<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, 1997

                                          OR

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

               For the transition period from __________ to __________

                            Commission File Number 1-12486


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




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


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

           (Former name, former address and former fiscal year, if changed
                                  since last report)


           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 [ ]


                        APPLICABLE ONLY TO CORPORATE ISSUERS:


          Indicate the number of shares outstanding of each of the issuer's
          classes of common as of the latest practicable date.

                  15,322,391 shares outstanding as of May 15, 1997.

                                                                         


<PAGE> 2

                        ASSOCIATED ESTATES REALTY CORPORATION

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

           Financial Statements

   <S>                                                           <C>
   ITEM 1


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

           Consolidated Statements of Operations for the 
              three month period ended March 31, 1997             
              and 1996                                            4

           Consolidated Statements of Cash Flows for the 
              three month period ended March 31, 1997 
              and 1996                                            5
             
           Notes to Financial Statements                          6


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


   PART II  -  OTHER INFORMATION


   ITEM 4  Submission of Matters to a Vote of 
              Security-Holders                                   20
     

   ITEM 6  Exhibits and Reports on Form 8-K                      20
   

   SIGNATURES                                                    21
</TABLE>


<PAGE> 3

                        ASSOCIATED ESTATES REALTY CORPORATION
                             CONSOLIDATED BALANCE SHEETS 


<TABLE>
<CAPTION>
   
                                                      March 31,     December 31,
                                                         1997           1996     
                                                     (Unaudited)
                        ASSETS
   <S>                                              <C>            <C>
   Real estate assets:
    Land                                            $ 47,066,757   $ 44,241,900 
    Buildings and improvements                       454,532,972    430,920,893 
    Furniture and fixtures                            21,260,283     20,286,700 
                                                     -----------    -----------
                                                     522,860,012    495,449,493 
      Less:  accumulated depreciation               (116,268,919)  (112,102,829)
                                                    ------------   ------------
                                                     406,591,093    383,346,664 
      Construction in progress (including land)       23,611,010     18,516,982 
                                                     -----------    -----------
      Real estate, net                               430,202,103    401,863,646 
   Cash and cash equivalents                             564,676      1,286,959 
   Restricted cash and investments                     5,514,933      5,625,003 
   Accounts and notes receivable:
    Rents                                              1,578,503      1,569,907 
    Affiliates                                         5,128,128      1,784,297 
   Deferred charges and prepaid expenses               6,386,027      5,616,394 
                                                    ------------   ------------
                                                    $449,374,370   $417,746,206 
                                                    ============   ============
         LIABILITIES AND SHAREHOLDERS' EQUITY
   Secured debt                                     $ 68,689,452   $ 69,024,253 
   Unsecured debt                                    185,404,607    148,788,707 
                                                    ------------   ------------
      Total indebtedness                             254,094,059    217,812,960 
   Accounts payable and accrued expenses              11,035,738     14,361,609 
   Dividends payable                                   7,124,907      6,895,071 
   Resident security deposits                          4,356,265      4,154,418 
   Funds held for non-owned properties                 1,467,941      1,571,219 
   Accrued interest                                    3,919,477      2,521,644 
   Accumulated losses and distributions of equity
    investees in excess of investment and advances    12,646,045     12,413,087
                                                      ----------     ----------
      Total liabilities                              294,644,432    259,730,008 
   Commitments and contingencies                               -              - 
   Shareholders' equity: 
    Preferred shares, Class A cumulative, without
      par value; 3,000,000 shares authorized;
      225,000 issued and outstanding                  56,250,000     56,250,000 
    Common shares, without par value, $.10 stated
      value; 50,000,000 shares authorized;
      15,322,391 and 15,322,381 shares issued and
      outstanding at March 31, 1997 and December
      31, 1996, respectively                           1,532,239      1,532,238 
     Paid-in capital                                  133,057,259    133,073,035 
     Accumulated dividends in excess of net income    (36,109,560)   (32,839,075)
                                                      -----------    -----------  
       Total shareholders' equity                     154,729,938    158,016,198 
                                                      -----------    -----------   
                                                     $449,374,370   $417,746,206  <PAGE>
 
                                                     ============   ============
</TABLE>

                     The accompanying notes are an integral part
                            of these financial statements




<PAGE> 4
                        ASSOCIATED ESTATES REALTY CORPORATION
                        CONSOLIDATED STATEMENTS OF OPERATIONS
                      FOR THE THREE MONTH PERIOD ENDED MARCH 31,
                                     (UNAUDITED)

<TABLE>
<CAPTION>

                                                 1997          1996     
   <S>                                      <C>           <C>
   Revenues
     Rental                                 $ 23,159,943  $   20,559,867 
     Property management fees                    100,909          92,080 
     Property management fees-affiliates         879,896         862,114 
     Painting service                            122,432          73,776 
     Painting service-affiliates                 386,012         207,502 
     Other                                       149,149         128,993 
                                              ----------      ----------
                                              24,798,341      21,924,332 
   Expenses
     Property operating and maintenance        9,190,041       8,514,709 
     Depreciation and amortization             4,328,837       3,549,955 
     Painting services                           410,471         258,380 
     General and administrative                1,539,797       1,292,325 
     Interest expense                          4,061,829       3,500,282 
                                              ----------      ----------
      Total expenses                          19,530,975      17,115,651 
                                              ----------      ----------
     Income before equity in net loss of
      joint ventures                           5,267,366       4,808,681 
     Equity in net loss of joint ventures        (41,839)        (17,504)
                                            ------------  --------------
     Net income                             $  5,225,527  $    4,791,177 
                                            ============  ==============

     Net income applicable to common shares $  3,854,421  $    3,420,072 
                                            ============  ==============
   Per common share:
     Net income                             $        .25  $          .25 
                                            ============  ==============
     Dividends paid                         $       .465  $         .450 
                                            ============  ==============
   Weighted average number of common 
     shares outstanding                       15,322,386      13,872,381 
                                            ============  ==============
</TABLE>


                     The accompanying notes are an integral part
                            of these financial statements


<PAGE> 5

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




<TABLE>
<CAPTION>
   
                                                       1997           1996    

   <S>                                             <C>            <C>
   Cash flow from operating activities:                                        
    Net income                                     $  5,225,527   $  4,791,177 
    Adjustments to reconcile net income to
      net cash provided by operating
      activities:
      Depreciation and amortization                   4,328,837      3,549,955 
      Equity in net loss of joint ventures               41,839         17,504 
      Earnings distributed from joint ventures           67,190         76,785 
      Net change in - Accounts and notes
                        receivable                       (8,596)       141,628 
                     - Accounts and notes
                        receivable-affiliates        (3,343,831)      (531,140)
                     - Accounts payable and
                        accrued expenses             (3,725,979)    (2,188,373)
                     - Other operating assets
                        and liabilities                 709,118      1,500,957 
                     - Restricted cash                  110,070        202,945 
                     - Funds held for non-owned    
                        properties                     (103,278)    (2,446,912)
                                                     ----------     ----------
         Total adjustments                           (1,924,630)       323,349 
                                                     ----------     -----------
      Net cash flow provided by operating
       activities                                     3,300,897      5,114,526 
   Cash flow from investing activities:
    Acquisition of real estate (net of
      liabilities assumed)                          (31,560,293)   (26,248,388)
    Fixed asset additions                              (406,865)      (179,472)
    Distributions from joint ventures                   123,930         71,501 
                                                    -----------    -----------
      Net cash flow used for investing activities   (31,843,228)   (26,356,359)
   Cash flow from financing activities:
    Principal payments on mortgage notes               (334,801)    (1,979,126)
    Proceeds from senior and medium-term notes       15,000,000      7,500,000 
    Line of Credit borrowings                        64,900,000     54,800,000 
    Line of Credit repayments                       (43,300,000)   (32,850,000)
    Deferred financing and offering costs              (179,212)      (256,676)
    Common share dividends paid                      (6,895,071)    (5,965,125)
    Preferred share dividends paid                   (1,371,106)    (1,371,105)
    Exercise of stock options                               238              0 
                                                     ----------     ----------
      Net cash flow provided by financing
        activities                                   27,820,048     19,877,968 
                                                     ----------     ----------
      (Decrease) increase in cash and cash             (722,283)    (1,363,865)
         equivalents
   Cash and cash equivalents, beginning of period     1,286,959      2,848,285 
                                                   ------------   ------------
   Cash and cash equivalents, end of period        $    564,676   $  1,484,420 
                                                   ============   ============
</TABLE>

