SECOND AMENDMENT TO LOAN AGREEMENT AND DOCUMENTS

         THIS SECOND  AMENDMENT TO LOAN  AGREEMENT  AND  DOCUMENTS,  dated as of
October 14, 1998 (the  "Amendment"),  is entered  into by and between  BROOKDALE
LIVING COMMUNITIES,  INC., a Delaware corporation (the "Borrower"),  and LaSALLE
NATIONAL BANK, a national banking association (the "Bank").

                                   WITNESSETH

         WHEREAS,  Borrower has previously  executed and delivered to the Bank a
certain  Note dated April 27,  1998 in the  original  principal  amount of up to
Fifteen  Million Dollars  ($15,000,000.00)  (the "Original  Note")  evidencing a
certain loan (the "Loan") set forth more fully in and governed by a certain Loan
Agreement  of that same date to which  the Bank is also a party  (the  "Original
Loan Agreement");

         WHEREAS,  the Loan was subsequently  modified and amended by Borrower's
execution and delivery to the Bank of a certain  Amended and Restated Note dated
July 16, 1998 increasing the principal amount of the Loan by $10,000,000.00,  on
an interim basis only, from  $15,000,000.00 to $25,000,000.00  (the "Amended and
Restated Note") and a certain First Amendment to Loan Agreement and Documents of
that same date to which the Bank is also a party (the  "First  Amendment")  that
(a) increased the principal  amount of the Loan on an interim basis as aforesaid
and (b)  permitted  a portion of the Loan to be  reserved  for the  issuance  of
standby  Letters of Credit by the Bank to and for the benefit of  municipalities
and other  governmental  units in connection with projects developed by Borrower
from time to time as set forth more fully therein (the Original Loan  Agreement,
as  amended  by  the  First  Amendment,  is  herein  referred  to as  the  "Loan
Agreement");

         WHEREAS,  subject  to the  terms  and  conditions  of  this  Amendment,
Borrower has requested the Bank (a) to consent to the  Borrower's  issuance of a
convertible  subordinated  and  unsecured  note to OZ Master  Fund,  Ltd. in the
principal amount of Ten Million Dollars ($10,000,000.00), (b) to permit Borrower
to guarantee financing from other financial institutions to certain Subsidiaries
of Borrower in connection with certain development projects located in New York,
New York (Battery Park City), Glen Ellyn, Illinois and Raleigh,  North Carolina,
which  projects  were  to  be  originally   financed  by  Nomura  Asset  Capital
Corporation,  (c) to modify the Event of Default set forth in Section 7.01(O) of
the Loan Agreement,  and (d) to extend the Interim  Maturity Date to November 3,
1998 (the foregoing  matters referred to in (a), (b) (c) and (d) of this recital
paragraph being referred to collectively herein as the "Requested Activities");

         WHEREAS,  the Requested  Activities are  prohibited  under the existing
Loan Agreement and Documents and require the consent of the Bank; and

         WHEREAS,  the Bank is willing to consent to the  Requested  Activities,
subject  to and  conditioned  upon the  terms and  conditions  set forth in this
Amendment.

         NOW,  THEREFORE,  in consideration  of the premises,  the covenants and
agreements  herein  contained,  and other good and valuable  consideration,  the
receipt and  sufficiency  of which are hereby  acknowledged,  the parties hereby
agree as follows:

         1.  Incorporation  of Recitals.  The above and  foregoing  recitals are
incorporated into and made a part of this Amendment.  All capitalized terms used
herein,  if not  otherwise  specifically  defined,  shall have the  meanings and
definitions  prescribed  in the Loan  Agreement  and the  Documents  referred to
therein.


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         2.  Outstanding  Principal  Balance  of  Loan.  For  purposes  of  this
Amendment and the Loan Agreement,  the outstanding principal balance of the Loan
at any time shall be the sum of (a) all amounts of the Loan  Advances made under
the Loan Agreement remaining unpaid plus (b) all outstanding LC Reserves.

         3. Consent to  Subordinated  Note.  The Bank consents to the Borrower's
proposed issuance of a convertible  subordinated and unsecured note to OZ Master
Fund, Ltd. in the principal  amount of Ten Million Dollars  ($10,000,000.00)  in
accordance with terms and conditions not materially  different (as determined by
the Bank in its sole discretion) than those set forth in the Term Sheet provided
to the Bank on October 14, 1998 (the "Term Sheet") [the "Subordinated Note"] and
acknowledges that the Subordinated Note shall not constitute an Event of Default
under the Loan Agreement upon the condition that (a) the Subordinated Note shall
be subordinate to the Loan and (b) proceeds from the Subordinated  Note shall be
used and applied  immediately and directly to reduce the  outstanding  principal
balance of the Loan to  $15,000,000.00  on or before the Interim  Maturity Date,
and (c) the terms and  conditions of the  Subordinated  Note are not  materially
different  (as  determined  by the Bank in its sole  discretion)  than those set
forth in the Term Sheet.

