<PAGE>1                  


                          SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C.  20549

                                      Form 10-Q

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

                  For the quarterly period ended September 30, 1998

                                          OR

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

               For the transition period from __________ to __________

                            Commission File Number 1-12486


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


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


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


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


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

                Number of shares outstanding as of November 13, 1998: 
                                  22,596,958 shares

                                                                           
<PAGE>2

                        ASSOCIATED ESTATES REALTY CORPORATION



                                        INDEX
<TABLE>
<CAPTION>

   PART I  -  FINANCIAL INFORMATION                                 Page

   <S>                                                              <C>

   ITEM 1  Condensed Financial Statements

           Consolidated Balance Sheets as of
              September 30, 1998 and December 31, 1997                3

           Consolidated Statements of Income for the three and
              nine month periods ended September 30, 1998 and 1997    4

           Consolidated Statements of Cash Flows for the nine
              month periods ended September 30, 1998 and 1997         5

           Notes to Financial Statements                              6

   ITEM 2     Management's Discussion and Analysis of Financial 
              Condition and Results of Operations                    19

   PART II  -  OTHER INFORMATION

    ITEM 6     Exhibits and Reports on Form 8-K                      34
  
   SIGNATURES                                                        37
</TABLE>

<PAGE>3


                        ASSOCIATED ESTATES REALTY CORPORATION
                             CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                    September 30,   December 31,
                                                                         1998           1997     
                                                                     (Unaudited)
                               ASSETS

   <S>                                                             <C>            <C>
   Real estate assets:
     Land                                                           $ 88,278,636   $ 54,906,050 
       Buildings and improvements                                    749,001,597    550,156,521 
     Furniture and fixtures                                           32,009,550     24,997,001 
                                                                     869,289,783    630,059,572 
       Less:  accumulated depreciation                              (149,433,938)  (130,668,538)
                                                                     719,855,845    499,391,034 
       Construction in progress                                       49,494,451     16,439,393 
          Real estate, net                                           769,350,296    515,830,427 
   Cash and cash equivalents                                           1,787,636      2,251,819 
   Restricted cash                                                     7,091,140     10,125,513 
   Accounts and notes receivable:
     Rents                                                             2,394,064      2,256,158 
     Affiliates and joint ventures                                    15,166,723     14,439,155 
     Other                                                             2,876,192      2,385,829 
   Deferred charges, intangible assets and prepaid expenses           15,375,076      6,621,404 
                                                                    $814,041,127   $553,910,305 
                LIABILITIES AND SHAREHOLDERS' EQUITY
   Secured debt                                                     $ 63,878,679   $ 57,817,981 
   Unsecured debt                                                    408,535,991    260,352,307 
       Total indebtedness                                            472,414,670    318,170,288 
   Accounts payable and accrued expenses                              18,470,815     16,197,356 
   Dividends payable                                                  10,507,585      7,938,692 
   Resident security deposits                                          5,845,258      4,867,011 
   Funds held on behalf of managed properties:                                                  
     Affiliates and joint ventures                                     6,510,044      7,124,217 
     Other                                                             4,066,826      2,340,115 
   Accrued interest                                                    4,533,848      3,776,884 
   Accumulated losses and distributions of joint ventures
     in excess of investment and advances                             12,752,363     12,337,664 
       Total liabilities                                             535,101,409    372,752,227 

   Operating partnership minority interest                            10,902,557              - 


   Commitments and contingencies                                               -              - 
   Shareholders' equity:<PAGE>


     Preferred shares, Class A cumulative, without
       par value; 3,000,000 authorized, liquidation preference
       of $25 per share, 225,000 issued and outstanding                56,250,000     56,250,000 
     Common shares, without par value, $.10 stated
       value; 50,000,000 authorized; 22,621,958 and
       17,073,773 issued at September 30, 1998 
       and December 31, 1997, respectively                             2,262,195      1,707,377 
     Paid-in capital                                                 277,120,515    171,752,807 
     Accumulated dividends in excess of net income                   (67,129,026)   (48,552,106)
     Less:  Treasury shares, at cost, 25,000 shares at
              September 30, 1998                                        (466,523)             - 
       Total shareholders' equity                                    268,037,161    181,158,078 
                                                                    $814,041,127   $553,910,305 <PAGE>
</TABLE>
                     The accompanying notes are an integral part
                            of these financial statements



<PAGE>4

                         ASSOCIATED ESTATES REALTY CORPORATION
                           CONSOLIDATED STATEMENTS OF INCOME
                                      (UNAUDITED)
<TABLE>
<CAPTION>

                                           For the three months ended  For the nine months ended
                                                  September 30,              September 30,
                                               1998         1997           1998          1997     
   <S>                                     <C>          <C>            <C>          <C>
   Revenues
    Rental                                 $35,783,150  $  26,154,443  $95,773,865  $ 74,258,037 
    Property management fees                 1,426,665        930,124    3,256,711     2,844,349 
    Asset management fees                      636,108              -      636,108             - 
    Painting services                          481,775        448,666    1,202,759     1,304,519 
    Other                                      680,874        531,240    1,694,168     1,342,604 
                                            39,008,572     28,064,473  102,563,611    79,749,509 
   Expenses
    Property operating and maintenance      15,886,030     11,334,163   41,104,763    31,005,051 
    Depreciation and amortization            7,082,905      4,818,185   18,105,384    13,680,669 
    Painting services                          469,027        395,440    1,200,968     1,154,075 
    Preliminary project costs                  200,456              -      200,456             - 
    General and administrative               3,078,635      1,331,472    6,713,606     4,402,314 
    Interest expense                         7,346,108      4,681,293   20,890,667    13,641,493 
      Total expenses                        34,063,161     22,560,553   88,215,844    63,883,602 
   Income before equity in net income of
     joint ventures, minority interest 
     and extraordinary items                 4,945,411      5,503,920   14,347,767    15,865,907 
    Equity in net income of joint ventures     105,950        272,104      312,839       492,586 
    Minority interest in operating             (39,353)             -      (39,353)             - 
    partnership
    Income before extraordinary item         5,012,008      5,776,024   14,621,253    16,358,493 
    Extraordinary loss or (gain)
      extinguishment of debt                         -         19,733      124,895    (1,023,713)
   Net income                              $ 5,012,008  $   5,756,291  $14,496,358  $ 17,382,206 

   Net income applicable to common shares  $ 3,640,903  $   4,385,186  $10,383,043  $ 13,268,891 

   Earnings Per Common Share - Basic:
    Net income before extraordinary item   $       .16  $         .26  $       .55  $        .77 
    Net income                             $       .16  $         .26  $       .55  $        .83 

   Earnings Per Common Share - Diluted:
    Net income before extraordinary item   $       .16  $         .26  $       .55  $        .77 
    Net income                             $       .16  $         .26  $       .54  $        .83 

   Dividends paid per common share         $      .465  $        .465  $     1.395  $      1.395 

   Weighted average number of
     common shares outstanding  - Basic     22,598,199     17,052,189   18,954,875    15,904,262 
                                - Diluted   23,057,918     17,078,126   19,109,799    15,930,835 
</TABLE>

                      The accompanying notes are an integral part
                             of these financial statements
<PAGE> 5


                        ASSOCIATED ESTATES REALTY CORPORATION
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                    FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30,
                                     (UNAUDITED)
<TABLE>
<CAPTION>

                                                                           1998            1997     
   <S>                                                               <C>             <C>
   Cash flow from operating activities:                                                            
    Net income                                                        $  14,496,358   $ 17,382,206 
    Adjustments to reconcile net income to net
      cash provided by operating activities:
      Depreciation and amortization                                      18,105,384     13,680,669 
      Minority interest in operating partnership                             39,353              - 
      Loss (gain) on extinguishment of debt                                 124,895     (1,023,713)
      Equity in net income of joint ventures                               (312,838)      (492,588)
      Earnings distributed from joint ventures                              394,267        509,228 
      Net change in assets and liabilities net of effect of the
       MIGRA merger -  Accounts and notes receivable                         91,832     (3,011,883)
                    -  Accounts and notes receivable-                                   (5,541,263)
                        affiliates and joint ventures                       819,490 

                    -  Accounts payable and accrued expenses             (5,962,278)    (1,916,246)
                    -  Other operating assets and liabilities            (1,543,222)     1,382,030 
                    -  Restricted cash                                    5,373,197        712,809 
                    -  Funds held for non-owned managed properties        1,495,162        352,256 
                    -  Funds held for non-owned managed properties-
                        affiliates and joint ventures                    (2,952,997)     1,373,220 
         Total adjustments                                               15,672,245      6,024,519 
      Net cash flow provided by operations                               30,168,603     23,406,725 

   Cash flow from investing activities:
    Loans receivable-affiliate                                                    -     (3,342,000)
    Real estate acquired or developed (net of liabilities assumed)     (133,012,361)  (108,585,330)
    Fixed asset additions                                                (3,038,473)    (1,706,381)
    Distributions from joint ventures                                       244,457       (100,833)
      Net cash flow used for investing activities                      (135,806,377)  (113,734,544)
   Cash flow from financing activities:
    Principal payments on mortgage notes                                 (8,763,651)   (19,068,056)
    Proceeds from mortgage notes                                                  -      8,100,000 
    Proceeds from senior and medium-term notes                           20,000,000     50,000,000 
    Proceeds from the issuance of common shares,
      net of $2,187,500 of underwriting commissions 
      and $150,306 of offering expenses                                           -     38,838,432 
    Line of Credit borrowings                                           948,100,000    305,600,000 
    Line of Credit repayments                                          (821,100,000)  (265,900,000)
    Deferred financing and offering costs                                (2,091,850)      (606,798)
    Common share dividends paid                                         (26,391,069)   (21,958,666)<PAGE>
    Preferred share dividends paid                                       (4,113,316)    (4,113,315)
    Purchase of treasury shares                                            (466,523)             - 
    Stock options exercised                                                       -          1,717 
      Net cash flow provided by financing activities                    105,173,591     90,893,314 
      Decrease in cash and cash equivalents                                (464,183)       565,495 
   Cash and cash equivalents, beginning of period                         2,251,819      1,286,959 
   Cash and cash equivalents, end of period                           $   1,787,636   $  1,852,454 
</TABLE>


                     The accompanying notes are an integral part
                            of these financial statements

<PAGE>6


                        ASSOCIATED ESTATES REALTY CORPORATION
                            NOTES TO FINANCIAL STATEMENTS
                                      UNAUDITED


          1.   BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

          Business

               Associated Estates Realty Corporation (the "Company") is a
          self-administered and self-managed real estate investment trust
          ("REIT") which specializes in the acquisition, development,
          ownership and management of multifamily properties.  On June 30,
          1998, the Company consummated the merger of MIG Realty Advisors,
          Inc. ("MIGRA") into the Company and the related acquisition of
          eight multifamily properties and one development property.  The
          Company also acquired the property management businesses of
          several of MIGRA's affiliates and the right to receive certain
          asset management fees, including disposition and incentive fees,
          that would have otherwise been received by MIGRA upon the sale of
          certain of the properties owned by institutions advised by MIGRA. 
          MIGRA's asset management, property management, investment
          advisory and mortgage servicing operations, including those of
          MIGRA's affiliates, are collectively referred to herein as the
          "MIGRA Operations".

               At September 30, 1998, the Company owned, or was a joint
          venture partner in, 101 multifamily properties containing 21,346
          suites.  Additionally, the Company managed 59 non-owned
          properties, 51 of which were multifamily properties consisting of
          13,331 suites (19 of which are owned by various institutional
          investors consisting of 6,279 suites) and eight of which were
          commercial properties consisting of an aggregate of approximately
          825,000 square feet of gross leasable area.  Through special
          purpose entities, collectively referred to as the "Service
          Companies," the Company provides management, painting and
          computer services as well as mortgage origination and servicing
          to both owned and non-owned properties.

          Principles of Consolidation

               The accompanying consolidated financial statements include
          the accounts of the Company, all  subsidiaries, the Service
          Companies and the operating partnership structured as a DownREIT. 
          The Company holds a preferred share interest in the Service
          Companies which entitles it to receive 95% of the economic
          benefits from operations and which is convertible into a majority
          interest in the voting common shares.  The outstanding voting
          common shares of these Service Companies are held by an executive
          officer of the Company.  The Service Companies are consolidated
          because, from a financial reporting perspective, the Company is
          entitled to virtually all economic benefits and has operating
          control.  The preferred share interest is not an impermissible
          investment for purposes of the Company's REIT qualification test.

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

               As further described in Note 2, the Company entered into an
          operating partnership structured as a DownREIT of which a 41%
          interest is owned by limited partners.  Interests held by limited
          partners in real estate partnerships controlled by the Company
          are reflected as "Operating partnership minority interest." 
          Capital contributions, distributions and profits and losses are
          allocated to minority interests in accordance with the terms of
          the operating partnership agreement.

<PAGE>7
               All significant intercompany balances and transactions have
          been eliminated in consolidation.

          Basis of Presentation

               The accompanying unaudited financial statements have been
          prepared by the Company's management in accordance with generally
          accepted accounting principles for interim financial information
          and applicable rules and regulations of the Securities and
          Exchange Commission.  Accordingly, they do not include all of the
          information and footnotes required by generally accepted
          accounting principles for complete financial statements.  In the
          opinion of management, all adjustments (consisting only of
          normally recurring adjustments) considered necessary for a fair
          presentation have been included.  The results of operations for
          the three and nine month periods ended September 30, 1998 and
          1997 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 Company's audited financial
          statements and notes thereto included in the Company's Annual
          Report on Form 10-K for the year ended December 31, 1997.

