<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 September 30, 1997

                                          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. 
                   incorporation or organization)          Employer
                                                        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 November 14, 1997: 
                                  17,072,456 shares


                                                                           
<PAGE> 2
                        ASSOCIATED ESTATES REALTY CORPORATION



                                        INDEX 



<TABLE>
<CAPTION>
   PART I  -  FINANCIAL INFORMATION                              Page

    <S>      <C>                                                 <C>
    ITEM 1   Financial Statements


             Consolidated Balance Sheets as of September 30,
               1997 and December 31, 1996                          3


             Consolidated Statements of Operations for the three
               and nine month periods ended September 30, 1997     
               and 1996                                            4


             Consolidated Statements of Cash Flows for the nine
               month period ended September 30, 1997 and 1996      5


             Notes to Financial Statements                         6


     ITEM 2  Management's Discussion and Analysis of Financial 
               Condition and Results of Operations                11


   PART II  -  OTHER INFORMATION


     ITEM 6  Exhibits and Reports on Form 8-K                     23


   SIGNATURES                                                     24
</TABLE>

<PAGE> 3
                        ASSOCIATED ESTATES REALTY CORPORATION
                             CONSOLIDATED BALANCE SHEETS 


<TABLE>
<CAPTION>
                                                           September 30,   December 31,
                                                                1997           1996     
                                                            (Unaudited)
                           ASSETS
   <S>                                                    <C>            <C>
   Real estate assets:
     Land                                                  $ 55,365,438   $  44,241,900 
     Buildings and improvements                             528,652,163     430,920,893 
     Furniture and fixtures                                  24,228,261      20,286,700 
                                                            608,245,862     495,449,493 
       Less:  accumulated depreciation                     (125,275,070)   (112,102,829)
                                                            482,970,792     383,346,664 
       Construction in progress (including land)             18,213,568      18,516,982 
          Real estate, net                                  501,184,360     401,863,646 
   Cash and cash equivalents                                  1,852,454       1,286,959 
   Restricted cash and investments                            4,912,194       5,625,003 
   Accounts and notes receivable:
     Rents                                                     2,332,780      1,569,907 
     Affiliates                                              11,867,260       1,784,297 
   Deferred charges and prepaid expenses                      6,948,321       5,616,394 
                                                           $529,097,369   $ 417,746,206 

            LIABILITIES AND SHAREHOLDERS' EQUITY
   Secured debt                                           $  58,056,197   $  69,024,253 
   Unsecured debt                                           238,536,407     148,788,707 
       Total indebtedness                                   296,592,604     217,812,960 
   Accounts payable and accrued expenses                     14,333,001      14,361,609 
   Dividends payable                                             -            6,895,071 
   Resident security deposits                                 4,786,216       4,154,418 
   Funds held for non-owned properties                        2,247,385       1,571,219 
   Accrued interest                                           3,758,064       2,521,644 
   Accumulated losses and distributions of equity
     investees in excess of investment and advances          12,328,894      12,413,087 
       Total liabilities                                    334,046,164     259,730,008 
   Commitments and contingencies
   Shareholders' equity:
     Preferred shares, Class A cumulative, without
       par value; 3,000,000 shares authorized; 
       225,000 issued and outstanding                        56,250,000      56,250,000 


     Common shares, without par value, $.10 stated value;
       50,000,000 shares authorized; 17,072,456 and
       15,322,381 issued and outstanding at September 30,
       1997 and December 31, 1996, respectively               1,707,246       1,532,238 
     Paid-in capital                                        171,727,738     133,073,035 
     Accumulated dividends in excess of net income          (34,633,779)    (32,839,075)
       Total shareholders' equity                           195,051,205     158,016,198 
                                                           $529,097,369   $ 417,746,206 
</TABLE>


                     The accompanying notes are an integral part
                            of these financial statements

<PAGE> 4

                        ASSOCIATED ESTATES REALTY CORPORATION
                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                     (UNAUDITED)


<TABLE>
<CAPTION>
                                              For the three months ended For the nine months ended
                                                     September 30,             September 30,
                                                  1997          1996         1997          1996    
   <S>                                         <C>          <C>           <C>           <C>
   Revenues
     Rental                                     $26,154,443 $22,305,674   $74,258,037   $64,717,755
     Property management fees                        98,693     100,128       281,431       292,995
     Property management fees-affiliates            831,431     835,728     2,562,918     2,554,799
     Painting service                               221,570     108,016       484,208       310,163
     Painting service-affiliates                    227,095     368,123       820,311       986,210
     Other                                          522,339     367,083     1,270,704       573,447
                                                 28,055,571  24,084,752    79,677,609    69,435,369
   Expenses
     Property operating and maintenance          11,334,163   9,684,254    31,005,051    27,115,528
     Depreciation and amortization                4,818,185   3,858,100    13,680,669    11,192,067
     Painting services                              401,097     404,694     1,154,075     1,136,784
     General and administrative                   1,325,814   1,153,929     4,402,314     4,032,316
     Interest expense                             4,672,392   4,076,426    13,569,593    11,469,077
      Total expenses                             22,551,651  19,177,403    63,811,702    54,945,772
      Income before equity in net income of
        joint ventures and extraordinary item     5,503,920   4,907,349    15,865,907    14,489,597
     Equity in net income of joint ventures         272,104      76,894       492,586       210,029
     Income before extraordinary item             5,776,024   4,984,243    16,358,493    14,699,626
     Extraordinary items-loss or (gain)
       on early extinguishment of debt               19,733     -          (1,023,713)      -     
     Net income                                 $ 5,756,291 $ 4,984,243   $17,382,206   $14,699,626

   Net income applicable to common shares       $ 4,385,186 $ 3,613,138   $13,268,891   $10,586,311

   Per common share:
     Net income before extraordinary item       $       .26 $       .26   $       .77   $       .76
     Net income                                 $       .26 $       .26   $       .83   $       .76
     Dividends paid                             $      .465 $       .45   $     1.395   $      1.35
   Weighted average number of common
     shares outstanding                          17,053,427   13,872,381    15,905,750   13,872,381 

</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 NINE MONTH PERIOD ENDED SEPTEMBER 30,
                                     (UNAUDITED)

<TABLE>
<CAPTION>
                                                                         1997            1996     
   <S>                                                             <C>             <C>
   Cash flow from operating activities:                                                           
    Net income                                                      $  17,382,206   $  14,699,626 
    Adjustments to reconcile net income to net cash
      provided by operating activities:
      Depreciation and amortization                                    13,680,669      11,192,067 
      Gain on extinguishment of debt                                   (1,023,713)         -      
      Equity in net income of joint ventures                             (492,588)       (210,030)
      Earnings distributed from joint ventures                            509,228         539,519 
      Net change in - Accounts and notes receivable                      (762,873)        212,858 
                    - Accounts and notes receivable-affiliates         (6,740,963)        370,215 
                    - Accounts payable and accrued expenses            (1,916,246)     (1,902,686)
                    - Other operating assets and liabilities            1,382,030       1,113,205 
                    - Restricted cash                                     712,809        (250,762)
                    - Funds held for non-owned properties                 676,166      (3,291,052)
         Total adjustments                                              6,024,519       7,773,334 
      Net cash flow provided by operating activities                   23,406,725      22,472,960 
   Cash flow from investing activities:
    Loans receivable - affiliate                                       (3,342,000)         -      
    Real estate acquired or developed (net of liabilities assumed)   (108,585,330)    (67,029,289)
    Fixed asset additions                                              (1,706,381)       (487,142)
    Contributions to joint ventures                                      (100,833)       (164,378)
      Net cash flow used for investing activities                    (113,734,544)    (67,680,809)
   Cash flow from financing activities:
    Principal payments on mortgage notes                              (19,068,056)     (2,596,657)
    Proceeds from mortgage notes                                        8,100,000          -      
    Proceeds from senior and medium-term notes                         50,000,000      27,500,000 
    Proceeds from the issuance of common shares, net of
      $2,187,500 of underwriting commissions and $150,306
      of offering expenses                                             38,838,432          -      
    Line of Credit borrowings                                         305,600,000     147,450,000 

    Line of Credit repayments                                        (265,900,000)   (106,550,000)
    Deferred financing and offering costs                                (606,798)       (762,488)
    Common share dividends paid                                       (21,958,666)    (18,450,267)
    Preferred share dividends paid                                     (4,113,315)     (4,113,315)
    Exercise of stock options                                               1,717         -        
      Net cash flow provided by financing activities                   90,893,314      42,477,273 
      Increase (decrease) in cash and cash equivalents                    565,495      (2,730,576)
   Cash and cash equivalents, beginning of period                       1,286,959       2,848,285 
   Cash and cash equivalents, end of period                         $   1,852,454   $     117,709

</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 the Great
          Lakes Region.  At September 30, 1997, the Company owned or was a
          joint venture partner in 87 multifamily properties containing
          17,370 suites.  Additionally, the Company managed 40 non-owned
          properties, 32 of which were multifamily properties containing
          7,052 suites and eight of which were commercial properties
          containing an aggregate of approximately 825,000 square feet of
          gross leasable area.  Through special purpose entities,
          collectively referred to as the "Service Companies", the Company
          provides to both owned and non-owned properties, management,
          painting and computer services as well as mortgage origination
          and servicing.

