<PAGE>1                      


                               SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C.  20549

                                      Form 10-Q

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

                    For the quarterly period ended March 31, 1999

                                          OR

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

               For the transition period from __________ to __________

                            Commission File Number 1-12486


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



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

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


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



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


                   Number of shares outstanding as of May 14, 1999:
                                  22,527,726 shares

<PAGE>2
                                                                            
                        ASSOCIATED ESTATES REALTY CORPORATION

                                        INDEX 

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

   <S>                                                          <C>
   ITEM 1  Condensed Financial Statements



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


           Consolidated Statements of Income for the three
              months ended March 31, 1999 and 1998                4



           Consolidated Statements of Cash Flows for the three
              month periods ended March 31, 1999 and 1998         5


           Notes to Financial Statements                          6



   ITEM 2  Management's Discussion and Analysis of Financial 
              Condition and Results of Operations                20


   PART II  -  OTHER INFORMATION



   ITEM 4  Submission of Matters to a Vote of Security-Holders   39


   ITEM 6  Exhibits and Reports on Form 8-K                      39



   SIGNATURES                                                    42 
</TABLE>

<PAGE>3
                        ASSOCIATED ESTATES REALTY CORPORATION
                             CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                              March 31,     December 31,
                                                                 1999           1998     
                                                             (Unaudited)
                           ASSETS

   <S>                                                      <C>            <C>
   Real estate assets
     Land                                                   $ 90,435,383   $ 92,675,356 
     Buildings and improvements                              767,179,503    778,450,807 
     Furniture and fixtures                                   31,999,312     30,804,870 
                                                             -----------   ------------
                                                             889,614,198    901,931,033 
       Less:  accumulated depreciation                      (158,692,514)  (153,941,702)
                                                             -----------   ------------
                                                             730,921,684    747,989,331 
       Construction in progress                               57,317,005     53,740,292 
                                                             -----------    -----------
          Real estate, net                                   788,238,689    801,729,623 
     Properties held for sale, net                            17,351,824              - 
   Cash and cash equivalents                                  20,201,610      1,034,655 
   Restricted cash                                             7,314,040      6,718,863 
   Accounts and notes receivable
     Rents                                                     3,104,115      2,801,835 
     Affiliates and joint ventures                             7,830,557     13,113,400 
     Other                                                     2,464,063      2,293,007 
   Intangible and other assets, net                           13,115,729     13,093,972 
                                                            ------------   ------------
                                                            $859,620,627   $840,785,355 
                                                            ============   ============
            LIABILITIES AND SHAREHOLDERS' EQUITY
   Secured debt                                             $110,230,031   $ 80,042,667 
   Unsecured debt                                            423,431,803    423,862,468 
                                                            ------------   ------------
       Total indebtedness                                    533,661,834    503,905,135 
   Accounts payable and accrued expenses                      18,842,463     21,525,517 
   Dividends payable                                           8,472,272     10,507,586 
   Resident security deposits                                  5,946,800      5,960,971 
   Funds held on behalf of managed properties                                           
     Affiliates and joint ventures                             4,168,988      5,353,394 
     Other                                                     3,784,184      4,128,298 
   Accrued interest                                            4,792,813      5,501,634 
   Accumulated losses and distributions of joint ventures
     in excess of investment and advances                     12,438,247     12,679,793 
                                                             -----------    -----------
       Total liabilities                                     592,107,601    569,562,328 

   Operating partnership minority interest                    11,987,910     12,034,880 

   Commitments and contingencies                                       -              - 
   Shareholders' equity  


     Preferred shares, Class A cumulative, without
       par value; 3,000,000 authorized; 225,000 
       issued and outstanding                                 56,250,000     56,250,000 
     Common shares, without par value, $.10 stated
       value; 50,000,000 authorized; 22,641,726 and
       22,621,958 issued and outstanding at March 31, 1999
       and December 31, 1998, respectively                     2,264,172      2,262,195 
     Paid-in capital                                         277,124,317    277,134,988 
     Accumulated dividends in excess of net income           (79,645,975)   (75,991,638)
     Accumulated other comprehensive income                         (875)          (875)
     Less:  Treasury shares, at cost, 25,000 shares
       at December 31, 1998                                     (466,523)      (466,523)
                                                            ------------   ------------
       Total shareholders' equity                            255,525,116    259,188,147 
                                                            ------------   ------------
                                                            $859,620,627   $840,785,355  <PAGE>
 
                                                            ============   ============
</TABLE>

                     The accompanying notes are an integral part
                            of these financial statements

<PAGE> 4
                        ASSOCIATED ESTATES REALTY CORPORATION
                          CONSOLIDATED STATEMENTS OF INCOME
                                     (UNAUDITED)
<TABLE>
<CAPTION>
                                                               For the three months
                                                                 ended March 31,
                                                                1999          1998    
   <S>                                                     <C>            <C>
   Revenues
     Rental                                                $ 35,340,655   $  29,104,614
     Property management fees                                 1,295,738         948,838
     Asset management fees                                      585,835               -
     Painting services                                          287,043         348,555
     Other                                                      506,780         306,798
                                                             ----------      ----------
                                                             38,016,051      30,708,805
   Expenses
     Property operating and maintenance                      15,382,150      12,302,462
     Depreciation and amortization                            8,276,048       5,314,595
     Painting services                                          307,401         337,939
     General and administrative                               3,870,946       1,833,612
     Interest expense                                         8,250,732       6,431,667
                                                           ------------     -----------
      Total expenses                                         36,087,277      26,220,275
   Income before equity in net (loss) income of
    joint ventures, minority interest and cumulative effect
    of a change in accounting principle                       1,928,774       4,488,530
     Equity in net (loss) income of joint ventures              (26,737)         36,216
     Minority interest in operating partnership                 (32,159)              -
   Income before cumulative effect of a change in          ------------   -------------
    accounting principle                                      1,869,878       4,524,746
     Cumulative effect of a change in accounting principle    4,319,162               -
                                                           ------------   ------------- 
   Net income                                              $  6,189,040   $   4,524,746
                                                           ============   =============
   Net income applicable to common shares                  $  4,817,935   $   3,153,641
                                                           ============   =============
   Earnings per common share - basic:
     Income before cumulative effect of a change in
       accounting principle                                $        .02   $         .18
                                                           ============   =============
     Cumulative effect of a change in accounting principle $        .19   $           -
                                                           ============   =============
     Net income                                            $        .21   $         .18
                                                           ============   =============
   Earnings per common share - diluted:
     Income before cumulative effect of a change in
       accounting principle                                $        .02   $         .18
                                                           ============   =============
     Cumulative effect of a change in accounting principle $        .19   $           -
                                                           ============   =============
     Net Income                                            $        .21   $         .18
                                                           ============   =============
   Pro forma amounts assuming the new capitalization
    policy is applied retroactively:
     Net income                                            $  1,869,878   $   4,659,048
                                                           ============   =============
     Net income applicable to common shares                $    498,773   $   3,287,943
      Earnings per common share - basic:                   ============   =============
        Net income                                         $        .08   $         .27 <PAGE>
 
                                                           ============   =============
        Income applicable to common shares                 $        .02   $         .19
      Earnings per common share - diluted:                 ============   =============
        Net income                                         $        .08   $         .27
                                                           ============   =============
        Income applicable to common shares                 $        .02   $         .19
                                                           ============   =============
   Dividends paid per common share                         $       .375   $        .465
                                                           ============   =============
   Weighted average number of
     common shares outstanding  - Basic                      22,665,998      17,071,950
                                                            ===========   =============
                                - Diluted                    22,665,998      17,073,153
                                                            ===========   =============
</TABLE>
                     The accompanying notes are an integral part
                            of these financial statements

<PAGE>5


                        ASSOCIATED ESTATES REALTY CORPORATION
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                      FOR THE THREE MONTH PERIOD ENDED MARCH 31,
                                     (UNAUDITED)

<TABLE>
<CAPTION>
                                                                         1999           1998    
   <S>                                                              <C>             <C>
   Cash flow from operating activities:
    Net income                                                      $   6,189,040   $  4,524,746 
    Adjustments to reconcile net income to net
      cash provided by operating activities:
      Depreciation and amortization                                     8,276,048      5,314,595 
      Cumulative effect of a change in accounting principle            (4,319,162)             - 
      Minority interest in operating partnership                           32,159              - 
      Equity in net loss (income) of joint ventures                        26,737        (36,216)
      Earnings distributed from joint ventures                            383,389        104,982 
      Net change in  - Accounts and notes receivable                     (473,336)       865,443 

                     - Accounts and notes receivable of
                       affiliates and joint ventures                    5,282,843        463,804 
                     - Accounts payable and accrued expenses             (437,093)    (1,283,100)
                     - Other operating assets and liabilities            (729,130)    (2,096,408)
                     - Restricted cash                                   (595,177)     5,321,626 
                     - Funds held for non-owned managed properties       (344,114)       153,977 
                     -  Funds held for non-owned managed properties
                         of affiliates and joint ventures              (1,184,406)       126,297 
                                                                       ----------     ----------
         Total adjustments                                              5,918,758      8,935,000 
                                                                       ----------    -----------
      Net cash flow provided by operations                             12,107,798     13,459,746 

   Cash flow from investing activities:
    Real estate acquired or developed (net of liabilities assumed)     (9,931,065)   (66,095,671)
    Fixed asset additions                                                (214,506)      (359,946)
    (Contributions to) distributions from joint ventures                 (125,905)        81,139 
                                                                       -----------   -----------
      Net cash flow used for investing activities                     (10,271,476)   (66,374,478)

   Cash flow from financing activities:
    Principal payments on secured debt                                   (312,636)      (317,304)
    Proceeds from secured debt                                         30,500,000              - 
    Term loan borrowings                                                        -     45,000,000 
    Line of credit borrowings                                         257,000,000    107,500,000 
    Line of credit repayments                                        (257,446,565)   (90,500,000)
    Deferred financing and offering costs                                (531,475)       (68,557)
    Common share dividends paid                                       (10,507,586)    (7,939,916)
    Preferred share dividends paid                                     (1,371,105)    (1,371,105)
                                                                       ----------     ----------
      Net cash flow provided by financing activities                   17,330,633     52,303,118 
                                                                       ----------     ----------
      Increase (decrease) in cash and cash equivalents                 19,166,955       (611,614)
   Cash and cash equivalents, beginning of period                       1,034,655      2,251,819 
                                                                      -----------     ----------
   Cash and cash equivalents, end of period                           $20,201,610     $1,640,205
                                                                      ===========     ==========
   Supplemental disclosure of cash flow information:
     Assumption of liabilities in connection with the
       acquisition of properties                                                -      1,988,898
     Assumption of mortgage debt in connection with the
       acquisition of properties                                                -     15,013,771
     Dividends declared but not paid                                    8,472,272      7,939,304

</TABLE>                                                              

                     The accompanying notes are an integral part
                            of these financial statements

<PAGE>6

                        ASSOCIATED ESTATES REALTY CORPORATION
                            NOTES TO FINANCIAL STATEMENTS
                                      UNAUDITED


          1.   BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

          Business

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

               At March 31, 1999, the Company owned directly or indirectly,
          or was a joint venture partner in 101 multifamily properties
          containing 21,558 units.  Of these properties, 75 were located in
          Ohio, 11 in Michigan, two in Florida, two in Georgia, three in
          Maryland, one in North Carolina, one in Texas, one in Arizona,
          three in Indiana, one in California and one in Pennsylvania. 
          Additionally, the Company managed 57 non-owned properties, 50 of
          which were multifamily properties consisting of 12,426 units (16
          of which are owned by various institutional investors consisting
          of 5,749 units) and seven of which were commercial properties
          containing an aggregate of approximately 782,000 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.  The Company holds a
          preferred share interest in the Service Companies which entitles
          it to receive 95% of the economic benefits from operations and
          which is convertible into a majority interest in the voting
          common shares.  The outstanding voting common shares of these
          Service Companies are held by an executive officer of the
          Company.  The Service Companies are consolidated because, from a
          financial reporting perspective, the Company is entitled to
          virtually all economic benefits and has operating control.  The
          preferred share interest is 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.  These OP units may, under certain
          circumstances, become exchangeable into common shares of the
          Company on a one-for-one basis.  The Class A unitholders are
          entitled to receive distributions per OP unit equal to the per
          share distributions on the Company's common shares.  At March 31,
          1999, the Company  charged $32,159 to minority interest in
          operating partnership in the Consolidated Statements of Income
          relating to the Class A unitholders  allocated share of net
          income.  At March 31, 1999, the Class B, Class C, Class D and
          Class E unitholders were not entitled to receive an allocation of
          net income and did not receive any cash distributions from the
          operating partnership.

