UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington,
  D.C.  20549Form 10-Q[x]  QUARTERLY
  REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THESECURITIES
  EXCHANGE ACT OF 1934For the
  quarterly period ended June 30, 2009OR[ ]  TRANSITION
  REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THESECURITIES
  EXCHANGE ACT OF 1934For the transition
  period from     toCommission File
  Number 1-12486Associated Estates Realty
  Corporation(Exact name of registrant as specified in its
  charter)OHIO
  
  34-1747603(State or other
  jurisdiction of
  
  (I.R.S. Employerincorporation or
  organization)
  
  Identification
  Number)1 AEC Parkway, Richmond Hts., Ohio  44143-1467(Address of principal executive offices)(216) 261-5000(Registrant's telephone number, including area code)Indicate by check mark whether
  the registrant (1) has filed all reports required to be filed by Section 13
  or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
  (or for such shorter period that the registrant was required to file such
  reports), and (2) has been subject to such filing requirements for the past
  90 days.  Yes [x]  No [ ]Indicate by check mark whether the registrant has
  submitted electronically and posted on its corporate Web site, if any, every
  Interactive Data File required to be submitted and posted pursuant to Rule
  405 of Regulation S-T (subsection 232.405 of this chapter) during the
  preceding 12 months (or for such shorter period that the registrant was
  required to submit and post such files).  Yes [ ]  No [ ]Indicate by check mark whether
  the registrant is a large accelerated filer, an accelerated filer, a
  non-accelerated filer, or a smaller reporting company.  See the definitions
  of "large accelerated filer", "accelerated filer" and "smaller
  reporting company" in Rule 12b-2 of the Exchange Act.  (Check one):Large accelerated
  filer [ ]  Accelerated filer [x]  Non-accelerated filer [ ]  (Do not check if
  a smaller reporting company)  Smaller reporting company [ ]Indicate by check
  mark whether the registrant is a shell company (as defined in Rule 12b-2 of
  the Exchange Act).  Yes [ ]  No [x]The number of
  shares outstanding as of July 27, 2009 was 16,705,327 shares.


1





ASSOCIATED ESTATES
REALTY CORPORATION

Index

PART I  FINANCIAL INFORMATION
  PageITEM 1
  Consolidated Financial Statements (Unaudited)Consolidated Balance
  Sheets at June 30, 2009 and December 31, 2008
  3Consolidated
  Statements of Operations for the three and six monthperiods ended June 30, 2009 and 2008
  4Consolidated
  Statements of Cash Flows for the six month periodsended June 30, 2009 and 2008
  5Notes to
  Consolidated Financial Statements
  6ITEM 2
  Management's
  Discussion and Analysis of FinancialCondition and Results of Operations
  20ITEM 3
  Quantitative
  and Qualitative Disclosures About Market Risk
  26ITEM 4
  Controls and Procedures
  26PART II  OTHER INFORMATIONITEM 1
  Legal Proceedings
  26ITEM 1A
  Risk Factors
  27ITEM 2
  Unregistered
  Sales of Equity Securities and Use of Proceeds
  27ITEM 4
  Submission of
  Matters to a Vote of Security Holders
  28ITEM 6
  Exhibits
  29SIGNATURES
  31




2





PART 1.  FINANCIAL
INFORMATION
ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

ASSOCIATED ESTATES REALTY CORPORATIONCONSOLIDATED BALANCE SHEETS
(UNAUDITED)

(In thousands, except
  share amounts)
  June 30,
  
  December 31,ASSETS
  2009
  
  2008Real estate assetsLand
  $
  107,815
  
  $
  110,220Buildings
  and improvements
  790,862
  
  812,443Furniture
  and fixtures
  28,899
  
  29,315927,576
  
  951,978Less: 
  accumulated depreciation
  (286,246)
  
  (280,541)641,330
  
  671,437Construction
  in progress
  3,927
  
  745Real
  estate associated with property held for sale, net
  -
  
  1,666Real
  estate, net
  645,257
  
  673,848Cash and cash equivalents
  4,321
  
  3,551Restricted cash
  7,862
  
  6,873Accounts and notes
  receivable, netRents
  1,056
  
  1,320Affiliates
  455
  
  606Other
  2,756
  
  1,842Goodwill
  1,725
  
  1,725Other assets, net
  7,962
  
  10,131Total assets
  $
  671,394
  
  $
  699,896LIABILITIES AND SHAREHOLDERS' EQUITYMortgage notes payable
  $
  489,135
  
  $
  510,201Unsecured revolving credit
  facility
  10,000
  
  21,500Unsecured debt
  25,780
  
  25,780Total
  debt
  524,915
  
  557,481Accounts payable, accrued
  expenses and other liabilities
  25,202
  
  26,217Dividends payable
  2,979
  
  2,920Resident security deposits
  3,211
  
  3,360Accrued interest
  2,251
  
  2,468Total liabilities
  558,558
  
  592,446Noncontrolling redeemable
  interest
  1,829
  
  1,829Shareholders' equityPreferred
  shares, without par value; 9,000,000 shares authorized; 8.70% Class B Series
  II cumulativeredeemable,
  $250 per share liquidation preference, 232,000 issued and 193,050outstanding
  at June 30, 2009 and December 31, 2008, respectively
  48,263
  
  48,263Common
  shares, without par value, $.10 stated value; 41,000,000 authorized;
  22,995,763 issued and16,705,327
  and 16,556,221 outstanding at June 30, 2009 and December 31, 2008,
  respectively
  2,300
  
  2,300Paid-in
  capital
  282,480
  
  282,501Accumulated
  distributions in excess of accumulated net income
  (155,560)
  
  (159,595)Accumulated
  other comprehensive loss
  (2,150)
  
  (2,899)Less: 
  Treasury shares, at cost, 6,290,436 and 6,439,542 sharesat
  June 30, 2009 and December 31, 2008, respectively
  (64,326)
  
  (64,949)Total shareholders' equity
  111,007
  
  105,621Total liabilities and shareholders' equity
  $
  671,394
  
  $
  699,896The accompanying notes are an integral part of these
  consolidated financial statements.




3





ASSOCIATED ESTATES
REALTY CORPORATIONCONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)

Three Months Ended
  Six Months EndedJune 30,
  June 30,(In thousands, except per
  share amounts)
  2009
  
  2008
  
  2009
  
  2008RevenueProperty
  revenue
  $
  32,138
  
  $
  32,166
  
  $
  63,962
  
  $
  62,390Management
  and service company revenue:Fees,
  reimbursements and other
  357
  
  397
  
  825
  
  950Painting
  services
  253
  
  188
  
  350
  
  325Total
  revenue
  32,748
  
  32,751
  
  65,137
  
  63,665ExpensesProperty
  operating and maintenance
  13,812
  
  13,711
  
  27,566
  
  26,377Depreciation
  and amortization
  8,587
  
  9,167
  
  17,795
  
  17,421Direct
  property management and service company expense
  348
  
  398
  
  708
  
  793Painting
  services
  322
  
  277
  
  535
  
  520General
  and administrative
  3,165
  
  3,183
  
  6,304
  
  6,711Total
  expenses
  26,234
  
  26,736
  
  52,908
  
  51,822Operating income
  6,514
  
  6,015
  
  12,229
  
  11,843Interest
  income
  18
  
  92
  
  33
  
  106Interest
  expense
  (8,736)
  
  (8,784)
  
  (16,919)
  
  (17,611)(Loss) income before gain on
  insurance recoveries, equity in netloss
  of joint ventures and income from discontinued operations
  (2,204)
  
  (2,677)
  
  (4,657)
  
  (5,662)Gain
  on insurance recoveries
  544
  
  -
  
  544
  
  -Equity
  in net loss of joint ventures
  -
  
  (23)
  
  -
  
  (45)(Loss) income from
  continuing operations
  (1,660)
  
  (2,700)
  
  (4,113)
  
  (5,707)Income
  from discontinued operations:Operating
  income (loss)
  267
  
  241
  
  569
  
  (1,003)Gain
  on disposition of properties
  13,135
  
  2,293
  
  15,413
  
  45,203Income
  from discontinued operations
  13,402
  
  2,534
  
  15,982
  
  44,200Net income (loss)
  11,742
  
  (166)
  
  11,869
  
  38,493Net
  loss attributable to noncontrolling redeemable interest
  (14)
  
  (13)
  
  (27)
  
  (27)Net income (loss)
  attributable to AERC
  11,728
  
  (179)
  
  11,842
  
  38,466Preferred share dividends
  (1,049)
  
  (1,201)
  
  (2,100)
  
  (2,402)Allocation to participating
  securities
  (429)
  
  -
  
  (482)
  
  (768)Net income (loss) applicable
  to common shares
  $
  10,250
  
  $
  (1,380)
  
  $
  9,260
  
  $
  35,296Earnings per common share
  - basic and diluted:(Loss)
  income from continuing operations applicable to common shares
  $
  (0.16)
  
  $
  (0.24)
  
  $
  (0.38)
  
  $
  (0.50)Income
  from discontinued operations
  0.78
  
  0.15
  
  0.94
  
  2.68Net
  income (loss) applicable to common shares
  $
  0.62
  
  $
  (0.09)
  
  $
  0.56
  
  $
  2.18Dividends declared per
  common share
  $
  0.17
  
  $
  0.17
  
  $
  0.34
  
  $
  0.34Weighted average number
  of common sharesoutstanding - basic and diluted
  16,528
  
  16,200
  
  16,481
  
  16,184The accompanying notes are an integral part of these
  consolidated financial statements.