                                  The accompanying notes are an integral part
                                         of these financial statements




<PAGE> 6
                        ASSOCIATED ESTATES REALTY CORPORATION
                            NOTES TO FINANCIAL STATEMENTS



          1.   BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

          Business

               Associated Estates Realty Corporation (the "Company") is a
          self-administered and self-managed real estate investment trust
          ("REIT") which specializes in the acquisition, development,
          ownership and management of multifamily properties in the Great
          Lakes Region.  At March 31, 1997, the Company owned or was a
          joint venture partner in 82 multifamily properties containing
          16,300 suites.  Additionally, the Company managed 40 non-owned
          properties, 32 of which were multifamily properties consisting of
          7,052 suites and eight of which were commercial properties
          containing an aggregate of approximately 825,000 square feet of
          gross leasable area.  Through special purpose entities,
          collectively referred to as the "Service Companies", the Company
          provides to both owned and non-owned properties, management,
          painting and computer services as well as mortgage origination
          and servicing.

          Principles of Consolidation

               The accompanying consolidated financial statements include
          the accounts of the Company, its wholly owned subsidiaries, which
          own certain of the real estate properties, and the Service
          Companies.  The Company holds a preferred share interest in the
          Service Companies which entitles it to receive 95% of the
          economic benefits from operations and which is convertible into a
          majority interest in the voting common shares.  The outstanding
          voting common shares of these Service Companies are held by an
          executive officer of the Company.  The Service Companies are
          consolidated because, from a financial reporting perspective, the
          Company is entitled to virtually all economic benefits and has
          operating control.

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

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

          Use of Estimates

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

          Reclassifications

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

<PAGE> 7

          2.   DEVELOPMENT AND ACQUISITION OF MULTIFAMILY PROPERTIES

               Construction in progress including the cost of land for the
          development of multifamily properties was $23,611,010 and
          $18,516,982 at March 31, 1997 and December 31, 1996,
          respectively.  The Company capitalizes interest costs on funds
          used in construction, real estate taxes and insurance from the
          commencement of development activity through the time the
          property is ready for leasing.  Interest, real estate taxes and
          insurance aggregating approximately $464,000 were capitalized
          during the period ended March 31, 1997.  The following schedule
          details construction in progress at March 31, 1997:



<TABLE>
<CAPTION>

                                                                Construction
            (dollars in thousands)                                  Costs
                                            Number               Incurred to
                   Property               of Suites  Land Cost      Date      Completion 

   <S>                                    <C>        <C>        <C>           <C>
   AURORA, OH
      The Residence at Barrington-Phase I      168    $ 1,359    $   6,585   Late 1997
      The Residence at Barrington-Phase II     120        982           -    Winter 1998
                                               288      2,341        6,585  
   ANN ARBOR, MI
      Arbor Landings Apartments II             160*       650          195   Summer 1998
   COLUMBUS, OH
      Bradford at Easton                       324      1,506        8,215   Fall 1997
   FENTON, MI
      Georgetown Park Apartments III           120*       350           77   1998*    
   GRAND RAPIDS, MI
      Aspen Lakes II                           114*       402           24   1998*
   STREETSBORO, OH
      The Village of Western Reserve           108        691        1,105   Late 1997
   WESTLAKE, OH
      Westlake                                 300*       523           47   1999*
   MT. STERLING, OH
      Muirwood Mt. Sterling                     89*       125            3   1999*
   COLUMBUS, OH
      Wyndemere                                170*       201           20   2000*
   Other                                         -         -           551  
                                             -----    -------    ---------
                                             1,673    $ 6,789    $  16,822  
                                             =====    =======    =========
      *Estimated
</TABLE>

               During the period January 1, 1997 through March 31, 1997,
          the Company acquired, in separate purchase transactions, two
          multifamily properties containing an aggregate of 462 suites and
          a parcel of land consisting of 10 acres for an aggregate purchase
          price of $24.3 million, which was financed with (i) borrowings
          under the Company's Line of Credit of $23.3 million, and (ii)
          available cash of $1 million.


<PAGE> 8

          3.   SHAREHOLDERS' EQUITY

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

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

   <S>                      <C>           <C>           <C>           <C>            <C> 
   Balance, Dec. 31, 1996   $  56,250,000 $  1,532,238  $ 133,073,035 $ (32,839,075) $ 158,016,198 
      Net income               -             -             -              5,225,527      5,225,527 
      Exercise of stock
        options                -                     1           237      -                    238 
      Additional costs re-                             
        lating to common
        stock offering         -             -               (16,013)     -                (16,013)
      Common share
        dividends declared     -             -             -             (7,124,906)    (7,124,906)
      Preferred share
        dividends declared     -             -              -            (1,371,106)    (1,371,106)
                            ------------  ------------  ------------- -------------     ----------
   Balance, Mar. 31, 1997   $ 56,250,000  $  1,532,239  $ 133,057,259 $ (36,109,560) $ 154,729,938  <PAGE>
 
                            ============  ============  ============= =============  =============
</TABLE>

          4.   SECURED DEBT

          Conventional Mortgage Debt

               Conventional mortgages payable are comprised of nonrecourse,
          fixed rate, project specific loans to the Company which are
          collateralized by the associated real estate and resident leases. 
          Mortgages payable are generally due in monthly installments of
          principal and/or interest and mature at various dates through
          August 1, 2018. 

          Federally Insured Mortgage Debt

               Federally insured mortgage debt is insured by HUD pursuant
          to one of the mortgage insurance programs administered under the
          National Housing Act of 1934, (one property is funded through
          Industrial Development Bonds).  These government-insured loans
          are nonrecourse to the Company.  Payments of principal, interest
          and HUD mortgage insurance premiums are made in equal monthly
          installments and mature at various dates through August 1, 2028. 
          Seven of the eight federally insured mortgages have a fixed rate
          and the remaining mortgage 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.

          5.   UNSECURED DEBT

          Senior Notes

               The Senior Notes were issued in 1995, and net proceeds of
          $83.6 million, after underwriting commissions, offering expenses
          and discounts, were applied to amounts drawn on the Line of
          Credit.  Senior Notes with a principal balance of $75 million
          accrue interest at 8.38% and mature in 2000.  Senior Notes with a
          principal balance of $10 million accrue interest at 7.10% and
          mature in 2002.