<PAGE>7
               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 three month period ended March 31, 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 $632,148 in the first quarter.  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 had 
          the effect of reducing income by approximately $212,800 
          for the three month period ended March 31, 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 $237,000 
          for the three month period ended March 31, 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.

          Recent Accounting Pronouncements

               Effective December 31, 1998, the Company implemented
          Statement of Financial Accounting Standards ( SFAS ) No. 130 -
          Reporting Comprehensive Income.  At March 31, 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.

<PAGE>8
               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 January 1, 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 March 31, 1999, there was no material impact of adoption on the
          provisions of this statement on the Company's financial position,
          results of operations and cash flow.

          2.   DEVELOPMENT OF MULTIFAMILY PROPERTIES

               Construction in progress, including the cost of land, for
          the development of multifamily properties was $57,317,005 and
          $53,740,292 at March 31, 1999 and December 31, 1998,
          respectively.  The Company capitalizes interest costs on funds
          used in construction, real estate taxes and insurance from the
          commencement of development activity through the time the
          property is available for leasing.  Capitalized interest, real
          estate taxes and insurance aggregated approximately $978,486 and
          $361,640  during the three month periods ended March 31, 1999 and
          1998, respectively.  For the three month period ended March 31,
          1999, the construction and leasing of 48 units at one property
          was completed at a total cost of $3.1 million. The following
          schedule details construction in progress at March 31, 1999: 

<TABLE>
<CAPTION>
                                                                       
                                                   
       (dollars in thousands)                      Placed in     March 31, 1999    Estimated
                                  Number  Costs     Service      --------------
                                    of   Incurred   through      Land  Building   Scheduled
              Property             Units to Date    3/31/99      Cost    Cost     Completion
   -----------------------------------------------------------------------------------------
   <S>                             <C>   <C>        <C>         <C>      <C>      <C>      
   ANN ARBOR, MICHIGAN
     Arbor Landings Apartments II    160$  10,266  $  7,301   $     193$   2,772    1999

   ATLANTA, GEORGIA
     Boggs Road                      535   4,104          -       3,955      149     TBD

   BATTLE CREEK, MICHIGAN
     The Landings at the Preserve     90     320          -         266       54     TBD

   GRAND RAPIDS, MICHIGAN
     Aspen Lakes II                  118     750          -        402       348     TBD

   WESTLAKE, OHIO
     Westlake                        300     745          -        523       222     TBD

   ORLANDO, FLORIDA
     Windsor at Kirkman Apts.        460  39,494          -       3,222   36,272    1999
                                                                          
   AVON, OHIO
     Village at Avon                 312   7,300          -       2,158    5,142    2000

   Other                               -   1,639          -         326    1,313  
                                   ----- -------     ------     -------  -------    
                                   1,975 $64,618     $7,301(1)  $11,045  $46,272
                                   ===== =======     ======     =======  =======
   (1)  Including land of $451.

</TABLE>

<PAGE>9

          3.   PROPERTIES HELD FOR SALE

               The Company is in negotiations to sell six of its Market-
          rate properties.  Five of these properties are located in Ohio
          and one is located in California.  The Company anticipates that
          these assets will be sold during 1999.  The net real estate
          assets of these six properties are presented on 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:

<TABLE>
<CAPTION>

                                Class A        Common
                              Cumulative       Shares
                               Preferred      (at $.10       Paid-In
                                Shares     stated value)     Capital   
                              -----------  -------------  ------------
   <S>                        <C>          <C>            <C>
   Balance, Dec. 31, 1998     $56,250,000  $   2,262,195  $ 277,134,988 
   Net income                           -              -              - 
   Issuance of 21,000
     restricted common shares           -          2,100         (2,100)
   Retired 1,232 restricted
     common shares                      -           (123)           123 
   Deferred compensation                -              -         (8,694)
   Common share
     dividends declared                 -              -              - 
   Preferred share
     dividends declared                 -              -              - 
                              -----------  -------------  -------------
   Balance, March 31, 1999    $56,250,000  $   2,264,172  $ 277,124,317 
                              ===========  =============  =============

</TABLE>

<TABLE>
<CAPTION>
                               Accumulated   Accumulated        
                                Dividends       Other       Treasury
                               In Excess Of Comprehensive    Shares
                                Net Income      Income      (at cost)      Total    

   <S>                        <C>           <C>           <C>          <C>
   Balance, Dec. 31, 1998     $ (75,991,638)$       (875)  $(466,523)  $ 259,188,147 
   Net income                     6,189,040            -           -       6,189,040 
   Issuance of 21,000
     restricted common shares             -            -           -               - 
   Retired 1,232 restricted
     common shares                        -            -           -               - 
   Deferred compensation                  -            -           -          (8,694)
   Common share
     dividends declared          (8,472,272)           -           -      (8,472,272)
   Preferred share
     dividends declared          (1,371,105)           -           -      (1,371,105)
   Balance, March 31, 1999    $ (79,645,975)$       (875)  $(466,523)  $ 255,525,116 
</TABLE>

          5.   SECURED DEBT

          Conventional Mortgage Debt

               Conventional mortgages payable are comprised of ten and
          seven loans at March 31, 1999 and December 31, 1998,
          respectively, each of which is collateralized by the associated
          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
          April, 2009.  The balance of the conventional mortgages was $82.5
          million and $52.2 million at March 31, 1999 and December 31,
          1998, respectively.

               On March 31, 1999, the Company received proceeds of $30.5
          million from individual nonrecourse mortgage loans 
          collateralized by three properties owned by qualified REIT
          subsidiaries, having a net book value of $40.8 million.  The
          proceeds from these loans was used to pay down the Company s
          floating rate unsecured line of credit facility.  The weighted 
          average maturity of the loans is 10 years, and the weighted average 
          interest rate is 7.375%.

          Federally Insured Mortgage Debt

               Federally insured mortgage debt which encumbered seven of
          the properties at March 31, 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 $27.7 million
          and $27.9 million at March 31, 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.

<PAGE>10
          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 March 31, 1999 and
          December 31, 1998.

          Medium-Term Notes Program

               The Company had 11 Medium-Term Notes (the "MTN's")
          outstanding having an aggregate balance of $112.5 million at
          March 31, 1999 and December 31, 1998, respectively.  The
          principal amounts of these MTN's range from $2.5 million to $20
          million and bear interest from 6.18% to 7.93% over terms ranging
          from two to 30 years, with a stated weighted average maturity of
          9.02 years at March 31, 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 would be 4.66 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 March 31,
          1999, there was $62.5 million of additional MTN borrowings
          available under the program.

               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 March 31, 1999.

          Line of Credit

               In June 1998, the Company completed a new unsecured $200
          million revolving credit facility (the "Line of Credit") which
          replaced a $100 million unsecured revolving credit facility. 
          During the third quarter of 1998, the Line of Credit was
          increased from $200 million to $250 million.  The new agreement
          provided for an extension of the term for an additional year
          through June 2001 with the Company having the option to extend
          the term through June 2002.  The Line of Credit included certain
          restrictive covenants which, among others, required the Company
          to (i) maintain a minimum level of net worth, (ii) limit
          dividends to less than 95% and 90% of Distributable Cash Flow, as
          defined in the agreement, for 1999 and 2000, respectively, and
          (iii) maintain certain debt coverage ratios.  The Company's
          borrowings under this Line of Credit bore interest at variable
          rates 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, payable annually in
          advance on each anniversary date.  The Line of Credit was used to
          finance the acquisition of properties, to provide working capital
          and for general corporate purposes.  At March 31, 1999 and
          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 6.59% and 7.04% at March
          31, 1999 and December 31, 1998, respectively.  As discussed in
          Note 14, in May 1999, the Company has repaid all outstanding
          obligations under this Line of Credit and has terminated the
          facility.  Additionally, the Company was not required to and did not 
          determine compliance with the financial covenants for the unsecured
          facility for the first quarter.

               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.

<PAGE>11
          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:
<TABLE>
<CAPTION>

                                                         March 31,      
                                                      1999       1998   

   <S>                                             <C>        <C>
   Property management fee and other
    miscellaneous service revenues
                              - affiliates         $495,132   $ 583,931 
                              - joint ventures      223,366     226,945 
   Painting service revenues
                              - affiliates           75,862      99,912 
                              - joint ventures       27,742      93,901 
   Expenses incurred on behalf                           (1)
     of and reimbursed by      
                              - affiliates          716,068   1,144,958 
                              - joint ventures    1,018,981     641,641 
   Interest income            - affiliates           74,868     167,984 
   Interest expense           - affiliates          (49,398)   (129,379)
                              - joint ventures       (5,744)    (11,810)
   (1)  Primarily payroll and employee benefits, reimbursed at cost.
</TABLE>

               Property management fees and other miscellaneous receivables
          due from affiliates and joint venture properties aggregated
          $5,723,689 and $6,677,611 at March 31, 1999 and December 31,
          1998, respectively.  There were no payables due to affiliates and
          joint venture properties at March 31, 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 $895,050 and $1,211,818 at March 31, 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 March 31, 1999 and 1998.  The
          Company held funds for the benefit of affiliates and joint
          ventures in the aggregate amount of $2,311,368 and $1,857,620  at
          March 31, 1999, respectively, and $3,174,898 and $2,178,496 at
          December 31, 1998, respectively.  

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

<PAGE>12
               On March 11, 1999, the Company, the Corporation, certain
          shareholders of the Corporation and others entered into a
          settlement agreement which resolved all disputes concerning the
          aforementioned expenditures and other issues concerning the
          management by the Company or one of its Service Companies of
          various properties owned by entities in which the Corporation was
          a general partner.  Pursuant to that settlement agreement, the
          Corporation and other affiliates funded all outstanding advances
          made by the Company.  At December 31, 1998, amounts outstanding
          which were subsequently funded in the first quarter of 1999
          pursuant to the settlement agreement were $4.7 million.