4





ASSOCIATED ESTATES
REALTY CORPORATIONCONSOLIDATED STATEMENTS OF CASH
FLOWS
(UNAUDITED)

Six Months EndedJune 30,(In thousands)
  2009
  
  2008Cash flow from
  operations:Net
  income
  $
  11,869
  
  $
  38,493Adjustments
  to reconcile net income to net cash provided by operations:Depreciation
  and amortization (including discontinued operations)
  18,269
  
  18,764Loss
  on fixed asset replacements write-off
  5
  
  38Gain
  on disposition of properties
  (15,413)
  
  (45,203)Gain
  on insurance recoveries
  (544)
  
  -Amortization
  of deferred financing costs and other
  624
  
  664Share-based
  compensation
  1,049
  
  996Equity
  in net loss of joint ventures
  -
  
  45Net
  change in assets and liabilities:Accounts
  and notes receivable
  408
  
  1,505Accounts
  payable and accrued expenses
  (974)
  
  (4,926)Other
  operating assets and liabilities
  1,011
  
  858Restricted
  cash
  (989)
  
  (150)Total
  adjustments
  3,446
  
  (27,409)Net
  cash flow provided by operations
  15,315
  
  11,084Cash flow from investing
  activities:Recurring
  fixed asset additions
  (3,872)
  
  (3,756)Revenue
  enhancing/non-recurring fixed asset additions
  (691)
  
  (360)Acquisition
  fixed asset additions
  (1,514)
  
  (34,310)Net
  proceeds from disposition of operating properties
  32,714
  
  88,357Net
  cash flow provided by investing activities
  26,637
  
  49,931Cash flow from financing
  activities:Principal
  amortization payments on mortgage notes payable
  (1,421)
  
  (1,407)Principal
  repayments of mortgage notes payable
  (72,096)
  
  (42,851)Payment
  of debt procurement costs
  (686)
  
  (601)Proceeds
  from mortgage notes obtained
  52,450
  
  -Revolver
  borrowings
  95,400
  
  77,850Revolver
  repayments
  (106,900)
  
  (84,750)Common
  share dividends paid
  (5,625)
  
  (5,534)Preferred
  share dividends paid
  (2,100)
  
  (2,402)Operating
  partnership distributions paid
  (27)
  
  (27)Purchase
  of preferred and/or treasury shares
  (177)
  
  (217)Net
  cash flow used for financing activities
  (41,182)
  
  (59,939)Increase in cash and cash
  equivalents
  770
  
  1,076Cash and cash equivalents,
  beginning of period
  3,551
  
  1,549Cash and cash
  equivalents, end of period
  $
  4,321
  
  $
  2,625Supplemental disclosure of
  cash flow information:Dividends
  declared but not paid
  $
  2,979
  
  $
  2,784Cash
  paid for interest
  16,544
  
  20,077Net
  change in accounts payable/receivable related to fixed asset additions
  (287)
  
  1,345Assumption
  of debt in connection with property acquisition
  -
  
  45,002The accompanying notes are an integral part of these
  consolidated financial statements.




5





ASSOCIATED
ESTATES REALTY CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED

1.         BASIS OF
PRESENTATION AND ACCOUNTING POLICIES

Except as the context otherwise requires, all references to
"we," "our," "us," "AERC" and the
"Company" in this report collectively refer to Associated Estates
Realty Corporation and its consolidated subsidiaries.

Business

We are a self-administered and self-managed equity real estate
investment trust ("REIT") specializing in multifamily property management,
advisory, development, acquisition, disposition, operation and ownership
activities.  Our primary source of income is rental revenue.  Additional income
is derived primarily from property and asset management fees.

As of June 30, 2009, our property portfolio consisted of: (i) 48
apartment communities containing 12,108 units in seven states that are wholly owned,
either directly or indirectly through subsidiaries; (ii) two apartment
communities that we manage for third party owners consisting of 343 units; and (iii)
a 186-unit apartment community and a commercial property containing
approximately 145,000 square feet that we asset manage for a government
sponsored pension fund.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been
prepared by management in accordance with accounting principles generally
accepted in the United States of America ("GAAP") 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 GAAP for complete financial statements. 
In the opinion of management, all adjustments, consisting only of normal and
recurring adjustments considered necessary for a fair statement, have been
included.  The reported results of operations are not necessarily indicative of
the results that may be expected for the full year.  These financial statements
should be read in conjunction with the audited financial statements and
accompanying notes in our Annual Report on Form 10-K for the year ended
December 31, 2008.  We have evaluated all subsequent events through August 4,
2009, which is the date the financial statements were issued.

Noncontrolling
Redeemable Interest

In December 2007, the Financial Accounting Standards Board ("FASB")
issued Statement No. 160, "Noncontrolling Interests in Consolidated
Financial Statements  an Amendment of ARB No. 51" ("SFAS 160"),
which establishes and expands accounting and reporting standards for minority
interests in a subsidiary and the deconsolidation of a subsidiary.  SFAS 160
also requires minority interests to be recharacterized as noncontrolling
interests.  SFAS 160 was effective for us January 1, 2009, and as such, the
operating partnership minority interest reported in our Annual Report on Form   10-K
for the year ended December 31, 2008, has been recharacterized as "Noncontrolling
redeemable interest" for all periods presented.

6





Share-Based
Compensation

During the three and six months ended June 30, 2009, we recognized total
share-based compensation cost of $ 450,000 and $1.0 million, respectively, in "General
and administrative expense" in the Consolidated Statements of Operations. 
During the three and six months ended June 30, 2008, we recognized total
share-based compensation cost of $429,000 and $900,000, respectively, in
"General and administrative expense."

Stock Options.  During the six months ended June 30, 2009, there
were 8,000 options awarded and no options exercised.  There were no stock options
awarded or exercised during the six months ended June 30, 2008.  We use the
Black-Scholes option pricing model to estimate the fair value of share-based
awards.  The weighted average Black-Scholes assumptions and fair value for
options awarded during the six months ended June 30, 2009, were as follows:

|Expected volatility                   |  | 36.5 %
|------------------------------------- |  | ------
|Risk-free interest rate               |  | 2.0 % 
|Expected life of options (in
  years) |  | 7.2   
|Dividend yield                        |  | 12.2 %
|Grant-date fair value                 |  |       

The expected volatility was based upon the
historical volatility of our weekly share closing prices over a period equal to
the expected life of the options granted.  The risk-free interest rate used
was the yield from U.S. Treasury bonds on the date of grant with a maturity
approximating the expected life of the options.  The expected life of the
options was derived using our historical experience for similar awards. 
The dividend yield was derived using our annual dividend rate as a percentage of
the price of our shares on the date of grant.

Restricted Shares.  The following table represents restricted
share activity for the six months ended June 30, 2009:

|                                   |  |           |  | Weighted  
|---------------------------------- |  | --------- |  | ----------
|                                   |  |           |  | Average   
|                                   |  | Number of |  | Grant-Date
|                                   |  | Shares    |  | Fair Value
|                                   |  |           |  |           
|Nonvested at beginning of
  period |  | 189,867   |  | $         
|Granted                            |  | 184,070   |  | $         
|Vested                             |  | 110,445   |  | $         
|Forfeited                          |  | 1,672     |  | $         
|Nonvested at end of period         |  | 261,820   |  | $         

At June 30, 2009, there
was $2.5 million of unrecognized compensation cost related to nonvested
restricted share awards that we expect to recognize over a weighted average
period of 2.2 years.  Pursuant to the terms of the Company's Elective Deferred
Compensation Program, certain of our officers elected to defer the receipt of all
or a portion of the restricted shares granted them during the six months ended June
30, 2009.

7





Derivative
Instruments and Hedging Activities

Statement of Financial Accounting Standards No. 161, "Disclosures
about Derivative Instruments and Hedging Activities, an amendment of FASB Statement
No. 133" ("SFAS 161"), amends and expands the disclosure
requirements of FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133") with the intent
to provide users of financial statements with an enhanced understanding of: (a)
how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under SFAS 133 and its
related interpretations, and (c) how derivative instruments and related hedged
items affect an entitys financial position, financial performance, and cash
flows. SFAS 161 requires qualitative disclosures about objectives and
strategies for using derivatives, quantitative disclosures about the fair value
of and gains and losses on derivative instruments, and disclosures about
credit-risk-related contingent features in derivative instruments.  SFAS 133,
as amended and interpreted, establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities.  As required by SFAS 133, we
record all derivatives on the balance sheet at fair value.  The accounting for
changes in the fair value of derivatives depends on the intended use of the
derivative and the resulting designation.  Derivatives used to hedge the
exposure to changes in the fair value of an asset, liability, or firm
commitment attributable to a particular risk, such as interest rate risk, are
considered fair value hedges.  Derivatives used to hedge the exposure to
variability in expected future cash flows, or other types of forecasted
transactions, are considered cash flow hedges.

For derivatives designated as fair value hedges, changes in
the fair value of the derivative and the hedged item related to the hedged risk
are recognized in earnings.  For derivatives designated as cash flow hedges,
the effective portion of changes in the fair value of the derivative is
initially reported in other comprehensive income (outside of earnings) and subsequently
reclassified to earnings when the hedged transaction affects earnings, and the
ineffective portion of changes in the fair value of the derivative is
recognized directly in earnings.  Hedge ineffectiveness is measured by
comparing the changes in fair value or cash flows of the derivative hedging
instrument with the changes in fair value or cash flows of the designated
hedged item or transaction.  For derivatives not designated as hedges, changes
in fair value are recognized in earnings.

We do not use derivatives for trading or speculative
purposes.  Further, we have a policy of only entering into contracts with major
financial institutions based upon their credit ratings and other factors.  When
viewed in conjunction with the underlying and offsetting exposure that the
derivatives are designed to hedge, we have not sustained a material loss from
these hedges.

We have utilized interest rate swaps and caps to add
stability to interest expense and to manage our exposure to interest rate
movements.  Interest rate swaps designated as cash flow hedges involve the
receipt of variable-rate amounts in exchange for fixed-rate payments over the
life of the agreements without exchange of the underlying principal amount. 
Interest rate caps designated as cash flow hedges involve the receipt of
variable-rate amounts if interest rates rise above a certain level in exchange
for an up front premium.

