<PAGE>1
         =================================================================
                          SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C.  20549

                                      Form 10-Q

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

                     For the quarterly period ended June 30, 1999

                                          OR

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

               For the transition period from __________ to __________

                            Commission File Number 1-12486

                        Associated Estates Realty Corporation
                (Exact name of registrant as specified in its charter)


                             Ohio                         34-1747603
                (State or other jurisdiction of        (I.R.S. Employer
                incorporation or organization)          Identification
                                                            Number)


           5025 Swetland Court, Richmond Hts., Ohio       44143-1467
           (Address of principal executive offices)       (Zip Code)


          Registrant's telephone number, including area code (216) 261-5000



             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 [   ]

                 Number of shares outstanding as of August 12, 1999:
                                  21,540,375 shares
==========================================================================

<PAGE>2

                        ASSOCIATED ESTATES REALTY CORPORATION


                                        INDEX
<TABLE>
<CAPTION>

         PART I  -  FINANCIAL INFORMATION                             Page
                                                                      ----

          <S>                                                          <C>
          ITEM 1   Condensed Financial Statements


                   Consolidated Balance Sheets as of
                      June 30, 1999 and December 31, 1998                3



                   Consolidated Statements of Income for the three and
                      six month periods ended June 30, 1999 and 1998     4


                   Consolidated Statements of Cash Flows for the six
                      month periods ended June 30, 1999 and 1998         5



                   Notes to Financial Statements                         6


          ITEM 2   Management's Discussion and Analysis of Financial
                      Condition and Results of Operations               21


          PART II  -  OTHER INFORMATION

          ITEM 4   Submission of Matters to a Vote of Security-Holders  42
          ITEM 6   Exhibits and Reports on Form 8-K                     43


          SIGNATURES                                                    46

</TABLE>

<PAGE>3
                        ASSOCIATED ESTATES REALTY CORPORATION

                             CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>


                                                                   June 30,     December 31,
                                                                     1999           1998
                              ASSETS                             (Unaudited)
                                                               -------------   ------------
   <S>                                                          <C>            <C>
   Real estate assets:
    Land                                                        $ 91,380,383   $ 92,675,356
    Buildings and improvements                                   782,516,008    778,450,807
    Furniture and fixtures                                        32,553,819     30,804,870
                                                                 -----------    -----------
                                                                 906,450,210    901,931,033
      Less:  accumulated depreciation                           (166,627,445)  (153,941,702)
                                                                 -----------    -----------
                                                                 739,822,765    747,989,331
      Construction in progress                                    51,290,146     53,740,292
                                                                 -----------    -----------
         Real estate, net                                        791,112,911    801,729,623
         Property held for sale, net                              15,837,111              -
   Cash and cash equivalents                                      25,575,954      1,034,655
   Restricted cash                                                22,629,401      6,718,863
   Accounts and notes receivable
    Rents                                                          3,345,010      2,801,835
    Affiliates and joint ventures                                  9,006,902     13,113,400
    Other                                                          2,630,631      2,293,007
   Intangible and other assets, net                               16,275,332     13,093,972
                                                                ------------   ------------
                                                                $886,413,252   $840,785,355
                                                                ============   ============
               LIABILITIES AND SHAREHOLDERS' EQUITY
   Secured debt                                                 $369,227,076   $ 80,042,667
   Unsecured debt                                                197,447,703    423,862,468
                                                                 -----------    -----------
      Total indebtedness                                         566,674,779    503,905,135
   Accounts payable and accrued expenses                          23,367,410     21,525,517
   Dividends payable                                               8,073,422     10,507,586
   Resident security deposits                                      5,802,961      5,960,971
   Funds held on behalf of managed properties
    Affiliates and joint ventures                                  2,938,578      5,353,394
    Other                                                          2,277,030      4,128,298
   Accrued interest                                                5,554,491      5,501,634
   Accumulated losses and distributions of joint ventures
    in excess of investment and advances                          12,409,549     12,679,793
                                                                 -----------    -----------
      Total liabilities                                          627,098,220    569,562,328

   Operating partnership minority interest                        11,988,535     12,034,880

   Commitments and contingencies                                           -              -
   Shareholders' equity
    Preferred shares, Class A cumulative, without par value;
      3,000,000 authorized; 225,000 issued and outstanding        56,250,000     56,250,000
    Common shares, without par value, $.10 stated value;
      50,000,000 authorized; 22,641,726 and 22,621,958 issued
      and outstanding at June 30, 1999 and December 31, 1998,
      respectively                                                 2,264,172      2,262,195
    Paid-in capital                                              277,134,892    277,134,988
    Accumulated dividends in excess of net income                (77,740,200)   (75,991,638)
    Accumulated other comprehensive income                              (875)          (875)
    Less: Treasury shares, at cost, 922,600 and 25,000 shares
      at June 30, 1999 and December 31, 1998, respectively       (10,581,492)      (466,523)
                                                                 -----------    -----------
      Total shareholders' equity                                 247,326,497    259,188,147
                                                                ------------    -----------
                                                                $886,413,252   $840,785,355
                                                                ============   ============
</TABLE>
                     The accompanying notes are an integral part
                            of these financial statements

<PAGE>4
                         ASSOCIATED ESTATES REALTY CORPORATION
                           CONSOLIDATED STATEMENTS OF INCOME
                                      (UNAUDITED)
<TABLE>
<CAPTION>
                                                     For the three months ended For the six months ended
                                                              June 30,                  June 30,
                                                         1999         1998          1999          1998
                                                     ----------- -------------- -----------   -----------
   <S>                                               <C>         <C>             <C>           <C>
   Revenues
     Rental                                          $36,100,421  $ 30,886,103  $71,491,076   $59,990,715
     Property management fees                          1,329,357       881,208    2,625,095     1,830,046
     Asset management fees                               588,292             -    1,174,127             -
     Asset acquisition fees                              121,680             -      121,680             -
     Asset disposition fees                                5,042             -        5,042             -
     Painting services                                   449,062       372,429      736,105       720,984
     Other                                               720,136       706,497    1,226,916     1,013,295
                                                      ----------    ----------   ----------    ----------
                                                      39,313,990    32,846,237   77,380,041    63,555,040
   Expenses and charges
     Property operating and maintenance               16,457,654    12,918,625   31,965,731    25,218,738
     Depreciation and amortization                     8,328,860     5,707,884   16,604,908    11,022,479
     Painting services                                   407,874       394,002      715,275       731,941
     General and administrative                        4,767,213     1,799,001    8,562,232     3,634,966
     Charge for funds advanced to non-owned property     150,000             -      150,000             -
     Interest expense                                  9,105,415     7,112,892   17,356,147    13,544,559
                                                      ----------    ----------   ----------    ----------
      Total expenses and charges                      39,217,016    27,932,404   75,354,293    54,152,683
   Income before gain on sale of properties, equity
    in net income of joint ventures, minority
    interest, extraordinary item and cumulative
    effect of a change in accounting principle            96,974     4,913,833    2,025,748     9,402,357
     Gain on sale of properties                       12,830,328             -   12,830,328             -
     Equity in net income of joint ventures              264,106       170,665      237,370       206,887
     Minority interest in operating partnership           32,362             -       64,521             -
                                                      ----------     ---------    ---------      --------
     Income before extraordinary item and cumulative
      effect of a change in accounting principle      13,159,046     5,084,498   15,028,925     9,609,244
     Extraordinary item-extinguishment of debt        (1,808,742)     (124,895)  (1,808,742)     (124,895)
     Cumulative effect of a change in accounting
       principle                                               -             -    4,319,162             -
                                                     -----------  ------------  -----------   -----------
   Net income                                        $11,350,304  $  4,959,603  $17,539,345   $ 9,484,349
                                                     ===========  ============  ===========   ===========
   Net income applicable to common shares            $ 9,979,199  $  3,588,498  $14,797,135   $ 6,742,139
                                                     ===========  ============  ===========   ===========
   Earnings per common share - basic:
     Income before extraordinary item and cumulative
      effect of a change in accounting principle     $       .53  $        .22  $       .54   $       .40
                                                     ===========  ============  ===========   ===========
     Extraordinary item                              $      (.08) $       (.01) $      (.08)  $      (.01)
                                                     ===========  ============  ===========   ===========
     Cumulative effect of a change in accounting
       principle                                     $         -  $          -  $       .19   $         -
                                                     ===========  ============  ===========   ===========
     Net income                                      $       .45  $        .21  $       .65   $       .39
                                                     ===========  ============  ===========   ===========
   Earnings per common share - diluted:

     Income before extraordinary item and cumulative
      effect of a  change in accounting principle    $       .53  $        .22  $       .54   $       .40
                                                     ===========  ============  ===========   ===========
     Extraordinary item                              $      (.08) $       (.01) $      (.08)  $      (.01)
                                                     ===========  ============  ===========   ===========
     Cumulative effect of a change in accounting
       principle                                     $         -  $          -  $       .19   $         -
                                                     ===========  ============  ===========   ===========
     Net income                                      $       .45  $        .21  $       .65   $       .39
                                                     ===========  ============  ===========   ===========
   Pro forma amounts assuming the new
     capitalization policy is applied retroactively:
     Net income                                      $11,350,304  $  5,148,603  $13,220,183   $ 9,807,651
                                                     ===========  ============  ===========   ===========
     Net income applicable to common shares          $ 9,979,199  $  3,777,498  $10,477,973   $ 7,065,441
                                                     ===========  ============  ===========   ===========
       Earnings per common share - basic:
        Net income applicable to common shares       $       .45  $        .22  $       .47   $       .41
                                                     ===========  ============  ===========   ===========
       Earnings per common share - diluted:
         Net income applicable to common shares      $       .45  $        .22  $       .47   $       .41
                                                     ===========  ============  ===========   ===========
   Dividends paid per common share                   $      .375  $        .465 $       .75   $       .93
                                                     ===========  ============  ===========   ===========
   Weighted average number of common
    shares outstanding   - Basic                      22,359,480     17,133,185  22,516,237    17,102,729
                                                      ===========  ============  ===========   ===========
                         - Diluted                    22,359,480     17,133,185  22,519,253    17,102,729
                                                      ===========  ============  ===========   ===========
</TABLE>
                      The accompanying notes are an integral part
                             of these financial statements
<PAGE>5

                        ASSOCIATED ESTATES REALTY CORPORATION
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                       FOR THE SIX MONTH PERIOD ENDED JUNE 30,
                                     (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                1999            1998
                                                                           -------------  -------------
   <S>                                                                     <C>            <C>
   Cash flow from operating activities:
    Net income                                                             $  17,539,345   $  9,484,349
    Adjustments to reconcile net income to net cash provided by operating
     activities:
      Depreciation and amortization                                           16,604,908     11,022,479
      Cumulative effect of a change in accounting principle                   (4,319,162)             -
      Minority interest in operating partnership                                  64,521              -
      Loss on extinguishment of debt                                           1,808,742        124,895
      Gain on sale of operating properties                                   (12,830,328)             -
      Equity in net income of joint ventures                                    (237,370)      (206,886)
      Earnings distributed from joint ventures                                   417,696        298,607
      Net change in assets and liabilities
      (net of effect of the MIGRA merger for
       1998 amounts)   - Accounts and notes receivable                          (880,799)      (276,420)
                       - Accounts and notes receivable of affiliates and
                          joint ventures                                       4,106,498      2,452,693
                       - Accounts payable and accrued expenses                 5,116,575     (4,372,186)
                       - Other operating assets and liabilities                 (319,281)      (365,808)
                       - Restricted cash                                      (2,553,261)     1,783,404
                       - Funds held for non-owned managed properties          (1,851,268)     3,129,887
                       -  Funds held for non-owned managed properties
                          of affiliates and joint ventures                    (2,414,816)       257,454
                                                                              ----------     ----------
         Total adjustments                                                     2,712,655     13,848,119
                                                                              ----------     ----------
      Net cash flow provided by operations                                    20,252,000     23,332,468

   Cash flow from investing activities:
    Real estate acquired or developed (net of liabilities assumed)           (20,575,616)  (104,110,880)
    Fixed asset additions                                                       (376,692)      (739,418)
    Net proceeds received from sale of operating properties                   13,357,277              -
    Net proceeds received from sale of operating properties held in escrow   (13,357,277)             -
    Distributions from joint ventures                                             75,197        145,131
                                                                             -----------   ------------
      Net cash flow used for investing activities                            (20,877,111)  (104,705,167)


   Cash flow from financing activities:
    Principal payments on secured debt                                          (725,591)    (8,658,305)
    Proceeds from secured debt                                               289,910,000              -
    Proceeds from senior and medium-term notes                                         -     20,000,000
    Term loan borrowings                                                               -     45,000,000
    Line of Credit borrowings                                                310,200,000    313,000,000
    Line of Credit repayments                                               (536,646,565)  (268,000,000)
    Deferred financing costs                                                  (5,734,394)    (1,796,625)
    Common share dividends paid                                              (18,979,858)   (15,878,833)
    Preferred share dividends paid                                            (2,742,213)    (2,742,210)
    Purchase of treasury shares                                              (10,114,969)             -
                                                                              ----------     ----------
      Net cash flow provided by financing activities                          25,166,410     80,924,027
                                                                              ----------     ----------
      Increase (decrease) in cash and cash equivalents                        24,541,299       (448,672)
   Cash and cash equivalents, beginning of period                              1,034,655      2,251,819
                                                                           -------------   ------------
   Cash and cash equivalents, end of period                                $  25,575,954   $  1,803,147
                                                                           =============   ============
   Supplemental disclosure of cash flow information:
    Issuance of common shares in connection with the acquisition of MIG
      REIT properties and the MIGRA merger                                 $           -   $105,782,635
    Issuance of operating partnership units in connection with the
      acquisition of the development property                                          -     10,863,204
    Assumption of liabilities in connection with the acquisition of                    -     15,013,771
      properties
    Assumption of mortgage debt in connection with the acquisition of
      properties                                                                       -      5,342,371
    Dividends declared but not paid                                            8,073,422     10,513,686
    Cash paid for interest (including capitalized interest)                   18,258,876     13,659,390
</TABLE>


                         The accompanying notes are an integral part
                                of these financial statements

<PAGE>6

                        ASSOCIATED ESTATES REALTY CORPORATION
                            NOTES TO FINANCIAL STATEMENTS
                                      UNAUDITED

          1.   BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

          Business

               Associated Estates Realty Corporation (the "Company") is a
          self-administered and self-managed real estate investment trust
          ("REIT") which specializes in the acquisition, development,
          ownership and management of multifamily properties.  In
          connection with the merger of MIG Realty Advisors, Inc. ( MIGRA )
          on June 30, 1998, the Company also acquired the property and
          advisory management businesses of several of MIGRA's affiliates
          and the right to receive certain asset management fees, including
          disposition and incentive fees, that would have otherwise been
          received by MIGRA upon the sale of certain of the properties
          owned by institutions advised by MIGRA.  MIG II Realty Advisors,
          Inc. ("MIG"), MIGRA's successor, is a registered investment
          advisor and also functions as a mortgage banker and as a real
          estate advisor to pension funds.  MIG recognizes revenue
          primarily from its clients' real estate acquisitions and
          dispositions, loan origination and consultation, debt servicing,
          asset and property management and construction lending
          activities.  MIG earns the majority of its debt servicing fee
          revenue from two of its pension fund clients.  MIG's asset
          management, property management, investment advisory and mortgage
          servicing operations, including those of the prior MIG
          affiliates, are collectively referred to herein as the "MIGRA
          Operations".

               At June 30, 1999, the Company owned directly or indirectly,
          or was a joint venture partner in 97 multifamily properties
          containing 21,068 units.  Of these properties, 71 were located in
          Ohio, 11 in Michigan, two in Florida, two in Georgia, three in
          Maryland, one in North Carolina, one in Texas, one in Arizona,
          three in Indiana, one in California and one in Pennsylvania.
          Additionally, the Company managed 54 non-owned properties, 48 of
          which were multifamily properties consisting of 11,555 units (17
          of which are owned by various institutional investors consisting
          of 5,991 units) and six of which were commercial properties
          containing an aggregate of approximately 621,000 square feet of
          gross leasable area.  Through affiliates, collectively referred
          to as the "Service Companies", the Company provides property and
          asset management, investment advisory, painting and computer
          services as well as mortgage origination and servicing to both
          owned and non-owned properties.

          Principles of Consolidation

               The accompanying consolidated financial statements include
          the accounts of the Company, all  subsidiaries, the Service
          Companies and the operating partnership.  In connection with the
          project specific, nonrecourse mortgage refinancing as described
          in Note 5, separate legal entities, which are qualified REIT
          subsidiaries of the Company, were formed which are included in
          the Company's consolidated financial statements.  These qualified
          REIT subsidiaries are separate legal entities and maintain
          separate records, books of account and bank accounts separate and
          apart from any other person or entity.  The Company holds
          preferred share interests in the Service Companies, which
          entitles it to receive 95% of the economic benefits from
          operations and which is convertible into a majority interest in
          the voting common shares.  The outstanding voting common shares
          of these Service Companies are held by an executive officer of
          the Company.  The Service Companies are consolidated because,
          from a financial reporting perspective, the Company is entitled
          to virtually all economic benefits and has operating control.
          The preferred share interests are not an impermissible investment
          for purposes of the Company's REIT qualification test.

               The Company entered into an operating partnership structured
          as a DownREIT of which an aggregate 20% is owned by limited
          partners.  Interests held by limited partners in real estate
          partnerships controlled by the Company are reflected as
          "Operating partnership minority interest" in the Consolidated
          Balance Sheets.  Capital contributions, distributions and profits
          and losses are allocated to minority interests in accordance with
          the terms of the operating partnership agreement.  In conjunction
          with the acquisition of the operating partnership, the Company
          issued a total of 522,032 operating partnership units ("OP
          units") which consist of 84,630 Class A OP units, 36,530 Class B

<PAGE>7
          OP units, 115,124 Class C OP units, 62,313 Class D OP units, and
          223,435 Class E OP units.  These OP units may, under certain
          circumstances, become exchangeable into common shares of the
          Company on a one-for-one basis.  The Class A unitholders are
          entitled to receive distributions per OP unit equal to the per
          share distributions on the Company's common shares.  At June 30,
          1999, the Company  charged $64,521 to minority interest in
          operating partnership in the Consolidated Statements of Income
          relating to the Class A unitholders  allocated share of net
          income.  At June 30, 1999, the Class B, Class C, Class D and
          Class E unitholders were not entitled to receive an allocation of
          net income and did not receive any cash distributions from the
          operating partnership.

               One property included in the financial statements is 33-1/3%
          owned by third party investors.  As this property has an
          accumulated deficit, no recognition of the third party interest
          is reflected in the financial statements since it is the
          Company's policy to recognize minority interest only to the
          extent that the third party's investment and accumulated share of
          income exceeds distributions and its share of accumulated losses.
          Investments in joint ventures, that are 50% or less owned by the
          Company, are presented using the equity method of accounting.
          Since the Company intends to fulfill its obligations as a partner
          in the joint ventures, the Company has recognized its share of
          losses and distributions in excess of its investment.

               All significant intercompany balances and transactions have
          been eliminated in consolidation.

          Basis of Presentation

               The accompanying unaudited financial statements have been
          prepared by the Company's management in accordance with generally
          accepted accounting principles for interim financial information
          and applicable rules and regulations of the Securities and
          Exchange Commission.  Accordingly, they do not include all of the
          information and footnotes required by generally accepted
          accounting principles for complete financial statements.  In the
          opinion of management, all adjustments (consisting only of
          normally recurring adjustments) considered necessary for a fair
          presentation have been included.  The reported results of
          operations are not necessarily indicative of the results that may
          be expected for the full year.  The results of operations for the
          six month period ended June 30, 1999 include the cumulative
          effect of a change in accounting principle related to the Company
          changing its capitalization policy on certain replacements and
          improvements (See Note 12).  These financial statements should be
          read in conjunction with the Company's audited financial
          statements and notes thereto included in the Associated Estates
          Realty Corporation Annual Report on Form 10-K for the year ended
          December 31, 1998.