          Principles of Consolidation

               The accompanying consolidated financial statements include
          the accounts of the Company, its wholly owned subsidiaries, which
          own certain of the real estate properties, and the Service
          Companies.  The Company holds a preferred share interest 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.

               One property included in the consolidated 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, which 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.

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

          Recent Accounting Pronouncements

               In June 1997, the FASB issued SFAS No. 130 - Reporting
          Comprehensive Income.  SFAS No. 130 establishes standards for the
          reporting and display of comprehensive income and its components
          in a full set of general purpose financial statements.  
          Comprehensive income is defined as the change in equity of a
          business during a period and other events and circumstances from
          nonowner sources.  The Company does not expect this pronouncement
<PAGE> 7
          to materially impact the presentation or form of the Company's
          financial statements.

               In June 1997, the FASB issued SFAS No. 131 - Disclosure about
          Segments of an Enterprise and Related Information.  SFAS No. 131
          establishes standards for disclosure about operating segments in
          annual financial statements and selected information in interim
          financial reports.  It also establishes standards for related
          disclosures about products and services, geographic areas and
          major customers.  The statement supersedes SFAS No. 14 - Financial
          Reporting for Segments of a Business Enterprise.  The new standard
          becomes effective for the Company for the year ending December 31, 
          1998, and requires that comparative information from earlier years
          be restated to conform to the requirements of this standard.  The
          Company does not expect this pronouncement to materially change
          the Company's current reporting and disclosure.

          Reclassifications

               Certain reclassifications have been made to the 1996
          financial statements to conform to the 1997 presentation.

          2.   DEVELOPMENT AND ACQUISITION OF MULTIFAMILY PROPERTIES

               Construction in progress, including the cost of land, for
          the development of multifamily properties was $18,213,568 and
          $18,516,982 at September 30, 1997 and December 31, 1996,
          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 ready for leasing.  Interest, real estate taxes and
          insurance aggregating approximately $1,474,000 and $1,394,800
          were capitalized during the nine month period ended September
          30, 1997 and the year ended December 31, 1996, respectively.
          The following schedule details construction in progress at
          September 30, 1997: 

<TABLE>
<CAPTION>
                                                   Construction in   Placed in  Construction
           (dollars in thousands)         Number      Progress        Service       Costs     Estimated 
                                            of     Land   Building    through     Incurred    Scheduled
                  Property                Suites   Cost      Cost     9/30/97      to Date    Completion

   <S>                                    <C>      <C>      <C>       <C>        <C>          <C>
   AURORA, OHIO
     The Residence at Barrington-Phase I    168  $   704  $   6,885 $7,116      $     14,705  1997
     The Residence at Barrington-Phase II   120      982         -       -               982  1998
                                            288    1,686      6,885  7,116            15,687 
   ANN ARBOR, MICHIGAN
     Arbor Landings Apartments II           160*     650        298      -               948  1998

   COLUMBUS, OHIO
     Bradford at Easton                     324      276      1,700  15,990           17,966  1997

   FENTON, MICHIGAN
      Georgetown Park Apartments III        120*     350        954      -             1,304  1998*

   GRAND RAPIDS, MICHIGAN
     Aspen Lakes II                         114*     402         55      -               457  1998*

   STREETSBORO, OHIO
     The Village of Western Reserve         108      605      2,195     902            3,702  1998

   WESTLAKE, OHIO
     Westlake                               300*     523         85      -               608 1999*

   Other                                    361      674        875      -             1,549 Various
                                          1,775   $5,166  $  13,047 $24,008 (1) $     42,221 
<PAGE> 8

          <FN>
               *Estimated

          (1)  Including land of $2,514
          </FN>
</TABLE>

               During the period January 1, 1997 through September 30,
          1997, the Company acquired, in separate purchase transactions,
          seven multifamily properties containing an aggregate of 1,532
          suites and two parcels of land consisting of 14.5 acres (together
          the "Acquired Properties") for an aggregate purchase price of
          $89.7 million, of which $3.7 million represented liabilities
          assumed.  The Acquired Properties are located in Clinton,
          Michigan; Indianapolis, Indiana; and Cincinnati, Columbus and
          Toledo, Ohio.  The purchase price of the Acquired Properties has
          been financed primarily with cash on hand made available through
          the Line of Credit (as defined herein).

          3.   SHAREHOLDERS' EQUITY

               The following table summarizes the changes in shareholders'
          equity since December 31, 1996:

<TABLE>
<CAPTION>

                                                 Common
                                   Class A       Shares                    Accumulated
                                 Cumulative     (at $.10                    Dividends
                                  Preferred      stated        Paid-In     In Excess Of
                                   Shares        value         Capital      Net Income       Total    

   <S>                           <C>          <C>           <C>           <C>            <C>
   Balance, Dec. 31, 1996        $ 56,250,000 $ 1,532,238   $ 133,073,035 $(32,839,075)  $ 158,016,198 
      Net income                            -           -               -   17,382,206      17,382,206 
      Exercise of stock
        options                             -           8          1,709             -           1,717 
      Issuance of 1,750,000  
        common shares, net of
        underwriters' discounts                           
        and offering expenses
        of $2,337,806                       -     175,000     38,652,994             -      38,827,994 
      Common share
        dividends declared                  -           -              -   (15,063,595)    (15,063,595)
      Preferred share
        dividends declared                  -           -              -    (4,113,315)     (4,113,315)
   Balance, September 30,1997    $ 56,250,000  $ 1,707,246  $ 171,727,738 $(34,633,779)  $ 195,051,205 
</TABLE>
      

          4.   SECURED DEBT

          Conventional Mortgage Debt

               Conventional mortgages payable include nonrecourse, fixed
          and variable rate, project specific loans to the Company which
          are collateralized by the associated real estate and resident
          leases.  Mortgages payable are generally due in monthly
          installments of principal and/or interest and mature at various
          dates through August 1, 2018.  The balance of the conventional
          mortgages was $29.5 million and $37.7 million at  September 30,
          1997 and December 31, 1996, respectively.  Three of the four
          conventional mortgages have a fixed rate and the remaining
          mortgage has a variable rate.

          Federally Insured Mortgage Debt

               Federally insured mortgage debt is insured by HUD pursuant
          to one of the mortgage insurance programs administered under the
          National Housing Act of 1934 (one property is funded through
          Industrial Development Bonds).  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 August 1, 2028. 
          The balance of the federally insured mortgages was $28.6 million
          and $31.3 million at September 30, 1997 and December 31, 1996,
          respectively.  Six of the seven federally insured mortgages have
          a fixed rate and the remaining mortgage has a variable rate.

<PAGE> 9
               Under certain of the mortgage agreements, the Company is
          required to make escrow deposits for taxes, insurance and
          replacement of project assets.

          5.   UNSECURED DEBT

          Senior Notes

               Senior Notes with a principal balance of $75 million accrue
          interest at 8.38% and mature in 2000.  Issued at an effective
          interest rate of 8.48%, the balance of the $75 million senior
          notes, net of unamortized discounts, was $74.8 million at
          September 30, 1997 and December 31, 1996.  Senior Notes with a
          principal balance of $10 million accrue interest at 7.10% and
          mature in 2002.

