UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934, for the Quarterly Period ended June 30, 2000.

                                       or

[ ]  Transition  Report  Pursuant  to  Section  13 or  15(d)  of the  Securities
     Exchange Act of 1934, for the Transition Period from ________ to _________.

Commission File Number       0-22253
                             -------

                       BROOKDALE LIVING COMMUNITIES, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

         DELAWARE                                        36-4103821
------------------------------------        ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
        incorporation)

330 North Wabash Avenue, Suite 1400
         Chicago, IL                                         60611
------------------------------------        ------------------------------------
    (Address of principal                                 (Zip Code)
      executive offices)

                                 (312) 977-3700
--------------------------------------------------------------------------------
                (Registrant's telephone number, including area code)

                                 Not Applicable
--------------------------------------------------------------------------------
                  (Former  name,  former  address,   or  former
                    fiscal year, if changed since last report)

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 the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

As of August 11, 2000,  9,926,549 shares (not including 1,724,800 shares held in
the Company's  treasury) of the registrant's  Common Stock,  $0.01 par value per
share, were outstanding.




<PAGE>
<TABLE>
<CAPTION>

                                         BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

                                                              FORM 10-Q

                                                                INDEX
                                                                -----


PART I:  FINANCIAL INFORMATION                                                                                        PAGE
                                                                                                                      ----

<S>      <C>                                                                                                           <C>
ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED).                                                                               3

         Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999                                           4

         Consolidated  Statements  of  Operations  for the three  months and six months ended June
         30, 2000 and 1999                                                                                               5

         Consolidated Statements of Cash Flows for the six months ended June 30, 2000 and 1999                           6

         Notes to Consolidated Financial Statements                                                                      8

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.                         12

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.                                                    17

PART II: OTHER INFORMATION                                                                                              19

ITEM 1.  LEGAL PROCEEDINGS.                                                                                             19
ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.                                                                     19
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.                                                                               19
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.                                                           19
ITEM 5.  OTHER INFORMATION.                                                                                             19
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.                                                                              20

SIGNATURES                                                                                                              22


</TABLE>
<PAGE>



                          PART I: FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS (UNAUDITED).

          The information furnished in the accompanying  unaudited  consolidated
balance sheets, statements of operations,  and statements of cash flows reflects
all  adjustments  which are, in the opinion of management,  necessary for a fair
presentation of the aforementioned financial statements for the interim period.

          Brookdale  Living  Communities,  Inc. was incorporated on September 4,
1996 and commenced operations upon the completion of its initial public offering
on May 7, 1997.  The  consolidated  financial  statements  of  Brookdale  Living
Communities,  Inc. and its subsidiaries (the "Company") represent the results of
operations of 24 facilities  the Company  operated  during the six months period
ended June 30, 2000.

          The aforementioned  financial statements should be read in conjunction
with  the  notes  to the  consolidated  financial  statements  and  Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
consolidated  financial statements for the year ended December 31, 1999 included
in the Company's  Annual Report on Form 10-K, as filed with the  Securities  and
Exchange Commission on March 30, 2000.

                                        3

<PAGE>
<TABLE>
<CAPTION>


                                         BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

                                                     CONSOLIDATED BALANCE SHEETS
                                              (IN THOUSANDS, EXCEPT PAR VALUE AMOUNTS)


                                                                              June 30, 2000      December 31, 1999
                                                                              -------------      -----------------
                                                                               (unaudited)            (audited)

<S>                                                                          <C>                  <C>
ASSETS
Cash and cash equivalents..............................................      $         788        $         638
Short-term investments.................................................                  -               12,505
Accounts receivable....................................................              1,022                1,188
Notes receivable.......................................................              5,546                5,147
Reimbursable development costs.........................................             24,454               10,958
Prepaid expenses and other.............................................              5,249                4,456
                                                                             -------------        -------------
      Total current assets.............................................             37,059               34,892
                                                                             -------------        -------------

Property, plant and equipment..........................................            144,272              139,323
Accumulated depreciation...............................................            (12,754)             (10,472)
                                                                             -------------        -------------
      Property, plant and equipment, net...............................            131,518              128,851
                                                                             -------------        -------------

Property under development.............................................             27,259               13,401
Cash and investments - restricted......................................              9,229                9,835
Investment certificates - restricted...................................             38,876               35,637
Lease security deposits................................................             93,101               92,735
Other, net.............................................................             28,361               24,854
                                                                             -------------        -------------
      Total assets.....................................................      $     365,403        $     340,205
                                                                             =============        =============

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Current portion of long-term debt......................................      $         123        $         118
Current portion of deferred gain on sale of property...................                806                  805
Unsecured line of credit...............................................             16,000                    -
Accrued interest payable...............................................                547                  413
Accounts payable and accrued expenses..................................             17,266               12,251
Tenant refundable entrance fees and security deposits..................              7,463                7,648
Other..................................................................                605                  574
                                                                             -------------        -------------
      Total current liabilities........................................             42,810               21,809
                                                                             -------------        -------------

Long-term debt, less current portion...................................            102,322               98,947
Convertible subordinated notes.........................................            100,000              100,000
Deferred lease liability...............................................              2,584                2,885
Deferred gain on sale of property, less current portion................             14,908               15,311
Deferred income taxes..................................................              7,357                4,927
                                                                             -------------        -------------
      Total liabilities................................................            269,981              243,879
                                                                             -------------        -------------

STOCKHOLDERS' EQUITY
Preferred  stock,  $.01 par value,  20,000  shares  authorized,  none
    issued.............................................................                  -                    -
Common stock, $.01 par value,  75,000 shares  authorized,  11,651 and
    11,575 shares issued and outstanding at June 30, 2000 and
    December 31, 1999, respectively....................................                116                  116
Additional paid-in-capital.............................................             95,056               94,134
Accumulated earnings...................................................             22,605               18,224
Treasury stock, 1,725 and 1,266 common shares, respectively, at cost...            (22,355)             (16,148)
                                                                             -------------        -------------
      Total stockholders' equity.......................................             95,422               96,326
                                                                             -------------        -------------
      Total liabilities and stockholders' equity.......................      $     365,403        $     340,205
                                                                             =============        =============


See accompanying notes to consolidated financial statements.
</TABLE>

                                       4

<PAGE>

<TABLE>
<CAPTION>

                                         BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

                                                CONSOLIDATED STATEMENTS OF OPERATIONS
                                              (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                                             (UNAUDITED)


                                                                 Three months ended June 30,     Six months ended June 30,
                                                                -----------------------------    -------------------------
                                                                     2000              1999        2000           1999
                                                                  ----------        ---------    ---------      ---------

<S>                                                             <C>                 <C>          <C>            <C>
REVENUE
Resident fees.............................................      $    27,291         $  24,410    $  54,726      $  48,188
Development fees..........................................            1,638             1,635        3,284          3,301
Management fees...........................................              184                72          391            145
                                                                -----------         ---------    ---------      ---------
       Total revenue......................................           29,113            26,117       58,401         51,634
                                                                -----------         ---------    ---------      ---------

EXPENSES
Facility operating........................................           15,832            12,896       30,722         25,688
General and administrative................................            1,954             1,277        3,449          2,435
Lease expense.............................................            6,970             6,358       13,782         12,646
Depreciation and amortization.............................            1,824             1,320        3,513          2,682
Merger costs..............................................              684                 -          684              -
Write-off of deferred financing costs.....................                -               273            -            273
                                                                -----------         ---------    ---------      ---------
       Total operating expenses...........................           27,264            22,124       52,150         43,724
                                                                -----------         ---------    ---------      ---------
       Income from operations.............................            1,849             3,993        6,251          7,910
Interest income...........................................            2,602             1,943        5,287          3,489
Interest expense..........................................           (2,468)           (1,788)      (4,685)        (2,915)
                                                                -----------         ---------    ---------      ---------
       Income before income tax expense...................            1,983             4,148        6,853          8,484
Income tax expense........................................             (690)           (1,508)      (2,472)        (3,087)
                                                                -----------         ---------    ---------      ---------

       Net income.........................................      $     1,293         $   2,640    $   4,381      $   5,397
                                                                ===========         =========    =========      =========

Basic earnings per common share...........................      $      0.13         $    0.23    $    0.44      $    0.47
                                                                ===========         =========    =========      =========

Weighted average shares used for computing
    basic earnings per common share.......................            9,887            11,572        9,935         11,572
                                                                ===========         =========    =========      =========