8





Interest Rate Hedge Activity:  During 2007,
we executed two interest rate swaps to hedge the cash flows of existing
variable rate debt.  No hedge ineffectiveness on these cash flow hedges was
recognized during the six months ended June 30, 2009.  Amounts reported in "Accumulated
other comprehensive loss" related to derivatives will be reclassified to "Interest
expense" as interest payments are made on our variable-rate debt.  During the
next twelve months, we estimate that approximately $2.0 million will be
reclassified from "Accumulated other comprehensive loss" as an
increase to "Interest expense."  The following table presents the notional
amounts of the swaps as of June 30, 2009:

|(Dollar amount in
  thousands) | Number of |             | Notional
|------------------------------ | --------- | ----------- | --------
|Interest Rate Derivative       |           | Instruments |         
|Interest rate swaps            |           | 2           |         

The following table presents the fair value of our derivative financial
instruments as well as their classification on the Consolidated Balance Sheets
(see Note 7 for additional information regarding the fair value of these
derivative instruments):

Fair Value of Derivative InstrumentsLiability DerivativesAs of June 30, 2009
  
  As of December 31, 2008(In thousands)
  
  Balance Sheet Location
  
  Fair Value
  
  Balance Sheet Location
  
  Fair ValueDerivatives designated as
  hedginginstruments under SFAS 133:Interest rate swaps
  
  Accounts payable, accrued
  
  
  
  Accounts payable, accruedexpenses
  and other liabilities
  $   
  2,150
  
  expenses
  and other liabilities
  $   
  2,899


The following
table presents the effect of our derivative financial instruments on the
Consolidated Statements of Income (see Note 5 for additional information
regarding the effect of these derivative instruments on total comprehensive
income):

The Effect of Derivative Instruments on the
  Consolidated Statements of OperationsLocation of Gainor (Loss)Amount of Gain or (Loss) Recognized
  
  Reclassified from
  
  Amount of Gain or (Loss) Reclassifiedin OCI on Derivative
  
  Accumulated
  
  from Accumulated OCI into Income(In thousands)
  
  (Effective Portion)
  
  OCI into
  
  (Effective Portion)Derivatives in SFAS 133 Cash
  
  Three Months Ended
  
  Six Months Ended
  
  Income
  
  Three Months Ended
  
  Six Months EndedFlow Hedging Relationships
  
  June 30, 2009
  
  June 30, 2009
  
  (Effective Portion)
  
  June 30, 2009
  
  June 30, 2009Interest rate swaps
  
  $ 
   (487)
  
  $  
  (215)
  
  Interest
  expense
  
  $   
  546
  
  $  
  964


We
have agreements with each of our derivative counterparties that contain a provision
where if we either default or are capable of being declared in default on any
of our indebtedness, then such counterparty can declare us to be in default on our
derivative obligations.

We
have an agreement with a derivative counterparty that incorporates the loan
covenant provisions of our indebtedness with a lender affiliate of the
derivative counterparty. Failure to comply with the loan covenant provisions
would result in our being in default on any derivative instrument obligations
covered by the agreement.

9





As
of June 30, 2009, the fair value of derivatives in a net liability position,
which includes accrued interest but excludes any adjustment for nonperformance
risk, related to these agreements was $2.6 million. As of June 30, 2009, we
have not posted any collateral related to these agreements. If we had breached any
of these provisions at June 30, 2009, we would have been required to settle our
obligations under the agreements at their termination value of $2.6 million.

Classification
of Fixed Asset Additions

We define recurring fixed asset additions to a property to be capital
expenditures made to replace worn out assets to maintain the property's value. 
Revenue enhancing/non-recurring fixed asset additions are defined as capital
expenditures that increase the value of the property and/or enable us to
increase rents.  Acquisition fixed asset additions are defined as capital
expenditures for the purchase or construction of new properties to be added to
our portfolio, or fixed asset additions identified at the time of purchase that
are not made until subsequent periods.

Reclassifications

Certain reclassifications have been made to the 2008 financial
statements to conform to the 2009 presentation.

2.         DEVELOPMENT AND DISPOSITION
ACTIVITY

Development Activity

We recently commenced construction of a 60-unit expansion of the
existing 240-unit River Forest apartment community located in the Richmond,
Virginia metropolitan market area.  Construction in progress related to this
development was $1.6 million at June 30, 2009.  We capitalize 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.  Capitalized interest costs for the three and six months ended June
30, 2009 were $25,000.

Disposition Activity

We report the results of operations and gain/loss related to the
sale of real estate assets as discontinued operations in accordance with SFAS
144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144").  Real estate assets that are classified as held for
sale are also reported as discontinued operations.  We classify properties as
held for sale when all significant contingencies surrounding the closing have
been resolved.  In most transactions, these contingencies are not satisfied
until the actual closing of the transaction.  Interest expense included in
discontinued operations is limited to interest on mortgage debt specifically
associated with properties sold or classified as held for sale.

On June 17, 2009, we completed the sale of Chestnut Ridge apartments, a
468-unit property located in Pittsburgh, Pennsylvania.  The sales price was
$29.8 million and we recorded a gain of $13.1 million.

On January 9, 2009, we completed the sale of Bay Club apartments, a
96-unit property located in Northeast Ohio.  The sales price was $4.1 million and
we recorded a gain of $2.3 million.

"Income from discontinued operations" in the accompanying
Consolidated Statements of Operations for the three and six months ended June
30, 2009 and 2008, includes the operating results for the properties sold in
2009 and prior years, as well as the gains recognized on properties sold during
each reporting period.   The following table summarizes "Income from
discontinued operations:"

10





|                                      | Three Months Ended |        | Six Months Ended
|------------------------------------- | ------------------ | ------ | ----------------
|                                      | June 30,           |        | June 30,        
|(In thousands)                        | 2009               |        | 2008            
|REVENUE                               |                    |        |                 
|Property revenue                      | $                  | 925    |                 
|                                      |                    |        |                 
|EXPENSES                              |                    |        |                 
|Property operating and
  maintenance  | 442                |        | 594             
|Depreciation and
  amortization       | 216                |        | 306             
|Total
  expenses                      | 658                |        | 900             
|Operating income                      | 267                |        | 439             
|Interest income                       | -                  |        | -               
|Interest expense(1)                   | -                  |        | (198)           
|Gain on disposition of
  properties   | 13,135             |        | 2,293           
|Income from discontinued
  operations | $                  | 13,402 |                 



|(1) | Interest expense for the six
  months ended June 30, 2008 includes $2.0 million of defeasance and other
  prepayment costs.
|--- | ---------------------------------------------------------------------------------------------------------------------------

3.         DEBT

The following table identifies our
total debt outstanding and weighted average interest rates:

|                                      | June 30, 2009 |         |                  |      | December 31, 2008 |   |                 
|------------------------------------- | ------------- | ------- | ---------------- | ---- | ----------------- | - | ----------------
|                                      | Balance       |         | Weighted Average |      | Balance           |   | Weighted Average
|(Dollar amounts in
  thousands)       | Outstanding   |         | Interest Rate    |      | Outstanding       |   | Interest Rate   
|FIXED RATE DEBT                       |               |         |                  |      |                   |   |                 
|Mortgages payable - CMBS              | $             | 116,501 |                  | 7.7% |                   | $ | 154,685         
|Mortgages payable - other (1)         | 337,524       |         | 5.8%             |      | 320,516           |   | 5.8%            
|Unsecured borrowings                  | 25,780        |         | 7.9%             |      | 25,780            |   | 7.9%            
|Total
  fixed rate debt               | 479,805       |         | 6.4%             |      | 500,981           |   | 6.5%            
|                                      |               |         |                  |      |                   |   |                 
|VARIABLE RATE DEBT                    |               |         |                  |      |                   |   |                 
|Mortgages payable                     | 35,110        |         | 4.8%             |      | 35,000            |   | 1.6%            
|Unsecured revolving credit
  facility | 10,000        |         | 2.0%             |      | 21,500            |   | 3.7%            
|Total
  variable rate debt            | 45,110        |         | 4.1%             |      | 56,500            |   | 2.4%            
|TOTAL
  DEBT                          | $             | 524,915 |                  | 6.2% |                   | $ | 557,481         



|(1) | Includes $63.0 million of
  variable rate debt swapped to fixed as of June 30, 2009 and December 31,
  2008.
|--- | ------------------------------------------------------------------------------------------------------------

Mortgage Notes Payable

The following table provides information on loans repaid at par as well
as loans obtained during 2009:

11





|(Dollar amounts in
  thousands) |  | Loans Repaid |        |      | Loans Obtained
|------------------------------- |  | ------------ | ------ | ---- | --------------
|Property                        |  | Amount       |        | Rate |               
|Saw Mill Village                |  | $            | 11,119 |      | 7.5%          
|Georgetown Park                 |  | 16,000       |        | 1.6% | (1)           
|Chestnut Ridge                  |  | 19,000       |        | 1.4% | (1)           
|Oaks at Hampton                 |  | 25,977       |        | 7.5% |               
|Steeplechase at Shiloh          |  | -            |        | N/A  |               
|Courtney Chase                  |  | -            |        | N/A  |               
|                                |  | $            | 72,096 |      | 4.6%          



|(1) | Denotes
  variable rate loans.  Variable rates on loans obtained are as of June 30,
  2009.
|--- | -------------------------------------------------------------------------------------------
|(2) | Represents
  weighted average interest rate for the loans listed.                          

During 2008, 2007 and 2006, we defeased 21 loans.  These loans were
defeased pursuant to the terms of the underlying loan documents.  Also, in
accordance with SFAS 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities," we removed those
financial assets and the mortgage loans from our financial records.  All risk
of loss associated with these defeasances have been transferred from us to the
successor borrower and any ongoing relationship between the successor borrower
and us was deemed inconsequential at the time of completion of the respective
transfers.  However, we subsequently learned that certain defeasance
transactions, completed prior to June 2007, could enable us to receive a refund
of a portion of the costs incurred in connection with the transaction.  During
the first quarter of 2009, we received refunds of $563,000, which were included
as a reduction to interest expense.  It is possible that we may receive
additional refunds in the future, however such amounts cannot be estimated due
to the uncertainty of future payments, and we believe that any amounts we may
receive would not be material to our consolidated financial position, cash flow
or results of operations.