          Medium-Term Notes Program

               The Company has issued ten Medium-Term Notes (the "MTN's")
          in the aggregate amount of $92.5 million and $42.5 million at
          September 30, 1997 and December 31, 1996, respectively.  The
          principal amounts of these MTN's range from $2.5 million to $20
          million and bear interest ranging from 6.18% to 7.82% over terms
          ranging from two to 30 years.  The holders of two MTN's with
          stated terms of 30 years each may request repayment five and
          seven years from the issue date of the respective MTN.  The
          weighted average interest rate of the ten MTN's is 6.97%.  Six of
          the MTN's in the aggregate amount of $42.5 million were issued in
          1996.  Four MTN's in the aggregate amount of $50 million were
          issued in 1997.

               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.  These MTN's 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 of
          the MTN.  These MTN's can bear interest at fixed rates or at
          floating rates and can be issued in minimum denominations of
          $1,000.  At September 30, 1997, $82.5 million of additional MTN
          borrowings were available under the current program.

          Line of Credit

               During the quarter ending September 30, 1997, the Company
          reached an agreement with its agent bank to increase its $75
          million unsecured credit facility (the "Line of Credit") to $100
          million.  The Company also negotiated a competitive bid option
          which could further reduce the pricing on its Line of Credit. 
          The revisions are subject to the entire bank group's approval. 
          The Line of Credit includes certain restrictive covenants which,
          among others, requires the Company to (i) maintain a minimum
          level of net worth, (ii) limit dividends to 90% of Distributable
          Cash Flow, as defined in the agreement, (iii) restrict the use of
          its borrowings, and (iv) maintain certain debt coverage ratios. 
          The Line of Credit provides for a scaled reduction in the LIBOR,
          prime rate and commitment fee margins based on the Company's
          credit ratings.  For the nine months ended September 30, 1997,
          based on the Company's present credit ratings, the LIBOR margin
          was 125 basis points, fixed in increments of 30, 60, 90, 120 or
          180 days or, alternatively, borrowings are at prime rate.  An
          annual commitment fee of 15 to 25 basis points on the average
          daily unused amount of the facility was paid quarterly in
          arrears.  The Company also exercised its option to extend the
          line for one additional year through September 1998.  At
          September 30, 1997, $61.2 million was drawn on the Line of
          Credit.

          6.   RELATED PARTY TRANSACTIONS

               At September 30, 1997, the Company had two notes receivable
          of equal amounts from the Chairman, President and Chief Executive
          Officer aggregating $3,342,000 included in accounts and notes
          receivables - affiliates.  The notes were entered into on May 23,
          1997 and bear interest, payable quarterly, at the LIBOR rate for
          a one month interest period with principal due May 1, 2002.  One
          of the notes is collateralized by 150,000 of the Company's common
          shares.
<PAGE> 10

          7.   PREFERRED AND COMMON SHARES

               On July 2, 1997, the Company completed an offering of
          1,750,000 common shares at $23.50 per share.  The net proceeds of
          approximately $38.8 million were applied to reduce debt.

          8.   EARNINGS PER SHARE

               Net income per share has been computed by dividing common
          share dividends paid or declared for the period by the weighted
          average number of common shares outstanding plus the
          undistributed net income applicable to common shareholders as
          appropriate, divided by the weighted average number of common
          shares outstanding.  Common share equivalents were excluded from
          the earnings per share calculation as they were not dilutive.

               The Company is required to adopt Statement of Financial
          Accounting Standard ("SFAS") No. 128 - Earnings Per Share
          as of December 15, 1997; earlier application is not permitted.  
          SFAS specifies computation, presentation, and disclosure
          requirements for earnings per share.  Assuming the application of
          the standard to the three and nine month periods ended September
          30, 1997 and 1996, earnings per share would not have differed
          from that presented in the statement of operations.
         
          9.   PRO FORMA CONDENSED FINANCIAL INFORMATION (UNAUDITED)

               The following unaudited supplemental pro forma operating
          data for 1997 is presented to reflect, as of January 1, 1997, (i)
          the effects of five property acquisitions completed in 1997 and
          (ii) the offering of 1,750,000 common shares.  The following 
          unaudited supplemental pro forma operating data for 1996 is
          presented to reflect, as of January 1, 1996, the effects
          of: (i)  the six property acquisitions completed in 1996, (ii)
          the offering of 1,450,000 common shares, and (iii) the offering
          of 1,750,000 common shares, and (iv) the five property
          acquisitions completed in 1997.

<TABLE>
<CAPTION>

                                                 For the nine months
                                                 ended September 30, 
   (In thousands, except per share amounts)        1997      1996   

   <S>                                             <C>       <C>
   Revenues                                      $82,502    $78,822
   *Net income                                    17,746     16,474
   *Net income applicable to common shares        13,633     12,361
   *Net income per common shares per share       $   .80    $   .72
     Weighted average common shares outstanding   17,072     17,072

   *Before extraordinary item
</TABLE>

               The 1997 and 1996 pro forma financial information does not
          include the revenue and expenses for Oak Bend Apartments and
          Waterstone Apartments, properties that were acquired in 1997, for 
          the period January 1, 1997 through the date the properties were 
          acquired by the Company or for the period January 1, 1996 through
          September 30, 1996, respectively. The revenue and expenses of Oak
          Bend Apartments and Waterstone Apartments were excluded
          from the pro forma financial information for the periods
          mentioned as the properties were under construction for
          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.

          10.  SUBSEQUENT EVENTS

               On October 31, 1997, the Company acquired one multifamily
          property containing 224 suites in Farmington Hills, Michigan.


<PAGE> 11

                        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
          Real Estate Investment Trust ("REIT") which, at September 30,
          1997 owned or was a joint venture partner in, 87 multifamily
          properties containing 17,370 suites located in Ohio, Michigan,
          Indiana and Western Pennsylvania (the "Great Lakes Region"). 

               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
          contained in the financial statements, including trends which
          might appear, should not be taken as indicative of future
          operations.

          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. 
          REIT's are subject to a number of organization and operational
          requirements including a requirement that 95% of the income that
          would otherwise be considered as taxable income be distributed to
          its shareholders.  Providing the Company continues to qualify as
          a 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.  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
          in both the short and long term.

          Financing:
               The Company utilizes borrowing under a $100 million
          unsecured revolving credit facility (the "Line of Credit") for
          the acquisition and development of multifamily properties and
          working capital purposes.  The Company reached an agreement to
          increase the total borrowing capacity under the Line of Credit
          from $75 to $100 million in September 1997.  The Company also
          negotiated a competitive bid option which could further reduce
          the pricing on its Line of Credit.  The Line of Credit includes
          certain restrictive covenants which, among others, requires the
          Company to maintain a minimum level of net worth, to limit
          dividends to 90% of Distributable Cash Flow, to restrict the use
          of its borrowing and to maintain certain debt coverage ratios. 
          The Line of Credit provides for a scaled reduction in the LIBOR
          or prime rate margins and commitment fees based on the Company's
          credit ratings.  Based on the Company's present credit ratings,
          the LIBOR margin is 125 basis points fixed in increments of 30,
          60, 90, 120 or 180 days and Prime Rate borrowings are at the
          Prime Rate with no margin.  An annual commitment fee of between
          15 basis points and 25 basis points on the average daily unused
          amount of the facility is paid quarterly in arrears.  The Line of
          Credit expires in September 1998.  At September 30, 1997, $61.2
          million was drawn on the Line of Credit with a weighted average
          interest rate of 6.98%.

               Seventy of the Company's 80 wholly owned properties were
          unencumbered at September 30, 1997 with annualized earnings
          before interest, depreciation and amortization of over $50.8
          million and a historical cost basis of over $491.7 million. 
          During the quarter ended September 30, 1997, the Company repaid
          mortgage debt in the aggregate amount of $2.3 million, with a
          stated weighted average interest rate of 8.5%, that was secured
          by one of the Company's wholly owned properties. The Company
          utilized borrowings under the Line of Credit to repay this
          mortgage. Unsecured debt, which totaled $238.5 million at
          September 30, 1997, consisted of $92.5 million in Medium-Term
          Notes, Senior Notes of $84.8 million and amounts drawn on the
          Line of Credit of $61.2 million.  

