PROMISSORY NOTE


          $1,671,000                                           May 23, 1997
                                                            Cleveland, Ohio

                    FOR VALUE RECEIVED, the undersigned, JEFFREY I.
          FRIEDMAN (the "Maker"), hereby promises to pay to the order of
          ASSOCIATED ESTATES REALTY CORPORATION, an Ohio corporation
          ("Payee"), the principal amount of ONE MILLION SIX HUNDRED
          SEVENTY ONE THOUSAND DOLLARS ($1,671,000), together with interest
          on and from the date hereof until due, whether at stated
          maturity, by acceleration or otherwise, upon the outstanding
          balance of the principal amount hereof at a fluctuating rate of
          interest equal at all times to the Libor Rate for a one month
          Interest Period in effect from time to time, as such capitalized
          terms are defined in the Second Amended and Restated Credit
          Agreement, among Payee and National City Bank, as agent, and the
          Banks, dated as of September 26, 1995, as amended from time to
          time (the "Credit Agreement").  Both principal and interest are
          payable in lawful money of the United States of America to Payee
          at 5025 Swetland Court, Richmond Heights, Ohio 44143-1467, or at
          such other address as Payee may designate in writing from time to
          time to Maker, in immediately available funds.

                    Section 1.  Terms of Payment.  Except under those
          circumstances hereinafter set forth providing for acceleration or
          for the payment of interest after the same becomes due, the
          principal of and interest on this Promissory Note are payable as
          follows: (a) accrued and unpaid interest only on the outstanding
          principal balance of this Promissory Note shall be paid quarterly
          on the first day of each February, May, August and November,
          commencing on August 1, 1997, until the principal balance hereof
          is paid in full; and (b) the entire outstanding balance of the
          principal hereof, together with all accrued and unpaid interest
          thereon, shall be due and payable on the 1st day of May, 2002. 
          Any amount of principal or interest which is not paid when due,
          whether at stated maturity, by acceleration or otherwise, or
          within ten days thereafter, shall bear interest, payable on
          demand, on and from the day when due at a fluctuating rate equal
          at all times to the Default Rate, as such term is defined in the
          Credit Agreement, until such amount is paid in full .

                    Section 2.  Optional Prepayment.  The Maker shall have
          the privilege of prepaying all or any part of the amounts due
          under this Promissory Note at any time and from time to time
          without notice or any prepayment penalty.  Any prepayment shall
          first be applied to accrued but unpaid interest and thereafter
          applied to the unpaid principal balance hereof.

                    Section 3.  Acceleration.  In the event (a) the
          undersigned shall fail to pay any installment of principal of or
          interest on this Promissory Note when due and payable or within
          ten days thereafter, or (b) the undersigned shall fail to pay any  
          installment of principal of or interest on that certain unsecured
          Promissory Note, in the original principal amount of One Million
          Six Hundred Seventy One Thousand Dollars ($1,671,000), of even
          date herewith of Maker in favor of Payee when due and payable or
          within ten days thereafter; (c) an Event of Default as defined
          under and described in that certain Pledge Agreement of even date
          herewith of Maker in favor of Payee (the "Pledge Agreement")
          shall occur and be continuing, or (d) the undersigned shall admit
          in writing his inability to pay debts generally as they become
          due, or (e) the undersigned shall make a general assignment for
          the benefit of creditors, or (f) any proceeding shall be
          instituted by or against the undersigned seeking to adjudicate
          him bankrupt or insolvent or seeking reorganization, arrangement,
          adjustment or composition of his debts under any law relating to
          bankruptcy, insolvency or reorganization or relief of debtors, or
          seeking appointment of a receiver, trustee or other similar
          official for him or for any substantial part of his property,
          then, and in any such event, the entire amount then remaining
          unpaid on this Promissory Note and accrued interest thereon
          shall, at the option of the holder or holders hereof, become due
          and payable at once without notice, presentment or demand, such
          notice, presentment and demand being hereby expressly waived.

                    Section 4. Security; Rights and Remedies.  This
          Promissory Note is secured by a pledge by Maker to Payee of
          150,000 common shares, without par value, of Payee pursuant to
          the Pledge Agreement.  The rights and remedies set forth herein
          shall be cumulative and in addition to any other or further
          rights and remedies available at law or in equity.  The
          invalidity or unenforceability of any term or provision of this
          Promissory Note, or the application of such term or provision to
          any person or circumstance, shall not impair or affect the
          remainder of this Promissory Note and its application to other
          persons and circumstances and the remaining terms and provisions
          hereof shall not be invalid, but shall remain in full force and
          effect.

                    Section 5.  Applicable Law.  This Promissory Note shall
          be governed by and construed in accordance with the laws of the
          State of Ohio.

                    Section 6.  Headings.  Section headings used in this
          Promissory Note are for convenience only and shall not affect the
          construction of this Promissory Note.

                    Section 7.  Waiver.  The Maker hereby waives
          presentment, demand, notice, protest and all other demands and
          notices in connection with the delivery, acceptance, performance,
          default or enforcement of this Promissory Note, assents to any
          extension or postponement of the time of payment or any other
          indulgence, to any substitution, exchange or release of
          collateral, and/or to the addition or release of any other party
          or person primarily or secondarily liable under this Promissory
          Note. 

                    Section 8.  Cognovit Note.  THE UNDERSIGNED HEREBY
          AUTHORIZES ANY ATTORNEY AT LAW TO APPEAR FOR THE UNDERSIGNED, IN
          AN ACTION ON THIS PROMISSORY NOTE, AT ANY TIME AFTER THE SAME
          BECOMES DUE, AS HEREIN PROVIDED, IN ANY COURT OF RECORD IN OR OF
          THE STATE OF OHIO, OR ELSEWHERE, TO WAIVE THE ISSUING AND SERVICE
          OF PROCESS AGAINST THE UNDERSIGNED AND TO CONFESS JUDGMENT IN
          FAVOR OF THE HOLDER OF THIS PROMISSORY NOTE AGAINST THE
          UNDERSIGNED FOR THE AMOUNT THAT MAY BE DUE, WITH INTEREST AT THE
          RATE HEREIN MENTIONED AND COSTS OF SUIT, AND TO WAIVE AND RELEASE
          ALL ERRORS IN SAID PROCEEDINGS AND JUDGMENT, AND ALL PETITIONS IN
          ERROR, AND RIGHT OF APPEAL FROM THE JUDGMENT RENDERED.

                    This Promissory Note has been executed at Cleveland,
          Cuyahoga County, Ohio, as of the date first above written.

                    WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT
          TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT
          JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE
          AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARD-
          LESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
          RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH
          THE AGREEMENT, OR ANY OTHER CAUSE.

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


          JCM3614:35295:97001:JCM-02E.NOT
                 jcm 05/19/97