          Change in Estimates

               During the first quarter, the Company refined certain cutoff
          procedures and its estimation process for the accumulation of
          property operating expense accrual adjustments.  This refinement
          was facilitated, in part, by the migration to the
          decentralization of certain functions to the properties and also
          by the upgrading of the Company's information systems.  This
          refinement had the one time effect of reducing net income by
          approximately $632,000 for the six month period ended June 30,
          1999.  In addition, in connection with the Company's adoption of
          the change in its policy for capitalizing certain replacements
          (Note 12), the Company reassessed its remaining useful lives of
          certain appliances and floor covering it had capitalized upon the
          acquisition of a property.  This change in useful lives together
          with the reduction in the estimated useful lives of certain
          software from 10 to 7 years had the effect of reducing income by
          approximately $545,600 for the six month period ended June 30,
          1999.  Also, the Company had determined in December 1998 that it
          would replace certain of its software during 1999.  Commencing
          January 1, 1999, the Company began amortizing the remaining net
          book value over its revised estimated useful life of one year.
          This change had the effect of reducing net income by
          approximately $474,000 for the six month period ended June 30,
          1999.

          Use of Estimates

               The preparation of financial statements in accordance with
          generally accepted accounting principles requires management to
          make estimates and assumptions that affect the reported amounts
          of assets and liabilities, disclosure of contingent assets and

<PAGE>8

          liabilities at the date of the financial statements and reported
          amounts of revenues and expenses during the reporting periods.
          Actual results could differ from these estimates.

          Reclassifications

               Certain reclassifications have been made to the 1998
          financial statements to conform to the 1999 presentation.

          Recent Accounting Pronouncements

               Effective December 31, 1998, the Company implemented
          Statement of Financial Accounting Standards ( SFAS ) No. 130 -
          Reporting Comprehensive Income.  At June 30, 1999, the Company
          had no items of other comprehensive income requiring additional
          disclosure.  Effective December 31, 1998, the Company implemented
          SFAS No. 131 - Disclosures about Segments of an Enterprise and
          Related Information.  All periods have been presented on the same
          basis.

               In June 1998, the FASB issued SFAS No. 133, Accounting for
          Derivative Instruments and Hedging Activities.  The provisions of
          this statement require that derivative instruments be carried at
          fair value on the balance sheet.  The statement continues to
          allow derivative instruments to be used to hedge various risks
          and sets forth specific criteria to be used to determine when
          hedge accounting can be used.  The statement also provides for
          offsetting changes in fair value or cash flows of both the
          derivative and the hedged asset or liability to be recognized in
          earnings in the same period; however, any changes in fair value
          or cash flow that represent the ineffective portion of a hedge
          are required to be recognized in earnings and cannot be deferred.
          For derivative instruments not accounted for as hedges, changes
          in fair value are required to be recognized in earnings.  The
          provisions of this statement become effective for quarterly and
          annual reporting beginning June 15, 2000.  Although the statement
          allows for early adoption in any quarterly period after June
          1998, the Company has no plans to adopt the provisions of SFAS
          No. 133 prior to the effective date.  The impact of adopting the
          provisions of this statement on the Company's financial position,
          results of operations and cash flow subsequent to the effective
          date is not currently estimable and will depend on the financial
          position of the Company and the nature and purpose of the
          derivative instruments in use by management at that time.

               Effective January 1, 1999, the Company adopted Statement of
          Position No. 98-5 - Reporting on the Cost of Start-Up Activities.
          At June 30, 1999, there was no material impact of adoption on the
          provisions of this statement on the Company's financial position,
          results of operations or cash flow.

          2.   DEVELOPMENT AND DISPOSITION ACTIVITY

          Development Activity

               Construction in progress, including the cost of land, for
          the development of multifamily properties was $51,290,146 and
          $53,740,292 at June 30, 1999 and December 31, 1998, respectively.
          The Company capitalizes interest costs on funds used in
          construction, real estate taxes and insurance from the
          commencement of development activity through the time the
          property is available for leasing.  Capitalized interest, real
          estate taxes and insurance aggregated approximately $2,106,885
          and $747,930 during the six month periods ended June 30, 1999 and
          1998, respectively.  For the six month period ended June 30,
          1999, the construction and leasing of 204 units at two properties
          were completed at a total cost of $16.0 million. The following
          schedule details construction in progress at June 30, 1999:

<PAGE>9
<TABLE>
<CAPTION>

                                                  Placed in
        (dollars in thousands)    Number  Costs    Service      June 30, 1999    Estimated
                                    of  Incurred   through      Land  Building   Scheduled
               Property           Units  to Date   6/30/99      Cost     Cost   Completion
   ------------------------------ ----- --------  ---------  -------   -------- ----------
   <S>                            <C>   <C>        <C>          <C>    <C>      <C>
   ANN ARBOR, MICHIGAN
     Arbor Landings Apartments II    160 $10,855  $10,198    $     32   $   625    1999

   ATLANTA, GEORGIA
     Boggs Road                      535   4,185        -       3,955       230     TBD

   BATTLE CREEK, MICHIGAN
     The Landings at the Preserve     90     326        -         266        60     TBD

   ORLANDO, FLORIDA
     Windsor at Kirkman Apts.        460  44,416    11,117      2,438    30,861    1999


   AVON, OHIO
     Village at Avon                 312   9,646        -       2,158     7,488    2000

   Other                               -   3,178        -       1,251     1,927
                                   ----- -------  -------     ------- ---------
                                   1,557 $72,606  $21,315(1)  $10,100 $  41,191
                                   ===== =======  =======     ======= =========
         (1) Including land of $1,396.
</TABLE>

          Disposition Activity

               In June 1999, the Company sold five operating properties for
          net cash proceeds of $13.4 million, resulting in a gain of $12.8
          million.  The net cash proceeds were placed in a trust which
          restricts the Company's use of these funds for the exclusive
          purchase of other property of like-kind and qualifying use.
          These funds are presented in the Consolidated Balance Sheet as
          restricted cash.  The like-kind exchange must occur prior to
          December 3, 1999.

          3.   PROPERTY HELD FOR SALE

               The Company has entered into a contract to sell one of its
          Market-rate properties.  This property is located in  California.
          The Company anticipates that this asset will be sold during 1999.
          The net real estate assets of this property is presented in the
          Consolidated Balance Sheet as property held for sale.

          4.   SHAREHOLDERS' EQUITY

               The following table summarizes the changes in shareholders'
          equity since December 31, 1998:

<TABLE>
<CAPTION>

                                         Class A        Common
                                        Cumulative      Shares
                                        Preferred      (at $.10        Paid-In
                                          Shares     stated value)     Capital
                                       ------------  -------------  -------------
          <S>                          <C>           <C>            <C>
          Balance, Dec. 31, 1998       $ 56,250,000   $  2,262,195  $ 277,134,988
          Net income                              -              -              -
          Issuance of 21,000
            restricted common shares              -          2,100         (2,100)
          Retired 1,232 restricted
            common shares                         -           (123)           123
          Purchase of treasury shares
            (897,600 shares)                      -              -              -
          Deferred compensation                   -              -          1,881
          Common share
            dividends declared                    -              -              -
          Preferred share
            dividends declared                    -              -              -
                                       ------------   ------------  -------------
          Balance, June 30, 1999       $ 56,250,000   $  2,264,172  $ 277,134,892
                                       ============   ============  =============

                                        Accumulated    Accumulated
                                         Dividends        Other        Treasury
                                        In Excess Of  Comprehensive     Shares
                                         Net Income       Income       (at cost)      Total
                                       -------------  -------------- -----------  -------------

          Balance, Dec. 31, 1998       $ (75,991,638) $       (875)  $  (466,523) $ 259,188,147
          Net income                      17,539,345             -             -     17,539,345
          Issuance of 21,000
            restricted common shares               -             -             -              -
          Retired 1,232 restricted
            common shares                          -             -             -              -
          Purchase of treasury shares
            (897,600 shares)                       -             -   (10,114,969)   (10,114,969)
          Deferred compensation                    -             -             -          1,881
          Common share
            dividends declared           (16,545,694)            -             -    (16,545,694)
          Preferred share
            dividends declared            (2,742,213)            -             -     (2,742,213)
                                       -------------- ------------  ------------- -------------
          Balance, June 30, 1999       $ (77,740,200) $       (875) $(10,581,492) $ 247,326,497
                                       ============== ============= ============= =============
</TABLE>

<PAGE>10

          5.   SECURED DEBT

          Conventional Mortgage Debt

               Conventional mortgages payable are comprised of 30 and six
          loans at June 30, 1999 and December 31, 1998, respectively, each
          of which is collateralized by the respective real estate and
          resident leases.  These nonrecourse project specific loans accrue
          interest at a fixed rate with the exception of one mortgage note
          which accrues interest at a variable rate.  Mortgages payable are
          generally due in monthly installments of principal and/or
          interest and mature at various dates through March 2024.  The
          balance of the conventional mortgages was $341.6 million and
          $52.2 million at June 30, 1999 and December 31, 1998,
          respectively.

               As of June 30, 1999, the Company received gross proceeds of
          $289.9 million from project specific, nonrecourse mortgage loans
          collateralized by 24 properties owned by qualified REIT
          subsidiaries, having a net book value of $350.9 million.  These
          qualified REIT subsidiaries are separate legal entities and
          maintain records, books of accounts and bank accounts separate
          and apart from any other person or entity.  The proceeds from
          these loans were used to pay down the Company s floating rate
          unsecured line of credit facility and to increase the Company's
          cash balances which will be used to fund construction in
          progress, fund joint venture opportunities with pension fund
          clients, and buy back limited quantities of the Company's stock
          as authorized by the Board of Directors.  Proceeds may also be
          used to repurchase a portion of the Company's senior unsecured
          debt.  These mortgage loan documents  require  escrow deposits
          for taxes and replacement of project assets.  The weighted
          average maturity of the loans is 9.86 years, and the weighted
          average interest rate is 7.54%.

          Federally Insured Mortgage Debt

               Federally insured mortgage debt which encumbered seven of
          the properties at June 30, 1999 and December 31, 1998 (including
          one property which is funded through Industrial Development
          Bonds), is insured by HUD pursuant to one of the mortgage
          insurance programs administered under the National Housing Act of
          1934.  These government-insured loans are nonrecourse to the
          Company.  Payments of principal, interest and HUD mortgage
          insurance premiums are made in equal monthly installments and
          mature at various dates through March 1, 2024.  The balance of
          the federally insured mortgages was $27.6 million and $27.9
          million at June 30, 1999 and December 31, 1998, respectively.
          Six of the seven federally insured mortgages have a fixed rate
          and the remaining mortgage ($1.8 million) has a variable rate.

               Under certain of the mortgage agreements, the Company is
          required to make escrow deposits for taxes, insurance and
          replacement of project assets.  The variable rate mortgage is
          secured by a letter of credit which is renewed annually.

          6.   UNSECURED DEBT

          Senior Notes

               The Senior Notes were issued during 1995 in the principal
          amounts of $75 million and $10 million and accrue interest at
          8.38% and 7.10%, respectively, and mature in 2000 and 2002,
          respectively.  The balance of the $75 million Senior Note, net of
          unamortized discounts, was $74.9 million at June 30, 1999 and
          December 31, 1998.

          Medium-Term Notes Program

               The Company had 11 Medium-Term Notes (the "MTN's")
          outstanding having an aggregate balance of $112.5 million at June
          30, 1999 and December 31, 1998.  The principal amounts of these
          MTN's range from $2.5 million to $20 million and bear interest
          from 6.18% to 7.93% over terms ranging from two to 30 years, with

<PAGE>11
          a stated weighted average maturity of 8.77 years at June 30,
          1999.  The holders of two MTN's with stated terms of 30 years
          each have a right to repayment in five and seven years from the
          issue date of the respective MTN.  If these holders exercised
          their right to prepayment, the weighted average maturity of the
          MTN's would be 4.41 years.

               The Company's current MTN Program provides for the issuance,
          from time to time, of up to $102.5 million of MTN's due nine
          months or more from the date of issue and may be subject to
          redemption at the option of the Company or repayment at the
          option of the holder prior to the stated maturity date.  These
          MTN's may bear interest at fixed rates or at floating rates and
          can be issued in minimum denominations of $1,000.  At June 30,
          1999, there was $62.5 million of additional MTN borrowings
          available under the program.  However, the Company may no longer
          be in a position to access public unsecured debt markets due to
          revised credit ratings.

               From time to time, the Company may enter into hedge
          agreements to minimize its exposure to interest rate risks.
          There are no interest rate protection agreements outstanding as
          of June 30, 1999.

          Line of Credit

               Prior to its termination in May 1999, the Company had
          available a $250 million revolving credit facility (the "Line of
          Credit") which contained various restrictive covenants.  At
          December 31, 1998, $226.0 million was outstanding under this
          facility.  The weighted average interest rate on borrowings
          outstanding under the Line of Credit was 6.88% at December 31,
          1998, representing a variable rate based on the prime rate or
          LIBOR plus a specified spread, depending on the Company's long
          term senior unsecured debt rating from Standard and Poor's and
          Moody's Investors Service.  An annual commitment fee of 15 basis
          points on the maximum commitment, as defined in the agreement,
          was payable annually in advance on each anniversary date.  In May
          1999,  the Company  repaid all outstanding obligations under this
          Line of Credit through proceeds received from financing project
          specific, nonrecourse mortgage loans (Note 5) and terminated the
          facility.  The Company recognized an extraordinary charge of
          $1,808,742 which represents a $750,000 facility fee charge,
          $126,559 breakage fee, and a $932,183 write off of deferred
          finance costs related to the termination of the unsecured line of
          credit facility.

               MIGRA maintained a $500,000 Line of Credit facility ( MIGRA
          Line of Credit Facility ) which the Company assumed at the time
          of the merger.  On February 10, 1999, the Company paid off the
          $446,565 outstanding MIGRA Line of Credit Facility and terminated
          this facility.

          7.   TRANSACTIONS WITH AFFILIATES AND JOINT VENTURES

          Management and Other Services

               The Company provides management and other services to (and
          is reimbursed for certain expenses incurred on behalf of) certain
          non-owned properties in which the Company's Chief Executive
          Officer and/or other related parties have varying ownership
          interests.  The entities which own these properties, as well as
          other related parties, are referred to as "affiliates".  The
          Company also provides similar services to joint venture
          properties.

<PAGE>12

               Summarized affiliate and joint venture transaction activity
          follows:

<TABLE>
<CAPTION>
                                                   Three months ended       Six months ended
                                                        June 30,                June 30,
                                                  --------------------  ------------------------
                                                     1999       1998        1999          1998
                                                  --------   --------   ----------   -----------
   <S>                                            <C>        <C>        <C>           <C>
   Property management fee and
    other miscellaneous service
    revenues                   - affiliates       $605,868   $459,005   $ 1,101,000   $ 1,042,936
                               - joint ventures    228,191    236,609       451,557       463,554
   Painting service revenues   - affiliates        223,243     82,439       299,105       182,351
                               - joint ventures     36,883    119,065        64,625       212,966
   Expenses incurred on behalf
    of and reimbursed by(1)    - affiliates      1,297,349  1,011,478     2,013,417     2,156,436
                               - joint ventures    364,348    640,937     1,383,329     1,282,578
   Interest income             - affiliates          2,502    210,701        77,370       378,685
   Interest expense            - affiliates        (33,181)   (83,751)      (82,579)     (213,130)
                               - joint ventures     (6,883)   (12,227)      (12,627)      (24,037)
<FN>

          (1)  Primarily payroll and employee benefits, reimbursed at cost.
</FN>
</TABLE>

               Property management fees and other miscellaneous receivables
          due from affiliates and joint venture properties aggregated
          $6,246,737 and $6,677,611 at June 30, 1999 and December 31, 1998,
          respectively.  There were no payables due to affiliates and joint
          venture properties at June 30, 1999 and December 31, 1998.

          Advances to Affiliates and Joint Ventures

               In the normal course of business, the Company advances funds
          on behalf of, or holds funds for the benefit of, affiliates and
          joint ventures.  Funds advanced to affiliates and joint ventures
          aggregated $1,231,825 and $1,714,132 at June 30, 1999,
          respectively, and $5,555,732 and $880,057 at December 31, 1998,
          respectively.  Except for insignificant amounts, advances to
          affiliates bear interest; the weighted average rate charged was
          8.3% during the periods ending June 30, 1999 and 1998.  The
          Company held funds for the benefit of affiliates and joint
          ventures in the aggregate amount of $1,682,190 and $1,256,388  at
          June 30, 1999, respectively, and $3,174,898 and $2,178,496 at
          December 31, 1998, respectively.

               During 1999, the Company provided an additional reserve of
          $150,000 with respect to a receivable from a managed but non-
          owned property.  This reserve is reflected as a charge for funds
          advanced to non-owned properties in the Consolidated Statements
          of Income, but has been established primarily to cover the
          potential legal costs related to collection.

               In February 1998, certain affiliated entities which owed the
          Company a substantial amount of the advances described above,
          made capital calls to their partners for the purpose of effecting
          repayment of such advances.  Thereafter, approximately $4.0
          million of advances were repaid pursuant to such capital calls.
          However, a corporation (the "Corporation") owned by a member of
          the Company's Board of Directors, and his siblings (including the
          wife of the Company's Chairman and Chief Executive Officer) which
          serves as general partner of certain affiliated entities, had
          informed the Company that the Corporation has caused the
          commencement of a review of approximately $2.9 million in
          expenditures relating to certain HUD subsidized properties.  The
          Company believed that all expenditures were appropriate and that
          the ultimate outcome of any disagreement would not have a
          material adverse effect on the Company's financial position,
          results of operations or cash flows.

               On March 11, 1999, the Company, the Corporation, certain
          shareholders of the Corporation and others entered into a
          settlement agreement which resolved all disputes concerning the
          aforementioned expenditures and other issues concerning the
          management by the Company or one of its Service Companies of
          various properties owned by entities in which the Corporation was

<PAGE>13
          a general partner.  Pursuant to that settlement agreement, the
          Corporation and other affiliates funded all outstanding advances
          made by the Company.  At December 31, 1998, amounts outstanding
          which were subsequently funded in the first quarter of 1999
          pursuant to the settlement agreement were $4.7 million.

          Notes Receivable

               At June 30, 1999, two notes of equal amounts were receivable
          from the Company's Chief Executive Officer aggregating $3,342,000
          (included in "Accounts and notes receivables-affiliates and joint
          ventures").  One of the notes is partially secured by 150,000 of
          the Company's common shares; the other note is unsecured.  For
          the six months ended June 30, 1999, the interest rate charged on
          this note was approximately 6.5%, with principal due May 1, 2002.
          The Company recognized interest income of $109,106 for the period
          ending June 30, 1999 relating to these notes.

          8.   RAINBOW TERRACE APARTMENTS

               On February 9, 1998, HUD notified the Company that Rainbow
          Terrace Apartments, Inc. ("RTA"), the Company's subsidiary
          corporation that owns Rainbow Terrace Apartments, was in default
          under the terms of the Regulatory Agreement and Housing
          Assistance Payments Contract ("HAP Contract") pertaining to this
          property.  Among other matters, HUD alleged that the property was
          poorly managed and that RTA had failed to complete certain
          physical improvements to the property.  Moreover, HUD claimed
          that the owner was not in compliance with numerous technical
          regulations concerning whether certain expenses were properly
          chargeable to the property.  As provided in the Regulatory
          Agreement and HAP Contract, in the event of a default, HUD has
          the right to exercise various remedies including terminating
          future payments under the HAP Contract and foreclosing the
          government-insured mortgage encumbering the property.

               This controversy arose out of a Comprehensive Management
          Review of the property initiated by HUD in the Spring of 1997,
          which included a complete physical inspection of the property.
          In a series of written responses to HUD, the Company stated its
          belief that it had corrected the management deficiencies cited by
          HUD in the Comprehensive Management Review (other than the
          completion of certain physical improvements to the property) and
          justified the expenditures questioned by HUD as being properly
          chargeable to the property in accordance with HUD's regulations.
          Moreover, the Company stated its belief that it had repaired any
          physical deficiencies noted by HUD in its Comprehensive
          Management Review that might pose a threat to the life and safety
          of its residents.

               In June 1998, HUD notified the Company that all future
          Housing Assistance Payments ("HAP") for RTA were abated and
          instructed the lender to accelerate the balance due under the
          mortgage.  Subsequent to the notification of the HAP abatements
          and the acceleration of the mortgage, the lender advised the
          Company that the acceleration notification had been rescinded
          pursuant to HUD's instruction.  HUD then notified the Company
          that the HAP payments would be reinstated and that HUD was
          reviewing further information concerning RTA provided by the
          Company.  The Company has received the monthly HAP payments for
          RTA.

               In June 1998, the Company filed a lawsuit against HUD
          seeking to compel HUD to review certain budget based rent
          increases submitted to HUD by the Company in 1995.

               From June 1998 through March 1999, the Company was involved
          in ongoing negotiations with HUD for the purpose of resolving
          these and other disputes concerning other properties managed or
          formerly managed by the Company or one of the Service Companies,
          which were similarly the subject of Comprehensive Management
          Reviews initiated by HUD in the Spring of 1997.