               The remaining ten of the Company's wholly owned properties,
          having a historical cost basis of $90.6 million, were encumbered
          by secured property specific debt of $58.0 million at September
          30, 1997.  The Company's proportionate share of the mortgage debt
          relating to the seven joint venture properties was $17.8 million
          at September 30, 1997.  The weighted average interest rate on the
<PAGE> 12
          secured, unsecured and the Company's proportionate share of the
          joint venture debt was 7.55% at September 30, 1997.

               During the quarter ending September 30, 1997, the Company
          issued a $20 million Medium-Term Note (or "MTN") under its $102.5
          million MTN Program.  The MTN bears interest at 6.18% over a two-
          year term.  The net proceeds to the Company of $19.95 million
          were used to repay indebtedness outstanding under the Line of
          Credit. On July 2, 1997, the Company completed a public offering
          of 1,750,000 common shares at a price of $23.50 per share (the
          "Common Share Offering").  The net proceeds of this offering of
          $38.8 million, after underwriting discounts and commissions and
          other offering expenses, were used to repay indebtedness
          outstanding under the Company's Line of Credit. 

          Registration statements filed in connection with financing:
               The Company has filed a shelf registration statement 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 (collectively the "Shelf Securities").  At September 30,
          1997, $292.7 million was available under the shelf registration,
          which includes $82.5 million available under the $102.5 million
          MTN Program.  The Shelf Securities may be offered from time to
          time at prices and upon terms to be determined at the time of
          sale.

          Acquisitions, development and dispositions:
               The Company intends to continue to finance its multifamily
          property acquisitions and development with the most appropriate
          sources of capital, which may include undistributed Funds From
          Operations, the issuance of equity securities, bank and other
          institutional borrowings, the issuance of debt securities, the
          assumption of mortgage indebtedness or through the exchange of
          properties. The Company may also determine to raise additional
          working capital through one or more of these sources.

               During the period January 1, 1997 through September 30,
          1997, the Company acquired, in separate purchase transactions,
          seven multifamily properties containing an aggregate of 1,532
          suites and two parcels of land consisting of 14.5 acres (the
          "Acquired Properties") for an aggregate purchase price of $89.7
          million, of which $3.7 million represented liabilities assumed. 
          The multifamily properties are located in Clinton, Michigan;
          Indianapolis, Indiana; and Cincinnati, Columbus and Toledo, Ohio. 
          The purchase price of the Acquired Properties has been financed
          primarily with cash on hand made available through the Line of
          Credit.  On October 31, 1997, the Company acquired one
          multifamily property containing 224 suites located in Farmington
          Hills, Michigan.

               The remainder of the acquisitions, development and
          dispositions section contains forward-looking statements and
          certain risks, trends and uncertainties that could cause actual
          results to vary from those contained in the forward-looking
          statements.  Readers are cautioned not to place undue reliance on
          forward-looking statements, which are based only on current
          judgements and current knowledge of management. These forward-
          looking statements are intended to be covered by the safe harbor
          provisions of the Private Securities Litigation Reform Act of
          1995.  Factors which could cause actual results to differ
          materially from those projected include the general economic
          climate; the supply and demand for multifamily properties in the
          Great Lakes Region; interest rate levels; the availability of
          financing and other risks associated with the acquisition,
          development and disposition of properties, including risks that
          development, lease-up or disposition may not be completed on
          schedule.
               
               The Company has three newly constructed multifamily
          properties in lease-up.  Bradford at Easton, a 324 suite property
          located in Columbus, Ohio had 280 suites completed of which 239
          were leased at September 30, 1997, the 168 suite first phase of
          The Residence at Barrington, a 288 suite property located in
          Aurora, Ohio (a city located Southeast of Cleveland), had 82
          suites completed and 188 suites leased at September 30, 1997 and
          The Village of Western Reserve, a 108 suite property in
          Streetsboro, Ohio (also located Southeast of Cleveland) which had
          14 suites completed and 46 suites leased at September 30, 1997. 
          The Company has also commenced construction on a 120 suite
          expansion to Georgetown Park Apartments, a multifamily property
          owned by the Company in Fenton, Michigan.  The Bradford at
          Easton, Barrington Phase I and Western Reserve properties
          (collectively the "New Construction Properties") are scheduled
<PAGE> 13 
          for completion in the fourth quarter of 1997 and the Georgetown
          addition is estimated to be completed in the third quarter of
          1998.

               The Company is anticipating the construction of an estimated
          additional 514 suites (collectively the "Suite Additions") during
          1998, on land adjacent to multifamily properties currently owned
          by the Company as follows:
<TABLE>
<CAPTION>


                  Property                      Location         Suites

   <S>                                   <C>                       <C>
   Arbor Landings Apartments II          Ann Arbor, Michigan       160  
   The Residence at Barrington, Phase II Aurora, Ohio              120  
   Georgetown Park Apartments III        Fenton, Michigan          120  
   Aspen Lakes II                        Grand Rapids, Michigan    114  
                                                   Total Suites    514
</TABLE>

               The Company estimates the total cost of the New Construction
          Properties and the Suite Additions (a total of 1,114 suites) will
          be approximately $73.2 million, of which $40.1 million has been
          incurred through September 30, 1997, including land costs of $7.5
          million.

               The Company also owns approximately 63.5 acres of land,
          adjacent to multifamily properties currently owned by the
          Company, on which approximately 661 suites are planned for
          development.  Through September 30, 1997, the Company has
          incurred approximately $2.1 million in preliminary development
          and land costs for these and other planned development projects.

               The Company is exploring opportunities to dispose of several
          of its multifamily properties and has received an expression of
          interest from various prospective buyers.  In addition, the
          Company has determined that a 90 acre parcel of land, which was
          one of the assets acquired by the Company at the time of the
          Company's initial public offering of common shares (the "IPO")
          that is presently zoned for office and industrial use, will not
          be rezoned for multifamily use.  The Company has entered into a
          contract for the sale of the property and has been advised by the
          buyer that it is their intent to consummate their acquisition of
          the property in 1997.

          Dividends:
               On October 1, 1997, the Company declared a dividend of
          $0.465 per common share for the quarter ending September 30,
          1997, which was paid on October 31, 1997 to shareholders of
          record on October 15, 1997.  On August 27, 1997, 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 September 15, 1997 to shareholders of record on
          September 5, 1997.

          Cash flow sources and applications:
               Net cash provided by operating activities increased $0.9
          million to $23.4 million from $22.5 million for the nine-months
          ended September 30, 1997 when compared with the nine-months ended
          September 30, 1996. This increase was primarily the result of the
          increase in cash flow from operations resulting from the Acquired
          Properties and increasing operating cash flow from the Core
          Portfolio Properties.

               Net cash flows used for investing activities of $113.7
          million for the nine-months ended September 30, 1997 were
          primarily used for the acquisition of multifamily real estate,
          properties and undeveloped land parcels.

               Net cash flows provided by financing activities of $90.9
          million for the nine-months ended September 30, 1997 were
          primarily comprised of borrowings on the Line of Credit, the
          issuance of MTN's and the Common Share Offering.  Funds were also
          used to pay dividends on the Company's common and Perpetual
          Preferred Shares.

<PAGE> 14


          RESULTS OF OPERATIONS
          Comparison of the three-months ended September 30, 1997 to the
          three-months ended September 30, 1996

               Overall, total revenue increased $3,970,800 or 16.5% and
          total expenses before the extraordinary item and the net income
          of the joint ventures increased $3,374,200 or 17.6% for the
          quarter.  Net income applicable to common shares before the
          extraordinary item increased $791,800 or 21.9%, after dividends
          on the Company's Perpetual Preferred Shares.

               In the following discussion of the comparison of the three-
          months ended September 30, 1997 to the three-months ended
          September 30, 1996, the term Core Portfolio Properties refers to
          the 35 wholly owned multifamily properties acquired by the
          Company at the time of the IPO, the 36 properties acquired prior
          to July 1, 1996 and the acquisition of the remaining 50% interest
          in a property in which the Company was a joint venture partner at
          the time of the IPO.  Acquired Properties refers to the nine
          properties acquired between April 1, 1996 and September 30, 1997.

               During the three-months ended September 30, 1997, the
          Acquired Properties generated total revenues of $3,468,100 while
          incurring property, operating and maintenance expenses of
          $1,312,300.