          Notes Receivable

               At March 31, 1999, two notes of equal amounts were
          receivable from the Company's Chief Executive Officer aggregating
          $3,342,000 (included in "Accounts and notes receivables-
          affiliates and joint ventures"). The notes were entered into on
          May 23, 1997 and bear interest, payable quarterly at the 30-day
          LIBOR plus the LIBOR margin on the Company's Line of Credit, with
          principal due May 1, 2002.  The 30-day LIBOR averaged 5.01% for
          the period ending March 31, 1999.  One of the notes is
          collateralized by 150,000 of the Company's common shares; the
          other note is unsecured.  The Company recognized interest income
          of $54,320 for the period ending March 31, 1999 relating to these
          notes.

          8.   RAINBOW TERRACE APARTMENTS

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

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

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

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

               Since June 1998, the Company has been 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.

<PAGE>13
               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 March 31, 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
          conditional 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 March 31, 1999 and December 31, 1998,
          the Company had receivables of $1,784,467 related to the 1995 and
          1998 retroactive rental increase requests.  At March 31, 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.  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.

          9.   PREFERRED AND COMMON SHARES

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

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

               On December 17, 1996, the Company completed an offering of
          1,450,000 common shares at $22.375 per share.  The net proceeds
          of approximately $30.7 million were applied to reduce debt.

<PAGE>14
          Treasury Shares
               On June 29, 1998, the Company's Board of Directors
          authorized management to purchase, from time to time, up to
          1,000,000 common shares at market prices.  The timing of stock
          purchases are made at the discretion of management.  During the
          third quarter of 1998, 25,000 shares were repurchased at an
          aggregate cost of $466,523 which was funded primarily from
          operating cash flows.

          Preferred Shares
               At March 31, 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
          noncumulative preferred shares issued or outstanding at March 31,
          1999 or December 31, 1998.

          Shareholder Rights Plan

               During January 1999, the Company adopted a Shareholder
          Rights Plan in order to protect the interests of the Company and
          its shareholders if any hostile takeover activity should occur.  

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

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

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

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

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

<PAGE>15
<TABLE>
<CAPTION>
                                                                     For the three months
                                                                        ended March 31,
                                                                      1999          1998    
   <S>                                                             <C>          <C>
   Basic Earnings Per Share:
    Income before cumulative effect of a change in accounting
        principle                                                  $ 1,869,878  $ 4,524,746 
    Less:  Preferred share dividends                                 1,371,105    1,371,105 
                                                                   -----------  -----------
    Income before cumulative effect of a change in accounting
        principle applicable to common shares                          498,773    3,153,641 
    Plus:  Cumulative effect of a change in accounting principle     4,319,162            - 
                                                                   -----------  -----------
    Income applicable to common shares                             $ 4,817,935  $ 3,153,641 
                                                                   ===========  ===========
   Diluted Earnings Per Share:
    Income before cumulative effect of a change in accounting
        principle                                                  $ 1,869,878  $  4,524,746
    Less:  Preferred share dividends                                 1,371,105     1,371,105
    Amortization expense relating to contingent merger
        consideration                                                   30,763             -
    Income before cumulative effect of a change in accounting     ------------  ------------
        principle applicable to common shares                          468,010     3,153,641
    Plus:  Cumulative effect of a change in accounting principle     4,319,162             -
                                                                   -----------  ------------
    Income applicable to common share                              $ 4,787,172  $  3,153,641

   Number of Shares:
        Basic-average shares outstanding                            22,665,998    17,071,950
        Dilutive shares                                                      -         1,203
                                                                    ----------    ----------
        Diluted-average shares outstanding                          22,665,998    17,073,153
   Per Share Amount - Income before cumulative effect of a          ==========    ==========
    change in accounting principle:
        Basic                                                       $      .02  $        .18
                                                                    ==========  ============
        Diluted                                                     $      .02  $        .18
                                                                    ==========  ============
   Per Share Amount - Net Income
        Basic                                                       $      .21  $        .18
                                                                    ==========  ============
        Diluted                                                     $      .21  $        .18
                                                                    ==========  ============
   Pro forma amounts assuming the new capitalization
     policy is applied retroactively:
   Net income                                                      $ 1,869,878  $  4,659,048
   Income applicable to common shares                              $   498,773  $  3,287,943
     Per Share Amount - Net income:
        Basic                                                      $       .08  $        .27
        Diluted                                                    $       .08  $        .27
    Per Share Amount - Income applicable to common shares:
        Basic                                                      $       .02  $        .19
        Diluted                                                    $       .02  $        .19 

</TABLE>

               Options to purchase 1,515,009 and 908,009 shares of common
          stock were outstanding at March 31, 1999 and 1998, respectively,
          a portion of which has been reflected above using the treasury
          stock method.

<PAGE>16
          11.  INTERIM SEGMENT REPORTING

               In 1998, the Company adopted SFAS No. 131, Disclosures about
          Segments of an Enterprise and Related Information.  The Company
          has three reportable segments: (1) Market-rate multifamily
          properties, (2) Government-Assisted multifamily properties, and
          (3) Management and Service Operations.  The Company has
          identified these segments because the discrete information is the
          basis upon which management makes decisions regarding resource
          allocation and performance assessment.  The Market-rate
          multifamily properties are conventional multifamily residential
          apartments (the operations are not subject to regulation by HUD). 
          The Government-Assisted properties are multifamily properties for
          which the rents are subsidized and certain aspects of the
          operations are regulated by HUD pursuant to Section 8 of the
          National Housing Act of 1937.  The Management and Service
          Operations provide management and advisory services to the
          Market-rate and Government-Assisted properties which are owned by
          the Company, as well as to clients and properties that are not
          owned, but managed.  All of the Company's properties and
          Management and Service Operations are located in the United
          States.

               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.

               All of the Company's general and administrative costs which
          were $3,870,946 and $1,833,612 for the periods ended March 31,
          1999 and 1998, respectively, are included in the Management and
          Service Operations tier as the Company considers these costs
          directly attributable to the management business, regardless of
          whether these costs relate to the management of non-owned or
          owned properties.

               Information on the Company's segments for the three months
          ended March 31, 1999 and 1998 is as follows:

<TABLE>
<CAPTION>
                                              For the three months ended March 31, 1999
                                                                    Management         
                                                       Government- and Service      Total
                                         Market-Rate     Assisted   Operations   Consolidated

   <S>                                  <C>            <C>         <C>          <C>
   Total segment revenues               $ 33,185,641   $2,447,210  $6,060,531   $ 41,693,382 
   Elimination of intersegment revenues      (47,780)           -  (3,629,551)    (3,677,331)
   Consolidated revenues                $ 33,137,861   $2,447,210  $2,430,980   $ 38,016,051 
   Equity in net income of joint
     ventures                           $    (27,929)  $    3,664  $   (2,472)  $    (26,737)

   *EBITDA-including the proportionate
     share of joint ventures            $ 19,540,390   $ 1,507,281  $(1,903,525) $ 19,144,146

   Total assets                         $827,836,921   $17,739,801  $14,043,905  $859,620,627 
   Capital expenditures, gross          $  9,566,952   $   364,113  $   214,506  $ 10,145,571

</TABLE>
<PAGE>17

<TABLE>
<CAPTION>
                                                For the three months ended March 31, 1998       
                                                                       Management          
                                                          Government- and Service       Total
                                          Market-Rate      Assisted    Operations    Consolidated

   <S>                                   <C>             <C>          <C>           <C>
   Total segment revenues                $  25,825,591   $ 3,392,421  $ 4,439,661   $ 33,657,673 
   Elimination of intersegment revenues        (47,500)            -   (2,901,368)    (2,948,868)
   Consolidated revenues                 $  25,778,091   $ 3,392,421  $ 1,538,293   $ 30,708,805 
   Equity in net income of joint
     ventures                            $      29,778   $     6,438  $         -   $     36,216 

   *EBITDA-including the proportionate
     share of joint ventures             $   15,683,205  $ 1,725,973  $  (780,247)  $ 16,628,931 

   Total assets                          $ 586,685,265   $16,671,412  $24,230,343   $627,587,020 
   Capital expenditures, gross           $  82,895,909   $   203,431  $   359,946   $ 83,458,286


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

               A reconciliation of total segment EBITDA to total
          consolidated net income for the three months ended March 31, 1999
          and 1998 is as follows:

<TABLE>
<CAPTION>


                                                        1999          1998    

   <S>                                              <C>           <C>
   Total EBITDA for reportable segments             $19,144,146   $16,628,931 
   EBITDA-proportionate share of joint ventures        (635,929)     (588,390)
   Equity in net (loss) income of joint ventures        (26,737)       36,216 
   Depreciation and amortization                     (8,276,048)   (5,314,595)
   Interest expense                                  (8,250,732)   (6,431,667)
   Interest income                                      185,988       212,615 
   Income taxes                                        (270,810)      (18,364)
   Cumulative effect of a change in accounting
     principle                                        4,319,162             - 
   Consolidated net income                          $ 6,189,040   $ 4,524,746

</TABLE>



          12.  CHANGE IN ACCOUNTING PRINCIPLE

               Effective January 1, 1999, the Company changed its method of
          accounting to capitalize expenditures for certain replacements
          and improvements, such as new HVAC equipment, appliances,
          flooring, carpeting and kitchen/bath renovations.  Previously,
          these costs were charged to operations as incurred.  Ordinary
          repairs and maintenance, such as suite cleaning and painting, and
          appliance repairs are expensed.  The Company believes the change
          in the capitalization method provides an improved measure of the
          Company s capital investment, provides a better matching of
          expenses with the related benefit of such expenditures, including
          associated revenues, and is in the opinion of management,
          consistent with industry practice.  The cumulative effect of this
          change in accounting principle increased net income for the three
          months ended March 31, 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 $940,794 or $.04 per share (basic and diluted) for
          the three months ended March 31, 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 three months ended
          March 31, 1998 of which increased net income by $134,302 or $.01
          per share (basic and diluted).

<PAGE>18
          13.  PRO FORMA CONDENSED FINANCIAL INFORMATION (UNAUDITED)

               The following unaudited supplemental pro forma operating
          data for 1998 is presented to reflect, as of January 1, 1998, the
          effects of: (i)  the 12 property acquisitions completed in 1998,
          (ii) the merger of MIGRA in 1998, (iii)  the sale of a property
          in 1998, and (iv) the exclusion of Rainbow Terrace Apartments
          operating results.  There were no pro forma adjustments for 1999.

<TABLE>
<CAPTION>

                                                          For the three months
                                                              ended March 31,
                                                              1999       1998  
   (In thousands, except per share amounts)

   <S>                                                     <C>         <C>
   Revenues                                                $    38,016 $  35,514
   *Net income                                                   1,870     3,622
   *Income applicable to common shares (Basic and Diluted)         499     2,251
    Earnings per common shares (Basic and Diluted)         $       .02 $     .10
     Weighted average number of common shares outstanding:
        common shares outstanding (Basic and Diluted)           22,666    22,666

   *Before cumulative effect
</TABLE>

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

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

          14.  SUBSEQUENT EVENTS

          Treasury Shares

               Subsequent to March 31, 1999, the Company repurchased 89,000
          common shares at an aggregate cost of $957,378 which was funded
          primarily from operating cash flows.

          Dividends Declared

               On March 30, 1999, the Company declared a dividend of $0.375
          per common share for the quarter ending March 31, 1999, which was
          paid on May 1, 1999 to shareholders of record on April 15, 1999.

