**Form 10-Q**

















**Associated Estates Realty Corporation**



|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)            





|Indicate by check mark whether the registrant (1)  has filed all reports required to be filed
|---------------------------------------------------------------------------------------------
|by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12        
|months (or for such shorter period that the registrant was required to file such reports),   
|and (2) has been subject to such filing requirements for the past 90 days. Yes [ x ] No [ ]  
|                                                                                             
|Indicate by check mark whether the registrant is a large accelerated filer, an accelerated   
|filer, or a non-accelerated filer.  See definition of "accelerated filer and large           
|accelerated filer" in Rule 12b-2 of the Exchange Act.  (Check one):                          
|                                                                                             
|Large accelerated filer [ ]   Accelerated filer [ x ]   Non-accelerated filer [ ]            
|                                                                                             











**INDEX**

|**PART I  -  FINANCIAL INFORMATION**  | Page                                                        
|------------------------------------- | ------------------------------------------------------------
|                                      |                                                             
|ITEM 1                                | Consolidated Financial Statements (Unaudited)               
|                                      |                                                             
|                                      | Consolidated Balance Sheets at                              
|                                      | March 31, 2006 and December 31, 2005                        
|                                      |                                                             
|                                      | Consolidated Statements of Operations for the three         
|                                      | month periods ended March 31, 2006 and 2005                 
|                                      |                                                             
|                                      | Consolidated Statement of Shareholders' Equity for the three
|                                      | month period ended March 31, 2006                           
|                                      |                                                             
|                                      | Consolidated Statements of Cash Flows for the three         
|                                      | month periods ended March 31, 2006 and 2005                 
|                                      |                                                             
|                                      | Notes to Consolidated Financial Statements                  
|                                      |                                                             
|ITEM 2                                | Management's Discussion and Analysis of Financial           
|                                      | Condition and Results of Operations                         
|                                      |                                                             
|ITEM 3                                | Quantitative and Qualitative Disclosures About Market Risk  
|                                      |                                                             
|ITEM 4                                | Controls and Procedures                                     
|                                      |                                                             
|**PART II**  -  **OTHER INFORMATION** |                                                             
|                                      |                                                             
|ITEM 1                                | Legal Proceedings                                           
|                                      |                                                             
|ITEM 1A                               | Risk Factors                                                
|                                      |                                                             
|ITEM 2                                | Unregistered Sales of Equity Securities and Use of Proceeds 
|                                      |                                                             
|ITEM 6                                | Exhibits                                                    
|                                      |                                                             
|**SIGNATURES**                        | 28                                                          

*****Index*********

**PART I.  FINANCIAL INFORMATION**

**ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**

******ASSOCIATED ESTATES REALTY CORPORATION**

**CONSOLIDATED BALANCE SHEETS**

**(UNAUDITED)**

|                                                                  | March 31, | December 31,
|----------------------------------------------------------------- | --------- | ------------
|(In thousands, except share and per share amounts)                | 2006      | 2005        
|**ASSETS**                                                        |           |             
|Real estate assets                                                |           |             
|Land                                                              | $	97,544  | $	98,070    
|Buildings and improvements                                        | 802,632   | 809,967     
|Furniture and fixtures                                            | 31,061    | 31,112      
|                                                                  | 931,237   | 939,149     
|Less:  accumulated depreciation                                   | (294,500) | (294,505)   
|                                                                  | 636,737   | 644,644     
|Construction in progress                                          | 1,432     | 1,020       
|Real estate associated with property held for sale, net           | 2,494     | 273         
|Real estate, net                                                  | 640,663   | 645,937     
|Cash and cash equivalents                                         | 570       | 39,733      
|Restricted cash                                                   | 7,410     | 8,497       
|Accounts and notes receivable, net                                |           |             
|Rents                                                             | 982       | 1,277       
|Affiliates and joint ventures                                     | 1,135     | 1,909       
|Other                                                             | 2,909     | 3,674       
|Investments in joint ventures, net                                | 5,661     | 5,890       
|Goodwill                                                          | 1,725     | 1,725       
|Other assets, net                                                 | 10,252    | 10,584      
|Other assets associated with property held for sale, net          | 43        | 16          
|**Total assets**                                                  | $	671,350 | $	719,242   
|**LIABILITIES AND SHAREHOLDERS' EQUITY**                          |           |             
|Mortgage notes payable                                            | $	510,906 | $	547,790   
|Lines of credit borrowings                                        | 11,300    | -           
|Unsecured debt                                                    | 25,780    | 25,780      
|Total debt                                                        | 547,986   | 573,570     
|Accounts payable, accrued expenses and other liabilities          | 21,966    | 22,465      
|Dividends payable                                                 | 2,895     | 3,052       
|Resident security deposits                                        | 4,101     | 4,121       
|Funds held on behalf of managed properties                        |           |             
|Affiliates and joint ventures                                     | 434       | 959         
|Other                                                             | 1,512     | 1,101       
|Accrued interest                                                  | 2,704     | 2,800       
|Other liabilities associated with property held for sale          | 148       | 22          
|Commitments and contingencies (Note 10)                           | -         | -           
|**Total liabilities**                                             | 581,746   | 608,090     
|                                                                  |           |             
|Operating partnership minority interest                           | 2,172     | 2,172       
|Shareholders' equity                                              |           |             
|Preferred shares, without par value; 9,000,000 shares authorized: |           |             
|8.70% Class B Series II cumulative redeemable, $250 per share     |           |             
|liquidation preference, 232,000 issued and outstanding            | 58,000    | 58,000      
|Common shares, without par value, $.10 stated value; 41,000,000   |           |             
|authorized; 22,995,763 issued and 17,037,736 and 17,950,326       |           |             
|outstanding at March 31, 2006 and December 31, 2005, respectively | 2,300     | 2,300       
|Paid-in capital                                                   | 280,374   | 278,885     
|Accumulated distributions in excess of accumulated net income     | (196,083) | (184,303)   
|Accumulated other comprehensive income                            | (54)      | (25)        
|Less: Treasury shares, at cost, 5,958,027 and 5,045,437 shares    |           |             
|at March 31, 2006 and December 31, 2005, respectively             | (57,105)  | (45,877)    
|**Total shareholders' equity**                                    | 87,432    | 108,980     
|**Total liabilities and shareholders' equity**                    | $	671,350 | $	719,242   







*****Index***ASSOCIATED ESTATES REALTY CORPORATION**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(UNAUDITED)**

|                                                                     | For the three months
|-------------------------------------------------------------------- | --------------------
|                                                                     | ended March 31,     
|(In thousands, except per share amounts)                             | 2006                
|Revenues                                                             |                     
|Property revenues                                                    | $	35,227            
|Management and service company revenues:                             |                     
|Fees, reimbursements and other                                       | 3,079               
|Painting services                                                    | 312                 
|Total revenues                                                       | 38,618              
|Expenses                                                             |                     
|Property operating and maintenance                                   | 17,728              
|Depreciation and amortization                                        | 8,597               
|Direct property management and service companies expenses            | 3,223               
|Painting services                                                    | 407                 
|General and administrative                                           | 2,346               
|Total expenses                                                       | 32,301              
|Operating income                                                     | 6,317               
|Interest income                                                      | 381                 
|Interest expense                                                     | (14,181)            
|(Loss) income before equity in net loss of joint ventures,           |                     
|minority interest and (loss) income from discontinued operations     | (7,483)             
|Equity in net loss of joint ventures                                 | (106)               
|Minority interest in operating partnership                           | (16)                
|(Loss) income from continuing operations                             | (7,605)             
|(Loss) income from discontinued operations:                          |                     
|Operating (loss) income                                              | (18)                
|Gain on disposition of properties, net                               | -                   
|(Loss) income from discontinued operations                           | (18)                
|**Net (loss) income**                                                | (7,623)             
|Preferred share dividends                                            | (1,262)             
|Original issuance costs related to redemption of preferred shares    | -                   
|**Net (loss) income applicable to common shares**                    | $	(8,885)           
|                                                                     |                     
|**Earnings per common share - basic:**                               |                     
|(Loss) income from continuing operations applicable to common shares | $	(.51)             
|Income (loss) from discontinued operations                           | -                   
|Net (loss) income applicable to common shares                        | $	(.51)             
|                                                                     |                     
|**Earnings per common share - diluted:**                             |                     
|(Loss) income from continuing operations applicable to common shares | $	(.51)             
|Income (loss) from discontinued operations                           | -                   
|Net (loss) income applicable to common shares                        | $	(.51)             
|                                                                     |                     
|**Dividends declared per common share**                              | $	.17               
|                                                                     |                     
|**Weighted average number of common shares outstanding	-	basic**     | 17,283              
|**- 	diluted**                                                       | 17,283              