          Rental Revenues:
               Rental revenues increased $3,848,800 or 17.3% for the
          quarter.  The majority of this increase is attributable to an
          increase in rental revenues from the Acquired Properties of
          $3,343,200 for the same period.  Increases in occupancy and suite
          rents at the Core Portfolio Market-rate and Government-Assisted
          Properties resulted in a $505,600 or 2.3% increase in rental
          revenue from these properties.  Retroactive revenue increases
          related to budget based Government-Assisted Properties are
          recognized based on the applications submitted to the U.S.
          Department of Housing and Urban Development.

          Other Revenues:
               Other revenues increased $122,050 primarily due to interest
          income earned on amounts advanced to entities managed by the
          Company.

          Property operating and maintenance expenses:
               Property operating and maintenance expenses increased
          $1,649,900 or 17.0% for the quarter.  Operating and maintenance
          expenses at the Acquired Properties increased $1,284,000 for the
          quarter due primarily to the operating and maintenance expenses
          incurred at the nine properties acquired between April 1, 1996
          and September 30, 1997.  Property operating and maintenance
          expenses at the Core Portfolio Properties increased $365,900, or
          3.8% when compared to the prior three-month period primarily due
          to increases in payroll,  building and grounds repair and
          maintenance and other operating expenses.  Payroll expense
          increased due to (i) overtime and temporary labor costs incurred
          in preparing suites for market, (ii) annual wage increases, and
          (iii) staff additions.  Building and grounds repair and
          maintenance expenses increased primarily as a result of an
          increase in suite make ready costs such as cleaning, painting,
          carpet cleaning and replacement and appliance replacements. 
          Total expenditures for building renovations and suite and common
          area refurbishment in the Core Portfolio Properties that were not
          considered to be capital in nature averaged $159 per suite for
          the three-months ended September 30, 1997 as compared to $154 per
          suite for the three-months ended September 30, 1996.

          Other expenses:
               Depreciation and amortization increased $960,100 or 24.9%
          for the quarter primarily due to the increased depreciation and
          amortization expense recognized on the Acquired Properties.

               General and administrative expenses increased $171,900 or
          14.9% for the nine-month period.  This increase is primarily
          attributable to payroll and payroll related expenses as the
          Company continues to develop a team of professionals to provide
          hands-on attention to the Company's expanding portfolio of
          assets.

<PAGE> 15
               Interest expense increased $596,000 or 14.6% for the quarter
          primarily due to the interest incurred with respect to the
          additional borrowings under the Line of Credit and MTN's that
          were used for the acquisition of properties.

          Net income applicable to common shares:
               Net income applicable to common shares is reduced by
          dividends on the Perpetual Preferred Shares of $1,371,100.

          RESULTS OF OPERATIONS
          Comparison of the nine-months ended September 30, 1997 to the
          nine-months ended September 30, 1996

               Overall, total revenue increased $10,242,200 or 14.8% and
          total expenses before the extraordinary items and net income of
          the joint ventures increased $8,865,900 or 16.1% for the nine-
          month period.  Net income applicable to common shares before the
          extraordinary items increased $1,658.900 or 15.7%, after
          dividends on the Company's Perpetual Preferred Shares.

               In the following discussion of the comparison of the nine-
          months ended September 30, 1997 to the nine-months ended
          September 30, 1996, the term Core Portfolio Properties refers to
          the 35 wholly owned multifamily properties acquired by the
          Company at the time of the IPO, the 32 properties acquired prior
          to January 1, 1996 and the acquisition of the remaining 50%
          interest in a property in which the Company was a joint venture
          partner at the time of the IPO.  Acquired Properties refers to
          the 13 properties acquired between January 1, 1996 and September
          30, 1997.

               During the nine-months ended September 30, 1997, the
          Acquired Properties generated total revenues of $12,200,000 while
          incurring property, operating and maintenance expenses of
          $4,626,300.

          Rental Revenues:
               Rental revenues increased $9,540,300 or 14.7% for the nine-
          month period.  The majority of this increase is attributable to
          an increase in rental revenues from the Acquired Properties of
          $8,559,000 for the same period.  Increases in occupancy and suite
          rents at the Core Portfolio Market-rate and Government-Assisted
          Properties resulted in a $981,300 or 1.6% increase in rental
          revenue from these properties.  Retroactive revenue increases
          related to budget based Government-Assisted Properties are
          recognized based on the applications submitted to the U.S.
          Department of Housing and Urban Development.

          Other Revenues:
               Other revenues increased $701,958 primarily due to (i)
          refunds of prior years real estate taxes of $308,400 resulting
          from successful challenges to the property values used to assess
          real estate taxes at six multifamily properties and (ii) interest
          income of $332,000 on amounts advanced for major renovation
          programs to entities managed by the Company.  The balance of the
          increase relates to interest income earned on the Company's
          investments and late charges assessed to residents.

          Property operating and maintenance expenses:
               Property operating and maintenance expenses increased
          $3,889,500 or 14.3% for the nine-month period.  Operating and
          maintenance expenses at the Acquired Properties increased
          $3,229,700 for the nine-month period due primarily to the
          operating and maintenance expenses incurred at the 13 properties
          acquired between January 1, 1996 and September 30, 1997. 
          Property operating and maintenance expenses at the Core Portfolio
          Properties increased $659,900 or 2.6% when compared to the prior
          nine-month period primarily due to increases in payroll and
          utilities which were offset by decreases in real estate taxes,
          insurance, advertising and other operating expenses.  Total
          expenditures for building renovations and suite and common area
          refurbishment in the Core Portfolio Properties that were not
          considered to be capital in nature averaged $347 per suite for
          the nine-months ended September 30, 1997 as compared to $323 per
          suite for the nine-months ended September 30, 1996.    

<PAGE> 16

          Other expenses:
               Depreciation and amortization increased $2,488,600 or 22.2%
          for the nine-month period primarily due to the increased
          depreciation and amortization expense recognized on the Acquired
          Properties.
               
               General and administrative expenses increased $370,000 or
          9.2% for the nine-month period.  This increase is primarily
          attributable to payroll and payroll related expenses as the
          Company continues to develop a team of professionals to provide
          hands-on attention to the Company's expanding portfolio of
          assets.

               Interest expense increased $2,100,500 or 18.3% for the nine-
          month period primarily due to the interest incurred with respect
          to the additional borrowings under the Line of Credit and MTN's
          that were used for the acquisition of properties.

          Extraordinary items:
               The extraordinary items of $1,023,700 recognized during 1997
          relates primarily to the write-off of a portion of the
          liabilities assumed with respect to certain multifamily
          properties acquired by the Company which related to the
          difference between the stated interest rate and the effective
          interest rate on mortgage indebtedness assumed.  The mortgage
          indebtedness assumed upon the acquisition of these properties was
          repaid in 1997.

          Net income applicable to common shares:
               Net income applicable to common shares is reduced by
          dividends on the Perpetual Preferred Shares of $4,113,300.

          Equity in net income of joint ventures:
               The combined equity in net income of joint ventures
          increased $195,200 or 253.9% and $282,600 or 134.6% for the
          three- and nine-months ended September 30, 1997 and 1996,
          respectively.  These increases are primarily attributable to an
          increase in net collected rents as occupancies increased at the
          joint venture properties and a reduction in property operating
          and maintenance expenses.

               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 nine-months ended
          September 30, 1997 and 1996.

<TABLE>
<CAPTION>

                                          For the three-months       For the nine-months 
                                           ended September 30,       ended September 30,
                                             1997        1996          1997        1996    

   <S>                                   <C>         <C>           <C>          <C>
   Beneficial interests in joint venture
     operations
       Rental revenue                    $1,708,060  $1,643,740    $5,016,690  $4,949,030 
       Cost of operations                   886,840     994,450     2,836,060   3,014,760 
                                            821,220     649,290     2,180,630   1,934,270 
       Interest income                        3,820       5,180        16,330      14,410 
       Interest expense                    (440,420)   (444,000)   (1,325,280) (1,338,360)
       Depreciation                        (100,110)   (121,170)     (341,870)   (361,130)
       Amortization                         (12,410)    (12,410)      (37,220)    (39,160)
       Net income                        $  272,100  $   76,890     $ 492,590  $  210,030
</TABLE>

          Outlook
               
               The following three paragraphs contain forward-looking
          statements and certain risks, trends and uncertainties could
          cause actual results to vary from those contained in the forward-
          looking statements.  Readers are cautioned not to place undue
          reliance on forward-looking statements, which are based only on
          current judgments and current knowledge of management.  These
          forward-looking statements are intended to be covered by the safe

<PAGE> 17

          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 risks of a lessening of demand for the
          apartments owned by the Company, changes in government
          regulations affecting the Government-Assisted Properties, 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.

