**Form 10-Q**

















**Associated Estates Realty Corporation**



|Ohio                                     | 34-1747603            
|---------------------------------------- | ----------------------
|(State or other jurisdiction of          | (I.R.S. Employer      
|incorporation or organization)           | Identification Number)
|                                         |                       
|                                         |                       
|5025 Swetland Court, Richmond Hts., Ohio | 44143-1467            
|(Address of principal executive offices) | (Zip Code)            



|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 [   ]                                                                           







**INDEX**

|**PART I  -  FINANCIAL INFORMATION**  | Page                                                
|------------------------------------- | ----------------------------------------------------
|                                      |                                                     
|ITEM 1                                | Condensed Financial Statements                      
|                                      |                                                     
|                                      | Consolidated Balance Sheets as of                   
|                                      | September 30, 1999 and December 31, 1998            
|                                      |                                                     
|                                      | Consolidated Statements of Income for the three and 
|                                      | nine month periods ended September 30, 1999 and 1998
|                                      |                                                     
|                                      | Consolidated Statements of Cash Flows for the nine  
|                                      | month periods ended September 30, 1999 and 1998     
|                                      |                                                     
|                                      | Notes to Financial Statements                       
|                                      |                                                     
|ITEM 2                                | Management's Discussion and Analysis of Financial   
|                                      | Condition and Results of Operations                 
|                                      |                                                     
|**PART II**  -  **OTHER INFORMATION** |                                                     
|                                      |                                                     
|ITEM 6                                | Exhibits and Reports on Form 8-K                    
|                                      |                                                     
|**SIGNATURES**                        | 50                                                  

**ASSOCIATED ESTATES REALTY CORPORATION**

**CONSOLIDATED BALANCE SHEETS**

|                                                               |                |              
|-------------------------------------------------------------- | -------------- | -------------
|                                                               | September 30,  | December 31, 
|                                                               | 1999           | 1998         
|                                                               | (Unaudited)    |              
|**ASSETS**                                                     |                |              
|Real estate assets                                             |                |              
|Land                                                           | $   92,554,424 | $  92,675,356
|Buildings and improvements                                     | 807,272,828    | 778,450,807  
|Furniture and fixtures                                         | 34,311,936     | 30,804,870   
|                                                               | 934,139,188    | 901,931,033  
|Less:  accumulated depreciation                                | (172,206,379)  | (153,941,702)
|                                                               | 761,932,809    | 747,989,331  
|Construction in progress                                       | 31,821,021     | 53,740,292   
|Real estate, net                                               | 793,753,830    | 801,729,623  
|Properties held for sale, net                                  | 1,340,796      | -            
|Cash and cash equivalents                                      | 11,545,984     | 1,034,655    
|Restricted cash                                                | 23,296,840     | 6,718,863    
|Accounts and notes receivable                                  |                |              
|Rents                                                          | 3,758,673      | 2,801,835    
|Affiliates and joint ventures                                  | 9,727,639      | 13,113,400   
|Other                                                          | 2,549,705      | 2,293,007    
|Intangible and other assets, net                               | 18,781,893     | 13,093,972   
|                                                               | $ 864,755,360  | $840,785,355 
|**LIABILITIES AND SHAREHOLDERS' EQUITY**                       |                |              
|Secured debt                                                   | $ 374,953,717  | $  80,042,667
|Unsecured debt                                                 | 177,463,603    | 423,862,468  
|Total indebtedness                                             | 552,417,320    | 503,905,135  
|Accounts payable and accrued expenses                          | 24,429,795     | 21,525,517   
|Dividends payable                                              | 28,126         | 10,507,586   
|Resident security deposits                                     | 5,644,914      | 5,960,971    
|Funds held on behalf of managed properties                     |                |              
|Affiliates and joint ventures                                  | 4,233,950      | 5,353,394    
|Other                                                          | 2,947,003      | 4,128,298    
|Accrued interest                                               | 5,409,257      | 5,501,634    
|Accumulated losses and distributions of joint ventures         |                |              
|in excess of investment and advances                           | 12,344,261     | 12,679,793   
|Total liabilities                                              | 607,454,626    | 569,562,328  
|                                                               |                |              
|Operating partnership minority interest                        | 12,044,982     | 12,034,880   
|                                                               |                |              
|Commitments and contingencies                                  | -              | -            
|Shareholders' equity                                           |                |              
|Preferred shares, Class A cumulative, without par value;       |                |              
|3,000,000 authorized; 225,000 issued and outstanding           | 56,250,000     | 56,250,000   
|Common shares, without par value, $.10 stated value;           |                |              
|50,000,000 authorized; 22,716,720 and 22,621,958 issued and    |                |              
|outstanding at September 30, 1999 and December 31, 1998,       |                |              
|respectively                                                   | 2,271,671      | 2,262,195    
|Paid-in capital                                                | 278,010,903    | 277,134,988  
|Accumulated dividends in excess of net income                  | (78,509,456)   | (75,991,638) 
|Accumulated other comprehensive income                         | (875)          | (875)        
|Less: Treasury shares, at cost, 1,112,600 and 25,000 shares at |                |              
|September 30, 1999 and December 31, 1998, respectively         | (12,766,491)   | (466,523)    
|Total shareholders' equity                                     | 245,255,752    | 259,188,147  
|                                                               | $864,755,360   | $840,785,355 





**ASSOCIATED ESTATES REALTY CORPORATION**

**CONSOLIDATED STATEMENTS OF INCOME**

**(UNAUDITED)**

|                                                        | For the three months ended | For the nine months ended
|------------------------------------------------------- | -------------------------- | -------------------------
|                                                        | September 30,              | September 30,            
|                                                        | 1999                       | 1998                     
|Revenues                                                |                            |                          
|Rental                                                  | $36,103,305                | $35,783,150              
|Property management fees                                | 1,287,100                  | 1,426,665                
|Asset management fees                                   | 611,418                    | 636,108                  
|Asset acquisition fees                                  | -                          | -                        
|Asset disposition fees                                  | 127,500                    | -                        
|Painting services                                       | 360,316                    | 481,775                  
|Other                                                   | 765,152                    | 905,664                  
|                                                        | 39,254,791                 | 39,233,362               
|Expenses                                                |                            |                          
|Property operating and maintenance                      | 16,634,594                 | 16,571,398               
|Depreciation and amortization                           | 8,985,719                  | 7,082,905                
|Painting services                                       | 376,992                    | 469,027                  
|Preliminary project costs                               | -                          | 200,456                  
|General and administrative                              | 3,601,863                  | 3,078,635                
|Charge for funds advanced to non-owned property         | -                          | -                        
|Interest expense                                        | 10,089,051                 | 7,346,108                
|Total expenses and charges                              | 39,688,219                 | 34,748,529               
|(Loss) income before gain on sale of properties, equity |                            |                          
|in net income of joint ventures, minority interest,     |                            |                          
|extraordinary item and cumulative effect of a change in |                            |                          
|accounting principle                                    | (433,428)                  | 4,484,833                
|Gain on sale of properties                              | 1,049,675                  | -                        
|Equity in net income of joint ventures                  | 106,128                    | 105,950                  
|Minority interest in operating partnership              | (88,183)                   | (39,353)                 
|Income before extraordinary item and cumulative         |                            |                          
|effect of a change in accounting principle              | 634,192                    | 4,551,430                
|Extraordinary item - extinguishment of  debt            | -                          | -                        
|Cumulative effect of a change in accounting principle   | -                          | -                        
|**Net income**                                          | $     634,192              | $ 4,551,430              
|                                                        |                            |                          
|**Net (loss) income applicable to common shares**       | $    (736,916)             | $ 3,180,325              
|                                                        |                            |                          
|**Earnings Per Common Share - basic:**                  |                            |                          
|(Loss) income before extraordinary item and cumulative  |                            |                          
|effect of a change in accounting principle              | $              (.03)       | $              .14       
|Extraordinary item                                      | $                   -      | $                  -     
|Cumulative effect of a change in accounting principle   | $                   -      | $                  -     
|Net (loss) income                                       | $              (.03)       | $              .14       
|                                                        |                            |                          
|**Earnings Per Common Share - diluted:**                |                            |                          
|(Loss) income before extraordinary item and cumulative  |                            |                          
|effect of a change in accounting principle              | $              (.03)       | $              .14       
|Extraordinary item                                      | $                   -      | $                  -     
|Cumulative effect of a change in accounting principle   | $                   -      | $                  -     
|Net (loss) income                                       | $              (.03)       | $              .14       
|                                                        |                            |                          
|**Pro forma amounts assuming the new capitalization**   |                            |                          
|**policy is applied retroactively:**                    |                            |                          
|Net income                                              | $        634,192           | $   4,820,030            
|Net (loss) income applicable to common shares           | $       (736,916)          | $   3,448,925            
|**Earnings Per Common Share - basic:**                  |                            |                          
|Net (loss) income applicable to common shares           | $               (.03)      | $              .15       
|**Earnings Per Common Share - diluted:**                |                            |                          
|Net (loss) income applicable to common shares           | $               (.03)      | $              .15       
|                                                        |                            |                          
|**Dividends declared per common share**                 | $                    -     | $           .465         
|                                                        |                            |                          
|**Weighted average number of**                          |                            |                          
|**common shares outstanding  - basic**                  | 21,616,511                 | 22,599,498               
|**- diluted**                                           | 21,616,511                 | 23,059,217               





**ASSOCIATED ESTATES REALTY CORPORATION**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30,**

**(UNAUDITED)**

|                                                                                   | 1999           | 1998         
|---------------------------------------------------------------------------------- | -------------- | -------------
|Cash flow from operating activities:                                               |                |              
|Net income                                                                         | $18,173,536    | $ 14,035,780 
|Adjustments to reconcile net income to net                                         |                |              
|cash provided by operating activities:                                             |                |              
|Depreciation and amortization                                                      | 25,590,627     | 18,105,384   
|Cumulative effect of a change in accounting principle                              | (4,319,162)    | -            
|Minority interest in operating partnership                                         | 152,704        | 39,353       
|Loss on extinguishment of debt                                                     | 1,808,742      | 124,895      
|Gain on sale of operating properties                                               | (13,880,003)   | -            
|Equity in net income of joint ventures                                             | (343,498)      | (312,838)    
|Earnings distributed from joint ventures                                           | 466,412        | 394,267      
|Net change in assets and liabilities (net of effect of the MIGRA merger for 1998   |                |              
|amounts)		-	Accounts and notes receivable                                          | (1,213,536)    | 91,832       
|-	Accounts and notes receivable of affiliates and joint ventures                   | 3,385,761      | 819,490      
|-	Accounts payable and accrued expenses                                            | 6,405,819      | (5,501,700)  
|-	Other operating assets and liabilities                                           | (2,303,463)    | (1,543,222)  
|-	Restricted cash                                                                  | (3,220,700)    | 5,373,197    
|-	Funds held for non-owned managed properties                                      | (1,119,444)    | 1,495,162    
|-  Funds held for non-owned managed properties                                     |                |              
|of affiliates and joint ventures                                                   | (1,181,295)    | (2,952,997)  
|Total adjustments                                                                  | 10,228,964     | 16,132,823   
|Net cash flow provided by operations                                               | 28,402,500     | 30,168,603   
|                                                                                   |                |              
|Cash flow from investing activities:                                               |                |              
|Real estate acquired or developed (net of liabilities assumed)                     | (32,184,863)   | (133,012,361)
|Fixed asset additions                                                              | (1,034,846)    | (3,038,473)  
|Net proceeds received from sale of operating properties                            | 29,978,572     | -            
|Net proceeds received from sale of operating properties held in escrow             | (13,357,277)   | -            
|Distributions from joint ventures                                                  | 67,320         | 244,457      
|Net cash flow used for investing activities                                        | (16,531,094)   | (135,806,377)
|Cash flow from financing activities:                                               |                |              
|Principal payments on secured debt                                                 | (1,588,950)    | (8,763,651)  
|Proceeds from secured debt                                                         | 296,500,000    | -            
|Principal payment on medium-term note                                              | (20,000,000)   | -            
|Proceeds from senior and medium-term notes                                         | -              | 20,000,000   
|Line of Credit borrowings                                                          | 310,200,000    | 948,100,000  
|Line of Credit repayments                                                          | (536,646,565)  | (821,100,000)
|Deferred financing costs                                                           | (6,353,780)    | (2,091,850)  
|Common share dividends paid                                                        | (27,057,496)   | (26,391,069) 
|Preferred share dividends paid                                                     | (4,113,318)    | (4,113,316)  
|Purchase of treasury shares                                                        | (12,299,968)   | (466,523)    
|Net cash flow (used for) provided by financing activities                          | (1,360,077)    | 105,173,591  
|Increase in cash and cash equivalents                                              | 10,511,329     | (464,183)    
|Cash and cash equivalents, beginning of period                                     | 1,034,655      | 2,251,819    
|Cash and cash equivalents, end of period                                           | $11,545,984    | $   1,787,636
|Supplemental disclosure of cash flow information:                                  |                |              
|Issuance of common shares in connection with the acquisition of MIG REIT           |                |              
|properties, the MIGRA merger including the first anniversary payment of the merger | $      872,935 | $106,063,359 
|Issuance of operating partnership units in connection with the                     |                |              
|acquisition of the development property                                            | -              | 10,863,204   
|Assumption of liabilities in connection with the acquisition of properties         | -              | 5,543,977    
|Assumption of  mortgage debt in connection with the acquisition of properties      | -              | 15,013,771   
|Dividends declared but not paid                                                    | 28,126         | 10,507,586   
|Cash paid for interest (including capitalized interest)                            | 30,088,617     | 21,747,852   





******ASSOCIATED ESTATES REALTY CORPORATION**

**NOTES TO FINANCIAL STATEMENTS**



**1.**	**BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES**

**Business**

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

At September 30, 1999, the Company owned directly or indirectly, or was a joint venture partner
in 96 multifamily properties containing 20,868 units.  Of these properties, 71 were located in Ohio, 11 in
Michigan, two in Florida, two in Georgia, three in Maryland, one in North Carolina, one in Texas, one in
Arizona, three in Indiana and one in Pennsylvania.  Additionally, the Company managed 53 non-owned
properties, 47 of which were multifamily properties consisting of 11,261 units (16 of which are owned by
various institutional investors consisting of 5,751 units) and six of which were commercial properties
containing an aggregate of approximately 621,000 square feet of gross leasable area.  Through
affiliates, collectively referred to as the "Service Companies", the Company provides property and asset
management, investment advisory, painting and computer services as well as mortgage origination and
servicing to both owned and non-owned properties.