*****Index***ASSOCIATED ESTATES REALTY CORPORATION**

**CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY**

**(UNAUDITED)**

|                                           |           | Class B    |               | Accumulated   |               |            
|------------------------------------------ | --------- | ---------- | ------------- | ------------- | ------------- | -----------
|                                           |           | Cumulative | Common        | Total Paid-In | Distributions | Accumulated
|                                           |           | Redeemable | Shares        | Capital       | In Excess of  | Other      
|                                           |           | Preferred  | (at $.10      | Paid-In       | Unearned      | Accumulated
|(In thousands, except share amounts)       | Total     | Shares     | stated value) | Capital       | Compensation  | Net Income 
|                                           |           |            |               |               |               |            
|Balance, December 31, 2005                 | $	108,980 | $	58,000   | $	2,300       | $	279,484     | $	(599)       | $	(184,303)
|Comprehensive income:                      |           |            |               |               |               |            
|Net (loss) income                          | (7,623)   | -          | -             | -             | -             | (7,623)    
|Other comprehensive income:                |           |            |               |               |               |            
|Change in fair value of hedge instruments  | (29)      | -          | -             | -             | -             | -          
|Total comprehensive income                 | (7,652)   | -          | -             | -             | -             | (7,623)    
|Stock-based compensation                   | 243       | -          | -             | 983           | 599           | -          
|Purchase of 991,117 common shares          | (10,251)  | -          | -             | -             | -             | -          
|Issuance of 32,499 common shares for stock |           |            |               |               |               |            
|option exercises from treasury shares      | 269       | -          | -             | (93)          | -             | -          
|Common share dividends                     | (2,895)   | -          | -             | -             | -             | (2,895)    
|Preferred share dividends                  | (1,262)   | -          | -             | -             | -             | (1,262)    
|Balance, March 31, 2006                    | $	 87,432 | $	58,000   | $	2,300       | $	280,374     | $	-           | $	(196,083)





*****Index***ASSOCIATED ESTATES REALTY CORPORATION**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

|                                                                                         | For the three months
|---------------------------------------------------------------------------------------- | --------------------
|                                                                                         | ended March 31,     
|                                                                                         | 2006                
|(In thousands)                                                                           |                     
|Cash flow from operating activities:                                                     |                     
|Net (loss) income                                                                        | $	(7,623)           
|Adjustments to reconcile net (loss) income to net cash provided by operating activities: |                     
|Depreciation and amortization (including discontinued operations)                        | 8,689               
|Loss on fixed asset replacements write-off                                               | 46                  
|Minority interest in operating partnership                                               | 16                  
|Costs (discount) related to prepayment of debt, net                                      | 233                 
|Stock based compensation                                                                 | 215                 
|Equity in net loss of joint ventures                                                     | 106                 
|Earnings distributed from joint ventures                                                 | 123                 
|Net change in assets and liabilities:                                                    |                     
|- Accounts and notes receivable                                                          | 1,060               
|- Accounts and notes receivable of affiliates and joint ventures                         | 261                 
|- Accounts payable and accrued expenses                                                  | (471)               
|- Other operating assets and liabilities                                                 | (387)               
|- Restricted cash                                                                        | 1,087               
|- Funds held for non-owned managed properties                                            | 411                 
|- Funds held for non-owned managed properties of affiliates                              | (525)               
|Total adjustments                                                                        | 10,864              
|Net cash flow provided by operations                                                     | 3,241               
|Cash flow from investing activities:                                                     |                     
|Recurring fixed asset additions                                                          | (2,272)             
|Revenue enhancing/non-recurring fixed asset additions                                    | (235)               
|Acquisition/development fixed asset additions                                            | -                   
|Net cash flow used for investing activities                                              | (2,507)             
|Cash flow from financing activities:                                                     |                     
|Principal payments on mortgage notes payable                                             | (36,884)            
|Payment of debt procurement costs                                                        | -                   
|Proceeds from mortgage notes obtained                                                    | -                   
|Proceeds from issuance of unsecured trust preferred securities                           | -                   
|Line of credit borrowings                                                                | 20,000              
|Line of credit repayments                                                                | (8,700)             
|Redemption of Class A preferred shares                                                   | -                   
|Common share dividends paid                                                              | (3,054)             
|Preferred share dividends paid                                                           | (1,262)             
|Operating partnership distributions paid                                                 | (16)                
|Exercise of stock options                                                                | 269                 
|Purchase of treasury shares under repurchase plan                                        | (10,185)            
|Other (purchase) issue of treasury shares, net                                           | (64)                
|Net cash flow used for financing activities                                              | (39,897)            
|Decrease in cash and cash equivalents                                                    | (39,163)            
|Cash and cash equivalents, beginning of period                                           | 39,733              
|Cash and cash equivalents, end of period                                                 | $	570               
|Supplemental disclosure of cash flow information:                                        |                     
|Dividends declared but not paid                                                          | $	2,895             
|Cash paid for interest                                                                   | 14,008              
|Fixed asset replacement and other write-offs                                             | 590                 
|Reclassification of original issuance costs related to redemption of preferred shares    | -                   





*****Index*******ASSOCIATED ESTATES REALTY CORPORATION**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**



**1.**	**BASIS OF PRESENTATION AND ACCOUNTING POLICIES**



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

**Business**

We are a self-administered and self-managed equity real estate investment trust ("REIT") that
specializes in multifamily property management, advisory, development, acquisition, disposition, operation
and ownership activities.  We receive certain property and asset management fees, acquisition, disposition
and incentive fees, consultation fees, and mortgage servicing fees.  Our MIG subsidiary is a registered
investment advisor and serves as a real estate advisor to pension funds.  We own three taxable REIT
subsidiaries (the "Service Companies") that provide management and other services to us and to third
parties.

As of March 31, 2006, we owned or property managed 110 apartment communities in eleven states
consisting of 23,511 units.  We own, either directly or indirectly through subsidiaries, or hold ownership
interests in 74 of those 110 apartment communities containing 17,395 units in nine states, 13 of which are
Affordable Housing communities.  We also property manage 36 communities consisting of 6,116 units.
Additionally, we asset manage a 186-unit apartment community and a commercial property containing
approximately 145,000 square feet.

**Basis of Presentation**

The accompanying unaudited consolidated financial statements have been prepared by
management in accordance with accounting principles generally accepted in the United States of America
("GAAP") for interim financial information and applicable rules and regulations of the Securities and
Exchange Commission.  Accordingly, they do not include all of the information and footnotes required by
GAAP for complete financial statements.  In the opinion of management, all adjustments (consisting only
of normal and recurring adjustments) considered necessary for a fair presentation have been included.  The
reported results of operations are not necessarily indicative of the results that may be expected for the full
year.  These financial statements should be read in conjunction with the audited financial statements and
accompanying notes in our Annual Report on Form 10-K for the year ended December 31, 2005.

**Share-Based Compensation**

The Amended and Restated 2001 Equity-Based Award Plan (the "Plan") was the only stock-based
compensation plan in effect on March 31, 2006.  The Plan provides for equity award grants to our officers,
employees, and directors.  Equity awards available under the Plan include stock options, share appreciation
rights, restricted shares, deferred shares, and other awards based on common shares.  The aggregate
number of common shares subject to awards under the Plan is 2,250,000.  At March 31, 2006, there were
785,791 common shares available for awards under the Plan.  We also have stock-based awards
outstanding that had been issued under two other plans that have since expired, and outstanding stock
option awards that had been issued to our outside directors.  For additional information regarding these
stock-based compensation plans, see Note 17 of the Notes to the Consolidated Financial Statements of our
report on Form 10-K for the year ended December 31, 2005.

Effective January 1, 2006, we adopted the provisions of Statement of Financial Accounting
Standards No. 123 (revised), "Share-Based Payment" ("SFAS 123(R)") using the modified prospective
application method.  Prior to the adoption of SFAS123(R), we accounted for share-based compensation
using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25 ("APB No.
25"), and accordingly, we recognized no compensation expense for stock option awards.