          Management Contract

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

          Secured Financing

               On May 10, 1999, the Company collateralized individual
          mortgages on 20 properties for $239 million in project specific,
          non-recourse loans from The Chase Manhattan Bank.  The loans have
          maturities ranging from 8 to 12 years and fixed interest rates of
          198 basis points over comparable treasuries.  The weighted
          average maturity of the loans is 10-1/4 years, and the weighted
          average interest rate is 7.52%.

<PAGE>19
               The proceeds from the loans were used to pay off the
          Company's floating rate unsecured line of credit facility, which
          had an outstanding balance of $228 million at the time of the
          secured debt financing closing, and to provide additional working
          capital.  In the quarter ending June 30, 1999, the Company will 
          incur an extraordinary charge of approximately $1,726,139 which 
          represents a $750,000 facility fee charge and a $976,139 write off 
          of deferred finance costs related to the termination of the unsecured 
          line of credit facility.

<PAGE>20

                        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 systems.  MIG recognizes revenue
          primarily from its client's real estate acquisitions and
          dispositions, loan origination and consultation, debt servicing,
          asset and property management and construction lending
          activities.  MIG earns the majority of its debt servicing fee
          revenue from two of its pension fund clients.  MIG's asset
          management, property management, investment advisory and mortgage
          servicing operations, including those of the prior MIG
          affiliates, are collectively referred to herein as the "MIGRA
          Operations".

               At March 31, 1999, the Company owned directly or indirectly,
          or was a joint venture partner in 101 multifamily properties
          containing 21,558 units.  Of these properties, 75 were located in
          Ohio, 11 in Michigan, two in Florida, two in Georgia, three in
          Maryland, one in North Carolina, one in Texas, one in Arizona,
          three in Indiana, one in California and one in Pennsylvania. 
          Additionally, the Company managed 57 non-owned properties, 50 of
          which were multifamily properties consisting of 12,426 units (16
          of which are owned by various institutional investors consisting
          of 5,749 units) and seven of which were commercial properties
          containing an aggregate of approximately 782,000 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
<PAGE>21
          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 its net cash provided by operations will be
          sufficient to meet both operating requirements and the payment of
          dividends in accordance with REIT requirements.  During 1999 and
          2000, approximately $21 million and $107 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:
               On March 31, 1999, the Company received proceeds of $30.5
          million in individual nonrecourse mortgage loans which are
          collateralized by three properties owned by qualified REIT
          subsidiaries, having a net book value of $40.8 million.  Most of
          the proceeds from these loans were used to pay down the Company's
          floating rate unsecured line of credit facility.  Subsequently,
          on May 10, 1999, the Company received proceeds of $238.5 million
          in 20 nonrecourse mortgage loans collateralized by individual
          mortgages on 20 properties.  There are no cross-default or cross-
          collateralization provisions in the mortgages.  The proceeds from
          these loans were used to pay off the Company's floating rate
          unsecured line of credit facility.  After repayment of the
          unsecured line of credit facility, the Company's total floating
          rate debt outstanding was reduced to less than $17.0 million,
          while completely eliminating all outstanding borrowings under the
          Company's unsecured floating rate debt.  These nonrecourse
          financings have the effect of increasing the Company's weighted
          average debt maturity from approximately 3.1 years to
          approximately 7.5 years.

               In June 1998, the Company completed a new unsecured $200
          million revolving credit facility (the "Line of Credit") which
          replaced a $100 million unsecured revolving credit facility. 
          During the third quarter of 1998, the Line of Credit was
          increased from $200 million to $250 million.  The new agreement
          provided for an extension of the term for an additional year
          through June 2001 with the Company having the option to extend
          the term through June 2002.  The Line of Credit includes certain
          restrictive covenants which, among others, required the Company
          to (i) maintain a minimum level of net worth, (ii) limit
          dividends to less than 95% and 90% of Distributable Cash Flow, as
          defined in the agreement, for 1999 and 2000, respectively, and
          (iii) maintain certain debt coverage ratios.  The Company's
          borrowings under this Line of Credit bore interest at variable
          rates 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.  Based on
          the revised credit ratings the Company received from Moody's and
          Standard and Poor's on March 16, 1999, the spread increased 85
          basis points to 225 basis points.  The Company believes that this
          could have an adverse impact of up to $.05 on earnings per share
          in 1999.  An annual commitment fee of 15 basis points on the
          maximum commitment, as defined in the agreement, payable annually
          in advance on each anniversary date.  During 1998, the Company
          recognized a non-cash extraordinary charge of approximately
          $0.125 million ($0.0063 per share), relating to the write-off of
          unamortized deferred finance costs associated with the former
          revolving credit facility.  The Line of Credit is used to finance
          the acquisition of properties, to provide working capital and for
          general corporate purposes.  At March 31, 1999, $226.0 million
          was outstanding under this facility.  As a result of the May 10,
          1999, $238.5 million mortgage refinancing, which repaid the Line of 
          Credit in full, the Company was not required to, and did not, 
          determine compliance with the financial covenants for the unsecured 
          facility for the first quarter.  In the quarter ending June 30,
          1999, the Company will incur an extraordinary charge of approximately 
          $1,726,139 which represents a $750,000 facility fee charge and a 
          $976,139 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

<PAGE>22
          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
          MIGRA Line of Credit Facility of $446,565 and terminated this 
          facility. 

               Seventy-nine of the Company's 94 wholly owned properties
          were unencumbered at March  31, 1999 with annualized EBITDA of
          approximately $64.2 million and a historical cost basis of
          approximately $671.0 million.  The remaining fifteen of the
          Company's wholly owned properties, have an historical cost basis
          of $203.3 million and secured property specific debt of $110.2
          million at March 31, 1999.  Unsecured debt, which totaled $423.4
          million at March 31, 1999, consisted of $112.5 million in Medium-
          Term Notes, Senior Notes of $84.9 million, and amounts drawn on
          the Company's Line of Credit of $226.0 million.  The Company's
          proportionate share of the mortgage debt relating to the seven
          joint venture properties was $17.5 million at March 31, 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 March 31, 1999.

               After considering the effects of the May 10, 1999 $238.5 
          million mortgage refinancing, 59 of the Company's 94 wholly owned 
          properties remain unencumbered with annualized EBITDA of 
          approximately $36.7  million and a historical cost basis of 
          approximately $357.6 million.  The remaining 35 of the Company's 
          wholly owned properties have an historical cost basis of $516.7 
          million.

               The Company had 11 Medium-Term Notes (the "MTN's")
          outstanding having an aggregate balance of $112.5 million at
          March 31, 1999 and December 31, 1998, respectively.  The
          principal amounts of these MTN's range from $2.5 million to $20
          million and bear interest from 6.18% to 7.93% over terms ranging
          from two to 30 years, with a stated weighted average maturity of 
          9.02 years at March 31, 1999.  The holders of two MTN's with
          stated terms of 30 years each have a right to repayment of five
          and seven years from the issue date of the respective MTN.  If
          these holders exercised their right to prepayment, the weighted
          average maturity would be 4.66 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 March 31,
          1999, there are $62.5 million of additional MTN borrowings
          available under the program. However, due to the downgrade of the
          Company's credit rating to a non-investment grade rating in March
          1999, the Company does not anticipate near to intermediate
          issuance of additional MTN's or similar unsecured debt
          instruments.

          Registration statements:
               The Company has a shelf registration statement on file with
          the Securities and Exchange Commission relating to the proposed
          offering of up to $368.8 million of debt securities, preferred

<PAGE>23
          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 downgrade of
          the Company's public debt and preferred stock in March 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.  These OP units may, under certain
          circumstances, become exchangeable into common shares of the
          Company on a one-for-one basis.  The Class A unitholders are
          entitled to receive distributions per OP unit equal to the per
          share distributions on the Company's common shares.  At March 31,
          1999, the Company  charged $32,159 to minority interest in
          operating partnership in the Consolidated Statements of Income
          relating to the Class A unitholders  allocated share of net
          income.  At March 31, 1999, the Class B, Class C, Class D and
          Class E unitholders were not entitled to receive an allocation of
          net income and did not receive any cash distributions from the
          operating partnership.

          Merger Contingent Consideration Payable:
               Subject to certain conditions and adjustments, the MIGRA
          Stockholders' Conversion Rights entitle the MIGRA Stockholders to
          receive (a) on the second issuance date (June 30, 1999),
          approximately 70,737 common shares, based on the average closing
          price of the common shares of $12.34 for the 20 trading days
          immediately preceding December 31, 1998, the date the contingent
          consideration was met, or $872,934 and (b) on the third issuance
          date (June 30, 2000) $3,011,329 of common shares of the Company
          based on the average closing price of the common shares for the
          20 trading days immediately preceding the date the consideration
          was met.  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.  The contingencies
          precedent to the third payment have not been met as of March 31,
          1999.

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

               For the three month period ended March 31, 1999, the Company
          completed the construction and leasing of 48 units at one of the
          Company's development properties.

<PAGE>24
               The Company is in the process of constructing or planning
          the construction of an additional 1,975 units owned by the
          Company as follows:

<TABLE>
<CAPTION>

                                                    Additional   Anticipated
           Property                 Location           Units      Completion  

   <S>                      <C>                     <C>         <C>
   Arbor Landings Apts. II  Ann Arbor, Michigan         160     2nd Qtr. 1999
   Aspen Lakes II           Grand Rapids, Michigan      118          TBD
   Boggs Road               Atlanta, Georgia            535          TBD
   The Landings at the
     Preserve(a)            Battle Creek, Michigan       90          TBD
   Village at Avon          Avon, Ohio                  312     4th Qtr. 2000
   Windsor at Kirkman
     Apartments             Orlando, Florida            460     3rd Qtr. 1999
   Westlake                 Westlake, Ohio              300          TBD
                                                      1,975

          (a) A clubhouse will also be added to The Landings at the
          Preserve.
          TBD - To be determined.
</TABLE>


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

               Additionally, the Company has obtained contracts or verbal
          offers to sell six Market-rate properties, which the Company has
          disclosed as Properties held for sale on the Consolidated Balance
          Sheet, as follows:

<TABLE>
<CAPTION>
                      Property              Location          Units 

                  <S>               <C>                       <C>
                  Desert Oasis      Palm Desert, California     320
                  Cultural Gardens  Euclid, Ohio                186
                  Colonade West     Cleveland, Ohio             216
                  Memphis West      Cleveland, Ohio             120
                  Villa Moderne     North Olmsted, Ohio         135
                  West Park Plaza   Cleveland, Ohio             118
                                                              1,095
</TABLE>

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

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

          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 first quarter of 1999 of
          approximately $74,000.  Moreover, pursuant to the terms of the
          HUD Settlement Agreement discussed in Note 8 of the notes to the
          financial statements, in the second quarter of 1999, 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 three months ended March 31, 1999 were $7,426.

<PAGE>25
               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 6,
          the Company has agreed to end its management of certain
          commercial properties owned by certain affiliated persons upon 60
          days prior written notice from the respective owners of those
          properties.  Such notice has not been received.  The management
          fees generated from those commercial properties for the first
          quarter ended March 31, 1999 was $28,036.

               The Company will also lose 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 first quarter ended
          March 31, 1999 was $20,728.