Diluted earnings per common share.........................      $      0.13         $    0.22    $    0.41      $    0.45
                                                                ===========         =========    =========      =========

Weighted average shares used for computing
    diluted earnings per common share.....................            9,921            14,499       15,452         13,120
                                                                ===========         =========    =========      =========


See accompanying notes to consolidated financial statements.
</TABLE>

                                       5

<PAGE>

<TABLE>
<CAPTION>

                                         BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

                                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                           (IN THOUSANDS)
                                                             (UNAUDITED)


                                                                                       Six months ended June 30,
                                                                                    ----------------------------
                                                                                      2000                  1999
                                                                                   ----------            ----------

<S>                                                                             <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income..............................................................    $       4,381       $        5,397
    Adjustments to reconcile net income to net cash
    provided by operating activities:
       Depreciation and amortization........................................            3,513                2,682
       Write-off of deferred financing costs................................                -                  273
       Deferred income taxes................................................            2,430                2,787
       Change in deferred lease liability...................................             (301)                 227
       Deferred gain on sale of property....................................             (403)                (402)
       Changes in:
          Accounts receivable...............................................              166                 (387)
          Prepaid expenses and other........................................           (4,451)              (6,213)
          Accrued interest payable..........................................              134                 (595)
          Accounts payable and accrued expenses and other...................            5,046                2,579
          Tenant refundable entrance fees and security deposits.............             (185)                 128
                                                                                -------------       --------------
              Net cash provided by operating activities.....................           10,330                6,476
                                                                                -------------       --------------

CASH FLOWS FROM INVESTING ACTIVITIES
    (Increase) in lease security deposits and acquisitions..................             (366)             (11,295)
    Decrease (increase) in cash and investments - restricted................              606                 (579)
    (Increase) in investment certificates - restricted......................           (3,239)              (4,851)
    Proceeds from sale of property under development, net...................                -                  300
    Property under development, net of related payables ....................          (13,858)              (8,048)
    (Increase) decrease in notes receivable.................................             (399)               1,903
    Purchases of short-term investments.....................................          (19,002)             (55,000)
    Sales of short-term investments.........................................           31,507                    -
    Additions to property, plant and equipment and
       reimbursable development costs, net of related
       accounts payable.....................................................          (19,008)              (4,976)
                                                                                -------------       --------------
              Net cash (used in) investing activities.......................          (23,759)             (82,546)
                                                                                -------------       --------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Repayment of long-term debt.............................................              (58)              (3,151)
    Proceeds from long-term debt............................................            3,438                    -
    Proceeds from unsecured lines of credit.................................           29,000               31,933
    Repayment of unsecured lines of credit..................................          (13,000)             (42,930)
    Proceeds from issuance of convertible subordinated notes, net of costs..                -               94,294
    Increase in letter of credit deposits, net..............................                -               13,919
    Payment of financing costs..............................................             (516)              (1,500)
    Proceeds from issuance of common stock..................................              922                    -
    Purchases of treasury stock.............................................           (6,207)                   -
                                                                                -------------       --------------
              Net cash provided by financing activities.....................           13,579               92,565
                                                                                -------------       --------------

              Net increase in cash and cash equivalents.....................              150               16,495
              Cash and cash equivalents at beginning of period..............              638                1,065
                                                                                -------------       --------------
              Cash and cash equivalents at end of period....................    $         788       $       17,560
                                                                                =============       ==============



See accompanying notes to consolidated financial statements.

</TABLE>

                                        6
<PAGE>

<TABLE>
<CAPTION>


                                         BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

                                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                           (IN THOUSANDS)
                                                             (UNAUDITED)



                                                                                     Six months ended June 30,
                                                                                ----------------------------------
                                                                                    2000                 1999
                                                                                -------------        -------------

<S>                                                                             <C>                  <C>
Supplemental Disclosure of Cash Flow Information:

Interest paid, net of amounts capitalized.............................          $       4,609        $       3,510
                                                                                =============        =============

Income taxes paid.....................................................          $          90        $         486
                                                                                =============        =============

Supplemental  Schedule  of Noncash  Investing
and Financing Activities:

In connection  with property  acquisitions  and net lease  transactions,
assets acquired and liabilities assumed were as follows:
     Fair value of assets acquired....................................          $           -      $        11,404
     Less - cash consideration paid...................................                      -               10,911
                                                                                -------------      ---------------

     Liabilities assumed..............................................          $           -      $           493
                                                                                =============      ===============



See accompanying notes to consolidated financial statements.
</TABLE>

                                       7

<PAGE>

               BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (IN THOUSANDS, EXCEPT PER SHARE, UNITS AND SQUARE FOOT AMOUNTS)
                                   (UNAUDITED)

1.   ORGANIZATION

     Brookdale  Living  Communities,   Inc.  was  incorporated  in  Delaware  on
September 4, 1996 and commenced  operations  upon the  completion of the initial
public offering of its common stock on May 7, 1997.

     The consolidated financial statements of Brookdale Living Communities, Inc.
and its subsidiaries  (the "Company")  include the properties owned or leased by
the Company.  The Company operates in the senior independent and assisted living
segment.  The  properties  owned,  leased or  managed  by the  Company  or under
construction  as of June 30, 2000 are located  throughout  the United  States as
indicated on the following table:

<TABLE>
<CAPTION>

Property Name                                        Date Owned or Leased       Location
-------------                                        --------------------       --------

Owned Facilities:
-----------------
<S>                                                  <C>                        <C>
The Heritage of Des Plaines                          May 7, 1997                Des Plaines, IL
The Devonshire                                       May 7, 1997                Lisle, IL
Hawthorn Lakes (1)                                   May 7, 1997                Vernon Hills, IL
Edina Park Plaza                                     May 7, 1997                Edina, MN

Leased Facilities:
------------------
The Hallmark                                         May 7, 1997                Chicago, IL
The Springs of East Mesa                             May 7, 1997                Mesa, AZ
The Gables at Brighton                               May 7, 1997                Rochester, NY
The Park Place                                       May 7, 1997                Spokane, WA
The Gables at Farmington                             November 24, 1997          Farmington, CT
The Classic at West Palm Beach                       December 18, 1997          West Palm Beach, FL
The Brendenwood Retirement Community                 December 22, 1997          Voorhees, NJ
Kenwood of Lake View (formerly Harbor Village)       March 6, 1998              Chicago, IL
The Atrium of San Jose                               May 12, 1998               San Jose, CA
Chatfield                                            July 2, 1998               West Hartford, CT
Ponce de Leon                                        October 21, 1998           Santa Fe, NM
Woodside Terrace                                     December 22, 1998          Redwood City, CA
River Bay Club                                       January 19, 1999           Quincy, MA
Berkshire of Castleton (formerly Oakleaf Village)    September 14, 1999         Indianapolis, IN
Devonshire (formerly Benchmark) of Hoffman Estates   December 22, 1999          Hoffman Estates, IL

Managed Facilities:
-------------------
The Island on Lake Travis                                                       Lago Vista, TX
The Kenwood                                                                     Minneapolis, MN
Heritage at Gaines Ranch (2)                                                    Austin, TX
Heritage at Southfield (2)                                                      Southfield, MI
The Meadows of Glen Ellyn (2)                                                   Glen Ellyn, IL

Development Projects Under Construction (3):
--------------------------------------------
Raleigh, North Carolina
New York (Battery Park City), New York
Pittsburgh (Mount Lebanon), Pennsylvania
Columbus, Ohio
Creve Coeur (St. Louis), Missouri


(1) The Willows, a 54-unit assisted living addition to the Hawthorn Lakes facility, commenced operations in July 1999.
(2) These projects were developed by the Company and are being managed by the Company for third party owners.
(3) The Company is developing these projects for third party owners.
</TABLE>

                                       8
<PAGE>

              BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     BASIS OF PRESENTATION

     The  accompanying  unaudited  financial  statements  have been  prepared in
accordance with accounting  principles  generally  accepted in the United States
for interim  financial  information  and with the  instructions to Form 10-Q and
Article  10 of  Regulation  S-X.  Accordingly,  they do not  include  all of the
information and footnotes required by accounting  principles  generally accepted
in the United  States  for  complete  financial  statements.  In the  opinion of
management,  all adjustments  considered  necessary for a fair presentation have
been included.  Operating  results for such interim  periods are not necessarily
indicative  of the results  that may be expected  for a full  fiscal  year.  For
further information regarding significant  accounting policies,  please refer to
the financial statements and footnotes thereto for the period ended December 31,
1999  included in the  Company's  Annual  Report on Form 10-K, as filed with the
Securities and Exchange Commission (the "SEC") on March 30, 2000.