Under the modified prospective method of SFAS 123(R), stock-based compensation cost is
recognized on (i) all awards granted on or after January 1, 2006 using the fair-value method, (ii) unvested
stock option awards granted prior to January 1, 2006 based on their grant date fair value as previously
calculated under the pro-forma disclosure provisions of SFAS No. 123 over the remaining requisite service
periods, and (iii) unvested restricted stock awards based on their grant date fair value over the remaining
service periods.  Prior periods were not restated to reflect the impact of adopting this Statement.
Additionally, SFAS 123(R) requires us to estimate the amount of expected forfeitures when calculating
compensation costs, instead of accounting for forfeitures as they occur, which was our previous method.
Forfeiture rates were calculated based on our historical forfeiture activity, which was adjusted for activity that
we believe is not representative of expected future activity.  The following table reflects the effect on
operating results and per share information if we had accounted for stock-based compensation in
accordance with SFAS 123(R) for the three months ended March 31, 2005:

|                                                          | For the three months
|--------------------------------------------------------- | --------------------
|(In thousands, except per share data)                     | ended March 31,     
|                                                          | 2005                
|                                                          |                     
|Net (loss) income                                         | $    	(3,334)       
|Total stock compensation cost recognized                  | 88                  
|Total stock compensation cost under the fair value method | (138)               
|Proforma net (loss) income under the fair value method    | $    	(3,384)       
|                                                          |                     
|Net (loss) income applicable to common shares:            |                     
|Net (loss) income as reported                             | $	    (6,843)       
|Total stock compensation cost recognized                  | 88                  
|Total stock compensation cost under the fair value method | (138)               
|Pro forma net (loss) income under the fair value method   | $    	(6,893)       
|                                                          |                     
|(Loss) income per common share - basic:                   |                     
|Net (loss) income as reported                             | $	(.35)             
|Total stock compensation cost recognized                  | -                   
|Total stock compensation cost under the fair value method | -                   
|Pro forma net (loss) income under the fair value method   | $	(.35)             
|                                                          |                     
|(Loss) income per common share - diluted:                 |                     
|Net (loss) income as reported                             | $	(.35)             
|Total stock compensation cost recognized                  | -                   
|Total stock compensation cost under the fair value method | -                   
|Pro forma net (loss) income under the fair value method   | $	(.35)             

Our stock-based compensation awards consist primarily of restricted stock.  We award stock-based
compensation to our officers and employees as a performance incentive and to align individual goals with
those of the Company as a whole.  We grant stock-based awards that vest either at the end of a specified
service period, or in equal increments during the service period on each anniversary of the grant date.  In
accordance with SFAS 123(R), we have elected to recognize compensation cost on these awards on a
straight-line basis.  In addition to awards containing only service conditions, we issue certain grants in which
the number of shares that will ultimately vest and the date at which they will vest, is dependant upon the
achievement of specified performance goals.  Compensation cost for awards with performance conditions
is recognized based on our best estimate of the number of awards that will vest and the period of time in
which they will vest.

During the three months ended March 31, 2006, we recognized total compensation cost of $215,000
in "General and administrative expense" in theConsolidated Statements of Operations.

*Stock Options*.  We use the Black-Scholes option pricing model to estimate the fair value of stock-based awards.  There were no stock options awarded during the three months ended March 31, 2005.
During the three months ended March 31, 2006, there was one stock option award granted which consisted
of 227,155 options.  The Black-Scholes assumptions for this award were as follows:

|Expected volatility                 | 27.7%
|----------------------------------- | -----
|Risk-free interest rate             | 4.6% 
|Expected life of options (in years) | 6.0  
|Dividend yield                      | 6.0% 
|Grant-date fair value               | $1.83

The expected volatility was based upon the historical volatility of our weekly stock closing prices
over a period equal to the expected life of the options granted.  The risk-free interest rate used was the yield
from U.S. Treasury zero-coupon bonds on the date of grant with a maturity equal to the expected life of the
options.  The expected life of the options was derived using the "simplified" method as allowed under the
provisions of the Securities and Exchange Commission's Staff Accounting Bulletin No. 107.  The dividend
yield was derived using our annual dividend rate as a percentage of the price of our stock on the date of
grant.

The following table represents stock option activity for the three months ended March 31, 2006:



|                                   | Number of     | Weighted-Average | Weighted-Average       
|---------------------------------- | ------------- | ---------------- | -----------------------
|                                   | Share Options | Exercise Price   | Remaining Contract Life
|Outstanding at beginning of period | 1,996,308     | $ 11.89          |                        
|Granted                            | 227,155       | $ 11.26          |                        
|Exercised                          | 32,499        | $   8.26         |                        
|Forfeited or expired               | 21,250        | $ 14.90          |                        
|Outstanding at end of period       | 2,169,714     | $ 11.85          | 5.6 years              
|Exercisable at end of period       | 1,508,780     | $ 12.47          | 4.3 years              

The aggregate intrinsic value of stock options outstanding at March 31, 2006 was $3.5 million, and
the aggregate intrinsic value of stock options exercisable at March 31 was $2.8 million.  The aggregate
intrinsic value of stock options exercised during the three months ended March 31, 2006 and 2005 was
$76,000 and $56,000, respectively.  We generally issue shares from treasury upon the exercise of stock
options.

*Restricted Stock.*Restricted stock generally has the same rights as our common stock, except for
transfer restrictions and forfeiture provisions.  Prior to January 1, 2006, restricted stock awards were
recorded in shareholders' equity as deferred compensation on the grant date based upon the price of our
stock on the grant date and amortized into expense over the requisite service period based on the straight
line method.  We generally issue restricted stock awards from treasury shares.  Upon adoption of
SFAS123(R), we returned the unvested shares to treasury shares from unearned compensation at their
original cost, totaling $1.5 million.  We recorded an immaterial cumulative effect of a change in accounting
principle as a result of our change in policy from recognizing forfeitures as they occur to one where we
recognize cost after the application of a estimated forfeiture rate.  This amount was recorded in "General
and administrative expense" in the Consolidated Statements of Operations.  Accrued compensation cost
of $561,000 related to unvested restricted stock at January 1, 2006 was transferred to additional paid in
capital from deferred compensation.



The following table represents restricted stock activity for the three months ended March 31, 2006:

Number of
Weighted AverageShares
Grant-Date Fair ValueNonvested at beginning of period
144,582
$   8.96Granted
47,082
$ 11.30Vested
17,557
$   9.41Forfeited
1,055
$   9.11Nonvested at end of period
173,052
$   9.55

The weighted average grant-date fair value of restricted stock granted during the three months
ended March 31, 2006 and 2005 was $11.30 and $9.91, respectively.  The total grant-date fair value of
restricted stock vested during the three months ended March 31, 2006 and 2005 was $195,000 and
$120,000, respectively.  At March 31, 2006, there was $815,000 of unrecognized compensation cost related
to nonvested restricted stock awards that we expect to recognize over a weighted average period of 2.1
years.

**Derivative Instruments and Hedging Activity**

During the three months ended March 31, 2006, we utilized forward contracts with respect to
forecasted probable purchases of natural gas used in heating certain of our properties.  We utilize the gas
forwards to limit the market price risk associated with the forecasted gas purchase.  Identification of a
forward contract as a qualifying cash-flow hedge requires us to determine that the forecasted transaction(s)
is probable, and the hedging relationship between the gas contract and the expected future purchase is
expected to be highly effective at the initiation of the hedge and throughout the hedging relationship.  We
reassess this hedge on a quarterly basis to determine if it continues to be effective and the forecasted
transactions are probable.  The changes in fair value of the contracts will be recorded in other
comprehensive income ("OCI").  The amount in OCI will be reclassified into earnings when the cost of the
gas affects earnings.  If any portion of the hedge is determined to be ineffective, that amount will be recorded
into earnings.  As of March 31, 2006, this hedge was reported at fair value on the Consolidated Balance
Sheet as "Other assets, net" in the amount of $54,000.  The unrealized gain/loss in the fair value of this
hedge is deferred in OCI and will be recognized in earnings as the hedged transaction occurs.  The change
in net unrealized gain/loss on this hedge reflects a reclassification of net unrealized gain/loss from
accumulated OCI to earnings of $25,000 during the three months ended March 31, 2006.  We estimate the
$54,000 in OCI will be reclassified into earnings over the next 12 months.

**Classification of Fixed Asset Additions**

We consider recurring fixed asset additions to a property to be capital expenditures made to replace
worn out assets to maintain the property's value.  We consider investment/revenue enhancing and/or non-recurring fixed assets to be capital expenditures if such improvements increase the value of the property
and/or enables us to increase rents.  We consider acquisition and development fixed asset additions to be
for the purchase of, or construction of, new properties to be added to our portfolio.

**Reclassifications**

Certain reclassifications have been made to the 2005 financial statements to conform to the 2006
presentation.

**2.	PROPERTIES ACQUIRED**

On March 9, 2005, we acquired a 316-unit multifamily community located in Florida.  The purchase
was funded primarily by mortgage financing on the acquired property and on a previously unencumbered
Same Store Market-Rate ("Market-Rate") multifamily property.  See Note 4 for further information concerning
these mortgage notes.  Additionally, this property was part of a reverse Like-Kind Exchange under Section
1031 of the Internal Revenue Code.