               On March 12, 1999, the Company, Associated Estates
          Management Company ("AEMC"), RTA, PVA Limited Partnership
          ("PVA"), the owner of Park Village Apartments, and HUD, entered
          into a comprehensive settlement agreement (the "Settlement
          Agreement") for the purpose of resolving certain disputes

<PAGE>14
          concerning property operations at Rainbow Terrace Apartments,
          Park Village Apartments ("Park Village"), Longwood Apartments
          ("Longwood") and Vanguard Apartments ("Vanguard").  Longwood was
          managed by the Company until January 13, 1999.  Park Village is
          managed by the Company.  Vanguard was managed by AEMC until
          December 1997.  All four properties are encumbered by HUD insured
          mortgages, governed by HUD imposed regulatory agreements and
          subsidized by Section 8 Housing Assistance Payments.

               Under the terms of the Settlement Agreement, HUD has agreed
          to pay RTA a retroactive rent increase totaling $1,784,467, which
          represents the outstanding receivable recorded at June 30, 1999
          and December 31, 1998.  HUD has further agreed to release the
          Company, AEMC, RTA and the owners and principals of PVA, Longwood
          and Vanguard from all claims (other than tax or criminal fraud
          claims) regarding the ownership or operation of Rainbow Terrace
          Apartments, Park Village, Longwood and Vanguard.  Moreover, HUD
          has agreed not to issue a limited denial of participation,
          debarment or suspension, program fraud civil remedy action or
          civil money penalty, resulting from the ownership or management
          of any of these projects, or to deny eligibility to any of their
          owners, management agents or affiliates for participation in any
          HUD program on such basis.

               HUD's obligations under the Settlement Agreement are
          conditioned upon the performance by the Company, RTA and PVA of
          certain obligations, the most significant of which is the
          obligation to identify, on or before April 11, 1999, prospective
          purchasers for both Rainbow Terrace Apartments and Park Village
          who are acceptable to HUD, and upon HUD's approval, convey those
          projects to such purchasers.  Alternatively, if RTA and PVA are
          unable to identify prospective purchasers acceptable to HUD, then
          RTA and PVA have agreed to convey both projects to HUD pursuant
          to deeds in lieu of foreclosure.  In either case (conveyance to a
          HUD approved purchaser or deed in lieu of foreclosure), no
          remuneration will be received by either RTA or PVA in return,
          except for the $1,784,467 retroactive rent increase payable to
          RTA mentioned above.  At June 30, 1999 and December 31, 1998, the
          Company had receivables of $1,784,467 related to the 1995 and
          1998 retroactive rental increase requests.  At June 30, 1999, RTA
          had net assets of approximately $1,827,319, including the
          retroactive rental receivable of $1,784,467 due from HUD, and a
          remaining amount due under the mortgage of approximately
          $1,935,123.  The transfer of RTA to a purchaser which is
          acceptable to HUD or the direct transfer of RTA to HUD is not
          expected to have a material impact on the results of operations
          or cash flows of the Company.  The Company has excluded RTA's
          results of operations from its Consolidated Statement of Income
          for 1999.  RTA and PVA requested HUD to extend the April 11, 1999
          deadline for identification of potential purchasers.  HUD granted
          that request and the deadline was extended to May 31, 1999.  The
          Company believes that RTA and PVA have satisfied their obligation
          to identify prospective purchasers for those properties.

          9.   PREFERRED AND COMMON SHARES

          Common Shares
               In June and July 1998, the Company issued 408,314 and
          5,139,387 common shares relating to the Company's merger of MIGRA
          and the related acquisition of eight multifamily properties,
          respectively.

          Treasury Shares
               On June 21, 1999, the Company's Board of Directors amended
          the Company's stock repurchase plan by authorizing an additional
          2,000,000 common shares to be repurchased by the Company at
          market prices.  The timing of stock purchases are made at the
          discretion of management.  During 1999 and 1998, 897,600 and
          25,000 shares were repurchased at an aggregate cost of
          $10,114,969 and $466,523, respectively,  which was funded
          primarily from operating cash flows and financing proceeds.

          Preferred Shares
               At June 30, 1999, 2,250,000 Depositary Shares were
          outstanding, each representing 1/10 of a share of the Company's
          9.75% Class A Cumulative Redeemable Preferred Shares (the
          "Perpetual Preferred Shares").  Dividends on the Perpetual
          Preferred Shares are cumulative from the date of issue and are
          payable quarterly.  Except in certain circumstances relating to
          the preservation of the Company's status as a REIT, the Perpetual

<PAGE>15
          Preferred Shares are not redeemable prior to July 25, 2000.  On
          and after July 25, 2000, the Perpetual Preferred Shares will be
          redeemable for cash at the option of the Company.

               The Company is authorized to issue 3,000,000 Class B
          Cumulative Preferred Shares, without par value, and 3,000,000
          Noncumulative Preferred Shares, without par value.  There are no
          Noncumulative Preferred Shares issued or outstanding at June 30,
          1999 or December 31, 1998.

          Shareholder Rights Plan

               During January 1999, the Company adopted a Shareholder
          Rights Plan.  To implement the Plan, the Board of Directors
          declared a distribution of one Right for each of the Company's
          outstanding common shares.  Each Right entitles the holder to
          purchase from the Company 1/1,000th of a Class B Series I
          Cumulative Preferred Share (a "Preferred Share") at a purchase
          price of $40 per Right, subject to adjustment.  One one-
          thousandth of a Preferred Share is intended to be approximately
          the economic equivalent of one common share.  The Rights will
          expire on January 6, 2009, unless redeemed by the Company as
          described below.

               The Rights are not currently exercisable and trade with the
          Company's common shares.  The Rights will become exercisable if a
          person or group becomes the beneficial owner of 15% or more of
          the then outstanding common shares of the Company or announces an
          offer to acquire 15% or more of the Company's then outstanding
          common shares.

               If a person or group acquires 15% or more of the Company's
          outstanding common shares, then each Right not owned by the
          acquiring person or its affiliates will entitle its holder to
          purchase, at the Right's then-current exercise price, fractional
          preferred shares that are approximately the economic equivalent
          of common shares (or, in certain circumstances, common shares,
          cash, property or other securities of the Company) having a
          market value equal to twice the then-current exercise price.  In
          addition, if, after the Rights become exercisable, the Company is
          acquired in a merger or other business combination transaction
          with an acquiring person or its affiliates or sells 50% or more
          of its assets or earnings power to an acquiring person or its
          affiliates, each Right will entitle its holder to purchase, at
          the Right's then-current exercise price, a number of the
          acquiring Company's common shares having a market value of twice
          the Right's exercise price.  The Board of Directors may redeem
          the Rights, in whole, but not in part, at a price of $.01 per
          Right.

               The distribution was made on January 29, 1999 to
          shareholders of record on that date.  The initial distribution of
          Rights is not taxable to shareholders.

          10.  EARNINGS PER SHARE

               Earnings per share ("EPS") has been computed pursuant to the
          provisions  of SFAS No. 128. The following table provides a
          reconciliation of both income before cumulative effect of a
          change in accounting principle and the number of common shares
          used in the computation of basic EPS, which utilizes the weighted
          average number of common shares outstanding without regard to
          dilutive potential common shares, and diluted EPS, which includes
          all such shares.

<PAGE>16

<TABLE>
<CAPTION>
                                                       For the three months        For the six months
                                                          ended June 30,              ended June 30,
                                                         1999         1998          1999        1998
                                                     -----------  -----------  -----------   ----------
   <S>                                               <C>          <C>           <C>          <C>
   Basic Earnings Per Share:
    Income before extraordinary item and
     cumulative effect of a change in accounting
     principle                                       $ 13,159,046 $ 5,084,498   $ 15,028,925 $ 9,609,244
    Less:  Preferred share dividends                    1,371,105   1,371,105      2,742,210   2,742,210
                                                     ------------ -----------   ------------  ----------
    Income before extraordinary item and
     cumulative effect of a change in accounting
     principle applicable to common shares             11,787,941   3,713,393     12,286,715   6,867,034
    Less:  Extraordinary loss                           1,808,742     124,895      1,808,742     124,895
    Plus:  Cumulative effect of a change in
            accounting principle                                -           -      4,319,162           -
                                                     ------------ -----------   ------------ -----------
    Income applicable to common shares               $  9,979,199 $ 3,588,498   $ 14,797,135 $ 6,742,139
                                                     ============ ===========   ============ ===========
   Diluted Earnings Per Share:
    Income before extraordinary item and
     cumulative effect of a change in accounting
     principle                                       $ 13,159,046 $  5,084,498  $ 15,028,925 $ 9,609,244
    Less:  Preferred share dividends                    1,371,105    1,371,105     2,742,210   2,742,210
           Amortization expense relating to
             contingent merger consideration               36,911            -        73,822           -
                                                      -----------  -----------   -----------  ----------
    Income before extraordinary item and
     cumulative effect of  a change in accounting
     principle applicable to common shares             11,751,030    3,713,393    12,212,893   6,867,034
    Less:  Extraordinary loss                           1,808,742      124,895     1,808,742     124,895
    Plus:  Cumulative effect of a change
             in accounting principle                            -            -     4,319,162           -
                                                     ------------ ------------  ------------ -----------
    Income applicable to common shares               $  9,942,288 $  3,588,498  $ 14,723,313 $ 6,742,139
                                                     ============ ============  ============ ===========
   Number of Shares:
     Basic-average shares outstanding                  22,359,480   17,133,185    22,516,237  17,102,729
     Dilutive shares                                            -            -         3,016           -
                                                      -----------  -----------   -----------  ----------
     Diluted-average shares outstanding                22,359,480   17,133,185    22,519,253  17,102,729

                                                      ===========  ===========   ===========  ==========

   Earnings per common share - basic:
     Income before extraordinary item and cumulative
       effect of a change in accounting principle     $       .53  $       .22   $       .54  $      .40
                                                      ===========  ===========   ===========  ==========
     Extraordinary item                               $      (.08) $      (.01)  $      (.08) $     (.01)
                                                      ===========  ===========   ===========  ==========
     Cumulative effect of a change in accounting
       principle                                      $         -  $         -   $       .19  $        -
                                                      ===========  ===========   ===========  ==========
     Net income                                       $       .45  $       .21   $       .65  $      .39
                                                      ===========  ===========   ===========  ==========
   Earnings per common share - diluted:
     Income before extraordinary item and cumulative
       effect of a change in accounting principle     $       .53  $       .22   $       .54  $      .40
                                                      ===========  ===========   ===========  ==========
     Extraordinary item                               $      (.08) $      (.01)  $      (.08) $     (.01)
                                                      ===========  ===========   ===========  ==========
     Cumulative effect of a change in accounting
       principle                                      $         -  $         -   $       .19  $        -
                                                      ===========  ===========   ===========  ==========
     Net income                                       $       .45  $       .21   $       .65  $      .39
                                                      ===========  ===========   ===========  ==========

   Pro forma amounts assuming the new
    capitalization policy is applied retroactively:
     Net income                                      $ 11,350,304 $  5,148,603  $ 13,220,183 $ 9,807,651
                                                     ============ ============  ============ ===========
     Income applicable to common shares              $  9,979,199 $  3,777,498  $ 10,477,973 $ 7,065,441
                                                     ============ ============  ============ ===========
   Per Share Amount - Income applicable
    to common shares:
     Basic                                           $        .45 $        .22  $        .47 $       .41
                                                     ============ ============  ============ ===========
     Diluted                                         $        .45 $        .22  $        .47 $       .41
                                                     ============ ============  ============ ===========
</TABLE>

<PAGE>17


               Options to purchase 1,487,543 and 1,011,774 shares of common
          stock were outstanding at June 30, 1999 and 1998, respectively, a
          portion of which has been reflected above using the treasury
          stock method.

          11.  INTERIM SEGMENT REPORTING

               In 1998, the Company adopted SFAS No. 131, Disclosures about
          Segments of an Enterprise and Related Information.  The Company
          has four reportable segments: (1) Market-rate multifamily
          properties, (2) Government-Assisted multifamily properties, (3)
          Management and Service Operations and (4) Unallocated Corporate
          Overhead.  The Company has identified these segments because the
          discrete information is the basis upon which management makes
          decisions regarding resource allocation and performance
          assessment.  The Market-rate multifamily properties are
          conventional multifamily residential apartments (the operations
          are not subject to regulation by HUD).  The Government-Assisted
          properties are multifamily properties for which the rents are
          subsidized and certain aspects of the operations are regulated by
          HUD pursuant to Section 8 of the National Housing Act of 1937.
          The Management and Service Operations provide management and
          advisory services to the Market-rate and Government-Assisted
          properties which are owned by the Company, as well as to clients
          and properties that are not owned, but are managed by the
          Company.  All of the Company's segments are located in the United
          States.  During the second quarter of 1999, management added a new
          segment representing Unallocated Corporate Overhead to capture costs
          not specifically allocated to an individual segment and to isolate
          these costs from the third party Management and Service Operations.
          For comparability purposes, the second quarter of 1998 results have
          been restated to reflect this revision to the Company's reportable
          segments.

               The accounting policies of the segments are the same as
          those described in the "Basis of Presentation and Significant
          Accounting Policies".  The Company evaluates the performance of
          its segments and allocates resources to them based on EBITDA.
          EBITDA should not be considered as an alternative to net income
          (determined in accordance with generally accepted accounting
          principles - "GAAP"), as an indicator of the Company's financial
          performance, cash flow from operating activities (determined in
          accordance with GAAP) or as a measure of the Company's liquidity,
          nor is it necessarily indicative of sufficient cash flow to fund
          all of the Company's needs.

               Information on the Company's segments for the three and six
          months ended June 30, 1999 and 1998 is as follows:

<TABLE>
<CAPTION>

                                                   For the three months ended June 30, 1999
                                      ------------------------------------------------------------------
                                                                   Management   Unallocated
                                                     Government-   and Service   Corporate       Total
                                      Market-rate     Assisted     Operations    Overhead    Consolidated
                                      -----------    -----------   -----------   ----------- ------------
   <S>                               <C>            <C>           <C>          <C>           <C>
   Total segment revenues            $ 33,871,604   $  2,486,838  $ 6,802,903  $         -   $ 43,161,345
   Elimination of intersegment
     revenues                            (47,680)              -   (3,799,675)           -     (3,847,355)
                                     ------------   ------------  -----------  -----------
   Consolidated revenues             $ 33,823,924   $  2,486,838  $ 3,003,228  $         -   $ 39,313,990
                                     ============   ============  ===========  ===========
   Equity in net income of joint
     ventures                        $    167,152   $      7,612  $         -  $    89,342   $    264,106

   *EBITDA-including the
     proportionate share of joint
     ventures                        $ 19,188,434   $  1,517,549  $   953,474  $(3,508,262)  $ 18,151,195

   Total assets                      $814,930,941   $ 13,975,788  $49,474,005  $ 8,043,299   $886,424,033
   Capital expenditures, gross       $ 10,476,510   $    168,051  $   162,176  $         -   $ 10,806,737
</TABLE>

<PAGE>18

<TABLE>
<CAPTION>

                                                    For the six months ended June 30, 1999
                                       -----------------------------------------------------------------
                                                                    Management  Unallocated
                                                      Government-   and Service  Corporate      Total
                                       Market-rate     Assisted     Operations    Overhead   Consolidated
                                      ------------   ------------   -----------  ----------  ------------
   <S>                                <C>            <C>           <C>          <C>          <C>
   Total segment revenues             $ 66,967,772   $ 4,934,048   $13,002,907  $        -   $84,904,727
   Elimination of intersegment
     revenues                              (95,460)            -    (7,429,226)          -    (7,524,686)
                                      -------------  -----------   -----------  ----------
   Consolidated revenues              $ 66,872,312   $ 4,934,048   $ 5,573,681  $        -   $77,380,041
                                      ============   ===========   ===========  ==========
   Equity in net income of joint
     ventures                         $    139,223   $    11,277   $         -  $   86,870   $   237,370

   *EBITDA-including the
     proportionate share of joint
     ventures                         $ 38,611,720   $ 3,021,972   $  1,648,304 $(5,986,656) $ 37,295,340

   Total assets                       $814,930,941   $13,975,788   $ 49,474,005 $ 8,043,299  $886,424,033
   Capital expenditures, gross        $ 20,043,462   $   532,164   $   376,682  $        -   $ 20,952,308
</TABLE>

<TABLE>
<CAPTION>
                                                   For the three months ended June 30, 1998
                                       -----------------------------------------------------------------
                                                                   Management  Unallocated
                                                     Government-   and Service  Corporate       Total
                                       Market-rate     Assisted    Operations    Overhead    Consolidated
                                       -----------   -----------   -----------  -----------  ------------
   <S>                               <C>             <C>          <C>          <C>          <C>
   Total segment revenues            $  28,577,413   $ 2,487,695  $ 5,967,517  $         -  $  37,032,625
   Elimination of intersegment
     revenues                              (47,500)            -   (4,138,888)           -     (4,186,388)
                                     --------------  -----------  -----------  -----------
   Consolidated revenues             $  28,529,913   $ 2,487,695  $ 1,828,629  $         -  $  32,846,237
                                     =============   ===========  ===========  ===========
   Equity in net income of joint
    ventures                         $      151,205  $    19,460  $         -  $         -  $     170,665

   *EBITDA-including the
     proportionate share of joint
     ventures                        $   17,180,477  $ 1,597,642  $   213,418  $  (850,046) $  18,141,491

   Total assets                      $  718,656,566  $13,204,186  $49,444,343  $ 4,353,221  $ 785,658,316

   Capital expenditures, gross       $  157,237,022  $   482,969  $   673,002  $         -  $ 158,392,993
</TABLE>

<TABLE>
<CAPTION>
                                                    For the six months ended June 30, 1998
                                       -----------------------------------------------------------------
                                                                    Management  Unallocated
                                                      Government-  and Service   Corporate      Total
                                       Market-rate     Assisted     Operations    Overhead   Consolidated
                                       -----------    ------------ -----------  -----------  ------------
   <S>                                <C>            <C>           <C>          <C>         <C>
   Total segment revenues             $ 55,330,208   $ 4,952,908   $10,407,180  $         -  $ 70,690,296
   Elimination of intersegment
     revenues                              (95,000)            -    (7,040,256)           -    (7,135,256)
                                      ------------   -----------   -----------
   Consolidated revenues              $ 55,235,208   $ 4,952,908   $ 3,366,924  $         -  $ 63,555,040
                                      ============   ===========   ===========
   Equity in net income of joint
     ventures                         $    180,989   $    25,898   $         -  $         -  $    206,887

   *EBITDA-including the
     proportionate share of joint
     ventures                         $ 32,988,954   $ 3,200,689   $   523,348  $(1,942,574) $ 34,770,417

   Total assets                       $718,656,566   $13,204,186   $49,444,343  $ 4,353,221  $785,658,316
   Capital expenditures, gross        $240,132,931   $   686,400   $ 1,032,948  $         -  $241,852,279

      *Intersegment revenues and expenses have been eliminated in the
       computation of EBITDA for each of the segments.

</TABLE>


               A reconciliation of total segment EBITDA to total
          consolidated net income for the three and six months ended June
          30, 1999 and 1998 is as follows:

<PAGE>19
<TABLE>
<CAPTION>

                                                 For the three months ended    For the six months ended
                                                           June 30                     June 30,
                                                 ---------------------------  -------------------------
                                                     1999           1998          1999          1998

   <S>                                           <C>            <C>           <C>           <C>
   Total EBITDA for reportable segments          $ 18,151,195   $18,141,491   $ 37,295,340  $34,770,417
   EBITDA-proportionate share of joint ventures      (835,208)     (712,459)    (1,471,137)  (1,300,850)
   Equity in net income of joint ventures             264,106       170,665        237,370      206,887
   Depreciation and amortization                   (8,328,860)   (5,707,884)   (16,604,908) (11,022,479)
   Interest expense                                (9,105,415)   (7,112,892)   (17,356,147) (13,544,559)
   Interest income                                    325,041       315,904        511,029      528,519
   Income taxes                                      (142,141)      (10,327)      (412,950)     (28,691)
   Extraordinary item - loss                       (1,808,742)     (124,895)    (1,808,742)    (124,895)
   Gain on sale of operating properties            12,830,328             -     12,830,328            -
   Cumulative effect of a change in accounting
     principle                                              -             -      4,319,162            -
                                                 -------------  ------------  ------------
   Consolidated net income                       $  11,350,304  $  4,959,603  $ 17,539,345  $ 9,484,349
                                                 =============  ============  ============
</TABLE>

          12.  CHANGE IN ACCOUNTING PRINCIPLE

               Effective January 1, 1999, the Company changed its method of
          accounting to capitalize expenditures for certain replacements
          and improvements, such as new HVAC equipment, structural
          replacements, appliances, flooring, carpeting and kitchen/bath
          renovations.  Previously, these costs were charged to operations
          as incurred.  Ordinary repairs and maintenance, such as suite
          cleaning and painting, and appliance repairs are expensed.  The
          Company believes the change in the capitalization method provides
          an improved measure of the Company s capital investment, provides
          a better matching of expenses with the related benefit of such
          expenditures, including associated revenues, and is in the
          opinion of management, consistent with industry practice.  The
          cumulative effect of this change in accounting principle
          increased net income for the six months ended June 30, 1999  by
          $4,319,162 or $.19 per share (basic and diluted).  The effect of
          this change was to increase income before cumulative effect of a
          change in accounting principle by $2,157,594 or $.10 per share
          (basic and diluted) and $3,389,087 or $.15 per share (basic and
          diluted) for the three and six months ended June 30, 1999,
          respectively.   The pro forma amounts shown on the income
          statement have been adjusted to reflect the retroactive
          application of the capitalization of such expenditures and
          related depreciation for the three and six months ended June 30,
          1998 which increased net income by $189,000 and $323,302 or
          $.01 and $.02 per share (basic and diluted), respectively.