               Approximately 54% of the Company's multifamily properties
          are located in the greater Cleveland/Akron, Ohio area which is
          the fourteenth largest consumer market in the United States
          containing over four million people within a fifty mile radius of
          Akron.  In Central Ohio, which accounts for 25% of the Company's
          multifamily properties, Columbus is the 30th largest metropolitan
          area in the U.S. based on population.  Population in the Central
          Ohio region grew 7.6% from 1990 to 1996, ranking it 25th among
          the top 50 fastest growing metropolitan areas in the U.S.,
          according to Census Bureau data.  Columbus, Ohio was selected by
          the E & Y Kenneth Leventhal Real Estate Group as one of the 12
          best apartment investment markets in the country because of its
          well-diversified economic base, strong rental growth and lower
          vacancy rates.  The Company's Michigan portfolio, which comprises
          11% of the Company's multifamily properties, is located in eight
          separate markets each having a stable population and employment
          outlook. 

               Permitting activity in Indianapolis has been increasing but
          at a slower pace than 1996.  Thus far, the competition in this
          market has not had any real effect on the Company's multifamily
          property located in Indianapolis.  Though there are signs of
          excess multifamily apartment capacity in the Columbus, Ohio
          market attributable to a number of newly constructed properties
          that are at or near completion, supply of multifamily apartments
          has remained fairly consistent with demand.  While an excess
          capacity of multifamily apartments may have a short-run impact on
          the Company's multifamily properties located in the Columbus,
          Ohio vicinity, including the impact on the timing of the lease-up
          at Bradford at Easton.  The estimated demand for multifamily
          apartments currently exceeds the annualized permit issuance in
          the Greater Columbus, Ohio market.  There does not appear to be
          any significant permitting activity in the Northeast Ohio, Toledo
          or Michigan markets in which the Company is operating multifamily
          apartment properties.

               With an average economic occupancy for the Core Portfolio
          Market-rate properties over 94.4%, and favorable market
          conditions, it would appear that opportunities exist for
          continued rental growth at the Company's Market-rate properties. 
          The Company expects that building and grounds repair and
          maintenance expenditures for the Core Portfolio Properties will
          increase as the Company continues to maintain its properties to
          maximize their earnings potential.  Utility expenditures will
          vary over prior periods as the effect of weather related usage
          variances and rate variances are factored into the level of
          utility expense.

          Inflation
               Substantially all of the residential leases at the
          properties allow, at the time of renewal, for adjustments in the
          rent payable thereunder, and thus may enable the Company to seek
          increases in rents. The substantial majority of these leases are
          for one year or less and the remaining leases are for terms up to
          two years.  The short-term nature of these leases generally
          serves to reduce the risk to the Company of the adverse effect of
          inflation.

          Contingencies
               There are no recorded amounts resulting from environmental
          liabilities as 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

<PAGE> 18
          policy term aggregate. Management has no plans to abandon any of
          the properties and is unaware of any other material loss
          contingencies.

<PAGE> 19

    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  Suites   Rehab.    Sq. Ft. 

   MARKET RATE
   Acquired Properties
   Central Ohio
   <S>                            <C>                        <C>               <C>    <C>        <C>
   Perimeter Lakes                09/20/96 Dublin            Gdn/Tnhms          189   1992          999
   Oak Bend Commons (a)           05/30/97 Columbus          Garden              96   1997        1,110
   Saw Mill Village               04/22/97 Columbus          Garden             340   1987        1,161
                                                                                625               1,104
   Cincinnati, Ohio
   Remington Place Apartments     03/31/97 Cincinnati        Garden             234  1988-90        830

   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

   Michigan
   Aspen Lakes                    09/04/96 Grand Rapids      Garden             144   1992          789
   Clinton Place                  08/25/97 Clinton Twp.      Garden             202   1988          954
                                                                                346                 885

   Toledo, Ohio
   Hawthorne Hills Apartments     05/14/97 Toledo            Garden              88   1973        1,145
                                                                              1,865                 811
   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 Vllg. at Bennell      03/07/94 Columbus          Ranch              164   1990          769
   Muirwood Vllg. at London       03/03/94 London            Ranch              112   1989          769
   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
   Pendleton Lakes East           08/25/94 Columbus          Garden             256  1990-93        899
   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<PAGE>
   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
                                                                              2,946                 897
   Northeastern Ohio
   Bay Club                       IPO      Willowick         Garden              96   1990          925
   Colonnade West                 IPO      Cleveland         Garden             216   1964          502
   Cultural Gardens               IPO      Euclid            Mid Rise           186   1966          688
   Edgewater Landing              04/20/94 Cleveland         High Rise          241  1988 r         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
   Memphis Manor                  IPO      Cleveland         Garden             120   1966          554
   Park Place                     IPO      Parma Hts.        Mid Rise           164   1966          760


</TABLE>
<TABLE>
<CAPTION>
                                      For the three months ending         For the three months ending    
                                           September 30, 1997                  September 30, 1996         
                                   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.

   MARKET RATE
   Acquired Properties
   Central Ohio
   <S>                               <C>      <C>       <C>   <C>       <C>      <C>         <C>    <C>
   Perimeter Lakes                   94.1%    92.6%     $ 719 $ 0.72    N/A       N/A        N/A     N/A 
   Oak Bend Commons (a)              85.5     94.8        N/A    N/A    N/A       N/A        N/A     N/A 
   Saw Mill Village                  90.3     87.6        745   0.64    N/A       N/A        N/A     N/A 
                                     91.6%    90.2%     $ 736 $ 0.67    N/A       N/A        N/A     N/A 
   Cincinnati, Ohio
   Remington Place Apartments        92.2%    94.4%     $ 660 $ 0.80    N/A       N/A        N/A     N/A 

   Indiana                             
   The Gables at White River         90.6%    93.9%     $ 720 $ 0.74    N/A       N/A        N/A     N/A 
   Waterstone Apartments            N/A       88.4        222   0.23    N/A       N/A        N/A     N/A 
                                     90.6%    90.6%     $ 720 $ 0.74    N/A       N/A        N/A     N/A 

   Michigan
   Aspen Lakes                       94.0%    97.9%     $ 554 $ 0.70    N/A       N/A        N/A     N/A 
   Clinton Place                    N/A       93.6        268   0.28    N/A       N/A        N/A     N/A 
                                     96.7%    95.4%     $ 387 $ 0.44    N/A       N/A        N/A     N/A 