**3.	PROPERTIES SOLD OR HELD FOR SALE**

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

We classified two properties as held for sale at March 31, 2006.  The major classes of assets and
liabilities related to these properties have been reclassified as such in the accompanying Consolidated
Balance Sheet at March 31, 2006.  The operating results for these properties are included in "(Loss) income
from discontinued operations" in the accompanying Consolidated Statements of Operations for the three
months ended March 31, 2006 and 2005.  Additionally, the operating results for three properties sold during
2005 are also included in "(Loss) income from discontinued operations" for the three months ended March
31, 2005.

The following chart summarizes "(Loss) income from discontinued operations" for the three months
ended March 31, 2006 and 2005.

|                                                | For the three months
|----------------------------------------------- | --------------------
|                                                | ended March 31,     
|                                                | 2006                
|(In thousands)                                  |                     
|Property revenues                               | $	909               
|                                                |                     
|Property operating and maintenance expense      | (822)               
|Real estate asset depreciation and amortization | (92)                
|Interest expense, net (1)                       | (13)                
|                                                |                     
|Operating (loss) income                         | (18)                
|Gain on disposition of properties               | -                   
|**(Loss) income from discontinued operations**  | $	(18)              



(1)2005 includes a $330 discount received as a result of prepaying a loan (see Note 4).

**4.	DEBT**

**Mortgage Notes Payable**

During the three months ended March 31, 2006, we defeased four mortgage loans totaling $35.3
million, and incurred $3.6 million in related costs, which are included in interest expense.

On March 21, 2005, we repaid a $15.6 million variable rate mortgage note which had been secured
by a property in Florida.

On March 9, 2005, we obtained two conventional mortgage loans in connection with the purchase
of a property in Florida.  One loan, secured by a property in Northeast Ohio, was repaid in December 2005.
The other loan is secured by the acquired Florida property.  On October 28, 2005, the maturity date of this
loan was extended for three years to March 2010 and the interest rate was reduced to LIBOR plus 1.8% or
the Prime Loan Rate.

On February 1, 2005, we repaid $10.7 million in variable rate debt and prepaid $5.3 million in zero
percent UDAG financing, both of which had been secured by a Market-Rate property.  Of the $16.0 million
that was repaid, $10.7 million matured on February 1, 2005, $3.1 million would have matured on April 1,
2005 and $2.2 million would have matured on June 1, 2006.  The $2.2 million that would have matured on
June 1, 2006 was paid off at a discount of $330,000, which was recorded as a reduction to interest expense.
We funded the repayment by obtaining a new mortgage loan on the same property in the amount of $16.1
million.  This note was repaid in full in connection with the sale of this property on August 25, 2005.

**Lines of Credit**

Our $17.0 million secured line of credit was unavailable at December 31, 2005, because the
property securing that credit line had been sold.  In February 2006, we identified a replacement property to
serve as security for this credit line and amended the loan terms by increasing the credit line to $17.0 million
with interest calculated at LIBOR plus 1.5%.  This line matures March 1, 2008.  Borrowings under the line
may be restricted based upon the operating performance of the property.  There were borrowings of $11.3
million outstanding on this line of credit at March 31, 2006.  There were no borrowings outstanding on this
line at December 31, 2005.

We also have a $14.0 million secured line of credit which matures in December 2007.  There were
no regular borrowings outstanding under this line at March 31, 2006 or December 31, 2005.  The interest
rate on this line is 1.8% in excess of LIBOR or the one month reference rate.

**Unsecured Debt**

On March 15, 2005, AERC Delaware Trust (the "Trust"), a newly formed wholly owned subsidiary,
sold trust preferred securities for an aggregate amount of $25.8 million.  Associated Estates Realty
Corporation ("AERC") owns all of the common securities of the Trust.  The Trust used the proceeds to
purchase AERC's junior subordinated note due March 30, 2035, which represents all of the Trust's assets.
The terms of the trust preferred securities are substantially the same as the terms of the junior subordinated
note.  Interest on the junior subordinate note is payable at a fixed rate equal to 7.9% per annum through the
interest rate payment date in March 2015 and thereafter at a variable rate equal to LIBOR plus 3.25% per
annum.  AERC may redeem the junior subordinated note at par at any time on and after March 30, 2010.
To the extent that AERC redeems the junior subordinated note, the Trust is required to redeem a
corresponding amount of trust preferred securities.

**5.**	**GOODWILL AND OTHER INTANGIBLE ASSETS**

**Goodwill**



*MIG Realty Advisors, Inc.*  In June 1998, we recorded goodwill in connection with the MIG Realty
Advisors, Inc. merger.  The goodwill was allocated fully to the Management and Service Operations
Segment.

We completed our annual review of goodwill during the three months ended March 31, 2006.  In
performing this analysis, we use a multiple of revenues to the range of potential alternatives and assign a
probability of the various alternatives under consideration by management.  Based on this analysis, we have
determined that goodwill was not impaired as of March 31, 2006.  As such, there were no changes to the
carrying amount of goodwill during the three months ended March 31, 2006.  Should the estimates used to
determine alternatives or the probabilities of the occurrence thereof change, an impairment may result which
could materially impact our results of operations for the period in which it is recorded.

**Intangible Assets**

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

**6.**	**TRANSACTIONS WITH AFFILIATES AND JOINT VENTURES**

We provide management and other services to (and are reimbursed for certain expenses incurred
on behalf of) certain non-owned properties in which our Chief Executive Officer ("CEO") 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."  We also provide similar services to joint venture properties.

In the normal course of business, we have advanced funds on behalf of affiliates and joint ventures
and held funds for the benefit of affiliates and joint ventures.

We held two notes of equal amounts payable by our CEO aggregating $3.4 million, both of which
were paid in full on April 25, 2005.  For the three months ended March 31, 2005, the interest rate payable
on these notes was approximately 4.4%.

Merit Painting Services ("Merit"), a subsidiary of ours, has provided services to JAS Construction,
Inc. ("JAS") related to property rehabilitation and other work from time to time.  JAS is owned by a son of
our CEO.  Reported revenue related to work performed by Merit for JAS is included in the table below.

Summarized affiliate and joint venture transaction activity was as follows:

|                                                            | For the three months
|----------------------------------------------------------- | --------------------
|                                                            | ended March 31,     
|(In thousands)                                              | 2006                
|                                                            |                     
|Property management fee and other                           |                     
|miscellaneous service revenues                              | $	190               
|                                                            |                     
|Painting service revenues related to JAS Construction       | 161                 
|Other affiliate and joint venture painting service revenues | 3                   
|                                                            |                     
|Expenses incurred on behalf of and reimbursed by(1)         | 333                 
|                                                            |                     
|Interest income on notes due from CEO                       | -                   

(1)*Primarily payroll and employee benefits, reimbursed at cost.*

|                                                                  | March 31,          | December 31,
|----------------------------------------------------------------- | ------------------ | ------------
|(In thousands)                                                    | 2006               | 2005        
|                                                                  |                    |             
|Accounts and notes receivable from affiliates and joint ventures: |                    |             
|Funds advanced                                                    | $	 635             | $	633       
|JAS Construction, Inc.                                            | 164                | 392         
|Property management fees, insurance and                           |                    |             
|miscellaneous receivables                                         | 336                | 884         
|Total due from affiliates and joint ventures                      | $	1,135            | $	1,909     
|                                                                  |                    |             
|Funds held on behalf of affiliates and joint ventures             | $	             434 | $	959       

**7.	SHARES**

On July 27, 2005, our Board of Directors authorized the repurchase of up to $50.0 million of our
common shares.  As of March 31, 2006, we had repurchased 2,803,925 common shares under this plan at
a cost of $27.6 million.

Effective January 1, 2006, we adopted SFAS No. 123(R), "Share-Based Payment".  This Statement
requires that restricted shares are recognized as issued shares when they become vested.  In accordance
with previous generally accepted accounting principles, we had recognized restricted shares as issued
shares when they were initially granted.  As a result of the adoption of this Statement, we returned to the
treasury 144,582 restricted shares which were unvested at January 1, 2006.  During the three months ended
March 31, 2006, 17,557 restricted shares had vested and were issued from treasury shares. See Note 1 for
additional information related to the adoption of SFAS No. 123(R).

**8.	EARNINGS PER SHARE**

Earnings per share ("EPS") has been computed pursuant to the provisions of SFAS No. 128,
"Earnings per Share."  There were 2.2 million and 1.9 million options to purchase common shares
outstanding at March 31, 2006 and 2005, respectively.  None of the options were included in the calculation
of diluted earnings per share for the periods presented as their inclusion would be antidilutive to the net loss
applicable to common shares from continuing operations.