          Medium-Term Notes Program

               During the quarter ending March 31, 1997, the Company issued
          two Medium-Term Notes (the "MTN's") aggregating $15 million under
          its $75 million MTN program.  The principal amounts of these


<PAGE> 9

          MTN's were $10 million and $5 million and bear interest at 6.625%
          and 6.52% over terms of 5 and 30 years, respectively.  The holder
          of the $5 million, 30 year MTN has the option to require payment
          on February 20, 2002.  The net proceeds to the Company with
          respect to these issuances was $14.9 million which was applied to
          amounts outstanding under the Line of Credit.

          Line of Credit

               The Company utilizes a $75 million unsecured credit facility
          (the "Line of Credit").   The Line of Credit includes certain
          restrictive covenants which, among others, requires the Company
          to (i) maintain a minimum level of net worth, (ii) limit
          dividends to 90% of Distributable Cash Flow, as defined in the
          agreement, (iii) restrict the use of its borrowings, and (iv)
          maintain certain debt coverage ratios.  The Line of Credit
          provides for a scaled reduction in the LIBOR, prime rate and
          commitment fee margins based on the Company's credit ratings. 
          For the three months ended March 31, 1997, based on the Company's
          present credit ratings, the LIBOR margin was 150 basis points,
          fixed in increments of 30, 60, 90, 120 or 180 days or,
          alternatively, borrowings are at prime rate.  An annual
          commitment fee of 25 to 37.5 basis points on the average daily
          unused amount of the facility was paid quarterly in arrears.  The
          Line of Credit expires in September 1997 and the Company has the
          option to extend the facility for an additional one year period. 
          At March 31, 1997, $43.1 million was drawn on the Line of Credit.

          6.   PREFERRED AND COMMON SHARES

               On December 11, 1996, the Company completed an offering of
          1,300,000 common shares at $22.375 per share.  On December 17,
          1996, the underwriters exercised an option to purchase an
          additional 150,000 shares at $22.375 per share.  The net proceeds
          of approximately $30.7 million were applied to reduce debt.

               As of December 31, 1996, 2,250,000 Depositary Shares, each
          representing 1/10 of a share of the Company's 9.75% Class A
          Cumulative Redeemable Preferred Shares (the "Perpetual Preferred
          Shares"), were issued and outstanding.  Each Depositary Share has
          a $25 liquidation preference ($56.3 million in the aggregate). 
          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.

          7.   EARNINGS PER SHARE

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

               The Company is required to adopt Statement of Financial
          Accounting Standard No. 128 ("SFAS 128"), Earnings Per Share as
          of December 31, 1997; earlier application is not permitted.  SFAS
          128 specifies the computation, presentation, and disclosure
          requirements for earnings per share.  The Company does not
          believe that the adoption of SFAS 128 will have a material effect
          on the Company's method of calculation or display of earnings per
          share amounts.

<PAGE> 10

          8.   PRO FORMA CONDENSED FINANCIAL INFORMATION (UNAUDITED)

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

<TABLE>
<CAPTION>
                                           For the three
                                            months ended
                                             March 31, 
          (In thousands, except
            per share amounts)            1997       1996   

          <S>                           <C>        <C>
          Revenues                      $  25,493  $  24,692
          Net income                        5,225      5,038
          Net income applicable
           to common shares                 3,854      3,667
          Net income per common share   $    0.25  $    0.24

          Weighted average common
           shares outstanding              15,322     15,322
</TABLE>

               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.

          9.   SUBSEQUENT EVENTS

               Subsequent to March 31, 1997, the Company acquired one
          multifamily property containing 340 suites in Columbus, Ohio
          which was financed using borrowings under the Line of Credit.

               Subsequent to March 31, 1997, the Company issued a $15
          million note under the Medium-Term Notes Program bearing interest
          of 7.82% over a 10 year term.  The net proceeds to the Company of
          $14.9 million were applied to amounts outstanding under the Line
          of Credit.

               On April 23, 1997, The Company negotiated a reduction in
          pricing on its $75 million unsecured line of credit.  The new
          LIBOR rate margin is 125 basis points, a reduction of 25 basis
          points from the previous margin.

               On April 30, 1997, the Company prepaid three conventional
          mortgages.  The balance of the mortgages at the prepayment date
          was approximately $14,685,170.


<PAGE> 11


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

          Overview
               Associated Estates Realty Corporation (the "Company") is a
          Real Estate Investment Trust ("REIT") that currently owns, or is
          a joint venture partner in, 83 multifamily properties containing
          16,640 suites located in Ohio, Michigan, Indiana and Western
          Pennsylvania.  During the quarter ended March 31, 1997, several
          adjacent properties were combined for operating, administrative
          and reporting efficiencies thereby adjusting the Company's total
          property count.

               The following discussion should be read in conjunction with
          the financial statements and notes thereto appearing elsewhere in
          this report.  Historical results and percentage relationships
          contained in the financial statements, including trends which
          might appear, should not be taken as indicative of future
          operations.

          Liquidity and Capital Resources
               The Company has elected to be taxed as a REIT under Sections
          856 through 860 of the Internal Revenue Code of 1986, as amended. 
          REIT's are subject to a number of organization and operational
          requirements including a requirement that 95% of the income that
          would otherwise be considered as taxable income be distributed to
          its shareholders.  Providing the Company continues to qualify as
          a REIT, it will generally not be subject to a Federal income tax
          on net income.

               The Company expects to meet its short-term liquidity
          requirements generally through its net cash provided by
          operations.  The Company believes that its net cash provided by
          operations will be sufficient to meet both operating requirements
          and the payment of dividends in accordance with REIT requirements
          in both the short and long term.

          Financing:
               Sixty-two of the Company's 75 wholly owned properties were
          unencumbered at March 31, 1997 with annualized earnings before
          interest, depreciation and amortization of over $44.1 million and
          a historical cost basis of over $410.6 million.  The remaining
          thirteen of the Company's wholly owned properties, having a
          historical cost basis of $105 million, are encumbered by secured
          property specific debt of $67.3 million at March 31, 1997. 
          Unsecured debt, which totaled $185.4 million at March 31, 1997,
          consisted of $57.5 million in Medium-Term Notes, Senior Notes of
          $84.8 million and amounts drawn on the revolving credit facility
          of $43.1 million.  The Company's proportionate share of the
          mortgage debt relating to the seven joint venture properties was
          $18 million at March 31, 1997.  The weighted average interest
          rate on the secured, unsecured and the Company's proportionate
          share of the joint venture debt was 7.86% at March 31, 1997. <PAGE>
 

               The Company utilizes borrowings under a $75 million
          unsecured revolving credit facility (the "Line of Credit") for
          the acquisition and development of multifamily properties and
          working capital purposes.  The Line of Credit includes certain
          restrictive covenants which, among others, requires the Company
          to maintain a minimum level of net worth, to limit dividends to
          90% of Distributable Cash Flow, to restrict the use of its
          borrowings and to maintain certain debt coverage ratios.  The
          Line of Credit provides for a scaled reduction in the LIBOR or
          prime rate margins and commitment fees based on the Company's
          credit ratings.  Based on the Company's present credit ratings,
          the LIBOR margin is 125 basis points fixed in increments of 30,
          60, 90, 120 or 180 days and Prime Rate borrowings are at the
          Prime Rate with no margin.  An annual commitment fee of between
          25 basis points and 37.5 basis points on the average daily unused
          amount of the facility is paid quarterly in arrears.  The Line of
          Credit expires in September 1997 and the Company has the option
          to extend the facility for an additional one year period.  At
          March 31, 1997, $43.1 million was drawn on the Line of Credit
          with a weighted average interest rate of 7.1%.