          13.  PRO FORMA CONDENSED FINANCIAL INFORMATION (UNAUDITED)

               The following unaudited supplemental pro forma operating
          data for 1998 is presented to reflect, as of January 1, 1998, the
          effects of: (i)  the 12 property acquisitions completed in 1998,
          (ii) the merger of MIGRA in 1998, (iii)  the sale of a property
          in 1998, (iv) the exclusion of Rainbow Terrace Apartments
          operating results, and (v) the sale of the five properties in
          1999.  The following unaudited supplemental pro forma operating
          data for 1999 is presented to reflect, as of January 1, 1999, the
          effects of the sale of the five properties in 1999.

<TABLE>
<CAPTION>
                                                           For the six months
                                                             ended June 30,
                                                             1999       1998
   (In thousands, except per share amounts)               ---------   --------

   <S>                                                    <C>         <C>
   Revenues                                               $   75,304  $  70,039
   *Net income                                                 1,571      7,120
   *(Loss)/income applicable to common shares (Basic and
      Diluted)                                                (1,171)     4,378
    Earnings per common shares (Basic and Diluted)        $     (.05) $     .19
    Weighted average number of common shares outstanding:
                                             - Basic          22,516     22,516
                                             - Diluted        22,519     22,519
   *Before cumulative effect and extraordinary item

</TABLE>

<PAGE>20

               The 1999 and 1998 pro forma financial information does not
          include the revenue and expenses for the period January 1 through
          the date the properties were acquired by the Company for Windsor
          at Kirkman Apartments, Windsor Pines and Steeplechase at Shiloh
          Crossing Apartments which are properties that were acquired in
          1998.  The revenue and expenses of the aforementioned properties
          were excluded from the pro forma financial information for 1999
          and 1998 as the properties were under construction during
          substantially all of the periods prior to their acquisition.

               The unaudited pro forma condensed statement of operations is
          not necessarily indicative of what the actual results of
          operations of the Company would have been assuming the
          transactions had been completed as set forth, nor does it purport
          to represent the results of operations of future periods of the
          Company.

          14.  SUBSEQUENT EVENTS

          Treasury Shares

               Subsequent to June 30, 1999, the Company repurchased 190,000
          common shares at an aggregate cost of $2,185,000 which was funded
          primarily from operating cash flows and financing proceeds.

          Dividends Declared and Paid

               On June 21, 1999, the Company declared a dividend of $0.375
          per common share for the quarter ending June 30, 1999, which was
          paid on August 2, 1999 to shareholders of record on July 15,
          1999.

          Advisory Contract

               On July 14, 1999, MIG signed a contract with one of the
          Company's major pension fund clients which authorizes MIG to
          continue to manage existing properties and allocate up to $200
          million in new, discretionary funds to purchase additional
          properties for the client.

          Common Shares

               On July 14, 1999, the Company issued 11,249 common shares to
          one of the MIGRA shareholders relating to a partial settlement of
          the contingent consideration payable with respect to the amounts
          due on the first anniversary of the merger.  The shares were
          issued at $11.64, representing the average closing price of the
          common shares for the 20 trading days immediately preceding June
          30, 1999.  The remaining common shares payable with respect to
          the first anniversary payment is under review by the Company's
          management and the MIGRA shareholders since the language in the
          governing document requires further review as applicable to certain
          price adjustments the Company proposes to make.

          Secured Financing

               On August 3, 1999, the Company collateralized a mortgage on
          one property for $6.6 million in a project specific, non-recourse
          loan from The Chase Manhattan Bank.  The loan will mature in 12
          years with an interest rate of 7.8%.  The proceeds from this loan
          are being used to fund construction in progress, fund joint
          venture opportunities with pension fund clients, and buy back a
          limited number of the Company's stock as authorized by the Board
          of Directors.

<PAGE>21


                        ASSOCIATED ESTATES REALTY CORPORATION
                  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                         CONDITION AND RESULTS OF OPERATIONS.

          Overview
               Associated Estates Realty Corporation (the "Company") is a
          self-administered and self-managed real estate investment trust
          ("REIT") which specializes in the acquisition, development,
          ownership and management of multifamily properties.  In
          connection with the merger of MIG Realty Advisors, Inc. ( MIGRA )
          on June 30, 1998, the Company also acquired the property and
          advisory management businesses of several of MIGRA's affiliates
          and the right to receive certain asset management fees, including
          disposition and incentive fees, that would have otherwise been
          received by MIGRA upon the sale of certain of the properties
          owned by institutions advised by MIGRA.  MIG II Realty Advisors,
          Inc. ("MIG") MIGRA's successor,  is a registered investment
          advisor and also functions as a mortgage banker and as a real
          estate advisor to pension funds.  MIG recognizes revenue
          primarily from its clients' real estate acquisitions and
          dispositions, loan origination and consultation, debt servicing,
          asset and property management and construction lending
          activities.  MIG earns the majority of its debt servicing fee
          revenue from two of its pension fund clients.  MIG's asset
          management, property management, investment advisory and mortgage
          servicing operations, including those of the prior MIG
          affiliates, are collectively referred to herein as the "MIGRA
          Operations".

               At June 30, 1999, the Company owned directly or indirectly,
          or was a joint venture partner in 97 multifamily properties
          containing 21,068 units.  Of these properties, 71 were located in
          Ohio, 11 in Michigan, two in Florida, two in Georgia, three in
          Maryland, one in North Carolina, one in Texas, one in Arizona,
          three in Indiana, one in California and one in Pennsylvania.
          Additionally, the Company managed 54 non-owned properties, 48 of
          which were multifamily properties consisting of 11,555 units (17
          of which are owned by various institutional investors consisting
          of 5,991 units) and six of which were commercial properties
          containing an aggregate of approximately 621,000 square feet of
          gross leasable area.  Through affiliates, collectively referred
          to as the "Service Companies", the Company provides property and
          asset management, investment advisory, painting and computer
          services as well as mortgage origination and servicing to both
          owned and non-owned properties.

               The following discussion should be read in conjunction with
          the financial statements and notes thereto appearing elsewhere in
          this report.  Historical results and percentage relationships set
          forth in the Consolidated Statements of Income contained in the
          financial statements, including trends which might appear, should
          not be taken as indicative of future operations.  This discussion
          may also contain forward-looking statements based on current
          judgments and current knowledge of management, which are subject
          to certain risks, trends and uncertainties that could cause
          actual results to vary from those projected.  Accordingly,
          readers are cautioned not to place undue reliance on forward-
          looking statements.  These forward-looking statements are
          intended to be covered by the safe harbor provisions of the
          Private Securities Litigation Reform Act of 1995.  Investors are
          cautioned that the Company's forward-looking statements involve
          risks and uncertainty, including without limitation, changes in
          economic conditions in the markets in which the Company owns
          properties, risks of a lessening of demand for the apartments
          owned by the Company, changes in government regulations affecting
          the Government-Assisted Properties, changes in or termination of
          contracts relating to third party management and advisory
          business, and expenditures that cannot be anticipated such as
          utility rate and usage increases, unanticipated repairs,
          additional staffing, insurance increases and real estate tax
          valuation reassessments.

          Liquidity and Capital Resources
               The Company has elected to be taxed as a REIT under Sections
          856 through 860 of the Internal Revenue Code of 1986, as amended,
          commencing with its taxable year ending December 31, 1993.  REITs
          are subject to a number of organizational and operational
          requirements including a requirement that 95% of the income that
          would otherwise be considered as taxable income be distributed to
          shareholders.  Providing the Company continues to qualify as a

<PAGE>22

          REIT, it will generally not be subject to a Federal income tax on
          net income.

               The Company expects to meet its short-term liquidity
          requirements generally through its net cash provided by
          operations, secured borrowings and property sales proceeds.  The
          Company believes that its net cash provided by operations will be
          sufficient to meet both operating requirements and the payment of
          dividends in accordance with REIT requirements.  During 1999 and
          2000, approximately $21.7 million and $109.4 million,
          respectively, of the Company's debt will mature.  Although the
          Company may no longer be in a position to access public unsecured
          debt markets due to revised credit ratings, the Company believes
          it has adequate alternatives available to provide for its
          liquidity needs including new secured borrowings and  property
          sales proceeds.

          Financing:
               As of August 12, 1999, the Company has received proceeds of
          $296.5 million in project specific, nonrecourse mortgage loans
          which are collateralized by 25 properties owned by qualified REIT
          subsidiaries, having a net book value of $357.8 million.  These
          qualified REIT subsidiaries are separate legal entities and
          maintain records, books of accounts and bank accounts separate
          and apart from any other person or entity.  Most of the proceeds
          from these loans were used to pay down the Company's floating
          rate unsecured line of credit facility.  The proceeds were also
          used to increase the Company's cash balances which will be used
          to fund construction in progress, fund joint venture
          opportunities with pension fund clients, and buy back limited
          quantities of the Company's stock as authorized by the Board of
          Directors.  Proceeds may also be used to repurchase a portion of
          the Company's senior unsecured debt.  There are no cross-default
          or cross-collateralization provisions in the mortgages.  After
          repayment of the unsecured line of credit facility, the Company's
          total floating rate debt outstanding was reduced to $18.2
          million, and all outstanding unsecured floating rate debt was
          repaid.  These nonrecourse financings have the effect of
          increasing the Company's weighted average debt maturity from
          approximately 3 years to approximately 9 years.

               Prior to its termination in May 1999, the Company had
          available a $250 million revolving credit facility (the "Line of
          Credit") which contained various restrictive covenants.  At
          December 31, 1998, $226.0 million was outstanding under this
          facility.  The weighted average interest rate on borrowings
          outstanding under the Line of Credit was 6.88% at December 31,
          1998, representing a variable rate based on the prime rate or
          LIBOR plus a specified spread, depending on the Company's long
          term senior unsecured debt rating from Standard and Poor's and
          Moody's Investors Service.  An annual commitment fee of 15 basis
          points on the maximum commitment, as defined in the agreement,
          was payable annually in advance on each anniversary date.  In May
          1999,  the Company  repaid all outstanding obligations under this
          Line of Credit through proceeds received from financing project
          specific, nonrecourse mortgage loans (Note 5) and terminated the
          facility.   The Company recognized an extraordinary charge of
          $1,808,742 which represents a $750,000 facility fee charge,
          $126,559 breakage fee, and a $932,183 write off of deferred
          finance costs related to the termination of the unsecured line of
          credit facility.

               The Company was in violation of certain financial ratio
          covenants under the Line of Credit for the first quarter 1998
          reporting period.  The Company received waivers of those
          violations through June 30, 1998.  Additionally, the Company
          advised its bank group that it was not in compliance with one of
          the financial covenants concerning the Company's net worth for
          the third quarter 1998 reporting period.  The net worth covenant
          required that the Company maintain a minimum net worth of $400
          million, based on a formula that incorporates the annualized
          multiple of the most recent quarter's earnings before interest,
          taxes, depreciation and amortization ("EBITDA"), as defined in
          the agreement.  The Company negotiated with its bank group for a
          waiver by the banks of the breach of the net worth covenant,
          along with an increase in borrowing costs under its Line of
          Credit from LIBOR plus 100 basis points to LIBOR plus 140 basis
          points (based on the then-current credit rating).  In addition,
          certain of the covenants, including the minimum net worth
          covenant, were modified to provide the Company a limited increase
          in flexibility.  The minimum net worth covenant was reduced from

<PAGE>23
          $400 million to $325 million.  The bank group continued to make
          advances under the Line of Credit following the Company's
          notification that it was not in compliance with the net worth
          covenant.  A $395,000 default waiver fee was paid in December
          1998 and was reflected in the Consolidated Statements of Income
          at December 31, 1998.

               MIGRA maintained a $500,000 Line of Credit facility ("MIGRA
          Line of Credit Facility") which the Company assumed at the time
          of the merger. During February 1999, the Company paid off the
          $446,565 outstanding MIGRA Line of Credit Facility and terminated
          this facility.

               Fifty-five (43 Market-rate Properties which refers to the
          Core and Acquired/Disposed Property portfolios and 12
          Government-Assisted Properties) of the Company's 90 (77
          Market-rate Properties and 13 Government-Assisted Properties)
          wholly owned properties were unencumbered at June 30, 1999 with
          annualized EBITDA of approximately $37.8 million (approximately
          $32.1 million represents the Market-rate Properties and
          approximately $5.7 million represents the Government-Assisted
          Properties) and a historical gross cost basis of approximately
          $389.4 million (approximately $354.3 million represents the
          Market-rate Properties and approximately $35.1 million
          represents the Government-Assisted Properties).  The remaining
          35 of the Company's wholly owned properties, (all of which are
          Market-rate Properties except one which is a Government-Assisted
          Property), have an historical gross cost basis of $518.9 million
          ($515.1 million represents the Market-rate Properties and $3.8
          million represents the Government-Assisted Property) and
          secured property specific debt of $369.2 million ($2.9 million
          relates to the Government-Assisted Property) at June 30, 1999.
          Unsecured debt, which totaled $197.4 million at June 30, 1999,
          consisted of $112.5 million in Medium-Term Notes and Senior
          Notes of $84.9 million.  The Company's proportionate share of
          the mortgage debt relating to the seven joint venture
          properties was $17.4 million at June 30, 1999.  The weighted
          average interest rate on the secured, unsecured and the
          Company's proportionate share of the joint venture debt was
          7.28% at June 30, 1999.

               After considering the effect of the August 3, 1999 $6.6
          million mortgage refinancing of one property, 54 (42 Market-rate
          Properties and 12 Government-Assisted Properties) of the
          Company's 90 (77 Market-rate Properties and 13 Government-Assisted
          Properties) wholly owned properties remain unencumbered with
          annualized EBITDA of approximately $37.1 million (approximately
          $31.4 million represents the Market-rate Properties and
          approximately $5.7 million represents the Government-Assisted
          Properties) and a historical gross cost basis of approximately
          $381.0 million (approximately $345.9 million represents the
          Market-rate Properties and approximately $35.1 million
          represents the Government-Assisted Properties).  The remaining
          36 of the Company's wholly owned properties (all of which are
          Market-rate Properties except one which is a Government-Assisted
          Property, have a historical gross cost basis of $527.2 million
          ($523.4 million represents the Market-rate Properties and $3.8
          million represents the Government-Assisted Property).

               The Company had 11 Medium-Term Notes (the "MTN's")
          outstanding having an aggregate balance of $112.5 million at June
          30, 1999 and December 31, 1998, respectively.  The principal
          amounts of these MTN's range from $2.5 million to $20 million and
          bear interest from 6.18% to 7.93% over terms ranging from two to
          30 years, with a stated weighted average maturity of 8.77 years
          at June 30, 1999.  The holders of two MTN's with stated terms of
          30 years each have a right to repayment in five and seven years
          from the issue date of the respective MTN.  If these holders
          exercised their right to prepayment, the weighted average
          maturity of the MTN's would be 4.41 years.

               The Company's current MTN Program provides for the issuance,
          from time-to-time, of up to $102.5 million of MTN's due nine
          months or more from the date of issue and may be subject to
          redemption at the option of the Company or repayment at the
          option of the holder prior to the stated maturity date.  These
          MTN's may bear interest at fixed rates or at floating rates and
          can be issued in minimum denominations of $1,000.  At June 30,
          1999, there are $62.5 million of additional MTN borrowings
          available under the program. However, due to the downgrades of
          the Company's credit rating to a non-investment grade rating in
          March, June and July 1999, the Company does not anticipate near
          to intermediate issuance of additional MTN's or similar unsecured
          debt instruments.

          Registration statements:
               The Company has a shelf registration statement on file with
          the Securities and Exchange Commission relating to the proposed
          offering of up to $368.8 million of debt securities, preferred
          shares, depositary shares, common shares and common share
          warrants.  The total amount of the shelf filing includes a $102.5
          million MTN Program of which MTN's totaling $40.0 million have
          been issued leaving $62.5 million available. The securities may
          be offered from time to time at prices and upon terms to be
          determined at the time of sale.  However, due to the currently
          depressed price of the Company's common shares and downgrades of
          the Company's public debt and preferred stock in March, June and
          July 1999, it is unlikely that the Company will be in a position
          to offer any securities under its shelf registration statement in
          the near future.

<PAGE>24
          Operating Partnership:
               The Company entered into an operating partnership structured
          as a DownREIT of which an aggregate 20% is owned by limited
          partners.  Interests held by limited partners in real estate
          partnerships controlled by the Company are reflected as
          "Operating partnership minority interest" in the Consolidated
          Balance Sheets.  Capital contributions, distributions and profits
          and losses are allocated to minority interests in accordance with
          the terms of the operating partnership agreement.  In conjunction
          with the acquisition of the operating partnership, the Company
          issued a total of 522,032 operating partnership units ("OP
          units") which consist of 84,630 Class A OP units, 36,530 Class B
          OP units, 115,124 Class C OP units, 62,313 Class D OP units, and
          223,435 Class E OP units.  These OP units may, under certain
          circumstances, become exchangeable into common shares of the
          Company on a one-for-one basis.  The Class A unitholders are
          entitled to receive distributions per OP unit equal to the per
          share distributions on the Company's common shares.  At June 30,
          1999, the Company  charged $64,521 to minority interest in
          operating partnership in the Consolidated Statements of Income
          relating to the Class A unitholders  allocated share of net
          income.  At June 30, 1999, the Class B, Class C, Class D and
          Class E unitholders were not entitled to receive an allocation of
          net income and did not receive nor were entitled to receive any
          cash distributions from the operating partnership.

          Merger Contingent Consideration Payable:
               Subject to certain conditions and adjustments, the MIGRA
          Stockholders' Conversion Rights entitle the MIGRA Stockholders to
          receive (a) on the second issuance date (June 30, 1999), $872,935
          worth of common shares of the Company at $11.64 per share, the
          average closing price of the common shares for the 20 trading
          days immediately preceding June 30, 1999, (approximately 74,994
          common shares) subject to certain price adjustments as provided
          for in the Merger Agreement and (b) on the third issuance date
          (June 30, 2000) $2,982,917 worth of common shares of the Company
          of which $872,935 is based on the average closing price of the
          common shares for the 20 trading days immediately preceding the
          date the consideration was met and $2,109,982 is based on a
          closing price of $23.63 per the merger agreement.  The obligation
          of the Company to issue common shares on the second issuance date
          was contingent upon the issuance of a certificate of occupancy
          for the Windsor Pines property and the MIGRA stockholders'
          submission to the Company of multifamily property acquisition
          opportunities with an aggregate gross asset value of at least $50
          million and an average yield of at least 85% of the pro forma
          yield of the properties being acquired by the Company in
          connection with the acquisitions (the "Minimum Yield").  The
          obligation of the Company to issue common shares on the third
          issuance date is contingent upon the issuance of a certificate of
          occupancy for the Windsor at Kirkman property and the MIGRA
          stockholders' submission to the Company of an additional $50
          million of multifamily property acquisition opportunities with
          the Minimum Yield.  On July 14, 1999, the Company issued 11,249
          common shares to one of the MIGRA shareholders relating to a
          partial settlement of the contingent consideration payable in
          respect of the amounts due on the first anniversary of the
          merger.  The shares were issued at $11.64, representing the
          average closing price of the common shares for the 20 trading
          days immediately preceding June 30, 1999.  The remaining common
          shares payable with respect to the first anniversary payment is
          under review by the Company's management and the MIGRA
          shareholders since the language in the governing document requires
          further review as applicable to certain price adjustments the Company
          proposes to make.  The conditions precedent to the first anniversary
          payment were met in December 1998.  The contingencies precedent
          to the third payment have not been met as of June 30, 1999.