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

**9.	INTERIM SEGMENT REPORTING**

We have four reportable segments: (1) Acquisition/Disposition Multifamily Properties; (2) Same
Store Market-Rate ("Market-Rate") Multifamily Properties; (3) Affordable Housing Multifamily Properties; and
(4) Management and Service Operations.  We have identified these segments based upon how
management makes decisions regarding resource allocation and performance assessment. The
Acquisition/Disposition properties represent acquired or developed properties which have not yet reached
stabilization (we consider a property stabilized when its occupancy rate reaches 93.0% and we have owned
the property for one year), and properties that have been sold or are classified as held for sale in accordance
with SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."  The Market-Rate
properties are same store (owned during the entirety of the comparison periods) conventional multifamily
residential apartments.  The Affordable Housing properties are multifamily properties for which the rents are
subsidized and certain aspects of the operations are regulated by HUD pursuant to Section 8 of the National
Housing Act of 1937.  The Management and Service Operations provide management and advisory services
to the Acquisition/Disposition, Market-Rate and Affordable Housing properties that we own, as well as to
third party clients and properties.  All of our segments are located in the United States.

The accounting policies of the reportable segments are the same as those described in the "Basis
of Presentation and Significant Accounting Policies" in our Annual Report on Form 10-K for the year ended
December 31, 2005.  We evaluate the performance of our reportable segments based on Net Operating
Income ("NOI").  NOI is determined by deducting property operating and maintenance expenses from
property revenues for the Acquisition/Disposition (excluding amounts classified as discontinued operations),
Market-Rate and Affordable Housing segments and deducting direct property management and service
companies expenses and painting services expenses from Management and Service Company revenues
for the Management and Service Operations segment.  We consider NOI to be an appropriate supplemental
measure of our performance because it reflects the operating performance of our real estate portfolio and
management and service companies at the property and management and service company level and is
used to assess regional property level performance.  NOI should not be considered (i) as an alternative to
net income (determined in accordance with GAAP), (ii) as an indicator of financial performance, (iii) as cash
flow from operating activities (determined in accordance with GAAP) or (iv) as a measure of liquidity; nor
is it necessarily indicative of sufficient cash flow to fund all of our needs.  Certain other real estate
companies may define NOI in a different manner.

Segment information for the three months ended March 31, 2006 and 2005 is as follows:

|                                            | For the three months ended March 31, 2006
|------------------------------------------- | -----------------------------------------
|                                            |                                          
|                                            | Acquisition/                             
|(In thousands)                              | Disposition                              
|                                            |                                          
|Total segment revenues                      | $	1,682                                  
|Elimination of intersegment revenues        | -                                        
|Consolidated revenues                       | 1,682                                    
|                                            |                                          
|Equity in net loss of joint ventures        | -                                        
|                                            |                                          
|Operating loss from discontinued operations | (18)                                     
|                                            |                                          
|*NOI                                        | 975                                      
|                                            |                                          
|Total assets                                | $	65,740                                 

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

|                                              | For the three months ended March 31, 2005
|--------------------------------------------- | -----------------------------------------
|                                              |                                          
|                                              | Acquisition/                             
|(In thousands)                                | Disposition                              
|                                              |                                          
|Total segment revenues                        | $	 244                                   
|Elimination of intersegment revenues          | -                                        
|Consolidated revenues                         | 244                                      
|                                              |                                          
|Equity in net loss of joint ventures          | -                                        
|                                              |                                          
|Operating income from discontinued operations | 521                                      
|                                              |                                          
|*NOI                                          | 117                                      
|                                              |                                          
|Total assets                                  | $	103,773                                

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

A reconciliation of total NOI to total consolidated net (loss) income for the three months ended March
31, 2006 and 2005 is as follows:

|                                            | For the three months
|------------------------------------------- | --------------------
|                                            | ended March 31,     
|(In thousands)                              | 2006                
|                                            |                     
|Total NOI for reportable segments           | $	17,260            
|Depreciation and amortization               | (8,597)             
|General and administrative expense          | (2,346)             
|Interest income                             | 381                 
|Interest expense                            | (14,181)            
|Equity in net loss of joint ventures        | (106)               
|Minority interest in operating partnership  | (16)                
|(Loss) income from discontinued operations: |                     
|Operating (loss) income                     | (18)                
|Gain on disposition of properties, net      | -                   
|(Loss) income from discontinued operations  | (18)                
|Consolidated net (loss) income              | $	(7,623)           

******10.	CONTINGENCIES**

***Legal Proceedings*****

We are subject to legal proceedings, lawsuits and other claims, including proceedings by
government authorities (collectively "Litigation").  Litigation is subject to uncertainties and outcomes are
difficult to predict.  Consequently, we are unable to estimate ultimate aggregate monetary liability or financial
impact with respect to the Litigation matters described in the following paragraphs as of March 31, 2006, and
no accruals have been made for these matters.  We believe that other Litigation will not have a material
adverse impact on us after final disposition.  However, because of the uncertainties of litigation, one or more
lawsuits could ultimately result in a material obligation.

***Pending Lawsuits*****

On or about April 14, 2002, Melanie and Kyle Kopp commenced an action against us in the Franklin
County, Ohio Court of Common Pleas seeking undetermined damages, injunctive relief and class action
certification.  This case arose out of our Suredeposit program.  This program allows cash short prospective
residents to purchase a bond in lieu of paying a security deposit.  The bond serves as a fund to pay those
resident obligations that would otherwise have been funded by the security deposit.  Plaintiffs allege that the
non-refundable premium paid for the bond is a disguised form of security deposit, which is otherwise
required to be refundable in accordance with Ohio's Landlord-Tenant Act.  Plaintiffs further allege that
certain pet deposits and other nonrefundable deposits required by us are similarly security deposits that
must be refundable in accordance with Ohio's Landlord-Tenant Act.  On or about January 15, 2004, the
plaintiffs filed a motion for class certification.  We subsequently filed a motion for summary judgment.  Both
motions are pending before the Court.  We intend to vigorously defend ourselves against these claims.

***Government Investigations***

On or about August 7, 2002, the Maryland Attorney General served us with a subpoena seeking
information concerning certain of our leasing practices in connection with our Maryland properties.  The
subpoena sought extensive information going back a number of years, including information about our
Suredeposit programs and certain non-refundable deposits.  We understand that other landlords operating
in Maryland have been served with similar subpoenas.  The Maryland Attorney General has now completed
its review of the information we furnished and based upon that information contends that certain of our
leasing practices are in violation of Maryland's landlord tenant laws.  We are attempting to cooperate with
the Maryland Attorney General in resolving these matters.  Any issues with the Attorney General, regarding
the SureDeposit program, have already been resolved without any material impact on our financial results.

On or about December  22, 2003, the Montgomery County, Maryland Office of Landlord Tenant
Affairs commenced an investigation into possible violations of state and county Landlord-Tenant laws
involving two properties operated by us located in Montgomery County, Maryland.  The matters being
investigated are for the most part the same leasing practices being investigated by the Maryland Attorney
General.  We are attempting to cooperate with the County.

**11.	GUARANTEES**

We are a 49.0% partner in the joint venture partnership that owns Idlewylde Apartments, an 843-unit
multifamily community, located in Atlanta, Georgia. In connection with the $42.0 million mortgage loan
encumbering this property, we have guaranteed certain obligations of the partnership including
environmental indemnification obligations and typical non-recourse carveouts.  Although we have not
recorded a liability for a potential loss, we are required by GAAP to estimate the fair value of this guaranty.
We have estimated the fair value of the guaranty to be $290,000, and this amount is included as an asset
in "Investments in joint ventures, net" and as a liability in "Accounts payable, accrued expenses and other
liabilities" in the accompanying Consolidated Balance Sheet.  In addition, we routinely guaranty mortgage
debt of our wholly owned subsidiaries

******12.	SUBSEQUENT EVENTS**

***Dividends Declared***

On May 1, 2006, we paid a dividend of $0.17 per common share, which was declared on March 21,
2006 to shareholders of record on April 13, 2006.