               During the quarter ending March 31, 1997, the Company issued
          two Medium-Term Notes (the "MTN's") aggregating $15 million under
          its $75 million MTN program.  The principal amounts of these
          MTN's were $10 million and $5 million and bear interest at 6.625%
          at 6.52% over terms of 5 and 30 years, respectively.  The holder

<PAGE> 12

          of the $5 million, 30 year MTN has the option to require payment
          on February 20, 2002.  The net proceeds to the Company with
          respect to these issuances was $14.9 million which was applied to
          amounts outstanding under the Line of Credit.  On April 29, 1997,
          the Company issued a $15 million MTN bearing interest of 7.82%
          over a 10 year term.  The net proceeds to the Company of $14.9
          million was applied to amounts outstanding under the Line of
          Credit.

          Registration statements filed in connection with financing:
               The Company has filed a shelf registration statement with
          the Securities and Exchange Commission relating to the proposed
          offering of up to $368.8 million of debt securities, preferred
          shares, depositary shares, common shares and common share
          warrants.  The total amount of the shelf filing includes a $102.5
          million Medium-Term Notes Program.  The securities may be offered
          from time to time at prices and upon terms to be determined at
          the time of sale.

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

               During the period January 1, 1997 through March 31, 1997,
          the Company acquired, in separate purchase transactions, two
          multifamily properties containing an aggregate of 462 suites and
          a parcel of land consisting of 10 acres for an aggregate purchase
          price of $24.3 million.  The multifamily properties are located
          in Indianapolis, Indiana and Cincinnati, Ohio.  The property and
          land acquisitions were financed with borrowings under the
          Company's Line of Credit of $23.3 million and cash on-hand of
          $1.0 million.  On April 22, 1997, the Company acquired a 340
          suite property in Columbus, Ohio.

               The remainder of the acquisitions, development and
          dispositions section contains forward-looking statements and
          certain risks, trends and uncertainties that could cause actual
          results to vary from those projected. Readers are cautioned not
          to place undue reliance on forward-looking statements, which are
          based only on current judgements and current knowledge. These
          forward-looking statements are intended to be covered by the safe
          harbor provisions of the Private Securities Litigation Reform Act
          of 1995.  Factors which could cause actual results to differ
          materially from those projected include the general economic
          climate; the supply and demand for multifamily properties in the
          Midwest; interest rate levels; the availability of financing and
          other risks associated with the acquisition, development and
          disposition of properties, including risks that development or
          lease-up may not be completed on schedule.  Furthermore, there
          can be no assurances that the Company will be successful in
          acquiring the multifamily properties and the land parcels under
          contract or be successful in selling any of the Government-
          Assisted Properties or the parcel of land as described below.

               The Company is currently under contract to purchase three
          multifamily properties containing an aggregate of 534 suites and
          five parcels of undeveloped land containing an aggregate 172.5
          acres for a purchase price of $39.1 million.  The three
          multifamily properties are located in Columbus, Ohio; Toledo,
          Ohio and Indianapolis, Indiana, respectively, while the land
          parcels are located in Ohio, Michigan and Pennsylvania.  With the
          exception of one 37 acre parcel located in Avon, Ohio, the land
          parcels under contract are located adjacent to or in the vicinity
          of multifamily properties presently owned by the Company.

               The Company has two newly constructed multifamily properties
          in lease-up: Bradford at Easton, a 324 suite property located in
          Columbus, Ohio presently has 146 suites completed of which 132
          are leased.  Eighteen suites of the 168 suite first phase of The
          Residence at Barrington, a 288 suite development in Aurora, Ohio
          (a city located Southeast of Cleveland) have been completed while
          26 suites have been leased.  The Company has also commenced
          construction at the 108 suite first phase of The Village of
          Western Reserve in Streetsboro, Ohio (also located Southeast of
          Cleveland).  The Bradford at Easton, Barrington Phase II and
          Western Reserve properties are scheduled for completion in the
          fourth quarter of 1997.

<PAGE> 13

               The Company is anticipating the construction of an
          additional 514 suites during 1998 on land adjacent to multifamily
          properties currently owned by the Company as follows:
<TABLE>
<CAPTION>

                 Property                Location         Suites

          <S>                     <C>                     <C>
          Arbor Landings          Ann Arbor, Michigan       160  
             Apartments II

          The Residence at        Aurora, Ohio                
            Barrington, Phase II                            120

          Georgetown Park         Fenton, Michigan            
            Apartments III                                  120

          Aspen Lake II           Grand Rapids, Michigan    114  
                                                            ---
                                            Total Suites    514  
</TABLE>

               The Company estimates the total cost of the new construction
          properties and suite additions will be approximately  $73.2
          million, of which $22.1 million has been incurred through March
          31, 1997, including land costs of $5.9 million.

               The Company also owns approximately 59 acres of land, also
          adjacent to properties currently owned by the Company, on which
          approximately 560 suites are planned for development.  Through
          March 31, 1997, the Company has incurred approximately $1.5
          million in preliminary development and land costs for these and
          other planned development projects.

               The Company is exploring opportunities to dispose of several
          of its multifamily properties and has received an expression of
          interest from various prospective buyers.  In addition, the
          Company has determined that a 90 acre parcel of land, which was
          one of the assets acquired by the Company at the time of the IPO
          that is presently zoned for office and industrial use, will not
          be rezoned for multifamily use.  The Company intends to sell the
          property.

          Dividends
               On February 19, 1997, the Company declared a dividend of
          $0.465 per common share for the quarter ending March 31, 1997
          which was paid on May 1, 1997 to shareholders of record on April
          15, 1997.  On February 14, 1997, the Company declared a dividend
          of $0.60938 per depositary share on its Class A Cumulative
          Preferred Shares (the "Perpetual Preferred Shares") which was
          paid on March 14, 1997 to shareholders of record on February 28,
          1997.

          Cash flow sources and applications:
               Net cash provided by operating activities decreased $1.8
          million to $3.3 million from $5.1 million for the three-months
          ended March 31, 1997 when compared with the three-months ended
          March 31, 1996. This decrease was primarily the result of the
          application of cash flow from operating activities to the
          reduction of accounts payable and accrued expenses, and an
          increase in accounts receivable from affiliates.

               Net cash flows used for investing activities of $31.8
          million for the three-months ended March 31, 1997 were primarily
          used for the acquisition of multifamily real estate, properties
          and undeveloped land parcels.

               Net cash flows provided by financing activities of $27.8
          million for the three-months ended March 31, 1997 were primarily
          comprised of borrowings on the Line of Credit and the issuance of
          MTN's.  Funds were also used to pay dividends on the Company's
          common and Perpetual Preferred Shares.


