PLEDGE AGREEMENT


                    THIS PLEDGE AGREEMENT, dated as of May 23, 1997, is
          made by JEFFREY I. FRIEDMAN (the "Pledgor") to ASSOCIATED ESTATES
          REALTY CORPORATION, an Ohio corporation (the "Pledgee").

                                W I T N E S S E T H :

                    WHEREAS, the Pledgor has executed and delivered to the
          Pledgee on the date hereof a promissory note of the Pledgor in
          the original principal amount of $1,671,000 (the "Note"); and

                    WHEREAS, as a condition precedent to the acceptance of
          the Note by the Pledgee, and in order to induce the Pledgee to
          make the loan evidenced by the Note, the Pledgor must make the
          pledge contemplated by this Agreement;

                    NOW, THEREFORE, the Pledgor hereby agrees as follows:

                    SECTION 1.  Pledge.  The Pledgor hereby pledges and
          assigns to the Pledgee, and grants to the Pledgee a security
          interest in, the following (the "Pledged Collateral"):

                    (a)  150,000 common shares, without par value, of the
          Pledgee (the "Pledged Shares") and the certificate(s) 
          representing the Pledged Shares, and all dividends, cash,
          instruments and other property from time to time received,
          receivable or otherwise distributed in respect of or in exchange
          for any or all of the Pledged Shares; and

                    (b)  all proceeds of any and all of the foregoing
          (including, without limitation, proceeds that constitute property
          of the types described above).

                    SECTION 2.  Security for Obligations.  This Agreement
          secures (a) the payment of any and all obligations of the
          Pledgor, now or hereafter existing under the Note, whether for
          principal, interest, fees, expenses or otherwise, and (b) the
          performance and observance of all obligations of the Pledgor now
          or hereafter existing under this Agreement, including, without
          limitation those obligations set forth in Section 14 (all such
          obligations of the Pledgor being the "Obligations").

                    SECTION 3.  Delivery of Pledged Collateral.  All
          certificates or instruments representing or evidencing the
          Pledged Collateral shall be delivered to and held by or on behalf
          of the Pledgee pursuant hereto and shall be in suitable form for
          transfer by delivery, or shall be accompanied by duly executed
          instruments of transfer or assignment in blank, all in form and
          substance satisfactory to the Pledgee.  The Pledgee shall have
          the right, at any time in its discretion and without notice to
          the Pledgor, to transfer to or to register in the name of the
          Pledgee or any of its nominees any or all of the Pledged
          Collateral, subject only to the revocable rights specified in
          Section 6(a).  In addition, the Pledgee shall have the right at
          any time to exchange certificates or instruments representing or
          evidencing the Pledged Collateral for certificates or instruments
          of smaller or larger denominations.

                    SECTION 4.  Representations and Warranties.  The
          Pledgor represents and warrants as follows:

                    (a)  the Pledgor is the legal and beneficial owner of
          the Pledged Collateral free and clear of any lien, security
          interest, option or other charge or encumbrances, except for the
          security interest created by this Agreement and except for
          encumbrances created by securities laws;

                    (b)  the pledge of the Pledged Shares pursuant to this
          Agreement creates a valid and perfected first priority security
          interest in the Pledged Shares, securing the payment of the
          Obligations; and

                    (c)  no consent of any other person or entity and no
          authorization, approval, or other action by, and no notice to or
          filing with, any governmental authority or regulatory body is
          required for (i) the pledge by the Pledgor of the Pledged
          Collateral pursuant to this Agreement or for the execution,
          delivery or performance of this Agreement by the Pledgor, (ii)
          the perfection or maintenance of the security interest created
          hereby (including the first priority nature of such security
          interest) or (iii) the exercise by the Pledgee of the voting or
          other rights provided for in this Agreement or the remedies in
          respect of the Pledged Collateral pursuant to this Agreement.

                    SECTION 5.  Further Assurances.  The Pledgor agrees
          that at any time and from time to time, at the expense of the
          Pledgor, the Pledgor will promptly execute and deliver all
          further instruments and documents, and take all further action,
          that may be necessary or desirable, or that the Pledgee may
          reasonably request, in order to perfect and protect any security
          interest granted or purported to be granted hereby or to enable
          the Pledgee to exercise and enforce its rights and remedies
          hereunder with respect to any Pledged Collateral.

                    SECTION 6.  Voting Rights; Dividends; Etc.  (a) So long
          as no Event of Default (as defined in Section 12 hereof) shall
          have occurred and be continuing:

                    (i)  the Pledgor shall be entitled to exercise or
               refrain from exercising any and all voting and other
               consensual rights pertaining to the Pledged Collateral or
               any part thereof for any purpose not inconsistent with the
               terms of this Agreement or the Note; and

                    (ii) notwithstanding Section 1(b), the Pledgor shall be
               entitled to receive and retain any and all dividends paid
               with respect to the Pledged Collateral.