         4. Interim  Maturity Date.  The term "Interim  Maturity Date" is hereby
amended and restated to mean the earlier of (a) November 3, 1998,  or (b) a date
certain which is the date on which Borrower issues the Subordinated Note.

         5. Decreased Loan  Commitment.  On the Interim  Maturity Date,  without
further notice and without regard to whether the Offering has occurred,  (a) the
outstanding  principal  balance of the Loan shall be reduced to  $15,000,000.00,
and (b) the principal  amount of the Loan and Maximum  Revolving Loan Commitment
shall  be   decreased   from   $25,000,000.00   to  an  amount   not  to  exceed
$15,000,000.00.

         6.  Maturity  Date.  The term  "Maturity  Date" is hereby  amended  and
restated to mean (a) the Interim  Maturity Date as to any and all amounts of the
outstanding  principal balance of the Loan in excess of $15,000,000.00,  and (b)
April 26, 1999 as to the outstanding principal balance of the Loan together with
any  accrued but unpaid  interest  thereon and any other costs or amount owed to
the Bank under the Loan Agreement as amended hereby.

         7. Interim Interest Rate. Effective as of October 14, 1998, (a) any and
all outstanding  principal balance of the Loan in excess of $15,000,000.00 shall
bear interest  payable on demand at the Prime Rate plus four and one-half of one
percent  (4.50%) and (b) any and all outstanding  principal  balance of the Loan
not in excess of  $15,000,000.00  shall bear interest  payable at the Prime Rate
plus one-half of one percent  (0.50%) per annum (the "Interim  Interest  Rate").
The Interim Interest Rate is, during its pendency,  in lieu of the interest rate
set forth in Section 2.02 of the Loan Agreement.

         8. Interim Maturity Default Rate. If the outstanding  principal balance
of the Loan is not reduced to  $15,000,000.00  by the Interim  Maturity  Date as
required under this Amendment, Borrower shall be considered in default under the
Loan  Agreement  and, in addition to all other rights and remedies  available to
the Bank under the Loan Agreement,  the Documents, at law or equity, any and all
amounts  outstanding  under  the Loan  Agreement  shall,  without  notice,  bear
interest  payable  on  demand at the Prime  Rate  plus six and  one-half  of one
percent (6.50%)  ("Revised  Default Rate").  The Revised Default Rate is, during
its pendency,  in lieu of the default rate of interest set forth in Section 2.03
of the Loan Agreement.



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         9. Consent to Outside  Financing.  The Bank consents to the  Borrower's
guarantee  of  financing  to certain  Subsidiaries  of Borrower  from  financial
institutions  (including,  but not limited to,  insurance  companies) other than
Nomura Asset Capital Corporation in connection with certain development projects
located in New York,  New York  (Battery  Park City),  Glen Ellyn,  Illinois and
Raleigh,  North Carolina (the "Guarantees") and acknowledges that the Guarantees
shall not constitute  (a) a breach of Section  5.08(iv)(B) of the Loan Agreement
or (b) an Event of Default  under the Loan  Agreement;  provided  however,  that
prior to the  execution of any  documents  relating to the  Guarantees  and as a
condition  to the  foregoing  consent,  Borrower  shall  provide  the Bank  with
commitment letters setting forth the terms and conditions of each such financing
and the Bank shall  approve  the terms and  conditions  of each such  financing,
which approval shall be at the Bank's sole but reasonable discretion.

         10.  Further  Decrease  of  Loan  Commitment.  As of the  date  of this
Amendment,  the Loan  Agreement and Documents are hereby amended and restated to
provide that if at any time that any portion of the loan remains outstanding and
the closing price of Borrower's publicly traded shares of stock as quoted on the
NASDAQ (the  "Stock  Price")  (the date of the  occurrence  described  herein is
hereafter referred to as the "Trigger Date") is:

                  a. Less than  $14.00  per share but not less than  $12.50  per
         share, the principal amount of the Loan and the Maximum  Revolving Loan
         Commitment   shall,   without   further   notice,   be   decreased   to
         $10,000,000.00  and  Borrower  shall pay within one business day of the
         Trigger Date,  without further notice or demand,  amounts  necessary to
         reduce the outstanding principal balance of the Loan to $10,000,000.00.

                  b. Less than  $12.50 per share but not less than  $10.00,  the
         principal amount of the Loan and the Maximum  Revolving Loan Commitment
         shall,  without  further  notice,  be  decreased to  $5,000,000.00  and
         Borrower  shall pay within one  business day of Trigger  Date,  without
         further notice or demand,  amounts  necessary to reduce the outstanding
         principal balance of the Loan to $5,000,000.00.

                  c. Less than  $10.00 per share,  the  principal  amount of the
         Loan and the Maximum Revolving Loan Commitment  shall,  without further
         notice,  be  decreased  to $0.00  and  Borrower  shall pay  within  one
         business day of Trigger Date, without further notice or demand, amounts
         necessary to reduce the  outstanding  principal  balance of the Loan to
         $0.00. If any amount of the outstanding  principal  balance of the Loan
         is comprised of LC Reserves,  Borrower shall provide the Bank with cash
         collateral in an amount equal to the  outstanding  LC Reserve to secure
         the amount of the  outstanding  principal  balance  comprised of the LC
         Reserve.