*Index*****

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

The following discussion should be read in conjunction with the consolidated financial statements
and notes thereto included in Part I, Item 1 of this report on Form 10-Q.  This discussion may contain
forward-looking statements based on current judgments and current knowledge of management, which are
subject to certain risks, trends and uncertainties that could cause actual results to vary from those projected,
including but not limited to, expectations regarding our 2006 performance, which are based on certain
assumptions.  Accordingly, readers are cautioned not to place undue reliance on forward-looking statements
which speak only as of the dates of the document.  These forward-looking statements are intended to be
covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  The words
"expects", "projects", "believes", "plans", "anticipates", and similar expressions are intended to identify
forward-looking statements.  Investors are cautioned that these forward-looking statements involve risks and
uncertainty, that could cause actual results to differ from estimates or projections contained in these forward-looking statements, including without limitation the following:

- changes in economic climate in the markets in which we own and manage properties, including
interest rates, the overall level of economic activity, the availability of consumer credit and
mortgage financing, unemployment rates and other factors;

risks of a lessening of demand for the multifamily units that we own or manage;

competition from other available multifamily units and change in market rental rates;

increases in property and liability insurance costs;

changes in real estate taxes and other operating expenses (e.g., cleaning, utilities, repairs and
maintenance costs, insurance and administrative costs, security, landscaping, staffing and other
general costs);

changes in government regulations affecting  properties, the rent of which are subsidized and
certain aspects of which are regulated by the United States Department of Housing and Urban
Development ("HUD") and other properties that we own;

changes in or termination of contracts relating to third party management and advisory
business;

inability to renew contracts with HUD for rent subsidized properties at existing rents;

weather and other conditions that might adversely affect operating expenses;

expenditures that cannot be anticipated such as utility rate and usage increases, unanticipated
repairs, and real estate tax valuation reassessments or millage rate increases;

inability to control operating expenses or achieve increases in revenues;

the results of litigation filed or to be filed against us;

changes in tax legislation;

risks related to our joint ventures;

risks of personal injury claims and property damage related to mold claims because of
diminished insurance coverage;

catastrophic property damage losses that are not covered by our insurance;

risks associated with property acquisitions such as environmental liabilities, among others;

changes in market conditions that may limit or prevent us from acquiring or selling properties;
and

risks related to the perception of residents and prospective residents as to the attractiveness,
convenience and safety of our properties or the neighborhoods in which they are located.

**Overview**.  We are engaged primarily in the ownership and operation of multifamily residential units.
We also provide asset and property management services to third party owners of multifamily residential
units for which we are paid fees.  Our primary source of cash and revenue from operations is rents from the
leasing of owned apartment units.  Approximately 91.0% of our consolidated revenues were generated from
the leasing of these owned units for the three months ended March 31, 2006, and approximately 88.0% of
the rental revenues generated by these owned properties during the three months ended March 31, 2006
were related to the Market-Rate properties.  The operating performance of the properties, particularly the
Market-Rate properties, is affected by factors such as interest rates, unemployment rates, and the supply
and demand of rental housing in particular markets.  In recent years, the demand for rental housing in our
principal markets has lessened due to increased home purchase competition, primarily driven by low
mortgage rates, the weak economy and related unemployment rates.  These factors have resulted in total
rental revenue collections for the Market-Rate properties remaining relatively flat over the last few years.
Total rental revenue collections are a combination of rental rates, rent concessions and occupancy levels.
We attempt to adjust these factors from time to time, based on market conditions, in order to maximize rental
revenues.  Indicators that we use in measuring these factors include physical occupancy and net collected
rent.  These indicators are more fully described in the Results of Operations comparison.  Additionally, we
consider property net operating income to be an important indicator of our overall performance.  Property
net operating income (property operating revenues  less property operating and maintenance expenses)
is a measure of the profitability of our properties, which has the largest impact of all of our sources of income
and expense on our financial condition and operating results.  See Note 9 of the Notes to Consolidated
Financial Statements presented in Part I, Item 1 of this report on Form 10-Q for additional information
regarding property net operating income and total net operating income, in addition to  a reconciliation of
total net operating income to consolidated net (loss) income in accordance with GAAP.

**2006 Expectations.**

***Portfolio performance***** - We continue to expect to increase our Market-Rate property NOI by
approximately 2.75% to 3.25% in 2006, with operating margins remaining relatively flat.  For the
three months ended March 31, 2006, our Market-Rate property NOI increased approximately
2.0% while our Market-Rate operating margins declined 1.8%.

***Interest expense and general and administrative expense***- We expect total interest expense
before defeasance costs to decrease approximately $2.9 million by utilizing sale proceeds to
pay down or by refinancing debt at lower interest rates.  Defeasance costs associated with
these prepayments are expected to be approximately $8.0 million.  During the quarter ended
March 31, 2006, we defeased four loans aggregating $35.4 million and incurred related costs
of approximately $3.6 million.  Additionally, general and administrative expenses are expected
to increase approximately 10.0% as a result of anticipated increases in payroll and bonuses and
other costs.  For the three months ended March 31, 2006, general and administrative expenses
were approximately 14.0% higher than the general and administrative expenses for the three
months ended March 31, 2005.

***Property sales***** - We plan to sell at least $75.0 million of properties in 2006.

The timing of asset sales and ultimate use of sale proceeds may have a material impact on our
expected results for 2006.

**LIQUIDITY AND CAPITAL RESOURCES**

**Cash Flows and Liquidity**.   Significant sources and uses of cash in the three months ended March
31, 2006 and 2005, are summarized as follows:

Cash Sources (Uses):

|                                          | For the three months
|----------------------------------------- | --------------------
|                                          | ended March 31,     
|(In thousands)                            | 2006                
|                                          |                     
|Net cash provided by operating activities | $	3,241             
|Net real estate and fixed asset activity  | (2,507)             
|(Decreases) increases in debt - net       | (25,584)            
|Payment of debt procurement costs         | -                   
|Redemption of preferred shares            | -                   
|Cash dividends and operating partnership  |                     
|distributions paid                        | (4,332)             
|Exercise of stock options                 | 269                 
|Purchase of treasury shares               | (10,186)            
|Net cash from other financing activities  | (64)                
|Cash decrease                             | $	(39,163)          

Our primary sources of liquidity are cash flow provided by operations, short term borrowings on our
lines of credit and proceeds from property sales.  The increase in cash provided by operations in 2006
compared to 2005 was primarily due to changes in accounts receivable and accounts payable resulting from
the timing of cash receipts and payments, which were partially offset by the payment of $3.6 million of
defeasance costs.

We obtained cash from the following additional sources during 2006:

- $11.3 million in line of credit borrowings;
- $269,000 in proceeds related to stock option exercises.

We utilized cash for the following additional purposes during 2006:

- $2.5 million in capital additions;
- $36.9 million reduction in mortgage notes primarily due to defeasance (prepayment) of four
mortgage loans;
- $4.3 million in dividends and distributions paid; and
- $10.2 million to repurchase our common shares;

At March 31, 2006, we had a total of $11.3 million outstanding on our two secured lines of credit and
outstanding letters of credit of $53,000 leaving $19.7 million available for additional borrowings.

In February 2006, we completed an agreement that increased our $15.0 million line of credit to a
$17.0 million line and identified a replacement property to serve as security for this line.  In October 2005,
the property that previously secured this line was sold.  As a result of that sale, the line was not available
to us until the replacement security was identified in February 2006.

In February and March 2006, we defeased a total of four mortgage loans totaling $35.3 million and
incurred $3.6 million in related costs, which are included in "Interest expense" on our Consolidated
Statements of Operations.

We anticipate spending approximately $12.8 million for recurring, investment/revenue enhancing
and non-recurring capital expenditures for the remainder of 2006.  These commitments are expected to be
funded from cash flow provided by operating activities and the sale of properties.

On March 21, 2006, we declared a dividend of $0.17 per common share, which was paid on May
1, 2006, to shareholders of record on April 13, 2005.  We anticipate that we will continue paying quarterly
dividends and that we will sustain our current dividend rate.

Any future multifamily property acquisitions or developments would be financed with the most
appropriate sources of capital, which may include the assumption of mortgage indebtedness, bank and other
institutional borrowings, the exchange of properties, undistributed earnings, secured or unsecured debt
financings, or the issuance of shares or units exchangeable into common shares.

We anticipate that we will meet our liquidity requirements for the remainder of 2006 generally
through net cash provided by operations.  We believe that if net cash provided by operations is below
projections, other sources, such as secured borrowings (primarily the lines of credit) and property sales'
proceeds are available and should be sufficient to meet operating requirements, capital additions, mortgage
amortization payments and the payment of dividends in accordance with REIT requirements.

**Guarantees.**   We routinely guaranty mortgage debt of our wholly owned subsidiaries.  Additionally,
we had one guaranty at March 31, 2006, related to a mortgage loan secured by one of our joint venture
properties.  See Note 11 of the Notes to Consolidated Financial Statements presented in Part I, Item 1 of
this report on Form 10-Q for information related to this guaranty.