**Principles of Consolidation**

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

The Company entered into an operating partnership structured as a DownREIT of which an
aggregate 20% is owned by limited partners.  Interests held by limited partners in real estate
partnerships controlled by the Company are reflected as "Operating partnership minority interest" in the
Consolidated Balance Sheets.  Capital contributions, distributions and profits and losses are allocated to
minority interests in accordance with the terms of the operating partnership agreement.  In conjunction
with the acquisition of the operating partnership, the Company issued a total of 522,032 operating
partnership units ("OP units") which consist of 84,630 Class A OP units, 36,530 Class B OP units,
115,124 Class C OP units, 62,313 Class D OP units, and 223,435 Class E OP units.  Pursuant to terms
of the underlying agreements, the B and C OP units were  exchanged into A OP units during 1999.  The
OP units may, under certain circumstances, become exchangeable into common shares of the
Company on a one-for-one basis.  The Class A unitholders are entitled to receive cumulative
distributions per OP unit equal to the per share distributions on the Company's common shares.  At
September 30, 1999, the Company  charged $152,704 to minority interest in operating partnership in the
Consolidated Statements of Income relating to the Class A unitholders  allocated share of net income.
At September 30, 1999, the Class D and Class E unitholders were not entitled to receive an allocation of
net income and did not receive any cash distributions from the operating partnership.

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

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

**Basis of Presentation**

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

**Change in Estimates**

During the first quarter, the Company refined certain cutoff procedures and its estimation
process for the accumulation of property operating expense accrual adjustments.  This refinement was
facilitated, in part, by the migration to the decentralization of certain functions to the properties and also
by the upgrading of the Company's information systems.  This refinement had the one time effect of
reducing net income by approximately $632,000 for the nine month period ended September 30, 1999.
In addition, in connection with the Company's adoption of the change in its policy for capitalizing certain
replacements (Note 12), the Company reassessed its remaining useful lives of certain appliances and
floor covering it had capitalized upon the acquisition of a property.  This change in useful lives together
with the reduction in the estimated useful lives of certain software from 10 to 7 years had the effect of
reducing income by approximately $767,600 for the nine month period ended September 30, 1999.
Also, the Company had determined in December 1998 that it would replace certain of its software during
1999.  Commencing January 1, 1999, the Company began amortizing the remaining net book value over
its revised estimated useful life of one year.  This change had the effect of reducing net income by
approximately $711,000 for the nine month period ended September 30, 1999.

**Use of Estimates**

The preparation of financial statements in accordance with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements
and reported amounts of revenues and expenses during the reporting periods.  Actual results could
differ from these estimates.

**Reclassifications**

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

**Recent Accounting Pronouncements**

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

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

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

**2.	DEVELOPMENT AND DISPOSITION ACTIVITY**

***Development Activity***

Construction in progress, including the cost of land, for the development of multifamily properties
was $31,821,021 and $53,740,292 at September 30, 1999 and December 31, 1998, respectively.  The
Company capitalizes interest costs on funds used in construction, real estate taxes and insurance from
the commencement of development activity through the time the property is available for occupancy.
Capitalized interest, real estate taxes and insurance aggregated approximately $2,644,877 and
$933,190 during the nine month periods ended September 30, 1999 and 1998, respectively.  For the
nine month period ended September 30, 1999, the construction and leasing of 440 units at three
properties were completed at a total cost of $41.3 million. The following schedule details construction in
progress at September 30, 1999:

|                         |        |          | Placed in  |                    |          
|------------------------ | ------ | -------- | ---------- | ------------------ | ---------
|(dollars in thousands)   | Number | Costs    | Service    | September 30, 1999 | Estimated
|                         | of     | Incurred | through    | Land               | Building 
|Property                 | Units  | to Date  | 9/30/99    | Cost               | Cost     
|                         |        |          |            |                    |          
|ATLANTA, GEORGIA         |        |          |            |                    |          
|Idlewylde                | 843    | $  4,288 | $        - | $3,955             | $     333
|                         |        |          |            |                    |          
|ORLANDO, FLORIDA         |        |          |            |                    |          
|Windsor at Kirkman Apts. | 460    | 47,526   | 31,617     | 1,177              | 14,732   
|                         |        |          |            |                    |          
|AVON, OHIO               |        |          |            |                    |          
|Village at Avon          | 312    | 14,003   | 5,470      | 1,824              | 6,709    
|                         |        |          |            |                    |          
|Other                    | -      | 3,091    | -          | 1,517              | 1,574    
|                         | 1,615  | $68,908  | $37,087(1) | $ 8,473            | $23,348  

(1)  Including land of $2,366.

***Disposition Activity***

During 1999, the Company sold six operating properties for net cash proceeds of $30 million,
resulting in a gain of $13.9 million.  The net cash proceeds of $13.4 million which were received from the
sale of five operating properties were placed in a trust which restricts the Company's use of these funds
for the exclusive purchase of other property of like-kind and qualifying use.  These funds are presented
in the Consolidated Balance Sheet as restricted cash.  The like-kind exchange must occur prior to
December 3, 1999.  The remaining net cash proceeds were used to pay down the $20 million Medium-Term Note which matured in September 1999.

During September 1999, MIG sold a multifamily property on behalf of a pension fund client.  The
Company recognized an asset disposition fee of $127,500.

**3.	PROPERTY HELD FOR SALE**

****The Company has entered into contracts to sell two of its Market-rate properties.  These
properties are located in Ohio.  The Company sold one of the properties on October 1, 1999 and
anticipates that the other asset will be sold during 1999.  The net real estate assets of these properties
are presented in the Consolidated Balance Sheet as properties held for sale.

**4.**	**SHAREHOLDERS' EQUITY**

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

|                            | Class A     |                        |              | Accumulated   | Accumulated            |                 |             
|--------------------------- | ----------- | ---------------------- | ------------ | ------------- | ---------------------- | --------------- | ------------
|                            | Cumulative  | Common                 |              | Dividends     | Other                  | Treasury        |             
|                            | Preferred   | Shares                 | Paid-In      | In Excess Of  | Comprehensive          | Shares          |             
|                            | Shares      | (at $.10 stated value) | Capital      | Net Income    | Income                 | (at cost)       | Total       
|                            |             |                        |              |               |                        |                 |             
|Balance, Dec. 31, 1998      | $56,250,000 | $2,262,195             | $277,134,988 | $(75,991,638) | $                (875) | $     (466,523) | $259,188,147
|Net income                  | -           | -                      | -            | 18,173,536    | -                      | -               | 18,173,536  
|Issuance of 74,994 common   |             |                        |              |               |                        |                 |             
|shares                      | -           | 7,499                  | 865,436      | -             | -                      | -               | 872,935     
|Issuance of 21,000          |             |                        |              |               |                        |                 |             
|restricted common shares    | -           | 2,100                  | (2,100)      | -             | -                      | -               | -           
|Retired 1,232 restricted    |             |                        |              |               |                        |                 |             
|common shares               | -           | (123)                  | 123          | -             | -                      | -               | -           
|Purchase of treasury shares |             |                        |              |               |                        |                 |             
|(1,087,600 shares)          | -           | -                      | -            | -             | -                      | (12,299,968)    | (12,299,968)
|Deferred compensation       | -           | -                      | 12,456       | -             | -                      | -               | 12,456      
|Common share                |             |                        |              |               |                        |                 |             
|dividends declared          | -           | -                      | -            | (16,578,036)  | -                      | -               | (16,578,036)
|Preferred share             |             |                        |              |               |                        |                 |             
|dividends declared          | -           | -                      | -            | (4,113,318)   | -                      | -               | (4,113,318) 
|Balance, September 30, 1999 | $56,250,000 | $2,271,671             | $278,010,903 | $(78,509,456) | $                (875) | $(12,766,491)   | $245,255,752

**5.	SECURED DEBT**

***Conventional Mortgage Debt***

Conventional mortgages payable are comprised of 31 and six loans at September 30, 1999 and
December 31, 1998, respectively, each of which is collateralized by the respective real estate and
resident leases.  These nonrecourse project specific loans accrue interest at a fixed rate with the
exception of one mortgage note which accrues interest at a variable rate.  Mortgages payable are
generally due in monthly installments of principal and/or interest and mature at various dates through
March 2024.  The balance of the conventional mortgages was $347.5 million and $52.2 million at
September 30, 1999 and December 31, 1998, respectively.

During 1999 through September 30, 1999, the Company received gross proceeds of $296.5
million from project specific, nonrecourse mortgage loans collateralized by 25 properties owned by
qualified REIT subsidiaries, having a net book value of $356.3 million.  These qualified REIT
subsidiaries are separate legal entities and maintain records, books of accounts and depository
accounts separate and apart from any other person or entity.  The proceeds from these loans were used
to pay down the Company's floating rate unsecured line of credit facility and a $20 million Medium-Term
Note and to increase the Company's cash balances which may be used to fund construction in progress,
fund joint venture opportunities with pension fund clients, and buy back limited quantities of the
Company's stock as authorized by the Board of Directors.  These mortgage loan documents  require
escrow deposits for taxes and replacement of project assets.  The weighted average maturity of the
loans funded in 1999 through September 30, 1999 is 9.64 years, and the weighted average interest rate
is 7.54%.

***Federally Insured Mortgage Debt***

Federally insured mortgage debt which encumbered seven of the properties at September 30,
1999 and December 31, 1998 (including one property which is funded through Industrial Development
Bonds), is insured by HUD pursuant to one of the mortgage insurance programs administered under the
National Housing Act of 1934.  These government-insured loans are nonrecourse to the Company.
Payments of principal, interest and HUD mortgage insurance premiums are made in equal monthly
installments and mature at various dates through March 1, 2024.  The balance of the federally insured
mortgages was $27.4 million and $27.9 million at September 30, 1999 and December 31, 1998,
respectively.  Six of the seven federally insured mortgages have a fixed rate and the remaining
mortgage ($1.8 million) has a variable rate.

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

**6.	UNSECURED DEBT**

**Senior Notes**

The Senior Notes were issued during 1995 in the principal amounts of $75 million and $10
million and accrue interest at 8.38% and 7.10%, respectively, and mature in 2000 and 2002,
respectively.  The balance of the $75 million Senior Note, net of unamortized discounts, was $74.9
million at September 30, 1999 and December 31, 1998.  The Company intends to pay off the Senior
Notes pursuant to a tender offer as provided in Note 14.

******Medium-Term Notes Program**

The Company had 10 and 11 Medium-Term Notes (the "MTN's") outstanding having an
aggregate balance of $92.5 million and $112.5 million at September 30, 1999 and December 31, 1998,
respectively.  During September 1999, a $20 million MTN matured and was paid off using funds from the
sale of an operating property and financing proceeds.  The principal amounts of these MTN's range from
$2.5 million to $20 million and bear interest from 6.18% to 7.93% over terms ranging from two to 30
years, with a stated weighted average maturity of 7.33 years at September 30, 1999.  The holders of two
MTN's with stated terms of 30 years each have a right to repayment in five and seven years from the
issue date of the respective MTN.  If these holders exercised their right to prepayment, the weighted
average maturity of the MTN's would be 5.44 years.

The Company's current MTN Program provides for the issuance, from time to time, of up to
$102.5 million of MTN's due nine months or more from the date of issue and may be subject to
redemption at the option of the Company or repayment at the option of the holder prior to the stated
maturity date.  These MTN's may bear interest at fixed rates or at floating rates and can be issued in
minimum denominations of $1,000.  At September 30, 1999, there was $62.5 million of additional MTN
borrowings available under the program.  However, the Company believes that it may no longer be in a
position to access public unsecured debt markets due to revised credit ratings.  Moreover, the Company
intends to pay off all of its outstanding MTN's pursuant to a tender offer as provided for in Note 14.

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

**Line of Credit**

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

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

**7.	TRANSACTIONS WITH AFFILIATES AND JOINT VENTURES**

***Management and Other Services***



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

Summarized affiliate and joint venture transaction activity follows:

|                                            | Three months ended | Nine months ended
|------------------------------------------- | ------------------ | -----------------
|                                            | September 30,      | September 30,    
|                                            | 1999               | 1998             
|                                            |                    |                  
|Property management fee and other           |                    |                  
|miscellaneous service revenues	- affiliates | $481,980           | $712,103         
|- joint ventures                            | 217,610            | 230,387          
|Painting service revenues	- affiliates      | 96,887             | 99,011           
|- joint ventures                            | 79,378             | 85,353           
|Expenses incurred on behalf                 |                    |                  
|of and reimbursed by (1)	- affiliates       | 842,207            | 990,588          
|- joint ventures                            | 691,715            | 635,532          
|Interest income 	- affiliates               | 274                | 200,417          
|Interest expense	- affiliates               | (25,656)           | (100,230)        
|- joint ventures                            | (5,793)            | (4,550)          

(1)  *Primarily payroll and employee benefits, reimbursed at cost.*

Property management fees and other miscellaneous receivables due from affiliates and joint
venture properties aggregated $6,531,334 and $6,677,611 at September 30, 1999 and December 31,
1998, respectively.  Included in these amounts was approximately $1.2 million due from a partnership
owned in part by certain officers of the Company which was assumed in connection with the MIGRA
merger and liquidated subsequent to September 30, 1999 as disclosed in Note 9.  There were no
payables due to affiliates and joint venture properties at September 30, 1999 and December 31, 1998.

***Advances to Affiliates and Joint Ventures***

In the normal course of business, the Company advances funds on behalf of, or holds funds for
the benefit of, affiliates and joint ventures.  Funds advanced to affiliates and joint ventures aggregated
$1,716,975 and $1,479,330 at September 30, 1999, respectively, and $5,555,732 and $880,057 at
December 31, 1998, respectively.  Except for insignificant amounts, advances to affiliates bear interest;
the weighted average rate charged was 8.3% during the periods ending September 30, 1999 and 1998.
The Company held funds for the benefit of affiliates and joint ventures in the aggregate amount of
$2,528,248 and $1,705,702  at September 30, 1999, respectively, and $3,174,898 and $2,178,496 at
December 31, 1998, respectively.

During 1999, the Company provided an additional reserve of $150,000 with respect to a
receivable from a managed but non-owned property.  This reserve is reflected as a charge for funds
advanced to non-owned properties in the Consolidated Statements of Income.

***Notes Receivable***

At September 30, 1999 and December 31, 1998, two notes of equal amounts were receivable
from the Company's Chief Executive Officer aggregating $3,342,000 (included in "Accounts and notes
receivables-affiliates and joint ventures").  One of the notes is partially secured by 150,000 of the
Company's common shares; the other note is unsecured.  For the nine months ended September 30,
1999, the interest rate charged on this note was approximately 6.6%, with principal due May 1, 2002.
The Company recognized interest income of $56,665 and $165,771 for the three and nine month period
ending September 30, 1999, respectively,  relating to these notes.