          Use of Estimates

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

          Reclassifications

               Certain reclassifications have been made to the 1997
          financial statements to conform to the 1998 presentation.

          Recent Accounting Pronouncements

               During 1997, the Financial Accounting Standards Board issued
          Statements of Financial Accounting Standards No. 130 - Reporting
          Comprehensive Income ("SFAS 130") and SFAS 131 - Disclosure About
          Segments of an Enterprise and Related Information and in 1998,
          SFAS 133 - Accounting for Derivative Instruments and Hedging
          Activities ("SFAS 133").  In Addition, in March 1998, the
          Emerging Issues Task Force of the Financial Accounting Standards
          Board reached a consensus opinion on issue #97-11, Accounting for
          Internal Costs Relating to Real Estate Property Acquisitions
          ("EITF 97-11").

               SFAS 130 specifies the presentation and disclosure for
          reporting comprehensive income which includes those items which
          have been formerly reported as a component of stockholders'
          equity.  SFAS 131 establishes standards for disclosing
          information about an entity's operating segments and related
          information in interim and annual financial statements.  SFAS and
          130 and 131 are effective for the Company for the year ending
          December 31, 1998.  SFAS 133 requires fair value accounting for
          all derivatives, including recognizing all such instruments on
          the balance sheet with an offsetting amount recorded in the
          income or as part of comprehensive income.  This statement is
          effective for the Company for the year ending December 31, 2000. 
          EIFT 97-11 requires that the internal costs of identifying and
          acquiring an operating property should be expensed as incurred.

               The adoption of SFAS 130, SFAS 131, SFAS 133 and EITF 97-11
          are not expected to have a material impact on the Company's
          financial position, results of operations or cash flows.

<PAGE>8
          2.   DEVELOPMENT AND ACQUISITION OF MULTIFAMILY PROPERTIES

          Development Activity

               Construction in progress, including the cost of land, for
          the development of multifamily properties was $49,494,451 and
          $16,439,393 at September 30, 1998 and December 31, 1997,
          respectively.  The Company capitalizes interest costs on funds
          used in construction, real estate taxes and insurance from the
          commencement of development activity through the time the
          property is available for leasing.  Interest, real estate taxes
          and insurance aggregating approximately $933,190 and $1,681,120
          and $561,000 and $1,474,000 were capitalized during the three and
          nine month periods ended September 30, 1998 and 1997,
          respectively.  For the nine month period ended September 30,
          1998, the construction and leasing of 281 suites at four
          properties were completed at a total cost of $12.7 million. The
          following schedule details construction in progress at September
          30, 1998:
<TABLE>
<CAPTION>

                                                            Placed in           
           (dollars in thousands)         Number    Costs    Service   September 30, 1998  Estimated
                                            of    Incurred   through      Land  Building   Scheduled
                  Property                 Suites  to Date   9/30/98      Cost     Cost    Completion

   <S>                                     <C>     <C>       <C>        <C>     <C>        <C>
   AURORA, OHIO
     The Residence at Barrington-Phase I   168    $ 15,348  $14,630    $     65 $    653     1998
     The Residence at Barrington-Phase II  120       9,664    5,590         393    3,681     1998
                                           288      25,012   20,220         458    4,334 
   ANN ARBOR, MICHIGAN
     Arbor Landings Apartments II          160       6,798      508         621    5,669     1999

   BATTLE CREEK, MICHIGAN
     The Landings at the Preserve           90         308        -         266       42     2000
   FENTON, MICHIGAN
     Georgetown Park Apartments III        120       7,098    6,211          70      817     1998

   GRAND RAPIDS, MICHIGAN
     Aspen Lakes II                        118         710        -         402      308     2000

   MT. STERLING, OHIO
     Muirwood Village at Mt. Sterling II    90         146        -         126       21      TBD

   WESTLAKE, OHIO
     Westlake                              300         695        -         523      172     2000

   ORLANDO, FLORIDA
     Windsor at Kirkman Apts.              460      30,500        -       3,222   27,278     1999

   AVON, OHIO
     Village at Avon                       312       3,505        -       2,158    1,347     2000

   Other                                   278*      1,661        -         225    1,435 
                                         2,216    $ 76,433  $26,939(1)  $ 8,071 $ 41,423 
   * Estimated
   (1) Including land of $2,202
   TBD-To be determined
</TABLE>
          Acquisition Activity

               During the period January 1, 1998 through September 30,
          1998, without regard to the merger of MIGRA and the related
<PAGE>9
          acquisition of the eight MIG REIT Properties and the one
          development property, the Company acquired five multifamily
          properties containing 1,584 suites and a parcel of land
          containing 42 acres for an aggregate purchase price of $95.1
          million of which $17.2 million represents liabilities assumed
          including mortgage indebtedness of $15.0 million.  The balance of
          the purchase price was financed using borrowings under an
          unsecured 90 day term loan of $44.5 million and borrowings under
          the Company's Line of Credit of approximately $35.6 million.  The
          properties are located in Coconut Creek, Florida; Duluth,
          Georgia; Columbia, Maryland; Indianapolis, Indiana; and Toledo,
          Ohio.  The land parcel is located in Avon, Ohio.  Three of the
          five properties were acquired in anticipation of the merger with
          MIGRA and the purchase of the MIG REIT properties and one
          development property.  The three properties were owned, at least
          in part, by MIG Residential Trust.  The aggregate purchase price
          of these properties was $59.5 million of which approximately
          $16.3 million represented assumed liabilities.

               On June 30, 1998, the Company consummated the merger of
          MIGRA into the Company and the related acquisition of eight
          multifamily properties and one development property.  The Company
          also acquired the property management businesses of several of
          MIGRA's affiliates and the right to receive certain asset
          management fees, including disposition and incentive fees, that
          would have otherwise been received by MIGRA upon the sale of
          certain of the properties owned by institutions advised by MIGRA.

               As consideration for their interest in MIGRA and the
          affiliated property management businesses, the shareholders of
          MIGRA received 408,314 of the Company's common shares.  The
          number of shares issued was determined based on the average
          closing price of the Company's common shares for the 20 trading
          days preceding the date of the merger agreement or $23.63 per
          share.  Subject to the achievement of certain performance
          criteria, the former shareholders of MIGRA have the opportunity
          to receive additional contingent consideration to be paid in the
          form of the Company's common shares as further discussed in the
          following paragraph.

               The merger agreement provides for up to $3.1 million and
          $6.4 million in contingent consideration payable on the first and
          second anniversary of the merger, respectively.  The agreement
          also provides for certain reductions to the purchase price if any
          of MIGRA's or a MIGRA affiliate's advisory clients did not
          consent to the assignment of, or terminated any advisory, asset,
          property management or mortgage servicing agreement prior to the
          merger.  The initial purchase price, including contingent
          consideration, was reduced by $5.6 million pursuant to the price
          reduction provisions of the merger agreement.

               The Company recorded approximately $4.9 million in
          intangibles assets which represents the allocation of the
          purchase price to the purchase of the investment advisory, asset
          management and mortgage servicing operations including the
          property management and asset advisory contracts and key
          executives retained.  These intangibles are amortized on a
          straight-line basis over a period of six years, which represents
          its estimated life.  If there is an event or change in
          circumstance that indicates an impairment in the value of the
          intangible assets has occurred, the Company's policy is to write
          off any unamortized balance.

               The Company also acquired eight multifamily properties from
          subsidiaries of MIG Residential REIT, Inc. (the "MIG REIT
          Properties") for $12 million in cash, the issuance of 5,139,387
          common shares of the Company and the assumption of approximately
          $0.6 million in liabilities.  The number of common shares was
          determined based on the average closing prices of the Company's
          common shares for the 20 trading days preceding the purchase of
          the MIG REIT Properties or $18.76 per share.  The cash portion of
          the purchase price was financed using borrowings made available
          through the Company's Line of Credit.
<PAGE>10

          The MIG REIT Properties are further described as follows:

<TABLE>
<CAPTION>

                                                          Number      Year
                                                            of       Placed
         Name of Property               Location          Suites   in Service 

         <S>                            <C>               <C>      <C>

   20th and Campbell Apartments Phoenix, Arizona            204       1989
   Annen Woods Apartments       Pikesville, Maryland        132       1987
   Desert Oasis Apartments      Palm Desert, California     320       1990
   Fleetwood Apartments         Houston, Texas              104       1993
   Hampton Point Apartments     Silver Springs, Maryland    352       1986
   Morgan Place Apartments      Atlanta, Georgia            186       1989
   Peachtree Apartments         St. Louis, Missouri         156       1989
   Windsor Falls Apartments     Raleigh, North Carolina     276       1994
                                                          1,730
</TABLE>

               In connection with the above transactions, the Company also
          acquired the general and certain limited partnership interests in
          a partnership that owns a multifamily property in development. 
          In exchange for cash of $15.6 million, the Company received
          661,663 operating partnership units, representing a 59% general
          partnership interest in AERC HP Advisors Limited Partnership ("HP
          Advisors"), a DownREIT partnership, which owns a parcel of real
          property located in Orlando, Florida upon which a 460 suite
          multifamily apartment complex known as Windsor at Kirkman
          Apartments is being constructed.  Windsor at Kirkman Apartments
          is approximately 48% complete.  Certain limited partners of HP
          Advisors received 459,719 operating partnership units ("OP
          units"), representing four classes of limited partnership
          interests, in exchange for their interests in Windsor at Kirkman
          Apartments.  The number of OP units issued was determined based
          on the average closing prices of the Company's common shares for
          the 20 trading days preceding the date of the merger agreement or
          $23.63 per share.  Commencing one year from the date of issuance,
          the holders of the Class A OP units can put these units to the
          operating partnership for cash, subject to certain conditions. 
          The Company has the option to redeem the OP units
          for cash or common shares, exchangeable on a one-for-one basis. 
          The Class B and C OP units and Class E OP units, are convertible
          into Class A OP units at the option of the Company, one and two
          years, respectively, from the date of issuance.  The cash paid by
          the Company in exchange for its operating partnership units in HP
          Advisors was financed using borrowings made available through the
          Company's Line of Credit.
<PAGE>11

          3.   SHAREHOLDERS' EQUITY

               The following table summarizes the changes in shareholders'
          equity since December 31, 1997:
<TABLE>
<CAPTION>

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

   <S>                    <C>         <C>            <C>           <C>            <C>      <C>
   Balance, Dec. 31, 1997 $56,250,000 $   1,707,377  $171,752,807 $(48,552,106)      -      $181,158,078 
    Net income                 -            -              -        14,496,358       -        14,496,358 
    Issuance of 484
     restricted common
     shares                    -                 48           (48)       -           -            -
    Issuance of 5,547,701
     common shares
     relating to the
     MIGRA merger and the                                                                          
     acquisition of the
     MIG REIT properties       -            554,770   105,508,589        -           -       106,063,359 
    Additional costs
     relating to common
     share offering            -            -            (140,833)       -           -          (140,833)
    Purchase of
     treasury shares           -            -              -             -       (466,523)      (466,523)
    Common share 
     dividends declared        -            -              -       (28,959,962)      -       (28,959,962)
    Preferred share
     dividends declared        -            -              -        (4,113,316)      -        (4,113,316)
   Balance, September 30,
     1998                 $56,250,000 $   2,262,195  $277,120,515 $(67,129,026)  $(466,523) $268,037,161

</TABLE>

          4.   SECURED DEBT

          Conventional Mortgage Debt

               Conventional mortgages payable include nonrecourse, fixed
          and variable rate, project specific loans to the Company which
          are collateralized by the associated real estate and resident
          leases.  Mortgages payable are generally due in monthly
          installments of principal and/or interest and mature at various
          dates through March 1, 2007.  The balance of the conventional
          mortgages was $35.9 million and $29.4 million at September 30,
          1998 and December 31, 1997, respectively.  The five conventional
          mortgages have a fixed rate.  On June 30, 1998, the Company paid
          off an $8.1 million mortgage which had a variable rate.

          Federally Insured Mortgage Debt

               Federally insured mortgage debt is insured by HUD pursuant
          to one of the mortgage insurance programs administered under the
          National Housing Act of 1934 (one property is funded through
          Industrial Development Bonds).  These government-insured loans
          are nonrecourse to the Company.  Payments of principal, interest
          and HUD mortgage insurance premiums are made in equal monthly
          installments and mature at various dates through March 1, 2024. 
          The balance of the federally insured mortgages was $28.0 million
          and $28.4 million at September 30, 1998 and December 31, 1997,
          respectively.  Six of the seven federally insured mortgages have
          a fixed rate and the remaining mortgage ($1.9 million) has a
          variable rate.

               Under certain of the mortgage agreements, the Company is
          required to make escrow deposits for taxes, insurance and
          replacement of project assets.  The variable rate mortgage is
          secured by a letter of credit which is renewed annually.

<PAGE>12
          5.   UNSECURED DEBT

          Senior Notes

               The Company has two Senior Notes outstanding in the
          principal amounts of $75 million and $10 million that accrue
          interest at 8.38% and 7.10%, respectively, and mature in 2000 and
          2002, respectively.  The balance of the $75 million Senior Notes,
          net of unamortized discounts, was $74.9 million at September 30,
          1998 and December 31, 1997.