                    (b)  Upon the occurrence and during the continuance of
          an Event of Default:

                    (i)  all rights of the Pledgor to exercise or refrain
               from exercising the voting and other consensual rights which
               he would otherwise be entitled to exercise pursuant to
               Section 6(a)(i) and to receive the dividends which he would
               otherwise be authorized to receive and retain pursuant to
               Section 6(a)(ii) shall cease, and all such rights shall
               thereupon become vested in the Pledgee who shall thereupon
               have the sole right to exercise or refrain from exercising
               such voting and other consensual rights and to receive and
               hold as Pledged Collateral such dividends; and

                   (ii)  all dividends which are received by the Pledgor
               contrary to the provisions of paragraph (i) of this Section
               6(b) shall be received in trust for the benefit of the
               Pledgee, shall be segregated from other funds of the Pledgor
               and shall be forthwith paid over to the Pledgee as Pledged
               Collateral in the same form as so received (with any
               necessary indorsement) to be held and applied pursuant to
               this Agreement.

                    SECTION 7.  Transfers and Other Liens.  The Pledgor
          agrees that he will not (i) sell, assign (by operation of law or
          otherwise) or otherwise dispose of, or grant any option with
          respect to, any of the Pledged Collateral, or (ii) create or
          permit to exist any lien, security interest, option or other
          charge or encumbrance upon or with respect to any of the Pledged
          Collateral, except for the security interest under this Agreement
          and except for encumbrances created by securities laws.

                    SECTION 8.  Pledgee May Perform.  If the Pledgor fails
          to perform any agreement contained herein, the Pledgee may itself
          perform, or cause performance of, such agreement, and the
          expenses of the Pledgee incurred in connection therewith shall be
          payable by the Pledgor under Section 14.

                    SECTION 9.  Pledgee's Duties.  The powers conferred on
          the Pledgee hereunder are solely to protect its interest in the
          Pledged Collateral and shall not impose any duty upon it to
          exercise any such powers.  Except for the safe custody of any
          Pledged Collateral in its possession and the accounting for
          moneys actually received by it hereunder, the Pledgee shall have
          no duty as to any Pledged Collateral, or as to the taking of any
          necessary steps to preserve rights against any parties or any
          other rights pertaining to any Pledged Collateral.

                    SECTION 10.  Pledgee Appointed Attorney-in-Fact.  The
          Pledgor hereby appoints the Pledgee as the Pledgor's attorney-in-
          fact, with full authority in the place and stead of the Pledgor
          and in the name of the Pledgor or otherwise, from time to time
          and in the Pledgee's discretion to take any action and to execute
          any instrument which the Pledgee may deem necessary or advisable
          to accomplish the purposes of this Agreement, including, without
          limitation, to receive, endorse and collect all instruments made
          payable to the Pledgor representing any dividend or other
          distribution in respect of the Pledged Collateral or any part
          thereof and to give full discharge for the same.

                    SECTION 11.  Reasonable Care.  The Pledgee shall be
          deemed to have exercised reasonable care in the custody and
          preservation of the Pledged Collateral in its possession if the
          Pledged Collateral is accorded treatment substantially equal to
          that which the Pledgee accords its own property, it being
          understood that the Pledgee shall not have any responsibility for
          (i) ascertaining or taking action with respect to calls,
          conversions, exchanges, tenders or other matters relative to any
          Pledged Collateral, whether or not the Pledgee has or is deemed
          to have any knowledge of such matters, or (ii) taking any
          necessary steps to preserve rights against any parties with
          respect to any Pledged Collateral.

                    SECTION 12.  Events of Default; Remedies upon Default. 

                    (a)  The occurrence of any of the following events
          shall constitute an Event of Default under this Agreement:

                         (i)  the occurrence of any event described in
               Section 3 of the Note that results in the Note becoming
               immediately due and payable; or

                         (ii) any representation or warranty made by the
               Pledgor in this Agreement shall prove to have been false or
               incorrect in any material respect when made; or 

                        (iii) the Pledgor shall fail to perform or observe
               in any material respect any term, covenant or agreement
               contained in this Agreement on his part to be performed or
               observed, and such failure shall remain unremedied for
               fifteen (15) days after written notice thereof shall have
               been given to the Pledgor; or

                         (iv) the validity or enforceability of this
               Agreement or the Note shall be contested by the Pledgor, or
               the Pledgor shall deny that he has any or further liability
               or obligation under this Agreement or the Note.