**8.	RAINBOW TERRACE APARTMENTS**

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

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

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

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

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

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

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

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

During the third quarter, RTA, with respect to Rainbow Terrace Apartments, and PVA, with
respect to Park Village, entered into contracts to sell those properties, subject to, among other matters,
HUD approval.  Under the terms of the Settlement Agreement, HUD has the right to approve or
disapprove those prospective purchasers.  Alternatively, HUD may require RTA and PVA to convey
these properties to HUD by deed in lieu of foreclosure.  The Company expects HUD to announce its
decision soon.

**9.	PREFERRED AND COMMON SHARES**

***Common Shares*****

In 1999, the Company issued 74,994 common shares for the benefit of the former MIGRA
shareholders.  This issuance was made pursuant to the contingent consideration provisions of the
MIGRA merger agreement.  These shares were entitled to the dividend payments which were declared
on June 21 and October 7, 1999, and amounted to $56,246.  Such shares were recorded at their, then,
fair value of $872,935 and increased the recorded amount of the intangible asset associated with the
purchase of MIGRA.  At September 30, 1999, a total of 30,000 shares of the 74,994 shares were held in
escrow for the benefit of the former MIGRA shareholders.

In October 1999, the Company settled the purchase price adjustment relating to the assets and
liabilities (as defined in the related agreement) assumed in connection with the MIGRA merger.  The
MIGRA merger agreement provided that such adjustment would be determined on the one-year
anniversary of the merger.  Accordingly, the Company paid a net of approximately $1.25 million with
respect to the purchase price adjustment.  The consideration paid was funded by proceeds from the
sale, at par (including accrued interest) of a large receivable to affiliates, the former MIGRA
shareholders.  This purchase price adjustment increased the Company's recorded amount of the
intangible asset initially recorded at the date of the merger.

The Company also believes that the conditions for the payment of additional contingent
consideration on the second anniversary of the merger pursuant to the MIGRA merger agreement will be
satisfied.  Such amounts, although not recorded as of September 30, 1999, since the consideration has
not yet been exchanged, approximate $3.0 million.  It is expected that this amount will increase the
Company's recorded intangible asset.  Amortization expense of approximately $149,150 was recorded
at September 30, 1999 with respect to this portion of the consideration.  This second anniversary
payment represents the final payment pursuant to the merger agreement.

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

***Treasury Shares***

On June 21, 1999, the Company's Board of Directors amended the Company's stock repurchase
plan by authorizing up to an additional 2,000,000 common shares to be repurchased by the Company at
market prices.  The timing of stock purchases are made at the discretion of management.  During 1999
and 1998, 1,087,600 and 25,000 shares were repurchased at an aggregate cost of $12,299,968 and
$466,523, respectively.  The repurchases were funded primarily from operating cash flows and financing
proceeds.

***Preferred Shares*****

At September 30, 1999, 2,250,000 Depositary Shares were outstanding, each representing 1/10
of a share of the Company's 9.75% Class A Cumulative Redeemable Preferred Shares (the "Perpetual
Preferred Shares").  Dividends on the Perpetual Preferred Shares are cumulative from the date of issue
and are payable quarterly.  Except in certain circumstances relating to the preservation of the
Company's status as a REIT, the Perpetual Preferred Shares are not redeemable prior to July 25, 2000.
On and after July 25, 2000, the Perpetual Preferred Shares will be redeemable for cash at the option of
the Company.

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

**Shareholder Rights Plan**

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

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

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

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

**10.	EARNINGS PER SHARE**

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

|                                                    | For the three months | For the nine months
|--------------------------------------------------- | -------------------- | -------------------
|                                                    | ended September 30,  | ended September 30,
|                                                    | 1999                 | 1998               
|**Basic Earnings Per Share:**                       |                      |                    
|Income before extraordinary item and                |                      |                    
|cumulative effect of a change in accounting         |                      |                    
|principle                                           | $  634,192           | $4,551,430         
|Less:	Preferred share dividends                     | 1,371,108            | 1,371,105          
|(Loss) income before extraordinary itemand          |                      |                    
|cumulative effect of a change
in accounting         |                      |                    
|principle applicable to common
shares               | (736,916)            | 3,180,325          
|Less:	Extraordinary loss                            | -                    | -                  
|Plus:	Cumulative effect of a change in              |                      |                    
|accounting principle                                | -                    | -                  
|(Loss) income applicable to common shares           | $(736,916)           | $3,180,325         
|                                                    |                      |                    
|**Diluted Earnings Per Share:**                     |                      |                    
|Income before extraordinary itemand                 |                      |                    
|cumulative effect  of a change in accounting        |                      |                    
|principle                                           | $  634,192           | $4,551,430         
|Less:	Preferred share dividends                     | 1,371,108            | 1,371,105          
|Add:	Minority interest in operating partnership     | -                    | 39,353             
|(Loss) income before extraordinary itemand          |                      |                    
|cumulative effect of  a change in accounting        |                      |                    
|principle applicable to common shares               | (736,916)            | 3,219,678          
|Less:	Extraordinary loss                            | -                    | -                  
|Plus:	Cumulative effect of a change                 |                      |                    
|in accounting principle                             | -                    | -                  
|(Loss)income applicable to common shares            | $(736,916)           | $3,219,678         
|                                                    |                      |                    
|**Number of Shares:**                               |                      |                    
|Basic-average shares outstanding                    | 21,616,511           | 22,599,498         
|Dilutive shares                                     | -                    | -                  
|Add:	Operating partnership units                    |                      | 459,719            
|Diluted-average shares outstanding                  | 21,616,511           | 23,059,217         
|                                                    |                      |                    
|**Earnings per common share -
basic:**              |                      |                    
|(Loss) income before extraordinary item and         |                      |                    
|cumulative effect of a change in accounting         |                      |                    
|principle                                           | $         ( .03)     | $           .14    
|Extraordinary item                                  | $               -    | $               -  
|Cumulative effect of a change in accounting         |                      |                    
|principle                                           | $               -    | $               -  
|Net (loss) income                                   | $         (.03)      | $           .14    
|                                                    |                      |                    
|**Earnings per common share -
diluted:**            |                      |                    
|(Loss) income before extraordinary item and         |                      |                    
|cumulative effect of a change in accounting         |                      |                    
|principle                                           | $          (.03)     | $          .14     
|Extraordinary item                                  | $               -    | $               -  
|Cumulative effect of a change in accounting         |                      |                    
|principle                                           | $               -    | $              -   
|Net (loss) income                                   | $          (.03)     | $          .14     
|                                                    |                      |                    
|**Pro forma amounts assuming the
new**              |                      |                    
|**capitalization policy is applied retroactively:** |                      |                    
|Net income                                          | $    634,192         | $4,820,030         
|Net (loss) income applicable to common shares       | $   (736,916)        | $3,448,925         
|**Per Share Amount - Net (loss) income**            |                      |                    
|**applicable to common shares:**                    |                      |                    
|Basic                                               | $          (.03)     | $           .15    
|Diluted                                             | $          (.03)     | $           .15    

Options to purchase 1,438,043 and 1,247,274 shares of common stock were outstanding at
September 30, 1999 and 1998, respectively, a portion of which has been reflected above using the
treasury stock method.

**11.	INTERIM SEGMENT REPORTING**

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

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

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

|                                       | For the three months ended September 30, 1999
|-------------------------------------- | ---------------------------------------------
|                                       |                                              
|                                       |                                              
|                                       | Market-rate                                  
|                                       |                                              
|Total segment revenues                 | $ 33,704,909                                 
|Elimination of intersegment revenues   | 47,760                                       
|Consolidated revenues                  | $ 33,657,149                                 
|                                       |                                              
|Equity in net income of joint ventures | $      120,533                               
|                                       |                                              
|*EBITDA-including the proportionate    |                                              
|share of joint ventures                | $ 18,853,238                                 
|                                       |                                              
|Total assets                           | $789,258,150                                 
|Capital expenditures, gross            | $  11,153,829                                

|                                        | For the nine months ended September 30, 1999
|--------------------------------------- | --------------------------------------------
|                                        |                                             
|                                        |                                             
|                                        | Market-rate                                 
|                                        |                                             
|Total segment revenues                  | $100,672,681                                
|Elimination of intersegment revenues    | 143,220                                     
|Consolidated revenues                   | $100,529,461                                
|                                        |                                             
|Equity
in net income of joint  ventures | $      259,757                              
|                                        |                                             
|*EBITDA-including the proportionate     |                                             
|share of joint ventures                 | $  57,464,320                               
|                                        |                                             
|Total
assets                            | $789,258,150                                
|Capital expenditures, gross             | $  31,782,144                               

|                                        | For the three months ended September 30, 1998
|--------------------------------------- | ---------------------------------------------
|                                        |                                              
|                                        |                                              
|                                        | Market-rate                                  
|                                        |                                              
|Total
segment revenues                  | $33,765,323                                  
|Elimination of intersegment revenues    | 47,500                                       
|Consolidated revenues                   | $33,717,823                                  
|                                        |                                              
|Equity
in net income of joint  ventures | $      111,629                               
|                                        |                                              
|*EBITDA-including the proportionate     |                                              
|share of joint ventures                 | $ 18,753,626                                 
|                                        |                                              
|Total
assets                            | $753,093,049                                 
|Capital expenditures, gross             | $	25,793,408                                 

|                                       | For the nine months ended September 30, 1998
|-------------------------------------- | --------------------------------------------
|                                       |                                             
|                                       |                                             
|                                       | Market-rate                                 
|                                       |                                             
|Total
segment revenues                 | $89,095,532                                 
|Elimination of intersegment revenues   | 142,500                                     
|Consolidated revenues                  | $88,953,032                                 
|                                       |                                             
|Equity
in net income of joint ventures | $     292,620                               
|                                       |                                             
|*EBITDA-including the proportionate    |                                             
|share of joint ventures                | $51,781,944                                 
|                                       |                                             
|Total
assets                           | $753,093,049                                
|Capital expenditures, gross            | $266,018,385                                

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

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

|                                             | For the three months ended | For the nine months ended
|-------------------------------------------- | -------------------------- | -------------------------
|                                             | September 30               | September 30,            
|                                             | 1999                       | 1998                     
|                                             |                            |                          
|Total EBITDA for reportable segments         | $18,995,448                | $19,289,345              
|EBITDA-proportionate share of joint ventures | (687,678)                  | (656,712)                
|Equity in net income of joint ventures       | 106,128                    | 105,950                  
|Depreciation and amortization                | (8,985,719)                | (7,082,905)              
|Interest expense                             | (10,089,051)               | (7,346,108)              
|Interest income                              | 473,219                    | 251,979                  
|Income taxes                                 | (227,830)                  | (10,119)                 
|Extraordinary item - loss                    | -                          | -                        
|Gain on sale of operating properties         | 1,049,675                  | -                        
|Cumulative effect of a change in accounting  |                            |                          
|principle                                    | -                          | -                        
|Consolidated net income                      | $      634,192             | $  4,551,430             

**12.	CHANGE IN ACCOUNTING PRINCIPLE**

****Effective January 1, 1999, the Company changed its method of accounting to capitalize
expenditures for certain replacements and improvements, such as new HVAC equipment, structural
replacements, appliances, flooring, carpeting and kitchen/bath replacements and renovations.
Previously, these costs were charged to operations as incurred.  Ordinary repairs and maintenance,
such as suite cleaning and painting, and appliance repairs are expensed.  The Company believes the
change in the capitalization method provides an improved measure of the Company's capital
investment, provides a better matching of expenses with the related benefit of such expenditures,
including associated revenues, and is in the opinion of management, consistent with industry practice.
The cumulative effect of this change in accounting principle increased net income for the nine months
ended September 30, 1999  by $4,319,162 or $.19 per share (basic and diluted).  The effect of this
change was to increase income before cumulative effect of a change in accounting principle by
$2,642,064 or $.12 per share (basic and diluted) and $5,530,903 or $.25 per share (basic and diluted)
for the three and nine months ended September 30, 1999, respectively.   The pro forma amounts shown
on the income statement have been adjusted to reflect the retroactive application of the capitalization of
such expenditures and related depreciation for the three and nine months ended September 30, 1998
which increased net income by $268,600 or $.01 per share - basic and  diluted and $579,200 or $.03 per
share - basic and diluted, respectively.

**13.	PRO FORMA CONDENSED FINANCIAL INFORMATION (UNAUDITED)**

The following unaudited supplemental pro forma operating data for 1998 is presented to reflect,
as of January 1, 1998, the effects of: (i)  the 13 property acquisitions completed in 1998, (ii) the merger
of MIGRA in 1998, (iii)  the sale of a property in 1998, (iv) the exclusion of Rainbow Terrace Apartments
operating results, and (v) the sale of the six operating properties in 1999.  The following unaudited
supplemental pro forma operating data for 1999 is presented to reflect, as of January 1, 1999, the
effects of the sale of the six operating properties in 1999.

|                                                               | For the nine months
|-------------------------------------------------------------- | -------------------
|                                                               | ended September 30,
|                                                               | 1999               
|(In thousands, except per share amounts)                       |                    
|                                                               |                    
|Revenues                                                       | $113,117           
|*Net income                                                    | 465                
|*(Loss)/income applicable to common shares (Basic and Diluted) | (3,648)            
|Earnings per common shares (Basic and Diluted)                 | $      (.16)       
|Weighted average number of common shares outstanding:          |                    
|- Basic                                                        | 22,224             
|- Diluted                                                      | 22,225             
|*Before cumulative effect and extraordinary item               |                    

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

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

**14.	SUBSEQUENT EVENTS**

***Disposition Activity*****

On October 1, 1999, the Company sold one of its Market-rate properties for net cash proceeds
of $2.2 million, resulting in a gain of $1.4 million.  The net cash proceeds will be used to pay a portion of
the Company's common share dividend.

On October 29, 1999, one of MIG's advisory client's sold a property that MIG was managing and
advising which generated $335,000 of disposition fee income.  The Company recognized management
fees of $46,080 for the nine months ended September 30, 1999.

***Dividends Declared and Paid***

On October 7, 1999, the Company declared a dividend of $0.375 per common share for the
quarter ending September 30, 1999, which was paid on November 1, 1999 to shareholders of record on
October 15, 1999.

***Secured Financing***

On October 8, 1999, the Company collateralized a mortgage on one property for $13.3 million in
a project specific, non-recourse loan from The Chase Manhattan Bank.  The loan will mature in 8 years
with an interest rate of 7.86%.  The proceeds from this loan are being used to fund construction in
progress, fund joint venture opportunities with pension fund clients, and repurchase a limited number of
the Company's common shares as authorized by the Board of Directors.