     Principles of Consolidation

     The consolidated  financial  statements include the financial statements of
Brookdale  Living  Communities,  Inc.  and its  wholly-owned  subsidiaries.  All
significant  intercompany  balances and  transactions  have been  eliminated  in
consolidation.

     Use of Estimates

     The preparation of the consolidated financial statements in accordance with
generally accepted  accounting  principles requires management to make estimates
and  assumptions  that affect  amounts  reported in the  consolidated  financial
statements  and  accompanying  notes.  Actual  results  could  differ from these
estimates.

     Development Fees

     Development  fees related to  development  activities for projects owned by
third  parties  are  earned  over the  term of the  development.  Such  fees are
recognized  as revenues as the  development  services  are provided to the owner
during the pre-construction and construction periods.

     Reclassifications

     Certain  prior period  amounts have been  reclassified  to conform with the
current financial statement presentation.

3.   RECENT DEVELOPMENTS

     On May 18, 2000, The Prime Group, Inc. ("Prime"), certain of its affiliates
and Michael W. Reschke,  the former Chairman of the Board of the Company and the
principal shareholder of Prime, sold 4,004 shares of the Company's common stock,
representing  approximately  40.3% of the  Company's  outstanding  shares,  in a
privately  negotiated   transaction  to  an  affiliate  of  Fortress  Registered
Investment Trust  ("Fortress"),  for an aggregate purchase price of $60,065,  or
$15 per share.  In  connection  with and pursuant to the terms of the sale,  Mr.
Reschke  resigned from the Company's board of directors,  (the "Company  Board")
and from his  executive  office of the Company,  and two of Fortress'  designees
were elected to the Company Board to fill the vacancy  created by Mr.  Reschke's
resignation and to fill the then existing vacancy on the Company Board.

     The transaction  was approved by the Committee of Independent  Directors of
the Company Board (the  "Independent  Committee")  based on, among other things,
the execution of a standstill  agreement by Fortress.  The standstill  agreement
provides  that  Fortress  may not  acquire  during  the  term of the  standstill
agreement  additional  Company common stock or engage in other activity designed
to acquire control of the Company,  except in the context of a cash tender offer
for all of the  Company's  shares at a price not less than $15 per share,  which
could not occur without the Company  Board's  consent prior to July 5, 2000. The
standstill  agreement  terminates on May 14, 2002, but may terminate  earlier if
Fortress  acquires a majority of the Company's  common stock  pursuant to a cash
tender  offer for all of the  Company's  shares at a price not less than $15 per
share,  which tender offer could not be commenced  prior to July 5, 2000 without
the Company Board's consent. (See Note 7)

     On April 24, 2000,  the Company  obtained a $9,000  construction  loan,  of
which $3,438 was drawn at June 30, 2000,  secured by the 82-unit skilled nursing
addition to The Devonshire facility located in Lisle,  Illinois.  The loan bears
interest  at  the  prime  rate  minus  one-half  percent,   payable  in  monthly
installments of interest only, and matures on March 31, 2003.  Brookdale  Living
Communities, Inc. has a guaranteed reimbursement obligation under the loan until
the skilled nursing facility meets certain performance requirements.

     On June 23, 2000, the Company sold certain  development rights to a site in
Alexandria,  Virginia to an unaffiliated  third party. The sales price was $614,
of which $215 was  received in cash and $399 was  received by the  delivery of a
promissory  note  bearing  interest at 12%.  The Company  will  develop the site
pursuant to a development agreement with such unaffiliated third party.

                                       9

<PAGE>

              BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

     On September 8, 1999, the Company Board  authorized the Company to purchase
up to 2,000 shares of its common stock.  Total shares repurchased by the Company
as of June 30, 2000 were 1,725  shares,  of which 1,600 shares were  repurchased
pursuant to the Company Board authorized program.

     The Company has entered into  interest  rate lock  agreements  on behalf of
third party owners of  development  projects  with respect to interest  rates on
floating  rate  construction  debt.  The  agreements  are  designed to limit the
exposure to movements in floating interest rates on the development construction
project  loans,  and the Company is to be  reimbursed by the third party for any
payments  made  pursuant  to  the   agreements.   The  notional  amount  of  the
construction  loans being hedged is $53,500,  and the approximate  fair value of
such hedging contracts was $739 at June 30, 2000.

     In connection with the replacement credit  enhancements  obtained to secure
the payment of principal and interest on the $65,000 of tax-exempt bonds secured
by The  Devonshire and The Heritage of Des Plaines and the $15,040 of tax exempt
bonds secured by Edina Park Plaza, the Company  purchased $65,000 and $15,040 of
interest rate caps,  with a strike price of 6.35% and 6.58%, a fair value of $96
and $25 at June 30, 2000 and an expiration  date of June 1, 2004 and December 1,
2004,  respectively.  The Company's  reimbursement  obligations are non-recourse
obligations secured by mortgages on the facilities; provided, however, Brookdale
Living  Communities,  Inc. has a  guaranteed  reimbursement  obligation  for The
Devonshire  and The  Heritage  of Des  Plaines  facilities  which is  limited to
$4,000.

4.   INCOME TAXES

     Income tax expense  differs from the amounts  computed by applying the U.S.
federal  income tax rate of 34% to income before income tax expense  principally
as a  result  of  non-taxable  amortization  of the  deferred  gain on sale of a
property and state income taxes.

5.   EARNINGS PER SHARE

     The  following  table  sets  forth the  computation  of basic  and  diluted
earnings per share for the three and six months ended June 30, 2000 and 1999:

<TABLE>
<CAPTION>

                                                            Three months ended June 30,     Six months ended June 30,
                                                            ---------------------------     -------------------------
                                                               2000           1999             2000         1999
                                                            -----------    ---------        ---------     ---------

       <S>                                                    <C>          <C>               <C>          <C>
       Numerator:
       Numerator for basic earnings per common share        $     1,293    $   2,640        $   4,381     $   5,397
       Interest expense on convertible
           subordinated notes, net of tax                             -          480            1,883           480
                                                            -----------    ---------        ---------     ---------
       Numerator for diluted earnings per share             $     1,293    $   3,120        $   6,264     $   5,877
                                                            ===========    =========        =========     =========

       Denominator:
        Denominator for basic earnings per common share -
           weighted-average shares                                9,887       11,572            9,935        11,572
        Effect of dilutive securities:
           Employee stock options                                    34           97               38           125
           Warrants                                                   -            -                -             -
           Convertible subordinated notes                             -        2,830            5,479         1,423
                                                            -----------    ---------        ---------     ---------
         Denominator for diluted earnings per common
            share-adjusted weighted-average shares
            and assumed conversions                               9,921       14,499           15,452        13,120
                                                            ===========    =========        =========     =========

       Basic earnings per common share                      $      0.13    $    0.23        $    0.44     $    0.47
                                                            ===========    =========        =========     =========

       Diluted earnings per common share                    $      0.13    $    0.22        $    0.41     $    0.45
                                                            ===========    =========        =========     =========
</TABLE>

     Common shares issuable upon the conversion of the convertible  subordinated
notes have been  excluded from the  computation  for the three months ended June
30, 2000, because the effect of their inclusion would be anti-dilutive.

6.   PRO FORMA INFORMATION

     The following unaudited pro forma condensed and consolidated  statements of
operations  are  not  necessarily  indicative  of what  the  actual  results  of
operations of the Company would have been assuming the Company had leased all of
the Leased Facilities,  issued 11,651 shares, purchased 1,725 shares of treasury
stock  and  issued  $100,000  of  5.5%  convertible  subordinated  notes  at the
beginning of each period presented, nor do they purport to represent the results
of operations of the Company for future periods.

                                       10

<PAGE>

              BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIAIRES

<TABLE>
<CAPTION>

                                                      Six months ended June 30,         Three months ended June 30,
                                                      -------------------------         --------------------------
                                                         2000           1999               2000           1999
                                                      ---------      ---------          ----------      ---------

         <S>                                          <C>            <C>                <C>             <C>
         Revenue                                      $  58,401      $  56,591          $   29,113      $  28,748
         Net income                                       4,381          5,522               1,293          2,582
         Basic earnings per share                          0.44           0.56                0.13           0.26
         Diluted earnings per share                        0.34           0.41                0.13           0.19

</TABLE>

     The pro forma  information  does not include  interest  income on available
cash from the proceeds of the 5.5% convertible  subordinated notes. Also, common
shares issuable upon the conversion of the convertible  subordinated  notes have
been  excluded  from the  computation  for the three months ended June 30, 2000,
because the effect of their inclusion would be anti-dilutive.

