving
          in all of these capacities, the Company may have conflicts of
          interest in that it has both a duty to act in the best interests
          of partners of various partnerships, including the limited
          partners of the Investing Partnerships, and the desire to
          maximize earnings for the Company's stockholders in the operation
          of such Syndicated Communities.

          During Fiscal 1996, 1997 and 1998, the Company paid to Francine
          Rodin, the wife of Bernard M. Rodin, the Company's Chief
          Operating Officer, President, Chief Financial Officer and a
          Director, $204, $133 and $153, respectively, as fees for
          introducing to the Company certain broker/dealers that have
          assisted the Company in its Syndications of partnership interests
          and in placing other securities offered by the Company.  Mrs.
          Rodin will receive a fee with respect to any future sales through
          such broker/dealers of Syndicated partnership interests and other
          securities offered by the Company.  During Fiscal 1996, Mrs.
          Rodin received consulting fees of $49 in connection with
          coordinating the Company's marketing efforts and travel
          arrangements.  Mrs. Rodin has been an employee of the Company for
          the Fiscal Years 1997 and  1998, respectively and performs
          similar services.

          The Company had loans receivable of $464 and $190 from the
          Chairman of the Board and the President of the Company as of the
          end of Fiscal 1997 and 1998, respectively.

          15.  1996 STOCK OPTIONS AND PERFORMANCE AWARD PLAN

               The Company has adopted the 1996 Stock Option and
          Performance Award Plan (the "Plan"), which authorizes the grant
          to officers, key employees and directors of the Company and any
          parent or subsidiary of the Company, of incentive or non-
          qualified stock options, stock appreciation rights, performance
          shares, restricted shares and performance units. Under the Plan,
          directors who are not employees of the Company may not be granted
          incentive stock options. The Company plans to reserve 2,500
          shares of Common Stock for issuance pursuant to the Plan.

               The Plan is administered by the Board of Directors. The
          Board of Directors determines the prices and terms at which
          options may be granted. Options may be exercisable in
          installments over the options period, but no options may be
          exercised after ten years from the date of grant. Stock
          appreciation rights may be granted in tandem with options or
          separately.

               The exercise price of any incentive stock option granted to
          an eligible employee may not be less than 100% of the fair market
          value of the shares underlying such option on the date of grant,
          unless such employee owns more than 10% of the outstanding Common
          Stock or stock of any subsidiary or parent of the Company, in

                                       63

<PAGE>

          which case the exercise price of any incentive stock option may
          not be less than 110% of such fair market value. No option may be
          exercisable more than ten years after the date of grant and, in
          the case of an incentive stock option granted to an eligible
          employee owning more than 10% of the outstanding Common Stock or
          stock of any subsidiary or parent of the Company, no more than
          five years from its date of grant. Incentive stock options are
          not transferable, except upon the death of the optionee. In
          general, upon termination of employment of an optionee (other
          than death or disability) , all options granted to such persons
          which are not exercisable on the date of such termination
          immediately expire, and any options that are so exercisable will
          expire three months following termination of employment in the
          case of non-qualified stock options. However, all options will be
          forfeited immediately upon an optionee's termination of
          employment for good cause and upon an optionee's voluntary
          termination of employment without the consent of the Board of
          Directors.

               Upon an optionee's death or termination of employment due to
          disability, all options will become 100% vested and will be
          exercisable (i) in the case of death, by the estate or other
          beneficiary of the optionee at any time prior to the date the
          option otherwise would expire and (ii) in the case of the
          disability of the optionee, by the optionee within one year of
          the date of such termination of employment in the case of
          incentive stock options, or at any time prior to the date the
          option otherwise would expire in the case of non-qualified stock
          options.

               At the time each grant of restricted shares or performance
          shares or units or stock appreciation rights is made, the Board
          of Directors determines the duration of the performance or
          restriction period, if any, the performance targets, if any, for
          earning performance shares or units, and the times at which
          restrictions placed on restricted shares shall lapse.

               As of January 31, 1999, options to acquire 475 shares have
          been granted, each with an exercise price of $8.50 per share. 20%
          of such options vest immediately and 20% will vest each year
          thereafter for the next four years. Such options will expire
          November 18, 2008.

               Under the provisions of FASB 123, the Company accounts for
          stock based compensation using the intrinsic value method
          prescribed by APB 25. On a pro-forma basis, net loss would have
          been $13,493 or $0.77 per share in Fiscal 1998. For purposes of
          this pro-forma disclosure under FASB 123, the estimated fair
          value of the options is amortized over the vesting period.

               The fair value of the options was estimated at the grant
          date using a Black-Scholes option pricing model with the
          following weighted average assumptions for Fiscal 1998; risk-free
          interest rate of 4.85%, volatility of 46%, dividend of 0% and a
          weighted average expected life of the options of 10 years.

               The Black-Scholes model requires the input of highly
          subjective assumptions and does not necessarily provide a
          reliable measure of fair value.

          16.  SEGMENT REPORTING INFORMATION.

          The Company views its business in the following three segments:

          1.   Syndication - Revenues are comprised of sales, syndication
          fee income, property management fees, deferred income earned and
          equity in earnings from partnerships relating to the Syndicated
          Communities.

          2.   Multi-Family - Revenues are comprised of sales of the
          underlying Syndicated Multi-Family properties or controlling
          interests therein, and recognition of deferred income from such 
          Syndications, which income is being recognized on the installment 
          method.

          3.   New Development - Revenues are derived from senior living
          rental revenues from the Development Communities.

                                        
                                       64

<PAGE>

                                                   January 31,
                                          ------------------------------
                                           1997          1998       1999
                                           ----          ----       ----
                                        (unaudited)   (unaudited)
          Revenues
          Syndication (a)                   $50,320     $56,423   $45,716
          Multi-family (b)                      944       5,797    27,182
          New Development                         -           -     6,443
                                             ------     -------    ------
          Combined Segments                 $51,264     $62,220   $79,341
                                             ======     =======    ======

          Interest Income
          Syndication                        $7,054      $4,768    $4,204
          Multi-family                        6,719       7,283     7,317
          New Development                         -           -       828
                                             ------     -------    ------
          Combined Segments                 $13,773     $12,051   $12,349
                                             ======     =======    ======

          Operating Profit (Loss)(c)
          Syndication                        $4,973      $7,363    $2,294
          Multi-family                      (28,080)(d)  (5,822)  (11,546)
          New Development                      (214)     (4,000)   (3,724)
                                       ------------     -------   ------
          Combined Segments                $(23,321)    $(2,459) $(12,976)
                                       ============     =======    =======