          Medium-Term Notes Program

               The Company has eleven Medium-Term Notes (the "MTN's")
          outstanding having an aggregate balance of $112.5 million and
          $92.5 million at September 30, 1998 and December 31, 1997,
          respectively.  The principal amounts of these MTN's range from
          $2.5 million to $20 million and bear interest from 6.18% to 7.93%
          over terms ranging from two to 30 years, with a stated weighted
          average maturity of 11 years at September 30, 1998.  The holders
          of two MTN's with stated terms of 30 years each have a right to  
          repayment of five and seven years from the issue date of the
          respective MTN.  If these holders exercised their right to
          prepayment, the weighted average maturity would be 5.8 years. 
          The weighted average interest rate of the eleven MTN's is 6.95%. 
          One and four of the MTN's in the aggregate amounts of $20.0
          million and $50.0 million were issued in 1998 and 1997,
          respectively.

               The Company's current MTN Program provides for the issuance,
          from time-to-time, of up to $102.5 million of MTN's due nine
          months or more from the date of issue and may be subject to
          redemption at the option of the Company or repayment at the
          option of the holder prior to the stated maturity date.  These
          MTN's may bear interest at fixed rates or at floating rates and
          can be issued in minimum denominations of $1,000.  There are
          currently $62.5 million of additional MTN borrowings available
          under the existing program.

               From time to time, the Company may enter into hedge
          agreements to minimize its exposure to interest rate risks. 
          There are no interest rate protection agreements outstanding as
          of September 30, 1998.

          Line of Credit

               In June 1998, the Company completed a new unsecured $200
          million revolving credit facility (the "Line of Credit") which
          replaced a $100 million unsecured revolving credit facility.  In
          July 1998, the Line of Credit was increased from $200 million to
          $250 million.  The new agreement provides for a reduction in
          pricing and an extension of the term for an additional year
          through June 2001.  The Line of Credit includes a competitive bid
          option for up to 50% of the amount of the facility.  The
          Company's borrowings under this Line of Credit bear interest at
          variable rates based on the prime rate or LIBOR plus a specified
          spread (currently 100 basis points), depending on the Company's
          long term senior unsecured debt rating from Standard and Poor's
          and Moody's Investors Service.  The Line of Credit is used to
          finance the acquisition of properties, to provide working capital
          and for general corporate purposes.  At September 30, 1998, $210
          million was outstanding under this facility.

               The Company recently advised its bank group that it is
          not in compliance with one of the financial covenants concerning 
          the Company's net worth.  The net worth covenant requires that the
          Company maintain a minimum net worth of $400 million, based on a 
          formula that incorporates the annualized multiple of the most 
          recent quarter's earnings before interest, taxes, depreciation and
          amortization (EBITDA).  The Company is currently in discussions with
          its bank group that it expects will result in a waiver by the banks
          of the breach of the net worth covenant, along with a modest 
          increase in borrowing costs under its Line of Credit.  The bank 
          group has continued to make advances under the Line of Credit 
          following the Company's notification that it was not in compliance 
          with the net worth covenant.

               MIGRA maintains two separate $500,000 Line of Credit
          facilities ("MIGRA Line of Credit Facilities") which the Company
          assumed at the time of the merger.  The MIGRA Line of Credit
          Facilities are used to provide working capital and for general
          corporate purposes for MIGRA's operations.  MIGRA's borrowings
          under these facilities bear interest at prime plus one percent. 
          The Company subsequently paid off one of the MIGRA Line of Credit
          Facilities at maturity, on October 31, 1998. The other facility
          will mature on May 1, 2000.  At September 30, 1998, approximately
          $1 million was outstanding under these facilities.

<PAGE>13
          6.   TRANSACTIONS WITH AFFILIATES AND JOINT VENTURES

               The Company provides management and other services to (and
          is reimbursed for certain expenses incurred on behalf of) certain
          non-owned properties in which the Company's Chief Executive
          Officer and/or other related parties have varying ownership
          interests.  The entities which own these properties, as well as
          other related parties, are referred to as "affiliates".  The
          Company also provides similar services to joint venture
          properties.

               Summarized affiliate and joint venture transaction activity
          follows:
<TABLE>
<CAPTION>
                                            Three months ended         Nine months ended
                                              September 30,              September 30,       
                                             1998        1997         1998         1997

   <S>                                    <C>        <C>          <C>          <C>
   Property management fee and other
     miscellaneous service revenues
                     - affiliates         $ 712,103   $542,330    $ 1,755,039  $  1,648,635 
                     - joint ventures       230,387    224,399        693,941       663,150 
   Painting service revenues                                                  
                     - affiliates            99,011     84,925        281,362       322,873 
                     - joint ventures        85,353     61,148        298,319       135,585 
   Expenses incurred on behalf of and re-                 
     imbursed by(1)  - affiliates           990,588   1,189,510     3,147,024     3,334,170 
                     - joint ventures       635,532     660,758     1,918,110     1,920,786 
   Interest income   - affiliates           200,417     211,518       692,284       414,982 
   Interest expense  - affiliates          (100,230)    (90,839)     (313,360)     (261,169)
                     - joint ventures        (4,550)     (5,151)      (19,487)      (16,907)
          (1)  Primarily payroll and employee benefits, reimbursed at cost.
</TABLE>

               Property management fees and other miscellaneous receivables
          due from affiliates and joint venture properties were $6,810,327
          and $4,542,798 in the aggregate at September 30, 1998 and
          December 31, 1997, respectively.  Other miscellaneous payables
          due to affiliates and joint venture properties were $231,549 and
          $329,000 in the aggregate at September 30, 1998 and December 31,
          1997, respectively.

               In the normal course of business, the Company advances funds
          on behalf of, or holds funds for the benefit of, affiliates and
          joint ventures.  Funds advanced to affiliates and joint ventures
          aggregated $7,485,383 and $871,013 at September 30, 1998,
          respectively, and $9,048,403 and $847,954 at December 31, 1997,
          respectively.  Except for insignificant amounts, advances to
          affiliates bear interest; the rate charged was 8.3% on a weighted
          average basis during the period ending September 30, 1998.  The
          Company held funds for the benefit of affiliates and joint
          ventures in the aggregate amount of $5,037,193 and $1,241,302 at
          September 30, 1998, respectively, and $4,989,674 and $1,805,543
          at December 31, 1997, respectively.

               In February 1998, certain affiliated entities which owed the
          Company a substantial amount of the advances described above made
          capital calls to their partners for the purpose of effecting
          repayment of such advances.  Thereafter, approximately $4.0
          million of advances were repaid pursuant to such capital calls. 
          However, a corporation (the "Corporation"), owned by a member of
          the Company's board of directors and his siblings (including the
          wife of the Company's Chairman and Chief Executive Officer),
          which serves as general partner of certain affiliated entities,
          has informed the Company that the Corporation has caused the
          commencement of a review of expenditures of approximately $2.9
          million relating to certain HUD subsidized properties to
          determine the appropriateness of such expenditures and whether
          certain of such expenditures are properly the responsibility of
          the Company.  Should this review result in any dispute with
          respect to the foregoing expenditures, such disagreement will be
<PAGE>14
          resolved through binding arbitration.  The Company believes that
          all expenditures were appropriate and, accordingly, does not
          believe that the ultimate outcome of any disagreement will have a
          material adverse effect on the Company's financial position,
          results of operations or cash flows.

               At September 30, 1998, two notes of equal amounts were
          receivable from the Company's Chief Executive Officer aggregating
          $3,342,000 (included in "Accounts and notes receivables-
          affiliates and joint ventures"). The notes were entered into on
          May 23, 1997 and bear interest, payable quarterly at the 30-day
          LIBOR plus the LIBOR margin on the Company's Line of Credit, 
          with principal due May 1, 2002.  The weighted average interest
          rate charged was 6.76% for the nine month period ending September
          30, 1998.  One of the notes is collateralized by 150,000 of the
          Company's common shares; the other note is unsecured.  The
          Company recognized interest income of $56,184 and $169,366 for
          the three and nine month period ending September 30, 1998
          relating to these notes.

          7.   PREFERRED AND COMMON SHARES

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

               On June 30, 1998, the Company issued 408,314 and 5,139,387
          common shares relating to the Company's merger of MIGRA and the
          related acquisition of eight multifamily properties,
          respectively.

               On June 30, 1998, the Company's Board of Directors
          authorized management to purchase, from time to time, up to
          1,000,000 common shares at market prices.  The timing of stock
          purchases are made at the discretion of management.  During the
          third quarter of 1998, 25,000 shares were repurchased at an
          aggregate cost of $466,523 which was funded primarily from
          operating cash flows.

          8.   EARNINGS PER SHARE
           
          Earnings Per Share

               Earnings per share ("EPS") has been computed pursuant to the
          provisions of SFAS No. 128 which became effective after December
          15, 1997; all periods prior thereto have been restated to conform
          with the provisions of this statement.

               The following table provides a reconciliation of both income
          before extraordinary items and the number of common shares used
          in the computations of basic EPS, which utilizes the weighted
          average number of common shares outstanding without regard to
          dilutive potential common shares, and diluted EPS, which includes
          all such shares.

<PAGE>15
<TABLE>
<CAPTION>
                                                For the three months        For the nine months
                                                 ended September 30,        ended September 30,
                                                  1998         1997         1998          1997    
   <S>                                        <C>          <C>          <C>           <C>
   Basic Earnings Per Share:
   Income before extraordinary items          $ 5,012,008  $ 5,776,024  $14,621,253   $16,358,493 
     Less: Preferred share dividends          ( 1,371,105) ( 1,371,105) ( 4,113,315)  ( 4,113,315)
   Income before extraordinary items
     applicable to common shares                3,640,903    4,404,919   10,507,938    12,245,178 
     Extraordinary items gain (loss)                    -      (19,733)    (124,895)    1,023,713 
   Net income applicable to common shares     $ 3,640,903  $ 4,385,186  $10,383,043   $13,268,891 

   Diluted Earnings Per Share:
   Income before extraordinary items          $ 5,012,008  $ 5,776,024  $14,621,253   $16,358,493 
     Add:  Minority interest in operating
           partnership                             39,353            -       39,353             - 
     Less:  Preferred share dividends         ( 1,371,105) ( 1,371,105) ( 4,113,315)  ( 4,113,315)
   Income before extraordinary items
     applicable to common shares                3,680,256    4,404,919   10,547,291    12,245,178 
     Extraordinary items gain (loss)                    -      (19,733)    (124,895)    1,023,713 
   Net income applicable to common shares     $ 3,680,256  $ 4,385,186  $10,422,396   $13,268,891 

   Number of Shares:                                                                              
   Basic-average shares outstanding            22,598,199   17,052,189   18,954,875    15,904,262 
     Add: Dilutive effect of stock options              -       25,937            -        26,573 
          Operating partnership units             459,719            -      154,924             - 
     Diluted shares                            23,057,918   17,078,126   19,109,799    15,930,835 

   Per Share Amount-Income
     Before Extraordinary Item:
       Basic                                  $       .16  $       .26  $       .55   $       .77 
       Diluted                                $       .16  $       .26  $       .55   $       .77 

   Per Share Amount-Net Income:
       Basic                                  $       .16  $       .26  $       .55   $       .83 
       Diluted                                $       .16  $       .26  $       .54   $       .83 <PAGE>
</TABLE>

               Options to purchase 1,243,474 and 1,070,274 common shares
          were outstanding at September 30, 1998 and December 31, 1997,
          respectively, a portion of which has been reflected above using
          the treasury stock method.

<PAGE>16

          9.   SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

               The following summarizes the non cash investing and
          financing activities of the Company which are not reflected in
          the Consolidated Statements of Cash Flows:

<TABLE>
<CAPTION>
                                                             Nine months ended
                                                               September 30,
                                                              1998         1997
   <S>                                                        <C>          <C>
   Issuance of common shares in connection with the
     acquisition of MIG REIT properties and the MIGRA
     merger                                               $106,063,359  $        -
   Issuance of operating partnership units
     in connection with the acquisition of the
     development property                                   10,863,204           -
   Assumption of mortgage debt in connection with the
     acquisition of properties                              15,013,771           -
   Assumption of liabilities in connection with the 
     acquisition of properties                               5,543,977   3,703,513
   Dividends declared but not paid                          10,507,585           -


</TABLE>

          10.  PRO FORMA CONDENSED FINANCIAL INFORMATION (UNAUDITED)

               The following unaudited supplemental pro forma operating
          data for 1998 is presented to reflect, as of January 1, 1998, the
          effects of: (i) the twelve property acquisitions completed in
          1998 and (ii) the merger of MIGRA.  The following unaudited
          supplemental pro forma operating data for 1997 is presented to
          reflect, as of January 1, 1997, the effects of: (i)  the eight
          property acquisitions completed in 1997, (ii) the thirteen
          property acquisitions completed in 1998, (iii) the merger of
          MIGRA and (iv)  the offering of 1,750,000 common shares.

<TABLE>
<CAPTION>
                                                  For the nine months
                                                  ended September 30, 
                                                    1998        1997   
                                                 (In thousands, except
                                                   per share amounts)

   <S>                                           <C>         <C>
   Revenues                                      $   113,067 $   107,767
   *Net income                                        11,495      16,443
   *Income applicable to common shares                 7,382      12,329
   *Income per common share
        - Basic                                  $      0.33 $      0.55
        - Diluted                                $      0.32 $      0.53
     Weighted average common shares outstanding:
        - Basic                                       22,597      22,597
        - Diluted                                     23,057      23,057

   *Before extraordinary item
</TABLE>

               The 1997 pro forma financial information does not include
          the revenue and expenses for Oak Bend Apartments and Waterstone
          Apartments, properties that were acquired in 1997, for the period
          January 1, 1997 through the date the properties were acquired by
          the Company.  The revenue and expenses of Oak Bend Apartments and
          Waterstone Apartments were excluded from the pro forma financial
          information for such periods as the properties were under
          construction during substantially all of the periods prior to
          their acquisition.