               In addition, if the Company proceeds with the proposed sale
          of its interests in the joint venture properties, the Company
          would no longer receive the management fees attributable to those
          properties and one other property.  The management fees generated
          for these properties for the first quarter ended March 31, 1999
          was $216,978.  Certain third party owners of properties
          currently managed by the Company have entered into contracts to
          sell those properties, subject to certain contingencies.  If all
          those third party owned properties were sold, the Company would
          similarly no longer receive the management fees generated from
          those properties.  The management fees generated for these
          properties for the first quarter ended March 31, 1999 was
          $87,874.  The impact of the loss of these management fee
          revenues would be partially offset by a reduction in operating
          expenses.

          Dividends:
               On March 30, 1999, the Company declared a dividend of $0.375
          per common share for the quarter ending March  31, 1999, which
          was paid on May 1, 1999 to shareholders of record on April 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
          February 16, 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 March 15,
          1999 to shareholders of record on March 1, 1999.

          Cash flow sources and applications:
               Net cash provided by operating activities decreased
          $1,351,948 from $13,459,746 to $12,107,798 for the quarter ended
          March 31, 1999 when compared with the quarter ended March 31,
          1998. This decrease was the result of decreases in accounts
          and notes receivable of affiliates and joint ventures, and increases 
          in depreciation and amortization, and decreases in accounts
          payable and accrued expenses, other operating assets and 
          liabilities and funds held for non-owned managed properties of 
          affiliates and joint ventures.

               Net cash flows used for investing activities of $10,271,476
          for the quarter ended March 31, 1999 were primarily used for the
          acquisition and development of multifamily real estate properties
          and undeveloped land parcels.

               Net cash flows provided by financing activities of
          $17,330,633 for the quarter ended March 31, 1999 were primarily 
          comprised of proceeds received from the mortgages on three
          properties.  Funds were also used to pay dividends on the
          Company's common and Perpetual Preferred Shares as well as
          repayments on the Line of Credit.

               During 1999 and 2000, approximately $113 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.
<PAGE>26

          RESULTS OF OPERATIONS
          Comparison of the quarter ended March 31, 1999 to the quarter
          ended March 31, 1998

               In the following discussion of the comparison of the quarter
          ended March 31, 1999 to the quarter ended March 31, 1998, Market-
          rate Properties refers to the Core and Acquired Property
          portfolios.  Core Properties represents the 34 wholly owned
          multifamily properties acquired by the Company at the time of the
          IPO and the 41 properties acquired in separate transactions or
          developed by the Company during 1994 through 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 Properties refers to the 17 properties acquired
          between January 1, 1998 and December 31, 1998 as well as the
          newly constructed properties.

               Overall, total revenue increased $7,307,200 or 23.8% and
          total expenses increased $9,867,000 or 37.6% for the quarter. 
          Net income applicable to common shares after deduction for the
          dividends on the Company's Perpetual Preferred Shares increased
          $1,664,300 or 52.8%.

               During the quarter ended March 31, 1999, the Market-rate
          Properties generated total revenues of $34,223,400 and property
          operating and maintenance expenses of $14,391,800. Of these
          amounts, the Acquired and Core Properties contributed total
          revenues of $11,921,400 and $22,302,000, respectively, while
          incurring property operating and maintenance expenses of
          $4,681,100 and $9,710,700, respectively.  The Government-Assisted
          Properties generated total revenues of $2,447,200 while incurring
          property operating and maintenance expenses of $990,300 for the
          quarter ended March 31, 1999.

          Rental Revenues:
               Rental revenues increased $6,236,000 or 21.4% for the
          quarter.  Rental revenues from the Acquired Properties increased
          $7,193,759 for the quarter.  Occupancy and unit rents at the Core
          Properties and Government-Assisted Properties resulted in a
          $14,000 decrease and $946,900 or 28.1% decrease, respectively, in
          rental revenue from these properties.  The decrease in rental
          revenues for the Government-Assisted Properties is attributable
          to the removal of a particular property's operating results
          in the reported results of operations as a result of a Settlement 
          Agreement.  The balance of the increase resulted from increased 
          rental revenues attributable to office space and other miscellaneous 
          rental revenue items.

          Other Revenues:
               Other income increased $200,000 or 65.2% for the quarter. 
          The increase is  due primarily to supervisory fees and late
          charges earned in the current year.

               The Company recognized property and asset management fee
          revenues of $1,295,700 and $585,800, respectively, for the
          quarter ended March 31, 1999 as compared to $948,800 and $0,
          respectively, for the quarter ended March 31, 1998.  The increase
          in property and asset management fee revenues is primarily due to
          the  collection of these fees by MIGRA relating to their
          institutional investor clients.

          Property operating and maintenance expenses:
               Property operating and maintenance expenses increased
          $3,079,700 or 25.0% for the quarter.  Property operating and
          maintenance expenses at the Acquired Properties increased
          $3,330,500 for the quarter due primarily to the operating and
          maintenance expenses incurred at the 13 properties acquired in
          1998, and the newly constructed properties of Bradford at Easton,

<PAGE>27
          The Village of Western Reserve and The Residence at Barrington. 
          Property operating and maintenance expenses at the Core
          Properties increased $465,700, or 5.0% when compared to the three
          months ended March 31, 1998 primarily due to increases in
          personnel, building and grounds repair and maintenance, the one
          time effect of additional operating expenses and real estate 
          and local taxes.  Property operating and maintenance expenses 
          at the Government-Assisted Properties decreased $716,500 or 42.0% 
          for the quarter due primarily to the removal of a particular
          property's operating results as described above.

          Other expenses:
               Depreciation and amortization increased $2,961,500 or 55.7%
          for the quarter primarily due to the increased depreciation
          expense recognized on the Acquired 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.  The amortization expense related to the
          intangible assets is reflected as a charge to the Management and
          Service Operations.

               General and administrative expenses increased $2,037,300 or
          111.1% for the quarter.  This increase is primarily attributable
          to payroll and related expenses due to the expense of the MIGRA 
          advisory operations.  General and administrative expenses are
          costs related to the Management and Service Operations.

               Interest expense increased $1,819,100 or 28.3% for the
          quarter primarily due to the interest incurred with respect to
          the additional borrowings under the Line of Credit used for the
          1998 acquisitions as well as the construction of properties.

          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, appliances,
          flooring, carpeting and kitchen/bath renovations to the
          capitalization method.  Previously, these costs were charged to
          operations as incurred.  Ordinary repairs and maintenance, such
          as suite cleaning and painting, and appliance repairs are
          expensed.  The Company believes the change in the capitalization
          method provides an improved measure of the Company s capital
          investment, provides a better matching of expenses with the
          related benefit of such expenditures, including associated
          revenues, and is in the opinion of management, consistent with
          industry practice.  The cumulative effect of this change in
          accounting principle increased net income for the three months
          ended March 31, 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
          $1,250,637 or $.06 per share (basic and diluted) for the three
          months ended March 31, 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 three months ended March 31, 1998 of
          which increased net income by $134,302 or $.01 per share (basic
          and diluted).

          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.

          Equity in net income of joint ventures:
               The combined equity in net income of joint ventures
          decreased $63,000 or 173.8% for the quarter ended March 31, 1999. 
          The decrease is due primarily to increased depreciation and
          interest expense at the joint venture level.

               The following table presents the historical statements of
          operations of the Company's beneficial interest in the operations
          of the joint ventures for the quarters ended March 31, 1999 and
          1998.
<PAGE>28
<TABLE>
<CAPTION>

                                       For the three months ended
                                                 March 31,        
                                           1999           1998    

          <S>                          <C>            <C>
          Beneficial interests in
            joint venture operations
              Rental revenue           $  1,724,000   $ 1,725,500 
              Cost of operations          1,088,100     1,137,100 
                                            635,900       588,400 
              Interest income                 3,250           700 
              Interest expense             (514,900)     (436,800)
              Depreciation                 (138,800)     (105,500)
              Amortization                  (12,150)      (10,500)
              Net income               $    (26,700)  $    36,300
</TABLE>

          Outlook

               The long term goal for the Company is to reduce portfolio
          concentration in Ohio with dispositions within the state and
          acquisitions in other geographic regions.  Although current
          conditions, principally restricted access to capital, dictate a
          significant reduction in acquisitions for 1999, the Company's
          long term plan is to seek economic diversification through
          strategic acquisitions.

               It is expected that to meet the Company's long term
          strategic acquisition goal, individual acquisitions will be
          located in the select metro areas of Atlanta, Washington, D.C.,
          Orlando, south Florida and Tampa over the short term.  Management
          believes that these markets offer excellent diversification
          characteristics as well as operational efficiency.  In addition
          to these direct investment markets, the Company will 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.

               As mentioned, the Company's growth strategy includes co-
          investment with institutional investors.  Two programs have been
          created for the implementation of the strategy.  The first is a
          co-investment development program that consists of individual
          development partnerships allowing the Company and its
          institutional partners to seek the high yields associated with
          development.  The projects in this program will be built for long
          term hold or a forward contracted sale.  The second program is a
          multifamily pooled fund which is designed to offer a favorable
          risk-return relationship for the Company.  This fund will acquire
          assets at stabilization or through forward contracts.  Both
          programs will employ moderate project specific debt.  The
          expected equity division is 25% from the Company and 75% from all
          institutional investors.  These two programs 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 apartment
          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 will be a modest 2.5% over 1999.  General market
          expectations for locations where the Company has significant
          concentrations are as follows:  Columbus is split between a
          strengthening northern half and a flattening southern half, 

<PAGE>29

          Cleveland continues to exhibit stability, Michigan will continue
          to grow but at a slower rate, Indianapolis is improving from very
          competitive conditions, Washington, D.C., Atlanta, and Orlando
          are in equilibrium with significant additions to employment and
          apartment supply, and south Florida is tightening overall as
          significant development is being absorbed.

          Inflation
               Management's belief is that any effects of minor inflation
          fluctuations would be minimal on the operational performance of
          this portfolio primarily due to the high correlation between
          inflation and housing costs combined with the short term nature,
          typically one year, of the leases. 

<PAGE>30


          Quantitative and Qualitative Disclosures About Market
          Risk

               The Company's primary market risk exposure is
          interest rate risk.  At March 31, 1999, the Company had
          $244.3 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) hedge certain long term
          variable rate debt through the use of interest rate
          swaps or interest rate caps; and (iii) use treasury
          locks where appropriate to hedge rates on anticipated
          debt transactions.  Management uses various financial
          models and advisors to achieve those objectives.