          Acquisitions, development and dispositions:
               Should the Company acquire any multifamily properties in
          1999, it would finance such acquisitions and development with the
          most appropriate sources of capital, which may include the
          assumption of mortgage indebtedness, bank and other institutional
          borrowings, through the exchange of properties, undistributed
          Funds From Operations, or secured debt financings.

               The Company currently has a letter of intent to purchase one
          multifamily property, located in Lawrenceville, Georgia,
          containing an aggregate of 308 units for a total purchase price
          of approximately $23.4 million.  The Company may finance the
          acquisition of the multifamily property or may purchase the


<PAGE>25
          property in a joint venture transaction using the funds received
          from the sale of five operating properties, which have been set
          aside to execute a like-kind exchange and proceeds received from
          the project specific, nonrecourse mortgage refinancing.

               For the six month period ended June 30, 1999, the Company
          completed the construction and leasing of 204 units at two of the
          Company's development properties.

               The Company is in the process of constructing or planning
          the construction of an additional 1,557 units to be owned by the
          Company as follows:

<TABLE>
<CAPTION>


                                                       Additional  Anticipated
            Property                  Location            Units     Completion
   -----------------------    ---------------------    ---------- -------------
   <S>                        <C>                         <C>     <C>
   Arbor Landings Apts. II    Ann Arbor, Michigan          160    3rd Qtr. 1999
   Boggs Road                 Atlanta, Georgia             535         TBD
   The Landings at the
     Preserve(a)              Battle Creek, Michigan        90         TBD
   Village at Avon            Avon, Ohio                   312    4th Qtr. 2000
   Windsor at Kirkman
     Apartments               Orlando, Florida             460    3rd Qtr. 1999
                                                         -----
                                                         1,557
          (a) A clubhouse will also be added to The Landings at the
          Preserve.
          TBD - To be determined.
</TABLE>


               The Company is exploring opportunities to dispose of some of
          its joint venture, Government-Assisted and congregate care
          multifamily properties.  The Company has retained a financial
          advisor to evaluate the alternatives relating to the disposition
          of its ownership of some of its Government-Assisted properties.

               The Company has entered into a contract to sell one of its
          Market-rate properties.  This property is located in  California.
          The Company anticipates that this asset will be sold during 1999.
          The net real estate assets of this property is presented in the
          Consolidated Balance Sheet as property held for sale.

               The sale of any or all of these assets may have either an
          accretive or dilutive effect on earnings depending upon the
          application of proceeds derived from the sale, which will not be
          known until the time of sale.

               In June 1999, the Company sold five operating properties for
          net cash proceeds of $13.4 million, resulting in a gain of $12.8
          million.  The net cash proceeds were placed in a trust which
          restricts the Company's use of these funds for the exclusive
          purchase of other property of like-kind and qualifying use.
          These funds are presented in the Consolidated Balance Sheet as
          restricted cash.  The like-kind exchange must occur prior to
          December 3, 1999.

               On May 4, 1999, a pension fund client of MIG acquired a
          multifamily property containing 248 units located in Fairfax
          County, Virginia.  MIG was retained to provide asset and property
          management services.

               On July 14, 1999, MIG signed a contract with one of the
          Company's major pension fund clients pursuant to which MIG will
          continue to manage existing properties and the client has
          committed to allocate up to $200 million in new, discretionary
          funds to purchase additional properties.


<PAGE>26
          Management Contract Cancellation:
               On January 13, 1999, the Company terminated its management
          contract for Longwood Apartments, which resulted in a loss of
          management fee income for the six months ended June 30, 1999 of
          approximately $148,000.  Moreover, pursuant to the terms of the
          HUD Settlement Agreement discussed in Note 7 of the notes to the
          financial statements, the Company may terminate its management
          contract for Park Village Apartments, which will result in a
          partial loss of management fee income in 1999.  The management
          fees collected for Park Village Apartments for the six months
          ended June 30, 1999 were $11,083.

               In addition, pursuant to the terms of a separate settlement
          agreement with affiliates entered into in conjunction with the
          settlement agreement with the Corporation as discussed in Note 8,
          the Company has agreed to end its management of certain
          commercial properties owned by certain affiliated persons upon 60
          days prior written notice from the respective owners of those
          properties.  The management fees generated from those commercial
          properties for the six months ended June 30, 1999 was $56,242.
          Subsequent to June 30, 1999, the 60 days written notice to cancel
          the management of two commercial properties was received.  The
          management fees generated from these two commercial properties
          was $15,500 for the six months ended June 30, 1999.

               The Company has also lost management fees from Euclid
          Medical & Commercial Arts Building, a non-owned commercial
          property, because of foreclosure proceedings.  During March 1999,
          the Company lost management of this property.  The management
          fees generated from this property for the three months ended
          March 31, 1999 was $20,728; no fees were recognized for the
          period after March 31, 1999.

               In addition, if the Company proceeds with the proposed sale
          of its interests in certain joint venture properties, the Company
          would no longer receive the management fees attributable to those
          properties and one other property.  The management fees net of
          consulting fees generated for these properties for the six months
          ended June 30, 1999 was $431,549.  Certain third party owners of
          properties currently managed by the Company have entered into
          contracts to sell those properties, subject to certain
          contingencies.  To the extent those third party owned properties
          are sold, the Company would similarly no longer receive the
          management fees generated from the respective properties.  The
          aggregate management fees generated for these properties for the
          six months ended June 30, 1999 was $196,055.  The impact of the
          loss of these management fee revenues would be partially offset
          by a reduction in operating expenses.

          Dividends:
               On June 21, 1999, the Company declared a dividend of $0.375
          per common share for the quarter ending June 30, 1999, which was
          paid on August 2, 1999 to shareholders of record on July 15,
          1999.  The common share dividend was reduced to $0.375 from
          $0.465 in order to reduce the Company's dividend payout ratio.
          On May 20, 1999, the Company declared a dividend of $0.60938 per
          Depositary Share on its Class A Cumulative Preferred Shares (the
          "Perpetual Preferred Shares") which was paid on June 15, 1999 to
          shareholders of record on June 1, 1999.  At the current dividend
          level, the Company is a net borrower and will continue to monitor
          earnings expectations to determine if any changes should be made
          with respect to the dividend policy.

          Cash flow sources and applications:
               Net cash provided by operating activities decreased
          $3,080,500 from $23,332,500 to $20,252,000  for the six months
          ended June 30, 1999 when compared with the six months ended June
          30, 1998. This decrease was the result of increases in depreciation
          and amortization, restricted cash and other operating assets and
          liabilities offset by funds received from accounts and notes
          receivable of affiliates and joint ventures and decreases in funds
          held for non-owned managed properties of affiliates and joint
          ventures as well as an increase in accounts payable and accrued
          expenses.

<PAGE>27

               Net cash flows used for investing activities of $20,877,100
          for the six months ended June 30, 1999 were primarily used for
          the development of multifamily real estate and acquisition of
          capital expenditures.

               Net cash flows provided by financing activities of
          $25,166,400 for the six months ended June 30, 1999 were primarily
          comprised of proceeds received from the mortgage financing of 24
          properties.  Funds were also used to pay dividends on the
          Company's common and Perpetual Preferred Shares as well as
          repayments on the Line of Credit.

               During the remainder of 1999 and 2000, approximately $131.1
          million of the Company's debt will mature.  The Company intends
          to repay any such debt as it matures through a combination of new
          secured borrowings and property sales proceeds.

          RESULTS OF OPERATIONS
          Comparison of the quarter ended June 30, 1999 to the quarter
          ended June 30, 1998

               In the following discussion of the comparison of the quarter
          ended June 30, 1999 to the quarter ended June 30, 1998, Market-
          rate Properties refers to the Core and Acquired/Disposed Property
          portfolios.  Core Properties represents 29 of the 34 wholly owned
          multifamily properties acquired by the Company at the time of the
          IPO and the 46 properties acquired in separate transactions or
          developed by the Company during 1994 through March 31, 1998 and
          the acquisition of the remaining 50% interest in two properties
          in which the Company was a joint venture partner at the time of
          the IPO.  Acquired/Disposed Properties refers to 13 properties
          which were acquired between April 1, 1998 and June 30, 1999 as
          well as the newly constructed and repositioned properties, the
          sale of five operating properties and Rainbow Terrace Apartments.

               Overall, total revenue increased $6,467,800 or 19.7% and
          total expenses increased $11,284,600  or 40.4% for the quarter.
          Net income applicable to common shares after deduction for the
          dividends on the Company's Perpetual Preferred Shares increased
          $6,390,700 or 178.1%.

               During the quarter ended June 30, 1999, the Market-rate
          Properties generated total revenues of $33,823,900 while
          incurring property operating and maintenance expenses of
          $15,438,500. Of these amounts, the Acquired/Disposed and Core
          Properties contributed total revenues of $8,618,000 and
          $25,206,000, respectively, while incurring property operating and
          maintenance expenses of $3,945,300  and $11,493,200,
          respectively.  The Government-Assisted Properties generated total
          revenues of $2,486,800 while incurring property operating and
          maintenance expenses of $1,019,200 for the quarter ended June 30,
          1999.

          Rental Revenues:
               Rental revenues increased $5,214,300 or 16.9% for the
          quarter.  Rental revenues from the Acquired/Disposed Properties
          increased $5,021,900 for the quarter.  Occupancy and unit rents
          at the Core Properties and Government-Assisted Properties
          resulted in an increase of $174,800 or .70% and $12,900 or .53%,
          respectively, in rental revenue from these properties.

          Other Revenues:
               Other income decreased $110,300 or 29.1% for the quarter.
          The decrease is due primarily to the receipt of a workers
          compensation refund during the second quarter of 1998.

               The Company recognized property and asset management fee
          revenues of $1,329,400 and $588,200, respectively, for the
          quarter ended June 30, 1999 as compared to $881,200 of property
          management fees and no asset management fees for the quarter
          ended June 30, 1998.  The increase in property and asset
          management fee revenues is primarily due to the  collection of
          these fees by MIGRA relating to their institutional investor
          clients.


<PAGE>28
               The Company recognized asset acquisition fee revenue of
          $121,700 and $0 for the quarters ended June 30, 1999 and 1998,
          respectively.  The fee relates to MIG acquiring a multifamily
          property on behalf of a pension fund client in May 1999.

          Property operating and maintenance expenses:
               Property operating and maintenance expenses increased
          $3,539,000 or 27.4% for the quarter.  Property operating and
          maintenance expenses at the Acquired/Disposed Properties
          increased $2,093,900 for the quarter due primarily to the
          operating and maintenance expenses incurred at the 13 properties
          acquired in 1998, the newly constructed properties of The Village
          of Western Reserve and The Residence at Barrington.  Property
          operating and maintenance expenses at the Core Properties
          increased $1,386,900, or 13.7% when compared to the three months
          ended June 30, 1998 primarily due to increases in personnel,
          utilities, building and grounds repair and maintenance, and real
          estate and local taxes.  Property operating and maintenance
          expenses at the Government-Assisted Properties increased $58,200
          or 6.1% for the quarter

          Other expenses:
               Depreciation and amortization increased $2,621,100 or 45.9%
          for the quarter primarily due to the increased depreciation
          expense recognized on the Acquired/Disposed Properties and the
          additional depreciation as a result of the adoption of the new
          capitalization policy as well as the amortization expense of the
          intangible assets recorded with respect to the merger with MIGRA.
          The amortization expense related to the intangible assets is
          reflected as a charge to the Management and Service Operations.

               General and administrative expenses increased $3,019,600 or
          172.8% for the quarter.  This increase is primarily attributable
          to payroll and related expenses due to the expense of the MIGRA
          advisory operations and other consulting and professional fees
          incurred by the Company principally related to system processes
          and operating consulting services.  During the second quarter of
          1999, a severance benefit of $550,000 was paid to an executive
          officer of the Company.  The increase related to general and
          administrative expenses of  approximately $2,522,000 is
          classified as Unallocated Corporate Overhead.

               Interest expense increased $1,992,400 or 28.0% for the
          quarter primarily due to the interest incurred with respect to
          the project specific, nonrecourse mortgage financing
          collateralized by 24 properties owned by the REIT.

               The Company recognized a charge for funds advanced to a non-
          owned property totaling $150,000 for the quarter ended June 30,
          1999.  The Company is continuing its collection efforts in
          connection with this receivable.

               The gain on sale of properties of $12,830,300 for 1999
          resulted from the sale of five operating properties.

          Extraordinary items:
               The extraordinary item of $1,808,700 recognized during 1999
          represents a $750,000 facility fee charge, $126,500 interest
          breakage fee and a $932,200 write off of deferred finance costs
          related to the termination of the unsecured line of credit
          facility.  The $124,900 charge recognized in 1998 relates to the
          write off of the deferred financing fees related to the
          termination of a $100 million unsecured revolving credit
          facility.

<PAGE>29
          Net income applicable to common shares:
               Net income applicable to common shares is equal to net
          income less dividends on the Perpetual Preferred Shares of
          $1,371,100.

          RESULTS OF OPERATIONS
          Comparison of the six months ended June 30, 1999 to the six
          months ended June 30, 1998

               In the following discussion of the comparison of the six
          months ended June 30, 1999 to the six months ended June 30, 1998,
          Market-rate Properties refers to the Core and Acquired/Disposed
          Property portfolios.  Core Properties represents 29 of the 34
          wholly owned multifamily properties acquired by the Company at
          the time of the IPO, the 41 properties acquired in separate
          transactions or developed by the Company during 1994 and 1997 and
          the acquisition of the remaining 50% interest in two properties
          in which the Company was a joint venture partner at the time of
          the IPO.  Acquired/Disposed Properties refers to 18 properties
          which were acquired between January 1, 1998 and June 30, 1999 as
          well as the newly constructed and repositioned properties, the
          sale of five operating properties and Rainbow Terrace Apartments.

               Overall, total revenue increased $13,825,000 or 21.8% and
          total expenses increased $21,201,600  or 39.2% for the six month
          period.  Net income applicable to common shares after deduction
          for the dividends on the Company's Perpetual Preferred Shares
          increased $8,055,000 or 119.5%.

               During the six months ended June 30, 1999, the Market-rate
          Properties generated total revenues of $66,872,300 while
          incurring property operating and maintenance expenses of
          $29,873,700.  Of these amounts, the Acquired/Disposed and Core
          Properties contributed total revenues of $23,710,700 and
          $43,161,600, respectively, while incurring property operating and
          maintenance expenses of $10,790,400 and $19,083,300,
          respectively.  The Government-Assisted Properties generated total
          revenues of $4,934,000 while incurring property operating and
          maintenance expenses of $2,012,300 for the six months ended June
          30, 1999.

          Rental Revenues:
               Rental revenues increased $11,500,400 or 19.2% for the six
          month period.  Rental revenues from the Acquired/Disposed
          Properties increased $11,518,700 for the six month period.
          Occupancy and suite rents at the Core and Government-Assisted
          Properties resulted in a decrease of $19,400 or .05% and $15,400
          or .31%, respectively, in rental revenue from these properties.

          Other Revenues:
               The Company recognized property and asset management fee
          revenues of $2,625,100 and $1,174,100, respectively, for the six
          months ended June 30, 1999 as compared to $1,830,000 of property
          management fees and no asset management fees for the six months
          ended June 30, 1998.  The increase in property and asset
          management fee revenues is primarily due to the collection of
          these fees by MIGRA relating to their institutional investor
          clients.

               The Company recognized asset acquisition fee revenue of
          $121,700 and $0 for the quarters ended June 30, 1999 and 1998,
          respectively.  The fee relates to MIG acquiring a multifamily
          property on behalf of a pension fund client in May 1999.

          Property operating and maintenance expenses:
               Property operating and maintenance expenses increased
          $6,747,000 or 26.8% for the six month period.  Property operating
          and maintenance expenses at the Acquired/Disposed Properties
          increased $4,896,300 or 83% for the six month period due
          primarily to the operating and maintenance expenses incurred at
          the 18 properties acquired between January 1, 1998 and June 30,
          1999 as well as the newly constructed and repositioned
          properties.  Property operating and maintenance expenses at the
          Core Properties increased $1,629,600 or 9.3% when compared to the
          prior six month period primarily due to increases in personnel,
          utilities, real estate taxes and local taxes, and the one time
          effect of additional operating expenses related to refining

<PAGE>30
          certain cutoff procedures and its estimation process for the
          accumulation of property operating expense accrual adjustments.
          Property operating and maintenance expenses at the Government-
          Assisted Properties increased $141,400 or 7.6% for the quarter
          due to an increase in other operating expenses.

          Other expenses:
               Depreciation and amortization increased $5,582,400 or 50.6%
          for the six months ended June 30, 1999 primarily due to the
          increased depreciation expense recognized on the
          Acquired/Disposed Properties and the additional depreciation as a
          result of the adoption of the new capitalization policy as well
          as the amortization expense of the intangible assets recorded
          with respect to the merger with MIGRA.  The amortization expense
          related to the intangible assets is reflected as a charge to the
          Management and Service Operations.

               General and administrative expenses increased $4,978,700 or
          138.9% for the six months ended June 30, 1999.  This increase is
          primarily attributable to payroll and related expenses due to the
          expense of the MIGRA advisory operations and other consulting and
          professional fees incurred by the Company principally related to
          system processes and operating consulting services.  During the
          second quarter of 1999, a severance benefit of $550,000 was paid
          to an executive officer of the Company.  The increase related to
          general and administrative expenses of approximately $3,881,000
          is classified as Unallocated Corporate Overhead.

               Interest expense increased $3,811,600 or 28.1% for the six
          months ended June 30, 1999  primarily due to the interest
          incurred with respect to the project specific, nonrecourse
          mortgage financing collateralized by 24 properties owned by the
          REIT.

               The Company recognized a charge for funds advanced to a non-
          owned property totaling $150,000 for the six months ended June
          30, 1999.  The Company is continuing its collection efforts in
          connection with this receivable.

               The gain on sale of properties of $12,830,300 for 1999
          resulted from the sale of five operating properties.

          Extraordinary items:
               The extraordinary item of $1,808,700 recognized during 1999
          represents a $750,000 facility fee charge, $126,500 interest
          breakage fee and a $932,200 write off of deferred finance costs
          related to the termination of the unsecured line of credit
          facility.  The $124,900 charge recognized in 1998 relates to the
          write off of the deferred financing fees related to the
          termination of a $100 million unsecured revolving credit
          facility.

          Cumulative effect:
               Effective January 1, 1999, the Company changed its method of
          accounting to capitalize expenditures for certain replacements
          and improvements, such as new HVAC equipment, structural
          replacements, appliances, flooring, carpeting and kitchen/bath
          renovations to the capitalization method.  Previously, these
          costs were charged to operations as incurred.  Ordinary repairs
          and maintenance, such as suite cleaning and painting, and
          appliance repairs are expensed.  The Company believes the change
          in the capitalization method provides an improved measure of the
          Company s capital investment, provides a better matching of
          expenses with the related benefit of such expenditures, including
          associated revenues, and is in the opinion of management,
          consistent with industry practice.  The cumulative effect of this
          change in accounting principle increased net income for the six
          months ended June 30, 1999  by $4,319,162 or $.19 per share
          (basic and diluted).  The effect of this change was to increase
          income before cumulative effect of a change in accounting
          principle by $3,389,087 or $.15 per share (basic and diluted) for
          the six months ended June 30, 1999.   The pro forma amounts shown
          on the income statement have been adjusted to reflect the

<PAGE>31
          retroactive application of the capitalization of such
          expenditures and related depreciation for the six months ended
          June 30, 1998 of which increased net income by $323,302 or $.02
          per share (basic and diluted).

          Net income applicable to common shares:
               Net income applicable to common shares is reduced by
          dividends on the Perpetual Preferred Shares of $2,742,200.

          Equity in net income of joint ventures:
               The combined equity in net income of joint ventures
          increased $93,400 or 54.8% and $30,500 or 14.7% for the three and
          six months ended June 30, 1999 and 1998, respectively.  The
          increase is due primarily to a decrease in the costs of
          operations.

               The following table presents the historical statements of
          operations of the Company's beneficial interest in the operations
          of the joint ventures for the three and six months ended June 30,
          1999 and 1998.