<PAGE> 14

          RESULTS OF OPERATIONS
          Comparison of the three-months ended March 31, 1997 to the three-
          months ended March 31, 1996

               Overall, total revenue increased $2,874,000 or 13.1% and
          total expenses before the net loss of the joint ventures
          increased $2,415,300 or 14.1% for the quarter.  Net income
          applicable to common shares increased $434,400 or 12.7%, after
          dividends on the Company's Perpetual Preferred Shares.

               In the following discussion of the comparison of the three-
          months ended March 31, 1997 to the three-months ended March 31,
          1996, the term Core Portfolio Properties refers to the 36 wholly
          owned multifamily properties acquired by the Company at the time
          of the IPO and the 36 properties acquired prior to January 1,
          1996 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 eight
          properties acquired between January 1, 1996 and March 31, 1997.

               During the three-months ended March 31, 1997, the Acquired
          Properties generated total revenues of $2,698,500 while incurring
          property, operating and maintenance expenses of $1,018,550.

          Rental Revenues:
               Rental revenues increased $2,600,100 or 12.7% for the
          quarter.  The majority of this increase is attributable to rental
          revenues from the Acquired Properties of $2,344,400 for the same
          period.  Increases in occupancy and suite rents at the Core
          Portfolio Conventional and Government-Assisted Properties
          resulted in a $255,700 or 1.3% increase in rental revenue from
          these properties.

          Other Revenues:
               Painting service revenue and painting service revenue -
          affiliates increased $227,200 or 80.8%  for the quarter and
          reflects an increase in revenue generated from suite painting and
          major renovation projects when compared to the previous quarter. 
          The increase in painting service and painting service revenue -
          affiliates was partially offset by an increase in painting
          service expenses as discussed elsewhere herein.

          Property operating and maintenance expenses:
               Property operating and maintenance expenses increased
          $675,300 or 7.9% for the quarter.  Operating and maintenance
          expenses at the Acquired Properties increased $925,500 for the
          quarter due primarily to the operating and maintenance expenses
          incurred at the two properties acquired during 1997 and the
          recognition of a full quarter's operating expenses at the six
          properties acquired during 1996.  Property operating and
          maintenance expenses at the Core Portfolio Properties decreased
          $250,200, or 3.1% when compared to the prior three month period
          primarily due to decreases in building and grounds repairs and
          maintenance, real estate taxes, insurance and other operating
          expenditures which were partially offset by increases in
          personnel and utilities expenses.  Total expenditures for
          building renovations and suite and common area refurbishment in
          the Core Portfolio Properties that were not considered to be
          capital in nature averaged $70 per suite for the three-months
          ended March 31, 1997 as compared to $74 per suite for the three-
          months ended March 31, 1996.

          Other expenses:
               Depreciation and amortization increased $778,900 or 21.9%
          for the quarter primarily due to the increased depreciation and
          amortization expense recognized on the Acquired Properties.

               Painting service expenses increased $152,100 or 58.9% for
          the quarter.  These increases were primarily the result of
          payroll related expenses attributable to the increased sales
          activity of the painting company.

               General and administrative expenses increased $247,500 or
          19.2% for the quarter.  This increase is primarily attributable
          to payroll and payroll related expenses as the Company continues
          to develop a team of professionals to provide the hands-on
          attention to the Company's expanding portfolio of assets.

<PAGE> 15

               Interest expense increased $561,500 or 16.0% for the quarter
          primarily due to the interest incurred with respect to the
          additional borrowings under the Line of Credit that were used for
          the acquisition of properties.

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

          Equity in net loss of joint ventures:
               The combined equity in net loss of joint ventures increased
          $24,300 for the quarter primarily attributable to a decline in
          rents and occupancies at the joint venture properties.

               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, 1997 and
          1996.
<TABLE>
<CAPTION>
                                          For the quarter 
                                           ended March 31,
                                          1997        1996    

          <S>                        <C>           <C>
          Beneficial interests in
            joint venture operations
              Rental revenue          $ 1,624,600  $ 1,642,600 
              Cost of operations        1,096,300    1,083,000 
                                      -----------  -----------
                                          528,300      559,600 
              Interest income               6,400        3,700 
              Interest expense           (443,200)    (447,800)
              Depreciation               (120,900)    (121,300)
              Amortization                (12,400)     (11,700)
                                      -----------  -----------
              Net income              $   (41,800) $   (17,500)
                                      ===========  ===========
</TABLE>
          Outlook
               
               The following two paragraphs contain forward-looking
          statements and certain risks, trends and uncertainties could
          cause actual results to vary from those projected.  Readers are
          cautioned not to place undue reliance on forward-looking
          statements, which are based only on current judgments and current
          knowledge.  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 risks of a lessening of
          demand for the apartments owned by the Company, changes in
          government regulations affecting the Government-Assisted
          Properties, and expenditures that cannot be anticipated such as
          utility rate and usage increases, unanticipated repairs,
          additional staffing, insurance increases and real estate tax
          valuation reassessments.

               Approximately 61% of the Company's multifamily properties
          are located in the greater Cleveland/Akron, Ohio area which is
          the fourteenth largest consumer market in the United States
          containing over four million people within a fifty mile radius of
          Akron.  In Central Ohio, Columbus is the 30th largest
          metropolitan area in the U.S. based on population.  Population in
          the Central Ohio region grew 7.6% from 1990 to 1996, ranking it
          25th among the top 50 fastest growing metropolitan areas in the
          U.S., according to Census Bureau data.  Columbus, Ohio was
          selected by the E & Y Kenneth Leventhal Real Estate Group as one
          of the 12 best apartment investment markets in the country
          because of its well-diversified economic base, strong rental
          growth and lower vacancy rates.  The Company's Michigan portfolio
          is located in eight separate markets with a stable population and
          employment outlook. 


<PAGE> 16
               With an average economic occupancy for the Core Portfolio
          market-rate properties over 94.5%, and strong market
          fundamentals, it would appear that opportunities exist for
          continued rental growth at the Company's market-rate properties. 
          The Company expects that building and grounds repair and
          maintenance expenditures for the Core Portfolio properties will
          increase when compared to the prior quarter as the Company
          continues to maintain its properties to maximize their earnings
          potential.  Real estate tax increases should begin to moderate as
          the effect of the reassessed values diminishes over time. 
          Utility expenditures will vary over prior periods as the effect
          of weather related usage variances is factored into the level of
          utility expense.

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

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



  <PAGE> 17
  The following tables present information concerning the Multifamily Properties
  owned by Associated Estates Realty Corporation.