          Gross Assets
          Syndication                       $21,997     $27,719   $23,548
          Multi-family                      229,236     236,326   229,794
          New Development                    10,428      31,754    65,972
                                       ------------     -------   -------
          Combined Segments                $261,661    $295,799  $319,314
                                       ============     =======   =======


                                                 January 31,
                                     -----------------------------------
                                         1997           1998        1999
                                         ----           ----        ----
                                       (unaudited)    (unaudited)
          Interest Expense
          Syndication                        $3,493    $4,945      $4,152
          Multi-family                       12,752    13,778      14,887
          New Development                       149       686       3,027
                                             ------    ------      ------
          Combined Segments                 $16,394   $19,409     $22,066
                                             ======    ======      ======

          Depreciation and Amortization
          Syndication                         $319          $363      $490
          Multi-family                       2,947         2,770     3,591
          New Development                       65           207       951
                                            ------        ------    ------
          Combined Segments                 $3,331        $3,340    $5,032
                                            ======        ======    ======

          Capital Expenditures
          Syndication                           $-            $-        $-
          Multi-family                           -             -         -
          New Development                    6,742        19,499    20,973
                                            ------        ------    ------
          Combined Segments                 $6,742       $19,499   $20,973
                                            ======        ======    ======


          (a)  Includes non-cash income of deferred income and equity in
          earnings from unconsolidated affiliates.
          (b)  Includes non-cash income comprised of deferred income
          earned.
          (c)  Includes the allocation of certain expenses based upon
          either gross revenues or gross assets to the individual segments.
          (d)  Includes a non-cash loss of $18,442.


          17.  SUBSEQUENT EVENT

               In April 1999, the Company entered into joint venture
          arrangements regarding three completed and one substantially
          completed Development Community. Pursuant to each joint venture
          arrangement, the Company sold a 50% interest in the Development
          Communities to a third party. The Company realized a profit from
          each of the sales and earns management fees for managing each of
          the communities. The third party has the right to terminate the
          Company's management upon thirty days written notice. The third
          party receives a cumulative priority return on its investment
          from all cash flow generated by the community and any excess cash
          flow is shared 50% by the Company and 50% by the third party. For
          future periods, the Company will no longer consolidate these
          Development Communities into its consolidated financial
          statements but will recognize its investment in these Development
          Communities under the equity basis of accounting.


                                        65

<PAGE>

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

               A Form 8-K was filed on October 13, 1998. Under Item 4  
          Change in Registrant's Certifying Accountant, the Company
          announced the appointment of BDO Seidman, LLP as the Company's
          independent accountant and the Company's decision not to continue
          the engagement of Deloitte & Touche, LLP. 


                                        66
<PAGE>


          PART III

          ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

               The directors and executive officers of the Company are as
          follows: 

           Name                     Age      Position

           John Luciani(1)          66       Chairman of the Board and
                                             Chief Executive Officer
           Bernard M. Rodin(2)      68       Chief Operating Officer,
                                             Chief Financial Officer, 
                                             President and Director

           John W. Luciani III      46       Executive Vice President and
                                             Director

           Paul Jawin               43       General Counsel and Senior
                                             Vice President

           Dorian Luciani           43       Senior Vice President -
                                             Acquisition and Construction

           Deborah Luciani          42       Senior Vice President 

           Catherine V. Merlino     34       Chief Accounting Officer and
                                             Vice President

           Edward J. Glatz          56       Vice President - Multi-
                                             Family

           Keith Marlowe            36       Secretary

           Walter Feldesman(1)(2)   81       Director

           Leslie E. Goodman(1)(2)  54       Director

           Sidney Dworkin(1)(2)     78       Director

          --------------------

          (1)  Member of the Compensation Committee
          (2)  Member of the Audit Committee

               JOHN LUCIANI, Chief Executive Officer and Chairman of the
          Board of Directors since January 1996, founded the earliest
          predecessor of the Company in 1969 with Bernard M. Rodin and has
          been engaged in a number of business activities and investments
          since 1952.  Commencing in 1960, he entered into the real estate
          development and construction business, concentrating initially on
          the development, construction and sale of residential high-rise
          apartment buildings and single-family homes and subsequently on
          the acquisition and development of multi-family rental housing
          complexes.  Since 1986, he has concentrated on the acquisition,
          development and financing of senior living communities for the
          elderly.  Mr. Luciani was a general partner of three Protected
          Partnerships, but withdrew as a general partner prior to their
          filing the respective Chapter 11 Petitions.

               BERNARD M. RODIN, Chief Operating Officer, Chief Financial
          Officer, President and Director since October, 1998, has been
          engaged, since the formation of the earliest predecessor of the
          Company in 1969 with John Luciani, in the financing of property
          acquisitions by arranging for the sale of partnership interests
          and in property management.  This activity initially focused on
          the Company's multi-family housing portfolio and, since 1986, on
          the Company's senior living communities.  Mr. Rodin has a
          bachelor of science degree from the City University of New York.  
          Mr. Rodin is a certified public accountant and was actively
          engaged in the practice of public accounting prior to 1969.  Mr.
          Rodin was a general partner of three Protected Partnerships, but
          withdrew as a general partner prior to their filing the
          respective Chapter 11 Petitions.


                                       67

<PAGE>
               JOHN W. LUCIANI III, Executive Vice President and Director
            since June, 1996, a son of John Luciani, joined the Company in
          1975 and initially was involved in the management and operations
          of the Company's multi-family housing portfolio. Mr. Luciani is
          presently involved in the acquisition of existing senior living
          communities and the daily operation of the Company's senior
          living portfolio. Mr. Luciani graduated from Fairleigh Dickinson
          University with a bachelor of science degree in Accounting and a
          master of business administration degree in Finance. He is an
          active member of the American Seniors Housing Association (ASHA).

               PAUL JAWIN, General Counsel and Senior Vice President since
          September, 1998, a son-in-law of Bernard M. Rodin, joined the
          Company in May 1991.  His activities primarily involve the
          various legal and financial aspects of the Company's business
          including its debt financing and matters involving the Company's
          equity and debt securities.  Mr. Jawin is an attorney and was
          actively engaged in a real estate/corporate practice prior to
          joining the Company.  Mr. Jawin graduated from Ithaca College
          with a bachelor of science degree in history and earned a juris
          doctor degree from Syracuse University School of Law.