7.   SUBSEQUENT EVENTS

     On July 26,  2000,  the  Company  signed  a  definitive  agreement  with an
affiliate of Senior Housing  Properties  Trust to purchase four  facilities that
the Company  currently leases and operates  pursuant to a master lease agreement
for  $123,000.  The  facilities  consist of The  Hallmark,  located in  Chicago,
Illinois,  The  Springs of East Mesa,  located in Mesa,  Arizona,  The Gables of
Brighton,  located in Brighton,  New York,  and Park Place,  located in Spokane,
Washington.  On July 31, 2000,  the Company made a $12,300  earnest money escrow
deposit,  creditable  against the purchase price. The purchase must be completed
by October 31, 2000.

     On July 26, 2000, the Company,  Fortress,  Fortress  Brookdale  Acquisition
LLC, a Delaware  limited  liability  company  ("Purchaser"),  owned by Fortress,
Health Partners,  a Bermuda exempted partnership ("Health Partners") and certain
of  their  respective   affiliates,   and  FBZ  Acquisition  Corp.,  a  Delaware
Corporation and wholly-owned subsidiary of Purchaser, (Acquisition Sub"), signed
a definitive  merger  agreement,  which  provides that Purchaser will commence a
cash tender offer for all of the  Company's  outstanding  shares of common stock
not already  owned by Purchaser  for a net  purchase  price of $15.25 per share.
Health  Partners  also agreed to  contribute  to  Purchaser  its  $100,000  5.5%
convertible  subordinated  note  due  2009  issued  by  the  Company,  which  is
convertible into 5,479 shares of the Company's common stock.

     The all-cash  transaction,  which is  structured as a $15.25 per share cash
tender offer  followed by a second-step  merger of the Company with  Acquisition
Sub, is valued at  approximately  $91,000,  excluding  shares  already  owned by
Purchaser.  The tender offer  commenced  on August 1, 2000 and will  conclude on
September 5, 2000, unless extended.  The Company has approximately  9,927 shares
of common  stock  outstanding,  including  approximately  4,004  shares owned by
Purchaser.  The Company Board,  acting upon the unanimous  recommendation of the
Independent  Committee,  has  recommended  that the  stockholders of the Company
(other than Purchaser and its  affiliates)  tender their shares  pursuant to the
tender  offer.  The  Independent  Committee  and the Company  Board  received an
opinion from Merrill Lynch, Pierce, Fenner & Smith Incorporated, the Independent
Committee's  financial advisor, to the effect that the $15.25 per share price in
the  tender  offer and the  merger is fair to the  stockholders  of the  Company
(other than Purchaser and its affiliates) from a financial point of view.

     The  tender  offer  and  merger  will  be  subject  to  certain   customary
conditions; however, the tender offer is not subject to a financing condition or
a condition  that any minimum  number of shares be tendered.  In  addition,  the
waiting period under the  Hart-Scott-Rodino Act was satisfied in connection with
Purchaser's initial purchase of the Company's common stock in May 2000.

     Purchaser  will be paid an  expense  reimbursement  payment  of $750 in the
event that the Independent  Committee receives a higher offer from a third party
and accepts that offer pursuant to the exercise of its fiduciary  duties.  Other
than the expense reimbursement  payment, no other "break-up" or "commitment" fee
would be payable in such event.

     For more information  concerning the tender offer and the merger,  refer to
the  Company's  Solicitation/Recommendation  Statement  on  Schedule  14D-9  and
Purchaser's  Tender Offer Statement on Schedule TO, in each case, as amended and
initially filed with the SEC on August 1, 2000.

     In 1998,  the  Company  established  a $100,000  credit  facility  with The
Capital  Company  of  America  LLC (the  successor-in-interest  to Nomura  Asset
Capital  Corporation)  (the  "Lender")  pursuant  to which the Lender  agreed to
provide  financing of up to an  aggregate of $100,000 for projects  developed by
the Company  for third  parties.  In 1998,  an  aggregate  $51,000 of the credit
facility was committed to the Austin, Texas and Southfield, Michigan development
projects,  both of which opened in August 1999.  On August 4, 2000,  the Company
and the Lender  amended the credit  facility and the loans made  thereunder.  In
general,  the  amendment  provides  a  $26,000  construction  loan to  fund  the
Pittsburgh (Mount Lebanon),  Pennsylvania development project being developed by
the Company for a third party, no further obligation of the Lender to fund under
the  credit  facility,  elimination  of the  Lender's  obligation  to  fund  the
permanent  loans under the credit facility and elimination of the Company's loan
resizing obligation on the Austin, Texas and Southfield, Michigan loans.

                                       11

<PAGE>

              BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES


     On August 9, 2000,  the Company  agreed to increase its line of credit with
LaSalle Bank National Association from $35,000 to $45,000.


ITEM 2.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
          RESULTS OF OPERATIONS (DOLLARS AND SHARE AMOUNTS IN THOUSANDS).

    The following  discussion is based on and should be read in conjunction with
the  Consolidated  Financial  Statements  of the Company as of June 30, 2000 and
December  31, 1999 and for the six months and three  months  ended June 30, 2000
and 1999, including the related notes, and other information appearing elsewhere
in this Form 10-Q. Historical results and any apparent percentage  relationships
with respect thereto are not necessarily indicative of future operations.

CAUTIONARY STATEMENTS

     This quarterly  report on Form 10-Q contains  "forward-looking  statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. When
used in this report, the words "believes," "expects," "anticipates," "estimates"
and  similar  words  and   expressions   are  generally   intended  to  identify
forward-looking  statements.  Statements  that  describe  the  Company's  future
strategic  plans,  goals  or  objectives  are also  forward-looking  statements.
Readers  of this  report  are  cautioned  that any  forward-looking  statements,
including  those  regarding the intent,  belief or current  expectations  of the
Company or  management,  are not  guarantees of future  performance,  results or
events and involve risks and  uncertainties  and that actual  results and events
may differ materially from those in the  forward-looking  statements as a result
of various factors, including, but not limited to:

     -    general  economic  conditions  in the  markets  in which  the  Company
          operates;
     -    competitive  pressures within the industry or the markets in which the
          Company operates;
     -    the  successful  completion  of the  acquisition  of facilities by the
          Company,  the  successful  completion of development  activities,  the
          successful   integration  of  newly  acquired,   leased  or  developed
          facilities with the operations of the Company's  existing  facilities,
          fluctuations in operating  results or occupancy  levels in the markets
          in which the Company competes, or unanticipated changes in expenses or
          capital expenditures;
     -    the  effect  of  future  legislation  or  regulatory  changes  on  the
          Company's operations; and
     -    other factors  described  from time to time in the  Company's  filings
          with the Securities  and Exchange  Commission  (the "SEC"),  including
          this Form 10-Q and the Company's 1999 Annual Report on Form 10-K.

The  forward-looking  statements included in this report are made only as of the
date hereof.  Except as required by law, the Company undertakes no obligation to
update  such   forward-looking   statements  to  reflect  subsequent  events  or
circumstances.

OVERVIEW

     The Company  provides  independent  and assisted living services to seniors
through  its  owned,  leased or managed  facilities.  As of June 30,  2000,  the
Company operated 24 senior independent and assisted living facilities containing
a total of approximately  5,328 units. Four facilities are owned by the Company,
15  facilities  are leased by the  Company and 5  facilities  are managed by the
Company pursuant to management  contracts.  The Company's senior independent and
assisted living facilities offer residents a supportive,  "home-like" setting as
well as assistance  with  activities of daily living.  By providing  residents a
range of service  options as their needs  change,  the Company  seeks to achieve
greater  continuity  of care,  enabling  senior  residents to  age-in-place  and
thereby  maintain  their stay for a longer  time  period.  The  ability to allow
residents to  age-in-place  is beneficial to the Company's  residents as well as
their families who are burdened with care decisions for their elderly relatives.