***Cash Tender Offers for Unsecured Debt Securities***

On October 21, 1999, the Company commenced cash tender offers and concurrent consent
solicitations for all of the Company's outstanding unsecured debt securities.  The vote of the holders of a
simple majority of the principal amount of outstanding notes voting together as one class was required
to obtain the requisite consents.  The initial offer provided for a discount to par; however, on November
3, 1999, the Company had not received the requisite consents.  The Company has notified the
noteholders that it will tender the notes for par.  The Company intends to fund the tender offers with
project specific, non-recourse loans from The Chase Manhattan Bank and a secured line of credit from
National City Bank.   The loans will be collateralized by individual mortgages on as many as  31
properties.  This structure is intended to give the Company more operating and financial flexibility than
that under the indenture governing the notes.

Upon completion of the revised tender and the related financing, the Company's total debt
structure will consist of approximately $560 million in long-term, secured, fixed rate financing,
encumbering approximately 66 properties (excluding 7 unconsolidated joint venture properties).  The
Company owns an additional 21 properties that will remain unencumbered at the completion of the
tender and the related financing.

The tender offers and consent solicitations are being made pursuant to an Offer to Purchase
and Consent Solicitation Statement and related materials, which set forth the terms of the tender offers
and consent solicitations.  The tender offers are, among other matters, expressly conditional upon the
successful consummation of the secured financing.  The Company expressly reserves the right, in its
sole discretion, to terminate the tender offers and the consent solicitations.

Under the revised terms of the offers and solicitations, investors who tender their securities prior
to the Consent Date will receive the revised consideration of $975 per $1,000 principal amount plus a
Consent Fee of $25 per $1,000 Note; investors tendering after that date will receive the new purchase
price but not the Consent Fee.  Investors who have previously validly tendered their notes will receive
the increased purchase price, as well as the Consent Fee.  In either event, accrued and unpaid interest
will be paid up to, but excluding the settlement date of the tender offers.

On November 5, 1999, the Company received consents from holders of more than a majority in
aggregate principal amount of its outstanding notes pursuant to the amended terms of its cash tender
offers and concurrent consent solicitations for all of its outstanding senior and medium-term notes
totaling $177.5 million in principal.  Accordingly, the Company and the trustee for the notes will execute a
supplemental indenture containing the proposed amendments approved by noteholders, which becomes
effective upon acceptance by the Company for payment of all notes validly tendered pursuant to the
tender offers.

Upon completion of this transaction, the Company will recognize an extraordinary charge of
approximately $1.6 million which represents a write off of deferred finance costs related to the
termination of these unsecured debt securities.

***Management Contract Cancellation***

On October 1, 1999, the management contracts on two non-owned commercial properties were
canceled.  The Company recognized management fees of $27,562 for the nine months ended
September 30, 1999.

The owners of two non-owned managed properties have contracted to sell these properties.
Upon the sale of these properties, it is likely that the management contracts will be canceled.  The
Company recognized management fees of $10,708 for the nine months ended September 30, 1999.

**ASSOCIATED ESTATES REALTY CORPORATION**

**MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL**

**CONDITION AND RESULTS OF OPERATIONS.**

*******Overview***

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

At September 30, 1999, the Company owned directly or indirectly, or was a joint venture partner
in 96 multifamily properties containing 20,868 units.  Of these properties, 71 were located in Ohio, 11 in
Michigan, two in Florida, two in Georgia, three in Maryland, one in North Carolina, one in Texas, one in
Arizona, three in Indiana and one in Pennsylvania.  Additionally, the Company managed 53 non-owned
properties, 47 of which were multifamily properties consisting of 11,261 units (16 of which are owned by
various institutional investors consisting of 5,751 units) and six of which were commercial properties
containing an aggregate of approximately 621,000 square feet of gross leasable area.  Through
affiliates, collectively referred to as the "Service Companies", the Company provides property and asset
management, investment advisory, painting and computer services as well as mortgage origination and
servicing to both owned and non-owned properties.

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

***Liquidity and Capital Resources***

The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Internal
Revenue Code of 1986, as amended, commencing with its taxable year ending December 31, 1993.
REITs are subject to a number of organizational and operational requirements including a requirement
that 95% of the income that would otherwise be considered as taxable income be distributed to
shareholders.  Providing the Company continues to qualify as a REIT, it will generally not be subject to a
Federal income tax on net income.

The Company expects to meet its short-term liquidity requirements generally through its net
cash provided by operations, secured borrowings and property sales proceeds.  The Company believes
that  these sources will be sufficient to meet both operating requirements and the payment of dividends
in accordance with REIT requirements.  During the remainder of 1999 and 2000, approximately $.9
million and $93.2 million, respectively, of the Company's debt will mature.  Although the Company may
no longer be in a position to access public unsecured debt markets due to revised credit ratings, the
Company believes it has adequate alternatives available to provide for its liquidity needs including new
secured borrowings and property sales proceeds.

*Financing:*

During 1999 through November 9, 1999, the Company has received proceeds of $309.8 million
in project specific, nonrecourse mortgage loans which are collateralized by 26 properties owned by
qualified REIT subsidiaries, having a net book value of $375.2 million.  These qualified REIT
subsidiaries are separate legal entities and maintain records, books of accounts and depository
accounts separate and apart from any other person or entity.  Most of the proceeds from these loans
were used to pay down the Company's floating rate unsecured line of credit facility and a $20 million
Medium-Term Note.  The proceeds were also used to increase the Company's cash balances which will
be used to fund construction in progress, fund joint venture opportunities with pension fund clients, and
buy back limited quantities of the Company's stock as authorized by the Board of Directors.  There are
no cross-default or cross-collateralization provisions in the mortgages.  After repayment of the
unsecured line of credit facility, the Company's total floating rate debt outstanding was reduced to $18.1
million, and all outstanding unsecured floating rate debt was repaid.  These nonrecourse financings had
the effect of increasing the Company's weighted average debt maturity from approximately 4 years to
approximately 9 years.

*Cash Tender Offers for Unsecured Debt Securities:*

On October 21, 1999, the Company commenced cash tender offers and concurrent consent
solicitations for all of the Company's outstanding unsecured debt securities.  The vote of the holders of a
simple majority of the principal amount of outstanding notes voting together as one class was required
to obtain the requisite consents.  The initial offer provided for a discount to par; however, on November
3, 1999, the Company had not received the requisite consents.  The Company has notified the
noteholders that it will tender the notes for par.  The Company intends to fund the tender offers with
project specific, non-recourse loans from The Chase Manhattan Bank and a secured line of credit from
National City Bank.   The loans will be collateralized by individual mortgages on as many as  31
properties.  This structure is intended to give the Company more operating and financial flexibility than
that under the indenture governing the notes.

Upon completion of the revised tender and the related financing, the Company's total debt
structure will consist of approximately $560 million in long-term, secured, fixed rate financing,
encumbering approximately 66 properties (excluding 7 unconsolidated joint venture properties).  The
Company owns an additional 21 properties that will remain unencumbered at the completion of the
tender and the related financing.

The tender offers and consent solicitations are being made pursuant to an Offer to Purchase
and Consent Solicitation Statement and related materials, which set forth the terms of the tender offers
and consent solicitations.  The tender offers are, among other matters, expressly conditional upon the
successful consummation of the secured financing.  The Company expressly reserves the right, in its
sole discretion, to terminate the tender offers and the consent solicitations.

Under the revised terms of the offers and solicitations, investors who tender their securities prior
to the Consent Date will receive the revised consideration of $975 per $1,000 principal amount plus a
Consent Fee of $25 per $1,000 Note; investors tendering after that date will receive the new purchase
price but not the Consent Fee.  Investors who have previously validly tendered their notes will receive
the increased purchase price, as well as the Consent Fee.  In either event, accrued and unpaid interest
will be paid up to, but excluding the settlement date of the tender offers.

On November 5, 1999, the Company received consents from holders of more than a majority in
aggregate principal amount of its outstanding notes pursuant to the amended terms of its cash tender
offers and concurrent consent solicitations for all of its outstanding senior and medium-term notes
totaling $177.5 million in principal.  Accordingly, the Company and the trustee for the notes will execute a
supplemental indenture containing the proposed amendments approved by noteholders, which becomes
effective upon acceptance by the Company for payment of all notes validly tendered pursuant to the
tender offers.

Upon completion of this transaction, the Company will recognize an extraordinary charge of
approximately $1.6 million which represents a write off of deferred finance costs related to the
termination of these unsecured debt securities.

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

The Company was in violation of certain financial ratio covenants under the Line of Credit for the
first quarter 1998 reporting period.  The Company received waivers of those violations through June 30,
1998.  Additionally, the Company advised its bank group that it was not in compliance with one of the
financial covenants concerning the Company's net worth for the third quarter 1998 reporting period.  The
net worth covenant required that the Company maintain a minimum net worth of $400 million, based on
a formula that incorporates the annualized multiple of the most recent quarter's earnings before interest,
taxes, depreciation and amortization ("EBITDA"), as defined in the agreement.  The Company
negotiated with its bank group for a waiver by the banks of the breach of the net worth covenant, along
with an increase in borrowing costs under its Line of Credit from LIBOR plus 100 basis points to LIBOR
plus 140 basis points (based on the then-current credit rating).  In addition, certain of the covenants,
including the minimum net worth covenant, were modified to provide the Company a limited increase in
flexibility.  The minimum net worth covenant was reduced from $400 million to $325 million.  The bank
group continued to make advances under the Line of Credit following the Company's notification that it
was not in compliance with the net worth covenant.  A $395,000 default waiver fee was paid in
December 1998 and was reflected in the Consolidated Statements of Income at December 31, 1998.

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

Fifty-two (40 Market-rate Properties which refers to the Core and Acquired/Disposed Property
portfolios and 12 Government-Assisted Properties) of the Company's 89 (76 Market-rate Properties and
13 Government-Assisted Properties) wholly owned properties were unencumbered at September 30,
1999 with annualized EBITDA of approximately $57.2 million (approximately $47.8 million represents the
Market-rate Properties and approximately $9.4 million represents the Government-Assisted Properties)
and a historical gross cost basis of approximately $336.4  million (approximately $300.9 million
represents the Market-rate Properties and approximately $35.5 million represents the Government-Assisted Properties).  The remaining 37 of the Company's wholly owned properties, (all of which are
Market-rate Properties except one which is a Government-Assisted Property), have an historical gross
cost basis of $555.6 million ($553.0 million represents the Market-rate Properties and $2.6 million
represents the Government-Assisted Property) and secured property specific debt of $374.9 million
($1.8 million relates to the Government-Assisted Property) at September 30, 1999.  Unsecured debt,
which totaled $177.5 million at September 30, 1999, consisted of $92.5 million in Medium-Term Notes
and $85 million of Senior Notes.  The Company's proportionate share of the mortgage debt relating to
the seven joint venture properties was $17.3 million at September 30, 1999.  The weighted average
interest rate on the secured, unsecured and the Company's proportionate share of the joint venture debt
was 7.28% at September 30, 1999.

After considering the effect of the October 8, 1999 $13.3 million mortgage refinancing of one
property, 51 (39 Market-rate Properties and 12 Government-Assisted Properties) of the Company's 89
(76 Market-rate Properties and 13 Government-Assisted Properties) wholly owned properties remain
unencumbered with annualized EBITDA of approximately $56.6 million (approximately $47.2 million
represents the Market-rate Properties and approximately $9.4 million represents the Government-Assisted Properties) and a historical gross cost basis of approximately $316.7 million (approximately
$281.2 million represents the Market-rate Properties and approximately $35.5 million represents the
Government-Assisted Properties).  The remaining 38 of the Company's wholly owned properties, (all of
which are Market-rate Properties except one which is a Government-Assisted Property), have a
historical gross cost basis of $575.4 million ($572.8 million represents the Market-rate Properties and
$2.6 million represents the Government-Assisted Property).

**Medium-Term Notes Program**

The Company had 10 and 11 Medium-Term Notes (the "MTN's") outstanding having an
aggregate balance of $92.5 million and $112.5 million at September 30, 1999 and December 31, 1998,
respectively.  During September 1999, a $20 million MTN matured and was paid off using funds from the
sale of an operating property and financing proceeds.  The principal amounts of these MTN's range from
$2.5 million to $20 million and bear interest from 6.18% to 7.93% over terms ranging from two to 30
years, with a stated weighted average maturity of 7.33 years at September 30, 1999.  The holders of two
MTN's with stated terms of 30 years each have a right to repayment in five and seven years from the
issue date of the respective MTN.  If these holders exercised their right to prepayment, the weighted
average maturity of the MTN's would be 5.44 years.

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

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

*Registration statements:*

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

*Operating Partnership:*

The Company entered into an operating partnership structured as a DownREIT of which an
aggregate 20% is owned by limited partners.  Interests held by limited partners in real estate
partnerships controlled by the Company are reflected as "Operating partnership minority interest" in the
Consolidated Balance Sheets.  Capital contributions, distributions and profits and losses are allocated to
minority interests in accordance with the terms of the operating partnership agreement.  In conjunction
with the acquisition of the operating partnership, the Company issued a total of 522,032 operating
partnership units ("OP units") which consist of 84,630 Class A OP units, 36,530 Class B OP units,
115,124 Class C OP units, 62,313 Class D OP units, and 223,435 Class E OP units.  Pursuant to terms
of the underlying agreements, the B and C OP units were exchanged into A OP units effective June 30,
1999.  The OP units may, under certain circumstances, become exchangeable into common shares of
the Company on a one-for-one basis.  The Class A unitholders are entitled to receive cumulative
distributions per OP unit equal to the per share distributions on the Company's common shares.  At
September 30, 1999, the Company  charged $152,704 to minority interest in operating partnership in the
Consolidated Statements of Income relating to the Class A unitholders  allocated share of net income.
At September 30, 1999, the Class D and Class E unitholders were not entitled to receive an allocation of
net income and did not receive nor were entitled to receive any cash distributions from the operating
partnership.