<PAGE>17
               The 1997 and 1998 pro forma financial information does not
          include the revenue and expenses for Windsor at Kirkman
          Apartments and Steeplechase at Shiloh Crossing Apartments, 
          properties that were acquired in 1998, for the period January 1
          through the date the properties were acquired by the Company. 
          The revenue and expenses of Windsor at Kirkman Apartments and
          Steeplechase at Shiloh Crossing Apartments were excluded from the
          pro forma financial information for such periods as the
          properties were under construction during substantially all of
          the periods prior to their acquisition.

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

          11.  CONTINGENCIES

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

               This controversy arose out of a Comprehensive Management
          Review of the property initiated by HUD in the Spring of 1997,
          which included a complete physical inspection of the property. 
          Rainbow Terrace Apartments, Inc. believes that it has corrected
          the management deficiencies cited by HUD in the Comprehensive
          Management Review (other than the completion of certain physical
          improvements to the property) and, in a series of written<PAGE>
          responses to HUD, justified the expenditures questioned by HUD as
          being properly chargeable to the property in accordance with
          HUD's regulations.  Moreover, Rainbow Terrace Apartments, Inc.
          believes it has repaired any physical deficiencies noted by HUD
          in its Comprehensive Management Review that might pose a threat
          to the life and safety of its residents.  The Company is unable
          to predict the outcome of the controversy with HUD, but does not
          believe it will have a material adverse effect on the Company's
          financial position, results of operations or cash flows.

               In June 1998, HUD notified the Company that all future
          Housing Assistance Payments ("HAP") for Rainbow Terrace
          Apartments were abated and instructed the lender to accelerate
          the balance due under the mortgage.  Subsequent to the
          notification of HAP abatements and the acceleration of the
          mortgage, the lender advised the Company that the acceleration
          notification had been rescinded pursuant to HUD's instruction. 
          HUD then notified the Company that the HAP payments would be
          reinstated and that HUD was reviewing further information
          concerning Rainbow Terrace Apartments provided by the Company. 
          The Company has since received the July, August, September, 
          October and November 1998 HAP payments for Rainbow Terrace 
          Apartments. As part of the Company's ongoing discussions with HUD 
          concerning the resolution of these matters, the Company has been 
          notified that HUD has agreed to review the budget based rent increase
          submitted to HUD by the Company in 1995.  At December 31, 1997 and
          September 30, 1998, the Company had receivables of $1.35 million
          related to these retroactive rent increase requests.   At
          September 30, 1998, Rainbow Terrace Apartments, Inc. had net
          assets of $1.3 million, including the retroactive rent receivable
          of $1.35 million due from HUD, and a remaining amount due under
          the mortgage of $1.9 million.

<PAGE>18
          12.  SUBSEQUENT EVENTS

               The Company is exploring opportunities to strategically
          dispose of a number of its multifamily properties which include
          certain joint venture, government assisted and congregate care
          properties.

               On August 26, 1998, the Company declared a dividend of $.465
          per common share for the quarter ending September 30, 1998, which
          was paid on October 31, 1998 to shareholders of record on October
          15, 1998.

               The Company is currently under contract to purchase a parcel
          of land containing 24 acres for a purchase price of approximately
          $2.1 million.  The land parcel is located in Cranberry Township,
          Pennsylvania (a suburb of Pittsburgh).  The Company expects to
          finance the land parcel acquisition with borrowings made
          available through the Company's Line of Credit.  There can be no
          assurances, however, that the Company will be successful in its
          attempts to acquire the land parcel currently under contract.

               In connection with the MIGRA transaction, and subsequent to
          September 30, 1998, the Company acquired the general and certain
          limited partnership interests in a partnership that owns one
          multifamily property located in Pembroke Pines, Florida
          containing 368 suites for a purchase price of approximately $34.2
          million.  In exchange for cash of $16.6 million and the
          assumption of mortgage indebtedness of $16.5 million, the Company
          received 1,887,345 OP units, bringing the Company's general
          partnership interest in HP Advisors to 83%.  Certain limited
          partners of HP Advisors received 62,313 Class D OP units in exchange
          for their interests in the property.

               Additionally, subsequent to September 30, 1998, the Company 
          acquired a parcel of land containing 48 acres for a purchase price of
          approximately $3.9 million which was financed with borrowings
          under the Company's Line of Credit.  The Company plans to
          construct 535 suites on the land parcel.

<PAGE>19

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

          Overview
               Associated Estates Realty Corporation (the "Company") is a
          Real Estate Investment Trust ("REIT") which, at September 30,
          1998, owned or was a joint venture partner in 101 multifamily
          properties containing 21,346 suites located in Florida, Georgia,
          Ohio, Maryland, Michigan, Indiana, Pennsylvania, Arizona,
          California, Missouri, North Carolina and Texas.

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

          Liquidity and Capital Resources
               The Company has elected to be taxed as a REIT under Sections
          856 through 860 of the Internal Revenue Code of 1986, as amended,
          commencing with its taxable year ending December 31, 1994. REIT's
          are subject to a number of organization and operational
          requirements including a requirement that 95% of the income that
          would otherwise be considered as taxable income be distributed to
          its shareholders.  Providing the Company continues to qualify as
          a REIT, it will generally not be subject to a Federal income tax
          on net income.

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

          Financing:
               In June 1998, the Company completed a new unsecured $200
          million revolving credit facility (the "Line of Credit") which
          replaced a $100 million unsecured revolving credit facility.  In
          July 1998, the Line of Credit was increased from $200 million to
          $250 million.  The new agreement provides for a reduction in
          pricing and an extension of the term for an additional year
          through June 2001.  The Line of Credit includes a competitive bid
          option for up to 50% of the amount of the facility.  During the
          second quarter of 1998, the Company recognized a non-cash
          extraordinary charge of approximately $0.125 million ($0.0075 per
          share), relating to the write-off of unamortized deferred finance
          costs associated with the former revolving credit facility.  The
          Company's borrowings under this Line of Credit bear interest at
          variable rates based on the prime rate or LIBOR plus a specified
          spread (currently 100 basis points), depending on the Company's
          long term senior unsecured debt rating from Standard and Poor's<PAGE>
          and Moody's Investors Service.  The Line of Credit is used to
          finance the acquisition of properties, to provide working capital
          and for general corporate purposes.  At September 30, 1998, $210
          million was outstanding under this facility. 

               The Company recently advised its bank group that it is not in
          compliance with one of the financial covenants concerning the 
          Company's net worth.  The net worth covenant requires that the 
          Company maintain a minimum net worth of $400 million, based on a 
          formula that incorporates an annualized multiple of the most recent
          quarter's earnings before interest, taxes, depreciation and 
          amortization (EBITDA).  The Company is currently in discussions 
          with its bank group that it expects will result in a waiver by the
          banks of the breach of the net worth covenant, along with a modest
          increase in borrowing costs under its Line of Credit. The bank 
          group has continued to make advances under the Line of Credit 
          following the Company's notification that it was not in compliance
          with the net worth covenant.

               MIG Realty Advisors, Inc. ("MIGRA") maintains two separate
          $500,000 Line of Credit facilities ("MIGRA Line of Credit
          Facilities") which the Company assumed at the time of the merger. 
          The MIGRA Line of Credit Facilities are used to provide working
          capital and for general corporate purposes for MIGRA's
          operations.  MIGRA's borrowings under these facilities bear
          interest at prime plus one percent.  The Company subsequently
          paid off one of the MIGRA Line of Credit Facilities at maturity,

<PAGE>20
          on October 31, 1998. The other facility will mature on May 1,
          2000.  At September 30, 1998, approximately $1 million was
          outstanding under these facilities.

               Eighty-three of the Company's 94 wholly owned properties
          were unencumbered at September 30, 1998 with annualized earnings
          before interest, depreciation and amortization of approximately
          $74.7 million and an historical cost basis of approximately
          $235.4 million.  The remaining eleven of the Company's wholly
          owned properties, have an historical cost basis of $151.4 million
          and secured property specific debt of $63.9 million at September
          30, 1998.  Unsecured debt, which totaled $408.5 million at
          September 30, 1998, consisted of $112.5 million in Medium-Term
          Notes; Senior Notes of $84.9 million;  amounts drawn on the
          revolving credit facility of $210 million; and amounts drawn on
          the MIGRA Line of Credit Facilities of approximately $1 million. 
          The Company's proportionate share of the mortgage debt relating
          to the seven joint venture properties was $17.6 million at
          September 30, 1998.  The weighted average interest rate on the
          secured, unsecured and the Company's proportionate share of the
          joint venture debt was 7.3% at September 30, 1998.

               On April 9, 1998  the Company issued a 10-year, $20 million
          Medium-Term Note (the "MTN") under its $102.5 million MTN
          program.  The weighted average interest rate, including the
          effect of the settlement of a Treasury Lock agreement, is 7.2%. 
          The net proceeds to the Company with respect to this issuance
          were $19.4 million, which were applied to amounts outstanding
          under the Line of Credit.

          Registration statements filed in connection with financing:
               The Company has a shelf registration statement on file with
          the Securities and Exchange Commission relating to the proposed
          offering of up to $368.8 million of debt securities, preferred
          shares, depositary shares, common shares and common share
          warrants.  The total amount of the shelf filing includes a $102.5
          million MTN program of which MTN's totaling $40.0 million have
          been issued leaving $62.5 million available.  The securities may
          be offered from time to time at prices and upon terms to be
          determined at the time of sale.

          The MIGRA Transaction
               On June 30, 1998, the Company consummated the merger of
          MIGRA into the Company and the related acquisition of eight
          multifamily properties and one development property.  The Company
          also acquired the property management businesses of several of
          MIGRA's affiliates and the right to receive certain asset
          management fees, including disposition and incentive fees, that
          would have otherwise been received by MIGRA upon the sale of
          certain of the properties owned by institutions advised by MIGRA. 
          MIGRA's asset management, property management, investment
          advisory and mortgage servicing operations, including those of
          MIGRA's affiliates, are collectively referred to herein as the
          "MIGRA Operations".

               As consideration for their interest in MIGRA and the
          affiliated property management businesses, the shareholders of
          MIGRA received 396,434 of the Company's common shares.  The
          number of shares issued was determined based on the average
          closing price of the Company's common shares for the 20 trading
          days preceding the date of the merger agreement or $23.63 per
          share.  On July 23, 1998, the Company issued 11,880 common shares
          to the MIGRA shareholders.  Such shares were withheld at the
          closing of the merger pending the receipt of a consent of a MIGRA
          client with respect to the merger and represented all shares that
          were held back at the closing of the merger.  The shares were
          issued at $23.63 per share. Subject to the achievement of certain
          performance criteria, the former shareholders of MIGRA have
          the opportunity to receive additional contingent consideration
          to be paid in the form of the Company's common shares as
          further discussed in the following paragraph.

               The merger agreement provides for up to $3.1 million and
          $6.4 million in contingent consideration payable on the first and
          second anniversary of the merger, respectively.  The agreement
          also provides for certain reductions to the purchase price if any
          of MIGRA's or a MIGRA affiliate's advisory clients did not
          consent to the assignment of, or have terminated any advisory,
          asset, property management or mortgage servicing agreement prior
          to the merger.  The initial purchase price, including contingent
          consideration, was reduced by $5.6 million pursuant to the price
          reduction provisions of the merger agreement.

<PAGE>21
               The Company recorded approximately $4.9 million in
          intangibles assets which represents the allocation of the
          purchase price to the purchase of the investment advisory, asset
          management and mortgage servicing operations including the
          property management and asset advisory contracts and key
          executives retained.  These intangibles are amortized on a
          straight-line basis over a period of six years, which represents
          its estimated life.  If there is an event or change in
          circumstance that indicates an impairment in the value of the
          intangible assets has occurred, the Company's policy is to write
          off any unamortized balance.

               The Company also acquired eight multifamily properties from
          subsidiaries of MIG Residential REIT, Inc. (the "MIG REIT<PAGE>
          Properties") for $12 million in cash, the issuance of 5,139,387
          common shares of the Company and the assumption of approximately
          $0.6 million in liabilities.  The number of common shares was
          determined based on the average closing prices of the Company's
          common shares for the 20 trading days preceding the purchase of
          the MIG REIT Properties or $18.76 per share.  The cash portion of
          the purchase price was financed using borrowings made available
          through the Company's Line of Credit.

          The MIG REIT Properties are further described as follows:
<TABLE>
<CAPTION>

                                                           Number    Year
                                                             of     Placed
         Name of Property                Location          Suites in Service 

   <S>                           <C>                        <C>      <C>

   20th and Campbell Apartments  Phoenix, Arizona           204      1989
   Annen Woods Apartments        Pikesville, Maryland       132      1987
   Desert Oasis Apartments       Palm Desert, California    320      1990
   Fleetwood Apartments          Houston, Texas             104      1993
   Hampton Point Apartments      Silver Springs, Maryland   352      1986
   Morgan Place Apartments       Atlanta, Georgia           186      1989
   Peachtree Apartments          St. Louis, Missouri        156      1989
   Windsor Falls Apartments      Raleigh, North Carolina    276      1994
                                                          1,730
</TABLE>
               In connection with the above transactions, the Company also
          acquired the general and certain limited partnership interests in
          a partnership that owns a multifamily property in development. 
          In exchange for cash of $15.6 million, the Company received
          661,663 operating partnership units, representing a 59% general
          partnership interest in AERC HP Advisors Limited Partnership ("HP
          Advisors"), a DownREIT partnership, which owns a parcel of real
          property located in Orlando, Florida upon which a 460 suite
          multifamily apartment complex known as Windsor at Kirkman
          Apartments is being constructed.  At the date of acquisition,
          Windsor at Kirkman Apartments was approximately 30% complete. 
          Certain limited partners of HP Advisors received 459,719
          operating partnership units ("OP units"), representing four
          classes of limited partnership interests, in exchange for their
          interests in Windsor at Kirkman Apartments.  The number of OP
          units issued was determined based on the average closing prices
          of the Company's common shares for the 20 trading days preceding
          the date of the merger agreement or $23.63 per share.  Commencing
          one year from the date of issuance, the holders of the Class A OP
          units can put these units to the operating partnership for cash,
          subject to certain conditions.  The Company has the option to
          redeem the OP units for cash or common shares, exchangeable on a
          one-for-one basis.  The Class B and C OP units and Class E OP
          units are convertible into Class A OP units at the option of the
          Company, one and two years, respectively, from the date of
          issuance.  The cash paid by the Company in exchange for its
          operating partnership units in HP Advisors was financed using
          borrowings made available through the Company's Line of Credit.