4.         GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

In June 1998, we recorded goodwill in connection with the MIG Realty
Advisors, Inc. merger.   We have a policy of completing our annual review of
goodwill during the first quarter of each year and more frequently if events or
changes in circumstances indicate that the carrying value may not be
recoverable.  The review that was completed during the three months ended March
31, 2009 determined that goodwill was not impaired and no other events have
occurred which would require that goodwill be reevaluated and as such there
were no changes to the carrying value of goodwill as of June 30, 2009.  In
performing this analysis, we use a multiple of revenues to the range of
potential alternatives and assign a probability of the various alternatives
under consideration by management.  Should the estimates used to determine
alternatives or the probabilities of the occurrence thereof change, impairment
may result which could materially impact our results of operations for the
period in which it is recorded.

Intangible
Assets

In accordance with
SFAS 141(R), "Business Combinations," we allocate a portion of the
total purchase price of a property acquisition to any intangible assets
identified, such as existing leases and tenant relationships.  The intangible
assets are amortized over the remaining lease terms or estimated life of the
tenant relationship, which is approximately 12 to 16 months.  Due to the short
term nature of residential leases, we believe that existing lease rates
approximate market rates; therefore, no allocation is made for above/below
market leases.

12





5.         SHAREHOLDERS' EQUITY

The following table provides a reconciliation of activity in Shareholders'
equity accounts:

Six Months
  
  Twelve MonthsEnded
  
  Ended(In thousands)
  June 30, 2009
  
  December 31, 2008Noncontrolling redeemable
  interestBalance outstanding at
  beginning of period
  $
  1,829
  
  $
  1,829Balance outstanding at end
  of period
  $
  1,829
  
  $
  1,829Preferred sharesBalance outstanding at
  beginning of period
  $
  48,263
  
  $
  55,213Purchase and retirement of
  Class B Cumulative Redeemable Preferred Shares
  -
  
  (6,950)Balance outstanding at end
  of period
  48,263
  
  48,263Common shares (at $.10
  stated value)Balance outstanding at
  beginning and end of period
  2,300
  
  2,300Paid-in capitalBalance outstanding at
  beginning of period
  282,501
  
  281,152Share based compensation
  (21)
  
  1,294Shares issued from treasury
  for stock option exercises
  -
  
  (88)Purchase and retirement of
  Class B Cumulative Redeemable Preferred Shares
  -
  
  143Balance outstanding at end
  of period
  282,480
  
  282,501Accumulated distributions
  in excess of accumulated net incomeBalance outstanding at
  beginning of period
  (159,595)
  
  (180,436)Net income
  11,869
  
  34,680Net loss attributable to
  noncontrolling redeemable interest
  (27)
  
  (53)Share based compensation
  2
  
  8Purchase and retirement of
  Class B Cumulative Redeemable Preferred Shares
  -
  
  2,146Common share dividends
  declared
  (5,709)
  
  (11,285)Preferred share dividends
  declared
  (2,100)
  
  (4,655)Balance outstanding at end
  of period
  (155,560)
  
  (159,595)Accumulated other
  comprehensive lossBalance outstanding at
  beginning of period
  (2,899)
  
  (1,050)Change in fair value of hedge
  instruments
  749
  
  (1,849)Balance outstanding at end
  of period
  (2,150)
  
  (2,899)Treasury shares (at cost)Balance outstanding at
  beginning of period
  (64,949)
  
  (67,393)Purchase of common shares
  (178)
  
  (221)Share based compensation
  801
  
  734Shares issued from treasury
  for stock option exercises
  -
  
  1,931Balance outstanding at end
  of period
  (64,326)
  
  (64,949)Total Shareholders'
  Equity
  $
  111,007
  
  $
  105,621


13





The
following table identifies total comprehensive income:

|                                            | Six Months Ended
|------------------------------------------- | ----------------
|                                            | June 30,        
|(In thousands)                              | 2009            
|Comprehensive income:                       |                 
|Net income attributable to
  AERC           | $               
|Other comprehensive income
  (loss):        |                 
|Change
  in fair value of hedge instruments | 749             
|Total comprehensive income                  | $               

6.         EARNINGS PER SHARE

Earnings per share ("EPS") have been computed pursuant to the
provisions of SFAS 128, "Earnings per Share."  In June 2008, the
Financial Accounting Standards Board issued Staff Position FSP EITF 03-6-1,
"Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities," which was effective for us
January 1, 2009.  This FSP clarifies that nonvested awards containing
nonforfeitable dividend rights are participating securities and are therefore
required to be included in the computations of basic and diluted earnings per
share.  This FSP requires retrospective application to all periods presented.

There were 1.4
million and 1.6 million options to purchase common shares outstanding at June
30, 2009 and 2008, respectively.  The dilutive effect of these options were not
included in the calculation of diluted earnings per share for the periods
presented as their inclusion would be antidilutive to the net loss applicable
to common shares from continuing operations.

The exchange of
operating partnership noncontrolling interests into common shares was also not
included in the computation of diluted EPS because we intend to settle these OP
units in cash.

The following table presents a reconciliation of
basic and diluted earnings per common share:

Three Months Ended
  
  Six Months EndedJune 30,
  
  June 30,(In thousands)
  2009
  
  2008
  
  2009
  
  2008Numerator - basic and
  diluted:(Loss) income from continuing
  operations
  $
  (1,660)
  
  $
  (2,700)
  
  $
  (4,113)
  
  $
  (5,707)Net
  loss attributable to noncontrolling redeemable interest
  (14)
  
  (13)
  
  (27)
  
  (27)Preferred
  share dividends
  (1,049)
  
  (1,201)
  
  (2,100)
  
  (2,402)(Loss) income from
  continuing operations applicable to common shares
  $
  (2,723)
  
  $
  (3,914)
  
  $
  (6,240)
  
  $
  (8,136)Income from discontinued
  operations
  $
  13,402
  
  $
  2,534
  
  $
  15,982
  
  $
  44,200Allocation
  to participating securities
  (429)
  
  -
  
  (482)
  
  (768)Income from discontinued operations
  applicable to common shares
  $
  12,973
  
  $
  2,534
  
  $
  15,500
  
  $
  43,432Denominator - basic and
  diluted:
  16,528
  
  16,200
  
  16,481
  
  16,184Net income (loss)
  applicable to common shares - basic and diluted:(Loss) income from
  continuing operations applicable to common shares
  $
  (0.16)
  
  $
  (0.24)
  
  $
  (0.38)
  
  $
  (0.50)Income from discontinued
  operations
  0.78
  
  0.15
  
  0.94
  
  2.68Net income (loss) applicable
  to common shares - basic and diluted
  $
  0.62
  
  $
  (0.09)
  
  $
  0.56
  
  $
  2.18





14





7.         FAIR VALUE

Fair value determined   in accordance with GAAP should be based on the
assumptions that market participants would use when pricing certain assets or
liabilities.  Inputs used in determining fair value should be from the highest
level available in the following hierarchy:

| | Level 1 inputs utilize quoted
  prices (unadjusted) in active markets for identical assets or liabilities
  that we have the ability to access;                                                      
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Level 2 inputs may include
  quoted prices for similar assets and liabilities in active markets, as well
  as interest rates and yield curves that are observable at commonly quoted
  intervals; and
| | Level 3 inputs are unobservable
  inputs for the asset or liability that are typically based on an entitys own
  assumptions as there is little, if any, related market activity.                   

In instances where
the determination of the fair value measurement is based on inputs from
different levels of the fair value hierarchy, the fair value measurement will
fall within the lowest level input that is significant to the fair value
measurement in its entirety.

The following table presents the financial liabilities that we measured
at fair value on a recurring basis as of June 30, 2009:

|(In thousands)      |  | Level 1           |  | Level 2     |  | Level 3        |  | Total      
|------------------- |  | ----------------- |  | ----------- |  | -------------- |  | -----------
|Interest rate swaps |  | $            
  - |  | $  
  2,150 |  | $         
  - |  | $  
  2,150

We incorporate credit valuation adjustments to appropriately reflect both
our own nonperformance risk and that of the respective counterparty in the fair
value measurements.  The credit valuation adjustments utilize Level 3 inputs,
such as estimates of current credit spreads, to evaluate the likelihood of
default by either the respective counterparty or us.  However, we determined
that as of June 30, 2009, the impact of the credit valuation adjustments were
not significant to the overall valuation of the swaps.  See "Derivative Instruments
and Hedging Activities" in Note 1 for additional information regarding the
swaps.

Rents, accounts and
notes receivable, other assets, accounts payable, accrued expenses and other
liabilities are carried at amounts that reasonably approximate corresponding
fair values.

In the following disclosure, we determined estimated fair value by
using available market information and appropriate valuation methodologies. 
Considerable judgment is necessary to interpret market data and develop
estimated fair values.  Accordingly, the estimates presented herein are not
necessarily indicative of the amounts we could realize on disposition of the
financial instruments.  The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts.

Mortgage notes payable, revolving debt and other unsecured debt
with an aggregate carrying value of $524.9 million and $557.5 million at June
30, 2009, and December 31, 2008, respectively, have an estimated aggregate fair
value of $528.7 million and $549.0 million, respectively.  Estimated fair value
is based on interest rates available to us as of the dates reported on for
issuance of debt with similar terms and remaining maturities.

8.         GAIN ON INSURANCE RECOVERIES

In June 2009 we settled
a wind storm damage insurance claim involving 13 of our central Ohio properties
for the aggregate sum of $906,000, net of our deductible.  In accordance with
GAAP, we recorded this settlement as a gain on insurance recoveries.  The roofs
of five of these properties sustained extensive damage and were replaced.  We
reported a gain on insurance recoveries of $544,000 in the Consolidated
Statements of Income for the three and six months ended June 30, 2009, which represents
insurance proceeds to be received net of the carrying value of the assets
written off and costs incurred to make repairs.