*Merger Contingent Consideration Paid and Payable:*

Subject to certain conditions, adjustments and achievements of specified performance goals, the
MIGRA Stockholders' Conversion Rights entitle the MIGRA Stockholders to receive (a) on the second
issuance date (June 30, 1999), an amount of $872,935 payable in common shares of the Company
using the average closing price of the common shares for the 20 trading days immediately preceding
June 30, 1999, (approximately 74,994 common shares at a price of $11.64 per share) subject to certain
price adjustments as provided for in the Merger Agreement and (b) on the third issuance date (June 30,
2000) $2,982,917 worth of common shares of the Company of which $872,935 is based on the average
closing price of the common shares for the 20 trading days immediately preceding the date the
consideration was paid and $2,109,982 is based on a closing price of $23.63 per the merger agreement.
The obligation of the Company to issue common shares on the second issuance date was contingent
upon the issuance of a certificate of occupancy for the Windsor Pines property and the MIGRA
stockholders' submission to the Company of multifamily property acquisition opportunities with an
aggregate gross asset value of at least $50 million and an average yield of at least 85% of the pro forma
yield of the properties being acquired by the Company in connection with the acquisitions (the "Minimum
Yield").  The obligation of the Company to issue common shares on the third issuance date is contingent
upon the issuance of a certificate of occupancy for the Windsor at Kirkman property and the MIGRA
stockholders' submission to the Company of an additional $50 million of multifamily property acquisition
opportunities with the Minimum Yield.

In 1999, the Company issued 74,994 common shares for the benefit of the former MIGRA
shareholders.  This issuance was made pursuant to the contingent consideration provisions of the
MIGRA merger agreement.  These shares were entitled to the dividend payments which were declared
on June 21 and October 7, 1999, and amounted to $56,246.  Such shares were recorded at their, then,
fair value of $872,935 and increased the recorded amount of the intangible asset associated with the
purchase of MIGRA.  At September 30, 1999, a total of 30,000 shares of the 74,994 shares were held in
escrow for the benefit of the former MIGRA shareholders.

In October 1999, the Company settled the purchase price adjustment relating to the assets and
liabilities (as defined in the related agreement) assumed in connection with the MIGRA merger.  The
MIGRA merger agreement provided that such adjustment would be determined on the one-year
anniversary of the merger.  Accordingly, the Company paid a net of approximately $1.25 million with
respect to the purchase price adjustment.  The consideration paid was funded by proceeds from the
sale, at par (including accrued interest) of a large receivable to affiliates, the former MIGRA
shareholders.  This purchase price adjustment increased the Company's recorded amount of the
intangible asset initially recorded at the date of the merger.

The Company also believes that the conditions for the payment of additional contingent
consideration on the second anniversary of the merger pursuant to the MIGRA merger agreement will be
satisfied.  Such amounts, although not recorded as of September 30, 1999, since the consideration has
not yet been exchanged, approximate $3.0 million.  It is expected that this amount will increase the
Company's recorded intangible asset.  Amortization expense of approximately $149,150 was recorded
at September 30, 1999 in respect of this portion of the consideration.  This second anniversary payment
represents the final payment pursuant to the merger agreement.

*Acquisitions, development and dispositions:*

Any future multifamily property acquisitions or development would be financed with the most
appropriate sources of capital, which may include the assumption of mortgage indebtedness, bank and
other institutional borrowings, through the exchange of properties, undistributed Funds From Operations,
or secured debt financings.

The Company currently has letters of intent to purchase one multifamily property, located in
Lawrenceville, Georgia, containing an aggregate of 308 units for a total purchase price of approximately
$23.4 million and a 24 acre parcel of land located in Cranberry Township, Pennsylvania on which the
Company plans to construct 436 units for a total purchase price of approximately $2.1 million.  The
Company may finance the acquisition of the multifamily property or may purchase the property in a joint
venture transaction using the funds received from the sale of five operating properties, which have been
set aside to execute a like-kind exchange and proceeds received from the project specific, nonrecourse
mortgage refinancing.

For the nine month period ended September 30, 1999, the Company completed the construction
and leasing of 440 units at three of the Company's development properties.

The Company is in the process of constructing or planning the construction of an additional
1,615 units to be owned by the Company as follows:

|                              |                  | Additional | Anticipated  
|----------------------------- | ---------------- | ---------- | -------------
|Property                      | Location         | Units      | Completion   
|                              |                  |            |              
|Idlewylde                     | Atlanta, Georgia | 843        | 2nd Qtr. 2002
|Village at Avon               | Avon, Ohio       | 312        | 4th Qtr. 2000
|Windsor at Kirkman Apartments | Orlando, Florida | 460        | 4thQtr. 1999 
|                              |                  | 1,615      |              

The Company is exploring opportunities to dispose of some of its joint venture, Government-Assisted and congregate care multifamily properties and 22 Market-rate Properties (18 located in Ohio
and four located in Michigan).  The Company has retained a financial advisor to evaluate the alternatives
relating to the disposition of its ownership of some of its Government-Assisted properties.

On October 29, 1999,  one of MIG's advisory client's sold a property that MIG was managing
and advising which generated $335,000 of disposition fee income.  The Company recognized
management fees of $46,080 for the nine months ended September 30, 1999.

During September 1999, MIG sold a multifamily property on behalf of a pension fund client.  The
Company recognized an asset disposition fee of $127,500 and management fees of $70,700 for the nine
months ended September 30, 1999.

On August 17, 1999, the Company  entered into a contract to sell one of its Northeast Ohio
Market-rate properties.  The Company anticipates that this asset will be sold during 1999.  The net real
estate assets of this property is presented in the Consolidated Balance Sheet as property held for sale.

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

During 1999, the Company sold seven operating properties for net cash proceeds of $32.2
million, resulting in a gain of $15.3 million.  The net cash proceeds of $13.4 million which were received
from the sale of five operating properties were placed in a trust which restricts the Company's use of
these funds for the exclusive purchase of other property of like-kind and qualifying use.  These funds are
presented in the Consolidated Balance Sheet as restricted cash.  The like-kind exchange must occur
prior to December 3, 1999.

MIG has two properties under contract to be acquired for two of its advisory clients, which will be
managed in accordance with the terms of advisory contracts currently in place.

*Management Contract Cancellation:*

On January 13, 1999, the Company terminated its management contract for Longwood
Apartments, which resulted in a loss of management fee income for the nine months ended September
30, 1999 of approximately $222,000.  Moreover, pursuant to the terms of the HUD Settlement
Agreement discussed in Note 7 of the notes to the financial statements, the Company may terminate its
management contract for Park Village Apartments, which will result in a partial loss of management fee
income in 1999.  The management fees collected for Park Village Apartments for the nine months ended
September 30, 1999 were $16,007.

In addition, pursuant to the terms of a separate settlement agreement with affiliates entered into
in conjunction with the settlement agreement with the Corporation as discussed in Note 8, the Company
has agreed to end its management of two commercial properties owned by certain affiliated persons
upon 60 days prior written notice from the respective owners of those properties.  Effective October 1,
1999, the management contracts of these commercial properties were canceled.  The management fees
generated from these two commercial properties were $27,562 for the nine months ended September
30, 1999.

In March 1999, the Company lost management fees from Euclid Medical & Commercial Arts
Building, a non-owned commercial property, because of foreclosure proceedings.  The management
fees generated from this property for the three months ended March 31, 1999 were $20,728; no fees
were recognized for the period after March 31, 1999.  Additionally, due to the sale of a property in
September 1999, the Company has lost management fees from a managed, but non-owned property.
The management fees generated from this property for the nine months ended September 30, 1999
were $7,835.

In addition, if the Company proceeds with the proposed sale of its interests in certain joint
venture properties, the Company would no longer receive the management fees attributable to those
properties and one other property.  The management fees net of consulting fees generated for these
properties for the nine months ended September 30, 1999 were $649,125.  Certain third party owners of
properties currently managed by the Company have entered into contracts to sell those properties,
subject to certain contingencies.  To the extent those third party owned properties are sold, the
Company would similarly no longer receive the management fees generated from the respective
properties.  The aggregate management fees generated for these properties for the nine months ended
September 30, 1999 were $313,620.

The owners of two non-owned managed properties have contracted to sell these properties.
Upon the sale of these properties, it is likely that the management contracts will be canceled.  The
Company recognized management fees of $10,708 for the nine months ended September 30, 1999.

The impact of the loss of management fee revenues would generally be partially offset by a
reduction in operating expenses.

*Dividends*:

On October 7, 1999, the Company declared a dividend of $0.375 per common share for the
quarter ending September 30, 1999, which was paid on November 1, 1999 to shareholders of record on
October 15, 1999.  The common share dividend was reduced to $0.375 from $0.465 in order to reduce
the Company's dividend payout ratio.  On August 17, 1999, the Company declared a dividend of
$0.60938 per Depositary Share on its Class A Cumulative Preferred Shares (the "Perpetual Preferred
Shares") which was paid on September 15, 1999 to shareholders of record on September 1, 1999.  At
the current dividend level, the Company is a net borrower and will continue to monitor earnings
expectations to determine if any changes should be made with respect to the dividend policy.

*Cash flow sources and applications:*

Net cash provided by operating activities increased $1,766,100 from $30,168,600 to
$28,402,500  for the nine months ended September 30, 1999 when compared with the nine months
ended September 30, 1998. This increase was the result of increases in depreciation and amortization,
restricted cash, accounts and notes receivable and other operating assets and liabilities offset by funds
received from accounts and notes receivable of affiliates and joint ventures and decreases in funds held
for non-owned managed properties as well as an increase in accounts payable and accrued expenses
and funds held for non-owned managed properties of affiliates and joint ventures.

Net cash flows used for investing activities of $16,531,100 for the nine months ended
September 30, 1999 were primarily used for the development of multifamily real estate and capital
expenditures.

Net cash flows used for financing activities of $1,360,100 for the nine months ended September
30, 1999 were primarily comprised of proceeds received from the mortgage financing of 25 properties.
Funds were also used to pay dividends on the Company's common and Perpetual Preferred Shares as
well as repayments on the Line of Credit and a $20 million MTN that matured in September 1999.

During the remainder of 1999 and 2000, approximately $94.1 million of the Company's debt will
mature.  The Company intends to repay any such debt as it matures through a combination of new
secured borrowings and property sales proceeds.  The Company intends to pay off all of its outstanding
Senior Notes and MTN's pursuant to the tender offer described herein.

*********RESULTS OF OPERATIONS***

***Comparison of the quarter ended September 30, 1999 to the quarter ended September 30, 1998***

In the following discussion of the comparison of the quarter ended September 30, 1999 to the
quarter ended September 30, 1998, Market-rate Properties refers to the Same Store-Market Rate
("Same Store") and Acquired/Disposed Property portfolios.  Same Store Properties represents 28 of the
34 wholly owned multifamily properties acquired by the Company at the time of the IPO and the 52
properties acquired in separate transactions or developed by the Company during 1994 through June
30, 1998 and the acquisition of the remaining 50% interest in two properties in which the Company was
a joint venture partner at the time of the IPO.  Acquired/Disposed Properties refers to six properties
which were acquired between July 1, 1998 and September 30, 1999 as well as the newly constructed
and repositioned properties, the sale of six operating properties and Rainbow Terrace Apartments.

Overall, total revenue increased $21,400 or 0.05% and total expenses increased $4,939,700  or
14.2% for the quarter.  Net income applicable to common shares after deduction for the dividends on the
Company's Perpetual Preferred Shares decreased $3,917,200 or 123.2%.

During the quarter ended September 30, 1999, the Market-rate Properties generated total
revenues of $33,657,100 while incurring property operating and maintenance expenses of $15,638,500.
Of these amounts, the Acquired/Disposed and Same Store Properties contributed total revenues of
$5,340,200 and $28,316,900, respectively, while incurring property operating and maintenance
expenses of $2,579,500  and $13,059,000, respectively.  The Government-Assisted Properties
generated total revenues of $2,486,200 while incurring property operating and maintenance expenses of
$996,100 for the quarter ended September 30, 1999.

*Rental Revenues*:

Rental revenues increased $320,200 or 0.89% for the quarter.  Rental revenues from the
Acquired/Disposed Properties increased $619,400 for the quarter.  Occupancy and unit rents at the
Same Store Properties and Government-Assisted Properties resulted in a decrease of $404,200 or
1.42% and an increase of $31,244 or 1.3%, respectively, in rental revenue from these properties.

*Other Revenues*:

Other income decreased $140,500 or 15.5% for the quarter.  The decrease is due primarily to
the receipt of a workers compensation refund during the third quarter of 1998.

The Company recognized property and asset management fee revenues of $1,287,100 and
$611,400, respectively, for the quarter ended September 30, 1999 as compared to $1,426,700 of
property management fees and $636,100 of asset management fees for the quarter ended September
30, 1998.  The decrease in property and asset management fee revenues is primarily due to the loss of
management contracts and sale of an advisory client.

The Company recognized asset disposition fee revenue of $127,500 and $0 for the quarters
ended September 30, 1999 and 1998, respectively.  The fee relates to MIG selling a multifamily property
on behalf of a pension fund client in September 1999.

*Property operating and maintenance expenses:*

Property operating and maintenance expenses increased $63,200 or 0.38% for the quarter.
Property operating and maintenance expenses at the Acquired/Disposed Properties decreased $98,900
for the quarter due primarily to the operating and maintenance expenses incurred at the 6 properties
acquired in 1998, the newly constructed properties of The Village of Western Reserve and The
Residence at Barrington.  Property operating and maintenance expenses at the Same Store Properties
increased $196,700 or 1.5% when compared to the three months ended September 30, 1998 primarily
due to increases in personnel and real estate and local taxes.  Property operating and maintenance
expenses at the Government-Assisted Properties decreased $34,700 or 2.1% for the quarter

*Other expenses:*

Depreciation and amortization increased $1,902,800 or 26.9% for the quarter primarily due to
the increased depreciation expense recognized on the Acquired/Disposed Properties and the additional
depreciation as a result of the adoption of the new capitalization policy as well as the amortization
expense of the intangible assets associated with the merger with MIGRA.  The amortization expense
related to the intangible assets is reflected as a charge to the Management and Service Operations.

General and administrative expenses increased $523,200 or 17% for the quarter.  This increase
is primarily attributable to payroll and related expenses  and other consulting and professional fees
incurred by the Company principally related to system processes, tax, accounting and operating
consulting services.  The increase related to general and administrative expenses of approximately
$699,200 is classified as Unallocated Corporate Overhead.

Interest expense increased $2,742,900 or 37.3% for the quarter primarily due to the interest
incurred with respect to the project specific, nonrecourse mortgage financing collateralized by 25
properties owned by the REIT.

The gain on sale of properties of $1,049,700 for 1999 resulted from the sale of an operating
property.

*Net income applicable to common shares:*

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

***RESULTS OF OPERATIONS***

***Comparison of the nine months ended September 30, 1999 to the nine months ended September
30, 1998***

In the following discussion of the comparison of the nine months ended September 30, 1999 to
the nine months ended September 30, 1998, Market-rate Properties refers to the Same Store and
Acquired/Disposal Property portfolios.  Same Store Properties represents 28 of the 34 wholly owned
multifamily properties acquired by the Company at the time of the IPO, the 41 properties acquired in
separate transactions or developed by the Company during 1994 and 1997 and the acquisition of the
remaining 50% interest in two properties in which the Company was a joint venture partner at the time of
the IPO.  Acquired/Disposed Properties refers to 17 properties which were acquired between January 1,
1998 and September 30, 1999 as well as the newly constructed and repositioned properties, the sale of
six operating properties and Rainbow Terrace Apartments.