                    (b)  If any Event of Default shall have occurred and be
          continuing:

                         (i)  the Pledgee may exercise in respect of the
               Pledged Collateral, in addition to other rights and remedies
               provided for herein or otherwise available to it, all the
               rights and remedies of a secured party under the Uniform
               Commercial Code in effect in the State of Ohio at that time
               (the "Code") (whether or not the Code applies to the
               affected Collateral), and may also, without notice except as
               specified below, sell the Pledged Collateral or any part
               thereof at public or private sale, at any exchange, broker's
               board or at any of the Pledgee's offices or elsewhere, for
               cash, on credit or for future delivery, and upon such other
               terms as the Pledgee may deem commercially reasonable.  The
               Pledgor agrees that, to the extent notice of sale shall be
               required by law, at least ten (10) days' notice to the
               Pledgor of the time and place of any public sale or the time
               after which any private sale is to be made shall constitute
               reasonable notification.  The Pledgee shall not be obligated
               to make any sale of Pledged Collateral regardless of notice
               of sale having been given.  The Pledgee may adjourn any
               public or private sale from time to time by announcement at
               the time and place fixed therefor, and such sale may,
               without further notice, be made at the time and place to
               which it was so adjourned; and

                         (ii)  any cash held by the Pledgee as Pledged
               Collateral and all cash proceeds received by the Pledgee in
               respect of any sale of, collection from, or other
               realization upon all or any part of the Pledged Collateral
               may, in the discretion of the Pledgee, be held by the
               Pledgee as collateral for, and/or then or at any time
               thereafter be applied (after payment of any amounts payable
               to the Pledgee pursuant to Section 14) in whole or in part
               by the Pledgee against, all or any part of the Obligations
               in such order as the Pledgee, in its sole discretion, shall
               elect.  Any surplus of such cash or cash proceeds held by
               the Pledgee and remaining after payment in full of all the
               Obligations shall be paid over to the Pledgor or to
               whomsoever may be lawfully entitled to receive such surplus.

                    SECTION 13. Registration Rights.  If the Pledgee shall
          determine to exercise its right to sell all or any of the Pledged
          Collateral pursuant to Section 12, the Pledgor agrees that, upon
          request of the Pledgee, the Pledgor will, at its own expense:

                    (a)  execute and deliver, and cause the Pledgee and the
               directors and officers thereof to execute and deliver, all
               such instruments and documents, and do or cause to be done
               all such other acts and things, as may be necessary or, in
               the opinion of the Pledgee, advisable to register such
               Pledged Collateral under the provisions of the Securities
               Act of 1933, as from time to time amended (the "Securities
               Act"), and to cause the registration statement relating
               thereto to become effective and to remain effective for such
               period as prospectuses are required by law to be furnished,
               and to make all amendments and supplements thereto and to
               the related prospectus which, in the opinion of the Pledgee,
               are necessary or advisable, all in conformity with the
               requirements of the Securities Act and the rules and
               regulations of the Securities and Exchange Commission
               applicable thereto;

                    (b)  use his best efforts to qualify the Pledged
               Collateral under the state securities or "Blue Sky" laws and
               to obtain all necessary governmental approvals for the sale
               of the Pledged Collateral, as requested by the Pledgee;

                    (c)  cause the Pledgee to make available to its
               security holders, as soon as practicable, an earnings
               statement which will satisfy the provisions of Section 11(a)
               of the Securities Act; and

                    (d)  do or cause to be done all such other acts and
               things as may be necessary to make such sale of the Pledged
               Collateral or any part thereof valid and binding and in
               compliance with applicable law.

          The Pledgor further acknowledges the impossibility of
          ascertaining the amount of damages which would be suffered by the
          Pledgee by reason of the failure by the Pledgor to perform any of
          the covenants contained in this Section and, consequently, agrees
          that, if the Pledgor shall fail to perform any of such covenants,
          it shall pay, as liquidated damages and not as a penalty, an
          amount equal to the value of the Pledged Collateral on the date
          the Pledgee shall demand compliance with this Section.

                    SECTION 14.  Expenses.  The Pledgor will upon demand
          pay to the Pledgee the amount of any and all reasonable expenses,
          including the reasonable fees and expenses of its counsel and of
          any experts and agents, which the Pledgee may incur in connection
          with (i) the administration of this Agreement, (ii) the custody
          or preservation of, or the sale of, collection from, or other
          realization upon, any of the Pledged Collateral, (iii) the
          exercise or enforcement of any of the rights of the Pledgee
          hereunder or (iv) the failure by the Pledgor to perform or
          observe any of the provisions hereof.  These aforementioned
          expenses shall be paid only in an Event of Default.