15





9.         INTERIM
SEGMENT REPORTING

We have three reportable segments:  (1) Acquisition/Disposition
Multifamily Properties; (2) Same Community Multifamily Properties; and (3)
Management and Service Operations.  We have identified our reportable segments
based upon how management makes decisions regarding resource allocation and
performance assessment.  The Acquisition/Disposition properties represent
acquired or developed properties which have not yet reached stabilization (we
consider a property stabilized when we have owned the property for one year)
and properties that have been sold or are classified as held for sale in
accordance with SFAS 144.  The Same Community properties are multifamily
residential apartments that have been owned during the entirety of the
comparison periods.  The Management and Service Operations provide management
and advisory services to the Acquisition/Disposition and Same Community
properties that we own, as well as to third party clients and properties, both
affiliate and non-affiliates, and charge a market rate fee based upon such
services.  All of our segments are located in the United States.

The accounting policies of the reportable segments are the same as those
described in the "Basis of Presentation and Significant Accounting
Policies" in our Annual Report on Form 10-K for the year ended December
31, 2008.  We evaluate the performance of our reportable segments based on Net
Operating Income ("NOI").  NOI is determined by deducting property
operating and maintenance expenses from property revenue for the
Acquisition/Disposition (excluding amounts classified as discontinued
operations) and Same Community segments and deducting direct property
management and service company expenses and painting service expenses from
Management and Service Company revenue for the Management and Service
Operations segment.  We consider NOI to be an appropriate supplemental measure
of our performance because it reflects the operating performance of our real
estate portfolio and management and service companies at the property and
management and service company level and is used to assess regional property
level performance.  NOI should not be considered (i) as an alternative to net
income (determined in accordance with GAAP), (ii) as an indicator of financial
performance, (iii) as an alternative to cash flow from operating activities
(determined in accordance with GAAP) or (iv) as a measure of liquidity; nor is
it necessarily indicative of sufficient cash flow to fund all of our needs.  Other
real estate companies may define NOI in a different manner.

Segment information for the three and six months ended June 30, 2009 and
2008 is as follows:

|                                                |  | Three Months Ended June 30, 2009
|----------------------------------------------- |  | --------------------------------
|                                                |  |                                 
|                                                |  | Acquisition/                    
|(In thousands)                                  |  | Disposition                     
|                                                |  |                                 
|Total segment revenue                           |  | $                               
|Elimination of intersegment
  revenue           |  | -                               
|Consolidated revenue                            |  | 1,672                           
|                                                |  |                                 
|Operating income from
  discontinued operations |  | 267                             
|                                                |  |                                 
|*NOI                                            |  | 1,137                           

*Intersegment revenue and expenses have been eliminated in the computation of
NOI for each of the segments.

16





|                                                |  | Three Months Ended June 30, 2008
|----------------------------------------------- |  | --------------------------------
|                                                |  |                                 
|                                                |  | Acquisition/                    
|(In thousands)                                  |  | Disposition                     
|                                                |  |                                 
|Total segment revenue                           |  | $                               
|Elimination of intersegment
  revenue           |  | -                               
|Consolidated revenue                            |  | 1,375                           
|                                                |  |                                 
|Operating income from
  discontinued operations |  | 241                             
|                                                |  |                                 
|*NOI                                            |  | 924                             

*Intersegment revenue and expenses have been eliminated in the computation of
NOI for each of the segments.

|                                                |  | Six Months Ended June 30, 2009
|----------------------------------------------- |  | ------------------------------
|                                                |  |                               
|                                                |  | Acquisition/                  
|(In thousands)                                  |  | Disposition                   
|                                                |  |                               
|Total segment revenue                           |  | $                             
|Elimination of intersegment
  revenue           |  | (1)                           
|Consolidated revenue                            |  | 3,372                         
|                                                |  |                               
|Operating income from
  discontinued operations |  | 569                           
|                                                |  |                               
|*NOI                                            |  | 2,253                         

*Intersegment revenue and expenses have been eliminated in the computation of
NOI for each of the segments.

|                                              |  | Six Months Ended June 30, 2008
|--------------------------------------------- |  | ------------------------------
|                                              |  |                               
|                                              |  | Acquisition/                  
|(In thousands)                                |  | Disposition                   
|                                              |  |                               
|Total segment revenue                         |  | $                             
|Elimination of intersegment
  revenue         |  | -                             
|Consolidated revenue                          |  | 1,375                         
|                                              |  |                               
|Operating loss from
  discontinued operations |  | (1,003)                       
|                                              |  |                               
|*NOI                                          |  | 922                           

*Intersegment revenue and expenses have been
eliminated in the computation of NOI for each of the segments.

17





Total
assets for each of the reportable segments are summarized as follows:

|                                    |  | June 30, |         | December 31,
|----------------------------------- |  | -------- | ------- | ------------
|                                    |  | 2009     |         | 2008        
|Assets                              |  |          |         |             
|Acquisition/disposition             |  | $        | 72,873  |             
|Same community                      |  | 585,234  |         | 610,975     
|Management and service
  operations |  | 13,287   |         | 13,909      
|Total assets                        |  | $        | 671,394 |             

A reconciliation of NOI to total consolidated net income (loss) attributable
to AERC is as follows:

|                                                              | Three Months Ended |        | Six Months Ended
|------------------------------------------------------------- | ------------------ | ------ | ----------------
|                                                              | June 30,           |        | June 30,        
|(In thousands)                                                | 2009               |        | 2008            
|                                                              |                    |        |                 
|Property NOI                                                  | $                  | 18,326 |                 
|Management and service
  operations NOI                       | (60)               |        | (90)            
|Depreciation and
  amortization                               | (8,587)            |        | (9,167)         
|General and administrative
  expense                          | (3,165)            |        | (3,183)         
|Interest income                                               | 18                 |        | 92              
|Interest expense                                              | (8,736)            |        | (8,784)         
|Gain on insurance recoveries                                  | 544                |        | -               
|Equity in net loss of joint
  ventures                        | -                  |        | (23)            
|Income from discontinued
  operations:                        |                    |        |                 
|Operating income (loss)                                       | 267                |        | 241             
|Gain on disposition of
  properties                           | 13,135             |        | 2,293           
|Income from discontinued
  operations                         | 13,402             |        | 2,534           
|Net income (loss)                                             | 11,742             |        | (166)           
|Net loss attributable to
  noncontrolling redeemable interest | (14)               |        | (13)            
|Consolidated net income
  (loss) attributable to AERC         | $                  | 11,728 |                 

10.        CONTINGENCIES

Legal
Proceedings

We are subject to legal proceedings, lawsuits and other claims,
including proceedings by government authorities (collectively
"Litigation").  Litigation is subject to uncertainties and outcomes
are difficult to predict.  Consequently, we are unable to estimate ultimate
aggregate monetary liability or financial impact with respect to the Litigation
matter described in the following paragraph as of June 30, 2009, and no accrual
has been made for this matter.  We believe that other Litigation will not have
a material adverse impact on us after final disposition.  However, because of
the uncertainties of Litigation, one or more lawsuits could ultimately result
in a material obligation.

18





Pending Lawsuits

On or about April
14, 2002, Melanie and Kyle Kopp commenced an action against us in the Franklin
County, Ohio Court of Common Pleas seeking undetermined damages, injunctive
relief and class action certification.  This case arose out of our Suredeposit
program.  This program allowed cash short prospective residents to purchase a
bond in lieu of paying a security deposit.  The bond serves as a fund to pay
those resident obligations that would otherwise have been funded by the security
deposit.  Plaintiffs allege that the nonrefundable premium paid for the bond is
a disguised form of security deposit, which is otherwise required to be
refundable in accordance with Ohio's Landlord-Tenant Act.  Plaintiffs further
allege that certain pet deposits and other nonrefundable deposits required by
us are similarly security deposits that must be refundable in accordance with Ohio's Landlord-Tenant Act.  On or about
January 15, 2004, the Plaintiffs filed a motion for class certification.  We
subsequently filed a motion for summary judgment.  On or about September 3,
2008, the court granted our motion for summary judgment thereby dismissing all
Plaintiff claims against us.  However, Plaintiff subsequently appealed the
courts ruling to the Ohio Court of Appeals for the 10th District,
which dismissed the appeal on technical grounds. The technical issues have now
been resolved and we anticipate that Plaintiff will refile its appeal.

11.        SUBSEQUENT
EVENTS

Dividends.

On August 3, 2009,
we paid a dividend of $0.17 per common share to shareholders of record on July 15,
2009, which was declared on June 15, 2009.

19







ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following
discussion should be read in conjunction with the consolidated financial
statements and notes thereto included in Part I, Item 1 of this report on Form
10-Q.  This discussion may 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, including but not limited to, expectations regarding our 2009
performance which are based on certain assumptions.  Accordingly, readers are
cautioned not to place undue reliance on forward-looking statements that speak
only as of the dates of the document.  These forward-looking statements are
intended to be covered by the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995.  The words "expects," "projects,"
"believes," "plans," "anticipates" and similar
expressions are intended to identify forward-looking statements.  Investors are
cautioned that these forward-looking statements involve risks and uncertainty
that could cause actual results to differ from estimates or projections
contained in these forward-looking statements, including without limitation the
following:

| | changes in the economic climate
  in the markets in which we own and manage properties, including interest rates,
  our ability to consummate the sale of properties pursuant to our current
  plan, the overall level of economic activity, the availability of consumer
  credit and mortgage financing, unemployment rates and other factors;
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | our ability to refinance debt on
  favorable terms at maturity;                                                                                                                                                                                                                                                                                 
| | our ability to defease or
  prepay debt pursuant to our current plan;                                                                                                                                                                                                                                                                           
| | risks of a lessening of demand
  for the multifamily units that we own or manage;                                                                                                                                                                                                                                                               
| | competition from other
  available multifamily units and changes in market rental rates;                                                                                                                                                                                                                                                        
| | increases in property and
  liability insurance costs;                                                                                                                                                                                                                                                                                          
| | unanticipated increases in real
  estate taxes and other operating expenses;                                                                                                                                                                                                                                                                    
| | weather conditions that
  adversely affect operating expenses;                                                                                                                                                                                                                                                                                  
| | expenditures that cannot be
  anticipated such as utility rate and usage increases, unanticipated repairs
  and real estate tax valuation reassessments or millage rate increases;                                                                                                                                                              
| | our inability to control
  operating expenses or achieve increases in revenue;                                                                                                                                                                                                                                                                  
| | the results of litigation filed
  or to be filed against us;                                                                                                                                                                                                                                                                                    
| | changes in tax legislation;                                                                                                                                                                                                                                                                                                                     
| | risks of personal injury claims
  and property damage related to mold claims because of diminished insurance
  coverage;                                                                                                                                                                                                                        
| | catastrophic property damage
  losses that are not covered by our insurance;                                                                                                                                                                                                                                                                    
| | our ability to acquire
  properties at prices consistent with our investment criteria;                                                                                                                                                                                                                                                          
| | risks associated with property
  acquisitions such as environmental liabilities, among others;                                                                                                                                                                                                                                                  
| | changes in or termination of
  contracts relating to third party management and advisory business; and                                                                                                                                                                                                                                          
| | risks related to the perception
  of residents and prospective residents as to the attractiveness, convenience
  and safety of our properties or the neighborhoods in which they are located.                                                                                                                                                   



20





Overview.