     The Company derives its revenues from resident fees,  development  fees and
management fees.  Resident fees consist of charges for leasing units,  providing
basic care  services  and, in certain  instances,  providing  supplemental  care
services to residents. Basic care services generally include meals, housekeeping
services  within  the  resident  units,  social  and  recreational   activities,
scheduled  transportation to medical centers and shopping,  security,  emergency
call response, and access to on-site medical education and wellness programs. In
addition to basic care services, the Company offers custom tailored supplemental
care  services  for  residents  who  desire  or  need  such  services.  Optional
supplemental  care services include  check-in  services and escort and companion
services,  and,  depending on the  particular  facility and as dictated by state
licensing requirements,  the Company also provides assistance with activities of
daily living, such as dressing, bathing, eating and medication administration or
reminders.  The  Company  may  expand its  supplemental  service  offerings,  as
permitted  by  applicable  state  licensing  requirements,  in order to  capture
incremental revenue and enable its residents to remain in its facilities longer.
Resident fees  typically are paid monthly by residents,  their families or other
responsible  parties. As of June 30, 2000, over 99% of the Company's revenue was
derived from private pay sources.

     The Company derives  additional  revenue from  development  fees associated
with  developing   senior   independent  and  assisted  living   facilities  for
unaffiliated  third parties and management fees for managing senior  independent
and assisted living facilities

                                       12

<PAGE>

               BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

pursuant to management  contracts.  Management fees typically range from 3.0% to
5.0% of a managed  facility's  total  gross  revenues.  Fees are  recognized  as
revenues when services are rendered.

     The  Company   classifies   its  operating   expenses  into  the  following
categories:  (i) facility operating  expenses,  which include facility personnel
payroll and related costs, food,  marketing,  other direct facility expenses and
real estate taxes;  (ii) general and  administrative  expenses,  which primarily
include  corporate and other  overhead  costs;  (iii) lease  expenses;  and (iv)
depreciation and amortization.

COMPARISON OF SIX MONTHS ENDED JUNE 30, 2000 TO SIX MONTHS ENDED JUNE 30, 1999

     For the six months ended June 30, 2000,  results  reflect the operations of
the  Company's 24  facilities.  For the six months ended June 30, 1999,  results
reflect the operations of 19 facilities.

     Revenue.  Total revenue  increased by $6,767,  or 13.1%, to $58,401 for the
six months ended June 30, 2000,  when  compared to the six months ended June 30,
1999.  Resident fees increased by $6,538, or 13.6%, to $54,726.  Of the increase
in total  revenue,  approximately  $1,727 (or a "same  store"  increase of 3.8%)
reflects an increase in resident fees at the properties  that have been operated
during both periods,  which resulted primarily from increases in monthly charges
under  residency  agreements.  Approximately  $4,811 of such  increase  reflects
revenue  from  facilities  first  leased and managed  after June 30,  1999.  The
remaining $229 of the total revenue  increase  reflects  increased  revenue from
management  fees  associated  with  projects  being  managed by the  Company for
third party owners.

     Operating Expenses. Total operating expenses increased by $8,426, or 19.3%,
to $52,150  for the six months  ended June 30,  2000,  when  compared to the six
months ended June 30, 1999.  Facility operating expenses increased by $5,034, or
19.6%, to $30,722  primarily due to the expenses  associated with the facilities
first leased after June 30, 1999.

     General and administrative  expenses increased by $1,014, or 41.6%, for the
six months ended June 30, 2000, when compared to six months ended June 30, 1999,
primarily due to increased personnel costs in the corporate office and increased
costs associated with the Company's branding and marketing efforts.

     Lease expense  increased by $1,136,  or 9.0%, to $13,782 for the six months
ended  June 30,  2000,  when  compared  to the six months  ended June 30,  1999,
primarily due to the lease expense  associated with the facilities  first leased
after June 30, 1999.  Depreciation and amortization increased by $831, or 31.0%,
to $3,513  for the six months  ended June 30,  2000,  when  compared  to the six
months ended June 30, 1999. This increase primarily reflects the depreciation of
additional  furniture,  fixtures  and  equipment  at the  corporate  office  and
improvements at the facilities.

     During the six months ended June 30, 1999,  the Company  wrote-off  $273 of
deferred  financing costs in connection with the replacement  credit enhancement
for the $65,000 of tax-exempt  bonds secured by The  Devonshire and The Heritage
of Des Plaines facilities.

     During the six months ended June 30,  2000,  the Company  incurred  $684 of
professional fees in connection with the acquisition by an affiliate of Fortress
Registered  Investment Trust ("Fortress") of the Company's common stock owned by
The Prime  Group,  Inc.  ("Prime"),  certain of its  affiliates  and  Michael W.
Reschke,  the former  Chairman  of the Board of the  Company  and the  principal
shareholder of Prime, in May 2000.

     Interest income increased by $1,798, or 51.5%, to $5,287 for the six months
ended June 30, 2000, when compared to the six months ended June 30, 1999, due to
the  investment  of the net  proceeds  from the  issuance  of  $100,000  of 5.5%
convertible  subordinated  notes due 2009 in May 1999 and an increase in various
deposits and restricted investments.

     Interest expense  increased  $1,770, or 60.7%, to $4,685 for the six months
ended June 30, 2000, when compared to the six months ended June 30, 1999, due to
increased  borrowings  under the line of credit and the  issuance of $100,000 of
5.5% convertible subordinated notes due 2009 in May 1999.

     Net Income.  For the six months ended June 30, 2000, the Company  generated
net income of  approximately  $4,381,  as compared to a net income of $5,397 for
the six months ended June 30,  1999,  due to the changes in revenue and expenses
described above.

                                       13

<PAGE>

               BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES


COMPARISON  OF THREE  MONTHS  ENDED JUNE 30, 2000 TO THREE MONTHS ENDED JUNE 30,
1999

     For the three months ended June 30, 2000, results reflect the operations of
the Company's 24 facilities.  For the three months ended June 30, 1999,  results
reflect the operations of 19 facilities.

     Revenue.  Total revenue  increased by $2,996,  or 11.5%, to $29,113 for the
three months ended June 30, 2000,  when  compared to the three months ended June
30, 1999.  Resident  fees  increased  by $2,881,  or 11.8%,  to $27,291.  Of the
increase in total revenue, $580 (or a "same store" increase of 2.4%) reflects an
increase in resident fees at the facilities  that have been operated during both
periods,  which  resulted  primarily  from  increases in monthly  charges  under
residency  agreements.  Approximately  $2,300 of such increase  reflects revenue
from  facilities  first leased after June 30, 1999.  The  remaining  $116 of the
total revenue  increase  reflects  increased  revenue from  development fees and
management  fees for facilities  being  developed and managed by the Company for
third-party owners.

     Operating Expenses. Total operating expenses increased by $5,140, or 23.2%,
to $27,264 for the three months ended June 30, 2000,  when compared to the three
months ended June 30, 1999.  Facility operating expenses increased by $2,936, or
22.8%, to $15,832,  primarily due to the expenses associated with the facilities
first leased after June 30, 1999.

     General and  administrative  expense increased by $677, or 53.0%, to $1,954
for the three  months  ended June 30,  2000,  when  compared to the three months
ended June 30, 1999, due to increased  personnel  costs at the corporate  office
and  increased  costs  associated  with the  Company's  branding  and  marketing
efforts.

     Lease  expense  increased by $612,  or 9.6%, to $6,970 for the three months
ended June 30,  2000,  when  compared to the three  months  ended June 30, 1999,
primarily due to the lease expense  associated with the facilities  first leased
after June 30, 1999.  Depreciation and amortization increased by $504, or 38.2%,
to $1,824 for the three months ended June 30, 2000,  when  compared to the three
months ended June 30, 1999. This increase primarily reflects the depreciation of
additional  furniture,  fixtures  and  equipment  at the  corporate  office  and
improvements at the facilities.

     During the three months ended June 30, 1999, the Company  wrote-off $273 of
deferred  financing costs in connection with the replacement  credit enhancement
for the $65,000 of tax exempt bonds secured by The  Devonshire  and The Heritage
of Des Plaines facilities.

     During the three months ended June 30, 2000,  the Company  incurred $684 of
professional fees in connection with the acquisition by an affiliate of Fortress
of the  Company's  common stock owned by Prime,  certain of its  affiliates  and
Michael W.  Reschke,  the former  Chairman  of the Board of the  Company and the
principal shareholder of Prime, in May 2000.