               In connection with the MIGRA transaction, and subsequent to
          September 30, 1998, the Company acquired the general and certain
          limited partnership interests in a partnership that owns a
          multifamily property, Windsor Pines Apartments ("Pines"), a 368
          suite multifamily property in Pembroke Pines, Florida, for total
          consideration of $34.2 million. In exchange for cash of $16.6
          million and the assumption of  mortgage indebtedness of $16.5

<PAGE>22
          million, the Company received 1,887,345 OP units, bringing the
          Company's general partnership interest in HP Advisors to 83%. 
          Certain limited partners of HP Advisors received 62,313 Class D
          OP units in exchange for their interests in Pines.  The number of
          OP units issued for the Pines property was determined based on
          the average closing prices of the Company's common shares for the
          20 trading days preceding the original closing date of the
          transaction or $17.54 per share.  The Class D OP units are
          convertible into Class A OP units at the option of the Company
          two years from June 30, 1998.  Once converted into Class A OP
          units, the holders can put these units to the operating
          partnership for cash, subject to certain conditions.  The Company
          has the option to redeem the units for cash or common shares,
          exchangeable on a one-for-one basis.  The cash paid by the
          Company in exchange for its operating partnership units in HP
          Advisors was financed using borrowings made available through the
          Company's Line of Credit.

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

               During the period January 1, 1998 through September 30,
          1998, without regard to the merger of MIGRA and the related
          acquisition of the eight MIG REIT Properties and the one
          development property, the Company acquired five multifamily
          properties containing 1,584 suites and a parcel of land
          containing 42 acres for an aggregate purchase price of $95.1
          million of which $17.2 million represents liabilities assumed
          including mortgage indebtedness of $15.0 million.  The balance of
          the purchase price was financed using borrowings under an
          unsecured 90 day term loan of $44.5 million and borrowings under
          the Company's Line of Credit of approximately $35.6 million.  The
          properties are located in Coconut Creek, Florida; Duluth,
          Georgia; Columbia, Maryland; Indianapolis, Indiana; and Toledo,
          Ohio.  The land parcel is located in Avon, Ohio.  Three of the
          five properties were acquired in anticipation of the merger with
          MIGRA and the purchase of the MIG REIT properties and one
          development property.  The three properties were owned, at least
          in part, by MIG Residential Trust.  The aggregate purchase price
          of these properties was $59.5 million of which approximately
          $16.3 million represented assumed liabilities.

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

               Bradford at Easton, a newly developed 324 suite property
          located in Columbus, Ohio, achieved stabilized occupancy during
          the second quarter and was 98.5% physically occupied at September
          30, 1998.  The Village of Western Reserve, a newly developed 108
          suite property located in Streetsboro, Ohio (a city located
          southeast of Cleveland) was completed and achieved stabilized
          occupancy in July 1998 and is currently 99.1% physically
          occupied.  The Company considers occupancy at a newly developed
          property to have stabilized once the property's physical
          occupancy reaches 93%.

               The Residence at Barrington, a planned 288 suite property
          located in Aurora, Ohio (also located southeast of Cleveland) is
          scheduled for completion in the fourth quarter of 1998.  The
          Company has recently commenced construction of The Village at
          Avon, a 312 suite property located in Avon, Ohio (a city located
          west of Cleveland) and is scheduled for completion in the third
          quarter of 2000.  Windsor at Kirkman Apartments, the newly

<PAGE>23
          acquired development project, is a planned 460 suite property
          located in Orlando, Florida and is scheduled for completion in
          the second quarter of 1999.

               The Company is in the process of constructing or planning
          the construction of an additional 578 suites on land adjacent 
          to multifamily properties currently owned by the Company as 
          follows:

<TABLE>
<CAPTION>
                                                                 Additional     Anticipated
                 Property                       Location           Suites       Completion   

   <S>                                   <C>                         <C>       <C>
   Arbor Landings Apartments             Ann Arbor, Michigan         160       1st Qtr. 1999
   Aspen Lakes II                        Grand Rapids, Michigan      118       2nd Qtr. 2000
   Georgetown Park Apartments III        Fenton, Michigan            120       4th Qtr. 1998
   The Landings at the Preserve(a)       Battle Creek, Michigan       90       2nd Qtr. 2000
   Muirwood Village at Mt. Sterling II   Mt. Sterling, Ohio           90            TBD
                                                                     578
</TABLE>

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

               Additionally, the Company acquired a parcel of land
          containing 42 acres for an aggregate purchase price of
          approximately $2.1 million.  The land parcel is located in Avon,
          Ohio (a suburb of Cleveland).  The Company plans to construct 312
          suites on the land parcel.  The purchase price was financed with
          borrowings under the Company's Line of Credit.

               Subsequent to September 30, 1998, the Company acquired a parcel
          of land containing 48 acres for an aggregate purchase price of 
          approximately $3.9 million.  The land parcel is located in Atlanta,
          Georgia.  The Company plans to construct 535 suites on the land
          parcel.  The purchase price was financed with borrowings under the
          Company's Line of Credit.

               The Company has entered into a contract to purchase a parcel
          of land containing 24 acres for a purchase price of approximately
          $2.1 million.  The land parcel is located in Cranberry Township,
          Pennsylvania (a suburb of Pittsburgh).  The Company will commence
          construction of Berkley Manor, a 226 suite property on this
          parcel after the consummation of the anticipated purchase in
          1999.

               The Company is exploring opportunities to dispose of a
          number of its joint venture, government assisted and congregate
          care multifamily properties.  The Company has retained a
          financial advisor to evaluate the alternatives relating to the
          disposition of its ownership and management of government
          assisted properties.  The Company recognizes that the sale of these
          assets may have a short term dilutive effect on earnings.

          Dividends:
               On August 26, 1998, the Company declared a dividend of
          $0.465 per common share for the quarter ending September 30, 1998
          which was paid on October 31, 1998 to shareholders of record on
          October 15, 1998.  Additionally, on August 26, 1998, the Company
          declared a dividend of $0.60938 per depositary share on its Class
          A Cumulative Preferred Shares (the "Perpetual Preferred Shares")
          which was paid on September 15, 1998 to shareholders of record on
          September 4, 1998.

          Cash flow sources and applications:
               Net cash provided by operating activities increased
          $6,761,878 from $23,406,725 to $30,168,603  for the nine months
          ended September 30, 1998 when compared with the nine months ended
          September 30, 1997. This increase was primarily the result of an
          increase in cash provided by a decrease in accounts and notes
          receivable, accounts and notes receivable - affiliates and joint
          ventures, funds held for non-owned managed properties, and
          restricted cash which was offset somewhat by uses of cash from
          other operating assets and liabilities, accounts payable and
          accrued expenses, and funds held for non-owned properties -
          affiliates and joint ventures.

<PAGE>24

               Net cash flows used for investing activities of $135,806,377
          for the nine months ended September 30, 1998 were primarily used
          for the acquisition and development of multifamily real estate,
          properties and undeveloped land parcels.

               Net cash flows provided by financing activities of
          $105,173,591 for the nine months ended September 30, 1998 were
          primarily comprised of borrowings on the Line of Credit and other
          unsecured short-term borrowings. Funds were also used to pay
          dividends on the Company's common and Perpetual Preferred Shares
          as well as repayments on the Line of Credit and the repayment of
          an $8,100,000 mortgage note.

<PAGE>24
          RESULTS OF OPERATIONS
          Comparison of the three months ended September 30, 1998  to the
          three months ended September 30, 1997
               Overall, total revenue increased $10,944,100 or 39.0% and
          total expenses before the equity in net income of the joint
          ventures, minority interest expense and extraordinary item
          increased $11,502,600 or 51.0% for the quarter.  Net income
          applicable to common shares decreased $744,300 or 17.0%, after
          payment of the dividends on the Company's Perpetual Preferred
          Shares.

               In the following discussion of the comparison of the three
          months ended September 30, 1998 to the three months ended
          September 30, 1997, the term Core Portfolio Properties refers to
          the 74 wholly owned multifamily properties owned by the Company
          at June 30, 1997.  Acquired Properties refers to the 20
          properties acquired between July 1, 1997 and September 30, 1998.

               During the quarter ended September 30, 1998, the Acquired
          Properties generated total revenues of $12,571,600 while
          incurring property, operating and maintenance expenses of
          $4,170,100.

          Rental Revenues:
               Rental revenues increased $9,628,700 or 36.8% for the
          quarter.  Increases in occupancy and suite rents at the Core
          Portfolio Market-rate and Government-Assisted Properties resulted
          in a $405,900 or 1.7% increase in rental revenue from these
          properties.  The balance of the increase resulted from increased
          rental revenues attributable to the commercial properties and
          other miscellaneous rental revenue items.

          Other Revenues:
               Other income increased $149,600 or 28.2% for the quarter. 
          The increase is due primarily to real estate tax refunds.

               The Company recognized asset management fee revenues of
          $636,100 during the quarter.  These revenues represent the
          collection of management fees by MIGRA relating to their
          institutional investor clients.

          Property operating and maintenance expenses:
               Property operating and maintenance expenses increased
          $4,551,900 or 40.2% for the quarter.  Operating and maintenance
          expenses at the Acquired Properties increased $3,459,000 for the
          quarter due primarily to the operating and maintenance expenses
          incurred at the three properties acquired during 1997, the
          thirteen properties acquired in 1998, and the newly constructed
          properties of Bradford at Easton and The Village of Western
          Reserve.  Property operating and maintenance expenses at the Core
          Portfolio Properties increased $1,092,800, or 10.3% when compared
          to the quarter ended September 30, 1997 primarily due to
          increases in personnel; building and grounds repair and
          maintenance; and real estate taxes and insurance.  Building
          renovations and suite and common area refurbishment in the Core
          Portfolio Properties that were not considered to be capital in
          nature averaged $156 per suite for the quarter ended September
          30, 1998 as compared to $144 per suite for the quarter ended
          September 30, 1997.

<PAGE>25

          Other expenses:
               Depreciation and amortization increased $2,264,700 or 47.0%
          for the quarter primarily due to the increased depreciation and
          amortization expense recognized on the Acquired Properties as
          well as the amortization expense recognized relating to the
          intangible assets recorded in connection with the merger of MIGRA
          into the Company.

               General and administrative expenses increased $1,747,200 or
          131.2% for the quarter.  This increase is primarily attributable
          to payroll, consulting and training expenses as well as overhead
          costs incurred as a result of the MIGRA transaction.

               Interest expense increased $2,664,800 or 56.9% for the
          quarter primarily due to the interest incurred with respect to
          the additional borrowings under the Line of Credit that were used
          for the acquisition of properties and general working capital
          purposes.

               Preliminary project cost expense of $200,500 were charged to
          operations during the quarter.  These costs consist primarily of
          certain pre-development costs, such as architectural, legal and
          accounting fees, that were incurred on projects that the Company
          decided not to pursue.

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

          RESULTS OF OPERATIONS
          Comparison of the nine months ended September 30, 1998 to the
          nine months ended September 30, 1997
               Overall, total revenue increased $22,814,100 or 28.6% and
          total expenses before the equity in net income of the joint
          ventures, minority interest expense and extraordinary item
          increased $24,332,200 or 38.1% for the nine month period.  Net
          income applicable to common shares before the extraordinary item
          decreased $1,737,200 or 14.2%, after payment of dividends on the
          Company's Perpetual Preferred Shares.

               In the following discussion of the comparison of the nine
          months ended September 30, 1998 to the nine months ended
          September 30, 1997, the term Core Portfolio Properties refers to
          the 69 wholly owned multifamily properties owned by the Company
          at December 31, 1996.  Acquired Properties refers to the 25<PAGE>
          properties acquired between January 1, 1997 and September 30,
          1998, and the two newly constructed properties.

               During the nine months ended September 30, 1998, the
          Acquired Properties generated total revenues of $29,939,000 while
          incurring property, operating and maintenance expenses of
          $10,826,600.

          Rental Revenues:
               Rental revenues increased $21,515,800 or 29.0% for the nine
          month period.  The majority of this increase is attributable to
          an increase in rental revenues from the Acquired Properties of
          $20,480,800 for the same period.  Increases in occupancy and
          suite rents at the Core Portfolio Market-rate and Government-
          Assisted Properties resulted in a $1,035,000 or 1.6% increase in
          rental revenue from these properties.

          Other Revenues:
               Other revenues increased $351,600 or 26.2% primarily due to
          refunds of workers compensation.

               The Company recognized asset management fee revenues of
          $636,100 for the nine month period.  These revenues represent the
          collection of management fees by MIGRA relating to their
          institutional investor clients.