Overall, total revenue increased $13,846,400 or 13.5% and total expenses increased
$26,141,300  or 29.4% for the nine month period.  Net income applicable to common shares after
deduction for the dividends on the Company's Perpetual Preferred Shares increased $4,137,800 or
41.7%.

During the nine months ended September 30, 1999, the Market-rate Properties generated total
revenues of $100,529,500 while incurring property operating and maintenance expenses of
$45,512,800.  Of these amounts, the Acquired/Disposed and Same Store Properties contributed total
revenues of $35,302,900 and $65,226,500, respectively, while incurring property operating and
maintenance expenses of $16,165,000 and $29,347,800 respectively.  The Government-Assisted
Properties generated total revenues of $7,420,200 while incurring property operating and maintenance
expenses of $3,007,800 for the nine months ended September 30, 1999.

*Rental Revenues*:

Rental revenues increased $11,820,500 or 12.3% for the nine month period.  Rental revenues
from the Acquired/Disposed Properties increased $11,616,500 for the nine month period.  Occupancy
and suite rents at the Same Store and Government-Assisted Properties resulted in an increase of
$98,000 or .15% and $15,900 or .22%, respectively, in rental revenue from these properties.

***Other Revenues*:

The Company recognized property and asset management fee revenues of $3,912,200 and
$1,785,500, respectively, for the nine months ended September 30, 1999 as compared to $3,256,700 of
property management fees and $636,100 of asset management fees for the nine months ended
September 30, 1998.  The increase in property and asset management fee revenues is primarily due to
additional  fees earned by MIGRA relating to their institutional investor clients.

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

The Company recognized asset disposition fee revenue of $127,500 and $0 for the nine months
ended September 30, 1999 and 1998, respectively.  The fee relates to MIG selling a multifamily property
on behalf of a pension fund client in September 1999.

*Property operating and maintenance expenses:*

Property operating and maintenance expenses increased $6,810,200 or 16.3% for the nine
month period.  Property operating and maintenance expenses at the Acquired/Disposed Properties
increased $5,131,200 or 46.5% for the nine month period due primarily to the operating and
maintenance expenses incurred at the 17 properties acquired between January 1, 1998 and September
30, 1999 as well as the newly constructed and repositioned properties.  Property operating and
maintenance expenses at the Same Store Properties increased $1,532,500 or 5.5% when compared to
the prior nine month period primarily due to increases in personnel, advertising, utilities, real estate taxes
and local taxes, and the one time effect of refining certain cutoff procedures and its estimation process
for the accumulation of property operating expense accrual adjustments.  Property operating and
maintenance expenses at the Government-Assisted Properties increased $66,700 or 2.3% for the nine
month period due primarily to an increase in other operating expenses.

***Other expenses:*

Depreciation and amortization increased $7,485,200 or 41.3% for the nine months ended
September 30, 1999 primarily due to the increased depreciation expense recognized on the
Acquired/Disposed Properties and the additional depreciation as a result of the adoption of the new
capitalization policy as well as the amortization expense of the intangible assets  associated with the
merger with MIGRA.  The amortization expense related to the intangible assets is reflected as a charge
to the Management and Service Operations.

General and administrative expenses increased $5,450,500 or 81.2% for the nine months ended
September 30, 1999.  This increase is primarily attributable to increased payroll and related expenses
arising principally from the MIGRA merger as well as from increased employee headcount and wages,
and other consulting and professional fees incurred by the Company principally related to system
processes, tax, accounting and operating consulting services.  During the second quarter of 1999, a
severance benefit of $550,000 was paid to an executive officer of the Company.  The increase related to
general and administrative expenses of approximately $4,528,700 is classified as Unallocated Corporate
Overhead.

Interest expense increased $6,554,500 or 31.4% for the nine months ended September 30,
1999  primarily due to the interest incurred with respect to the project specific, nonrecourse mortgage
financing collateralized by 25 properties owned by the REIT.

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

The gain on sale of properties of $13,880,000 for 1999 resulted from the sale of six operating
properties.

*Extraordinary items:*

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

*Cumulative effect:*

****Effective January 1, 1999, the Company changed its method of accounting to capitalize
expenditures for certain replacements and improvements, such as new HVAC equipment, structural
replacements, appliances, flooring, carpeting and kitchen/bath replacements and renovations to the
capitalization method.  Previously, these costs were charged to operations as incurred.  Ordinary repairs
and maintenance, such as suite cleaning and painting, and appliance repairs are expensed.  The
Company believes the change in the capitalization method provides an improved measure of the
Company's capital investment, provides a better matching of expenses with the related benefit of such
expenditures, including associated revenues, and is in the opinion of management, consistent with
industry practice.  The cumulative effect of this change in accounting principle increased net income for
the nine months ended September 30, 1999  by $4,319,162 or $.19 per share (basic and diluted).  The
effect of this change was to increase income before cumulative effect of a change in accounting
principle by $5,530,903 or $.25 per share (basic and diluted) for the nine months ended September 30,
1999.   The pro forma amounts shown on the income statement have been adjusted to reflect the
retroactive application of the capitalization of such expenditures and related depreciation for the nine
months ended September 30, 1998 of which increased net income by $579,200 or $.03 per share (basic
and diluted).

*Net income applicable to common shares:*

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

***Equity in net income of joint ventures:*****

The combined equity in net income of joint ventures increased $200 or 0.17% and $30,700 or
9.8% for the three and nine months ended September 30, 1999 and 1998, respectively.  The increase is
due primarily to a decrease in the costs of operations.

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

|                         | For the three months ended | For the nine months
|------------------------ | -------------------------- | -------------------
|                         | September 30,              | ended September 30,
|                         | 1999                       | 1998               
|                         |                            |                    
|Beneficial interests in  |                            |                    
|joint venture operations |                            |                    
|Rental revenue           | $1,726,249                 | $1,750,253         
|Cost of operations       | 1,038,571                  | 1,093,541          
|                         | 687,678                    | 656,712            
|Interest income          | 2,674                      | 3,653              
|Interest expense         | (428,418)                  | (434,836)          
|Depreciation             | (142,946)                  | (106,559)          
|Amortization             | (12,861)                   | (13,020)           
|Net income               | $   106,127                | $    105,950       

**Outlook**

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

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

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

In addition to acquisitions on behalf of advised clients, the Company is initiating co-investment
with institutional investors.  These co-investments will include both purchase and development
opportunities.  Co-investment in the purchase of stabilized assets is expected to offer low volatility and
immediate cash flow.  The development program allows the Company and its institutional partners to
seek the high yields anticipated with development.  The expected equity division for both co-investment
forms is 25% to 49% from the Company and 51% to 75% from institutional investors.

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

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

**Inflation**

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

******Quantitative and Qualitative Disclosures About Market Risk**

At September 30, 1999, the Company had $18.1 million of variable rate debt.  Additionally, the Company has interest rate risk associated with fixed
rate debt at maturity.

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

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

|                               | **********Expected Maturity Date** | ****           | ****       
|------------------------------ | ---------------------------------- | -------------- | -----------
|                               |                                    |                |            
|**Long term debt**             | **1999**                           | **2000**       | **2001**   
|****Fixed:                     |                                    |                |            
|Fixed rate mortgage debt       | $817,596                           | $18,189,184    | $14,877,890
|Weighted average interest rate | 7.70%                              | 7.69%          | 7.65%      
|                               |                                    |                |            
|MTN's                          | -                                  | -              | 10,000,000 
|Weighted average interest rate | -                                  | -              | 7.12%      
|                               |                                    |                |            
|Senior notes                   | -                                  | 74,963,603     | -          
|Weighted average interest rate | -                                  | 8.23%          | -          
|Total fixed rate debt          | $817,596                           | $93,152,787    | $24,877,890
|                               |                                    |                |            
|Variable:                      |                                    |                |            
|Variable rate mortgage debt    | $  92,307                          | $       61,687 | $16,314,997
|                               |                                    |                |            
|Total long term debt           | $909,903                           | $93,214,474    | $41,192,887

On October 8, 1999, the Company collateralized an individual mortgage on one property for $13.3 million in project specific, nonrecourse loans
from The Chase Manhattan Bank.  The loan has a maturity of 8 years and a fixed interest rate of 7.86%.

Upon completion of the anticipated cash tender offer transaction as discussed in Note 14 of the financial statements, the Company will pay off the
MTN's and Senior Notes during 1999 and anticipates replacing them with new property specific debt.

**Sensitivity Analysis**

****The Company estimates that a 100 basis point decrease in market interest rates would have
changed the fair value of fixed rate debt to a liability of $568.8 million.  The sensitivity to changes in
interest rates of the Company's fixed rate debt was determined with a valuation model based upon
changes that measure the net present value of such obligation which arise from the hypothetical
estimate as discussed above.

**Year 2000 Compliance**

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

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

The Company's plan to resolve the Year 2000 issue has involved the following four phases:
assessment, remediation, testing and implementation.  The Company has conducted an assessment
and/or survey of its core IT and non-IT systems at both its corporate offices and properties and believes
it is 100% complete on such assessment.

Much of the mission critical operating systems, networking and accounting software that has
been purchased over the past few years has been represented by vendors to already be Year 2000
compliant.  The property management software currently being used at the Company's corporate offices
and which has been rolled out to the properties during the second and third quarters of 1999 has been
affirmed by the vendor to be tested and Year 2000 compliant.  Hardware upgrades at all of the
properties are substantially complete.  Testing by the Company of all such critical systems represented
by the vendors to be compliant is substantially complete.  Software patches are being applied routinely
as vendors continue to release through year-end.

The costs to upgrade and convert have been considered in the Company's cash flow
requirements for 1999 and have already been substantially incurred as part of an overall upgrade plan
implemented this year.

The Company believes it has identified all non-IT systems at all properties and expects to have
100% of its remediation and/or testing complete on these systems by mid-November.  Findings to date
suggest a low incidence of non-compliance on critical systems.

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

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

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

**CONTINGENCIES**

**Environmental**

There are no recorded amounts resulting from environmental liabilities and there are no known
contingencies with respect thereto.  Future claims for environmental liabilities are not measurable given
the uncertainties surrounding whether there exists a basis for any such claims to be asserted and, if so,
whether any claims will, in fact, be asserted.  Furthermore, no condition is known to exist that would give
rise to a liability for site restoration, post closure and monitoring commitments, or other costs that may be
incurred with respect to the sale or disposal of a property.  Phase I environmental audits have been
completed on all of the Company's wholly owned and joint venture properties.

**Rainbow Terrace Apartments**

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

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

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

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

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

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

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

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

During the third quarter, RTA, with respect to Rainbow Terrace Apartments, and PVA, with
respect to Park Village, entered into contracts to sell those properties, subject to, among other matters,
HUD approval.  Under the terms of the Settlement Agreement, HUD has the right to approve or
disapprove those prospective purchasers.  Alternatively, HUD may require RTA and PVA to convey
these properties to HUD by deed in lieu of foreclosure.  The Company expects HUD to announce its
decision soon.

The following tables present information concerning the Multifamily Properties owned by Associated Estates Realty Corporation.  Oct, 99