<TABLE>
<CAPTION>
                                                                                   Year     Average
                                                         Type of         Total   Built or  Unit Size
      The Multifamily Properties       Location        Construction     Suites    Rehab.    Sq. Ft. 
   ------------------------------  --------------  -----------------    -------  --------  ---------
   <S>                             <C>             <C>                  <C>      <C>        <C>
   MARKET RATE
   Acquired Properties
   Central Ohio Properties
   Perimeter Lakes                 Dublin          Garden/Townhomes         189    1992         999
   Remington Place Apartments      Cincinnati      Garden                   234   1988-90       830
   The Residence at Washington     Wash. Ct. House Ranch                     72    1995         862
                                                                            ---                 ---
                                                                            495                 899

   Indiana Properties
   The Gables at White River       Indianapolis    Garden                   228    1991         974

   Michigan Properties
   Aspen Lakes                     Grand Rapids    Garden                   144    1981         789
   Spring Brook Apartments         Holland         Garden/Townhomes         168    1986         818
   Summer Ridge Apartments         Kalamazoo       Garden                   248   1989-91       960
                                                                          -----                 ---
                                                                            560                 873

   Western Pennsylvania Properties
   Chestnut Ridge                  Pittsburgh      Garden                   468    1986         769
                                                                          -----                 ---
     Acquired Property Subtotal                                           1,751                 866

   Core Portfolio Properties
   Michigan Properties
   Arbor Landings Apartments       Ann Arbor       Garden                   168    1990       1,116
   Central Park Place              Grand Rapids    Garden                   216    1988         850
   Country Place Apartments        Mt. Pleasant    Garden                   144    1987         859
   Georgetown Park Apartments      Fenton          Garden                   360   1987-96     1,005
   The Landings at the Preserve    Battle Creek    Garden                   190   1990-91       952
   The Oaks and Woods at Hampton   Rochester Hills Garden/Townhomes         544   1986-88     1,050
                                                                          -----               -----
                                                                          1,622                 992
   Central Ohio Properties
   Arrowhead Station               Columbus        Townhomes                102    1987       1,344
   Bedford Commons                 Columbus        Townhomes                112    1987       1,157
   Bolton Estates                  Columbus        Garden                   196    1992         687 <PAGE>
 



   Colony Bay East                 Columbus        Garden                   156    1994         903
   Heathermoor                     Worthington     Garden/Townhomes         280    1989         829
   Kensington Grove                Westerville     Garden/Townhm/Ranch       76    1995       1,109
   Lake Forest                     Columbus        Garden                   192    1994         788
   Muirwood Vllg. at Bennell       Columbus        Ranch                    164    1988         769
   Muirwood Vllg. at London        London          Ranch                    112    1989         769
   Muirwood Vllg. at Mt. Sterling  Mt. Sterling    Ranch                     48    1990         769
   Muirwood Vllg. at Zanesville    Zanesville      Ranch                    196   1991-95       769
   Pendleton Lakes East            Columbus        Garden                   256   1990-93       899
   Residence at Christopher Wren   Gahanna         Garden/Townhomes         264    1993       1,062
   Residence at Turnberry          Pickerington    Garden/Townhomes         216    1991       1,182
   Sheffield at Sylvan             Circleville     Ranch                    136    1989         791
   Sterling Park                   Grove City      Garden                   128    1994         763
   The Residence at Newark         Newark          Ranch                    112   1993-94       868
   Wyndemere                       Franklin        Ranch                    128   1991-95       768
                                                                          -----                 ---
                                                                          2,874                 898
   Northern Ohio Properties
   Bay Club                        Willowick       Garden                    96    1990         925
   Cloisters                       Toledo          Townhomes                188    1990       1,037
   Colonnade West                  Cleveland       Garden                   216    1964         502
   Cultural Gardens                Euclid          Mid Rise                 186    1966         688
   Edgewater Landing               Cleveland       High Rise                241   1988 r        585
   Gates Mills III                 Mayfield Hts.   High Rise                320    1978         874
   Holly Park                      Kent            Garden                   192    1990         875
   Huntington Hills                Stow            Townhomes                 85    1982         976
   Kensington Village              Toledo          Garden/Townhomes         190   1985-90       920
   Mallard's Crossing              Medina          Garden                   192    1990         998
   Memphis Manor                   Cleveland       Garden                   120    1966         554
   Park Place                      Parma Hts.      Mid Rise                 164    1966         760
   Pinecrest                       Broadview Hts.  Garden                    96   1987 r        598 <PAGE>
 


<CAPTION>
                                       For the three months ending         For the three months ending    
                                              March 31, 1997                      March 31, 1996           
                                    --------------------------------    ---------------------------------
                                    Average              Average Rent   Average              Average Rent
                                    Economic  Physical       Per        Economic  Physical       Per
      The Multifamily Properties   Occupancy Occupancy  Suite Sq. Ft.  Occupancy Occupancy  Suite  Sq. Ft.
   -----------------------------   --------- ---------  ----- -------  --------- ---------  -----  -------
   <S>                              <C>      <C>        <C>   <C>      <C>       <C>        <C>    <C>
   MARKET RATE
   Acquired Properties
   Central Ohio Properties
   Perimeter Lakes                   94.1%      89.9%    $ 703 $ 0.70      N/A       N/A       N/A    N/A 
   Remington Place Apartments         N/A       86.8       640   0.77      N/A       N/A       N/A    N/A 
   The Residence at Washington       91.1       94.4       527   0.61      N/A      95.8%      N/A    N/A 
                                     ----       ----     ----  ------      ---      ----       ---    ---
                                     93.4%      89.1     $ 655 $ 0.68      N/A      95.8%      N/A    N/A 

   Indiana Properties
   The Gables at White River         81.4%      82.5%    $ 731 $ 0.75      N/A       N/A       N/A    N/A 

   Michigan Properties
   Aspen Lakes                       90.7%      89.6%    $ 550 $ 0.70      N/A       N/A       N/A    N/A 
   Spring Brook Apartments           95.3       96.4       469   0.57      N/A       N/A       N/A    N/A 
   Summer Ridge Apartments           90.4       95.6       672   0.70      N/A       N/A       N/A    N/A 
                                     ----       ----     ----- ------      ---       ---       ---    ---
                                     91.7%      94.3%    $ 580 $ 0.66      N/A       N/A       N/A    N/A 

   Western Pennsylvania Properties
   Chestnut Ridge                    94.7%      96.6%    $ 695 $ 0.90      N/A      84.6%      N/A    N/A 
                                     ----       ----     ----- ------      ---      ----       ---    ---
     Acquired Property Subtotal      93.2%      91.9%    $ 637 $ 0.75      N/A      86.1%      N/A    N/A 

   Core Portfolio Properties
   Michigan Properties
   Arbor Landings Apartments         95.5%      95.2%    $ 838 $ 0.75    97.2%      97.0%    $ 807 $ 0.72
   Central Park Place                92.9       94.0       609   0.72    97.0       93.5       608   0.72
   Country Place Apartments          94.7       91.0       516   0.60   100.0       98.6       487   0.57
   Georgetown Park Apartments        95.3       93.3       670   0.67    93.4       93.6       651   0.65
   The Landings at the Preserve      91.8       88.9       657   0.69    86.8       92.1       646   0.68
   The Oaks and Woods at Hampton     95.5       95.0       783   0.75    97.5       98.9       752   0.72
                                     ----       ----     ----- ------   -----       ----       ---   ----
                                     94.7%      93.5%    $ 702 $ 0.71    95.6%      96.1%    $ 681 $ 0.69
   Central Ohio Properties
   Arrowhead Station                 96.9%      94.1%    $ 680 $ 0.51    88.5%      97.1%    $ 640 $ 0.48
   Bedford Commons                   97.6       93.8       744   0.64    96.6       93.8       710   0.61
   Bolton Estates                    95.8       98.0       459   0.67    88.1       93.9       459   0.67
   Colony Bay East                   93.2       90.4       511   0.57    89.9       98.7       482   0.53
   Heathermoor                       96.1       95.0       538   0.65    94.1       96.8       524   0.63
   Kensington Grove                  92.9       93.4       772   0.70    96.7       97.4       750   0.68
   Lake Forest                       90.4       97.9       547   0.69    87.8       93.8       530   0.67 <PAGE>
 