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

<TABLE>
<CAPTION>


                                                 Expected Maturity Date 

            Long term debt             1999        2000         2001         2002    

   <S>                             <C>         <C>          <C>          <C> 
   Fixed:
    Fixed rate mortgage debt       $   916,454  $16,028,782   $12,487,095 $ 1,482,769
    Weighted average interest rate       7.93%        7.92%         7.76%       7.57%

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

    Senior notes                             -   74,931,803             -  10,000,000
    Weighted average interest rate           -        8.23%             -       7.10%
    Total fixed rate debt          $20,916,454  $90,960,585   $22,487,095 $26,482,769

   Variable:
    LIBOR based credit facility    $         -  $         -  $226,000,000 $         -
    Variable rate mortgage debt        250,397   16,308,538        68,146      75,283
    Total variable rate debt       $   250,397 $ 16,308,538  $226,068,146 $    75,283
                                                                                     
   Total long term debt            $21,166,851 $107,269,123  $248,555,241 $26,558,052

                                                                          
                                                                           Fair Market
            Long term debt             2003     Thereafter       Total        Value    
   Fixed:
    Fixed rate mortgage debt        $ 1,605,372 $ 59,426,297  $ 91,946,769 $ 95,035,334
    Weighted average interest rate        7.57%        7.75%         8.12%            -

    MTN's                            12,500,000   55,000,000   112,500,000  118,925,779
    Weighted average interest rate        7.12%        7.23%         6.95%            -

    Senior notes                              -            -    84,931,803   88,794,575
    Weighted average interest rate            -            -         8.23%            -
    Total fixed rate debt          $ 14,105,372 $114,426,297  $289,378,572 $302,755,688

   Variable:
    LIBOR based credit facility    $          -  $         -  $226,000,000 $226,000,000
    Variable rate mortgage debt          83,165    1,497,733    18,283,262   18,583,344
    Total variable rate debt       $     83,165  $ 1,497,733  $244,283,262 $244,583,344
                                                                                      
   Total long term debt            $ 14,188,537$ 115,924,030 $ 533,661,834$ 547,339,032

</TABLE>

               On May 10, 1999, the Company collateralized individual mortgages
          on 20 properties for $239 million in project specific, non-recourse
          loans from The Chase Manhattan Bank.  The loans have maturities
          ranging from 8 to 12 years and fixed interest rates of 198 basis 
          points over comparable treasuries.  The weighted average maturity of
          the loans is 10-1/4 years, and the weighted average interest rate is
          7.52%.

          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
          $314.2 million.  The sensitivity to changes in interest
          rates of the Company's fixed rate debt was determined
          with a valuation model based upon changes that measure
          the net present value of such obligation which arise
          from the hypothetical estimate as discussed above. 

<PAGE>31

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

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

               The Company's plan to resolve the Year 2000 issue involves
          the following four phases:  assessment, remediation, testing and
          implementation.  The Company has conducted an assessment and/or
          survey of its core IT and non-IT systems at both its corporate
          offices and properties and believes it is 85% complete on such
          assessment which is currently under review by the Company's
          technical staff.

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

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

               The Company believes it has identified all non-IT systems at
          all properties and expects to have 70% of its remediation and/or
          testing complete on these systems by June of 1999.  While a
          complete technical assessment of all such systems is not final,
          the Company does not anticipate expenditures in excess of
          $500,000 to remediate non-IT systems at the properties since
          findings to date suggest a low incidence of non-compliance on
          critical systems.  The Company may engage an outside technical
          consultant to work with its internal technical staff to assist in
          finalizing such assessment, remediation and testing.

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

<PAGE>32
               The Company believes it has an effective program in place
          that will resolve the Year 2000 issue in a timely manner.  In
          addition, the Company has commenced its contingency planning for
          critical operational areas that might be affected by the Year
          2000 issue if compliance by the Company is delayed.  The
          Company's contingency plans will involve training and increased
          awareness at the property management level, manual workarounds
          and adjustment of staffing strategies.  The Company intends to
          have its contingency planning complete in the third quarter of
          1999.

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

          CONTINGENCIES

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

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

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

<PAGE>33
               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.

               Since June 1998, the Company has been 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
          conditional 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 March 31, 1999, the Company had
          receivables of $1,784,467 related to the 1995 and 1998
          retroactive rental increase requests.  At March  31, 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. 
          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.

<PAGE>34

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

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

<PAGE>35
        
     The following tables present information concerning the Multifamily 
     Properties owned by Associated Estates Realty Corporation.

<TABLE>
<CAPTION>


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

   <S>                                  <C>          <C>         <C>           <C>     <C>      <C>
   MARKET RATE
   Acquired Properties
   Arizona
   20th & Campbell Apartments           06/30/98 Phoenix         Garden           204   1989          982

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

   Florida
   Cypress Shores                       02/03/98 Coconut Creek   Garden           300   1991          991
   Windsor Pines                        10/23/98 Pembroke Pines  Garden           368   1998        1,132
                                                                                  668               1,069
   Georgia
   The Falls                            02/03/98 Atlanta         Garden           520   1986          963
   Morgan Place Apartments              06/30/98 Atlanta         Garden           186   1989          679
                                                                                  706                 888
   Indiana
   Steeplechase at Shiloh Crossing Apts 08/11/98 Indianapolis    Garden           264   1998          929

   Maryland
   The Gardens at Annen Woods           06/30/98 Metro D.C.      Garden           132   1987        1,269
   Hampton Point Apartments             06/30/98 Metro D.C.      Garden           352   1986          817
   Reflections                          02/03/98 Metro D.C.      Garden           184   1985        1,020
                                                                                  668                 962
   Michigan
   Georgetown-Phase II                  02/01/99 Fenton          Garden           120   1998        1,269

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

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

   Toledo, Ohio
   Country Club Apartments              02/19/98 Toledo          Garden           316   1989          811
 
   Northeastern Ohio                                                                 
   Village at Western Reserve           08/01/98 Streetsboro     Ranch            108   1998          999

   Texas
   Fleetwood Apartments                 06/30/98 Houston         Garden           104   1993        1,019
                                                                                4,078
   Repositioned Properties
   Woodlands of North Royalton
     fka Somerset West (a)              IPO      North Royalton  Gdn/Tnhms        197   1982        1,038
   Williamsburg at Greenwood Village    02/18/94 Sagamore Hills  Townhomes        260   1990          938
                                                                                  457                 981
   CORE PORTFOLIO PROPERTIES
   Market rate
   Central Ohio
   Arrowhead Station                    02/28/95 Columbus        Townhomes        102   1987        1,344
   Bedford Commons                      12/30/94 Columbus        Townhomes        112   1987        1,157
   Bolton Estates                       07/27/94 Columbus        Garden           196   1992          687
   Colony Bay East                      02/21/95 Columbus        Garden           156   1994          903
   Heathermoor                          08/18/94 Worthington     Gdn/Tnhms        280   1989          829
   Kensington Grove                     07/17/95 Westerville     Gdn/Tnhms         76   1995        1,109
   Lake Forest                          07/28/94 Columbus        Garden           192   1994          788
   Muirwood Village at Bennell          03/07/94 Columbus        Ranch            164   1988          769
   Muirwood Village at London           03/03/94 London          Ranch            112   1989          769

     </TABLE>

 
     <TABLE>
     <CAPTION>
                                     For the three months ending         For the three months ending     
                                           March 31, 1999                      March 31, 1998           
                                  Average             Average Rent   Average               Average Rent
                                  Economic  Physical      Per        Economic   Physical        Per
     The Multifamily Properties  Occupancy Occupancy Suite  Sq. Ft. Occupancy  Occupancy  Suite  Sq. Ft.

   <S>                           <C>       <C>        <C>    <C>    <C>        <C>         <C>    <C>
   MARKET RATE 
   Acquired Properties
   Arizona
   20th & Campbell Apartments     94.1%      95.6%   $ 834  $ 0.85     N/A        N/A        N/A      N/A

   California
   Desert Oasis Apartments        95.4%      97.2%   $ 686   $ 0.78    N/A        N/A        N/A      N/A

   Florida
   Cypress Shores                 91.7%      93.7%   $ 862   $ 0.87    N/A        N/A        N/A      N/A
   Windsor Pines                  91.7       90.5    1,037     0.92    N/A        N/A        N/A      N/A
                                  91.7%      91.9%   $ 958   $ 0.90    N/A        N/A        N/A      N/A
   Georgia
   The Falls                      83.5%      92.5%   $ 723   $ 0.75    N/A        N/A        N/A      N/A
   Morgan Place Apartments        91.7       98.4      806     1.19    N/A        N/A        N/A      N/A
                                  85.9%      94.1%   $ 745   $ 0.84    N/A        N/A        N/A      N/A
   Indiana                           
   Steeplechase at Shiloh
     Crossing Apartments          72.2%      79.5%   $ 794   $ 0.85    N/A        N/A        N/A      N/A

   Maryland
   The Gardens at Annen Woods     91.5%      90.9%   $ 933   $ 0.74    N/A        N/A        N/A      N/A
   Hampton Point Apartments       94.7       97.4      805     0.99    N/A        N/A        N/A      N/A
   Reflections                    95.3       95.7      898     0.88    N/A        N/A        N/A      N/A
                                  94.2%      95.7%   $ 856   $ 0.89    N/A        N/A        N/A      N/A
   Michigan
   Georgetown-Phase II            95.9%      95.8%    $762   $ 0.60    N/A        N/A        N/A      N/A

   North Carolina
   Windsor Falls Apartments       80.9%      84.8%   $ 773   $ 0.79    N/A        N/A        N/A      N/A

   Central Ohio
   Bradford at Easton             93.2%      94.4%   $ 708   $ 0.70    N/A        N/A        N/A      N/A

   Toledo, Ohio
   Country Club Apartments        91.1%      92.1%   $ 641   $ 0.79    N/A        N/A        N/A     N/A 

   
   Northeastern Ohio
   Village at Western Reserve      90.1%     97.2%   $ 789   $ 0.79    N/A        N/A        N/A     N/A 

   Texas
   Fleetwood Apartments           91.1%      93.3%   $ 918   $ 0.90    N/A        N/A        N/A      N/A

   Repositioned Properties
   Woodlands of North Royalton
     fka Somerset West (a)        76.6%      91.9%   $ 717    $0.69     75.3%    80.2%     $ 699   $ 0.67
   Williamsburg at Greenwood
     Village                      87.4      100.0      876     0.93     83.8     90.8        865     0.92
                                  83.3%      96.5%   $ 807   $ 0.82     80.6%    86.2%    $ 794    $ 0.81
   CORE PORTFOLIO PROPERTIES
   Market rate
   Central Ohio
   Arrowhead Station              95.8%      97.1%   $ 734   $ 0.55     91.6%    95.1%     $ 706   $ 0.53
   Bedford Commons                92.8       90.2      794     0.69     93.7     98.2        785     0.68
   Bolton Estates                 84.1       83.7      477     0.69     93.9     99.5        466     0.68
   Colony Bay East                90.7       89.7      532     0.59     92.8     98.7        521     0.58
   Heathermoor                    95.6       95.4      561     0.68     95.3     96.4        552     0.67
   Kensington Grove               89.5       86.8      799     0.72     92.2     94.7        771     0.70
   Lake Forest                    92.6       93.2      556     0.71     89.9     93.8        545     0.69
   Muirwood Village at Bennell    84.8       86.0      519     0.68     96.1     97.6        510     0.66
   Muirwood Village at London     97.5       95.5      512     0.67     95.3     94.6        508     0.66
     </TABLE>

