**FIRSTAMENDMENT TO**

**CREDIT AGREEMENT**

            This FirstAmendment to Credit Agreement (the “Amendment”), dated as of March 20,2008 (the “Effective Date”), is by and among Associated Estates RealtyCorporation (the “Borrower”), National City Bank and the other banks andfinancial institutions whose signatures appear below (collectively, the “Lenders”)and National City Bank, not individually but as administrative agent for theLenders (the “Administrative Agent”).

**RECITALS**

 A.                Borrower, Administrative Agent, and certain of the Lenders are partiesto that certain Credit Agreement dated as of April 24, 2007 (the “CreditAgreement”), pursuant to which such Lenders made available to Borrower anunsecured revolving credit facility with an Aggregate Commitment of $100,000,000. All capitalized terms used in this Amendment and not otherwise defined hereinshall have the meanings given to such terms in the Credit Agreement.

B.                Borrower and the Lenders wish to amend the Credit Agreement to increasethe Aggregate Commitment to $150,000,000 by adding new Lenders and increasingthe Commitments of certain of the existing Lenders, to extend the FacilityTermination Date thereunder and to modify certain other terms, covenants, andprovisions in the Credit Agreement, all as set forth herein.

            NOW, THEREFORE, in consideration of theforegoing recitals and for other good and valuable consideration, the receiptand sufficiency of which are hereby acknowledged, the parties hereto agree asfollows:

**AGREEMENTS**

1.                 Incorporation. The foregoing Recitals to this Amendment arehereby incorporated and made part of this Amendment.

2.                 Effectiveness. This Amendment shall be effective fromand after the Effective Date shown above, which is the date on which each ofthe parties hereto has executed and delivered to the Administrative Agent acounterpart of this Amendment.

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3.                 New and Increased Commitments. From and after the Effective Date(i) US Bank, National Association shall be considered a “Lender” under theCredit Agreement and the Loan Documents and each shall have a Commitment in theamount shown next to its signature on the signature pages of this Amendment,and (ii) National City Bank, Wells Fargo Bank, N.A., Raymond James Bank,FSB, and The Huntington National Bank shall each be deemed to have increasedits Commitment to the increased amount shown next to its signature on thesignature pages of this Amendment.  For purposes of Section 14.1 of the CreditAgreement (Notices), the address(es) and facsimile number(s) for each such newLender shall be as specified below its signature on the signature pages of thisAmendment. The Borrower shall, on orbefore the Effective Date, execute and deliver to the Administrative Agent onbehalf of each such new Lender a Note to evidence the Loans to be made by suchLender.

4.                 Changes to Defined Terms.  From and after the Effective Date, thefollowing definitions in Article I of the Credit Agreement are amended asfollows:

a.                  The definition of  “Aggregate Commitment” isdeleted in its entirety and shall be replaced by the following:                                                “Aggregate Commitment” means, as of any date, theaggregate of the then-current Commitments of all the Lenders, which is, as ofthe Effective Date of the First Amendment to this Agreement, $150,000,000.

b.                 The definition of  “Capitalization Rate” shall be amended by modifyingclause (i) thereof to read “seven and one quarter percent (7.25%).”

c.                  The definition of “Facility Termination Date” is deleted in its entiretyand shall be replaced by the following: 

                        “Facility Termination Date” shall mean March 20, 2011,which shall be the third (3rd ) anniversary of the Effective Date of the FirstAmendment to this Agreement, or if such day is not a Business Day the lastBusiness Day immediately preceding such day.

d.                    The definition of “Total Asset Value” is deleted in itsentirety and shall be replaced with the following:

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     “Total Asset Value” means, as ofany date, (i) the Net Operating Income for the most recent four (4)consecutive fiscal quarters of the Borrower for which financial results havebeen reported attributable to Projects then owned or leased by Borrower or anyother member of the Consolidated Group (excluding 100% of the Net OperatingIncome attributable to any such Projects which have not been owned or leased byany combination of Borrower, other members of the Consolidated Group orInvestment Affiliates for at least eight (8) full fiscal quarters as of the endof the most recent fiscal quarter for which financial results have beenreported, other than Net Operating Income from Overlimit Projects (as definedbelow) then owned or leased by Borrower or any other member of the ConsolidatedGroup which Net Operating Income will be included in this clause (i)) dividedby the Capitalization Rate, plus (ii) 100% of cost for any such Projects firstacquired or leased during such eight (8) fiscal quarter period (including theamount of any assumed Indebtedness secured thereby) which are not OverlimitProjects, plus (iii) the Consolidated Group Pro RataShare of Net Operating Income for the most recent four (4) consecutivefiscal quarters of the Borrower for which financial results have been reported attributable to Projects then owned or leased by anInvestment Affiliate (excluding Net Operating Income attributable to any suchProjects which have not been so owned or leased for eight (8) fiscal quarters as of the end of such most recent fiscalquarter for which financial results have been reported, other than NetOperating Income from Overlimit Projects (as defined below) then owned orleased by an Investment Affiliate which Net Operating Income will be includedin this clause (iii)) divided by the Capitalization Rate, plus (iv) theConsolidated Group Pro Rata Share of 100% of cost for any such Projectsfirst acquired or leased by an Investment Affiliate during such eight (8)fiscal quarter period (including the amount of any assumed Indebtedness securedthereby); plus (v) cash and Cash Equivalents owned byBorrower or any other member of the Consolidated Group as of the end of themost recent fiscal quarter for which financial results have been reported, plus(vi) the Consolidated Group Pro Rata Share of all cash and Cash Equivalentsowned by Investment Affiliates as of the end of the most recent fiscal quarterfinancial results have been reported plus (vii) Real Property Under Developmentand Undeveloped Land of the Consolidated Group, valued at cost, plus (viii) theConsolidated Group Pro Rata Share of any Real Property Under Development andUndeveloped Land of Investment Affiliates, valued at cost, plus (ix) First MortgageReceivables owned by the Consolidated Group, valued in accordance with GAAP,plus (x) the Consolidated Group Pro Rata Share of First Mortgage Receivablesowned by any Investment Affiliates, valued in accordance with GAAP.  Asused herein, the term “Overlimit Projects” shall mean, if at any time theaggregate amount contributed to Total Asset Value under clauses (ii) and (iv)of this definition on account of acquired Projects owned or leased for morethan four (4) quarters but less than nine (9) quarters would exceed twentypercent (20%) of Total Asset Value, a sufficient number of such Project(s)which would otherwise be valued at cost under such clauses (ii) or (iv), whichthe Company shall designate to instead be valued in accordance with clauses (i)or (iii), so that the aggregate value of the remaining Projects owned or leasedfor more than four (4) quarters but less than nine (9) quarters which areincluded at cost under clauses (ii) and (iv) of this definition do not exceedtwenty percent (20%) of Total Asset Value. 

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e.                  The definition of “Unencumbered Real Property Value” is deleted in itsentirety and shall be replaced by the following:                        **                      “**Unencumbered Real Property Value” shall mean,as of any date, (i) Unencumbered Real Property Adjusted NOI divided by theCapitalization Rate applicable thereto, plus (ii) the cost of all QualifyingUnencumbered Projects then owned by Borrower or a Subsidiary Guarantor whichhave not been owned by any combination of Borrower, other members of theConsolidated Group or Investment Affiliates for eight (8) consecutive fullfiscal quarters as of the end of the most recent fiscal quarter of Borrower forwhich financial results have been reported other than Overlimit UnencumberedProjects, with the cost of each such Qualifying Unencumbered Project being theamount capitalized as “real estate” on Borrower’s balance sheet plus anyportion of the acquisition cost required to be allocated as an intangible assetby GAAP.  As used herein, the term “Overlimit Unencumbered Projects” shallmean, if at any time the aggregate amount contributed to Unencumbered RealProperty Value under clause (i) of this definition for acquired QualifyingUnencumbered Projects owned or leased for more than four (4) quarters but lessthan nine (9) quarters would exceed twenty percent (20%) of Unencumbered RealProperty Value, a sufficient number of such Project(s) which would otherwise bevalued at cost under such clause (ii), which the Company shall designate toinstead be valued in accordance with clause (i), so that the aggregate value ofthe remaining Qualifying Unencumbered Projects owned or leased for more thanfour (4) quarters but less than nine (9) quarters which are included at costunder clause (ii) of this definition does not exceed twenty percent (20%) ofUnencumbered Real Property Value. [

f.                   The definition of “Unencumbered Real Property Adjusted NOI”is deleted in its entirety and shall be replaced by the following:

                                              “Unencumbered Real Property Adjusted NOI” shall mean, as of any date,  the NetOperating Income for the most recent four (4) consecutive fiscal quarters ofBorrower for which financial results have been reported attributable toQualifying Unencumbered Projects then owned or leased by Borrower or aSubsidiary Guarantor (excluding Net Operating Income attributable to any suchQualifying Unencumbered Projects which have not been owned or leased by anycombination of Borrower, other members of the Consolidated Group or InvestmentAffiliates for eight (8) full fiscal quarters as of the end of the most recentfiscal quarter of Borrower for which financial results have been reported otherthan Net Operating Income from Overlimit Unencumbered Projects then owned orleased by Borrower or a Subsidiary Guarantor which shall be included in this definition),less (i) management fees equal to 2.5% of the aggregate gross revenuesattributable to such Qualifying Unencumbered Projects for such period, and less(ii) a capital expenditure reserve equal to $150 per unit for such QualifyingUnencumbered Projects.  

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5.                 Other Changes to Credit Agreement.  From and after the EffectiveDate, the following sections in the Credit Agreement shall be modified asfollows:

         a.                  In Section 2.5 the words “(the “Fee Letter”)” shall bereplaced by the words “and pursuant to the Borrower’s letter agreement with theAdministrative Agent dated as of February 13, 2008 (collectively, the “FeeLetter”).”

        b.                   The text of Section 7.20(b) shall be deleted in its entirety andreplaced with the following:  “The ratio of Consolidated Adjusted EBITDA toConsolidated Fixed Charges to be less than 1.35:1 as of the end of any fiscalquarter.”

        c.                  The text of Section 7.20(c) shall be deleted in its entirety andreplaced with the following:  “The ratio of Consolidated Unsecured Indebtednessto Unencumbered Real Property Value to be greater than 0.65:1 as of the end ofany fiscal quarter.”

       d.                    In Section 7.20(d) the ratio “2.40:1” shall be replaced with“2.00:1.”

       e.                  A new subsection (e) shall be added at the end of Section 7.20and shall read as follows:                                          “(e) The percentage of the total residential units in theQualifying Unencumbered Projects that are physically occupied by tenants underthird party occupancy leases to be less than 85% as of any date, providedhowever that, if and to the extent that the total percentage of residentialunits in the Qualifying Unencumbered Projects that are physically occupied bytenants under third party occupancy leases falls below the 85% threshold at anytime, Borrower may, within thirty (30) days from such date, either (i) add anEligible Unencumbered Project (in accordance with Section 3.1 of theCredit Agreement), (ii)  replace a Qualifying Unencumbered Project, or (iii)remove a Qualifying Unencumbered Project (in accordance with Section 3.3of the Credit Agreement) in order to comply with such 85% minimum threshold.”

   f.                         The following sentence shall be added at the end of Section9.2:                                “Notwithstanding anything to the contrary in this Section 9.2, no suchsupplemental agreement or waiver shall modify Section 7.12 or thedefinition of Change in Control or delete or modify the reference to Section7.12 which is contained in Section 8.3 without the consent ofLenders in the aggregate having at least 75% of the Aggregate Commitment, or ifthe Aggregate Commitment has been terminated, Lenders in the aggregate holdingat least 75% of the aggregate unpaid principal amount of the outstandingAdvances.” 