**Off-Balance Sheet Investments and Financing Commitments.**   At March 31, 2006, we had
investments in two joint ventures that own a total of two multifamily apartment communities.  The operations
of these properties are similar to the operations of our wholly owned portfolio.  These investments enable
us to exercise influence over the operations of the properties and share in their profits, while earning
additional fee income.  We account for our investments in unconsolidated joint ventures under the equity
method of accounting as we exercise significant influence, but do not control these entities.  These
investments are initially recorded at cost as investments in joint ventures and subsequently adjusted for
equity in earnings and cash contributions and distributions.

We have one guaranty obligation related to our joint ventures, which was previously discussed
under Guarantees.  Both of the joint venture properties were encumbered by debt at March 31, 2006.

**Dispositions.** 	We classified two properties as held for sale at March 31, 2006.  We tested these
properties in accordance with SFAS 144 and determined that they were not impaired.  The results of
operations for these properties are included in "Income from discontinued operations" in the Consolidated
Statements of Operations for all periods presented.

Additionally, we entered into contracts to sell an Affordable Housing property and a Market-Rate
property, both of which are located in Northeast Ohio.  These properties were not classified as held for sale
at March 31, 2006, as we believe all significant contingencies surrounding the sales were not resolved at
that time.

***RESULTS OF OPERATIONS***

***Comparison of the three months ended March 31, 2006 to the three months ended March 31, 2005*****

In the following discussion, Market-Rate properties represents 56 wholly owned Same Store Market-Rate properties (Market-Rate properties that we have owned during the entirety of the comparison periods).
Affordable Housing represents 12 properties subject to HUD regulations.  Acquired/Disposed properties
represents two properties that were acquired in 2005, two properties classified as held for sale at March 31,
2006, and all sold properties.

Overall, the net loss from continuing operations increased in 2006 primarily due to increases in
interest expense (including $3.6 million of defeasance costs), property operating and maintenance
expenses, and depreciation expense during 2006.  These increases were partially offset by an increase in
property revenues during 2006.

The following chart reflects the amount and percentage change in line items that are relevant to the
changes in overall operating performance when comparing the three months ended March 31, 2006 to the
three months ended March 31, 2005:

|                                             | Increase (decrease)
|-------------------------------------------- | -------------------
|                                             | in three month     
|                                             | comparison period  
|(Amounts in thousands)                       |                    
|Property revenues                            | $	 3,079           
|Fees, reimbursements, and other revenue      | 483                
|Property operating and maintenance expenses: |                    
|Repairs and maintenance                      | 508                
|Real estate taxes and insurance              | 725                
|Utilities                                    | 368                
|Personnel                                    | 384                
|Property operating and maintenance expenses  | 2,147              
|Depreciation and amortization                | 607                
|Interest expense (1)                         | 4,238              
|(Loss) income from discontinued operations   | (539)              

(1)Includes $3.6 million of defeasance costs.

*Property Revenues*.  Property revenues are impacted by a combination of rental rates, rent
concessions and occupancy levels.  We measure these factors using indicators such as  physical occupancy
(number of units occupied divided by total number of units at the end of the period) and average monthly
net collected rent per unit (gross potential rents less vacancies and concessions divided by total number of

units).  This information is presented in the following table for the three months ended March 31, 2006 and
2005 (information for the three months ended March 31, 2005 reflect results based upon the operating
properties and their respective segments as of March 31, 2006):

|                       | For the three months ended
|---------------------- | --------------------------
|                       | March 31, 2006            
|                       |                           
|                       | Physical                  
|                       | Occupancy                 
|                       |                           
|Acquisition Properties | 97.5%                     
|Market-Rate            | 94.6%                     
|Affordable Housing     | 99.8%                     

|                       | For the three months ended
|---------------------- | --------------------------
|                       | March 31, 2005            
|                       |                           
|                       | Physical                  
|                       | Occupancy                 
|                       |                           
|Acquisition Properties | N/A                       
|Market-Rate            | 92.6%                     
|Affordable Housing     | 99.4%                     

Property revenue increased in 2006 primarily as a result of increased occupancy and a combination
of rental rate increases and an overall reduction in concessions being offered in the Market-Rate segment
and due to $1.4 million in revenues received from the two properties acquired in 2005.  Additionally, we
initiated several new reimbursement programs in 2004 and 2005 which were phased-in throughout 2005.
The programs were fully implemented by late 2005.

*Fees, Reimbursements and other.*  The management and service operations recognized an increase
in fee revenue of $163,000 primarily due to the addition of several property management contracts during
2005 and improved performance at properties that we asset manage.   Other revenue increased $103,000

*Index*****

primarily as a result of liquidated damages that we received when a prospective buyer did not perform under

the terms of a contract to sell one of our properties.  Reimbursements of expenses from managed properties

increased during 2006, however this increase had no impact on the net loss from continuing operations as
these reimbursements are also included in direct property management expenses.



*Property Operating and Maintenance Expenses.*  Property operating and maintenance expenses
increased primarily as a result of increases in real estate tax expense, utilities expense, personnel expense,
and repair and maintenance expense.  Real estate taxes increased primarily due to an Ohio tax law change
that resulted in an increase in our estimated tax expense.  This law was signed June 30, 2005, and became
effective July 1, 2005, retroactive to January 1, 2005.  Consequently, the resulting increase for 2005 was
not recorded until the second quarter of 2005.  Therefore, increases due to this change are included in the
results for the three months ended March 31, 2006, but were not recorded during the three months ended
March 31, 2005.  Utilities increased primarily due to increases in the cost per unit of natural gas in 2006
compared to 2005 offset by reduced consumption.  The increase in personnel expense was primarily due
to salary increases and benefit costs.  Repairs and maintenance expenses increased during 2006 primarily
due to increases in unit preparation costs, landscaping costs, and trash removal costs.

*Depreciation and Amortization Expenses.*  Depreciation and amortization expenses increased during
2006 primarily as a result of the acquisition of two properties in 2005.

*General and Administrative Expenses.*   Expenses related to share-based payments are included
in general and administrative expenses.  Effective January 1, 2006, we adopted SFAS 123(R), "Share-Based Payment" using the modified prospective method.  As a result, our 2006 results of operations
includes an immaterial amount of expense associated with stock options that was not included in our 2005
results of operations, and as such, the impact to the results of operations for the remainder of 2006 is also
expected to be immaterial.  For additional information on share-based payments, see Note 1 of the Notes
to Consolidated Financial Statements presented in Part I, Item 1 of this report on Form 10-Q.

*Interest Expense.*Interest expense increased during 2006 primarily due to $3.6 million in costs
incurred related to the defeasance of four mortgage loans, and interest related to the trust preferred
securities that were issued in March 2005, resulting in three months of expense in 2006 compared to only
fifteen days in 2005.

*(Loss) income from Discontinued Operations.*  Discontinued operations includes the operating
results of two properties that have been classified as held for sale and three properties that were sold during
2005.  For further details on "(Loss) income from discontinued operations," see Note 3 of the Notes to
Consolidated Financial Statements presented in Part I, Item 1 of this report on Form 10-Q.

**CONTINGENCIES**

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

******ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

During the three months ended March 31, 2006, we entered into forward contracts to manage our
exposure to fluctuations in natural gas prices.  We do not expect to use these contracts for trading or other
speculative purposes.  These contracts have been designated as cash flow hedges and the changes in the
fair values are not material to our financial condition or results of operations.  Additionally, we are exposed
to interest rate changes associated with variable rate debt as well as refinancing risk on our fixed-rate debt.
We occasionally use derivative instruments to manage our exposure to interest rates.  See our Form 10-K
"Item 7A Qualitative and Quantitative Disclosures About Market  Risk" for a more complete discussion of
interest rate sensitive assets and liabilities.

**ITEM 4.  CONTROLS AND PROCEDURES**

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

*Changes in Internal Control over Financial Reporting.*There were no changes in our internal control
over financial reporting during the first quarter of 2006 that materially affected or are reasonably likely to
materially affect internal control over financial reporting.**

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

*****Index*****

**PART II.	OTHER INFORMATION**

**ITEM 1.	LEGAL PROCEEDINGS**

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

**ITEM 1A.	RISK FACTORS**

See "Risk Factors" in Part I, Item 1A of our report on Form 10-K for the year ended December 31,
2005.

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

|Issuer Purchases of Equity Securities for the three months ended March 31, 2006
|-------------------------------------------------------------------------------
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Period                                                                         
|                                                                               
|January 1 through                                                              
|January 31                                                                     
|February 1 through                                                             
|February 28                                                                    
|March 1 through                                                                
|March 31                                                                       
|Total                                                                          

On July 27, 2005, our Board of Directors authorized the repurchase of up to $50.0 million of our
common shares.  Additionally, we have a policy which allows employees to pay their portion of the payroll
taxes related to restricted share vesting by surrendering shares equal in value on the day of vesting to the
amount of taxes due.