<PAGE>26
          Property operating and maintenance expenses:
               Property operating and maintenance expenses increased
          $10,099,700 or 32.6% for the nine month period.  Operating and
          maintenance expenses at the Acquired Properties increased
          $7,709,600 for the nine month period due primarily to the
          operating and maintenance expenses incurred at the 25 properties
          acquired between January 1, 1997 and September 30, 1998, and the
          two newly constructed properties.  Property operating and
          maintenance expenses at the Core Portfolio Properties increased
          $2,390,100 or 8.6% when compared to the prior nine month period
          primarily due to increases in payroll, real estate taxes and
          insurance, and other operating expenses.  Total expenditures for
          building renovations and suite and common area refurbishment in
          the Core Portfolio Properties that were not considered to be
          capital in nature averaged $363 per suite for the nine months
          ended September 30, 1998 as compared to $338 per suite for the
          nine months ended September 30, 1997.

          Other expenses:
               Depreciation and amortization increased $4,424,700 or 32.3%
          for the nine month period primarily due to the increased
          depreciation and amortization expense recognized on the Acquired
          Properties as well as the amortization expense recognized
          relating to the intangible assets recorded in connection with the
          merger of MIGRA into the Company.
               
               General and administrative expenses increased $2,311,300 or
          52.5% for the nine month period.  This increase is primarily
          attributable to payroll and payroll related expenses as the
          Company continues to develop a team of professionals to provide
          hands-on attention to the Company's expanding portfolio of
          assets.  Additionally, the increase is attributable to overhead
          costs incurred as a result of the MIGRA transaction.

               Interest expense increased $7,249,200 or 53.1% for the nine
          month period primarily due to the interest incurred with respect
          to the additional borrowings under the Line of Credit and MTN's
          that were used for the acquisition of properties and general
          working capital purposes.

          Extraordinary item:
               The extraordinary item of $124,895 recognized during 1998
          relates to the write-off of the deferred financing fees related
          to the termination of the old $100 million unsecured revolving
          credit facility.  The extraordinary item of $1,023,713 recognized
          during 1997 relates to the write-off of a debt premium in
          connection with the early repayment of the related mortgage
          indebtedness.

          Net income applicable to common shares:
               Net income applicable to common shares is reduced by
          dividends paid on the Perpetual Preferred Shares of $4,113,300.

          Equity in net income of joint ventures:
               The combined equity in net income of joint ventures
          decreased $179,700 or 36.5% and $166,200 or 61.1% for the nine
          and three months ended September 30, 1998 as compared to the nine
          and three months ended September 30, 1997, respectively.  These
          decreases are primarily attributable to decreased rents and
          occupancies.

               The following table presents the historical statements of
          operations of the Company's beneficial interest in the operations
          of the joint ventures for the quarter and nine month period ended
          September 30, 1998 and 1997.

<PAGE>27

<TABLE>
<CAPTION>


                                 For the three months        For the nine months
                                 ended September 30,         ended September 30,
                                  1998          1997          1998         1997

   <S>                            <C>           <C>           <C>          <C>
   Beneficial interests in
     joint venture operations
       Rental revenue         $ 1,750,260   $ 1,708,060   $ 5,222,610  $ 5,016,690 
       Cost of operations       1,093,540       886,840     3,265,050    2,836,060 
                                  656,720       821,220     1,957,560    2,180,630 
       Interest income              3,650         3,824        18,439       16,326 
       Interest expense          (434,840)     (440,420)   (1,307,790)  (1,325,280)
       Depreciation              (106,560)     (100,110)     (319,140)    (341,870)
       Amortization               (13,020)      (12,410)      (36,230)     (37,220)
       Net income             $   105,950   $   272,104   $   312,839  $   492,586 
</TABLE>

          Outlook
               The following three paragraphs contain forward-looking
          statements and are subject to certain risks, trends and
          uncertainties that could cause actual results to vary from those
          projected.  Readers are cautioned not to place undue reliance on
          forward-looking statements, which are based only on current
          judgments and current knowledge.  These forward-looking
          statements are intended to be covered by the safe harbor
          provisions of the Private Securities Litigation Reform Act of
          1995.  Investors are cautioned that the Company's forward-looking
          statements involve risks and uncertainty, including without
          limitation risks of a lessening of demand for the apartments
          owned by the Company, changes in government regulations affecting
          the Government-Assisted Properties, and expenditures that cannot
          be anticipated such as utility rate and usage increases,
          unanticipated repairs, additional staffing, insurance increases
          and real estate tax valuation reassessments.

               Approximately 52% of the Company's multifamily properties
          are located in the greater Cleveland/Akron, Ohio area which is
          the fourteenth largest consumer market in the United States
          containing over four million people within a 50 mile radius of
          Akron.  In central Ohio, Columbus is the only city in the
          northeast quadrant of the country that has experienced continuous
          population growth since 1970, according to Census Bureau data. 
          The Company's Michigan portfolio is located in ten separate 
          markets having a combined projected population growth of 
          approximately 4.2%, or 153,000 people, with a projected 8.5% 
          increase in job growth or an additional 17,000 jobs.

               Markets like Columbus and Indianapolis, in which there is an 
          abundance of undeveloped land suitable for development, 
          will continue to be sensitive to the impact of new multifamily 
          housing starts.  Some of these new starts, particularly those in 
          proximity to the Company's properties, may have a short-term effect 
          on occupancies.  The Company expects that fourth quarter 1998 rental
          revenues for the Core Portfolio Market-rate Properties will be
          consistent with the rental revenues achieved during the third
          quarter of 1998.  Core Portfolio Market-rate rental rates will grow
          at modest rates through 1999.  The Company believes that its 1998
          and 1999 rental revenue growth objectives are reasonable given the 
          market demographics in the markets where the Company's Core 
          Portfolio Market-rate Properties are located.

               The Company expects that building and grounds repair and
          maintenance expenditures for the Core Portfolio Properties will
          increase when compared to the prior year as the Company continues
          to maintain its properties to maximize their earnings potential. 
          Real estate tax increases should begin to moderate as the effect<PAGE>
          of the reassessed values diminishes over time.  Utility
          expenditures will vary over prior periods as the effect of
          weather related usage variances is factored into the level of
          utility expense.

<PAGE>28
          Inflation
               Substantially all of the Market-rate residential leases at
          the properties allow, at the time of renewal, for adjustments in
          the rent payable thereunder, and thus may enable the Company to
          seek increases in rents.  The substantial majority of these
          leases are for one year or less and the remaining leases are for
          terms of up to two years.  The short-term nature of these leases
          generally serves to reduce the risk to the Company of the adverse
          effect of inflation.

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

               The Company believes that it has identified all of its informa-
          tion technology ("IT") and is in the process of identifying its 
          non-IT systems to assess their Year 2000 readiness.  Critical IT 
          systems include, but are not limited to: accounts receivable and 
          rent collections, accounts payable and general ledger, human 
          resources and payroll (both property and corporate levels), cash 
          management, fixed assets, all IT hardware (such as desktop/laptop 
          computers and data networking equipment).  Critical non-IT systems
          include telephone systems, fax machines, copy machines as well as 
          property environmental, health safety and security systems (such 
          as elevators and alarm systems).

               The Company has conducted an assessment of its core internal and
          external IT systems and, though not related to a Year 2000 
          remediation strategy, installed Year 2000 compliant financial report-
          ing and accounting systems.  The Company is currently in the process
          of determining its exposure to any non-IT systems that are not Year
          2000 compliant and believes that all such systems will have been
          identified and evaluated with respect to their Year 2000 compliance
          by the close of the fourth quarter of 1998.  The Company has not yet
          estimated that the total Year 2000 project cost pending completion of
          evaluation of its non-IT systems.

               In some cases, various third party vendors have been queried on 
          their Year 2000 readiness.  The Company continues to query its
          significant suppliers and vendors to determine the extent to which
          the Company's interface systems are vulnerable to those third
          parties' failure to remediate their own Year 2000 issues.  To date,
          the Company is not aware of any significant suppliers or vendors
          with a Year 2000 issue that would materially impact the Company's
          results of operatons, liquidity or capital resources.  However, there
          can be no assurances that the systems of other companies, on which
          the Company's systems rely, will be timely converted and would not 
          have an adverse effect on the Company's systems.

               The Company believes it has an effective program in place that
          will resolve the Year 2000 issue in a timely manner.  In addition,
          the Company has commenced its contingency planning for critical
          operational areas that might be affected by the Year 2000 issue if
          compliance by the Company is delayed.  Aside from catastrophic
          failure of banks or governmental agencies, the Company believes
          that it could continue its normal business operations if
          compliance by the Company is delayed.  The Company does not
          believe that the Year 2000 issue will materially impact its results
          of operations, liquidity or capital resources.

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

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

               This controversy arose out of a Comprehensive Management
          Review of the property initiated by HUD in the Spring of 1997,
          which included a complete physical inspection of the property. 
          Rainbow Terrace Apartments, Inc. believes that it has corrected
          the management deficiencies cited by HUD in the Comprehensive
          Management Review (other than the completion of certain physical
          improvements to the property) and, in a series of written
          responses to HUD, justified the expenditures questioned by HUD as
          being properly chargeable to the property in accordance with
          HUD's regulations.  Moreover, Rainbow Terrace Apartments, Inc.
          believes it has repaired any physical deficiencies noted by HUD
          in its Comprehensive Management Review that might pose a threat
          to the life and safety of its residents.  The Company is unable
          to predict the outcome of the controversy with HUD, but does not
          believe it will have a material adverse effect on the Company's
          financial position, results of operations or cash flows.

               In June 1998, HUD notified the Company that all future
          Housing Assistance Payments ("HAP") for Rainbow Terrace
          Apartments were abated and instructed the lender to accelerate
          the balance due under the mortgage.  Subsequent to the
          notification of HAP abatements and the acceleration of the
          mortgage, the lender advised the Company that the acceleration
          notification had been rescinded pursuant to HUD's instruction. 
          HUD then notified the Company that the HAP payments would be
          reinstated and that HUD was reviewing further information
          concerning Rainbow Terrace Apartments provided by the Company.
          The Company has since received the July, August, September and
          October 1998 HAP payments for Rainbow Terrace Apartments. As part
          of the Company's ongoing discussions with HUD concerning the

<PAGE>29
          resolution of these matters, the Company has been notified that
          HUD has agreed to review the budget based rent increase submitted
          to HUD by the Company in 1995.  At December 31, 1997 and
          September 30, 1998, the Company had receivables of $1.35 million
          related to these retroactive rent increase requests.   At
          September 30, 1998, Rainbow Terrace Apartments, Inc. had net
          assets of $1.3 million, including the retroactive rent receivable
          of $1.35 million due from HUD, and a remaining amount due under
          the mortgage of $1.9 million.

               In the normal course of business, the Company advances funds
          on behalf of, or holds funds for the benefit of affiliates which
          own real estate properties managed by the Company or one of the
          Service Companies. One of these affiliates, a corporation (the
          "Corporation") owned by a member of the Company's board of
          directors, and his siblings (including the wife of the Company's
          Chairman and Chief Executive Officer), which serves as general
          partner of certain affiliated entities, has informed the Company
          that the Corporation has caused the commencement of a review of
          expenditures relating to approximately $2.9 million of capital
          calls from certain HUD subsidized affiliated entities, to
          determine the appropriateness of such expenditures and whether
          certain of such expenditures are properly the responsibility of
          the Company.  Should this review result in any dispute with
          respect to the foregoing expenditures, such disagreement will be
          resolved through binding arbitration.  The Company believes that
          all expenditures were appropriate and, accordingly, does not
          believe that the ultimate outcome of any disagreement will have a
          material adverse effect on the Company's financial position,
          results of operations or cash flows.

<PAGE>30


     The following tables present information concerning the Multifamily 
     Properties owned by Associated Estates Realty Corporation.
<TABLE>
<CAPTION>
                                                                                    Year     Average
                                     Date                        Type of    Total Built or  Unit Size
      The Multifamily Properties   Acquired     Location      Construction Suites  Rehab.    Sq. Ft. 