     Interest income increased by $659, or 33.9%, to $2,602 for the three months
ended June 30, 2000,  when compared to the three months ended June 30, 1999, due
to the  investment  of the net  proceeds  from the  issuance of $100,000 of 5.5%
convertible  subordinated  notes due 2009 in May 1999 and an  increase  in lease
security deposits and investment certificates-restricted.

     Interest  expense  increased  by $680,  or 38.0%,  to $2,468  for the three
months  ended June 30,  2000,  when  compared to the three months ended June 30,
1999, due to the issuance of $100,000 of 5.5% convertible subordinated notes due
2009 and higher interest  expense,  partially offset by a decrease in borrowings
under the line of credit.

     Net Income. For the three months ended June 30, 2000, the Company generated
net income of $1,293, as compared to a net income of $2,640 for the three months
ended June 30, 1999, due to the changes in revenue and expenses described above.

LIQUIDITY AND CAPITAL RESOURCES

     Since the  commencement  of operations  by the Company on May 7, 1997,  the
Company has financed its growth from issuance of common stock,  borrowings under
lines of credit,  issuance of  convertible  subordinated  notes,  entering  into
operating leases with third parties and cash generated from the operation of the
facilities.

     At June 30, 2000, the Company had $788 in cash and cash equivalents.

     Cash and cash  equivalents  (which does not include cash and  investments -
restricted of $9,229,  investment certificates - restricted of $38,876 and lease
security  deposits of $93,101)  increased by $150 to $788 at June 30,  2000,  as
compared to December 31, 1999,  primarily due to cash  generated  from operating
activities,  increases in lease  security  deposits,  investment  certificates -
restricted,  and the line of credit,  offset by an increase  in  property  under
development, reimbursable development costs and purchase of treasury stock.

                                       14

<PAGE>

               BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

     Net cash provided by operating activities for the six months ended June 30,
2000  totaled  $10,330  as a result  of  increased  facility  operations  before
depreciation and amortization and the commencement of the lease of the Berkshire
of  Castleton  and  Devonshire  of Hoffman  Estates  facilities  first leased on
September 14, 1999 and December 22, 1999, respectively.

     Net cash used in investing  activities  totaled  $23,759 for the six months
ended June 30, 2000.  Investing  activities  included  increased  lease security
deposits  of  $366,  investment  certificates  -  restricted  of  $3,239,  notes
receivable  of $399,  cash  received  from cash and  investments - restricted of
$606, and the net sale of short term investments of $12,505, offset by cash paid
for  property  under  development  of $13,858 and an increase  in  additions  to
property, plant and equipment and reimbursable development costs of $19,008.

     Net cash  provided by financing  activities  was $13,579 for the six months
ended June 30, 2000.  Financing activities included proceeds from long-term debt
of $3,438, net proceeds from an unsecured line of credit of $16,000 and proceeds
from the  issuance  of common  stock of $922,  offset by  payments  of $6,207 to
purchase 459 shares of treasury stock and other net uses of $574.

COMPANY INDEBTEDNESS

     As of June 30, 2000 and December 31, 1999,  the Company's debt was $218,445
and $199,065, respectively. The increase is primarily attributable to borrowings
under the line of credit and proceeds  from  long-term  debt offset by principal
payments on a mortgage  note.  As of June 30, 2000 and December  31,  1999,  the
Company had $89,478  and  $86,040,  respectively,  of  variable  rate  long-term
indebtedness,  of which  $80,040  was in the form of  variable  rate  tax-exempt
bonds.  The interest rates  (exclusive of credit  enhancement and other fees) on
the  variable  rate  tax-exempt  bonds  were 4.8% and 5.5% at June 30,  2000 and
December 31, 1999,  respectively  (the average  interest rate was 4.1% and 3.4%,
for the  period  ended  June 30,  2000 and the year  ended  December  31,  1999,
respectively),  and are  subject to interest  rate caps.  The  tax-exempt  bonds
contain covenants requiring the facilities to maintain a minimum number of units
for income qualified residents.

     The  Company  established  a new line of credit in the amount of $35,000 on
August 1, 1999,  which it agreed to increase  to $45,000 on August 9, 2000,  and
has an effective  "shelf"  registration  statement that originally  provided the
Company the ability to issue up to  $200,000  of equity or debt  securities.  In
November 1998, the Company issued $33,000 of common stock,  leaving a balance of
$167,000  that the Company may issue in the future under the shelf  registration
statement. In order to achieve its growth plans, the Company will be required to
obtain a substantial  amount of additional  financing.  The Company  anticipates
that it may use a combination  of additional  equity and debt  financing,  lease
transactions  and cash generated  from  operations to fund its  acquisition  and
development activities.

ACQUISITION AND DEVELOPMENT ACTIVITIES

     The  Company  currently  plans  to  commence  development  of 3  to  4  new
facilities per year on behalf of third party owners containing approximately 220
units each and focus its future  acquisition/lease  strategy to larger portfolio
transactions.  However, the Company may acquire or lease individual  facilities.
The Company  anticipates that new  developments  will require 8 to 10 months for
pre-construction development, 12 to 14 months for construction and approximately
12 to 18  months  after  opening  to  achieve  a  stabilized  occupancy  rate of
approximately 95%. The total construction costs,  including  construction period
financing  costs and  operating  deficits  during the lease-up  period,  for the
220-unit prototype are estimated to be approximately  $35,000,  or approximately
$159 per unit. At June 30, 2000, the Company had 8 sites under  development  for
third parties for senior independent and assisted living facilities,  5 of which
were under construction. The Company's estimated capital expenditures related to
sites under development at June 30, 2000 are  approximately  $11,000 to $13,000.
Capital  expenditures  related to the Company's  existing  facilities  currently
under  construction are estimated to be  approximately  $5,000 to $6,000 for the
remainder of 2000.

     In 1998,  the  Company  established  a $100,000  credit  facility  with The
Capital  Company  of  America  LLC (the  successor-in-interest  to Nomura  Asset
Capital  Corporation)  (the  "Lender")  pursuant  to which the Lender  agreed to
provide  financing of up to an  aggregate of $100,000 for projects  developed by
the Company  for third  parties.  In 1998,  an  aggregate  $51,000 of the credit
facility was committed to the Austin, Texas and Southfield, Michigan development
projects,  both of which opened in August 1999.  On August 4, 2000,  the Company
and the Lender  amended the credit  facility and the loans made  thereunder.  In
general,  the amendment provides a $26,000  construction loan for the funding of
the Pittsburgh (Mount Lebanon), Pennsylvania development project being developed
by the Company for a third party,  no further  obligation  of the Lender to fund
under the credit  facility,  elimination of the Lender's  obligation to fund the
permanent  loans under the credit facility and elimination of the Company's loan
resizing obligation on the Austin, Texas and Southfield, Michigan loans.

     The  Company's  growth plan includes the  acquisition  or lease of existing
independent  and  assisted  living  facilities.  The  success  of the  Company's
acquisitions  will be  determined by numerous  factors,  including the Company's
ability to  identify  suitable  acquisition  candidates,  the  ability to obtain
suitable third-party financing,  competition for such acquisitions, the purchase
price, lease terms and conditions,  the financial  performance of the facilities
after  acquisition  and the  ability of the  Company to  integrate  and  operate
acquired  facilities  effectively.  The  failure of the  Company  to  adequately
address any of these factors may have a material adverse effect on the Company's
business, financial condition, revenues and earnings.

                                       15

<PAGE>

               BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

     The Company's  development  programs are dependent on a variety of factors,
including the ability to identify and purchase suitable  development  sites, the
ability to obtain suitable third-party financing, the ability to locate suitable
contractors to construct the  facilities,  the ability to obtain required zoning
and permits and the ability to complete and lease-up the  facilities on schedule
and within budget.

     Some  financing  obtained in the future is  expected  to contain  terms and
conditions and  representations and warranties that are customary for such loans
and may contain financing  covenants and other restrictions that (i) require the
Company to meet certain financial tests and maintain certain amounts of funds in
escrow,  (ii) limit,  among other  things,  the ability of the Company to borrow
additional  funds,  dispose of assets  and  engage in mergers or other  business
combinations and (iii) restrict the ability of the Company to operate  competing
facilities within certain distances from mortgaged  facilities.  There can be no
assurance that financing for the Company's  acquisition and development programs
will be available to the Company on acceptable  terms or at all. A lack of funds
may  require the Company to delay or  eliminate  all or some of its  development
projects  and  acquisition  plans and could  therefore  have a material  adverse
effect on the ability of the Company to meet its growth and  business  plans and
on the Company's financial condition and result of operations.