If  the  outstanding  principal  balance  of the  Loan  is  not  reduced  to the
applicable  amount by the close of the next business day  immediately  following
the Trigger Date or if Borrower fails to provide the Bank with  sufficient  cash
collateral as required in subsection (c) herein, Borrower shall be considered in
default  under the Loan  Agreement  and,  in  addition  to all other  rights and
remedies available to the Bank under the Loan Agreement,  the Documents,  at law
or equity,  any and all  amounts  outstanding  under the Loan  Agreement  shall,
without  notice,  bear  interest  payable on demand at (i) the  default  rate of
interest set forth in Section 2.03 of the Loan Agreement if the event of default
set forth  herein  occurs  after the Interim  Maturity  Date or (ii) the Revised
Default Rate if the event of default set forth herein  occurs before the Interim
Maturity Date.

         11.  NASDAQ  Registration.  If at any time that any portion of the loan
remains  outstanding and Borrower's  publicly traded shares of stock cease to be
quoted on the NASDAQ,  Borrower  shall be  considered to be in default under the
Loan Agreement.



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<PAGE>



         12. Information. Borrower shall provide Bank, upon request, with copies
of all  documentation  and information  concerning the Subordinated Note and the
outside financing referred to in this Amendment.

         13. Reaffirmation.  To the extent any term(s) or condition(s) in any of
the Documents  (including,  without  limitation,  the Amended and Restated Note)
shall  contradict  or be in conflict  with the amended  terms of the Loan as set
forth herein,  such terms and conditions are hereby deemed  modified and amended
accordingly, upon the effective date hereof, to reflect the terms of the Loan as
so amended herein. All terms of the Documents  (including,  without  limitation,
the Amended and Restated Note),  as amended hereby,  shall be and remain in full
force and effect and shall constitute the legal, valid,  binding and enforceable
obligations of Borrower to the Bank. As of the date of this Amendment,  Borrower
herein  restates,  ratifies and reaffirms  each and every term and condition set
forth in the  Documents  as amended  herein.  There are no other  changes to the
Documents except for the changes specifically set forth herein.

         14.  Certification.  To  further  induce  the Bank to enter  into  this
Amendment, Borrower represents and warrants to the Bank as follows: (a) Borrower
is empowered to perform all acts and things undertaken and done pursuant to this
Amendment and has taken all corporate or other action necessary to authorize the
execution,  delivery and performance of the of this Amendment; (b) the officers
of Borrower  executing  this  Amendment  have been duly elected or appointed and
have been fully  authorized to execute the same at the time  executed;  (c) this
Amendment,  when executed and  delivered,  will be the legal,  valid and binding
obligation of Borrower, enforceable against it in accordance with its respective
terms; and (d) Borrower is delivering to the Bank contemporaneously  herewith, a
certificate  of Borrower's  Secretary  certifying as to the  resolutions  of the
Executive  Committee of Borrower's  Board of Directors  approving this Amendment
and the  incumbency  and  signatures  of the  officers of Borrower  signing this
Amendment.

         15.  Absence Of Claim.  To  further  induce the Bank to enter into this
Amendment,  Borrower hereby acknowledges and agrees that, as of the date hereof,
there exists no right of offset, defense,  counterclaim or objection in favor of
Borrower as against the Bank with respect to the Obligations to the Bank.

         16.  Illinois  Law To  Govern.  This  Amendment  and  each  transaction
contemplated  hereunder  shall be deemed to be made under and shall be construed
and interpreted in accordance with the laws of the State of Illinois.

         17.  Binding  Effect.  The terms,  provisions  and  conditions  of this
Amendment  shall be binding  upon and inure to the  benefit  of each  respective
party and their respective legal representatives, successors and assigns.



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<PAGE>


         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized,  as of the date
first above written.

                                       BORROWER:

                                       BROOKDALE LIVING COMMUNITIES, INC.



                                    By: /s/ Robert J. Rudnik
                                    Print Name:  Robert J. Rudnik
                                    Title:  Executive Vice President   

ATTEST:

By: /s/ R. Stanley Young
Print Name:  R. Stanley Young
Title:  Senior Vice President      


                                       BANK:

                                       LaSALLE NATIONAL BANK



                                    By:  /s/  Ann B. O'Shaughnessy          
                                    Print Name:  Ann B. O'Shaughnessy      
                                    Title:  Assistant Vice President     


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