               DORIAN LUCIANI, Senior Vice President - Acquisition and
          Construction since June, 1996, a son of John Luciani, joined the
          Company in 1977 and was initially involved in the acquisition,
          development and management of the Company's multi-family housing
          portfolio.  Later, Mr. Luciani focused exclusively on the
          acquisition and development of the Company's senior living
          communities. Mr. Luciani graduated from Fairleigh Dickinson
          University with a bachelor of science degree in business.

               DEBORAH LUCIANI, Senior Vice President since May, 1998, a
          daughter of John Luciani, joined the Company in January 1992. 
          Ms. Luciani is involved in all aspects of acquisitions, debt and
          equity financing and new business development of the company's
          senior housing portfolio. Prior to joining the Company, Ms.
          Luciani worked for E.F. Hutton & Company, New York and with
          Prudential Bache Securities, New York, as an Oil Futures Hedger
          to institutional clients.  Ms. Luciani graduated from Boston
          University with a bachelor of science degree, a master of
          political science degree and a master of economics degree.

               CATHERINE V. MERLINO, Chief Accounting  Officer since May,
          1998 and Vice President since June, 1996, joined the Company in
          September 1993, and has since been actively involved in the
          financial reporting and analysis needs of the Company.  Prior to
          joining the Company, Mrs. Merlino was a Senior Accountant from
          June 1989 through June 1993 and a Supervisor from June 1993
          through September 1993 at Feldman Radin & Co., P.C., a public
          accounting firm located in New York City.  Mrs. Merlino graduated
          from Long Island University in May 1987 with a bachelor of
          science degree in Accounting and became a certified public
          accountant in February 1992.

               EDWARD J. GLATZ, Vice President - Multi Family - since June,
          1998, joined the Company in September 1992 and has been actively
          involved in the oversite and supervision of the third-party
          managing agents that manage the day-to-day operations of the
          Multi-Family Properties. Prior to joining the Company,  Mr. Glatz
          performed asset management duties for Kovens Enterprises, a real
          estate development company, from June 1988 until September 1992.

               KEITH MARLOWE, Secretary of the Company since June, 1996,
          joined the Company in August 1994.  From 1987 through August
          1994, Mr. Marlowe, an attorney, was an associate in the tax
          department at the law firm of Reid & Priest LLP where he was
          involved in a general transactional tax practice.  His activities
          primarily involve the various legal and financial aspects of  the
          Company's business.  Mr. Marlowe graduated from the University of
          Virginia with a bachelor of science degree in economics.  Mr.
          Marlowe earned a juris doctor degree from University of
          California Los Angeles School of Law and an LLM in Taxation from
          New York University School of Law.

               WALTER FELDESMAN, Director since June, 1996, has been Of
          Counsel to the law firm of Baer Marks & Upham LLP since  March
          1993 and for more than five years prior thereto was a partner of
          Summit, Rovins and Feldesman.  Mr. Feldesman is currently a
          Director and Chairman of the Audit Committee of Sterling Bancorp

                                        68

<PAGE>

          and a Director of its subsidiary, Sterling National Bank & Trust
          Co.  Mr. Feldesman is a member of the National Institute on
          Financial Services for Elders, the National Academy of Elder Law
          Attorneys, the American Association of Homes for the Aging, the
          National Council on the Aging and American Society on Aging.  Mr.
          Feldesman is also special counsel on elderlaw to United Senior
          Health Cooperative.  He has authored an article entitled "Long-
          Term Care Insurance Helps Preserve an Estate," and a published
          work entitled the "Dictionary of Eldercare Terminology".  He has
          written two other books, "New Medicare Choices" which was
          published in February, 1998 and Home Care which is expected to be
          published in July, 1999.  Mr. Feldesman has a bachelor's degree
          in economics from New York University.  Mr. Feldesman earned an
          LLB from Harvard Law School.

               LESLIE E. GOODMAN, Director since June, 1996.  Until
          December 1996 Mr. Goodman was the Area President for the North
          Jersey Region for First Union National Bank and a Senior
          Executive Vice President of First Union Corporation.  From
          September 1990 through January 1994, he served as President and
          Chief Executive Officer of First Fidelity Bank, N.A., New Jersey. 
          From January 1994 to December 1995, Mr. Goodman served as a
          Senior  Executive Vice President and a Director of First Fidelity
          Bank, National Association until it was merged into First Union. 
          From January 1990 until December 1995, he also served as Senior
          Executive Vice President, member of the Office of the Chairman
          and a Director of First Fidelity Bancorporation.  He is a member
          of the Board of Directors and Chairman of the Audit Committee of
          Wawa Inc., a member of the Board of Directors of Tear Drop Golf
          Company, Inc. and a director of Admiralty Bank Corporation.  In
          addition, Mr. Goodman is a member of the Board of Trustees of
          Rutgers University and Hackensack University Medical Center.

               SIDNEY DWORKIN, Director since June, 1998. Mr. Dworkin was
          one of the founders and served as President and Chairman of the
          Board of Revco D.S., Inc. until October 1987. Mr. Dworkin
          currently serves as a member of the Board of Directors of Crager
          Industries, Inc., Comtrex Systems, Inc., CCA Industries, Northern
          Technologies, International Inc., Viragen Inc. and Novapet Inc. 
          He is also the owner and Chairman of the Board of Advanced
          Modular Systems, Inc., a privately-held manufacturer of modular
          buildings. His experience ranges across a multitude of industries
          including, among others, pharmaceuticals, computer hardware and
          software, modular housing and consumer products. 

          AUDIT COMMITTEE

               The Board of Directors established an Audit Committee in
          June 1996.  The Audit Committee is currently composed of Messrs.
          Rodin, Feldesman, Goodman and Dworkin. The Audit Committee's
          duties include reviewing internal financial information,
          monitoring cash flow, budget variances and credit arrangements,
          reviewing the audit program of the Company, reviewing with the
          Company's independent accountants the results of all audits upon
          their completion, annually selecting and recommending independent
          accountants, overseeing the quarterly unaudited reporting process
          and taking such other action as may be necessary to assure the
          adequacy and integrity of all financial information distributed
          by the Company.

          COMPENSATION COMMITTEE

               The Board of Directors established a Compensation Committee
          in June 1996.  The Compensation Committee is currently composed
          of Messrs. John Luciani, Feldesman, Goodman and Dworkin. The
          compensation Committee recommends compensation levels of senior
          management and works with senior management on benefit and
          compensation programs for Company employees.