   Toledo, Ohio
   Hawthorne Hills Apartments        87.4%    93.2%     $ 548 $ 0.48    N/A       N/A        N/A     N/A 
                                     92.8%    94.1%     $ 586 $ 0.63    N/A       N/A        N/A     N/A 
   CORE PORTFOLIO PROPERTIES
   Market rate
   Central Ohio
   Arrowhead Station                 88.1%    88.2%     $ 696 $ 0.52     99.0%     99.0%   $ 660   $ 0.49
   Bedford Commons                   97.7     96.4        771   0.67     99.4      98.2      718     0.62
   Bolton Estates                    94.4     95.9        469   0.68     90.0      91.8      453     0.66
   Colony Bay East                   95.3     97.4        517   0.57     96.6      96.8      493     0.55
   Heathermoor                       97.7     97.9        548   0.66     97.6      98.6      528     0.64
   Kensington Grove                  93.1     94.7        779   0.70     96.2      98.7      761     0.69
   Lake Forest                       92.0     96.9        550   0.70     90.4      92.7      538     0.68
   Muirwood Vllg. at Bennell         93.4     97.0        499   0.65     96.4      95.7      483     0.63
   Muirwood Vllg. at London          97.8     98.2        504   0.66     97.2      94.6      491     0.64
   Muirwood Vllg. at Mt. Sterling    91.3     89.6        500   0.65     96.4      97.9      490     0.64
   Muirwood Vllg. at Zanesville      92.7     94.9        525   0.68     99.7      95.4      518     0.67
   Pendleton Lakes East              94.4     98.8        517   0.58     98.1      96.5      504     0.56
   Residence at Christopher Wren     96.6     96.6        745   0.70     98.9      98.5      709     0.67
   Residence at Turnberry            86.5     89.8        740   0.63     93.7      98.1      722     0.61 
   Sheffield at Sylvan              100.0     97.8        504   0.64     97.3      94.1      502     0.63
   Sterling Park                     96.7     96.9        550   0.72     93.0      94.5      537     0.70<PAGE>
   The Residence at Newark           96.5     95.5        560   0.65     99.5      97.3      540     0.62
   The Residence at Washington       95.5     88.9        530   0.61     99.2      88.9      519     0.60
   Wyndemere                         96.0     96.9        534   0.70     99.3     100.0      523     0.68
                                     94.4%    95.8%     $ 581 $ 0.65     96.6%     96.3%   $ 562   $ 0.63
   Northeastern Ohio
   Bay Club                          98.0%    99.0%     $ 622 $ 0.67     96.6%     94.8%   $ 618   $ 0.67
   Colonnade West                    91.4     91.2        405   0.81     94.6      91.2      397     0.79
   Cultural Gardens                  96.4     99.5        503   0.73     95.1      96.2      492     0.72
   Edgewater Landing                 94.9     98.3        416   0.71     95.3      96.3      409     0.70
   Gates Mills III                   93.7     98.4        717   0.82     91.9      93.8      664     0.76
   Holly Park                        91.0    100.0        685   0.78     92.4     100.0      686     0.78
   Huntington Hills                  97.5     97.6        656   0.67     95.6      97.6      641     0.66
   Mallard's Crossing                97.0     97.4        699   0.70     97.1      93.8      674     0.68
   Memphis Manor                     90.1     95.8        443   0.80     94.3      91.7      440     0.79
   Park Place                        90.1     92.7        555   0.73     93.1      95.7      521     0.69 <PAGE>
 
</TABLE>

<PAGE> 20
<TABLE>
<CAPTION>
                                                                                       Year     Average
                                     Date                        Type of      Total  Built or  Unit Size
      The Multifamily Properties   Acquired     Location       Construction  Suites   Rehab.    Sq. Ft. 

   <S>                             <C>      <C>               <C>            <C>      <C>         <C>
   Pinecrest                       IPO      Broadview Hts.    Garden              96  1965 r         598
   Portage Towers                  IPO      Cuyahoga Falls    High Rise          376   1973          869
   Somerset West (b)               IPO      North Royalton    Gdn/Tnhms          197   1982        1,038
   The Triangle (c)                IPO      Cleveland         High Rise          273   1989          616
   Timbers                         IPO      Broadview Hts.    Garden              96  1987-89        930
   Villa Moderne                   IPO      North Olmsted     Garden             135   1963          504
   Washington Manor                07/01/94 Elyria            Garden             120  1963-64        541
   West Park Plaza                 IPO      Cleveland         Garden             118   1964          520
   Westchester Townhouses          IPO      Westlake          Townhomes          136   1989        1,000
   Westlake Townhomes              IPO      Westlake          Townhomes            7   1985        1,000
   Williamsburg at Greenwood Vllg. 02/18/94 Sagamore Hills    Townhomes          260   1990          938
   Winchester Hills I  (d)         IPO      Willoughby Hills  High Rise          362   1972          822
   Winchester Hills II             IPO      Willoughby Hills  High Rise          362   1979          822
                                                                               4,350                 782
   Michigan
   Arbor Landings Apartments       01/20/95 Ann Arbor         Garden             168   1990        1,116
   Central Park Place              12/29/94 Grand Rapids      Garden             216   1988          850
   Country Place Apartments        06/19/95 Mt. Pleasant      Garden             144   1988          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
   Summer Ridge Apartments         04/01/96 Kalamazoo         Garden             248  1989-91        960
                                                                               2,038                 974
   Toledo, Ohio
   Cloisters                       09/14/95 Toledo            Townhomes          188   1990        1,037
   Kensington Village              09/14/95 Toledo            Gdn/Tnhms          190  1985-90        920
   Treetops                        09/14/95 Toledo            Townhomes          128  1988-89      1,350
   Vantage Villa                   10/30/95 Toledo            Garden             150   1974          935
                                                                                 656               1,041
   Pennsylvania
   Chestnut Ridge                  03/01/96 Pittsburgh        Garden             468   1986          769
      Core Market Rate                                                        10,458                 867

   GOVERNMENT ASST.-ELDERLY
   Ellet Development               IPO      Akron             High Rise          100   1978          589
   Hillwood I                      IPO      Akron             High Rise          100   1976          570
   Puritas Place (e)               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<PAGE>
   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
   Rainbow Terrace                 IPO      Cleveland         Gdn/Tnhms          484  1982 r         768
   Shaker Park Gardens II          IPO      Warrensville      Garden             151   1964          753
                                                                                 685                 769
                                                                               1,780                 666
   CONGREGATE CARE
   Gates Mills Club                IPO      Mayfield Heights  High Rise          120   1980          721
   The Oaks                        IPO      Westlake          Garden              50   1985          672
                                                                                 170                 707
      Wholly owned core portfolio                                             12,408                 836 <PAGE>
 


</TABLE>
<TABLE>
<CAPTION>
                                       For the three months ending        For the three months ending    
                                           September 30, 1997                  September 30, 1996         
                                    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>
   Pinecrest                          90.4     93.8       473   0.79     94.6      77.1      456     0.76
   Portage Towers                     94.0     94.4       573   0.66     94.2      91.2      559     0.64
   Somerset West (b)                  89.4     87.3       699   0.67     94.0      97.5      699     0.67
   The Triangle (c)                   96.5     97.1       913   1.48     98.4     100.0      848     1.38
   Timbers                            93.8     89.6       730   0.78     95.3      99.0      687     0.74
   Villa Moderne                      94.8     99.3       445   0.88     94.9      91.1      428     0.85
   Washington Manor                   97.2     99.2       387   0.72     95.7      99.2      374     0.69
   West Park Plaza                    91.7     90.7       427   0.82     91.8      90.7      421     0.81
   Westchester Townhouses             92.2     91.9       775   0.78     90.7      93.4      767     0.77
   Westlake Townhomes                 93.9    100.0       801   0.80     94.2     100.0      772     0.77
   Williamsburg at Greenwood Vllg.    91.6     91.9       888   0.95     96.0      97.3      809     0.86
   Winchester Hills I  (d)            90.9     93.9       574   0.70     88.6      93.9      564     0.69
   Winchester Hills II                90.7     89.8       616   0.75     87.8      90.6      601     0.73
                                      93.1%    94.8%    $ 617 $ 0.79     93.6%     94.3%   $ 594   $ 0.76
   Michigan
   Arbor Landings Apartments          98.5%    97.6%    $ 851 $ 0.76     97.7%     97.0%   $ 821   $ 0.74
   Central Park Place                 95.3     95.8       607   0.71     94.3      98.6      613     0.72
   Country Place Apartments          100.0     97.9       532   0.62    100.0     100.0      504     0.59
   Georgetown Park Apartments         92.8     89.4       676   0.67     98.6      97.8      709     0.71
   The Landings at the Preserve       94.8     94.2       683   0.72     95.5      97.4      666     0.70
   The Oaks and Woods at Hampton      96.4     96.7       810   0.77     96.4      97.1      771     0.73
   Spring Brook Apartments            98.0     97.0       477   0.58     96.4      94.0      474     0.58
   Summer Ridge Apartments            96.0     99.2       678   0.71     94.0      96.4      693     0.72
                                      96.0%    95.6%    $ 693 $ 0.71     96.5%     97.2%   $ 684   $ 0.70
   Toledo, Ohio
   Cloisters                          95.8%    96.8%    $ 540 $ 0.52     93.8%     97.9%   $ 514   $ 0.50
   Kensington Village                 96.8     96.8       458   0.50     95.9      98.4      438     0.48
   Treetops                           95.9     95.3       736   0.55     97.0      96.1      715     0.53
   Vantage Villa                      86.3     92.7       613   0.66     95.2      94.7      573     0.61
                                      93.7%    95.6%    $ 571 $ 0.55     95.5%     97.0%   $ 545   $ 0.52
   Pennsylvania
   Chestnut Ridge                     97.8%    95.5%    $ 716 $ 0.93     93.3%     97.4%   $ 691   $ 0.90 
      Core Market Rate                94.4%    95.3%    $ 623 $ 0.72     95.1%     95.7%   $ 603   $ 0.70