     To date,  the Company's  ability to increase cash flow to meet rising costs
has not been  adversely  affected in any material way by existing,  or proposed,
rent control  ordinances.  Rent control  ordinances may not be applicable to the
Company's  facilities due to the services  provided for the monthly fees charged
to its  residents.  If the  Company's  facilities  were  subject to rent control
ordinances,  an imposed  limitation  on the  resident  fees that the Company may
charge at any such  facility  could  impair  the  Company's  ability to meet any
rising costs of operating the facility.

COMPETITION

     The long-term care industry is highly  competitive  and the independent and
assisted  living  segment is  becoming  increasingly  competitive.  The  Company
competes  with many other  providers of  long-term  care  alternatives,  such as
not-for-profit organizations,  home health care agencies, facility-based service
programs, retirement communities, convalescent centers and other independent and
assisted living providers.  In pursuing the Company's development and operations
strategies,  the Company has  experienced  and expects to continue to experience
increased  competition in its efforts to develop,  acquire or lease  independent
and assisted living facilities.  Consequently, the Company can give no assurance
that it will not encounter increased competition that could limit its ability to
attract  residents or expand its business,  which could have a material  adverse
effect on its revenues and earnings.

IMPACT OF INFLATION

     Resident fees from senior  independent and assisted living facilities owned
or leased by the Company, management fees from facilities managed by the Company
for third parties and development fees from facilities  developed by the Company
for third parties are the Company's  primary sources of revenue.  These revenues
are affected by monthly  resident fee rates and facility  occupancy  rates.  The
rates charged for senior  independent  and assisted  living  services are highly
dependent upon local market conditions and the competitive  environment in which
the facilities operate.  Substantially all of the Company's residency agreements
allow for adjustments in the monthly fees payable thereunder not less frequently
than every 12 or 13 months,  thereby  enabling the Company to seek  increases in
monthly fees due to inflation,  demand or other factors. Any such increase would
be subject to market and competitive conditions. The Company believes,  however,
that the  ability  to adjust  the  monthly  fees  payable  under  the  residency
agreements  on an annual  basis  serves to reduce the risk to the Company of the
adverse effect of inflation.  In addition,  employee  compensation  expense is a
principal  cost element of facility  operations and is also dependent upon local
market conditions. There can be no assurance that resident fees will increase or
that costs will not increase due to inflation or other causes.  In addition,  at
June 30,  2000,  approximately  $89,478  in  principal  amount of the  Company's
indebtedness bore interest at a floating rate. The Company's  exposure to rising
interest  rates is  mitigated  by using  interest  rate caps on  $80,040  of its
floating rate debt. Inflation,  and its impact on floating interest rates, could
affect the amount of interest payments due on such indebtedness.

YEAR 2000

     The Company  implemented  a program to assess,  remediate  and mitigate the
potential  impact of the Year 2000 Issue  throughout the Company.  The Company's
program  was   structured   to  address  its  internal   computer   systems  and
applications, network services operations, facilities operations and third-party
vendors and suppliers.  As a result of the planning and implementation  efforts,
the Company did not experience any disruption due to the Year 2000 Issue. During
2000,  the Company is continuing  to upgrade its  accounting,  human  resources,
property  management  and  marketing  systems to meet its  internal and external
needs.  Through June 30, 2000, the Company had capitalized  approximately $5,296
of cost incurred in upgrading such systems. The Company will continue to monitor
its computer systems and applications,  network services operations,  facilities
operations  and  third-party  vendors and suppliers to ensure that any Year 2000
Issues are addressed promptly.

                                       16

<PAGE>

               BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

OTHER MATTERS

     On July 26,  2000,  the  Company  signed  a  definitive  agreement  with an
affiliate of Senior Housing  Properties  Trust to purchase four  facilities that
the Company  currently leases and operates  pursuant to a master lease agreement
for  $123,000.  The  facilities  consist of The  Hallmark,  located in  Chicago,
Illinois,  The  Springs of East Mesa,  located in Mesa,  Arizona,  The Gables of
Brighton,  located in Brighton,  New York,  and Park Place,  located in Spokane,
Washington.  On July 31, 2000,  the Company made a $12,300  earnest money escrow
deposit,  creditable  against the purchase price. The purchase must be completed
by October 31, 2000.

     On July 26, 2000, the Company,  Fortress,  Fortress  Brookdale  Acquisition
LLC, a Delaware  limited  liability  company  ("Purchaser"),  owned by Fortress,
Health Partners, a Bermuda exempted partnership ("Health Partners"), and certain
of  their  respective   affiliates,   and  FBZ  Acquisition  Corp.,  a  Delaware
corporation and wholly-owned subsidiary of Purchaser ("Acquisition Sub"), signed
a definitive  merger  agreement,  which  provides that Purchaser will commence a
cash tender offer for all of the  Company's  outstanding  shares of common stock
not already  owned by Purchaser  for a net  purchase  price of $15.25 per share.
Health  Partners  also agreed to  contribute  to  Purchaser  its  $100,000  5.5%
convertible  subordinated  note  due  2009  issued  by  the  Company,  which  is
convertible into 5,479 shares of the Company's common stock.

     The all-cash  transaction,  which is  structured as a $15.25 per share cash
tender offer  followed by a second-step  merger of the Company with  Acquisition
Sub, is valued at  approximately  $91,000,  excluding  shares  already  owned by
Purchaser.  The tender offer  commenced  on August 1, 2000 and will  conclude on
September 5, 2000, unless extended.  The Company has approximately  9,927 shares
of common  stock  outstanding,  including  approximately  4,004  shares owned by
Purchaser.  The Company's board of directors (the "Company Board"),  acting upon
the unanimous  recommendation of the of Independent  Committee,  has recommended
that the  stockholders  of the Company (other than Purchaser and its affiliates)
tender their shares pursuant to the tender offer. The Independent  Committee and
the Company Board received an opinion from Merrill Lynch, Pierce, Fenner & Smith
Incorporated,  the Independent Committee's financial advisor, to the effect that
the  $15.25 per share  price in the  tender  offer and the merger is fair to the
stockholders  of the Company  (other than Purchaser and its  affiliates)  from a
financial point of view.

     The  tender  offer  and  merger  will  be  subject  to  certain   customary
conditions; however, the tender offer is not subject to a financing condition or
a condition  that any minimum  number of shares be tendered.  In  addition,  the
waiting period under the  Hart-Scott-Rodino Act was satisfied in connection with
Purchaser's initial purchase of the Company's common stock in May 2000.

     Purchaser  will be paid an  expense  reimbursement  payment  of $750 in the
event that the Independent  Committee receives a higher offer from a third party
and accepts that offer pursuant to the exercise of its fiduciary  duties.  Other
than the expense reimbursement  payment, no other "break-up" or "commitment" fee
would be payable in such event.

     For more information  concerning the tender offer and the merger,  refer to
the  Company's  Solicitation/Recommendation  Statement  on  Schedule  14D-9  and
Purchaser's  Tender Offer Statement on Schedule TO, in each case, as amended and
initially filed with the SEC on August 1, 2000.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     The  Company  is  exposed  to  interest  rate risk  primarily  through  its
borrowing and leasing  activities.  The Company's  interest rate risk management
objective  is to limit the impact of interest  rate changes on earnings and cash
flows and to lower its overall  costs.  To achieve its  objectives,  the Company
borrows and leases at fixed rates and may enter into  swaps,  caps and  treasury
locks to mitigate  its  interest  rate risk on a related  financial  instrument.
There is  inherent  risk from  borrowings  and  leasing  as they  mature and are
renewed at current market rates.  The extent of this risk is not quantifiable or
predictable  because  of the  variability  of  future  interest  rates  and  the
Company's  future  financing  requirements.  The  Company  does not  enter  into
financial instrument transactions for trading or other speculative purposes.