<PAGE>36

     <TABLE>
     <CAPTION>


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

   <S>                            <C>     <C>              <C>            <C>     <C>      <C>   <C>
   Muirwood Vllg. at Mt. Sterling 03/03/94 Mt. Sterling     Ranch            48    1990          769
   Muirwood Village at Zanesville 03/07/94 Zanesville       Ranch           196   1991-95        769
   Oak Bend Commons               05/30/97 Canal Winchester Garden/Tnhm     102    1997        1,110
   Pendleton Lakes East           08/25/94 Columbus         Garden          256   1990-93        899
   Perimeter Lakes                09/20/96 Dublin           Gdn/Tnhms       189    1992          999
   Residence at Christopher Wren  03/14/94 Gahanna          Gdn/Tnhms       264    1993        1,062
   Residence at Turnberry         03/16/94 Pickerington     Gdn/Tnhms       216    1991        1,182
   Saw Mill Village               04/22/97 Columbus         Garden          340    1987        1,161
   Sheffield at Sylvan            03/03/94 Circleville      Ranch           136    1989          791
   Sterling Park                  08/25/94 Grove City       Garden          128    1994          763
   The Residence at Newark        03/03/94 Newark           Ranch           112   1993-94        868
   The Residence at Washington    02/01/96 Wash. Ct. House  Ranch            72    1995          862
   Wyndemere                      09/21/94 Franklin         Ranch           128   1991-95        768
                                                                          3,577                  903
   Cincinnati, Ohio
   Remington Place Apartments     03/31/97 Cincinnati       Garden          234   1988-90        830

   Indianapolis, Indiana
   The Gables at White River      02/06/97 Indianapolis     Garden          228    1991          974
   Waterstone Apartments          08/29/97 Indianapolis     Garden          344    1997          984
                                                                            572                  980
   Northeastern Ohio
   Bay Club                       IPO      Willowick        Garden           96    1990          925
   Colonnade West                 IPO      Cleveland        Garden          216    1964          502
   Cultural Gardens               IPO      Euclid           Mid Rise        186    1966          688
   Edgewater Landing              04/20/94 Cleveland        High Rise       241    1988r         585
   Gates Mills III                IPO      Mayfield Hts.    High Rise       320    1978          874
   Holly Park                     IPO      Kent             Garden          192    1990          875
   Huntington Hills               IPO      Stow             Townhomes        85    1982          976
   Mallard's Crossing             02/16/95 Medina           Garden          192    1990          998
   Memphis Manor                  IPO      Cleveland        Garden          120    1966          554
   Park Place                     IPO      Parma Hts.       Mid Rise        164    1966          760
   Pinecrest                      IPO      Broadview Hts.   Garden           96   1987 r         598
   Portage Towers                 IPO      Cuyahoga Falls   High Rise       376    1973          869
   The Triangle (b)               IPO      Cleveland        High Rise       273    1989          616
   Timbers                        IPO      Broadview Hts.   Garden           96   1987-89        930
   Villa Moderne                  IPO      North Olmsted    Garden          135    1963          504
   Washington Manor               07/01/94 Elyria           Garden          120   1963-64        541
   West Park Plaza                IPO      Cleveland        Garden          118    1964          520
   Westchester Townhouses         IPO      Westlake         Townhomes       136    1989        1,000
   Westlake Townhomes             IPO      Westlake         Townhomes         7    1985        1,000
   Winchester Hills I (c)         IPO      Willoughby Hills High Rise       362    1972          822
   Winchester Hills II            IPO      Willoughby Hills High Rise       362    1979          822
                                                                          3,893                  759
   Michigan
   Arbor Landings Apartments      01/20/95 Ann Arbor        Garden          168    1990        1,116
   Aspen Lakes                    09/04/96 Grand Rapids     Garden          144    1981          789
   Central Park Place             12/29/94 Grand Rapids     Garden          216    1988          850
   Clinton Place                  08/25/97 Clinton Twp.     Garden          202    1988          954
   Country Place Apartments       06/19/95 Mt. Pleasant     Garden          144   1987-89        859
   Georgetown Park Apartments     12/28/94 Fenton           Garden          360   1987-96      1,005
   The Landings at the Preserve   09/21/95 Battle Creek     Garden          190   1990-91        952
   The Oaks and Woods at Hampton  08/08/95 Rochester Hills  Gdn/Tnhms       544   1986-88      1,050
   Spring Brook Apartments        06/20/96 Holland          Gdn/Tnhms       168   1986-88        818
   Spring Valley Apartments       10/31/97 Farmington Hills Garden          224    1987          893
   Summer Ridge Apartments        04/01/96 Kalamazoo        Garden          248   1989-91        960
                                                                          2,608                  955
   Toledo, Ohio
   Hawthorne Hills Apartments     05/14/97 Toledo           Garden           88    1973        1,145
   Kensington Village             09/14/95 Toledo           Gdn/Tnhms       506   1985-90      1,072
   Vantage Villa                  10/30/95 Toledo           Garden          150    1974          935
                                                                            744                1,053
   Pittsburgh, Pennsylvania
   Chestnut Ridge                 03/01/96 Pittsburgh       Garden          468    1986          769
      Core Market Rate                                                   12,096                  883
</TABLE>




     <TABLE>
     <CAPTION>
                                      For the three months ending         For the three months ending     
                                            March 31, 1999                      March 31, 1998           
                                   Average             Average Rent   Average               Average Rent
                                   Economic  Physical      Per        Economic  Physical         Per
     The Multifamily Properties   Occupancy Occupancy Suite Sq. Ft.  Occupancy Occupancy   Suite Sq. Ft.

   <S>                            <C>       <C>       <C>    <C>     <C>       <C>         <C>    <C>
   Muirwood Vllg. at Mt. Sterling  98.3%      97.9%   $ 487  $ 0.63      90.5%   95.8%      $ 498  $ 0.65
   Muirwood Village at Zanesville  88.8       92.9      533    0.69      91.5    98.0         522    0.68
   Oak Bend Commons                83.6       86.3      690    0.62      91.9    96.1         709    0.64
   Pendleton Lakes East            91.8       95.3      538    0.60      92.2   100.0         528    0.59
   Perimeter Lakes                 93.4       94.2      721    0.72      94.9    98.4         713    0.71
   Residence at Christopher Wren   85.0       90.2      729    0.69      94.6    93.2         746    0.70
   Residence at Turnberry          91.6       94.4      768    0.65      90.5    96.3         744    0.63
   Saw Mill Village                90.6       95.6      732    0.63      83.5    90.6         749    0.65
   Sheffield at Sylvan             98.3       99.3      519    0.66      98.4    97.1         507    0.64
   Sterling Park                   94.3       96.1      559    0.73      97.3   100.0         565    0.74
   The Residence at Newark         96.8       99.1      579    0.67      97.2   100.0         563    0.65
   The Residence at Washington     97.6       97.2      520    0.60      90.6    93.1         525    0.61
   Wyndemere                       95.0       96.9      559    0.73      96.4    97.7         539    0.70
                                   91.4%      93.2%   $ 616  $ 0.66      92.5%   96.4%      $ 610  $ 0.65
   Cincinnati, Ohio
   Remington Place Apartments      92.7%      97.4%   $ 664  $ 0.80      89.1%   95.3%      $ 642  $ 0.77

   Indianapolis, Indiana
   The Gables at White River       83.0%      90.4%   $ 745  $ 0.76      88.1%   93.4%      $ 717  $ 0.74
   Waterstone Apartments           83.2       92.4      798    0.81      92.2    96.2         794    0.81
                                   83.1%      91.6%   $ 777  $ 0.79      90.7%   95.1%      $ 763  $ 0.78
   Northeastern Ohio
   Bay Club                        94.2%      99.0%   $ 647  $ 0.70      99.2%  100.0%       $634   $0.69
   Colonnade West                  93.7       96.8      412    0.82      90.9    92.6         402    0.80
   Cultural Gardens                97.3       98.4      511    0.74      96.0    98.9         501    0.73
   Edgewater Landing               96.0       96.7      423    0.72      96.9    96.7         413    0.71
   Gates Mills III                 92.6       95.1      704    0.81      90.0    95.3         722    0.83
   Holly Park                      98.6      100.0      714    0.82      99.9   100.0         702    0.80
   Huntington Hills                93.3       98.8      670    0.69      98.2    95.3         663    0.68
   Mallard's Crossing              92.2       92.2      736    0.74      91.7    98.4         704    0.71
   Memphis Manor                   98.5       98.3      441    0.80      94.0    98.3         438    0.79
   Park Place                      97.0      100.0      519    0.68      89.7    96.3         541    0.71
   Pinecrest                       92.5       94.8      465    0.78      91.2    97.9         465    0.78
   Portage Towers                  93.2       96.0      585    0.67      95.4    96.0         580    0.67
   The Triangle (b)                97.8       98.5      939    1.52      97.6    98.2         934    1.52
   Timbers                         90.7       95.8      699    0.75      89.2    89.6         707    0.76
   Villa Moderne                   97.0       96.3      461    0.92      96.9    97.8         455    0.90
   Washington Manor                96.0       99.2      402    0.74      95.0    96.7         391    0.72
   West Park Plaza                 96.3       94.9      441    0.85      93.6    98.3         430    0.83
   Westchester Townhouses          93.7       95.6      785    0.79      93.5    93.4         779    0.78
   Westlake Townhomes              99.5      100.0      832    0.83      98.6   100.0         814    0.81
   Winchester Hills I (c)          90.4       95.9      568    0.69      88.5    93.1         577    0.70
   Winchester Hills II             90.7       95.9      590    0.72      85.9    92.8         617    0.75
                                   94.3%      96.7%   $ 598  $ 0.79      93.1%   96.0%      $ 598  $ 0.79
   Michigan
   Arbor Landings Apartments       95.0%      95.2%   $ 892  $ 0.80      97.8%   98.8%      $ 867  $ 0.78
   Aspen Lakes                     95.0       97.2      560    0.71      95.0    97.2         557    0.71
   Central Park Place              96.1       99.5      631    0.74      95.9    98.6         611    0.72
   Clinton Place                   94.9       97.5      707    0.74      93.5    95.0         699    0.73
   Country Place Apartments        93.0       98.6      570    0.66      95.4    96.5         544    0.63
   Georgetown Park Apartments      85.8       85.8      675    0.67      93.7    95.8         679    0.68
   The Landings at the Preserve    90.2       87.4      786    0.83      96.7    98.9         754    0.79
   The Oaks and Woods at Hampton   95.4       97.4      811    0.77      91.4    90.4         813    0.77
   Spring Brook Apartments         96.9       98.2      508    0.62     100.0    97.6         485    0.59
   Spring Valley Apartments        97.6       96.9      824    0.92      99.0    96.4         802    0.90
   Summer Ridge Apartments         90.1       93.1      696    0.73      93.6    94.0         693    0.72
                                   93.4%      94.8%   $ 716  $ 0.75      94.8%   95.4%      $ 706  $ 0.74
   Toledo, Ohio
   Hawthorne Hills Apartments      91.9%      98.9%   $ 582  $ 0.51      94.0%   95.4%      $ 548  $ 0.48
   Kensington Village              92.5       92.3      622    0.58      97.6    97.8         569    0.53
   Vantage Villa                   89.3       96.7      599    0.64      89.7    96.7         576    0.62
                                   91.8%      94.0%   $ 613  $ 0.58      95.6%   97.8%      $ 568  $ 0.54
   Pittsburgh, Pennsylvania
   Chestnut Ridge                  81.6%      82.9%   $ 767  $ 1.00      92.8%   91.5%      $ 740  $ 0.96 
      Core Market Rate             91.9%      94.3%   $ 646  $ 0.73      93.2%   95.9%      $ 637  $ 0.72