|                                     |          |                  |              |       |          |           | For the three months ending | For the three months ending
|------------------------------------ | -------- | ---------------- | ------------ | ----- | -------- | --------- | --------------------------- | ---------------------------
|                                     |          |                  |              |       |          |           | September 30, 1999          | September 30, 1998         
|                                     |          |                  |              |       | Year     | Average   | Average                     |                            
|                                     | Date     |                  | Type of      | Total | Built or | Unit Size | Economic                    | Physical                   
|The Multifamily Properties           | Acquired | Location         | Construction | Units | Rehab.   | Sq. Ft.   | Occupancy                   | Occupancy                  
|                                     |          |                  |              |       |          |           |                             |                            
|MARKET RATE                          |          |                  |              |       |          |           |                             |                            
|Acquired Properties                  |          |                  |              |       |          |           |                             |                            
|Florida                              |          |                  |              |       |          |           |                             |                            
|Windsor Pines                        | 10/23/98 | Pembroke Pines   | Garden       | 368   | 1998     | 1,132     | 93.8%                       | 96.2%                      
|                                     |          |                  |              |       |          |           |                             |                            
|Indiana                              |          |                  |              |       |          |           |                             |                            
|Steeplechase at Shiloh Crossing Apts | 08/11/98 | Indianapolis     | Garden       | 264   | 1998     | 929       | 78.3%                       | 79.5%                      
|                                     |          |                  |              |       |          |           |                             |                            
|Michigan                             |          |                  |              |       |          |           |                             |                            
|Georgetown-Phase II                  | 02/01/99 | Fenton           | Garden       | 120   | 1998     | 1,269     | 96.8%                       | 92.5%                      
|                                     |          |                  |              |       |          |           |                             |                            
|Northeastern Ohio                    |          |                  |              |       |          |           |                             |                            
|Village at Western Reserve           | 08/01/98 | Streetsboro      | Ranch        | 108   | 1998     | 999       | 97.1%                       | 95.4%                      
|Residence at Barrington              | 06/30/99 | Aurora           | Gdn/Tnhms    | 285   | 1999     | 1,131     | 92.8                        | 95.4                       
|                                     |          |                  |              | 393   |          | 1,095     | 93.8%                       | 95.4%                      
|                                     |          |                  |              | 1,145 |          |           |                             |                            
|                                     |          |                  |              |       |          |           |                             |                            
|                                     |          |                  |              |       |          |           |                             |                            
|Repositioned Properties              |          |                  |              |       |          |           |                             |                            
|Woodlands of North Royalton          |          |                  |              |       |          |           |                             |                            
|fka Somerset West (a)                | IPO      | North Royalton   | Gdn/Tnhms    | 197   | 1982     | 1,038     | 90.8%                       | 94.9%                      
|Williamsburg at Greenwood Village    | 02/18/94 | Sagamore Hills   | Townhomes    | 260   | 1990     | 938       | 89.5                        | 90.8                       
|                                     |          |                  |              | 457   |          | 981       | 90.0%                       | 92.6%                      
|**CORE PORTFOLIO PROPERTIES**        |          |                  |              |       |          |           |                             |                            
|Market rate                          |          |                  |              |       |          |           |                             |                            
|Arizona                              |          |                  |              |       |          |           |                             |                            
|20th & Campbell Apartments           | 06/30/98 | Phoenix          | Garden       | 204   | 1989     | 982       | 80.4%                       | 87.3%                      
|                                     |          |                  |              |       |          |           |                             |                            
|Central Ohio                         |          |                  |              |       |          |           |                             |                            
|Arrowhead Station                    | 02/28/95 | Columbus         | Townhomes    | 102   | 1987     | 1,344     | 96.0%                       | 99.0%                      
|Bedford Commons                      | 12/30/94 | Columbus         | Townhomes    | 112   | 1987     | 1,157     | 96.5                        | 98.2                       
|Bolton Estates                       | 07/27/94 | Columbus         | Garden       | 196   | 1992     | 687       | 97.1                        | 93.4                       
|Bradford at Easton                   | 05/01/98 | Columbus         | Garden       | 324   | 1996     | 1,010     | 95.6                        | 97.8                       
|Colony Bay East                      | 02/21/95 | Columbus         | Garden       | 156   | 1994     | 903       | 94.1                        | 98.7                       
|Heathermoor                          | 08/18/94 | Worthington      | Gdn/Tnhms    | 280   | 1989     | 829       | 97.6                        | 96.8                       
|Kensington Grove                     | 07/17/95 | Westerville      | Gdn/Tnhms    | 76    | 1995     | 1,109     | 94.8                        | 94.7                       
|Lake Forest                          | 07/28/94 | Columbus         | Garden       | 192   | 1994     | 788       | 95.3                        | 98.4                       
|Muirwood Village at Bennell          | 03/07/94 | Columbus         | Ranch        | 164   | 1988     | 769       | 95.1                        | 98.2                       
|Muirwood Village at London           | 03/03/94 | London           | Ranch        | 112   | 1989     | 769       | 99.3                        | 94.6                       
|Muirwood Village at Mt. Sterling     | 03/03/94 | Mt. Sterling     | Ranch        | 48    | 1990     | 769       | 94.4                        | 89.6                       
|Muirwood Village at Zanesville       | 03/07/94 | Zanesville       | Ranch        | 196   | 1991-95  | 769       | 93.6                        | 98.0                       
|Oak Bend Commons                     | 05/30/97 | Canal Winchester | Garden/Tnhm  | 102   | 1997     | 1,110     | 96.4                        | 97.1                       
|Pendleton Lakes East                 | 08/25/94 | Columbus         | Garden       | 256   | 1990-93  | 899       | 92.6                        | 97.3                       
|Perimeter Lakes                      | 09/20/96 | Dublin           | Gdn/Tnhms    | 189   | 1992     | 999       | 96.0                        | 96.3                       
|Residence at Christopher Wren        | 03/14/94 | Gahanna          | Gdn/Tnhms    | 264   | 1993     | 1,062     | 88.1                        | 95.5                       
|Residence at Turnberry               | 03/16/94 | Pickerington     | Gdn/Tnhms    | 216   | 1991     | 1,182     | 92.8                        | 95.8                       
|Saw Mill Village                     | 04/22/97 | Columbus         | Garden       | 340   | 1987     | 1,161     | 92.1                        | 93.8                       
|Sheffield at Sylvan                  | 03/03/94 | Circleville      | Ranch        | 136   | 1989     | 791       | 99.2                        | 96.3                       
|Sterling Park                        | 08/25/94 | Grove City       | Garden       | 128   | 1994     | 763       | 96.7                        | 96.9                       
|The Residence at Newark              | 03/03/94 | Newark           | Ranch        | 112   | 1993-94  | 868       | 92.2                        | 83.9                       
|The Residence at Washington          | 02/01/96 | Wash. Ct. House  | Ranch        | 72    | 1995     | 862       | 97.1                        | 97.2                       
|Wyndemere                            | 09/21/94 | Franklin         | Ranch        | 128   | 1991-95  | 768       | 98.0                        | 99.2                       
|                                     |          |                  |              | 3,901 |          | 940       | 94.6%                       | 96.2%                      

|                              |          |                  |              |       |          |           | For the three months ending | For the three months ending
|----------------------------- | -------- | ---------------- | ------------ | ----- | -------- | --------- | --------------------------- | ---------------------------
|                              |          |                  |              |       |          |           | September 30, 1999          | September 30, 1998         
|                              |          |                  |              |       | Year     | Average   | Average                     |                            
|                              | Date     |                  | Type of      | Total | Built or | Unit Size | Economic                    | Physical                   
|The Multifamily Properties    | Acquired | Location         | Construction | Units | Rehab.   | Sq. Ft.   | Occupancy                   | Occupancy                  
|                              |          |                  |              |       |          |           |                             |                            
|Cincinnati, Ohio              |          |                  |              |       |          |           |                             |                            
|Remington Place Apartments    | 03/31/97 | Cincinnati       | Garden       | 234   | 1988-90  | 830       | 94.0%                       | 91.5%                      
|                              |          |                  |              |       |          |           |                             |                            
|Florida                       |          |                  |              |       |          |           |                             |                            
|Cypress Shores                | 02/03/98 | Coconut Creek    | Garden       | 300   | 1991     | 991       | 91.0%                       | 96.3%                      
|                              |          |                  |              |       |          |           |                             |                            
|Georgia                       |          |                  |              |       |          |           |                             |                            
|The Falls                     | 02/03/98 | Atlanta          | Garden       | 520   | 1986     | 963       | 76.6%                       | 90.6%                      
|Morgan Place Apartments       | 06/30/98 | Atlanta          | Garden       | 186   | 1989     | 679       | 90.7                        | 95.7                       
|                              |          |                  |              | 706   |          | 888       | 80.7%                       | 91.9%                      
|**Indianapolis, Indiana**     |          |                  |              |       |          |           |                             |                            
|The Gables at White River     | 02/06/97 | Indianapolis     | Garden       | 228   | 1991     | 974       | 92.0%                       | 94.7%                      
|Waterstone Apartments         | 08/29/97 | Indianapolis     | Garden       | 344   | 1997     | 984       | 92.7                        | 95.1                       
|                              |          |                  |              | 572   |          | 980       | 92.4%                       | 94.9%                      
|**Maryland**                  |          |                  |              |       |          |           |                             |                            
|Reflections                   | 02/03/98 | Metro D.C.       | Garden       | 184   | 1985     | 1,020     | 94.9%                       | 94.6%                      
|The Gardens at Annen Woods    | 06/30/98 | Metro D.C.       | Garden       | 132   | 1987     | 1,269     | 95.5                        | 96.2                       
|Hampton Point Apartments      | 06/30/98 | Metro D.C.       | Garden       | 352   | 1986     | 817       | 96.1                        | 95.2                       
|                              |          |                  |              | 668   |          | 962       | 95.6%                       | 95.2%                      
|**Michigan**                  |          |                  |              |       |          |           |                             |                            
|Arbor Landings Apartments     | 01/20/95 | Ann Arbor        | Garden       | 168   | 1990     | 1,116     | 97.3%                       | 95.8%                      
|Aspen Lakes                   | 09/04/96 | Grand Rapids     | Garden       | 144   | 1981     | 789       | 98.5                        | 96.5                       
|Central Park Place            | 12/29/94 | Grand Rapids     | Garden       | 216   | 1988     | 850       | 98.1                        | 99.5                       
|Clinton Place                 | 08/25/97 | Clinton Twp.     | Garden       | 202   | 1988     | 954       | 97.1                        | 97.0                       
|Country Place Apartments      | 06/19/95 | Mt. Pleasant     | Garden       | 144   | 1987-89  | 859       | 98.9                        | 99.3                       
|Georgetown Park Apartments    | 12/28/94 | Fenton           | Garden       | 360   | 1987-96  | 1,005     | 92.2                        | 92.8                       
|The Landings at the Preserve  | 09/21/95 | Battle Creek     | Garden       | 190   | 1990-91  | 952       | 87.6                        | 92.6                       
|The Oaks and Woods at Hampton | 08/08/95 | Rochester Hills  | Gdn/Tnhms    | 544   | 1986-88  | 1,050     | 97.5                        | 97.1                       
|Spring Brook Apartments       | 06/20/96 | Holland          | Gdn/Tnhms    | 168   | 1986-88  | 818       | 99.2                        | 98.2                       
|Spring Valley Apartments      | 10/31/97 | Farmington Hills | Garden       | 224   | 1987     | 893       | 97.9                        | 98.2                       
|Summer Ridge Apartments       | 04/01/96 | Kalamazoo        | Garden       | 248   | 1989-91  | 960       | 98.1                        | 98.8                       
|                              |          |                  |              | 2,608 |          | 955       | 96.3%                       | 96.7%                      
|**North Carolina**            |          |                  |              |       |          |           |                             |                            
|Windsor Falls Apartments      | 06/30/98 | Raleigh          | Garden       | 276   | 1994     | 979       | 88.6%                       | 92.8%                      
|                              |          |                  |              |       |          |           |                             |                            
|Northeastern Ohio             |          |                  |              |       |          |           |                             |                            
|Bay Club                      | IPO      | Willowick        | Garden       | 96    | 1990     | 925       | 97.6%                       | 96.9%                      
|Edgewater Landing             | 04/20/94 | Cleveland        | High Rise    | 241   | 1988r    | 585       | 98.2                        | 97.1                       
|Gates Mills III               | IPO      | Mayfield Hts.    | High Rise    | 320   | 1978     | 874       | 90.5                        | 91.3                       
|Holly Park                    | IPO      | Kent             | Garden       | 192   | 1990     | 875       | 94.6                        | 97.9                       
|Huntington Hills              | IPO      | Stow             | Townhomes    | 85    | 1982     | 976       | 97.6                        | 94.1                       
|Mallard's Crossing            | 02/16/95 | Medina           | Garden       | 192   | 1990     | 998       | 96.5                        | 95.8                       
|Park Place                    | IPO      | Parma Hts.       | Mid Rise     | 164   | 1966     | 760       | 93.2                        | 92.1                       
|Pinecrest                     | IPO      | Broadview Hts.   | Garden       | 96    | 1987 r   | 598       | 96.6                        | 95.8                       
|Portage Towers                | IPO      | Cuyahoga Falls   | High Rise    | 376   | 1973     | 869       | 95.6                        | 95.5                       
|The Triangle (b)              | IPO      | Cleveland        | High Rise    | 273   | 1989     | 616       | 97.3                        | 98.9                       
|Timbers                       | IPO      | Broadview Hts.   | Garden       | 96    | 1987-89  | 930       | 94.9                        | 93.8                       
|Washington Manor              | 07/01/94 | Elyria           | Garden       | 120   | 1963-64  | 541       | 90.3                        | 90.8                       
|Westchester Townhouses        | IPO      | Westlake         | Townhomes    | 136   | 1989     | 1,000     | 96.8                        | 89.0                       
|Westlake Townhomes            | IPO      | Westlake         | Townhomes    | 7     | 1985     | 1,000     | 99.4                        | 100.0                      
|Winchester Hills I  (c)       | IPO      | Willoughby Hills | High Rise    | 362   | 1972     | 822       | 92.0                        | 92.0                       
|Winchester Hills II           | IPO      | Willoughby Hills | High Rise    | 362   | 1979     | 822       | 89.4                        | 91.2                       
|                              |          |                  |              | 3,118 |          | 809       | 94.4%                       | 94.1%                      
|**Toledo, Ohio**              |          |                  |              |       |          |           |                             |                            
|Country Club Apartments       | 02/19/98 | Toledo           | Garden       | 316   | 1989     | 811       | 94.5%                       | 94.3%                      

|                             |          |                  |              |        |          |           | For the three months ending | For the three months ending
|---------------------------- | -------- | ---------------- | ------------ | ------ | -------- | --------- | --------------------------- | ---------------------------
|                             |          |                  |              |        |          |           | September 30, 1999          | September 30, 1998         
|                             |          |                  |              |        | Year     | Average   | Average                     |                            
|                             | Date     |                  | Type of      | Total  | Built or | Unit Size | Economic                    | Physical                   
|The Multifamily Properties   | Acquired | Location         | Construction | Units  | Rehab.   | Sq. Ft.   | Occupancy                   | Occupancy                  
|                             |          |                  |              |        |          |           |                             |                            
|Hawthorne Hills Apartments   | 05/14/97 | Toledo           | Garden       | 88     | 1973     | 1,145     | 97.7                        | 95.5                       
|Kensington Village           | 09/14/95 | Toledo           | Gdn/Tnhms    | 506    | 1985-90  | 1,072     | 93.9                        | 94.1                       
|Vantage Villa                | 10/30/95 | Toledo           | Garden       | 150    | 1974     | 935       | 94.0                        | 95.3                       
|                             |          |                  |              | 1,060  |          | 981       | 94.4%                       | 94.4%                      
|**Pittsburgh, Pennsylvania** |          |                  |              |        |          |           |                             |                            
|Chestnut Ridge               | 03/01/96 | Pittsburgh       | Garden       | 468    | 1986     | 769       | 82.8%                       | 87.8%                      
|                             |          |                  |              |        |          |           |                             |                            
|Texas                        |          |                  |              |        |          |           |                             |                            
|Fleetwood Apartments         | 06/30/98 | Houston          | Garden       | 104    | 1993     | 1,019     | 91.1%                       | 91.3%                      
|Core Market Rate             |          |                  |              | 14,219 |          | 913       | 93.1%                       | 94.8%                      
|                             |          |                  |              |        |          |           |                             |                            
|GOVERNMENT ASST.-ELDERLY     |          |                  |              |        |          |           |                             |                            
|Ellet Development            | IPO      | Akron            | High Rise    | 100    | 1978     | 589       | 99.7%                       | 100.0%                     
|Hillwood I                   | IPO      | Akron            | High Rise    | 100    | 1976     | 570       | 100.0                       | 99.0                       
|Puritas Place (d)            | IPO      | Cleveland        | High Rise    | 100    | 1981     | 518       | 100.0                       | 99.0                       
|Riverview                    | IPO      | Massillon        | High Rise    | 98     | 1979     | 553       | 100.0                       | 99.0                       
|State Road Apartments        | IPO      | Cuyahoga Falls   | Garden       | 72     | 1977 r   | 750       | 99.7                        | 100.0                      
|Statesman II                 | IPO      | Shaker Heights   | Garden       | 47     | 1987 r   | 796       | 99.3                        | 91.5                       
|Sutliff Apartments II        | IPO      | Cuyahoga Falls   | High Rise    | 185    | 1979     | 577       | 100.0                       | 100.0                      
|Tallmadge Acres              | IPO      | Tallmadge        | Mid Rise     | 125    | 1981     | 641       | 99.9                        | 100.0                      
|Twinsburg Apartments         | IPO      | Twinsburg        | Garden       | 100    | 1979     | 554       | 99.7                        | 100.0                      
|Village Towers               | IPO      | Jackson Twp.     | High Rise    | 100    | 1979     | 557       | 100.0                       | 99.0                       
|West High Apartments         | IPO      | Akron            | Mid Rise     | 68     | 1981 r   | 702       | 100.0                       | 100.0                      
|                             |          |                  |              | 1,095  |          | 602       | 100.0%                      | 99.3%                      
|**GOVERNMENT ASST.-FAMILY**  |          |                  |              |        |          |           |                             |                            
|Jennings Commons             | IPO      | Cleveland        | Garden       | 50     | 1981     | 823       | 98.4%                       | 98.0%                      
|Shaker Park Gardens II       | IPO      | Warrensville     | Garden       | 151    | 1964     | 753       | 100.0                       | 99.3                       
|                             |          |                  |              | 201    |          | 770       | 100.0                       | 99.0                       
|                             |          |                  |              | 1,296  |          | 628       | 100.0%                      | 99.2%                      
|**CONGREGATE CARE**          |          |                  |              |        |          |           |                             |                            
|Gates Mills Club             | IPO      | Mayfield Heights | High Rise    | 120    | 1980     | 721       | 91.1%                       | 86.7%                      
|The Oaks                     | IPO      | Westlake         | Garden       | 50     | 1985     | 672       | 91.7                        | 92.0                       
|                             |          |                  |              | 170    |          | 707       | 91.3                        | 88.2                       
|                             |          |                  |              | 15,685 |          | 887       | 93.7%                       | 95.1%                      
|**Joint Venture Properties** |          |                  |              |        |          |           |                             |                            
|Northeastern Ohio            |          |                  |              |        |          |           |                             |                            
|Market rate                  |          |                  |              |        |          |           |                             |                            
|Americana                    | IPO      | Euclid           | High Rise    | 738    | 1968     | 803       | 93.9%                       | 94.7%                      
|College Towers               | IPO      | Kent             | Mid Rise     | 380    | 1969     | 662       | 95.3                        | 99.5                       
|Euclid House                 | IPO      | Euclid           | Mid Rise     | 126    | 1969     | 654       | 92.4                        | 92.1                       
|Gates Mills Towers           | IPO      | Mayfield Hts.    | High Rise    | 760    | 1969     | 856       | 93.2                        | 93.6                       
|Highland House               | IPO      | Painesville      | Garden       | 36     | 1964     | 539       | 95.7                        | 97.2                       
|Watergate                    | IPO      | Euclid           | High Rise    | 949    | 1971     | 831       | 91.0                        | 94.7                       
|                             |          |                  |              | 2,989  |          | 789       | 93.0%                       | 94.9%                      
|**Government Asst.-Family**  |          |                  |              |        |          |           |                             |                            
|Lakeshore Village            | IPO      | Cleveland        | Garden       | 108    | 1982     | 786       | 97.5%                       | 98.1%                      
|Total Joint Venture          |          |                  |              | 3,097  |          | 789       | 93.2                        | 95.1                       
|Core                         |          |                  |              | 18,782 |          | 880       | 93.7%                       | 95.1%                      
|Portfolio average            |          |                  |              | 20,384 |          | 896       | 93.4%                       | 94.9%                      