                                      69

<PAGE>

          SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

                                                NO. OF
                                            TRANSACTIONS
                                                NOT         FAILURE TO
                              NO. OF LATE      TIMELY          FILE
                                REPORTS       REPORTED     REQUIRED FORM
                              ----------    ------------   -------------

      John Luciani                 1             1               0

      Bernard Rodin                1             1               0

      John W. Luciani III          0             1               1

      Sidney Dworkin               2             1               0

      Leslie Goodman               1             0               0

      Dorian Luciani               0             1               1

      Paul Jawin                   0             1               1

      Edward J. Glatz              0             1               1

      Deborah Luciani              0             1               1

      Catherine V. Merlino         0             1               1

      Keith Marlowe                0             1               1


                                       70

<PAGE>

          ITEM 11.  EXECUTIVE COMPENSATION

               The following table shows, as to the Chief Executive Officer
          and each of the four other most highly compensated executive
          officers information concerning compensation accrued for services
          to the Company in all capacities during Fiscal 1996, 1997 and
          1998,  respectively.

          < TABLE >



                              SUMMARY COMPENSATION TABLE


                                                   LONG-TERM
                                                 COMPENSATION
                                                    AWARDS
                                       ANNUAL     SECURITIES        ALL
                                    COMPENSATION  UNDERLYING       OTHER
     NAME AND PRINCIPAL                SALARY       OPTIONS    COMPENSATION
     POSITION                 YEAR       ($)          (#)           ($)
     ------------------       ----   ----------   -----------    --------

     John Luciani,
     Chairman of the Board
     and Chief Executive     Fiscal
     Officer(1)  . . . . .    1996    $500,000        --          $497,000

                             Fiscal
                              1997    $600,000                   1,566,000

                             Fiscal
                              1998    $600,000        --            --
     Bernard M. Rodin,
     Chief Operating
     Officer, Chief
     Financial Officer,
     President and           Fiscal
     Director(1) . . . . .    1996    $500,000        --         $497,000 

                             Fiscal 
                              1997    $600,000        --        1,566,000 

                             Fiscal
                              1998    $600,000        --            --

     John W. Luciani, III,
     Executive Vice
     President and           Fiscal
     Director  . . . . . .    1996    $350,000

                             Fiscal
                              1997    $353,846        --            --

                             Fiscal 
                              1998    $375,000      50,000          --

     Dorian Luciani,         Fiscal
     Senior Vice President    1996    $350,000        --            --

                             Fiscal
                              1997    $353,846        --            --

                             Fiscal 
                              1998    $375,000      50,000          --

     Paul Jawin, General
     Counsel and Senior      Fiscal
     Vice President  . . .    1996    $325,000        --            --


                                       71

<PAGE>
                                                   LONG-TERM
                                                 COMPENSATION
                                                    AWARDS
                                       ANNUAL     SECURITIES        ALL
                                    COMPENSATION  UNDERLYING       OTHER
     NAME AND PRINCIPAL                SALARY       OPTIONS    COMPENSATION
     POSITION                 YEAR       ($)          (#)           ($)
     ------------------       ----   ----------   -----------    --------

                             Fiscal
                              1997    $344,327        --            --

                             Fiscal 
                              1998    $365,000      50,000          --


          --------------------
          (1)  Messrs. Luciani and Rodin received dividends and
               distributions from the Company's predecessors but did not
               receive salaries.  As of April 1, 1996 a salary for each of
               Messrs. Luciani and Rodin was established at the rate of
               $600,000 per year.  In fiscal 1996 such officers also
               received $397,000 each as a dividend and $100,000 each for
               the period from February 1, 1996 until April 1, 1996, which
               was in the form of a dividend but which is classified as
               officers' compensation for financial statement purposes.  In
               January 1998, such officers received a non-cash distribution
               for the release of previously assigned collateral of $1,566
               each.

          COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

               The Board of Directors established a Compensation Committee
          in June 1996.  The Compensation Committee currently consists of
          Messrs. Luciani, Feldesman, Goodman and Dworkin.  None of the
          executive officers of the Company currently serves on the
          compensation committee of another entity or on any other
          committee of the board of directors of another entity performing
          similar functions.  For a description of transactions between the
          Company and members of the Compensation Committee or their
          affiliates, see "Certain Transactions."

          DIRECTOR COMPENSATION

               The Company pays each Director who is not an employee of the
          Company $500.00  per telephonic Board meeting attended and
          $1,000.00 per Board meeting personally attended. All Directors
          are reimbursed by the Company for their out-of-pocket expenses
          incurred in connection with attendance at meetings of, and other
          activities related to service on, the Board of Directors or any
          Board Committee.

          STOCK PLANS 

               1996 STOCK OPTION AND PERFORMANCE AWARD PLAN

               The Company has adopted the 1996 Stock Option and
          Performance Award Plan (the "Plan"), which authorizes the grant
          to officers, key employees and directors of the Company and any
          parent or subsidiary of the Company of incentive or non-qualified
          stock options, stock appreciation rights, performance shares,
          restricted shares and performance units.  Under the Plan,
          directors who are not employees of the Company may not be granted
          incentive stock options.  The Company plans to reserve 2,500,000
          shares of Common Stock for issuance pursuant to the Plan.  Shares
          issued pursuant to the Plan are subject to certain transfer
          restrictions.  

               The Plan is administered by the Board of Directors.  The
          Board of Directors determines the prices and  terms at which
          options may be granted.  Options may be exercisable in
          installments over the option period, but no options may be

                                       72

<PAGE>

          exercised after ten years from the date of grant.  Stock
          appreciation rights may be granted in tandem with options or
          separately.

               The exercise price of any incentive stock option granted to
          an eligible employee may not be less than 100% of the fair market
          value of the shares underlying such option on the date of grant,
          unless such employee owns more than 10% of the outstanding Common
          Stock or stock of any subsidiary or parent of the Company, in
          which case the exercise price of any incentive stock option may
          not be less than 110% of such fair market value.  No option may
          be exercisable more than ten years after the date of grant and,
          in the case of an incentive stock option granted to an eligible
          employee owning more than 10% of the outstanding Common Stock or
          stock of any subsidiary or parent of the Company, no more than
          five years from its date of grant.  Incentive stock options are
          not transferable, except upon the death of the optionee.  In
          general, upon termination of employment of an optionee (other
          than due to death or disability), all options granted to such
          person which are not exercisable on the date of such termination
          immediately expire, and any options that are so exercisable will
          expire three months following termination of employment in the
          case of incentive stock options, but not until the date the
          options otherwise would expire in the case of non-qualified stock
          options.  However, all options will be forfeited immediately upon
          an optionee's termination of employment for good cause and upon
          an optionee's voluntary termination of employment without the
          consent of the Board of Directors.