**ITEM 6.	EXHIBITS**



|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | **Filed herewith or**                                                            
|---------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | **incorporated**                                                                 
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | **herein by**                                                                    
|**Number** | **Title**                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | **reference**                                                                    
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|3.1        | Amendment to Second Amended and Restated Articles of Incorporation                                                                                                                                                                                                                                                                                                                                                                                                                      |  | Exhibit 3.1 to Form 8-K
filed December 8, 2004.                                  
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|3.2        | Second Amended and Restated Articles of Incorporation, as amended by the
Company.                                                                                                                                                                                                                                                                                                                                                                                                       |  | Exhibit 3.2 to Form 8-K
filed December 8, 2004.                                  
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|3.3        | 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 Common Share Certificate.                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | Exhibit 3.1 to Form S-11 filed September 2,
1993 (File No. 33-68276
as amended). 
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|4.2        | Specimen 8.70% Class B Series II Cumulative Redeemable Preferred Shares                                                                                                                                                                                                                                                                                                                                                                                                                 |  | Exhibit 4.3 to Form 8-A
filed December 8, 2004.                                  
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|4.3        | Deposit Agreement by and among Associated Estates Realty Corporation and
National City Bank and Depositary Receipts                                                                                                                                                                                                                                                                                                                                                                     |  | Exhibit 4.5 to Form 8-A
filed December 8, 2004                                   
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|4.4        | Form of Indemnification Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | Exhibit 4.2 to Form S-11 filed September 2,
1993 (File No. 33-68276
as amended). 
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|4.5        | Form of Promissory Note and Form of Mortgage and Security Agreement
dated May 10, 1999 from AERC to The Chase Manhattan Bank.                                                                                                                                                                                                                                                                                                                                                           |  | Exhibit 4.5 to Form 10-Q filed August 13, 1999.                                  
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|4.5a       | Form of Promissory Note and Form of Mortgage and Security Agreement
dated September 10, 1999 from AERC to The Chase Manhattan Bank.                                                                                                                                                                                                                                                                                                                                                     |  | Exhibit 4.5a to Form 10-Q filed November 12,
1999.                               
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|4.5b       | Form of Promissory Note and Form of Mortgage and Security Agreement

dated November 18, 1999 from AERC to The Chase Manhattan Bank.                                                                                                                                                                                                                                                                                                                                                     |  | Exhibit 4.5b to Form 10-K filed March 15, 2000.                                  
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|4.9        | Second Amended and Restated Loan Agreement dated April 19, 2002
between Associated Estates Realty Corporation and National City Bank.                                                                                                                                                                                                                                                                                                                                                   |  | Exhibit 4.13a to Form
10-Q filed August 13,
2002.                                
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|4.9a       | Third Amended and Restated Loan Agreement dated November 1, 2005
between Associated Estates Realty Corporation and National City Bank.                                                                                                                                                                                                                                                                                                                                                  |  | Exhibit 4.9a to Form 10-K filed March 1, 2006.                                   
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|4.9b       | First Amendment to Second Amended and Restated Loan Agreement dated
May 14, 2002 between Associated Estates Realty Corporation and National
City Bank.                                                                                                                                                                                                                                                                                                                                  |  | Exhibit 4.13b to Form
10-Q filed August 13,
2002.                                
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|4.9c       | Second Amendment to Second Amended and Restated Loan Agreement
dated April 17, 2003 between Associated Estates Realty Corporation and
National City Bank.                                                                                                                                                                                                                                                                                                                               |  | Exhibit 4.13c to Form
10-Q filed August 1,
2003.                                 
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|4.9d       | Third Amendment to Second Amended and Restated Loan Agreement dated
July 15, 2003 between Associated Estates Realty Corporation and National
City Bank.                                                                                                                                                                                                                                                                                                                                 |  | Exhibit 4.13d to Form
10-Q filed November
20, 2003.                              
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|4.9e       | Fourth Amendment to Second Amended and Restated Loan Agreement dated
September 7, 2004 between Associated Estates Realty Corporation and
National City Bank.                                                                                                                                                                                                                                                                                                                            |  | Exhibit 4.13e to Form
10-Q filed November 2,
2004.                               
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|4.11       | Loan Agreement dated July 22, 2003 between The Huntington National Bank
and MIG/Orlando Development, Ltd.                                                                                                                                                                                                                                                                                                                                                                               |  | Exhibit 4.15 to Form 10-Q filed November 20,
2003.                               
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|4.12       | Amended and Restated Loan Agreement dated February 20, 2006 between
The Huntington National Bank and MIG/Orlando Development, Ltd.                                                                                                                                                                                                                                                                                                                                                      |  | Exhibit 4.12 to Form 10-Q filed herewith.                                        
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|           | Certain of the Registrant's assets are subject to mortgage obligations each of
which individually relates to indebtedness totaling less than 10.0% of the total
assets of the Registrant.  The Registrant hereby agrees to furnish a copy of
such agreements to the Commission upon its request.                                                                                                                                                                                        |  |                                                                                  
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|           | The Registrant issued unsecured debt in the form of Trust Preferred
Securities on March 15, 2005 in a private placement in an amount less than
10.0% of the total assets of the Registrant.  The Registrant hereby agrees to
furnish a copy of the Purchase Agreement dated March 15, 2005 between
Associated Estates Realty Corporation, AERC Delaware Trust and Taberna
Preferred Funding 1, Ltd. and a specimen Preferred Securities Certificate to
the Commission upon its request. |  |                                                                                  
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|10         | Associated Estates Realty Corporation Directors' Deferred Compensation
Plan.                                                                                                                                                                                                                                                                                                                                                                                                            |  | Exhibit 10 to Form 10-Q
filed November 14,
1996.                                 
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|10.1       | Stock Option Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | Exhibit 10.2 to Form S-11 filed September 2,
1993 (File No. 33-68276
as amended).
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|10.2       | Amended and Restated Employment Agreement between the Company and
Jeffrey I. Friedman.                                                                                                                                                                                                                                                                                                                                                                                                  |  | Exhibit 10.1 to Form 10-Q filed May 13, 1996.                                    
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|10.3       | Equity-Based Incentive Compensation Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | Exhibit 10.4 to Form 10-K filed March 29, 1995.                                  
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|10.4       | Form of Restricted Agreement dated by and among the Company and Its
Independent Directors.                                                                                                                                                                                                                                                                                                                                                                                              |  | Exhibit 10.9 to Form 10-K filed March 28, 1996.                                  
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|10.8       | Form of Share Option Agreement by and among the Company and Its
Independent Directors.                                                                                                                                                                                                                                                                                                                                                                                                  |  | Exhibit 10.14 to Form
10-K filed March 30,
1993.                                 
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|10.9       | Partnership Interests Purchase Agreement dated July 17, 2004 by and among
Jeffrey I. Friedman and JIFCO, an Ohio Corporation  and Winchester, Inc., an
Ohio Corporation                                                                                                                                                                                                                                                                                                                 |  | Exhibit 10.21 to Form
10-K filed February 25,
2005.                              
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|10.10      | Associated Estates Realty Corporation Amended and Restated 2001 Equity-Based Plan (as amended on May 4, 2005).  Incorporated by reference to
Appendix 1 to the Definitive Proxy Statement filed March 28, 2005.                                                                                                                                                                                                                                                                         |  | Exhibit 99.01 to Form
S-8 filed May 26, 2005.                                    
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|10.11      | Form of Equity Award Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | Exhibit 10.11 to Form
10-Q filed August 2,
2005.                                 
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|10.12      | Long Term Incentive Compensation Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Exhibit 10.12 to Form
10-Q filed November 1,
2005.                               
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|31         | Certification of Chief Executive Officer Pursuant  to Section 302 of the
Sarbanes Oxley Act.                                                                                                                                                                                                                                                                                                                                                                                            |  | Exhibit 31 to Form 10-Q
filed herewith.                                          
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|31.1       | Certification of Chief Financial Officer Pursuant to Section 302 of the

Sarbanes Oxley Act.                                                                                                                                                                                                                                                                                                                                                                                            |  | Exhibit 31.1 to Form 10-Q filed herewith.                                        
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                  
|32         | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to
Section 906 of the Sarbanes Oxley Act.                                                                                                                                                                                                                                                                                                                                                                 |  | Exhibit 32 to Form 10-Q
filed herewith.                                          

*********Index*****

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|            | ASSOCIATED ESTATES REALTY CORPORATION
|----------- | -------------------------------------
|            |                                      
|            |                                      
|May 2, 2006 | /s/ Lou Fatica                       
|(Date)      | Lou Fatica, Vice President,          
|            | Chief Financial Officer and Treasurer