     The Company's  long-term debt and related  contracts to limit interest rate
risk at June 30, 2000 are as follows:

                                       17

<PAGE>

               BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>


                                                                                              Interest Rate Cap
                                                                                 ------------------------------------------
                                                     Rate at                     Fixed                Approximate Fair Value
                                      Amount     June 30, 2000       Maturity    Rate     Maturity       at June 30, 2000
                                      ------     -------------       --------    ----     --------   ----------------------

<S>                                  <C>              <C>              <C>        <C>        <C>         <C>
Fixed rate debt:
     Convertible subordinated notes..$ 100,000        5.5%             2009       -          -                   -
     Mortgage loan...................   12,967        8.525%           2027       -          -                   -
                                     ---------
                                       112,967
                                     ---------

Variable rate debt:
     Prime less .5%..................    3,438        9.00%            2003       -          -                   -
     LIBOR plus 1.625%...............    6,000        8.274%           2002       -          -                   -
     Tax-exempt......................   65,000        4.79%       2019-2025       6.35%     6/1/04       $      96
     Tax-exempt......................   15,040        4.80%            2029       6.58%    12/1/04              25
                                     ---------       =======          ======     =======  ========       ---------
                                        89,478
                                     ---------

Total..........................      $ 202,445                                                           $     121
                                     =========                                                           =========

</TABLE>

     If interest rates on the Company's variable rate debt, including tax-exempt
bonds,  increased by 1 percentage point as of June 30, 2000, the annual interest
expense would increase by approximately $895.

     Lease  expense - The Company has entered into  operating  leases which have
fixed terms and are subject to renewal at the option of the Company. The Company
has an option to purchase  the  properties  prior to or at the end of the lease.
The lease for four of the facilities  requires the payment of additional rent of
10% of the amount by which the revenue  generated from the facilities during the
applicable year exceeds the revenues  generated from the facilities during 1998.
On July 26, 2000, the Company signed a definitive agreement to purchase the four
facilities that is currently leases and operates for $123,000.

                                       18

<PAGE>

               BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

PART II:  OTHER INFORMATION

          ITEM 1.   Legal Proceedings.

                    No material  developments  with respect to legal proceedings
                    occurred during the period covered by this quarterly report.

          ITEM 2.   Changes in Securities and Use of Proceeds.

                    None

          ITEM 3.   Defaults Upon Senior Securities.

                    None

          ITEM 4.   Submission of Matters to a Vote of Security Holders.

                    On May 18, 2000, the Company held its 2000 annual meeting of
                    stockholders at 35 West Wacker Drive, Chicago, Illinois. The
                    annual meeting was called for the following purposes:

                    (1)  to elect two directors for terms of three years each;
                    (2)  to ratify the  appointment  of Ernst & Young LLP as the
                         Company's independent auditors;
                    (3)  to approve the First  Amendment to the  Company's  1999
                         Stock  Incentive  Plan to increase the number of shares
                         available  for issuance  under the plan by an aggregate
                         of 200,000 shares to 400,000 shares; and
                    (4)  to transact  such other  business as may properly  come
                         before the annual meeting.

                    The  following  table sets forth the names of the  directors
                    elected at the annual  meeting for new three  year-terms and
                    the number of votes cast for and withheld for each director:

                                                              Withheld
                                                           Authority to
                      Directors               For              Vote
                      ---------               ---          ------------

                    Mark J. Schulte        8,635,240          92,001
                    Wayne D. Boberg        8,401,440         325,801

                    The  names of each of the  other  directors  whose  terms of
                    offices continued after the annual meeting are as follows:

                    Bruce L.  Gewertz,  Darryl  W.  Hartley-Leonard,  Robert  J.
                    Rudnik, Mark H. Tabak and Paul H. Warren.

                    Michael W.  Reschke  resigned as a director  effective as of
                    May 18,  2000.  William B.  Doniger and Wesley R. Edens were
                    appointed directors effective as of May 18, 2000.

                    The  appointment  of  Ernst  &  Young  LLP as the  Company's
                    independent auditors was ratified at the annual meeting. The
                    vote  tabulation was as follows:  8,709,890  votes were cast
                    for the  ratification  of Ernst & Young LLP as the Company's
                    independent  auditors,  5,700 votes were cast  against  such
                    approval and 11,651 votes were abstentions.

                    The First  Amendment to the Company's  1999 Stock  Incentive
                    Plan was  also  approved  at the  annual  meeting.  The vote
                    tabulation was as follows: 6,712,471 votes were cast for the
                    approval of the First  Amendment to the Company's 1999 Stock
                    Incentive  Plan,  2,012,370  votes  were cast  against  such
                    approval and 2,400 votes were abstentions.

          ITEM 5.   Other Information.

                    None

                                       19

<PAGE>

              BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES


         ITEM 6.    Exhibits and Reports on Form 8-K.

(A)      EXHIBITS:

                                 EXHIBIT INDEX

     EXHIBIT
     NUMBER         DESCRIPTION
     -------        -----------

     3.1            Restated  Certificate of  Incorporation  of the Company,  as
                    filed with the SEC on June 16,  1997 as  Exhibit  3.1 to the
                    Company's  Form 10-Q for the  period  ended  March 31,  1997
                    (File No. 0-22253) and incorporated herein by reference.

     3.2            Amended and Restated  By-laws of the Company,  as filed with
                    the SEC on June 16,  1997 as  Exhibit  3.2 to the  Company's
                    Form 10-Q for the  period  ended  March 31,  1997  (File No.
                    0-22253) and incorporated herein by reference.

     4.1            Form  of  certificate   representing  Common  Stock  of  the
                    Company,  as filed with the SEC on March 17, 1997 as Exhibit
                    10.14 to the  Company's  Registration  Statement on Form S-1
                    (Registration  No.  333-12259)  and  incorporated  herein by
                    reference.

    10.1            Stock Purchase Agreement, dated as of April 20, 2000, by and
                    among the Company,  Fortress,  Prime,  Prime Group II, L.P.,
                    Prime Group VI, L.P., PGLP, Inc. and Michael W. Reschke,  as
                    filed with the SEC on April 21, 2000 as Exhibit  99.2 to the
                    Company's  Form 8-K dated April 20, 2000 (File No.  0-22253)
                    and incorporated herein by reference.

    10.2            Standstill  Agreement,  dated as of April 20,  2000,  by and
                    between the Company and  Fortress,  as filed with the SEC on
                    April 21,  2000 as Exhibit  99.3 to the  Company's  Form 8-K
                    dated April 20,  2000 (File No.  0-22253)  and  incorporated
                    herein by reference.

    10.3            Amendment No. 1 to Stockholders  Agreement,  dated as of May
                    17, 2000, by and among the Company,  Prime,  Prime Group II,
                    L.P., Prime Group VI, L.P., Health Partners and Purchaser.

    10.4            Assignment of Registration Rights, dated May 17, 2000.

    10.5            First Amendment to Brookdale Living  Communities,  Inc. 1999
                    Stock Incentive Plan.

    12.1            Statements  regarding  Computation  of Ratio of  Earnings to
                    Fixed Charges.

    27.1            Financial Data Schedule.

                                       20

<PAGE>

              BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

(B)  REPORTS ON FORM 8-K:

     On April 21,  2000,  the Company  filed a Current  Report on Form 8-K dated
April  20,  2000  with  the SEC  announcing  pursuant  to Item 5 of Form 8-K the
agreement  entered into among  Fortress,  Prime,  certain of its  affiliates and
Michael W.  Reschke,  the former  Chairman  of the Board of the  Company and the
principal  shareholder of Prime,  pursuant to which Fortress  agreed to purchase
from Prime,  certain of its affiliates and Mr. Reschke up to 4,004,350 shares of
the Company's common stock.

     On May 19, 2000,  the Company filed a Current  Report on Form 8-K dated May
18, 2000 with the SEC  announcing  pursuant to Item 5 of Form 8-K the completion
of the sale by Prime,  certain of its  affiliates  and Mr.  Reschke of 4,004,350
shares of the  Company's  common  stock to purchaser  for an aggregate  purchase
price of $60,065,250, or $15 per share, Mr. Reschke's resignation as Chairman of
the Board of the  Company  and the  election of two  Fortress  designees  to the
Company Board.

                                       21

<PAGE>


                                   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.


                                   BROOKDALE LIVING COMMUNITIES, INC.
                                   ----------------------------------
                                   Registrant


Date:  August 14, 2000             /s/ Mark J. Schulte
       ----------------            ----------------------------------
                                   Mark J. Schulte
                                   President and
                                   Chief Executive Officer


Date:  August 14, 2000             /s/ R. Stanley Young
       ----------------            ----------------------------------
                                   R. Stanley Young
                                   Executive Vice President,
                                   Chief Financial Officer and Treasurer

                                       22