               Upon an optionee's death or termination of employment due to
          disability, all options will become 100% vested and will be
          exercisable (i) in the case of death, by the estate or other
          beneficiary of the optionee at any time prior to the date the
          option otherwise would expire and (ii) in the case of the
          disability of the optionee, by the optionee within one year of
          the date of such termination of employment in the case of
          incentive stock options, or at any time prior to the date the
          option otherwise would expire in the case of non-qualified stock
          options.

               At the time each grant of restricted shares or performance
          shares or units or stock appreciation rights is made, the Board
          of Directors will determine the duration of the performance or
          restriction period, if any, the performance targets, if any, for
          earning performance shares or units, and the times at which
          restrictions placed on restricted shares shall lapse.


                          OPTION GRANTS IN LAST FISCAL YEAR

               Individual Grants
                                     Number of      % of Total
                                    Securities       Options
                                    Underlying      Granted to   Exercise
                                  Options Granted  Employees in    Price
                   Name               (#) (1)      Fiscal Year   ($/share)
                   ----           ---------------  ------------  --------

           John W. Luciani III        50,000          10.53%       8.50

           Dorian Lucian              50,000          10.53%       8.50

           Paul Jawin                 50,000          10.53%       8.50



                                                 Potential Realized
                                                  Value at Assumed
                                                Annual Rates of Stock
                                               Price Appreciation for
                                                     Option Term
                                  Expiration   ---------------------  
                   Name              Date            5%       10%
                   ----           ----------         --       --  

           John W. Luciani III     11/18/08       267,280    677,341

           Dorian Lucian           11/18/08       267,280    677,341

           Paul Jawin              11/18/08       267,280    677,341



          (1)  As of January 31, 1999, options to acquire 475,000 shares
          had been granted under the plan with an exercise price of $8.50
          per share.  20% of such options vest immediately and 20% will
          vest each year thereafter for the next four years. Such options
          expire November 18, 2008.


                                       73

<PAGE>

          AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR
          END OPTION VALUES

                                          Number of Securities
                                          Underlying Exercised
                                       Options at Fiscal Year End

                               Shares Acquired   Value Realized
                  Name         on Exercise (#)        ($)       Exercisable
           ------------------  ---------------   -------------  ----------

          John W. Luciani III         0                0          10,000

          Dorian Luciani              0                0          10,000

          Paul Jawin                  0                0          10,000



                                        Value of Unexercised
                                        In-The-Money Options
                                         at Fiscal Year End


                   Name              Exercisable     Unexercisable
                   ----              -----------     -------------
          John W. Luciani III             0                0

          Dorian Luciani                  0                0

          Paul Jawin                      0                0


          ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT

               The following table sets forth certain information as of
          April 26, 1999 concerning (i) persons known to the Company to be
          the beneficial owners of more than 5% of the Company's Common
          Stock, (ii) the ownership interest of each director and executive
          officer of the Company listed in the compensation table and (iii)
          by all directors and executive officers as a group.  Note: stock
          options are considered presently exercisable if exercisable
          within 60 days of April 26, 1999.

          < TABLE >


                                                 AMOUNT AND NATURE
      NAME AND ADDRESS OF                          OF BENEFICIAL     PERCENT OF
       BENEFICIAL OWNER           STATUS             OWNERSHIP        CLASS(1)
      -------------------         ------         -----------------     -------
     John Luciani         Chairman of the Board
                          and Chief Executive
                          Officer              7,326,970 shares        41.16%

     Bernard M. Rodin     Chief Operating
                          Officer, Chief
                          Financial Officer,
                          President and
                          Director             7,326,970 shares        41.16%
     John W. Luciani III  Executive Vice
                          President and
                          Director              10,000 shares(2)        0.06%

     Dorian Luciani       Senior Vice President 10,000 shares(2)        0.06%

     Paul Jawin           General Counsel and
                          Senior Vice President 10,000 shares(2)        0.06%

     All directors and
     officers as a group                    14,708,940 shares(3)       82.38%

    (1)  Based upon 17,800,000 shares of common stock outstanding on April 26, 
         1999. Percentage ownership is calculated separately for each person or
         group on the basis of the actual number of outstanding shares as of 
         such date, and assumes the exercise of certain stock options held by 
         such person or group (but not by anyone else) exercisable within sixty
         days of April 26, 1999.
    (2)  Includes presently exercisable options to purchase 10,000 shares.
    (3)  Includes presently exercisable options to purchase 55,000 shares.

                                       74

<PAGE>


          ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

               In the first quarter of fiscal 1996, the Principal
          Stockholders reorganized their businesses by consolidating them
          into the Company.  The Principal Stockholders transferred all of
          the issued and outstanding stock of each of 16 Sub-chapter S
          corporations along with various other assets and liabilities to
          the Company in exchange for 3,252,380 shares of the Company's
          Common Stock.  A partnership in which the Principal Stockholders
          are the sole partners transferred to the Company substantially
          all of its assets, subject to substantially all of its
          liabilities, in exchange for 1,626,190 shares of the Company's
          Common Stock.  The partnership distributed the shares received to
          the Principal Stockholders.  Six Sub-chapter S corporations which
          were wholly-owned by the Principal Stockholders were merged into
          the Company.  Pursuant to the mergers the shares of the six
          merged companies were converted into an aggregate of 10,121,430
          shares of the Company's 

          Common Stock.  After the reorganization was complete, the
          Principal Stockholders owned an aggregate of 15,000,000  shares
          of the Company's Common Stock.

               Prior to the reorganization discussed above, the business of
          the Principal Stockholders was conducted through a partnership
          and various Sub-chapter S corporations.  These entities and the
          Company paid distributions and other distributions to each of the
          Principal Stockholders of $850,000 and $397,000 in Fiscal 1995
          and 1996, respectively, exclusive of amounts reflected as
          officers' compensation.

               Messrs. Luciani and Rodin, the Chairman of the Board and
          President of the Company, respectively, and entities controlled
          by them serve as general partners (with interests ranging between
          1% and 2%) of partnerships directly and indirectly owning Multi-
          Family Properties and on account of such general partner status
          have personal liability for recourse partnership obligations and
          own small equity ownership interests in the partnerships.  The
          Company holds (i) notes, aggregating $100.8 million, net of
          deferred income, as of January 31, 1999, that are secured by the
          limited partnership interests in such partnerships and (ii) other
          partnership receivables aggregating $59.9 million from such
          partnerships at January 31, 1999.  Messrs. Luciani and Rodin have
          provided personal guarantees for certain of the Company's
          Investor Note Debt and Unsecured Debt, and the obligations
          thereunder may continue.  The aggregate amount of such debt
          personally guaranteed by each of Messrs. Luciani and Rodin is
          approximately $32.5 million.  In addition, Messrs. Luciani and
          Rodin and certain employees will devote a limited portion of
          their time to overseeing the third-party managers of Multi-Family
          Properties and one senior living community in which the Company
          has financial interests in that it holds the related Purchase
          Notes, but in which Messrs. Luciani and Rodin have equity
          interests and the Company does not.