<TABLE>
<CAPTION>


                                 For the three months
                                        ended                For the six months
                                        June 30,               ended June 30,
                              ----------  -----------   -----------   -----------
                                  1999         1998          1999          1998
                              ----------  ------------  -----------   -----------
   <S>                        <C>          <C>           <C>           <C>
   Beneficial interests in
     joint venture operations
       Rental revenue         $ 1,803,928  $ 1,746,864   $ 3,528,236   $ 3,472,360
       Cost of operations         968,719    1,034,405     2,057,100     2,171,510
                               ----------  -----------   -----------    ----------
                                  835,209      712,459     1,471,136     1,300,850
       Interest income              8,056       14,114        11,310        14,771
       Interest expense          (430,041)    (436,132)     (944,976)     (872,948)
       Depreciation              (136,713)    (107,067)     (275,545)     (212,577)
       Amortization               (12,405)     (12,709)      (24,555)      (23,209)
                              ------------ -----------   -----------   -----------
       Net income             $   264,106  $   170,665   $   237,370   $   206,887
                              ===========  ===========   ===========   ===========
</TABLE>

          Outlook

               The long term goal for the Company is to acquire and develop
          a portfolio of economically and geographically diversified
          institutional quality multifamily assets.  The goal extends to
          the effective and efficient operation and management of those
          assets.  Implementation of this goal will be through balanced
          investment in direct acquisition and co-investment with
          institutional investors.

               It is expected that individual acquisitions will be located
          in the select metropolitan areas of Atlanta, Washington, D.C.,
          Orlando, South Florida and Tampa until operational efficiencies
          are maximized.   Management believes that these markets offer
          excellent diversification characteristics as well as growth
          potential.  Over the next several years, the Company's focus is
          expected to expand to multiple major markets.  In addition to
          these direct investment markets, the Company plans to co-invest
          with institutional clients in many markets that are in the long
          term investment horizon.  As with all growth markets at this
          time, new development is active in these markets.  The Company's
          market research and operational experience in these areas will
          guide site selection and pricing.

               Investing for and with institutional investors is a major
          component of the Company's growth strategy.  The recent
          allocation from two advised clients for discretionary multifamily
          acquisition will enhance the Company's acquisition efforts.
          Purchases on behalf of these clients are expected to  improve
          operational efficiency and generate advisory income.

<PAGE>32

               In addition to acquisitions on behalf of advised clients,
          the Company is initiating co-investment with institutional
          investors.  These co-investments will include both purchase and
          development opportunities.  Co-investment in the purchase of
          stabilized assets is expected to offer low volatility and
          immediate cash flow.  The development program allows the Company
          and its institutional partners to seek the high yields
          anticipated with development.  The expected equity division for
          both co-investment forms is 25% from the Company and 75% from
          institutional investors.

               Management believes this co-investment program should allow
          the Company to increase operational efficiency in growth markets
          at a more rapid pace than direct individual investment because it
          requires less capital resources from the Company but allows the
          Company to apply its expertise in multifamily management.  The
          programs described above are currently being actively marketed
          and there can be no assurance that the Company will be able to
          attract institutional capital to fund these programs.

               Given the Midwestern concentration of the Market-rate
          portfolio, management's performance expectations are consistent
          with the recent past.  Management projects that the market-rate
          rental growth for existing assets will be a modest 2.5% over the
          next twelve months.  General market expectations for locations
          where the Company has significant concentrations are as follows:
          Columbus is experiencing construction levels consistent with
          recent employment growth, Cleveland continues to exhibit
          stability, Michigan markets are slowing from rapid growth in
          1998, Indianapolis continues to  improve, Washington, D.C.,
          Atlanta, and South Florida are in equilibrium with significant
          additions to employment and multifamily  supply, and Orlando is
          currently performing well in spite of significant construction.

          Inflation
               Management's belief is that any effects of minor inflation
          fluctuations would be minimal on the operational performance of
          its portfolio primarily due to the high correlation between
          inflation and housing costs combined with the short term nature,
          typically one year, of the leases.  In addition, the fixed rate
          nature of the Company's debt obligations virtually eliminates any
          negative effect of inflation on income.

<PAGE>33

          Quantitative and Qualitative Disclosures About Market Risk

               At June 30, 1999, the Company had $18.2 million of variable
          rate debt.  Additionally, the Company has interest rate risk
          associated with fixed rate debt at maturity.

               Management has and will continue to manage interest rate
          risk as follows:  (i) maintain a conservative ratio of fixed
          rate, long term debt to total debt such that variable rate
          exposure is kept at an acceptable level; (ii) consider a hedge
          for certain long term variable rate debt through the use of
          interest rate swaps or interest rate caps; and (iii) use treasury
          locks where appropriate to hedge rates on anticipated debt
          transactions.  Management uses various financial models and
          advisors to achieve those objectives.

               The table below provides information about the Company's
          financial instruments that are sensitive to changes in interest
          rates.  For debt obligations, the table presents principal cash
          flows and related weighted average interest rates by expected
          maturity dates.

<TABLE>
<CAPTION>

                                                 Expected Maturity Date
                                   ------------------------------------------------
            Long term debt             1999        2000         2001        2002

   <S>                             <C>           <C>        <C>            <C>
   Fixed:
    Fixed rate mortgage debt       $  1,541,399$ 18,139,118 $ 14,822,243$  4,003,176
    Weighted average interest rate        7.63%       7.62%        7.56%       7.53%

    MTN's                            20,000,000           -   10,000,000  15,000,000
    Weighted average interest rate        6.95%           -        7.12%       7.09%

    Senior notes                              -  74,947,703            -  10,000,000
    Weighted average interest rate            -       8.23%            -       7.10%
                                   -------------------------------------------------
    Total fixed rate debt          $ 21,541,399$ 93,086,821 $ 24,822,243$ 29,003,176

   Variable:
    Variable rate mortgage debt    $    184,615$     61,687 $ 16,314,997$     75,283
                                   -------------------------------------------------
   Total long term debt            $ 21,726,014$ 93,148,508 $ 41,137,240$ 29,078,459
                                   =================================================

                                    Expected Maturity Date
                                    ---------------------                 Fair Market
            Long term debt            2003     Thereafter      Total         Value
   Fixed:                          ---------------------------------------------------
    Fixed rate mortgage debt       $ 4,325,742$308,177,917 $ 351,009,595 $ 355,128,700
    Weighted average interest rate       7.53%       7.57%         7.21%             -

    MTN's                           12,500,000  55,000,000   112,500,000   116,146,455
    Weighted average interest rate       7.12%       7.23%         6.95%             -

    Senior notes                             -           -    84,947,703    88,121,306
    Weighted average interest rate           -           -         8.23%             -
                                   ---------------------------------------------------
    Total fixed rate debt          $16,825,742$363,177,917 $ 548,457,298 $ 559,396,461

   Variable:
    Variable rate mortgage debt    $    83,165$  1,497,734 $  18,217,481 $  18,503,897
                                   ---------------------------------------------------
   Total long term debt            $16,908,907$364,675,651 $ 566,674,779 $ 577,900,358
                                   ===================================================
</TABLE>

               On August 3, 1999, the Company collateralized an individual
          mortgage on one property for $6.6 million in project specific,
          nonrecourse loans from The Chase Manhattan Bank.  The loan has a
          maturity of 12 years and a fixed interest rate of 7.8%.

          Sensitivity Analysis
               The Company estimates that a 100 basis point decrease in
          market interest rates would have changed the fair value of fixed
          rate debt to a liability of $607.1 million.  The sensitivity to
          changes in interest rates of the Company's fixed rate debt was
          determined with a valuation model based upon changes that measure
          the net present value of such obligation which arise from the
          hypothetical estimate as discussed above.

<PAGE>34

          Year 2000 Compliance
               The year 2000 issue ("Year 2000") is the result of computer
          programs being written using two digits rather than four to
          define the applicable year.  Any of the Company's computer
          programs or hardware that have date sensitive software or
          embedded chips may recognize a date using "00" as the year 1900
          rather than the year 2000.  This could result in a system failure
          or miscalculations causing disruptions of operations, including,
          among other things, a temporary inability to process
          transactions, pay vendors or engage in similar normal business
          activities.

               The Company believes that it has identified all of its
          information technology ("IT") and non-IT systems to assess their
          Year 2000 readiness.  Critical IT systems include, but are not
          limited to, operating and data networking and communication
          systems, accounts receivable and rent collections, accounts
          payable and general ledger, human resources and payroll, cash
          management and all IT hardware (such as servers, desktop/laptop
          computers and data networking equipment).  Critical non-IT
          systems include telephone systems, fax machines, copy machines
          and property environmental, access and security systems (such as
          elevators and alarm systems).

               The Company's plan to resolve the Year 2000 issue involves
          the following four phases:  assessment, remediation, testing and
          implementation.  The Company has conducted an assessment and/or
          survey of its core IT and non-IT systems at both its corporate
          offices and properties and believes it is 95% complete on such
          assessment which is currently under review by the Company's
          technical staff.

               Much of the mission critical operating systems, networking
          and accounting software that has been purchased over the past few
          years has been represented by vendors to already be Year 2000
          compliant.  The property management software currently being
          tested and used at the Company's corporate offices and which is
          to be rolled out to the properties during the second and third
          quarters of 1999 has been affirmed by the vendor to be tested and
          Year 2000 compliant.  Hardware upgrades at all of the properties
          are expected to be complete by September 1999 to ensure all
          hardware is compliant.  Testing by the Company of all such
          critical systems represented by the vendors to be compliant is
          expected to be complete by September 1999.

               The estimated costs of these upgrades and conversions should
          not exceed $500,000 and have been considered in the Company's
          cash flow requirements for 1999.

               The Company believes it has identified all non-IT systems at
          all properties and expects to have 90% of its remediation and/or
          testing complete on these systems by September of 1999.  While a
          complete technical assessment of all such systems is not final,
          the Company does not anticipate expenditures in excess of
          $500,000 to remediate non-IT systems at the properties since
          findings to date suggest a low incidence of non-compliance on
          critical systems.  The Company has engaged an outside technical
          consultant to work with its internal technical staff to assist in
          finalizing such assessment, remediation and testing.

               In most cases, various third party vendors have been queried
          on their Year 2000 readiness.  While many responses have been
          received to such queries (especially by banks and other large
          financial institutions), many vendors have not yet responded.
          The Company will continue to query its significant suppliers and
          vendors to determine the extent to which the Company's interface
          systems are vulnerable to those third parties' failure to
          remediate their own Year 2000 issues.  To date, the Company is
          not aware of any significant suppliers or vendors with a Year
          2000 issue that would materially impact the Company's results of
          operations, liquidity or capital resources.  However, there can
          be no assurances that the systems of other companies, on which
          the Company's systems rely, will be timely converted and would
          not have an adverse effect on the Company's systems.


<PAGE>35
               The Company believes it has an effective program in place
          that will resolve the Year 2000 issue in a timely manner.  In
          addition, the Company has commenced its contingency planning for
          critical operational areas that might be affected by the Year
          2000 issue if compliance by the Company is delayed.  The
          Company's contingency plans will involve training and increased
          awareness at the property management level, manual workarounds
          and adjustment of staffing strategies.  The Company intends to
          have its contingency planning complete in the third quarter of
          1999.

               Aside from the catastrophic failure of banks or government
          agencies, the Company believes it could continue its normal
          business operations if compliance by the Company is delayed.  In
          the event of such catastrophic failures, the Company would be
          unable to deposit rent checks, transfer cash, wire money, pay
          vendors by check, or invest excess funds.  The Company could be
          subject to litigation for its inability to access cash to pay
          vendors or failure to properly record business transactions or if
          security or access systems fail at properties.  However, given
          that the Company intends to have contingency planning in place
          and that the nature of its day-to-day real estate operations is
          not heavily reliant on technology, the Company does not believe
          that the Year 2000 issue will materially impact its results of
          operations, liquidity or capital resources.

          CONTINGENCIES

          Environmental
               There are no recorded amounts resulting from environmental
          liabilities and there are no known contingencies with respect
          thereto.  Future claims for environmental liabilities are not
          measurable given the uncertainties surrounding whether there
          exists a basis for any such claims to be asserted and, if so,
          whether any claims will, in fact, be asserted.  Furthermore, no
          condition is known to exist that would give rise to a liability
          for site restoration, post closure and monitoring commitments, or
          other costs that may be incurred with respect to the sale or
          disposal of a property.  Phase I environmental audits have been
          completed on all of the Company's wholly owned and joint venture
          properties.  The Company has obtained environmental insurance
          covering (I) pre-existing contamination, (ii) on-going third
          party contamination, (iii) third party bodily injury and (iv)
          remediation.  The  policy is for a five year term and carries a
          limit of liability of $2 million per environmental contamination
          discovery (with a $50,000 deductible) and has a $10 million
          policy term aggregate.  Management has no plans to abandon any of
          the properties and is unaware of any other material loss
          contingencies.

          Rainbow Terrace Apartments
               On February 9, 1998, the U.S. Department of Housing and
          Urban Development ("HUD") notified the Company that Rainbow
          Terrace Apartments, Inc. ("RTA"), the Company's subsidiary
          corporation that owns Rainbow Terrace Apartments, was in default
          under the terms of the Regulatory Agreement and Housing
          Assistance Payments Contract ("HAP Contract") pertaining to this
          property.  Among other matters, HUD alleged that the property was
          poorly managed and that RTA had failed to complete certain
          physical improvements to the property.  Moreover, HUD claimed
          that the owner was not in compliance with numerous technical
          regulations concerning whether certain expenses were properly
          chargeable to the property.  As provided in the Regulatory
          Agreement and HAP Contract, in the event of a default, HUD has
          the right to exercise various remedies including terminating
          future payments under the HAP Contract and foreclosing the
          government-insured mortgage encumbering the property.

               This controversy arose out of a Comprehensive Management
          Review of the property initiated by HUD in the Spring of 1997,
          which included a complete physical inspection of the property.
          In a series of written responses to HUD, the Company stated its
          belief that it had corrected the management deficiencies cited by
          HUD in the Comprehensive Management Review (other than the
          completion of certain physical improvements to the property) and
          justified the expenditures questioned by HUD as being properly
          chargeable to the property in accordance with HUD's regulations.
          Moreover, the Company stated its belief that it had repaired any
          physical deficiencies noted by HUD in its Comprehensive
          Management Review that might pose a threat to the life and safety
          of its residents.

<PAGE>36

               In June 1998, HUD notified the Company that all future
          Housing Assistance Payments ("HAP") for RTA were abated and
          instructed the lender to accelerate the balance due under the
          mortgage.  Subsequent to the notification of HAP abatements and
          the acceleration of the mortgage, the lender advised the Company
          that the acceleration notification had been rescinded pursuant to
          HUD's instruction.  HUD then notified the Company that the HAP
          payments would be reinstated and that HUD was reviewing further
          information concerning RTA provided by the Company.  The Company
          has received all monthly HAP payments for RTA during 1998.

               In June 1998, the Company filed a lawsuit against HUD
          seeking to compel HUD to review certain budget based rent
          increases submitted to HUD by the Company in 1995.

               From June 1998 to March 1999, the Company was involved in
          ongoing negotiations with HUD for the purpose of resolving these
          and other disputes concerning other properties managed or
          formerly managed by the Company or one of the  Service Companies,
          which were similarly the subject of Comprehensive Management
          Reviews initiated by HUD in the Spring of 1997.

               On March 12, 1999, the Company, Associated Estates
          Management Company ("AEMC"), RTA, PVA Limited Partnership
          ("PVA"), the owner of Park Village Apartments, and HUD, entered
          into a comprehensive settlement agreement (the "Settlement
          Agreement") for the purpose of resolving certain disputes
          concerning property operations at Rainbow Terrace Apartments,
          Park Village Apartments ("Park Village"), Longwood Apartments
          ("Longwood") and Vanguard Apartments ("Vanguard").  Longwood was
          managed by the Company until January 13, 1999.  Park Village is
          currently managed by the Company.  Vanguard was formerly managed
          by AEMC until December 1997.  All four properties are encumbered
          by HUD insured mortgages, governed by HUD imposed regulatory
          agreements and subsidized by Section 8 Housing Assistance
          Payments.

               Under the terms of the Settlement Agreement, HUD has agreed
          to pay RTA a retroactive rent increase totaling $1,784,467.  HUD
          has further agreed to release the Company, AEMC, RTA and the
          owners and principals of PVA, Longwood and Vanguard from all
          claims (other than tax or criminal fraud claims) regarding the
          ownership or operation of Rainbow Terrace Apartments, Park
          Village, Longwood and Vanguard.  Moreover, HUD has agreed not to
          issue a limited denial of participation, debarment or suspension,
          program fraud civil remedy action or civil money penalty,
          resulting from the ownership or management of any of these
          projects, or to deny eligibility to any of their owners,
          management agents or affiliates for participation in any HUD
          program on such basis.

               HUD's obligations under the Settlement Agreement are
          conditioned upon the performance by the Company, RTA and PVA of
          certain obligations, the most  significant of which is the
          obligation to identify, on or before April 11, 1999, prospective
          purchasers for both Rainbow Terrace Apartments and Park Village
          who are acceptable to HUD, and upon HUD's approval, convey those
          projects to such purchasers.  Alternatively, if RTA and PVA are
          unable to identify prospective purchasers acceptable to HUD, then
          RTA and PVA have agreed to convey both projects to HUD pursuant
          to deeds in lieu of foreclosure.  In either case (conveyance to a
          HUD approved purchaser or deed in lieu of foreclosure), no
          remuneration will be received by either RTA or PVA in return,
          except for the $1,784,467 retroactive rent increase payable to
          RTA mentioned above.  At June 30, 1999, the Company had
          receivables of $1,784,467 related to the 1995 and 1998
          retroactive rental increase requests.  At June 30, 1999, RTA had
          net assets of approximately $1,827,319, including the retroactive
          rent receivable of $1,784,467 due from HUD, and a remaining
          amount due under the mortgage of $1,935,123.  The transfer of RTA
          to a purchaser which is acceptable to HUD or the direct transfer
          of RTA to HUD is not expected to have a material impact on the
          results of operations or cash flows of the Company.  The Company
          has excluded RTA's results of operations from its Consolidated
          Statement of Income for 1999.  RTA and PVA requested HUD to
          extend the April 11, 1999 deadline for identification of
          potential purchasers.  HUD granted that request and the deadline
          was extended to May 31, 1999.  The Company believes that RTA and
          PVA have satisfied their obligations to identify prospective
          purchasers for those properties.

<PAGE>37

          Affiliate Transactions
               In the normal course of business, the Company had followed a
          practice of advancing funds on behalf of, or holding funds for
          the benefit of, affiliates which own real estate properties
          managed by the Company or one of the Service Companies. One of
          these affiliates, a corporation (the "Corporation") owned by a
          member of the Company's Board of Directors and his siblings
          (including the wife of the Company's Chairman and Chief Executive
          Officer), which serves as general partner of certain affiliated
          entities, had informed the Company that the Corporation had
          caused the commencement of a review of expenditures relating to
          approximately $2.9 million of capital calls from certain HUD
          subsidized affiliated entities, to determine the appropriateness
          of such expenditures and whether certain of such expenditures are
          properly the responsibility of the Company.  The Company
          previously stated its belief that all expenditures were
          appropriate and that the ultimate outcome of any disagreement
          would not have a material adverse effect on the Company's
          financial position, results of operations or cash flows.

               On March 11, 1999, the Company, the Corporation, certain
          shareholders of the Corporation and others entered into a
          settlement agreement which resolved all disputes concerning the
          aforementioned expenditures and other issues concerning the
          management by the Company or one of its Service Companies of
          various properties owned by entities in which the Corporation was
          a general partner.  Pursuant to that settlement agreement, the
          Corporation and other affiliates funded all outstanding advances
          made by the Company.  At December 31, 1998, amounts outstanding
          which were subsequently funded in the first quarter of 1999
          pursuant to the settlement agreement were $4.7 million.

          The following tables present information concerning the Multifamily
          Properties owned by Associated Estates Realty Corporation.