We are engaged
primarily in the ownership and operation of multifamily residential units.  We
also provide asset and property management services to third party owners of
multifamily residential units.  Our primary source of cash and revenue from
operations is rents from the leasing of owned apartment units, which represented
98.2% of our consolidated revenue for the six months ended June 30, 2009.

The operating performance of our properties is affected by general
economic trends including, but not limited to, factors such as household formation,
job growth, unemployment rates, population growth, immigration, the supply of
new multifamily rental communities and the supply of other housing
alternatives, such as condominiums, single and multifamily rental homes and
owner occupied single and multifamily homes.  Additionally, our performance may
be affected by access to, and the cost of capital.

Rental revenue collections are a combination of rental rates, occupancy
levels and rent concessions.  We attempt to adjust these factors to adapt to
changing market conditions, thus allowing us to maximize rental income. 
Indicators that we use in measuring these factors include physical occupancy
and net rents.  These indicators are more fully described in the Results of
Operations comparison.  Additionally, we consider property NOI to be an
important indicator of our overall performance.  Property NOI (property
operating revenue less property operating and maintenance expenses) is a
measure of the profitability of our properties and has the largest impact on
our financial condition and operating results.  See Note 9 of the Notes to
Consolidated Financial Statements presented in Part I, Item 1 of this report on
Form 10-Q for additional information regarding property NOI and total NOI, in
addition to a reconciliation of NOI to consolidated net income (loss)
attributable to AERC in accordance with GAAP.

We have three
reportable segments:  (1) Acquisition/Disposition Multifamily Properties; (2)
Same Community Multifamily Properties; and (3) Management and Service
Operations.  Our Same Community portfolio consists of 46 properties containing
11,572 units and accounted for 94.7% of total property revenue and 93.8% of our
property NOI during the six months ended June 30, 2009.  NOI for the Same
Community portfolio decreased $948,000 or 2.7% during the six months ended June
30, 2009 when compared to the six months ended June 30, 2008.  This decrease
was primarily attributable to a $1.7 million or 16.1% reduction in NOI at our Southeast
properties, while NOI at our Midwest portfolio increased $754,000 or 3.8%.

Updated 2009
Expectations.

| | Portfolio performanceOur updated guidance reflects Same Community property NOI decreasing
  in the range of -3.5% to -2.5% in 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Property acquisitions,
  sales and development  Our updated guidance reflects the acquisition
  of $40.0 million of properties during the second half of the year, rather
  than the $80.0 million we originally anticipated.  We completed the
  disposition of two properties for $33.9 million through June 30, 2009, and we
  expect no further property sales during 2009.  We also began construction of
  a 60-unit expansion of our River Forest apartment community, which is located
  in the Richmond, Virginia metropolitan area.  The cost of this expansion
  project is expected to be approximately $7.0 million.  We expect to incur
  approximately $5.0 million in costs related to this development during 2009,
  with the remaining $2.0 million to be expended in 2010.
| | Debt repayment  We
  have already repaid all our loans maturing in 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



21





Forecast Qualification.  The uncertainties caused by the current
economic turndown and the unprecedented financial crisis complicate our ability
to forecast future performance and disposition/acquisition activity. We believe
that the apartment industry is better situated to weather the recession and
financial crisis than other real estate sectors, because people will normally
choose shelter over discretionary spending such as going to the mall or hotel
stays and because government sponsored agencies such as Fannie Mae and Freddie
Mac continue to provide needed financing and refinancing credit facilities,
which are otherwise unavailable to other commercial real estate sectors.
However, our 2009 expectations may be adversely impacted if recessionary forces
accelerate or Congress curtails Fannie Mae or Freddie Mac financing support to
the apartment industry.

LIQUIDITY AND CAPITAL
RESOURCES

Cash Flows and
Liquidity.  Significant sources and uses of cash during the six months ended June
30, 2009 and 2008 are summarized as follows:

|                                                                      | Six Months Ended
|--------------------------------------------------------------------- | ----------------
|                                                                      | June 30,        
|(In thousands)                                                        | 2009            
|Net cash provided by
  operations                                     | $               
|Fixed assets:                                                         |                 
|Property/land
  acquisitions and development expenditures, net        | (1,514)         
|Net
  property disposition proceeds                                   | 32,714          
|Recurring,
  revenue enhancing and non-recurring capital expenditures | (4,563)         
|Debt:                                                                 |                 
|Decrease
  in mortgage notes                                          | (21,067)        
|Decrease
  in revolver borrowings                                     | (11,500)        
|Cash dividends and operating
  partnership distributions paid         | (7,752)         

Our primary sources of liquidity are cash flow provided by operations,
short-term borrowings on the revolver and proceeds from property sales.  We
believe that we are well positioned to weather the recent turmoil in the
financial markets.  Four mortgage loans totaling approximately $72.2 million were
scheduled to mature in 2009.  During the six months ended June 30, 2009, we repaid
$52.5 million of the maturing debt with funds from new mortgage loans that
mature in 2016 and we utilized short term funding from our revolver for the
remaining $19.7 million.  The revolver borrowing was repaid with funds received
from the sale of a 468-unit property located in Pennsylvania in June 2009.  As
of June 30, 2009, our revolver had $140.0 million available for borrowing and matures
on March 11, 2011.

While we expect
rental revenue to remain flat or decline due to increased concessions in some
of our markets, we anticipate that cash flow provided by operations for the
remainder of the year should remain consistent with current levels and should be
adequate to fund our cash needs, other than the $5.0 million that we anticipate
spending in 2009 to develop a 60-unit expansion of a Richmond, Virginia property,
which we intend to fund with borrowings on our revolver.

Cash flow
provided by operations increased during 2009 compared to 2008 primarily due to changes
in accounts payable and accrued expenses and an increase in cash flow from
property operations of $2.1 million.

In addition to the development
costs of $5.0 million, we anticipate funding approximately $6.3 million for
recurring, revenue enhancing and nonrecurring capital expenditures for the
remainder of 2009.  These expenditures are expected to be funded largely from
cash flow provided by operations.

22





Any future multifamily property acquisitions or developments would be
financed with the most appropriate sources of capital, which may include secured
or unsecured debt financings, borrowings on the revolver, the assumption of
mortgage indebtedness, bank and other institutional borrowings, the exchange of
properties, undistributed earnings and debt or equity issuances under our
effective shelf registration.

We anticipate that we will meet our 2009 liquidity requirements through
cash flow provided by operations.  We believe that this and other sources, such
as the revolver, should be sufficient to meet operating requirements, capital
additions, mortgage amortization payments and the payment of dividends in accordance
with REIT requirements.  We anticipate that we will continue paying our regular
quarterly dividends in cash.

RESULTS
OF OPERATIONS

Comparison of the three and six
months ended June 30, 2009 to the three and six months ended June 30, 2008.

In the following discussion, Same Community properties
represent 46 properties that we have owned during the entirety of the
comparison periods.  Acquired properties represent two properties acquired in
April 2008.

The net loss from continuing operations decreased $1.0 million and $1.6
million during the three and six month comparison periods, respectively.  The
decrease in the three month comparison period was primarily due to a reduction
in depreciation and amortization expense and a gain on insurance recoveries
recognized during 2009.  The decrease in the six month comparison period was
primarily due to a reduction in interest expense, the gain on insurance
recoveries and an increase in property NOI recognized during 2009.  The
following table presents property NOI results for both comparison periods:

|                           |  | Three Months Ended June 30, |        | Six Months Ended June 30,
|-------------------------- |  | --------------------------- | ------ | -------------------------
|                           |  | 2009                        |        | 2008                     
|                           |  | Property                    |        | Property                 
|(In thousands)             |  | NOI                         |        | NOI                      
|Same Community Properties: |  |                             |        |                          
|Midwest                    |  | $                           | 10,426 |                          
|Mid-Atlantic               |  | 2,477                       |        | 2,428                    
|Southeast                  |  | 4,288                       |        | 5,146                    
|Total Same Community       |  | 17,191                      |        | 17,531                   
|Acquired Properties        |  | 1,135                       |        | 924                      
|Total Property NOI         |  | $                           | 18,326 |                          

The decrease in Same Community NOI during the three month comparison
period was primarily due to a decrease in property revenue of $325,000 or 1.1%,
combined with a slight increase in operating expenses.  The decrease in Same
Community NOI during the six month comparison period was primarily due to a
decrease in property revenue of $425,000 or 0.7%, combined with an increase in
operating expenses of $523,000 or 2.0%.