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6.                 Representations and Warranties.  Borrower hereby represents andwarrants to Lenders and the Administrative Agent that as of the Effective Date:

         a.                  no Default or Unmatured Default exists under the Credit Agreement or theother Loan Documents or will exist after giving effect to the terms of thisAmendment;

         b.                 the representations and warranties contained in Article VI of the CreditAgreement are true and correct;

        c.                  the Credit Agreement and the other Loan Documents are in full force andeffect and it has no defenses or offsets to, or claims or counterclaimsrelating to, the obligations under the Credit Agreement or any of the otherLoan Documents;

        d.                 other than changes which have been previously provided to and approvedby the Administrative Agent, no changes have been made to its organizationaldocuments since the Agreement Execution Date; and 

        e.                  it has full power and authority to execute this Amendment.  

7.                Reimbursement to Administrative Agent.  The Borrower agrees toreimburse the Administrative Agent for all reasonable out-of-pocket expenses(including, but not limited to fees relating to legal, consulting, or auditingexpenses) incurred in connection with the preparation, negotiation, andconsummation of this Amendment. 

8.                 References to Credit Agreement; Inconsistency.  All references inthe Loan Documents to the Credit Agreement henceforth shall be deemed to referto the Credit Agreement as amended by this Amendment.  In the event of aconflict or inconsistency between the provisions of the Loan Documents and theprovisions of this Amendment, the provisions of this Amendment shall govern.

9.                 Continuing Force and Effect of Credit Agreement and Loan Documents. The provisions of the Credit Agreement and other Loan Documents are in fullforce and effect, except as amended herein, and the Loan Documents as soamended are hereby ratified and reaffirmed by Borrower.  Nothing contained inthis Amendment shall be construed to disturb, discharge, cancel, impair orextinguish the indebtedness evidenced by the existing Notes and the other LoanDocuments.

          10.                 Counterparts.  This Amendment may be executed in anynumber of counterparts, all of which taken together shall constitute oneagreement, and any of the parties hereto may execute this Amendment by signingany such counterpart.  This Amendment shall be construed in accordance with theinternal laws (and not the law of conflicts) of the State of Ohio, but givingeffect to federal laws applicable to national banks.  

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              INWITNESS WHEREOF, Borrower, Lenders and the Administrative Agent have executedthis Agreement as of the date first above written.

ASSOCIATEDESTATES REALTY CORPORATION, 

an Ohiocorporation

            By:  /s/Martin A. Fishman                                           Name: MartinA. Fishman                                           Title:    VicePresident                                       

1 AECParkwayRichmondHeights, Ohio  44143Attention: Chief Financial Officer & Legal DepartmentPhone: 216-261-3902Facsimile: 216-797-8779With acopy to:

Greenberg Traurig, LLP77 West Wacker DriveChicago, Illinois  60601

Attention:  Michael T. FishmanPhone:  312- 476-5075Fax:  312-456-8435

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   The undersigned, being all of the Subsidiary Guarantorsunder the Credit Agreement, hereby consent to and approve of the foregoingAmendment and agree that their obligations under the Subsidiary Guaranty shallcontinue in full force and effect with respect to the Loan, as increased andmodified by the foregoing Amendment:

AERC COUNTRY PLACE, LLC

By:    AERC Country, Inc.         Its Managing Member

 

By:   /s/ MartinA. Fishman              Name:  Martin A. FishmanTitle:  Vice President 

AERC COURTNEY CHASE, LLC

By:    Associated Estates RealtyCorporation

         

By:  /s/ Martin A.Fishman                  Name: Martin A. Fishman Title:  Vice President  

AERCMORGAN PLACE, INC.

By:  /s/ Martin A.Fishman                       Name: Martin A. FishmanTitle:  Vice President

BUCKHEAD AERC, LLCBy: Associated Estates Realty Corporation 

By:  /s/ Martin A.Fishman                      Name:  Martin A. FishmanTitle:  Vice President

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                                                                                    AERC-REMINGTONPLACE, INC.

By:  /s/ Martin A.Fishman                         Name:  Martin A. FishmanTitle:  Vice President

 

                                                                                    SANDLERat ALTA LAGO, L.L.C.