<TABLE>
<CAPTION>
                                                                                         Year    Average
                                         Date                      Type of    Total    Built or Unit Size
        The Multifamily Properties     Acquired     Location    Construction  Units     Rehab.   Sq. Ft.
   -------------------------------     --------  ------------   ------------  -----    --------  -------
   <S>                                 <C>          <C>         <C>           <C>      <C>       <C>
   MARKET RATE
   Acquired Properties
   Arizona
   20th & Campbell Apartments          06/30/98  Phoenix        Garden            204    1989         982

   California
   Desert Oasis Apartments             06/30/98  Palm Desert    Garden            320    1990         875

   Florida
   Windsor Pines                       10/23/98  Pembroke Pines Garden            368    1998       1,132

   Georgia
   Morgan Place Apartments             06/30/98  Atlanta        Garden            186    1989         679

   Indiana
   Steeplechase at Shiloh Crossing Apts08/11/98  Indianapolis   Garden            264    1998         929

   Maryland
   The Gardens at Annen Woods          06/30/98  Metro D.C.     Garden            132    1987       1,269
   Hampton Point Apartments            06/30/98  Metro D.C.     Garden            352    1986         817
                                                                                  ---                ----
                                                                                  484                 940
   Michigan
   Georgetown-Phase II                 02/01/99  Fenton         Garden            120    1998       1,269

   North Carolina
   Windsor Falls Apartments            06/30/98  Raleigh        Garden            276    1994         979

   Central Ohio
   Bradford at Easton                  05/01/98  Columbus       Garden            324    1996       1,010

   Northeastern Ohio
   Village at Western Reserve          08/01/98  Streetsboro    Ranch             108    1998         999
   Residence at Barrington             06/30/99  Aurora         Gdn/Tnhms         285    1999       1,131
                                                                                  ---               -----
                                                                                  393               1,095
   Texas
   Fleetwood Apartments                06/30/98  Houston        Garden            104    1993       1,019
                                                                                -----
                                                                                3,043
   Repositioned Properties

   Woodlands of North Royalton
     fka Somerset West (a)             IPO       North Royalton Gdn/Tnhms         197    1982       1,038
   Williamsburg at Greenwood Village   02/18/94  Sagamore Hills Townhomes         260    1990         938
                                                                                  ---                ----
                                                                                  457                 981
   CORE PORTFOLIO PROPERTIES
   Market rate
   Central Ohio
   Arrowhead Station                   02/28/95  Columbus       Townhomes         102    1987       1,344
   Bedford Commons                     12/30/94  Columbus       Townhomes         112    1987       1,157
   Bolton Estates                      07/27/94  Columbus       Garden            196    1992         687
   Colony Bay East                     02/21/95  Columbus       Garden            156    1994         903
   Heathermoor                         08/18/94  Worthington    Gdn/Tnhms         280    1989         829
   Kensington Grove                    07/17/95  Westerville    Gdn/Tnhms          76    1995       1,109
   Lake Forest                         07/28/94  Columbus       Garden            192    1994         788
   Muirwood Village at Bennell         03/07/94  Columbus       Ranch             164    1988         769
   Muirwood Village at London          03/03/94  London         Ranch             112    1989         769

</TABLE>

<TABLE>
<CAPTION>
                                    For the three months ending          For the three months ending
                                           June 30, 1999                        June 30, 1998
                                 ----------------------------------   ---------------------------------
                                 Average              Average Rent    Average              Average Rent
                                 Economic   Physical       Per        Economic  Physical       Per
     The Multifamily Properties  Occupancy  Occupancy  Suite  Sq. Ft. Occupancy Occupancy  Suite Sq. Ft.
   ----------------------------  ---------  ---------  -----  ------- --------- ---------  -----  ------
   <S>                           <C>        <C>        <C>    <C>     <C>       <C>        <C>    <C>
   MARKET RATE
   Acquired Properties
   Arizona
   20th & Campbell Apartments     87.9%     87.7%      $ 843  $ 0.86    N/A      93.1%      N/A     N/A

   California
   Desert Oasis Apartments        93.8%     93.4%      $ 691  $ 0.79    N/A      92.2%      N/A     N/A

   Florida
   Windsor Pines                  91.2%     92.4%     $1,039  $ 0.92    N/A       N/A       N/A     N/A

   Georgia
   Morgan Place Apartments        92.6%     99.5%      $ 809  $ 1.19    N/A      94.6%      N/A     N/A

   Indiana
   Steeplechase at Shiloh         77.5%     85.6%      $ 769  $ 0.83    N/A       N/A       N/A     N/A
     Crossing Apts

   Maryland
   The Gardens at Annen Woods     90.1%     95.5%      $ 936  $ 0.74    N/A      97.7%      N/A     N/A
   Hampton Point Apartments       96.3      96.9         809    0.99    N/A      96.0       N/A     N/A
                                  ----      ----       -----  ------    ---      -----      ---     ---
                                  94.4%     96.5%      $ 844  $ 0.90    N/A      96.5%      N/A     N/A
   Michigan
   Georgetown-Phase II            96.9%     96.7%       $762  $ 0.60    N/A       N/A       N/A     N/A

   North Carolina
   Windsor Falls Apartments       84.0%     90.2%      $ 776  $ 0.79    N/A      94.9%      N/A     N/A

   Central Ohio
   Bradford at Easton             92.6%     97.5%      $ 708  $ 0.70     85.8%   95.4%    $ 715  $ 0.71

   Northeastern Ohio
   Village at Western Reserve     95.6%     96.3%      $ 783  $ 0.78    N/A       N/A       N/A     N/A
   Residence at Barrington         N/A      96.8         N/A    N/A     N/A       N/A       N/A     N/A
                                  -----     -----      -----  ------
                                  95.6%     96.7%      $ 783  $ 0.78
   Texas
   Fleetwood Apartments           90.8%     92.3%      $ 931  $ 0.91    N/A      93.3%      N/A     N/A

   Repositioned Properties

   Woodlands of North Royalton
     fka Somerset West (a)        90.0%     98.0%      $ 708  $ 0.68     81.1%   83.2%    $ 698  $ 0.67
   Williamsburg at Greenwood
    Village                       92.5      98.1         879    0.94     89.5    94.2       871    0.93
                                  ----      ----       -----  ------     -----   -----    -----  ------
                                  91.6%     98.0%      $ 805  $ 0.82     86.3%   89.5%    $ 797  $ 0.81
   CORE PORTFOLIO PROPERTIES
   Market rate
   Central Ohio
   Arrowhead Station              94.4%     96.1%      $ 727  $ 0.54     91.6%   93.1%    $ 709  $ 0.53
   Bedford Commons                91.3      92.0         788    0.68     94.8    97.3       786    0.68
   Bolton Estates                 88.2      96.4         472    0.69     96.8    97.4       463    0.67
   Colony Bay East                87.3      92.3         530    0.59     92.6    94.2       524    0.58
   Heathermoor                    97.3      97.5         559    0.67     97.2    97.9       555    0.67
   Kensington Grove               91.9      98.7         781    0.70     92.6    90.8       775    0.70
   Lake Forest                    93.1      97.9         555    0.70     92.0    95.3       544    0.69
   Muirwood Village at Bennell    92.5      97.6         515    0.67     92.7    94.5       514    0.67
   Muirwood Village at London     95.2      95.5         512    0.67     93.9    97.3       509    0.66

</TABLE>

<PAGE>39
<TABLE>
<CAPTION>
                                                                                   Year    Average
                                    Date                        Type of   Total  Built or Unit Size
    The Multifamily Properties   Acquired     Location      Construction Units   Rehab.   Sq. Ft.
   ----------------------------- --------- --------------   ------------ ------  --------  ------
   <S>                            <C>      <C>              <C>           <C>      <C>     <C>
   Muirwood Vllg at Mt. Sterling  03/03/94 Mt. Sterling      Ranch            48   1990         769
   Muirwood Vllg at Zanesville    03/07/94 Zanesville        Ranch           196  1991-95       769
   Oak Bend Commons               05/30/97 Canal Winchester  Garden/Tnhm     102   1997       1,110
   Pendleton Lakes East           08/25/94 Columbus          Garden          256  1990-93       899
   Perimeter Lakes                09/20/96 Dublin            Gdn/Tnhms       189   1992         999
   Residence at Christopher Wren  03/14/94 Gahanna           Gdn/Tnhms       264   1993       1,062
   Residence at Turnberry         03/16/94 Pickerington      Gdn/Tnhms       216   1991       1,182
   Saw Mill Village               04/22/97 Columbus          Garden          340   1987       1,161
   Sheffield at Sylvan            03/03/94 Circleville       Ranch           136   1989         791
   Sterling Park                  08/25/94 Grove City        Garden          128   1994         763
   The Residence at Newark        03/03/94 Newark            Ranch           112  1993-94       868
   The Residence at Washington    02/01/96 Wash. Ct. House   Ranch            72   1995         862
   Wyndemere                      09/21/94 Franklin          Ranch           128  1991-95       768
                                                                           -----                ---
                                                                           3,577                934
   Cincinnati, Ohio
   Remington Place Apartments     03/31/97 Cincinnati        Garden          234  1988-90       830

   Florida
   Cypress Shores                 02/03/98 Coconut Creek     Garden          300   1991         991

   Georgia
   The Falls                      02/03/98 Atlanta           Garden          520   1986         963

   Indianapolis, Indiana
   The Gables at White River      02/06/97 Indianapolis      Garden          228   1991         974
   Waterstone Apartments          08/29/97 Indianapolis      Garden          344   1997         984
                                                                             ---                ---
                                                                             572                980
   Maryland
   Reflections                    02/03/98 Metro D.C.        Garden          184   1985       1,020

   Northeastern Ohio
   Bay Club                       IPO      Willowick         Garden           96   1990         925
   Edgewater Landing              04/20/94 Cleveland         High Rise       241   1988r        585
   Gates Mills III                IPO      Mayfield Hts.     High Rise       320   1978         874
   Holly Park                     IPO      Kent              Garden          192   1990         875
   Huntington Hills               IPO      Stow              Townhomes        85   1982         976
   Mallard's Crossing             02/16/95 Medina            Garden          192   1990         998
   Park Place                     IPO      Parma Hts.        Mid Rise        164   1966         760
   Pinecrest                      IPO      Broadview Hts.    Garden           96  1987 r        598
   Portage Towers                 IPO      Cuyahoga Falls    High Rise       376   1973         869

   The Triangle (b)               IPO      Cleveland         High Rise       273   1989         616
   Timbers                        IPO      Broadview Hts.    Garden           96  1987-89       930
   Washington Manor               07/01/94 Elyria            Garden          120  1963-64       541
   Westchester Townhouses         IPO      Westlake          Townhomes       136   1989       1,000
   Westlake Townhomes             IPO      Westlake          Townhomes         7   1985       1,000
   Winchester Hills I  (c)        IPO      Willoughby Hills  High Rise       362   1972         822
   Winchester Hills II            IPO      Willoughby Hills  High Rise       362   1979         822
                                                                           -----                ---
                                                                           3,118                809
   Michigan
   Arbor Landings Apartments      01/20/95 Ann Arbor         Garden          168   1990       1,116
   Aspen Lakes                    09/04/96 Grand Rapids      Garden          144   1981         789
   Central Park Place             12/29/94 Grand Rapids      Garden          216   1988         850
   Clinton Place                  08/25/97 Clinton Twp.      Garden          202   1988         954
   Country Place Apartments       06/19/95 Mt. Pleasant      Garden          144  1987-89       859
   Georgetown Park Apartments     12/28/94 Fenton            Garden          360  1987-96     1,005
   The Landings at the Preserve   09/21/95 Battle Creek      Garden          190  1990-91       952
   The Oaks and Woods at Hampton  08/08/95 Rochester Hills   Gdn/Tnhms       544  1986-88     1,050
   Spring Brook Apartments        06/20/96 Holland           Gdn/Tnhms       168  1986-88       818
   Spring Valley Apartments       10/31/97 Farmington Hills  Garden          224   1987         893
   Summer Ridge Apartments        04/01/96 Kalamazoo         Garden          248  1989-91       960
                                                                           -----                ---
                                                                           2,608                955
   Toledo, Ohio
   Country Club Apartments        02/19/98 Toledo            Garden          316   1989         811
   Hawthorne Hills Apartments     05/14/97 Toledo            Garden           88   1973       1,145
   Kensington Village             09/14/95 Toledo            Gdn/Tnhms       506  1985-90     1,072
   Vantage Villa                  10/30/95 Toledo            Garden          150   1974         935
                                                                           -----                ---
                                                                           1,060                981
</TABLE>

<TABLE>
<CAPTION>


                                       For the three months ending        For the three months ending
                                    -------------------------------    ---------------------------------
                                              June 30, 1999                      June 30, 1998
                                    -------------------------------    ---------------------------------
                                    Average             Average Rent   Average              Average Rent
                                    Economic  Physical      Per        Economic  Physical       Per
      The Multifamily Properties   Occupancy Occupancy Suite  Sq. Ft. Occupancy Occupancy  Suite  Sq. Ft.
   -----------------------------   --------- --------- -----  ------- --------- ---------  -----  -------


   <S>                               <C>      <C>       <C>    <C>       <C>     <C>       <C>     <C>
   Muirwood Vllg at Mt. Sterling     92.2%    89.6%     $ 488  $ 0.64     96.3%  100.0%    $ 496   $ 0.65
   Muirwood Village at Zanesville    92.7     96.9        520    0.68     92.8    95.9       522     0.68
   Oak Bend Commons                  93.1    100.0        744    0.67     93.8    99.0       700     0.63
   Pendleton Lakes East              91.3     94.9        541    0.60     92.6    96.9       527     0.59
   Perimeter Lakes                   96.3     96.8        711    0.71     94.1    98.9       721     0.72
   Residence at Christopher Wren     90.4     91.7        743    0.70     92.2    94.7       742     0.70
   Residence at Turnberry            92.5     96.3        749    0.63     93.9    96.8       743     0.63
   Saw Mill Village                  92.7     95.9        752    0.65     90.7    94.1       752     0.65
   Sheffield at Sylvan               98.2     99.3        516    0.65     98.3    98.5       510     0.65
   Sterling Park                     94.3     99.2        550    0.72     97.1   100.0       555     0.73
   The Residence at Newark           96.1     94.6        573    0.66     98.2    98.2       568     0.65
   The Residence at Washington       97.0     94.4        522    0.61     92.7   100.0       532     0.62
   Wyndemere                         97.1     95.3        546    0.71     95.8    98.4       549     0.71
                                     -----    -----     -----  ------     -----   -----    -----   ------
                                     93.2%    95.9%     $ 615  $ 0.66     93.8%   96.5%    $ 611   $ 0.65
   Cincinnati, Ohio
   Remington Place Apartments        95.8%    97.0%     $ 659  $ 0.79     91.5%   94.9%    $ 650   $ 0.78

   Florida
   Cypress Shores                    90.4%    94.3%     $ 868  $ 0.88     88.3%   87.0%    $ 841   $ 0.85

   Georgia
   The Falls                         79.9%    89.8%     $ 728  $ 0.76     75.4%   88.3%    $ 713   $ 0.74

   Indianapolis, Indiana
   The Gables at White River         95.4%    91.2%     $ 738  $ 0.76     91.9%   95.6%    $ 731   $ 0.75
   Waterstone Apartments             93.7     98.3        796    0.81     94.4    96.8       799     0.81
                                     -----    ----      -----  ------     -----   -----    -----   ------
                                     94.3%    95.5%     $ 773  $ 0.79     93.5%   96.3%    $ 772   $ 0.79
   Maryland
   Reflections                       95.2%    96.7%     $ 903  $ 0.89     94.7%   95.1%    $ 879   $ 0.86

   Northeastern Ohio
   Bay Club                          93.4%    97.9%     $ 643  $ 0.70     99.7%   97.9%     $639    $0.69
   Edgewater Landing                 97.1     98.8        421    0.72     96.6    95.0       416     0.71
   Gates Mills III                   89.4     96.5        680    0.78     90.4    96.9       701     0.80
   Holly Park                        97.7     99.0        712    0.81     99.5    99.5       702     0.80
   Huntington Hills                  94.5     97.6        680    0.70     96.5    95.3       662     0.68
   Mallard's Crossing                95.0     98.4        709    0.71     96.0    96.9       721     0.72
   Park Place                        97.4     95.7        511    0.67     93.6    95.1       525     0.69
   Pinecrest                         96.7     97.9        466    0.78     93.9    97.9       469     0.78
   Portage Towers                    96.0     97.6        583    0.67     95.7    96.5       588     0.68

   The Triangle (b)                  97.8     96.3        955    1.55     97.7    97.1       938     1.52
   Timbers                           93.6     95.8        691    0.74     92.5    97.9       707     0.76
   Washington Manor                  97.2     96.7        408    0.75     96.0    97.5       393     0.73
   Westchester Townhouses            96.2    100.0        775    0.78     91.8    97.8       787     0.79
   Westlake Townhomes                99.4    100.0        833    0.83     99.3   100.0       822     0.82
   Winchester Hills I  (c)           94.4     98.3        563    0.69     92.3    97.2       573     0.70
   Winchester Hills II               90.3     98.3        588    0.72     88.5    97.5       600     0.73
                                     ----     ----      -----  ------     ----    ----     -----   ------
                                     94.9%    97.7%     $ 630  $ 0.78     94.2%   97.0%    $ 634   $ 0.78
   Michigan
   Arbor Landings Apartments         92.5%    96.4%     $ 917  $ 0.82     98.8%   98.8%    $ 861   $ 0.77
   Aspen Lakes                       97.0     98.6        559    0.71     95.4    97.9       559     0.71
   Central Park Place                96.9     99.1        627    0.74     95.8    96.8       613     0.72
   Clinton Place                     97.0     97.5        703    0.74     95.1    95.0       700     0.73
   Country Place Apartments          98.8     99.3        565    0.66     94.1    95.8       550     0.64
   Georgetown Park Apartments        87.3     95.3        677    0.67     93.2    96.4       747     0.74
   The Landings at the Preserve      86.7     86.3        773    0.81     98.4    95.8       757     0.80
   The Oaks and Woods at Hampton     96.8     98.0        818    0.78     94.4    98.5       813     0.77
   Spring Brook Apartments           97.8     98.2        501    0.61     98.5    97.6       507     0.62
   Spring Valley Apartments          94.6     98.2        825    0.92     95.8   100.0       818     0.92
   Summer Ridge Apartments           95.2     98.8        674    0.70     91.5    95.2       701     0.73
                                     ----     ----      -----  ------     ----    ----     -----   ------
                                     94.2%    96.9%     $ 715  $ 0.75     95.1%   97.2%    $ 719   $ 0.75
   Toledo, Ohio
   Country Club Apartments           91.8%    95.6%     $ 635  $ 0.78     97.0%   97.5%    $ 627   $ 0.77
   Hawthorne Hills Apartments        93.4     97.7        584    0.51     95.8   100.0       554     0.48
   Kensington Village                93.4     93.5        616    0.57     98.3    99.2       577     0.54
   Vantage Villa                     91.4     98.0        589    0.63     95.1    97.3       577     0.62
                                     ----     ----      -----  ------     ----    ----     -----   ------
                                     92.6%    95.1%     $ 615  $ 0.63     97.3%   98.5%    $ 590   $ 0.60
</TABLE>

<PAGE>40
<TABLE>
<CAPTION>

                                                                             Year     Average
                                Date                      Type of    Total Built or  Unit Size
   The Multifamily Properties Acquired    Location     Construction  Units  Rehab.    Sq. Ft.
   -------------------------- -------- --------------  ------------  -----  -------  ---------

   <S>                        <C>      <C>             <C>             <C>   <C>      <C>
   Pittsburgh, Pennsylvania
   Chestnut Ridge             03/01/96 Pittsburgh      Garden           468  1986          769
      Core Market Rate                                               12,641                909

   GOVERNMENT ASST.-ELDERLY
   Ellet Development          IPO      Akron           High Rise        100  1978          589
   Hillwood I                 IPO      Akron           High Rise        100  1976          570
   Puritas Place (d)          IPO      Cleveland       High Rise        100  1981          518
   Riverview                  IPO      Massillon       High Rise         98  1979          553
   State Road Apartments      IPO      Cuyahoga Falls  Garden            72 1977 r         750
   Statesman II               IPO      Shaker Heights  Garden            47 1987 r         796
   Sutliff Apartments II      IPO      Cuyahoga Falls  High Rise        185  1979          577
   Tallmadge Acres            IPO      Tallmadge       Mid Rise         125  1981          641
   Twinsburg Apartments       IPO      Twinsburg       Garden           100  1979          554
   Village Towers             IPO      Jackson Twp.    High Rise        100  1979          557
   West High Apartments       IPO      Akron           Mid Rise          68 1981 r         702
                                                                      -----                ---
                                                                      1,095                602
   GOVERNMENT ASST.-FAMILY
   Jennings Commons           IPO      Cleveland       Garden            50  1981          823
   Shaker Park Gardens II     IPO      Warrensville    Garden           151  1964          753
                                                                        ---                ---
                                                                        201                770
                                                                      -----                ---
                                                                      1,296                628
   CONGREGATE CARE
   Gates Mills Club           IPO      Mayfield        High Rise        120  1980          721
                                       Heights
   The Oaks                   IPO      Westlake        Garden            50  1985          672
                                                                     ------                ---
                                                                        170                707
                                                                     ------                      ---
                                                                     14,107                881
   Joint Venture Properties
   Northeastern Ohio
   Market rate
   Americana                  IPO      Euclid          High Rise        738  1968          803
   College Towers             IPO      Kent            Mid Rise         380  1969          662
   Euclid House               IPO      Euclid          Mid Rise         126  1969          654
   Gates Mills Towers         IPO      Mayfield Hts.   High Rise        760  1969          856
   Highland House             IPO      Painesville     Garden            36  1964          539
   Watergate                  IPO      Euclid          High Rise        949  1971          831
                                                                      -----                ---
                                                                      2,989                789
   Government Asst.-Family