23





The following chart reflects the amount and percentage change in line
items that are relevant to the changes in overall operating performance:

|                                             |  | Increase (decrease) when   |        | Increase (decrease) when
|-------------------------------------------- |  | -------------------------- | ------ | ------------------------
|                                             |  | comparing the three months |        | comparing the six months
|                                             |  | ended June 30, 2009        |        | ended June 30, 2009     
|(In thousands)                               |  | to June 30, 2008           |        | to June 30, 2008        
|                                             |  |                            |        |                         
|Property revenue                             |  | $                          | (28)   | (0.1)%                  
|Property operating and
  maintenance expense |  | 101                        | 0.7%   |                         
|Depreciation and
  amortization              |  | (580)                      | (6.3)% |                         
|Interest expense                             |  | (48)                       | (0.5)% |                         
|Gain on insurance recoveries                 |  | 544                        | N/A    |                         
|Income from discontinued
  operations        |  | 10,868                     | 428.9% |                         

Property revenue. 
Property revenue is impacted by a combination of rental rates, rent concessions
and occupancy levels, i.e., net collected rent per unit.  We measure these
factors using indicators such as physical occupancy (number of units occupied
divided by total number of units at the end of the period) and average monthly
net rent per unit (gross potential rents less concessions divided by total
number of units).  This information is presented in the following tables for
the three and six months ended June 30, 2009 and 2008:

|                           |  | Physical Occupancy
|-------------------------- |  | ------------------
|                           |  | June 30,          
|                           |  | 2009              
|Same Community Properties: |  |                   
|Midwest                    |  | 97.1%             
|Mid-Atlantic               |  | 97.6%             
|Southeast                  |  | 90.4%             
|Total Same Community       |  | 95.4%             
|Acquired Properties        |  | 94.0%             



|                           |  | Average Monthly Net Collected Rent Per Unit
|-------------------------- |  | -------------------------------------------
|                           |  | Three Months Ended                         
|                           |  | June 30,                                   
|                           |  | 2009                                       
|Same Community Properties: |  |                                            
|Midwest                    |  | $                                          
|Mid-Atlantic               |  | $                                          
|Southeast                  |  | $                                          
|Total Same Community       |  | $                                          
|Acquired Properties        |  | $                                          



24





The following table presents property revenue results for both
comparison periods:

|                           |  | Three Months Ended June 30, |        | Six Months Ended June 30,
|-------------------------- |  | --------------------------- | ------ | -------------------------
|                           |  | 2009                        |        | 2008                     
|                           |  | Property                    |        | Property                 
|(In thousands)             |  | Revenue                     |        | Revenue                  
|Same Community Properties: |  |                             |        |                          
|Midwest                    |  | $                           | 18,785 |                          
|Mid-Atlantic               |  | 3,632                       |        | 3,530                    
|Southeast                  |  | 8,049                       |        | 8,738                    
|Total Same Community       |  | 30,466                      |        | 30,791                   
|Acquired Properties        |  | 1,672                       |        | 1,375                    
|Total Property Revenue     |  | $                           | 32,138 |                          

The increases in property revenue for the Midwest portfolio during
2009 are primarily a result of an increase in net rents (gross potential rents
less concessions) combined with a reduction in the amount of vacancy losses
over both comparison periods.  Property revenue in the Mid-Atlantic properties
increased during 2009 primarily due to net rent increases which were partially
offset by an increase in the amount of vacancy losses over both comparison
periods.  Property revenue for the Southeast portfolio decreased during 2009 primarily
because of increases in concessions being offered and increases in the amount
of vacancy losses over both comparison periods.

Property operating and maintenance expenses.  Property operating
and maintenance expenses increased during both comparison periods primarily as
a result of expenses related to the Acquired properties.  Property operating
and maintenance expenses in the Same Community segment were flat during the three
month comparison period and increased $523,000 during the six month comparison
period primarily as a result of increases in utilities expense, real estate tax
expense and repairs and maintenance expense in the Southeast and Mid-Atlantic
properties.

Depreciation and amortization.Depreciation and amortization
expense decreased during the three month comparison period primarily due to a
decrease in amortization of intangible assets in 2009 related to properties
acquired in 2007, which was partially offset by an increase in depreciation and
amortization of intangible assets related to the properties acquired in 2008. 
Depreciation and amortization expense increased during the six month comparison
period primarily due to an increase in depreciation and amortization of
intangible assets related to the properties acquired in 2008.

Interest expense.Interest expense decreased in 2009 during the
six month comparison period primarily due to the receipt in the first quarter
of 2009 of refunds totaling $563,000 in defeasance costs in connection with certain
previously defeased loans and decreased interest expense of $125,000 for
borrowings on our revolver.

Income from
Discontinued Operations.  Discontinued operations include the operating
results and gains related to the sales of two properties sold in 2009 and 15 properties
that were sold during 2008.  Defeasance/prepayment costs recognized in 2008
totaling $2.0 million were included in discontinued operations.  For further
details on "Income from discontinued operations," see Note 2 of the
Notes to Consolidated Financial Statements presented in Part I, Item 1 of this
report on Form 10-Q.

25





CONTINGENCIES

For a discussion of contingencies, see Note 10 of the Notes to
Consolidated Financial Statements presented in Part I, Item 1 of this report on
Form 10-Q.

ITEM 3.  QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK

We are exposed to
interest rate changes associated with variable rate debt and the refinancing
risk on our fixed-rate debt.  Based on our variable rate debt outstanding at June
30, 2009 and 2008, an interest rate change of 100 basis points would impact
interest expense approximately $450,000 and $480,000 on an annual basis,
respectively. We occasionally use derivative instruments to manage our exposure
to interest rates.  See Note 1 of the Notes to Consolidated Financial
Statements presented in Part I, Item 1 of this report on Form 10-Q for
additional information regarding derivative instruments and "Item 7A
Qualitative and Quantitative Disclosures About Market Risk" of our Annual
Report on Form 10-K for the year ended December 31, 2008, for a more complete
discussion of interest rate sensitive assets and liabilities.

ITEM 4.  CONTROLS AND PROCEDURES

Disclosure
Controls and Procedures.  We have evaluated the design and operations of
our disclosure controls and procedures to determine whether they are effective
in ensuring that the disclosure of required information is timely made in
accordance with the Securities Exchange Act of 1934 ("Exchange Act")
and the rules and forms of the Securities and Exchange Commission.  This
evaluation was made under the supervision and with the participation of
management, including our Chief Executive Officer ("CEO") and Chief
Financial Officer ("CFO"), as of the end of the period covered by
this report on Form 10-Q.  The CEO and CFO have concluded, based on their
review, that our disclosure controls and procedures, as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e), are effective to ensure that information
required to be disclosed in reports that we file under the Exchange Act is (i) recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms, and (ii) accumulated and
communicated to management, including the principal executive and principal
financial officers, as appropriate, to allow timely decisions regarding
disclosure.

Changes in Internal Control over Financial Reporting.  There were
no changes in our internal control over financial reporting during the second quarter
of 2009 that materially affected, or are reasonably likely to materially
affect, internal control over financial reporting.

We believe that
because of its inherent limitations, internal control over financial reporting
may not always prevent or detect misstatements.  Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

PART II.     OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS

For information
related to legal proceedings, see Note 10 of the Notes to Consolidated
Financial Statements presented in Part I, Item 1 of this report on Form 10-Q.



26





ITEM 1A.    RISK
FACTORS

See "Risk
Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year
ended December 31, 2008.

ITEM 2.       UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS

|Issuer Purchases of Equity Securities for the Three
  Months Ended June 30, 2009
|--------------------------------------------------------------------------------
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Period                                                                          
|April 1 through                                                                 
|April
  30                                                                      
|May 1 through                                                                   
|May
  31                                                                        
|June 1 through                                                                  
|June
  30                                                                       
|Total                                                                           
|                                                                                

In December 2008,
our Board of Directors authorized the repurchase of up to $25.0 million of our
common and/or preferred shares.  This authorization is in addition to the $1.3
million remaining on our $50.0 million authorization, which was originally
approved by our Board of Directors in July 2005 and October 2006. 
Additionally, we have a policy, which allows employees to pay their portion of
the income taxes related to restricted share vesting by surrendering a number
of shares to us equal in value on the day of vesting to the amount of taxes due
up to the minimum statutory withholding amount.

27





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

On May 6, 2009, we held our Annual Meeting of Shareholders.  All of
the directors were elected.  Following are the matters our shareholders voted
upon and the results of the vote:

|(1) | The election of directors.
|--- | --------------------------



|                    |  |           |  | Withheld 
|------------------- |  | --------- |  | ---------
|                    |  | For       |  | Authority
|                    |  |           |  |          
|Albert T. Adams     |  | 6,980,489 |  | 8,226,813
|James M. Delaney    |  | 7,861,235 |  | 7,346,067
|Jeffrey I. Friedman |  | 8,331,021 |  | 6,876,281
|Michael E. Gibbons  |  | 8,421,483 |  | 6,785,819
|Mark L. Milstein    |  | 8,418,593 |  | 6,788,709
|James A. Schoff     |  | 8,414,154 |  | 6,793,148
|Richard T. Schwarz  |  | 8,417,671 |  | 6,789,631



|(2) | Ratification of the appointment of PricewaterhouseCoopers LLP as the Company's
|--- | ------------------------------------------------------------------------------
|    | Independent Registered Public Accounting Firm.                                





|For        |  | Against |  | Abstain
|---------- |  | ------- |  | -------
|15,056,264 |  | 105,099 |  | 45,941 