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

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

   Florida
   Cypress Shores                  02/03/98 Coconut Creek     Garden           300  1991          991

   Georgia
   The Falls                       02/03/98 Atlanta           Garden           520  1986          963
   Morgan Place Apartments         06/30/98 Atlanta           Garden           186  1989          679
                                                                               706                888
   Indiana
   Steeplechase at Shiloh Crossing
    Apartments                     08/11/98 Indianapolis      Garden           264  1998          929
   Waterstone Apartments           08/29/97 Indianapolis      Garden           344  1997          984
                                                                               608                960
   Maryland
   The Gardens at Annen Woods      06/30/98 Metro D.C.        Garden           132  1987        1,269
   Hampton Point Apartments        06/30/98 Metro D.C.        Garden           352  1986          817
   Reflections                     02/03/98 Metro D.C.        Garden           184  1985        1,020
                                                                               668                962
   Michigan
   Clinton Place                   08/25/97 Clinton Twp.      Garden           202  1988          954
   Spring Valley Apartments        10/31/97 Farmington Hills  Garden           224  1987          893
                                                                               426                922
   Missouri
   Peachtree Apartments            06/30/98 Chesterfield      Garden           156  1989          929

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

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

   Toledo, Ohio
   Country Club Apartments         02/19/98 Toledo            Garden           316  1989          811

   Northeastern Ohio                                                              
   Village at Western Reserve      08/01/98 Streetsboro       Ranch            108  1998          999

   Texas
   Fleetwood Apartments            06/30/98 Houston           Garden           104  1993        1,019
                                                                             4,516
   Repositioned Properties
   Woodlands of North Royalton
     fka Somerset West (a)         IPO      North Royalton    Gdn/Tnhms        197  1982        1,038
   Williamsburg at Greenwood Vllg  02/18/94 Sagamore Hills    Townhomes        260  1990          938
                                                                               457                981
   CORE PORTFOLIO PROPERTIES
   Market rate
   Central Ohio
   Arrowhead Station               02/28/95 Columbus          Townhomes        102  1987        1,344
   Bedford Commons                 12/30/94 Columbus          Townhomes        112  1987        1,157
   Bolton Estates                  07/27/94 Columbus          Garden           196  1992          687
   Colony Bay East                 02/21/95 Columbus          Garden           156  1994          903
   Heathermoor                     08/18/94 Worthington       Gdn/Tnhms        280  1989          829
   Kensington Grove                07/17/95 Westerville       Gdn/Tnhms         76  1995        1,109
   Lake Forest                     07/28/94 Columbus          Garden           192  1994          788
   Muirwood Vllg at Bennell        03/07/94 Columbus          Ranch            164  1988          769
   Muirwood Vllg at London         03/03/94 London            Ranch            112  1989          769
   Muirwood Vllg at Mt. Sterling   03/03/94 Mt. Sterling      Ranch             48  1990          769
   Muirwood Vllg at Zanesville     03/07/94 Zanesville        Ranch            196 1991-95        769
     </TABLE>

     <TABLE>
     <CAPTION>
                                      For the three months ending        For the three months ending    
                                          September 30, 1998                  September 30, 1997         
                                   Average             Average Rent   Average              Average Rent
                                   Economic  Physical      Per        Economic  Physical       Per
     The Multifamily Properties   Occupancy Occupancy Suite  Sq. Ft. Occupancy Occupancy  Suite  Sq. Ft.

   <S>                            <C>       <C>       <C>     <C>    <C>       <C>        <C>    <C>  
   MARKET RATE
   Acquired Properties
   Arizona
   20th & Campbell Apartments       90.1%    91.2%     $ 796 $ 0.81     N/A       N/A       N/A       N/A

   California
   Desert Oasis Apartments          91.7%    94.7%     $ 670  $ 0.77    N/A       N/A       N/A       N/A

   Florida
   Cypress Shores                   92.3%    98.3%     $ 846  $ 0.85    N/A       N/A       N/A       N/A

   Georgia
   The Falls                        98.6%    93.7%     $ 718  $ 0.75    N/A       N/A       N/A       N/A
   Morgan Place Apartments          94.7     96.2        802    1.18    N/A       N/A       N/A       N/A
                                    97.5%    94.3%      $740  $ 1.04
   Indiana                            
   Steeplechase at Shiloh
     Crossing Apartments
   Waterstone Apartments            91.9%    97.7%     $ 796  $ 0.81    N/A      88.4%      N/A       N/A
                                    91.9%    97.7%     $ 796  $ 0.81             88.4%
   Maryland
   The Gardens at Annen Woods       96.6%    97.0%     $ 924  $ 0.73    N/A       N/A       N/A       N/A
   Hampton Point Apartments         96.3     98.0        803    0.98    N/A       N/A       N/A       N/A
   Reflections                      95.0     96.2        895    0.88    N/A       N/A       N/A       N/A
                                    96.0%    97.3%     $ 852  $ 3.03
   Michigan
   Clinton Place                    94.2%    96.0%     $ 699  $ 0.73    N/A      93.6%      N/A       N/A
   Spring Valley Apartments         98.2     96.4        810    0.91    N/A       N/A       N/A       N/A
                                    96.5%    96.2%     $ 757  $ 0.82             93.6%
   Missouri
   Peachtree Apartments             91.2%    94.2%     $ 786  $ 0.85    N/A       N/A       N/A       N/A

   North Carolina
   Windsor Falls Apartments         94.2%    95.3%     $ 776  $ 0.79    N/A       N/A       N/A       N/A

   Central Ohio
   Bradford at Easton               95.8%    98.5%     $ 707  $ 0.70    N/A       N/A       N/A       N/A<PAGE>


   Toledo, Ohio
   Country Club Apartments          96.1%    95.9%     $ 625  $ 0.77    N/A       N/A       N/A      N/A 

   Northeastern Ohio
   Village at Western Reserve        N/A     99.1%     $ 776  $ 0.78    N/A       N/A       N/A      N/A 

   Texas
   Fleetwood Apartments             94.8%    89.4%     $ 925  $ 0.91    N/A       N/A       N/A       N/A

   Repositioned Properties
   Woodlands of North Royalton
     fka Somerset West (a)          75.9%    77.7%     $ 714  $ 0.69     89.4%   87.3%    $ 699    $ 0.67
   Williamsburg at Greenwood Vllg   88.6     93.5        899    0.96     91.6    91.6       888      0.95
                                    83.8%    86.7%     $ 819  $ 0.83     90.8%   89.9%    $ 807    $ 0.82
   CORE PORTFOLIO PROPERTIES
   Market rate
   Central Ohio
   Arrowhead Station                94.0%    98.0%     $ 716  $ 0.53     88.1%   88.2%    $ 696    $ 0.52
   Bedford Commons                  96.6     98.2        784    0.68     97.7    96.4       771      0.67
   Bolton Estates                   94.9     93.4        468    0.68     94.4    95.9       469      0.68
   Colony Bay East                  89.1     96.8        522    0.58     95.3    97.4       517      0.57
   Heathermoor                      97.9     99.3        553    0.67     97.7    97.9       548      0.66
   Kensington Grove                 94.5     94.7        772    0.70     93.1    94.7       779      0.70
   Lake Forest                      92.7     94.3        551    0.70     92.0    96.9       550      0.70
   Muirwood Vllg at Bennell         90.9     91.5        512    0.67     93.4    97.0       499      0.65
   Muirwood Vllg at London          96.9     98.2        510    0.66     97.8    98.2       504      0.66
   Muirwood Vllg at Mt. Sterling    96.6     97.9        487    0.63     91.3    89.6       500      0.65
   Muirwood Vllg at Zanesville      93.1     94.4        524    0.68     92.7    94.9       525      0.68
     </TABLE>

<PAGE>31

     <TABLE>
     <CAPTION>


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

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

   Indianapolis, Indiana
   The Gables at White River      02/06/97 Indianapolis      Garden           228   1991         974

   Northeastern Ohio
   Bay Club                       IPO      Willowick         Garden            96   1990         925
   Colonnade West                 IPO      Cleveland         Garden           216   1964         502
   Cultural Gardens               IPO      Euclid            Mid Rise         186   1966         688
   Edgewater Landing              04/20/94 Cleveland         High Rise        241   1988r        585
   Gates Mills III                IPO      Mayfield Hts.     High Rise        320   1978         874
   Holly Park                     IPO      Kent              Garden           192   1990         875
   Huntington Hills               IPO      Stow              Townhomes         85   1982         976
   Mallard's Crossing             02/16/95 Medina            Garden           192   1990         998
   Memphis Manor                  IPO      Cleveland         Garden           120   1966         554
   Park Place                     IPO      Parma Hts.        Mid Rise         164   1966         760
   Pinecrest                      IPO      Broadview Hts.    Garden            96  1987 r        598
   Portage Towers                 IPO      Cuyahoga Falls    High Rise        376   1973         869
   The Triangle (b)               IPO      Cleveland         High Rise        273   1989         616
   Timbers                        IPO      Broadview Hts.    Garden            96  1987-89       930
   Villa Moderne                  IPO      North Olmsted     Garden           135   1963         504
   Washington Manor               07/01/94 Elyria            Garden           120  1963-64       541
   West Park Plaza                IPO      Cleveland         Garden           118   1964         520
   Westchester Townhouses         IPO      Westlake          Townhomes        136   1989       1,000
   Westlake Townhomes             IPO      Westlake          Townhomes          7   1985       1,000
   Winchester Hills I  (c)        IPO      Willoughby Hills  High Rise        362   1972         822
   Winchester Hills II            IPO      Willoughby Hills  High Rise        362   1979         822
                                                                            3,893                759
   Michigan
   Arbor Landings Apartments      01/20/95 Ann Arbor         Garden           168   1990       1,116
   Aspen Lakes                    09/04/96 Grand Rapids      Garden           144   1981         789
   Central Park Place             12/29/94 Grand Rapids      Garden           216   1988         850
   Country Place Apartments       06/19/95 Mt. Pleasant      Garden           144  1987-89       859
   Georgetown Park Apartments     12/28/94 Fenton            Garden           360  1987-96     1,005
   The Landings at the Preserve   09/21/95 Battle Creek      Garden           190  1990-91       952
   The Oaks and Woods at Hampton  08/08/95 Rochester Hills   Gdn/Tnhms        544  1986-88     1,050
   Spring Brook Apartments        06/20/96 Holland           Gdn/Tnhms        168  1986-88       818
   Summer Ridge Apartments        04/01/96 Kalamazoo         Garden           248  1989-91       960
                                                                            2,182                961
   Toledo, Ohio
   Hawthorne Hills Apartments     05/14/97 Toledo            Garden            88   1973       1,145
   Kensington Village             09/14/95 Toledo            Gdn/Tnhms        506  1985-90     1,072
   Vantage Villa                  10/30/95 Toledo            Garden           150   1974         935
                                                                              744              1,053
   Pittsburgh, Pennsylvania
   Chestnut Ridge                 03/01/96 Pittsburgh        Garden           468   1986         769
      Core Market Rate                                                     11,326                865

   GOVERNMENT ASST.-ELDERLY
   Ellet Development              IPO      Akron             High Rise        100   1978         589
   Hillwood I                     IPO      Akron             High Rise        100   1976         570
   Puritas Place (d)              IPO      Cleveland         High Rise        100   1981         518
   Riverview                      IPO      Massillon         High Rise         98   1979         553
   State Road Apartments          IPO      Cuyahoga Falls    Garden            72  1977 r        750
     </TABLE>

     <TABLE>
     <CAPTION>
                                     For the three months ending         For the three months ending     
                                         September 30, 1998                  September 30, 1997         
                                  Average             Average Rent   Average              Average Rent
                                  Economic  Physical      Per        Economic  Physical        Per
     The Multifamily Properties  Occupancy Occupancy Suite  Sq. Ft. Occupancy Occupancy   Suite  Sq. Ft.

   <S>                             <C>      <C>       <C>     <C>       <C>     <C>        <C>     <C>
   Oak Bend Commons                92.3     96.1      $ 707   $0.64     85.5%   95.1%      $658    $0.59
   Pendleton Lakes East            92.8%    96.1%       527    0.59     94.4    98.8        517     0.58
   Perimeter Lakes                 95.8     97.9        716    0.72     94.1    92.6        719     0.72
   Residence at Christopher Wren   96.6     98.9        738    0.70     96.6    96.6        745     0.70
   Residence at Turnberry          93.6     94.4        744    0.63     86.5    89.8        740     0.63
   Saw Mill Village                91.1     94.4        742    0.64     90.3    87.6        745     0.64
   Sheffield at Sylvan             98.8     97.8        509    0.64    100.9    97.8        504     0.64
   Sterling Park                   97.6     98.4        552    0.72     96.7    96.9        550     0.72
   The Residence at Newark         97.4     97.3        569    0.66     96.5    95.5        560     0.65
   The Residence at Washington     97.0     97.2        517    0.60     95.5    88.9        530     0.61
   Wyndemere                       97.2     91.4        543    0.71     96.0    96.9        534     0.70
                                   94.5%    96.1%     $ 610  $ 0.65     93.6%   94.8%     $ 606   $ 0.65
   Cincinnati, Ohio
   Remington Place Apartments      93.0%    96.2%     $ 654  $ 0.79     92.2%   94.4%     $ 660   $ 0.80

   Indianapolis, Indiana
   The Gables at White River       92.4%    90.8%     $ 746  $ 0.77     90.6%   93.9%     $ 720   $ 0.74