   Lakeshore Village          IPO      Cleveland       Garden           108  1982          786
                                                                     ------                ---
                                                                      3,097                789
                                                                     ------                ---
        Core                                                         17,204                874
                                                                     ------                ---
        Portfolio average                                            20,704                878
                                                                     ======                ===
</TABLE>

<TABLE>
<CAPTION>

                                   For the three months ending        For the three months ending
                                --------------------------------  -----------------------------------
                                          June 30, 1999                      June 30, 1998
                                --------------------------------  -----------------------------------
                                Average             Average Rent   Average              Average Rent
                                Economic  Physical      Per        Economic  Physical        Per
    The Multifamily Properties Occupancy Occupancy Suite  Sq. Ft. Occupancy Occupancy   Suite Sq. Ft.
   --------------------------- --------- --------- -----  ------- --------- ---------   ----- -------

   <S>                          <C>      <C>       <C>    <C>      <C>      <C>        <C>     <C>
   Pittsburgh, Pennsylvania
   Chestnut Ridge                82.4%    84.4%     $ 729  $ 0.95     95.0%   98.3%     $ 760  $ 0.99
                                 ----     ----      -----  ------     ----    -----     -----  ------
      Core Market Rate           92.8%    95.8%     $ 666  $ 0.73     93.5%   96.4%     $ 664  $ 0.73

   GOVERNMENT ASST.-ELDERLY
   Ellet Development            100.0%   100.0%     $ 585   $0.99    100.0%  100.0%     $ 587   $1.00
   Hillwood I                    99.3    100.0        605    1.06     99.7    99.0        594    1.04
   Puritas Place (d)            100.0    100.0        793    1.53    100.0   100.0        782    1.51
   Riverview                     97.0    100.0        602    1.09    100.0   100.0        591    1.07
   State Road Apartments        100.0    100.0        619    0.83    100.0   100.0        596    0.79
   Statesman II                 100.0     97.9        647    0.81    100.0   100.0        646    0.81
   Sutliff Apartments II         98.7    100.0        596    1.03    100.0   100.0        586    1.02
   Tallmadge Acres              100.0    100.0        658    1.03    100.0   100.0        658    1.03
   Twinsburg Apartments         100.0    100.0        602    1.09    100.0   100.0        603    1.09
   Village Towers               100.0     99.0        576    1.03    100.0    99.0        579    1.04
   West High Apartments          94.9    100.0        822    1.17    100.0   100.0        792    1.13
                                -----    -----      -----  ------    -----   -----
                                 99.6%    99.8%     $ 638  $ 1.06    100.0%   99.8%     $ 630  $ 1.05
   GOVERNMENT ASST.-FAMILY
   Jennings Commons             100.0%   100.0%     $ 674  $ 0.82     99.9%  100.0%     $ 674  $ 0.82
   Shaker Park Gardens II        97.8     98.0        568    0.75     99.9   100.0        539    0.72
                                 ----     ----      -----  ------    -----   -----
                                 98.5     98.5        594    0.77     99.9   100.0        573    0.74
                                 ----     ----      -----  ------    -----   -----
                                 99.4%    99.6%     $ 631  $ 1.00    100.0%   99.8%     $ 621  $ 0.99
   CONGREGATE CARE
   Gates Mills Club              90.6%    91.7%     $ 916  $ 1.27     92.7%   95.0%     $ 872  $ 1.21
   The Oaks                      93.4     98.0      1,075    1.60     88.7    86.0      1,024    1.52
                                 ----     ----      -----  ------     ----    ----
                                 91.5     93.5        962    1.36     91.4    92.4        917    1.30
                                 ----     ----      -----  ------     ----    ----
                                 93.3%    96.1%     $ 667  $ 0.76     94.0%   96.7%     $ 663  $ 0.75
   Joint Venture Properties
   Northeastern Ohio
   Market rate
   Americana                     92.1%    96.5%     $ 481  $ 0.60     91.3%   93.1%     $ 490  $ 0.61
   College Towers                94.1     90.3        418    0.63     96.2    99.2        409    0.62
   Euclid House                  92.6     96.0        443    0.68     91.4    94.4        446    0.68
   Gates Mills Towers            92.2     96.5        694    0.81     94.8    96.8        707    0.83
   Highland House                97.2     97.2        428    0.79     97.6    97.2        416    0.77
   Watergate                     89.4     95.0        546    0.66     92.6    94.6        548    0.66
                                 ----     ----      -----  ------     ----    ----      -----  ------
                                 91.7%    95.2%     $ 538  $ 0.68     93.5%   95.4%     $ 542  $ 0.69
   Government Asst.-Family
   Lakeshore Village             99.7%    99.1%     $ 670  $ 0.85    100.0%  100.0%     $ 666  $ 0.85
                                 ----     ----      -----  ------    -----   -----      -----  ------
                                 92.2     95.4        544    0.69     93.9    95.6        548    0.69
                                 ----     ----      -----  ------    -----   -----      -----  ------
        Core                     93.3%    96.0%     $ 658  $ 0.75     94.0%   96.5%     $ 655  $ 0.75
                                 ----     ----      -----  ------     ----    ----      -----  ------
        Portfolio average        92.7%    95.8%     $ 684  $ 0.78     93.6%   95.6%     $ 618  $ 0.70
                                 ====     ====      =====  ======     =====   =====     =====  ======
<FN>
          ______________
          (a)  Woodlands of North Royalton (fka Somerset West) has 39 Contract Units and 158
               Market-rate units.
          (b)  The Triangle also contains 63,321 square feet of office/retail space.
          (c)  The Company acquired a noteholder interest entitling the Company to substantially
               all cash flows from operations.  The Company has certain rights under a security
               agreement to foreclose on the property to the extent that the unpaid principal
               and interest on the underlying notes exceed seven years equivalent principal and
               interest payments.
          (d)  The property was developed in 1981 subject to a warranty deed provision which states
               that the assignment of fee simple title of the property to the Company shall expire
               in 2037.
          r =  Rehabilitated
</FN>
</TABLE>

<PAGE>41

             HISTORICAL FUNDS FROM OPERATIONS AND DISTRIBUTABLE CASH FLOW

               Industry analysts generally consider Funds From Operations
          ("FFO") to be an appropriate measure of the performance of an
          equity REIT.  FFO is defined as net income (computed in
          accordance with generally accepted accounting principles),
          excluding gains (or losses) from sales of property, non-recurring
          and extraordinary items, plus depreciation on real estate assets
          and after adjustments for unconsolidated joint ventures.
          Adjustments for joint ventures are calculated to reflect FFO on
          the same basis.  FFO does not represent cash generated from
          operating activities in accordance with generally accepted
          accounting principles and is not necessarily indicative of cash
          available to fund cash needs and should not be considered an
          alternative to net income as an indicator of the Company's
          operating performance or as an alternative to cash flow as a
          measure of liquidity.  Distributable Cash Flow ("DCF") is
          calculated as FFO less capital expenditures funded by operations
          and amortization of deferred financing fees.  In 1999, the
          Company has re-evaluated how it was calculating capital
          expenditures funded by operations.  Reclassifications were made
          to the prior year to incorporate this refinement.  The Company
          believes that in order to facilitate a clear understanding of the
          consolidated historical operating results of the Company, FFO and
          DCF should be presented in conjunction with net income as
          presented in the consolidated financial statements and data
          included elsewhere in this report.

               FFO and Funds Available for Distribution ("Distributable
          Cash Flow") for the six month period ended June 30, 1998 and 1997
          are summarized in the following table:

<TABLE>
<CAPTION>


                                                      For the three   For the six
                                                          months         months
                                                      ended June 30,  ended June 30,
   (In thousands)                                    1999(1)    1998  1999(1)   1998

                                                    -------  -------  -------   -------
   <S>                                              <C>      <C>      <C>       <C>
   Net income applicable to common shares           $ 9,979  $ 3,588  $ 14,797  $ 6,742

   Depreciation on real estate assets
     Wholly owned properties                          7,077    5,205    14,179   10,047
     Joint venture properties                           136      107       276      212
     Amortization of intangible assets                  155        -       345        -
     Extraordinary item - loss                        1,809      125     1,809      125
     Nonrecurring expenses                              937       51     1,319       51
     Cumulative effect of a change in
       accounting principle                               -        -    (4,320)       -
     Additional operating expenses                        -        -       874        -
     Gain on sale of properties                     (12,830)       -   (12,830)       -
                                                     ------    -----    ------   ------
   Funds From Operations                              7,263    9,076    16,449   17,177

   Depreciation - other assets                          810      320     1,468      593
   Amortization of deferred financing fees              313      195       661      406
   Fixed asset additions                             (2,632)  (3,452)   (4,112)  (4,056)
   Fixed asset additions - joint venture properties     (75)      (1)     (244)     (21)
                                                    -------  -------  --------  -------
   Distributable Cash Flow                          $ 5,679  $ 6,138  $ 14,222  $14,099
                                                    =======  =======  ========  =======
   Weighted average shares                           22,359   17,133    22,516   15,321

          <FN>
          (1)DCF could be increased by up to the full amount of the gain on
          sale of operating properties, $12,830,000, should the 1031 like-
          kind exchange not take place.  At a minimum, DCF would likely be
          increased by $3,400,000 which is the Company's taxable gain.
          This would be a one time adjustment.
          </FN>

          </TABLE>


<PAGE>42


                                       PART II

                                  OTHER INFORMATION

                Except to the extent noted below, the items required in
          Part II are inapplicable or, if applicable, would be answered in
          the negative and have been omitted.

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

                On May 12, 1999, the Company held its Annual Meeting of
          Shareholders.  Following are the matters the Company's
          shareholders voted upon and the results of the vote:

<TABLE>
<CAPTION>


                                                 For        Withhold Authority
                                           -------------    ------------------

   <S>                                     <C>                  <C>
   (a)  To fix the number of directors at  17,070,567.794       1,204,672.720
        nine;

   (b)  The election of the following
        directors:

             Albert T. Adams               17,415,085.191         683,585.323
             James M. Delaney              17,447,121.191         651,549.323
             Jeffrey I. Friedman           16,599,899.559       1,498,770.955
             Gerald C. McDonough           17,460,625.420         638,045.094
             Mark L. Milstein              16,559,222.897       1,539,447.617
             Frank E. Mosier               17,453,725.420         644,945.094
             Richard T. Schwarz            17,463,095.191         635,575.323
             Louis E. Vogt                 17,460,771.191         637,899.323
             Larry E. Wright               17,465,184.191         633,486.323

</TABLE>

<PAGE>43

          ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

                (a)      Exhibits

<TABLE>
<CAPTION>

                                                                         Filed herewith or
                                                                           incorporated
                                                                             herein by
   Number                              Title                                 reference
   ------  -----------------------------------------------------------   --------------------

    <S>    <C>                                                           <C>
    2.01   Second Amended and Restated Agreement and Plan of Merger by   Exhibit 2.01 to Form
            and among the Company, MIG Realty Advisors, Inc.  ("MIGRA")  8-K filed March 31,
            and the MIGRA stockholders dated as of March 30, 1998        1998.

    3.1    Second Amended and Restated Articles of Incorporation of the  Exhibit 3.1 to Form
           Company                                                       S-11 filed June 30,
                                                                         1994 (File No. 33-
                                                                         80950 as amended)

    3.2    Code of Regulations of the Company                            Exhibit 3.2 to Form
                                                                         S-11 filed June 30,
                                                                         1994 (File No. 33-
                                                                         80950 as amended).

    4.1    Specimen Stock Certificate                                    Exhibit 3.1 to Form
                                                                         S-11 filed September
                                                                         2, 1993 (File No.
                                                                         33-68276 as
                                                                         amended).

    4.2    Form of Indemnification Agreement                             Exhibit 4.2 to Form
                                                                         S-11 filed September
                                                                         2, 1993 (File No.
                                                                         33-68276 as
                                                                         amended).

    4.3    Promissory Note dated October 23, 1991 from Triangle          Exhibit 4.3 to Form
           Properties Limited Partnership, et. al., in favor of PFL      S-11 filed September
           Life Insurance Company; Open End Mortgage from Triangle       2, 1993 (File No.
           Properties Limited Partnership I, et. al., in favor of PFL    33-68276 as
           Life Insurance Company (The Registrant undertakes to provide  amended).
           additional long-term loan documents upon request).

    4.4    Promissory Note dated February 28, 1994 in the amount of $25  Exhibit 4.4 to Form
           million.  Open-End Mortgage Deed and Security Agreement from  10-K filed March 31,
           AERC to National City Bank (Westchester Townhouse); Open-End  1993.
           Mortgage Deed and Security Agreement from AERC to National
           City Bank (Bay Club); Open-End Mortgage Deed and Security
           Agreement from Winchester II Apartments, Inc. to National
           City Bank (Winchester II Apartments); and Open-End Mortgage
           Deed and Security Agreement from Portage Towers Apartments,
           Inc. to  National City Bank (Portage Towers Apartments).

    4.5    Form of Promissory Note and Form of Mortgage and Security     Exhibit 4.5 filed
           Agreement dated May 10, 1999 from AERC to The Chase           herewith.
           Manhattan Bank.

    4.6    Indenture dated as of March 31, 1995 between Associated       Exhibit 4.6 to Form
           Estates Realty Corporation and National City Bank.            10-Q filed May 11,
                                                                         1995.

    4.7    $75 Million 8-3/8% Senior Note due April 15, 2000             Exhibit 4.7 to Form
                                                                         10-Q filed May 11,
                                                                         1995.

    4.8e   Credit Agreement dated June 30, 1998, by and among            Exhibit 4.8e to Form
           Associated Estates Realty Corporation, as Borrower; the       10-Q filed August
           banks and lending institutions identified therein as Banks;   14, 1998.
           National City Bank, as Agent and Bank of America National
           Trust and Savings Association, as Documentation Agent

<PAGE>44
    4.8f   First Amendment to Credit Agreement by and among Associated   Exhibit 4.8f to Form
           Estates Realty Corporation, as Borrower; National City Bank,  10-Q filed November
           as Managing Agent for itself and on behalf of the Existing    16, 1998.
           Banks and First Merit Bank, N.A. and Southtrust Bank, N.A.
           as the New Banks

    4.8g   Second Amendment to Credit Agreement by and among Associated  Exhibit 4.8g to Form
           Estates Realty Corporation, as Borrower, National City Bank,  10Q filed November
           as Managing Agent for itself and on behalf of the Existing    16, 1998.
           Banks and National City Bank, Bank of America National
           Commerzbank Aktiengesellschaft.

    4.8h   Third Amendment to Credit Agreement by and among Associated   Exhibit 4.8h to Form
           Estates Realty Corporation, as Borrower, National City Bank,  10-K filed March 30,
           as Managing Agent, Bank of America National Trust & Savings   1999.
           Association, as Documentation Agent and the banks identified
           therein.

    4.9    Form of Medium-Term Note-Fixed Rate-Senior Security.          Exhibit 4(I) to Form
                                                                         S-3 filed December
                                                                         7, 1995 (File No.
                                                                         33-80169) as
                                                                         amended.

    4.10   Form of Preferred Share Certificate.                          Exhibit 4.1 to Form
                                                                         8-K filed July 12,
                                                                         1995.

    4.11   Form of Deposit Agreement and Depositary Receipt.             Exhibit 4.2 to Form
                                                                         8-K filed July 12,
                                                                         1995.

    4.12   Ten Million Dollar 7.10% Senior Notes Due 2002.               Exhibit 4.12 to Form
                                                                         10-K filed March 28,
                                                                         1996.

   10      Associated Estates Realty Corporation Directors  Deferred     Exhibit 10 to Form
           Compensation Plan.                                            10-Q filed November
                                                                         14, 1996

   10.1    Registration Rights Agreement among the Company and certain   Exhibit 10.1 to Form
           holders of the Company's Common Shares.                       S-11 filed September
                                                                         2, 1993 (File No.
                                                                         33-68276 as
                                                                         amended).

   10.2    Stock Option Plan                                             Exhibit 10.2 to Form
                                                                         S-11 filed September
                                                                         2, 1993 (File No.
                                                                         33-68276 as
                                                                         amended).

   10.3    Amended and Restated Employment Agreement between the         Exhibit 10.1 to Form
           Company and Jeffrey I. Friedman.                              10-Q filed May 13,
                                                                         1996.

   10.4    Equity-Based Incentive Compensation Plan                      Exhibit 10.4 to Form
                                                                         10-K filed March 29,
                                                                         1995.

   10.5    Long-Term Incentive Compensation Plan                         Exhibit 10.5 to Form
                                                                         10-K filed March 29,
                                                                         1995.

<PAGE>45

   10.6    Lease Agreement dated November 29, 1990 between Royal         Exhibit 10.6 to Form
           American Management Corporation and Airport Partners Limited  10-K filed March 29,
           Partnership.                                                  1995.

   10.7    Sublease dated February 28, 1994 between the Company as       Exhibit 10.7 to Form
           Sublessee, and Progressive Casualty Insurance Company, as     10-K filed March 29,
           Sublessor.                                                    1995.

   10.8    Assignment  and  Assumption  Agreement  dated  May  17, 1994  Exhibit 10.8 to Form
           between  the  Company,  as  Assignee,  and  Airport Partners  10-K filed March 29,
           Limited Partnership, as Assignor.                             1995.

   10.9    Form of Restricted Agreement dated by and among the Company   Exhibit 10.9 to Form
           and Its Independent Directors.                                10-K filed March 28,
                                                                         1996.

   10.10   Pledge Agreement dated May 23, 1997 between Jeffrey I.        Exhibit 10.01 to
           Friedman and the Company.                                     Form 10-Q filed
                                                                         August 8, 1997

   10.11   Secured Promissory Note dated May 23, 1997 in the amount of   Exhibit 10.02 to
           $1,671,000 executed by Jeffrey I. Friedman in favor of the    Form 10-Q filed
           Company.                                                      August 8, 1997

   10.12   Unsecured Promissory Note dated May 23, 1997 in the amount    Exhibit 10.03 to
           of $1,671,000 executed by Jeffrey I. Friedman in favor of     Form 10-Q filed
           the Company.                                                  August 8, 1997

   10.14   Form of Share Option Agreement by and among the Company and   Exhibit 10.14 to
           Its Independent Directors.                                    Form 10-K filed
                                                                         March 30, 1993.

   10.15   Agreement dated March 11, 1999 by and among the Company and   Exhibit 10.15 to
           The Milstein Affiliates                                       Form 10-Q filed May
                                                                         17, 1999.

   10.16   Agreement dated March 11, 1999 by and among the Company and   Exhibit 10.16 to
           The Milstein Affiliates                                       Form 10-Q filed May
                                                                         17, 1999.

   10.17   Separation Agreement and Release dated January 8, 1999 by     Exhibit 10.17 to
           and between the Company and Dennis W. Bikun                   Form 10-Q filed May
                                                                         17, 1999.

   10.18   Separation Agreement and Release dated June 30, 1999 by and   Exhibit 10.18 filed
           between the Company and Larry E. Wright                       herewith.

   18.1    Letter regarding change in accounting principles              Exhibit 18.1 to Form
                                                                         10-Q filed May 17,
                                                                         1999.

   27      Financial Data Schedule                                       Exhibit 27 filed
                                                                         herewith.

          (b)  Reports on Form 8-K

               None
</TABLE>


<PAGE>46

          SIGNATURES

               Pursuant to the requirements of the Securities Exchange Act
          of 1934, the Registrant has duly caused this report to be signed
          on its behalf by the undersigned thereunto duly authorized.



                                   ASSOCIATED ESTATES REALTY CORPORATION



          August 13, 1999          /s/ Kathleen L. Gutin
          (Date)                   Kathleen L. Gutin, Vice President, Chief
                                        Financial Officer and Treasurer