______________

(a)	Woodlands of North Royalton (fka Somerset West) has 39 Contract Units and 158 Market-rate units.

(b)	The Triangle also contains 63,321 square feet of office/retail space.

(c)	The Company acquired a noteholder interest entitling the Company to substantially all cash flows from operations.  The Company has certain rights under a security agreement to foreclose on the

property to the extent that the unpaid principal and interest on the underlying notes exceed seven years equivalent principal and interest payments.

(d)	The property was developed in 1981 subject to a warranty deed provision which states that the assignment of fee simple title of the property to the Company shall expire in 2037.

R = Rehabilitated

**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 three and nine
month periods ended September 30, 1999 and 1998 are summarized in the following table:

|                                                      | For the three months | For the nine months
|----------------------------------------------------- | -------------------- | -------------------
|                                                      | ended September 30,  | ended September 30,
|**(In thousands)**                                    | 1999                 | 1998               
|                                                      |                      |                    
|**Net (loss) income**
**applicable to common shares** | $   (737)            | $ 3,180            
|                                                      |                      |                    
|Depreciation on real estate
assets                    |                      |                    
|Wholly owned properties                               | 7,602                | 6,338              
|Joint venture properties                              | 143                  | 106                
|Amortization of intangible assets                     | 422                  | 140                
|Extraordinary item - loss                             | -                    | -                  
|Nonrecurring expenses                                 | 237                  | 200                
|Cumulative effect of a change in accounting           |                      |                    
|principle                                             | -                    | -                  
|Additional operating expenses                         | -                    | -                  
|Gain on sale of properties                            | (1,050)              | -                  
|**Funds From Operations**                             | 6,617                | 9,964              
|                                                      |                      |                    
|Depreciation - other assets                           | 719                  | 306                
|Amortization of deferred financing fees               | 270                  | 312                
|Fixed asset additions                                 | (5,101)              | (1,166)            
|Fixed asset additions - joint venture properties      | (73)                 | (65)               
|**Distributable Cash Flow**                           | $  2,432             | $  9,351           
|                                                      |                      |                    
|**Weighted average
shares	- Basic**                   | 21,617               | 22,599             
|**- Diluted**                                         | 21,617               | 23,059             
|                                                      |                      |                    

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



**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

|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | **Filed herewith or**                                                            
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | **incorporated**                                                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | **herein by**                                                                    
|Number | **Title**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | **reference**                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|2.01   | Second Amended and Restated Agreement and Plan of Merger by

and among the Company, MIG Realty Advisors, Inc.  ("MIGRA")

and the MIGRA stockholders dated as of March 30, 1998                                                                                                                                                                                                                                                                                                                                                                        | Exhibit 2.01 to
Form 8-K filed
March 31, 1998.                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|3.1    | Second Amended and Restated Articles of Incorporation of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Exhibit 3.1 to Form
S-11 filed June 30,
1994 (File No. 33-80950 as amended)      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|3.2    | Code of Regulations of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Exhibit 3.2 to Form
S-11 filed June 30,
1994 (File No. 33-80950 as
amended).     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|4.1    | Specimen Stock Certificate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | Exhibit 3.1 to Form
S-11 filed
September 2, 1993
(File No. 33-68276
as amended). 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|4.2    | Form of Indemnification Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Exhibit 4.2 to Form
S-11 filed
September 2, 1993
(File No. 33-68276
as amended). 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|4.3    | Promissory Note dated October 23, 1991 from Triangle Properties Limited
Partnership, et. al., in favor of PFL Life Insurance Company; Open End Mortgage
from Triangle Properties Limited Partnership I, et. al., in favor of PFL Life
Insurance Company (The Registrant undertakes to provide additional long-term
loan documents upon request).                                                                                                                                                                                                       | Exhibit 4.3 to Form
S-11 filed
September 2, 1993
(File No. 33-68276
as amended). 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|4.4    | Promissory Note dated February 28, 1994 in the amount of $25 million.  Open-End Mortgage Deed and Security Agreement from AERC to National City Bank
(Westchester Townhouse); Open-End Mortgage Deed and Security Agreement
from AERC to National City Bank (Bay Club); Open-End Mortgage Deed and
Security Agreement from Winchester II Apartments, Inc. to National City Bank
(Winchester II Apartments); and Open-End Mortgage Deed and Security
Agreement from Portage Towers Apartments, Inc. to  National City Bank
(Portage Towers Apartments). | Exhibit 4.4 to Form 
10-K filed March
31, 1993.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|4.5    | Form of Promissory Note and Form of Mortgage and Security Agreement dated
May 10, 1999 from AERC to The Chase Manhattan Bank.                                                                                                                                                                                                                                                                                                                                                                                                                          | Exhibit 4.5 to Form
10-Q filed August
13, 1999.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|4.5a   | Form of Promissory Note and Form of Mortgage and Security Agreement dated
September 10, 1999 from AERC to The Chase Manhattan Bank.                                                                                                                                                                                                                                                                                                                                                                                                                    | Exhibit 4.5a filed
herewith.                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|4.6    | Indenture dated as of March 31, 1995 between Associated Estates Realty
Corporation and National City Bank.                                                                                                                                                                                                                                                                                                                                                                                                                                             | Exhibit 4.6 to Form
10-Q filed May 11,
1995.                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|4.7    | $75 Million 8-3/8% Senior Note due April 15, 2000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Exhibit 4.7 to Form
10-Q filed May 11,
1995.                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|4.8e   | Credit Agreement dated June 30, 1998, by and among Associated Estates
Realty Corporation, as Borrower; the banks and lending institutions identified
therein as Banks; National City Bank, as Agent and Bank of America National
Trust and Savings Association, as Documentation Agent                                                                                                                                                                                                                                                                 | Exhibit 4.8e to
Form 10-Q filed
August 14, 1998.                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|4.8f   | First Amendment to Credit Agreement by and among Associated Estates Realty
Corporation, as Borrower; National City Bank, as Managing Agent for itself and
on behalf of the Existing Banks and First Merit Bank, N.A. and Southtrust Bank,
N.A. as the New Banks                                                                                                                                                                                                                                                                                        | Exhibit 4.8f to Form
10-Q filed
November 16,
1998.                               
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|4.8g   | Second Amendment to Credit Agreement by and among Associated Estates
Realty Corporation, as Borrower, National City Bank, as Managing Agent for
itself and on behalf of the Existing Banks and National City Bank, Bank of
America National Commerzbank Aktiengesellschaft.                                                                                                                                                                                                                                                                            | Exhibit 4.8g to
Form 10Q filed
November 16,
1998.                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|4.8h   | Third Amendment to Credit Agreement by and among Associated Estates Realty
Corporation, as Borrower, National City Bank, as Managing Agent, Bank of
America National Trust & Savings Association, as Documentation Agent and the
banks identified therein.                                                                                                                                                                                                                                                                                             | Exhibit 4.8h to
Form 10-K filed
March 30, 1999.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|4.9    | Form of Medium-Term Note-Fixed Rate-Senior Security.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Exhibit 4(I) to Form
S-3 filed December
7, 1995 (File No.
33-80169) as
amended.  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|4.10   | Form of Preferred Share Certificate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Exhibit 4.1 to Form
8-K filed July 12,
1995.                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|4.11   | Form of Deposit Agreement and Depositary Receipt.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Exhibit 4.2 to Form
8-K filed July 12,
1995.                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|4.12   | Ten Million Dollar 7.10% Senior Notes Due 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Exhibit 4.12 to
Form 10-K filed
March 28, 1996.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|10     | Associated Estates Realty Corporation Directors' Deferred Compensation Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Exhibit 10 to Form
10-Q filed
November 14, 1996                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|10.1   | Registration Rights Agreement among the Company and certain holders of the
Company's Common Shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                    | Exhibit 10.1 to
Form S-11 filed
September 2, 1993
(File No. 33-68276
as amended).
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|10.2   | Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Exhibit 10.2 to
Form S-11 filed
September 2, 1993
(File No. 33-68276
as amended).
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|10.3   | Amended and Restated Employment Agreement between the Company and
Jeffrey I. Friedman.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Exhibit 10.1 to
Form 10-Q filed
May 13, 1996.                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|10.4   | Equity-Based Incentive Compensation Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Exhibit 10.4 to
Form 10-K filed
March 29, 1995.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|10.5   | Long-Term Incentive Compensation Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Exhibit 10.5 to
Form 10-K filed
March 29, 1995.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|10.6   | Lease Agreement dated November 29, 1990 between Royal American
Management Corporation and Airport Partners Limited Partnership.                                                                                                                                                                                                                                                                                                                                                                                                                        | Exhibit 10.6 to
Form 10-K filed
March 29, 1995.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|10.7   | Sublease dated February 28, 1994 between the Company as Sublessee, and
Progressive Casualty Insurance Company, as Sublessor.                                                                                                                                                                                                                                                                                                                                                                                                                           | Exhibit 10.7 to
Form 10-K filed
March 29, 1995.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|10.8   | Assignment and Assumption Agreement dated May 17, 1994 between the
Company, as Assignee, and Airport Partners Limited Partnership, as Assignor.                                                                                                                                                                                                                                                                                                                                                                                                        | Exhibit 10.8 to
Form 10-K filed
March 29, 1995.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|10.9   | Form of Restricted Agreement dated by and among the Company and Its
Independent Directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                             | Exhibit 10.9 to
Form 10-K filed
March 28, 1996.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|10.10  | Pledge Agreement dated May 23, 1997 between Jeffrey I. Friedman and the
Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Exhibit 10.01 to
Form 10-Q filed
August 8, 1997                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|10.11  | Secured Promissory Note dated May 23, 1997 in the amount of $1,671,000
executed by Jeffrey I. Friedman in favor of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                        | Exhibit 10.02 to
Form 10-Q filed
August 8, 1997                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|10.12  | Unsecured Promissory Note dated May 23, 1997 in the amount of $1,671,000
executed by Jeffrey I. Friedman in favor of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                      | Exhibit 10.03 to
Form 10-Q filed
August 8, 1997                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|10.14  | Form of Share Option Agreement by and among the Company and Its
Independent Directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Exhibit 10.14 to
Form 10-K filed
March 30, 1993.                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|10.15  | Agreement dated March 11, 1999 by and among the Company and The Milstein
Affiliates                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | Exhibit 10.15 to
Form 10-Q filed
May 17, 1999.                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|10.16  | Agreement dated March 11, 1999 by and among the Company and The Milstein
Affiliates                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | Exhibit 10.16 to
Form 10-Q filed
May 17, 1999.                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|10.17  | Separation Agreement and Release dated January 8, 1999 by and between the
Company and Dennis W. Bikun                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Exhibit 10.17 to
Form 10-Q filed
May 17, 1999.                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|10.18  | Separation Agreement and Release dated June 30, 1999 by and between the
Company and Larry E. Wright                                                                                                                                                                                                                                                                                                                                                                                                                                                    | Exhibit 10.18 to
Form 10-Q filed
August 13, 1999.                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|18.1   | Letter regarding change in accounting principles                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Exhibit 18.1 to
Form 10-Q filed
May 17, 1999.                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  
|27     | Financial Data Schedule                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Exhibit 27 filed
herewith.                                                       

(b)	Reports on Form 8-K.

None



**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 10, 1999 | /s/ Kathleen L. Gutin                             
|(Date)            | Kathleen L. Gutin, Vice President, Chief Financial
|                  | Officer and Treasurer                             

**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                     
|------ | ----------------------------------------------------------
|       |                                                           
|       |                                                           
|       | Kathleen L. Gutin, Vice President, Chief Financial Officer
|(Date) | and Treasurer