               Subsequent to the reorganization, the Principal Stockholders
          and one of their affiliates transferred the Assigned Interests to
          the Investing Partnerships that own interests in the Protected
          Partnerships.  The Assigned Interests were owned personally by
          the Principal Stockholders and their affiliate and provided
          additional assets at the Investing Partnership level and, as a
          result, additional security for the related Multi-Family Notes. 
          Two Investing Partnerships related to these Protected
          Partnerships transferred the respective Assigned Interests back
          to the Principal Stockholders and their affiliate after these
          Protected Partnerships successfully emerged from their bankruptcy
          proceedings. In that the Principal Stockholders transferred the
          Assigned Interests in July 1996, the Company recorded a $21.3
          million capital contribution in Fiscal 1996.  The bankruptcy
          petitions and risk of loss faced by the Protected Partnerships
          resulted in the Company recording a non-cash loss for Fiscal 1996
          in the amount of $18.4 million (representing the recorded value
          of these Multi-Family Notes, net of deferred income and net of
          any previously established reserves) due to the deemed full
          impairment of the Multi-Family Notes.  The transfer of the
          Assigned Interest back to the Principal Stockholders caused the
          Company to recognize non-cash other income of $3.1 million and to
          record a non-cash dividend to the Principal Stockholders for the
          release of the previously assigned interest of $3.1 million in
          Fiscal 1997.  Each of the Principal Stockholders was a general
          partner of three of the Protected Partnerships, but withdrew as a
          general partner prior to such partnerships' filings of the
          respective Chapter 11 Petitions.


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<PAGE>

               During Fiscal 1997 and 1998 the Company paid to Francine
          Rodin, the wife  of Bernard M. Rodin, the Company's Chief
          Operating Officer, Chief Financial Officer, President and a
          Director, $132,885 and $153,008, respectively, as fees for
          introducing to the Company broker/dealers that have assisted the
          Company in its Syndications of partnership interests and in
          placing other securities offered by the Company.  Mrs. Rodin will
          receive a fee with respect to any future sales through such
          broker/dealers of such Syndicated partnership interests and other
          securities offered by the Company.  During Fiscal 1996, Mrs.
          Rodin received consulting fees of $49,435 in connection with
          coordinating the Company's marketing efforts and travel
          arrangements.  Mrs. Rodin has been an employee of the Company for
          the entire fiscal years ended January 31, 1998 and 1999 and
          performs similar services.

               Walter Feldesman, a Director of the Company, is Of Counsel
          to the law firm of Baer Marks & Upham LLP, which acts as counsel
          to the Company from time to time. In addition, Mr. Feldesman is a
          director of Sterling National Bank & Trust Co. which has entered
          into a revolving credit agreement with the Company which permits
          the Company to borrow up to $8,000,000, of which $3,199,002 was
          outstanding at January 31, 1999

               Michele R. Jawin, the daughter of Mr. Rodin and wife of Paul
          Jawin, the Company's General Counsel and a Senior Vice President,
          is Of Counsel to Thelen Reid & Priest LLP, which acts as
          securities counsel to the Company.

          PART IV

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

          (a)  Please refer to Item 8, "Financial Statements and
               Supplementary Data" for a complete listing of all
               consolidated financial statements and financial statement
               schedules.

           (b)  Exhibits: Reference is made to the Exhibit Index commencing
               on page 77.


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<PAGE>


                                      SIGNATURES

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

                                             GRAND COURT LIFESTYLES, INC.

                                             /s/ Bernard M. Rodin
                                             --------------------
                                             Bernard M. Rodin
                                             Chief Financial Officer and
                                               Vice President

          Dated:    May 3, 1999
                

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

                  Signature                     Title               Date
            ----------------------       --------------------      ------

          /s/ John Luciani             Chairman of the Board       May 3, 1999
          ----------------             of Directors and 
          John Luciani                 Chief Executive Officer
                                       (Principal Executive 
                                       Officer)

          /s/ Bernard M. Rodin         President, Chief            May 3, 1999
          --------------------         Operating Officer,
          Bernard M. Rodin             Chief Financial Officer
                                       and Director (Principal
                                       Financial and
                                       Accounting Officer)

          /s/ John W. Luciani, III     Executive Vice              May 3, 1999
          ------------------------     President and Director
          John W. Luciani, III

          /s/ Walter Feldesman         Director                    May 3, 1999
          --------------------
          Walter Feldesman

          /s/ Leslie E. Goodman        Director                    May 3, 1999
          ---------------------
          Leslie E. Goodman

          /s/ Sidney Dworkin           Director                    May 3, 1999
          ------------------
          Sidney Dworkin