   Muirwood Vllg. at Bennell         97.5       97.0       474   0.62    97.6       98.8       472   0.61
   Muirwood Vllg. at London          96.7       96.4       499   0.65    95.2       97.3       485   0.63
   Muirwood Vllg. at Mt. Sterling    94.7      100.0       495   0.64    95.7       87.5       479   0.62
   Muirwood Vllg. at Zanesville      95.3       96.4       522   0.68   100.0       97.4       504   0.66
   Pendleton Lakes East              96.0       94.1       490   0.55    94.3       97.7       497   0.55
   Residence at Christopher Wren     95.7       93.2       722   0.68    93.3       94.3       702   0.66
   Residence at Turnberry            91.3       93.5       734   0.62    92.0       93.1       710   0.60
   Sheffield at Sylvan               98.4       92.6       501   0.63    98.0       96.3       498   0.63
   Sterling Park                     94.1       97.7       545   0.71    96.4       95.3       525   0.69
   The Residence at Newark           95.5       88.4       554   0.64    99.9       99.1       532   0.61
   Wyndemere                         98.1       96.1       532   0.69   100.0       97.7       518   0.67
                                     ----       ----     ----- ------   -----       ----     -----   ----
                                     95.1%      94.8%    $ 570 $ 0.63    94.3%      96.0%    $ 555 $ 0.62
   Northern Ohio Properties
   Bay Club                          97.5%      96.9%    $ 622 $ 0.67    95.4%      92.7%    $ 604 $ 0.65
   Cloisters                         98.5       98.4       526   0.51    93.7       94.7       499   0.48
   Colonnade West                    96.1       95.4       401   0.80    96.7       96.3       389   0.77
   Cultural Gardens                  95.4       93.5       498   0.72    98.0       98.9       486   0.71
   Edgewater Landing                 93.6       98.8       413   0.71    95.9       99.2       409   0.70
   Gates Mills III                   93.1       97.8       671   0.77    91.9       98.4       657   0.75
   Holly Park                        98.3       99.0       651   0.74    89.6       92.7       721   0.82
   Huntington Hills                  96.6       97.6       646   0.66    96.6       97.6       636   0.65
   Kensington Village                97.3       98.9       446   0.48    97.0       96.3       430   0.47
   Mallard's Crossing                98.7       98.4       688   0.69    97.8       97.4       656   0.66
   Memphis Manor                     91.8       95.0       441   0.80    94.5       98.3       428   0.77
   Park Place                        93.6       98.2       522   0.69    98.6       97.6       512   0.67
   Pinecrest                         97.2       94.8       457   0.76    94.7       94.8       452   0.76 <PAGE>
 
</TABLE>


  <PAGE> 18
<TABLE>
<CAPTION>
                                                                                 Year      Average
                                                         Type of       Total   Built or   Unit Size
      The Multifamily Properties       Location       Construction    Suites    Rehab.     Sq. Ft. 
   ------------------------------  -------------   -----------------  ------   --------   --------
   <S>                             <C>              <C>               <C>      <C>        <C>
   Portage Towers                  Cuyahoga Falls   High Rise             376    1973         869
   Somerset West (a)               North Royalton   Garden/Townhomes      197    1982       1,038
   The Triangle (b)                Cleveland        High Rise             273    1989         616
   Timbers                         Broadview Hts.   Garden                 96   1987-89       930
   Treetops                        Toledo           Townhomes             128   1988-89     1,350
   Villa Moderne                   North Olmsted    Garden                135    1963         504
   Vantage Villa                   Toledo           Garden                150    1974         935
   Washington Manor                Elyria           Garden                120   1963-64       541
   West Park Plaza                 Cleveland        Garden                118    1964         520
   Westchester Townhouses          Westlake         Townhomes             136    1989       1,000
   Westlake Townhomes              Westlake         Townhomes               7    1985       1,000
   Williamsburg at Greenwood Vllg. Sagamore Hills   Townhomes             260    1990         938
   Winchester Hills I  (c)         Willoughby Hills High Rise             362    1972         822
   Winchester Hills II             Willoughby Hills High Rise             362    1979         822
                                                                        -----                 ---
                                                                        5,006                 816
                                                                        -----                 ---
     Core Market Rate Properties                                        9,502                 871

   GOVERNMENT ASST.-ELDERLY
   Ellet Development               Akron            High Rise             100    1978         589
   Hillwood I                      Akron            High Rise             100    1976         570
   Puritas Place (d)               Cleveland        High Rise             100    1981         518
   Riverview                       Massillon        High Rise              98    1979         553
   State Road Apartments           Cuyahoga Falls   Garden                 72   1977 r        750
   Statesman II                    Shaker Heights   Garden                 47   1987 r        796
   Sutliff Apartments II           Cuyahoga Falls   High Rise             185    1979         577
   Tallmadge Acres                 Tallmadge        Mid Rise              125    1981         641
   Twinsburg Apartments            Twinsburg        Garden                100    1979         554
   Village Towers                  Jackson Twp.     High Rise             100    1979         557
   West High Apartments            Akron            Mid Rise               68   1981 r        702
                                                                        -----                 ---
                                                                        1,095                 602
   GOVERNMENT ASST.-FAMILY
   Jennings Commons                Cleveland        Garden                 50    1981         823
   Rainbow Terrace                 Cleveland        Garden                484   1982 r        768
   Shaker Park Gardens II          Warrensville     Garden                151    1964         753
                                                                          ---                 ---
                                                                          685                 769
                                                                        -----                 ---
     Core Portfolio Government                                          1,780                 666
       Asst. Propertie


   CONGREGATE CARE
   Gates Mills Club                Mayfield Heights High Rise             120    1980         721
   The Oaks                        Westlake         Garden                 50    1985         672
                                                                          ---                 ---
                                                                          170                 707
                                                                       ------                 ---
                                                                       11,452                 837
   Joint Venture Properties
   Northeast Ohio
   Market Rate
   Americana                       Euclid           High Rise             738    1968         803
   College Towers                  Kent             Mid Rise              380    1969         662
   Euclid House                    Euclid           Mid Rise              126    1969         654
   Gates Mills Towers              Mayfield Hts.    High Rise             760    1969         856
   Highland House                  Painesville      Garden                 36    1964         539
   Watergate                       Euclid           High Rise             949    1971         831
                                                                        -----                 ---
                                                                        2,989                 789
   Government Asst.-Family
   Lakeshore Village               Cleveland        Garden                108    1982         786
                                                                        -----                 ---
                                                                        3,097                 789
                                                                       ------                 ---
        Core                                                           14,549                 832
                                                                       ------                 ===
                                                                       16,300
                                                                       ======