   GOVERNMENT ASST.-ELDERLY
   Ellet Development                 100.0%   100.0%    $ 587  $1.00     99.7%    100.0%   $ 586    $ .99
   Hillwood I                        100.0    100.0       596   1.05     99.4     100.0      593     1.04
   Puritas Place (e)                  99.8    100.0       782   1.51     99.2      99.0      782     1.51
   Riverview                          99.7    100.0       591   1.07     98.8     100.0      594     1.07
   State Road Apartments              99.0    100.0       596   0.79    100.0     100.0      593     0.79
   Statesman II                       99.6    100.0       650   0.82    100.0     100.0      650     0.82
   Sutliff Apartments II             100.0    100.0       586   1.02    100.0     100.0      585     1.01<PAGE>
   Tallmadge Acres                   100.0    100.0       658   1.03     99.3     100.0      653     1.02
   Twinsburg Apartments              100.0    100.0       603   1.09     99.6     100.0      600     1.08
   Village Towers                     99.9    100.0       579   1.04    100.0     100.0      576     1.03
   West High Apartments               99.7     98.5       790   1.13     99.9     100.0      794     1.13
                                     100.0%    99.9%    $ 631 $ 1.05     99.7%     99.9%   $ 629   $ 1.05
   GOVERNMENT ASST.-FAMILY
   Jennings Commons                  100.0%   100.0%    $ 674 $ 0.82    100.0%    100.0%   $ 663   $ 0.81
   Rainbow Terrace                    96.6     96.7       773   1.01    100.0      97.5      708     0.92
   Shaker Park Gardens II             98.7     98.0       531   0.71    100.0      99.3      532     0.71
                                      97.2     97.2       713   0.93    100.0      98.1      666     0.87
                                      98.9%    98.9%    $ 662 $ 0.99     99.9%     99.2%   $ 643   $ 0.97
   CONGREGATE CARE
   Gates Mills Club                   97.7%    97.5%    $ 862 $ 1.20     96.1%    100.0%   $ 799   $ 1.11
   The Oaks                           94.6     78.0     1,033   1.54     93.9      98.0      987     1.47
                                      96.7     91.8       912   1.29     95.3      99.4      855     1.21
      Wholly owned core portfolio     95.1%    95.8%    $ 633 $ 0.76     95.9%     96.3%   $ 613   $ 0.73 <PAGE>
 
</TABLE>

<PAGE> 21
<TABLE>
<CAPTION>
                                                                                     Year     Average
                                    Date                        Type of     Total  Built or  Unit Size
     The Multifamily Properties   Acquired     Location      Construction  Suites   Rehab.    Sq. Ft. 

   Joint Venture Properties
   Northeastern Ohio
   Market rate
   <S>                            <C>      <C>               <C>               <C>   <C>           <C>  
   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                                                                15,505                 832
        Portfolio average                                                   17,370                 830


</TABLE>
<TABLE>
<CAPTION>


                                      For the three months ending        For the three months ending    
                                          September 30, 1997                  September 30, 1996         
                                   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.

   Joint Venture Properties
   Northeastern Ohio
   Market rate
 
   <S>                               <C>      <C>      <C>   <C>        <C>       <C>     <C>     <C>
   Americana                         89.0%    95.0%    $ 480 $ 0.60     86.1%     84.7%   $ 493   $ 0.61
   College Towers                    91.4     97.4       403   0.61     88.8      93.7      402     0.61
   Euclid House                      90.3     92.9       435   0.66     95.9      96.8      431     0.66
   Gates Mills Towers                94.5     98.7       703   0.82     93.3      94.6      666     0.78
   Highland House                    98.9    100.0       409   0.76     96.4      97.2      398     0.74
   Watergate                         93.8     94.8       545   0.66     90.0      89.1      544     0.65
                                     92.7%    96.2%    $ 536 $ 0.68     90.3%     90.4%   $ 529   $ 0.67
   Government Asst.-Family
   Lakeshore Village                100.0%   100.0%    $ 669 $ 0.85     99.9%    100.0%   $ 669   $ 0.85
                                     93.1     96.3       543   0.69     90.8      90.8      536     0.68
        Core                         94.9%    95.9%    $ 625 $ 0.75     95.5%     95.2%   $ 606   $ 0.73
        Portfolio average            94.8%    95.7%    $ 619 $ 0.75     95.5%     95.1%   $ 531   $ 0.64 <PAGE>
 
  <FN>
       ______________
       (a)  The recently constructed 96 suites have not yet reached stabilized occupancy.  The Company
            has entered into a contract to acquire 6 additional suites presently under construction;
            however, there can be no assurances that the suites will be acquired.
       (b)  Somerset West has 39 Contract Suites and 158 Market-rate suites.
       (c)  The Triangle also contains 63,321 square feet of office/retail space.
       (d)  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.
       (e)  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> 22

             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 is defined as FFO
          less capital expenditures funded by operations and loan
          amortization payments.  The Company believes that in order to
          facilitate a clear understanding of the consolidated historical
          operating results of the Company, FFO and Distributable Cash Flow
          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 nine month period ended September 30, 1997
          and 1996 are summarized in the following table:

<TABLE>
<CAPTION>
                                                     For the three months For the nine months
                                                      ended September 30, ended September 30,
   (In thousands)                                       1997       1996      1997      1996  

   <S>                                               <C> <C>    <C>       <C>        <C>
   Net income applicable to common shares            $   4,385  $  3,613  $ 13,269   $ 10,586 

   Depreciation on real estate assets
     Wholly owned properties                             4,450     3,627    12,734     10,513 
     Joint venture properties                              100       121       342        361 
   Extraordinary item - loss or (gain) on early
    extinguishment of debt                                  20         -     (1,024)        - 
   Funds From Operations                                 8,955     7,361     25,321    21,460 
                                                                  
   Depreciation - other assets                             191        80        438       226 
   Amortization of deferred financing fees                 188       164        545       492 
   Fixed asset additions                                  (273)      (97)      (504)     (276)
   Fixed asset additions - joint venture properties                    -                    - 
   Distributable Cash Flow                           $   9,061  $  7,508  $  25,800  $ 21,902 

   Weighted average shares outstanding                  17,053    13,872     15,906    13,872
</TABLE>

<PAGE> 23


                                       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 6.   EXHIBITS AND REPORTS ON FORM 8-K

                (a)    Exhibits
<TABLE>
<CAPTION>
                                                    Filed herewith or
                                                       incorporated
                                                        herein by
               Number             Title                 reference    

               <S>     <C>                          <C>
               27      Financial Data Schedule      Exhibit 27 filed
                                                      herewith.
</TABLE>


                (b)    Reports on Form 8-K

                       A Current Report on Form 8-K/A-1 dated February 6,
                       1997 was filed on July 2, 1997.  This report
                       describes the Company's acquisition of multifamily
                       properties, partnership interests and undeveloped
                       land.  This report includes (i) unaudited statements
                       of revenue and certain expenses of certain of the
                       multifamily properties for the period ended March
                       31, 1997 or date of acquisition, whichever is
                       earlier, and (ii) audited statements of revenue and
                       certain expenses for the year ended December 31,
                       1996 of those properties.  The report also includes
                       pro forma financial information (unaudited of the
                       Company and the acquired properties as follows:
                       condensed balance sheet as of March 31, 1997;
                       condensed statement of operations for the three
                       months ended March 31, 1997 and for the year ended
                       December 31, 1996; and estimated twelve month pro
                       forma statement of taxable net operating income and
                       operating funds available.

<PAGE> 24

          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



          November 14, 1997        /s/ Dennis W.  Bikun                    
          (Date)                   Dennis W. Bikun, Chief Financial Officer
                                      and Treasurer