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<PAGE>


                                    EXHIBIT INDEX


           *2.1     --   Consolidation Agreement dated as of April 1, 1996
                         among John Luciani, Bernard M. Rodin, J&B
                         Management Company and the Company.
           *2.1(a)  --   First Amendment dated as of April 1, 1996 to
                         Consolidation Agreement dated as of April 1, 1996
                         among John Luciani, Bernard M. Rodin, J&B
                         Management Company and the Company.
           *2.1(b)  --   Second Amendment dated as of April 1, 1996 to
                         Consolidation Agreement dated as of April 1, 1996
                         among John Luciani, Bernard M. Rodin, J&B
                         Management Company and the Company.
           *2.1(c)  --   Third Amendment dated as of April 1, 1996 to
                         Consolidation Agreement dated as of April 1, 1996
                         among John Luciani, Bernard M. Rodin, J&B
                         Management Company and the Company.
           *2.1(d)  --   Fourth Amendment dated as of April 1, 1996 to
                         Consolidation Agreement dated as of April 1, 1996
                         among John Luciani, Bernard M. Rodin, J&B
                         Management Company and the Company.
           *2.1(e)  --   Fifth Amendment dated as of April 1, 1996 to
                         Consolidation Agreement dated as of April 1, 1996
                         among John Luciani, Bernard M. Rodin, J&B
                         Management Company and the Company.
           *2.1(f)  --   Sixth Amendment dated as of April 1, 1996 to
                         Consolidation Agreement dated as of April 1, 1996
                         among John Luciani, Bernard M. Rodin, J&B
                         Management Company and the Company.
           *2.2(a)  --   Merger Agreement dated as of April 1, 1996 between
                         Leisure Centers, Inc. and the Company.
           *2.2(b)  --   Merger Agreement dated as of April 1, 1996 between
                         Leisure Centers Development, Inc. and the Company.
           *2.2(c)  --   Merger Agreement dated as of April 1, 1996 between
                         J&B Management Corp. and the Company.
           *2.2(d)  --   Merger Agreement dated as of April 1, 1996 between
                         Wilmart Development Corp. and the Company.
           *2.2(e)  --   Merger Agreement dated as of April 1, 1996 between
                         Sulgrave Realty Corporation and the Company.
           *2.2(f)  --   Merger Agreement dated as of April 1, 1996 between
                         Riv Development Inc. and the Company.
           *3.1     --   Restated Certificate of Incorporation of the
                         Company.
           *3.2     --   By-Laws of the Company.
            4.0     --   Indenture, dated October 1, 1998, between the
                         Company and The Bank of New York (the
                         "Indenture").
            4.1     --   Officer's Certificate, dated as of December 24,
                         1998, under Section 301 of the Indenture, with
                         form Note attached.
            4.2     --   Supplemental Officer's Certificate, dated March
                         12, 1999, under the Indenture.
         +*10.1     --   1996 Stock Option and Performance Award Plan.
          *10.2(a)  --   Loan Agreements dated as of November 25, 1996, by
                         and between Leisure Centers LLC-1 and Bank United
                         relating to financing of the Corpus Christi, Texas
                         property.
          *10.2(b)  --   Guaranty Agreement, dated as of November 25, 1996,
                         between the Company and Bank United relating to
                         financing of the Corpus Christi, Texas property.
          *10.2(c)  --   Loan Agreement, dated as of January 29, 1997, by
                         and between Leisure Centers LLC-1 and Bank United
                         relating to financing of the Temple, Texas
                         property.
          *10.2(d)  --   Guaranty Agreement, dated as of January 29, 1997,
                         between the Company and Bank United relating to
                         the financing of the Temple, Texas property.

                                       78

<PAGE>


          *10.3     --   Master Development Agreement dated September 18,
                         1996 between Capstone Capital Corp. and the
                         Company.
          *10.4(a)  --   Form of 12% Debenture due June 16, 2000 - Series
          1.
          *10.4(b)  --   Form of 12% Debenture due April 15, 1999 - Series
                         2.
          *10.4(c)  --   Form of 11% Debenture due December 31, 1996 -
                         Series 3.
          *10.4(d)  --   Form of 11.5% Debenture due April 15, 2000 -
                         Series 4.
          *10.4(e)  --   Form of 12% Debenture due January 15, 2003 -
                         Series 5.
          *10.4(f)  --   Form of 12% Debenture due April 15, 2003 - Series
                         6.
          *10.4(g)  --   Form of 11% Debenture due January 15, 2002 -
                         Series 7.
          *10.4(h)  --   Form of 11% Debenture due January 15, 2002 -
                         Series 8.
          *10.4(i)  --   Form of 12% Debenture due September 15, 2001 -
                         Series 9.
          *10.4(j)  --   Form of 12% Debenture due January 15, 2004 -
                         Series 10.
          *10.4(k)  --   Form of 12% Debenture due June 30, 2004 - Series
                         11.
          *10.5(a)  --   Bank Agreement dated August 14, 1990 between The
                         Bank of New York and the Company with respect to
                         12% Debentures, Series 1.
          *10.5(b)  --   First Amendment dated as of August 21, 1992 to
                         Bank Agreement dated August 14, 1990 between The
                         Bank of New York and the Company with respect to
                         12% Debentures, Series 1.
           10.5(c)  --   Amendment No. 2, dated as of April 15, 1997, to
                         Bank Agreement dated August 14, 1990 between The
                         Bank of New York and the Company with respect to
                         12% Debentures, Series 1.
           10.5(d)  --   Amendment No. 3, dated as of June 26, 1998, to 
                         Bank Agreement dated August 14, 1990 between The
                         Bank of New York and the Company with respect to 
                         12% Debentures, Series 1.
          *10.5(e)  --   Bank Agreement dated October 11, 1991 between The
                         Bank of New York and the Company with respect to
                         12% Debentures, Series 2.
           10.5(f)  --   Amendment No. 1, dated as of December, 1996, to
                         Bank Agreement dated as of October 11, 1991
                         between The Bank of New York and the Company with
                         respect to 12% Debentures, Series 2.
           10.5(g)  --   Amendment No. 2, dated as of June 26, 1998, to
                         Bank Agreement dated as of October 11, 1991
                         between The Bank of New York and the Company with
                         respect to 12% Debentures, Series 2.
          *10.5(h)  --   Bank Agreement dated October 17, 1991 between The
                         Bank of New York and the Company with respect to
                         11% Debentures, Series 3.
           10.5(i)  --   Amendment No. 1, dated as of December, 1996, to
                         Bank Agreement dated as of October 17, 1991
                         between The Bank of New York and the Company with
                         respect to 11% Debentures, Series 3.
           10.5(j)  --   Amendment No. 2, dated as of June 26, 1998, to
                         Bank Agreement dated as of October 17, 1991
                         between The Bank of New York and the Company with
                         respect to 11% Debentures, Series 3.
          *10.5(k)  --   Bank Agreement dated April 1, 1992 between The
                         Bank of New York and the Company with respect to
                         11.5% Debentures, Series 4.
           10.5(l)  --   Amendment No. 1, dated as of April 15, 1997, to
                         Bank Agreement dated as of April 1, 1992 between
                         The Bank of New York and the Company with respect
                         to 11.5% Debentures, Series 4.
           10.5(m)  --   Amendment No. 2, dated as of June 26, 1998, to
                         Bank Agreement dated as of April 1, 1992 between
                         The Bank of New York and the Company with respect
                         to 11.5% Debentures, Series 4.
          *10.5(n)  --   Bank Agreement dated October 30, 1992 between The
                         Bank of New York and the Company with respect to
                         12% Debentures, Series 5.