28





ITEM 6.     EXHIBITS

|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | Filed herewith or                                                                 
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | incorporated herein                                                               
|Number |  | Title                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | by reference                                                                      
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                   
|3.1    |  | Amendment to Second Amended
  and Restated Articles of Incorporation.                                                                                                                                                                                                                                                                                                                                                                                                                               |  | Exhibit 3.1 to Form 8-K
  filed December 8, 2004.                                 
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                   
|3.2    |  | Second Amended and Restated
  Articles of Incorporation.                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | Exhibit 3.2 to Form 10-Q
  filed July 31, 2007.                                   
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                   
|3.3    |  | Amended and Restated Code of
  Regulations of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | Exhibit 3.3 to Form 10-Q
  filed August 1, 2006.                                  
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                   
|4.1    |  | Specimen Common Share
  Certificate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Exhibit 3.1 to Form S-11
  filed September 2, 1993 (File No. 33-68276 as amended).
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                   
|4.1a   |  | Amended and Restated
  Shareholders Rights Agreement dated December 30 2008.                                                                                                                                                                                                                                                                                                                                                                                                                        |  | Exhibit 4.1 to Form 8-K
  filed December 30, 2008.                                
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                   
|4.2    |  | Specimen 8.70% Class B
  Series II Cumulative Redeemable Preferred Shares.                                                                                                                                                                                                                                                                                                                                                                                                                          |  | Exhibit 4.3 to Form 8-A
  filed December 8, 2004.                                 
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                   
|4.3    |  | Deposit Agreement by and
  among Associated Estates Realty Corporation and National City Bank and
  Depositary Receipts.                                                                                                                                                                                                                                                                                                                                                                            |  | Exhibit 4.5 to Form 8-A
  filed December 8, 2004.                                 
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                   
|4.5    |  | Form of Promissory Note and
  Form of Mortgage and Security Agreement dated May 10, 1999 from AERC to The
  Chase Manhattan Bank.                                                                                                                                                                                                                                                                                                                                                                   |  | Exhibit 4.5 to Form 10-Q
  filed August 13, 1999.                                 
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                   
|4.5a   |  | Form of Promissory Note and
  Form of Mortgage and Security Agreement dated September 10, 1999 from AERC to
  The Chase Manhattan Bank.                                                                                                                                                                                                                                                                                                                                                             |  | Exhibit 4.5a to Form 10-Q
  filed November 12, 1999.                              
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                   
|4.5b   |  | Form of Promissory Note and
  Form of Mortgage and Security Agreement dated November 18, 1999 from AERC to
  The Chase Manhattan Bank.                                                                                                                                                                                                                                                                                                                                                              |  | Exhibit 4.5b to Form 10-K
  filed March 15, 2000.                                 
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                   
|4.13   |  | Credit Agreement Dated As of
  April 24, 2007 among Associated Estates Realty Corporation, as Borrower and
  National City Bank as Administrative Agent, Lead Arranger, and Book Manager
  and The Several Lenders From Time to Time Parties Hereto, as Lenders.                                                                                                                                                                                                                                    |  | Exhibit 4.13 to Form 10-Q
  filed July 31, 2007.                                  
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                   
|4.15   |  | First Amendment to Credit
  Agreement dated March 20, 2008 by and among Associated Estates Realty
  Corporation (the Borrower), National City Bank and other banks and financial
  institutions (the Lenders) and National City Bank (the Administrative Agent).                                                                                                                                                                                                                                    |  | Exhibit 4.15 to Form 10-Q
  filed May 6, 2008.                                    
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                   
|4.16   |  | Joinder to Subsidiary
  Guaranty dated March 20, 2008 for the benefit of National City Bank, as agent
  for itself and certain other lenders, with respect to a loan from the Lenders
  to Associated Estates Realty Corporation.                                                                                                                                                                                                                                                                   |  | Exhibit 4.16 to Form 10-Q
  filed May 6, 2008.                                    
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                   
|       |  | Certain of the Registrant's
  assets are subject to mortgage obligations each of which individually relates
  to indebtedness totaling less than 10.0% of the total assets of the
  Registrant.  The Registrant hereby agrees to furnish a copy of such
  agreements to the Commission upon its request.                                                                                                                                                                                            |  |                                                                                   
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                   
|       |  | The Registrant issued
  unsecured debt in the form of Trust Preferred Securities on March 15, 2005 in
  a private placement in an amount less than 10.0% of the total assets of the
  Registrant.  The Registrant hereby agrees to furnish a copy of the Purchase
  Agreement dated March 15, 2005 between Associated Estates Realty Corporation,
  AERC Delaware Trust and Taberna Preferred Funding 1, Ltd. And a specimen
  Preferred Securities Certificate to the Commission upon its request. |  |                                                                                   
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                   
|10     |  | Associated Estates Realty
  Corporation Directors' Deferred Compensation Plan.                                                                                                                                                                                                                                                                                                                                                                                                                      |  | Exhibit 10 to Form 10-Q
  filed November 14, 1996.                                



29





|       |  |                                                                                                                                                                                                                       |  | Filed herewith or                                                                  
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------
|       |  |                                                                                                                                                                                                                       |  | incorporated herein                                                                
|Number |  | Title                                                                                                                                                                                                                 |  | by reference                                                                       
|       |  |                                                                                                                                                                                                                       |  |                                                                                    
|10a    |  | Associated Estates Realty
  Corporation Directors' Deferred Compensation Plan  (January 1, 2005
  Restatement).                                                                                                       |  | Exhibit 10a to Form 10-K
  filed February 25, 2009.                                
|       |  |                                                                                                                                                                                                                       |  |                                                                                    
|10.1   |  | Stock Option Plan.                                                                                                                                                                                                    |  | Exhibit 10.2 to Form S-11
  filed September 2, 1993 (File No. 33-68276 as amended).
|       |  |                                                                                                                                                                                                                       |  |                                                                                    
|10.2   |  | Amended and Restated
  Employment Agreement between the Company and Jeffrey I. Friedman.                                                                                                                              |  | Exhibit 10.1 to Form 10-Q
  filed May 13, 1996.                                    
|       |  |                                                                                                                                                                                                                       |  |                                                                                    
|10.3   |  | Equity-Based Incentive
  Compensation Plan.                                                                                                                                                                           |  | Exhibit 10.4 to Form 10-K
  filed March 29, 1995.                                  
|       |  |                                                                                                                                                                                                                       |  |                                                                                    
|10.4   |  | Form of Restricted Agreement
  by and among the Company and its Independent Directors.                                                                                                                                |  | Exhibit 10.9 to Form 10-K
  filed March 28, 1996.                                  
|       |  |                                                                                                                                                                                                                       |  |                                                                                    
|10.5   |  | Form of Indemnification
  Agreement.                                                                                                                                                                                  |  | Exhibit 4.2 to Form S-11
  filed September 2, 1993 (File No. 33-68276 as amended). 
|       |  |                                                                                                                                                                                                                       |  |                                                                                    
|10.6   |  | Amended 2008 Equity-Based
  Award Plan.                                                                                                                                                                               |  | Exhibit 10.1 to Form 8-K
  filed May 13, 2008.                                     
|       |  |                                                                                                                                                                                                                       |  |                                                                                    
|10.7   |  | Amendment to Associated
  Estates Realty Corporation 2008 Equity-Based Award Plan.                                                                                                                                    |  | Exhibit 10.7 to Form 10-K
  filed February 25, 2009.                               
|       |  |                                                                                                                                                                                                                       |  |                                                                                    
|10.7a  |  | Amendment to Associated Estates
  Realty Corporation Amended and Restated Equity-Based Award Plan.                                                                                                                    |  | Exhibit 10.7a to Form 10-K
  filed February 25, 2009.                              
|       |  |                                                                                                                                                                                                                       |  |                                                                                    
|10.7b  |  | Associated Estates Realty
  Corporation  Supplemental Executive Retirement Plan (Restated).                                                                                                                           |  | Exhibit 10.7b to Form 10-K
  filed February 25, 2009.                              
|       |  |                                                                                                                                                                                                                       |  |                                                                                    
|10.8   |  | Form of Share Option
  Agreement by and among the Company and its Independent Directors.                                                                                                                              |  | Exhibit 10.14 to Form 10-K
  filed March 30, 1993.                                 
|       |  |                                                                                                                                                                                                                       |  |                                                                                    
|10.10  |  | Associated Estates Realty
  Corporation Amended and Restated 2001 Equity-Based Plan (as amended on May 4,
  2005).  Incorporated by reference to Appendix 1 to the Definitive Proxy
  Statement filed March 28, 2005. |  | Exhibit 99.01 to Form S-8
  filed May 26, 2005.                                    
|       |  |                                                                                                                                                                                                                       |  |                                                                                    
|10.11  |  | Form of Equity Award
  Agreement.                                                                                                                                                                                     |  | Exhibit 10.11 to Form 10-Q
  filed August 2, 2005.                                 
|       |  |                                                                                                                                                                                                                       |  |                                                                                    
|10.12  |  | Long Term Incentive
  Compensation Plan.                                                                                                                                                                              |  | Exhibit 10.12 to Form 10-Q
  filed November 1, 2005.                               
|       |  |                                                                                                                                                                                                                       |  |                                                                                    
|10.13  |  | Associated Estates Realty
  Corporation Elective Deferred Compensation Plan.                                                                                                                                          |  | Exhibit 10.13 to Form 10-Q
  filed July 31, 2007.                                  
|       |  |                                                                                                                                                                                                                       |  |                                                                                    
|10.14  |  | Agreement of Purchase and
  Sale dated August 31, 2007 between River Forest Properties, LLC, and
  Associated Estates Realty Corporation.                                                                             |  | Exhibit 10.14 to Form 10-Q
  filed August 5, 2008.                                 
|       |  |                                                                                                                                                                                                                       |  |                                                                                    
|10.15  |  | Agreement of Purchase and
  Sale dated August 31, 2007 between Belvedere Properties, LLC, and Associated
  Estates Realty Corporation.                                                                                |  | Exhibit 10.15 to Form 10-Q
  filed August 5, 2008.                                 
|       |  |                                                                                                                                                                                                                       |  |                                                                                    
|31     |  | Certification of Chief
  Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act.                                                                                                                         |  | Exhibit 31 to Form 10-Q
  filed herewith.                                          
|       |  |                                                                                                                                                                                                                       |  |                                                                                    
|31.1   |  | Certification of Chief
  Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act.                                                                                                                         |  | Exhibit 31.1 to Form 10-Q
  filed herewith.                                        
|       |  |                                                                                                                                                                                                                       |  |                                                                                    
|32     |  | Certification of Chief
  Executive Officer and Chief Financial Officer Pursuant to Section 906 of the
  Sarbanes Oxley Act.                                                                                           |  | Exhibit 32 to Form 10-Q
  filed herewith.                                          



30





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
|-------------- |  | ---------------------------------------
|               |  |                                        
|               |  |                                        
|August 4, 2009 |  | /s/ Lou Fatica                         
|(Date)         |  | Lou Fatica, Vice President             
|               |  | Chief Financial Officer and
  Treasurer



31