   Northeastern Ohio
   Bay Club                        93.6%    89.6%     $ 639  $ 0.69     98.0%   99.0%      $622    $0.67
   Colonnade West                  91.9     96.3        400    0.80     91.4    91.2        405     0.81
   Cultural Gardens                97.1     95.2        509    0.74     96.4    99.5        503     0.73
   Edgewater Landing               95.6     96.3        417    0.71     94.9    98.3        416     0.71
   Gates Mills III                 91.8     96.3        728    0.83     93.7    98.4        717     0.82
   Holly Park                      92.1    100.0        709    0.81     91.0   100.0        685     0.78
   Huntington Hills                97.4     97.6        669    0.69     97.5    97.6        656     0.67
   Mallard's Crossing              97.0     97.4        719    0.72     97.0    97.4        699     0.70
   Memphis Manor                   93.8     96.7        439    0.79     90.1    95.8        443     0.80
   Park Place                      91.3     93.3        527    0.69     90.1    92.7        555     0.73
   Pinecrest                       93.4     97.9        458    0.77     90.4    93.8        473     0.79
   Portage Towers                  94.8     93.6        591    0.68     94.0    94.4        573     0.66
   The Triangle (b)                95.3     93.8        943    1.53     96.5    97.1        913     1.48
   Timbers                         92.8     96.9        686    0.74     93.8    89.6        730     0.78
   Villa Moderne                   96.6     99.3        455    0.90     94.8    99.3        445     0.88
   Washington Manor                97.2     95.8        395    0.73     97.2    99.2        387     0.72
   West Park Plaza                 95.2     97.5        428    0.82     91.7    90.7        427     0.82
   Westchester Townhouses          96.0    100.0        802    0.80     92.2    91.9        775     0.78
   Westlake Townhomes             100.0    100.0        825    0.83     93.9   100.0        801     0.80
   Winchester Hills I (c)          92.0     93.9        573    0.70     90.9    93.9        574     0.70
   Winchester Hills II             88.6     93.9        607    0.74     90.7    89.8        616     0.75
                                   93.7%    95.7%     $ 600  $ 0.79     93.5%   95.3%     $ 595   $ 0.78
   Michigan
   Arbor Landings Apartments       94.3%    98.8%     $ 908  $ 0.81     98.5%   97.6%     $ 851   $ 0.76
   Aspen Lakes                     95.8     97.9        559    0.71     94.0    97.9        554     0.70
   Central Park Place              97.1     99.1        616    0.72     95.3    95.8        607     0.71
   Country Place Apartments        99.0     99.3        555    0.65    100.6    97.9        532     0.62
   Georgetown Park Apartments      87.4     96.1        641    0.64     92.8    89.4        676     0.67
   The Landings at the Preserve    94.9     96.3        773    0.81     94.8    94.2        683     0.72
   The Oaks and Woods at Hampton   96.8     97.4        812    0.77     96.4    96.7        810     0.77
   Spring Brook Apartments         98.4     98.2        511    0.62     98.0    97.0        477     0.58
   Summer Ridge Apartments         92.9     94.4        706    0.74     96.0    99.2        678     0.71
                                   94.7%    97.3%     $ 700  $ 0.73     95.9%   95.7%     $ 684   $ 0.71
   Toledo, Ohio
   Hawthorne Hills Apartments      94.7%    98.9%     $ 561  $ 0.49     87.4%   93.2%     $ 548   $ 0.48
   Kensington Village              98.0     95.8        590    0.55     96.1    96.4        559     0.52
   Vantage Villa                   96.1     97.3        579    0.62     86.3    92.7        613     0.66
                                   97.2%    96.6%     $ 582  $ 0.55     93.0%   96.1%     $ 569   $ 0.54
   Pittsburgh, Pennsylvania
   Chestnut Ridge                  91.2%    91.0%     $ 778  $ 1.01     97.8%   95.5%     $ 716   $ 0.93 
      Core Market Rate             94.2%    95.9%     $ 633  $ 0.72     94.1%   95.3%     $ 623   $ 0.71

   GOVERNMENT ASST.-ELDERLY
   Ellet Development              100.0%   100.0%     $ 587   $1.00    100.0%  100.0%     $ 587    $1.00
   Hillwood I                      98.6     99.0        596    1.05    100.0   100.0        596     1.05
   Puritas Place (d)               99.9    100.0        782    1.51     99.8   100.0        782     1.51
   Riverview                       99.5     99.0        591    1.07     99.7   100.0        591     1.07
   State Road Apartments           99.8    100.0        596    0.79     99.0   100.0        596     0.79
     </TABLE>

<PAGE>32
     <TABLE>
     <CAPTION>


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

   <S>                        <C>      <C>               <C>           <C>    <C>      <C>

   Statesman II               IPO      Shaker Heights    Garden            47 1987 r         796
   Sutliff Apartments II      IPO      Cuyahoga Falls    High Rise        185  1979          577
   Tallmadge Acres            IPO      Tallmadge         Mid Rise         125  1981          641
   Twinsburg Apartments       IPO      Twinsburg         Garden           100  1979          554
   Village Towers             IPO      Jackson Twp.      High Rise        100  1979          557
   West High Apartments       IPO      Akron             Mid Rise          68 1981 r         702
                                                                        1,095                602
   GOVERNMENT ASST.-FAMILY
   Jennings Commons           IPO      Cleveland         Garden            50  1981          823
   Rainbow Terrace            IPO      Cleveland         Garden           484 1982 r         768
   Shaker Park Gardens II     IPO      Warrensville      Garden           151  1964          753
                                                                          685                769
                                                                        1,780                666
   CONGREGATE CARE
   Gates Mills Club           IPO      Mayfield Heights  High Rise        120  1980          721
   The Oaks                   IPO      Westlake          Garden            50  1985          672
                                                                          170                707
                                                                       13,276                835
   Joint Venture Properties
   Northeastern Ohio
   Market rate
   Americana                  IPO      Euclid            High Rise        738  1968          803
   College Towers             IPO      Kent              Mid Rise         380  1969          662
   Euclid House               IPO      Euclid            Mid Rise         126  1969          654
   Gates Mills Towers         IPO      Mayfield Hts.     High Rise        760  1969          856
   Highland House             IPO      Painesville       Garden            36  1964          539
   Watergate                  IPO      Euclid            High Rise        949  1971          831
                                                                        2,989                789
   Government Asst.-Family
   Lakeshore Village          IPO      Cleveland         Garden           108  1982          786
                                                                        3,097                789
        Core                                                           16,373                843
        Portfolio average                                              21,346                869
     </TABLE>

     <TABLE>
     <CAPTION>
                                  For the three months ending        For the three months ending    
                                      September 30, 1998                  September 30, 1997         
                               Average             Average Rent   Average              Average Rent
                               Economic  Physical      Per        Economic  Physical        Per
   The Multifamily Properties Occupancy Occupancy Suite  Sq. Ft. Occupancy Occupancy   Suite Sq. Ft.

   <S>                          <C>     <C>         <C>    <C>       <C>    <C>         <C>    <C>
   Statesman II                 99.8%   100.0%      $646   $0.81     99.6%  100.0%      $650   $0.82
   Sutliff Apartments II       100.0    100.0        586    1.02    100.0   100.0        586    1.02
   Tallmadge Acres              99.9    100.0        658    1.03    100.0   100.0        658    1.03
   Twinsburg Apartments         99.8    100.0        603    1.09    100.0   100.0        603    1.09
   Village Towers              100.0    100.0        579    1.04     99.9   100.0        579    1.04
   West High Apartments         99.9    100.0        790    1.13     99.7    98.5        790    1.13
                                99.9%    99.8%     $ 630  $ 1.05    100.0%   99.9%     $ 631  $ 1.05
   GOVERNMENT ASST.-FAMILY
   Jennings Commons             99.9%   100.0%     $ 674  $ 0.82    100.0%  100.0%     $ 674  $ 0.82
   Rainbow Terrace              96.3     94.4        663    0.86     96.6    96.7        773    1.01
   Shaker Park Gardens II       99.9    100.0        540    0.72     98.7    98.0        531    0.71
                                97.2     96.1        637    0.83     97.2    97.2        713    0.93
                                98.8%    98.4%     $ 633  $ 0.95     98.9%   98.9%     $ 662  $ 0.99
   CONGREGATE CARE
   Gates Mills Club             93.5%    95.8%     $ 916  $ 1.27     97.7%   97.5%     $ 862  $ 1.20
   The Oaks                     94.5     96.0      1,041    1.55     94.6    78.0      1,033    1.54
                                93.8     95.9        953    1.35     96.7    91.8        912    1.29
                                94.8%    96.2%     $ 637  $ 0.75     94.8%   95.7%     $ 632  $ 0.75
   Joint Venture Properties
   Northeastern Ohio
   Market rate
   Americana                    90.9%    92.0%     $ 490  $ 0.61     89.0%   95.0%     $ 480  $ 0.60
   College Towers               95.7    100.0        405    0.61     91.4    97.4        403    0.61
   Euclid House                 93.1     96.8        444    0.68     90.3    92.9        435    0.66
   Gates Mills Towers           93.4     96.3        710    0.83     94.5    98.7        703    0.82
   Highland House               98.6    100.0        420    0.78     98.9   100.0        409    0.76
   Watergate                    92.2     92.2        552    0.66     93.8    94.8        545    0.66
                                92.9     94.5%     $ 543  $ 0.69     92.7%   96.2%     $ 536  $ 0.68
   Government Asst.-Family
   Lakeshore Village            97.8%   100.0%     $ 668  $ 0.85    100.2%  100.0%     $ 669  $ 0.85
                                93.2     94.7        549    0.70     93.1    96.3        543    0.69
        Core                    94.7%    95.9%     $ 630  $ 0.75     94.7%   95.8%     $ 625  $ 0.74
        Portfolio average       94.4%    95.8%     $ 656  $ 0.76     94.5%   95.2%     $ 572  $ 0.66
     <FN>
          ______________
          (a)  Woodlands of North Royalton (fka Somerset West) has 39 
               Contract Suites and 158 Market-rate suites.
          (b)  The Triangle also contains 63,321 square feet
               of office/retail space.  
          (c)  The Company acquired a noteholder interest 
               entitling the Company to substantially all 
               cash flows from operations.  The Company has 
               certain rights under a security agreement to 
               foreclose on the property to the extent that 
               the unpaid principal and interest on the underlying 
               notes exceed seven years equivalent principal and interest 
               payments. 
          (d)  The property was developed in 1981 subject to a warranty 
               deed provision which states that the assignment of fee simple 
               title of the property to the Company shall expire in 2037.
          r =  Rehabilitated
     </FN>
     </TABLE>

<PAGE>33

             HISTORICAL FUNDS FROM OPERATIONS AND DISTRIBUTABLE CASH FLOW

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

               FFO and Funds Available for Distribution ("Distributable
          Cash Flow") for the three and nine month periods ended September
          30, 1998 and 1997 are summarized in the following table:

<TABLE>
<CAPTION>
                                                    For the three months  For the nine months
                                                     ended September 30,  ended September 30,
   (In thousands)                                      1998       1997       1998      1997   

   <S>                                              <C>        <C>        <C>       <C>
   Net income applicable to common shares           $   3,641  $   4,385  $ 10,383  $ 13,269 

   Depreciation on real estate assets
     Wholly owned properties                            6,428      4,451    16,654    12,734 
     Joint venture properties                             107        100       319       342 
     Amortization of intangible assets                    140          -       140         - 
     Preliminary project costs                            200          -       200         - 
     Extraordinary item                                     -         20       125    (1,024)
   Funds From Operations                               10,516      8,956    27,821    25,321 

   Depreciation - other assets                            216        191       633       434 
   Amortization of deferred financing fees                312        186       713       539 
   Fixed asset additions                                 (108)      (273)     (273)     (504)
   Fixed asset additions - joint venture properties         -          -         -         - 
   Distributable Cash Flow                          $  10,936  $   9,060  $ 28,894  $ 25,790 

   Weighted average shares - Basic                     22,598     17,052    18,955    15,904 
   Weighted average shares - Diluted                   23,058     17,078    19,110    15,931
</TABLE>

<PAGE>34


                                       PART II

                                  OTHER INFORMATION

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

          ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

                (a)      Exhibits
<TABLE>
<CAPTION>
                                                                                      Filed herewith or
                                                                                          incorporated
                                                                                           herein by
   Number                                   Title                                          reference       

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

    3.1    Second Amended and Restated Articles of Incorporation of the Company.    Exhibit 3.1 to Form
                                                                                    S-11 filed June 30,
                                                                                    1994 (File No. 33-
                                                                                    80950 as amended).

    3.2    Code of Regulations of the Company                                       Exhibit 3.2 to Form
                                                                                    S-11 filed June 30,
                                                                                    1994 (File No. 33-
                                                                                    80950 as amended).

    4.1    Specimen Stock Certificate                                               Exhibit 3.1 to Form S-
                                                                                    11 filed September
                                                                                    2, 1993 (File No.
                                                                                    33-68276 as
                                                                                    amended).

    4.2    Form of Indemnification Agreement                                        Exhibit 4.2 to Form S-
                                                                                    11 filed September
                                                                                    2, 1993 (File No.
                                                                                    33-68276 as
                                                                                    amended).

    4.3    Promissory Note dated October 23, 1991 from Triangle Properties Limited  Exhibit 4.3 to Form S-
           Partnership, et. al., in favor of PFL Life Insurance Company; Open End   11 filed September
           Mortgage from Triangle Properties Limited Partnership I, et. al., in     2, 1993 (File No. 33-
           favor of PFL Life Insurance Company (The Registrant undertakes to        68276 as amended).
           provide additional long-term loan documents upon request).
   

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

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

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


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

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

    4.8g   Second Amendment to Credit Agreement by and among Associated Estates     Exhibit 4.8g filed
           Realty Corporation, as Borrower, National City Bank, as Managing Agent   herewith.
           for itself and on behalf of the Existing Banks and National City Bank,
           Bank of America National Commerzbank Aktiengesellschaft.<PAGE>


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

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

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

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

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

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

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

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

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

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

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

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

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

   10.9    Form of Restricted Share Agreement dated December 6, 1995 by and         Exhibit 10.9 to Form
           between the Company and William A. Foley, Gerald C. McDonough, Frank E.  10-K filed March 28,
           Mosier and Richard T. Schwarz.                                           1996.

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


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

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

   10.14   Share Option Agreement dated November 18, 1993 by and between the        Exhibit 10.14 to Form
           Company and William A. Foley, Gerald C. McDonough, Frank E. Mosier and   10-K filed March 30,
           Richard T. Schwarz.                                                      1993.

   27      Financial Data Schedule                                                  Exhibit 27 filed
                                                                                    herewith.<PAGE>

  (b)      Reports on Form 8-K.

           A Current Report on Form 8-K dated June 30, 1998 was
           filed on July 13, 1998 as amended by Form 8-K/A-1 dated
           June 30, 1998 and filed on August 31, 1998.
</TABLE>

<PAGE>37


          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



          November 16, 1998                  /s/ Dennis W.  Bikun          
          (Date)                             Dennis W. Bikun, Vice
                                             President, Chief Financial
                                             Officer and Treasurer