                                      79

<PAGE>

           10.5(o)  --   Amendment No. 1, dated as of April 15, 1997, to
                         Bank Agreement dated as of October 30, 1992
                         between The Bank of New York and the Company with
                         respect to 12% Debentures, Series 5.
           10.5(p)  --   Amendment No. 2, dated as of June 26, 1998, to
                         Bank Agreement dated as of October 30, 1992
                         between The Bank of New York and the Company with
                         respect to 12% Debentures, Series 5.
          *10.5(q)  --   Bank Agreement dated May 24, 1993 between The Bank
                         of New York and the Company with respect to 12%
                         Debentures, Series 6.
           10.5(r)  --   Amendment No. 1, dated as of December, 1996, to
                         Bank Agreement dated as of May 24, 1993 between
                         The Bank of New York and the Company with respect
                         to 12% Debentures, Series 6.
           10.5(s)  --   Amendment No. 2, dated as of June 26, 1998, to
                         Bank Agreement dated as of May 24, 1993 between
                         The Bank of New York and the Company with respect
                         to 12% Debentures, Series 6.
          *10.5(t)  --   Bank Agreement dated October 27, 1993 between The
                         Bank of New York and the Company with respect to
                         11% Debentures, Series 7.
          *10.5(u)  --   First Amendment dated November 29, 1993 to Bank
                         Agreement dated October 27, 1993 between The Bank
                         of New York and the Company with respect to 11%
                         Debentures, Series 7.
           10.5(v)  --   Amendment No. 2, dated as of April 15, 1997, to
                         Bank Agreement dated as of October 27, 1993
                         between The Bank of New York and the Company with
                         respect to 11% Debentures, Series 7.
           10.5(w)  --   Amendment No. 3, dated as of June 26, 1998,to Bank
                         Agreement dated as of October 27, 1993 between The
                         Bank of New York and the Company with respect to
                         11% Debentures, Series 7.
          *10.5(x)  --   Bank Agreement dated November 29, 1993 between The
                         Bank of New York and the Company with respect to
                         11% Debentures, Series 8.
           10.5(y)  --   Amendment No. 1, dated as of April 15, 1997, to
                         Bank Agreement dated as of November 29, 1993
                         between The Bank of New York and the Company with
                         respect to 11% Debentures, Series 8.
           10.5(z)  --   Amendment No. 2, dated as of June 26, 1998, to
                         Bank Agreement dated as of November 29, 1993
                         between The Bank of New York and the Company with
                         respect to 11% Debentures, Series 8.
          *10.5(aa) --   Bank Agreement dated September 12, 1994 between
                         The Bank of New York and the Company with respect
                         to 12% Debentures, Series 9.
           10.5(bb) --   Amendment No. 1, dated as of April 15, 1997, to
                         Bank Agreement dated as of September 12, 1994
                         between The Bank of New York and the Company with
                         respect to 12% Debentures, Series 9.
           10.5(cc) --   Amendment No. 2, dated as of June 26, 1998, to
                         Bank Agreement dated as of September 12, 1994
                         between The Bank of New York and the Company with
                         respect to 12% Debentures, Series 9.
          *10.5(dd) --   Bank Agreement dated July 12, 1995 between The
                         Bank of New York and the Company with respect to
                         12% Debentures, Series 10.
           10.5(ee) --   Amendment No. 1, dated as of June 26, 1998, to
                         Bank Agreement dated as of July 12, 1995 between
                         The Bank of New York and the Company with respect
                         to 12% Debentures, Series 10.
          *10.5(ff) --   Bank Agreement dated July 25, 1997 between the
                         Bank of New York and the Company with respect to
                         12% Debentures, Series 11.
           10.5(gg) --   Amendment No. 1, dated as of June 26, 1998, to
                         Bank Agreement dated as of July 25, 1997 between
                         The Bank of New York and the Company with respect
                         to 12% Debentures, Series 11.
          *10.6(a)  --   Form of Short-term Step-up Bond due March 15, 2001
                         - Series 1.

                                       80

<PAGE>

          *10.6(b)  --   Form of 12.375% Bond due April 15, 2003 - Series
                         2.
          *10.7(a)  --   Bank Agreement between The Bank of New York and
                         the Company with respect to Short-term Step-up
                         Bonds - Series 1.
          *10.7(b)  --   Bank Agreement between The Bank of New York and
                         the Company with respect to 12.375% Bonds -Series
                         2.
          *10.8     --   Revolving Credit Agreement dated as of May 7, 1985
                         between Sterling National Bank & Trust Company and
                         the Company.
          *10.9     --   Assumption Agreement dated as of September 10,
                         1996 among Sterling National Bank & Trust, the
                         Company, Bernard M. Rodin and John Luciani.
          *10.9(a)  --   First Amendment to Assumption Agreement dated as
                         of September 10, 1996 among Sterling National Bank
                         & Trust, the Company, Bernard M. Rodin and John
                         Luciani.
          *10.9(b)  --   Second Amendment to Assumption Agreement among
                         Sterling National Bank, formerly known as Sterling
                         National Bank & Trust Company, the Company,
                         Bernard M. Rodin and John Luciani
          *10.10(a) --   Form of 13.125% Retirement Financing Notes - III,
                         due October 31, 2001.
          *10.10(b) --   Form of 13.125% Retirement Financing Notes - IV,
                         due March 31, 2002.
          *10.10(c) --   Form of 13.125% Retirement Financing Notes - V,
                         due June 30, 2003.
          *10.10(d) --   Form of 13.125% Retirement Financing Notes - VI,
                         due April 15, 2001.
          *10.10(e) --   Form of 13.125% Retirement Financing Notes - VII,
                         due October 15, 2002.
          *10.11(a) --   Bank Agreement dated as of September 6, 1996
                         between the Bank of New York and the Company with
                         respect to 13.125% Retirement Financing Notes -
                         III.
          *10.11(b) --   Bank Agreement dated as of October 22, 1996
                         between the Bank of New York and the Company with
                         respect to 13.125% Retirement Financing Notes -
                         IV.
          *10.11(c) --   Bank Agreement dated as of May 14, 1997 between
                         the Bank of New York and the Company with respect
                         to 13.125% Retirement Financing Notes - V.
          *10.11(d) --   Bank Agreement dated as of November 6, 1997
                         between the Bank of New York and the Company with
                         respect to 13.125% Retirement Financing Notes -
                         VI.
          *10.11(e) --   Bank Agreement dated as of November 20, 1997
                         between Bank of New York and the Company with
                         respect to 13.125% Retirement Financing Notes -
                         VII.
          *10.12    --   Warrant Agreement
           10.13    --   Form of Amended and Restated Regulations and
                         Operating Agreement.
           21       --   List of Subsidiaries of the Company.
           27.1     --   Financial Data Schedule for the period ended
                         January 31, 1999.
          ----------------
            * Previously filed in Registration Statement No. 333-05955.
          (+) Management contracts or compensatory plans or arrangements
              required to be filed as exhibits to this Form 10-K by item
              601(b)(10)(iii) of Regulation S-K.


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