                    SECTION 15.  Security Interest Absolute.  All rights of
          the Pledgee and the security interests hereunder, and all
          obligations of the Pledgor hereunder, shall be absolute and
          unconditional irrespective of:

                    (i)  any lack of validity or enforceability of the Note
               or any other agreement or instrument relating thereto;

                   (ii)  any taking, exchange, release or non-perfection of
               any other collateral for all or any of the Obligations;

                  (iii)  any manner of application of collateral, or
               proceeds thereof, to all or any of the Obligations, or any
               manner of sale or other disposition of any collateral for
               all or any of the Obligations; or

                   (iv)  any other circumstance which might otherwise
               constitute a defense available to, or a discharge of, the
               Pledgor.

                    SECTION 16.  Amendments, Etc.  No amendment or waiver
          of any provision of this Agreement, and no consent to any
          departure by the Pledgor herefrom, shall in any event be
          effective unless the same shall be in writing and signed by the
          Pledgee, and then such waiver or consent shall be effective only
          in the specific instance and for the specific purpose for which
          given.

                    SECTION 17.  Addresses for Notices.  All notices and
          other communications provided for hereunder shall be in writing
          (including telecopier, telegraphic, telex or cable communication)
          and mailed, telecopied, telegraphed, telexed, cabled or delivered
          as follows:  if to the Pledgee, at 5025 Swetland Court, Richmond
          Heights, Ohio 44143-1467, and if to the Pledgor, at 5025 Swetland
          Court, Richmond Heights, Ohio 44143-1467, or, as to either party,
          at such other address as shall be designated by such party in a
          written notice to the other party.  All such notices and other
          communications shall, when mailed, telecopied, telegraphed,
          telexed or cabled, be effective when deposited in the mails,
          telecopied, delivered to the telegraph company, confirmed by
          telex answer back or delivered to the cable company,
          respectively.

                    SECTION 18.  Continuing Security Interest; Assignments. 
          This Agreement shall create a continuing security interest in the
          Pledged Collateral and shall (i) remain in full force and effect
          until the payment in full of the Obligations and all other
          amounts payable under this Agreement, (ii) be binding upon the
          Pledgor, his heirs, executors, administrators, legal and personal
          representatives and assigns, and (iii) inure to the benefit of,
          and be enforceable by, the Pledgee and its assigns.  Without
          limiting the generality of the foregoing clause (iii), the
          Pledgee may assign or otherwise transfer all or any portion of
          its rights and obligations under the Note to any other person or
          entity, and such other person or entity shall thereupon become
          vested with all the benefits in respect thereof granted to the
          Pledgee herein or otherwise.  Upon the payment in full of the
          Obligations and all other amounts payable under this Agreement,
          the security interest granted hereby shall terminate and all
          rights to the Pledged Collateral shall revert to the Pledgor. 
          Upon any such termination, the Pledgee will, at the Pledgor's
          expense, return to the Pledgor such of the Pledged Collateral as
          shall be then held and not have been sold or otherwise applied
          pursuant to the terms hereof and execute and deliver to the
          Pledgor such documents as the Pledgor shall reasonably request to
          evidence such termination.

                    SECTION 19.  Release of Shares From Pledge and Security
          Interest.  Upon payment to Pledgee of all principal and interest
          due to it under the Note, the Pledged Shares pledged hereunder
          shall be released and discharged from the pledge, and the
          security interest therein shall be released by the Pledgee.  

                    SECTION 20.  Governing Law; Terms.  This Agreement
          shall be governed by, and construed in accordance with, the laws
          of the State of Ohio without regard to conflict of laws
          principals.  Unless otherwise defined herein, terms defined in
          Article 9 of the Code are used herein as therein defined. 
          Pronouns used herein and terms such as "himself", "herself"
          "itself" and should be read to refer to the masculine, feminine
          and neuter genders as the context indicates.

                    IN WITNESS WHEREOF, the Pledgor has executed and
          delivered this Agreement as of the date first above written.


                                        THE PLEDGOR:

                                        
                                        /s/ Jeffrey I. Friedman
                                        -----------------------            
                                        Jeffrey I. Friedman
                                        

                                        THE PLEDGEE:


                                        ASSOCIATED ESTATES REALTY     
                                           CORPORATION, an Ohio corporation


                                        By: /s/ Martin A. Fishman          
                                        -------------------------              
                                        Name: Martin A. Fishman            
                                        Its: Vice-President                


          JCM3614:35295:97001:SKH-04C.PLG
                 jcm 6/5/97