</TABLE>

<PAGE>37
 
     <TABLE>
     <CAPTION>


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

   <S>                        <C>          <C>         <C>            <C>    <C>      <C>
   GOVERNMENT ASST.-ELDERLY
   Ellet Development          IPO      Akron           High Rise        100   1978          589
   Hillwood I                 IPO      Akron           High Rise        100   1976          570
   Puritas Place (d)          IPO      Cleveland       High Rise        100   1981          518
   Riverview                  IPO      Massillon       High Rise         98   1979          553
   State Road Apartments      IPO      Cuyahoga Falls  Garden            72  1977 r         750
   Statesman II               IPO      Shaker Heights  Garden            47  1987 r         796
   Sutliff Apartments II      IPO      Cuyahoga Falls  High Rise        185   1979          577
   Tallmadge Acres            IPO      Tallmadge       Mid Rise         125   1981          641
   Twinsburg Apartments       IPO      Twinsburg       Garden           100   1979          554
   Village Towers             IPO      Jackson Twp.    High Rise        100   1979          557
   West High Apartments       IPO      Akron           Mid Rise          68  1981 r         702
                                                                      1,095                 602
   GOVERNMENT ASST.-FAMILY
   Jennings Commons           IPO      Cleveland       Garden            50   1981          823
   Rainbow Terrace            IPO      Cleveland       Garden           N/A  1982 r         N/A
   Shaker Park Gardens II     IPO      Warrensville    Garden           151   1964          753
                                                                        201                 770
                                                                      1,296                 628
   CONGREGATE CARE
   Gates Mills Club           IPO      Mayfield HeightsHigh Rise        120   1980          721
   The Oaks                   IPO      Westlake        Garden            50   1985          672
                                                                        170                 707
                                                                     13,562                 857
   Joint Venture Properties
   Northeastern Ohio
   Market rate
   Americana                  IPO      Euclid          High Rise        738   1968          803
   College Towers             IPO      Kent            Mid Rise         380   1969          662
   Euclid House               IPO      Euclid          Mid Rise         126   1969          654
   Gates Mills Towers         IPO      Mayfield Hts.   High Rise        760   1969          856
   Highland House             IPO      Painesville     Garden            36   1964          539
   Watergate                  IPO      Euclid          High Rise        949   1971          831
                                                                      2,989                 789
   Government Asst.-Family
   Lakeshore Village          IPO      Cleveland       Garden           108   1982          786
                                                                      3,097                 789
 
        Core                                                         16,659                 851
        Portfolio average                                            21,194                 878
     </TABLE>


     <TABLE>
     <CAPTION>
                                   For the three months ending        For the three months ending    
                                         March 31, 1999                      March 31, 1998           
                                Average             Average Rent   Average               Average Rent
                                Economic Physical       Per        Economic  Physical         Per
    The Multifamily Properties Occupancy Occupancy  Suite Sq. Ft.  Occupancy Occupancy   Suite Sq. Ft.

   <S>                         <C>       <C>       <C>    <C>      <C>       <C>         <C>   <C>
   GOVERNMENT ASST.-ELDERLY
   Ellet Development           100.0%    100.0%    $ 588   $1.00     100.0%  100.0%      $ 587   $1.00
   Hillwood I                  100.0     100.0       601    1.05      99.3   100.0         598    1.05
   Puritas Place (d)           100.0     100.0       774    1.50      99.9   100.0         782    1.51
   Riverview                    99.1      99.0       597    1.08     100.0   100.0         591    1.07
   State Road Apartments        98.3     100.0       598    0.80     100.0   100.0         597    0.80
   Statesman II                 99.6     100.0       652    0.82      99.2   100.0         647    0.81
   Sutliff Apartments II       100.0     100.0       583    1.01     100.0   100.0         586    1.02
   Tallmadge Acres              99.2     100.0       658    1.03     100.0   100.0         658    1.03
   Twinsburg Apartments         99.8     100.0       605    1.09     100.0   100.0         603    1.09
   Village Towers              100.0     100.0       583    1.05     100.0   100.0         579    1.04
   West High Apartments         97.3     100.0       802    1.14     100.0   100.0         790    1.13
                                99.5%     99.9%    $ 632  $ 1.05     100.0%  100.0%      $ 631  $ 1.05
   GOVERNMENT ASST.-FAMILY
   Jennings Commons             99.7%    100.0%    $ 675  $ 0.82      99.7%  100.0%      $ 674  $ 0.82
   Rainbow Terrace             N/A       N/A         N/A  N/A        N/A     N/A           N/A  N/A
   Shaker Park Gardens II       98.5     100.0       546    0.73      99.0   100.0         589    0.78
                                98.4     100.0       578    0.75      99.2   100.0         610    0.79
                                99.4%     99.9%    $ 624  $ 0.99     100.0%  100.0%      $ 627  $ 1.00
   CONGREGATE CARE
   Gates Mills Club             88.5%     89.2%    $ 914  $ 1.27      94.8%   95.8%      $ 870  $ 1.21
   The Oaks                     98.2      94.0     1,070    1.59      87.9    80.0       1,023    1.52
                                91.7      90.6       960    1.36      92.5    91.2         915    1.29
                                92.6%     94.8%    $ 648  $ 0.76      93.9%   96.2%      $ 640  $ 0.75
   Joint Venture Properties
   Northeastern Ohio
   Market rate
   Americana                    88.7%     94.4%    $ 494  $ 0.62      89.5%   93.6%      $ 487  $ 0.61
   College Towers               96.8      99.7       417    0.63      92.8    97.6         418    0.63
   Euclid House                 95.6      96.8       443    0.68      92.2    93.7         440    0.67
   Gates Mills Towers           92.5      95.1       711    0.83      93.2    95.3         713    0.83
   Highland House              100.0     100.0       417    0.77      98.6   100.0         417    0.77
   Watergate                    90.7      92.6       553    0.67      93.5    96.0         544    0.65

                                92.0%     94.9%    $ 546  $ 0.69      92.5%   95.4%      $ 543  $ 0.69
   Government Asst.-Family
   Lakeshore Village            97.7%    100.0%    $ 675  $ 0.86      99.9%  100.0%      $ 662  $ 0.84
                                92.3      95.1       552    0.70      93.0    95.5         549    0.70
        Core                    92.5%     94.9%    $ 641  $ 0.75      93.8%   96.1%      $ 633  $ 0.74
        Portfolio average       91.6%     94.5%    $ 678  $ 0.77      92.9%   95.3%      $ 630  $ 0.72

     <FN>
          ______________
          (a)  Woodlands of North Royalton (fka Somerset West) has 39 
               Contract Units and 158 Market-rate units.
          (b)  The Triangle also contains 63,321 square feet 
               of office/retail space.
          (c)  The Company acquired a noteholder interest entitling 
               the Company to substantially all cash flows from operations.  
               The Company has certain rights under a security agreement to 
               foreclose on the property to the extent that the unpaid
               principal and interest on the underlying notes exceed seven 
               years equivalent principal and interest payments.
          (d)  The property was developed in 1981 subject to a warranty deed 
               provision which states that the assignment of fee simple title 
               of the property to the Company shall expire in 2037.
          r =  Rehabilitated

     </FN>
     </TABLE>


<PAGE>38                                            



              HISTORICAL FUNDS FROM OPERATIONS AND DISTRIBUTABLE CASH FLOW

          The Company considers Funds From Operations ("FFO"), as defined by
     the National Association of Real Estate Investment Trusts ("NAREIT"), to 
     be one of the measures of the performance of an equity REIT.  FFO is 
     defined by NAREIT as net income (loss) before depreciation and amortiza-
     tion of real estate assets, determined in accordance with generally
     accepted accounting principles ("GAAP"), excluding gains (or losses) from
     extraordinary items, unusual or non-recurring items and sales of 
     depreciated property.  FFO of unconsolidated partnerships and joint
     ventures is determined on a similar basis.  Because the NAREIT definition
     does not define unusual or non-recurring items, differences between the
     Company's interpretation and other companies' interpretations may vary
     which could affect the comparability of the Company's FFO to that reported
     by other companies following the NAREIT definition.  Further, FFO 
     presented herein is not necessarily comparable to FFO presented by other
     real estate companies due to the fact that not all real estate
     companies use the NAREIT definition.  FFO should not be considered as an
     alternative to net income (as determined in accordance with GAAP) as an
     indicator of the Company's financial performance or to cash flows from
     operating activities (determined in accordance with GAAP) 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.  Distributable Cash Flow is 
     defined as FFO less capital expenditures funded by operations and 
     amortization of deferred financing fees.  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 month period ended March 31, 1999 and 1998 are
     summarized in the following table:

<TABLE>
<CAPTION>
                                                        For the three
                                                         months ended
                                                          March 31,
          (In thousands)                                1999     1998  

          <S>                                         <C>      <C>
          Net income applicable to common shares      $ 4,817  $ 3,154 

          Depreciation on real estate assets
            Wholly owned properties                     7,105    4,924 
            Joint venture properties                      138      105 
          Amortization of intangibles                     191        - 
          Nonrecurring expenses                           381        - 
          Cumulative effect of a change in accounting
            principle                                  (4,320)       - 
          Additional operating expenses                   874        - 
          Funds From Operations                         9,186    8,183 

          Depreciation - other assets                     656      192 
          Amortization of deferred financing fees         336      209 
          Fixed asset additions                            (7)     (68)
          Fixed asset additions - joint venture             -        - 
          properties
          Distributable Cash Flow                     $10,171  $ 8,516 

          Weighted average shares outstanding          22,666   17,072 

</TABLE>

<PAGE>39


                                     PART II

                                OTHER INFORMATION

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

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

           None

     ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

           (a)      Exhibits

<TABLE>
<CAPTION>

                                                                                Filed herewith or
                                                                                   incorporated
                                                                                     herein by
   Number                                  Title                                     reference

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

    3.1    Second Amended and Restated Articles of Incorporation of the 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       Exhibit 4.3 to Form
           Limited Partnership, et. al., in favor of PFL Life Insurance          S-11 filed September
           Company; Open End Mortgage from Triangle Properties Limited           2, 1993 (File No.
           Partnership I, et. al., in favor of PFL Life Insurance Company (The   33-68276 as
           Registrant undertakes to provide additional long-term loan documents  amended).
           upon request).

  

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

<PAGE>40

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

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

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

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

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

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

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

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

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

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

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

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

   10.2    Stock Option Plan                                                     Exhibit 10.2 to Form
                                                                                 S-11 filed September
                                                                                 2, 1993 (File No.
                                                                                 33-68276 as
                                                                                 amended).
<PAGE>41

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

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

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

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


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

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

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

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

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

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

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

   10.15   Agreement dated March 11, 1999 by and among the Company and The       Exhibit 10.15 filed
           Milstein Affiliates.                                                  herewith.

   10.16   Agreement dated March 11, 1999 by and among the Company and The       Exhibit 10.16 filed
           Milstein Affiliates.                                                  herewith.

   10.17   Separation Agreement and Release dated January 8, 1999 by and         Exhibit 10.17 filed
           between the Company and Dennis W. Bikun                               herewith.

   18.1    Letter regarding change in accounting principles                      Exhibit 18.1 filed
                                                                                 herewith.

   27      Financial Data Schedule                                               Exhibit 27 filed
                                                                                 herewith.


           (b) Reports on Form 8-K
                None
</TABLE>

<PAGE>42 

         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



     May 14, 1999                       /s/ Kathleen L. Gutin              
     (Date)                             Kathleen L. Gutin, CFO and
                                          Vice President