<CAPTION>
                                       For the three months ending          For the three months ending     
                                              March 31, 1997                      March 31, 1996           
                                   --------------------------------    ---------------------------------- 
                                   Average              Average Rent   Average              Average Rent
                                    Economic  Physical       Per        Economic  Physical        Per
      The Multifamily Properties   Occupancy Occupancy  Suite Sq. Ft.  Occupancy Occupancy  Suite  Sq. Ft.
--------------------------------   --------- ---------  ----- ------   --------- ---------  -----  ------
   <S>                             <c         <C>       <C>   <C>      <C>        <C>       <C>    <C>
   Portage Towers                    86.1       86.7       563   0.65    96.3       96.0       544    0.63
   Somerset West (a)                 93.6       95.4       686   0.66    93.5       95.9       678    0.65
   The Triangle (b)                  99.7       99.3       898   1.46    98.4       97.1       848    1.38
   Timbers                           96.2       90.6       680   0.73    93.6       94.8       674    0.72
   Treetops                          98.3       98.4       729   0.54    95.6       95.3       704    0.52
   Villa Moderne                     95.9       98.5       437   0.87    97.2       94.8       418    0.83
   Vantage Villa                     94.2       98.0       603   0.64    95.9       93.3       561    0.60
   Washington Manor                  99.3       98.3       370   0.68    96.5       99.2       366    0.68
   West Park Plaza                   95.3       95.8       423   0.81    95.3       98.3       412    0.79
   Westchester Townhouses            91.8       93.4       746   0.75    96.8       94.1       741    0.74
   Westlake Townhomes               100.0      100.0       781   0.78   100.0      100.0       745    0.75
   Williamsburg at Greenwood Vllg.   91.9       94.6       838   0.89    95.8       95.4       791    0.84
   Winchester Hills I  (c)           87.8       92.0       566   0.69    92.6       96.1       556    0.68
   Winchester Hills II               87.3       90.9       601   0.73    95.1       94.5       588    0.72
                                     ----       ----       ---   ----   -----       ----       ---    ----
                                     93.8       95.4       594   0.73    95.3       96.2       579    0.71
                                     ----       ----     ----- ------   -----       ----       ---  ------
      Core Market Rate Properties    94.4%      94.9%    $ 605 $ 0.69    95.1%      96.1%    $ 589  $ 0.68

   GOVERNMENT ASST.-ELDERLY
   Ellet Development                 99.3%     100.0%    $ 587  $1.00   100.0%     100.0%    $ 590  $ 1.00
   Hillwood I                       100.0      100.0       596   1.05   100.0      100.0       599    1.05
   Puritas Place (d)                 99.9      100.0       782   1.51   100.0      100.0       782    1.51
   Riverview                        100.0      100.0       591   1.07   100.0       99.9       591    1.07
   State Road Apartments            100.0      100.0       589   0.79   100.0      100.0       596    0.79
   Statesman II                      98.5       97.9       651   0.82   100.0      100.0       651    0.82
   Sutliff Apartments II             99.9      100.0       586   1.02    99.6      100.0       586    1.02
   Tallmadge Acres                  100.0      100.0       658   1.03   100.0      100.0       662    1.03
   Twinsburg Apartments              99.9      100.0       603   1.09   100.0      100.0       603    1.09
   Village Towers                    99.6      100.0       579   1.04   100.0       99.9       583    1.05
   West High Apartments             100.0      100.0       790   1.13   100.0      100.0       790    1.13
                                    -----      -----     ----- ------   -----      -----       ---  ------
                                    100.0%      99.9%    $ 630 $ 1.05   100.0%      99.8%    $ 632  $ 1.05
   GOVERNMENT ASST.-FAMILY
   Jennings Commons                  99.7%     100.0%    $ 674 $ 0.82    98.8%     100.0%    $ 685  $ 0.83
   Rainbow Terrace                   99.4       96.7       773   1.01    98.7       97.7       738    0.96
   Shaker Park Gardens II           100.0       99.3       531   0.71    99.0      100.0       531    0.71
                                    -----      -----     -----  -----    ----      -----      ----    ----
                                     99.6       97.5       712   0.93    98.8       98.4       688    0.89
                                    -----       ----     ----  ------    ----      -----     -----  ------
     Core Portfolio Government      100.0%      99.0%    $ 662 $ 0.99    99.7%      99.3%    $ 654  $ 0.98
       Asst. Properties

   CONGREGATE CARE
   Gates Mills Club                  98.3%     100.0%    $ 806 $ 1.12    96.6%      96.7%    $ 749  $ 1.04
   The Oaks                          97.1       96.0       985   1.47    92.9       94.0       953    1.42
                                     ----      -----     -----  -----    ----       ----     -----  ------
                                     97.8       98.8       859   1.22    95.3       95.9       809    1.14
                                     ----      -----     -----  -----    ----       ----     -----  ------
                                     95.4%      95.6%    $ 618 $ 0.74    95.9%      96.6%    $ 602  $ 0.72
   Joint Venture Properties
   Northeast Ohio
   Market Rate
   Americana                         85.0%      92.1%    $ 480 $ 0.60    90.3%      92.3%    $ 483  $ 0.60
   College Towers                    92.0       89.2       398   0.60    91.7       93.7       404    0.61
   Euclid House                      88.0       93.7       434   0.66    96.5       92.1       430    0.66
   Gates Mills Towers                93.3       96.4       676   0.79    94.2       98.0       655    0.77
   Highland House                    99.7       97.2       401   0.74   100.0      100.0       385    0.71
   Watergate                         88.0       92.9       538   0.65    87.9       91.7       533    0.64
                                     ----       ----     ----- ------   -----      -----     -----  ------
                                     89.7%      93.2%    $ 526 $ 0.67    91.3%      93.8%    $ 521  $ 0.66
   Government Asst.-Family
   Lakeshore Village                 99.3%     100.0%    $ 669 $ 0.85   100.0%     100.0%    $ 669  $ 0.85
                                     ----      -----     ----- ------   -----      -----     -----  ------
                                     90.3       93.5       533   0.68    91.9       94.0       528    0.67
                                     ----      -----     ----- ------   -----      -----     -----    ----
        Core                         95.0%      95.1%    $ 610 $ 0.73    95.5%      96.1%    $ 595  $ 0.71 <PAGE>
 
                                     ====      =====     ===== ======   =====      =====     =====  ======


       <FN>
       (a)  Somerset West has 77 Contract Suites and 120 Conventional Property suites.
       (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.  Unpaid principal and interest
            is expected to exceed seven years of equivalent principal and interest payments in 1995.
       (d)  The property was developed by AEG in 1981 subject to a warranty deed reversion provision.
            This provision states that the assignment of fee simple title of the property to AEG
            (transferred to the Company) shall expire in 2037.
       r =  Rehabilitated
</FN>
</TABLE>

<PAGE> 19

             HISTORICAL FUNDS FROM OPERATIONS AND DISTRIBUTABLE CASH FLOW

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

               FFO and Funds Available for Distribution ("Distributable
          Cash Flow") for the three month period ended March 31, 1997 and
          1996 are summarized in the following table:
<TABLE>
<CAPTION>
                                          For the three
                                          months ended
                                            March 31,
           (In thousands)                 1997     1996  

           <S>                          <C>      <C>
           Net income applicable to
             common shares              $ 3,854  $ 3,420 

           Depreciation on real estate
             assets
             Wholly owned properties      4,071    3,330 
             Joint venture properties       121      122 
                                          -----    -----
           Funds From Operations          8,046    6,872 
                                                  
           Depreciation - other assets      94        69 
           Amortization of deferred
             financing fees                175       162 
           Fixed asset additions          (114)     (115)
                      
                                        -------  -------
           Distributable Cash Flow      $ 8,201  $ 6,988 
                                        =======  =======
           Weighted average shares
             outstanding                 15,322   13,872
</TABLE>


<PAGE> 20

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

                (b)      Reports on Form 8-K

                    None 

<PAGE> 21



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