By:  Associated Estates Realty Corporation

By:  /s/ Martin A.Fishman                      Name:  Martin A. FishmanTitle:  Vice President

AERC WILLIAMSBURG, INC.

By:                                                                   

Name:  Martin A. FishmanTitle:  Vice President

AERC ARROWHEAD STATION, INC.

By:  /s/ Martin A.Fishman                           Name:  Martin A. FishmanTitle:  Vice President

AERC BAY CLUB, INC.

By:  /s/ Martin A.Fishman                             Name:  Martin A. FishmanTitle:  Vice President

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AERC BEDFORD COMMONS, INC.

By:   /s/ MartinA. Fishman                               Name:  Martin A. FishmanTitle:  Vice President

 

AERC STEEPLECHASE, LLC 

By:    AERC Shiloh Member, Inc.         Its Managing Member

By:  /s/ Martin A.Fishman                               Name:  Martin A. FishmanTitle:  Vice President

 

AERC WESTCHESTER, INC.

By:  /s/ Martin A.Fishman                           Name:  Martin A. FishmanTitle:  Vice President

 

ASPEN LAKES - AERC, INC.

By:  /s/ Martin A.Fishman                            Name:  Martin A. FishmanTitle:  Vice President

 

AERC LANDINGS AT PRESERVE, LLC

By:    AERC Landings, Inc.         Its Managing Member

By:   /s/ MartinA. Fishman                            Name:  Martin A. FishmanTitle:  Vice President

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AERC BENNELL, INC.

By:  /s/ Martin A.Fishman                             Name:  Martin A. FishmanTitle:  Vice President

 

AERC LAKE FOREST, INC.

By:  /s/ Martin A.Fishman                             |Name:  Martin A. FishmanTitle:  Vice President

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COMMITMENT:                                            NATIONALCITY BANK, 

$38,500,000                                                    Individuallyand as Administrative Agent

            By:  /s/Martin D. Rodriguez                                      Name:Martin D. Rodriguez                                     Title:    SeniorVice President                       

                                    NationalCity Bank                        InvestmentReal Estate                        OneChagrin Highlands                        2000Auburn Drive, Suite 400                        Beachwood,Ohio  44122-4327                        Attention: Martin D. Rodriguez                        Phone: 216-488-9123                        Facsimile: 216-488-3160

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COMMITMENT:                                            WELLSFARGO BANK, N.A., 

$38,500,000                                                    Individuallyand as Documentation Agent 

            By: /s/A.GeraldiPerry                                             Name:  A.Geraldi Perry                                          Title:  AssistantVice President                    

                                    200Public Square                        Suite3200                        Cleveland,OH  44114                        Attention: Toni G. Perry                        Phone: 216-344-6946                        Facsimile: 216-344-6971

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COMMITMENT:                                            RAYMONDJAMES BANK, FSB

$25,000,000

 

            By:  /s/James M. Armstrong                                       Name:  JamesM. Armstrong                                       Title:      VicePresident                                     

                                    710Carillon Parkway                        St.Petersburg, FL  33716                        Attention: James M. Armstrong                         Phone: 727-567-7919                         Facsimile: 727-567-8830

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COMMITMENT:                                            THEHUNTINGTON NATIONAL BANK

$24,000,000

 

            By:  /s/Stephen D. Bobonich                           Name:Stephen D. Bobonich                                Title:    VicePresident                                  

                                    925Euclid Avenue                        Suite 1990, CM17                        Cleveland,OH  44115                        Attention: Stephen D. Bobonich                        Phone:216-515-6235                        Facsimile:216-515-6251

                                                                                                                                                                                    

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COMMITMENT:                                            U.S.BANK NATIONAL ASSOCIATION

$24,000,000                                                    

 

            By:  /s/Leonard Olsavsky                                      Name:Leonard Olsavsky                                      Title:   VicePresident                                

            U.S.Bank National Association            CommercialReal Estate, Mid-East Region            1350Euclid Avenue             Suite1100, Mail Code CN-OH-RN11             Cleveland,Ohio 44115             Attention: Leonard Olsavsky             Phone:216-623-9212             Facsimile:216-241-0164

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