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

                                    FORM 10-Q/A

[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934, for the Quarterly Period ended June 30, 1998.

                                       or

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

Commission File Number       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 or organization)

 77 W. Wacker Drive, Suite 4400
         Chicago, IL                                         60601
-------------------------------             ------------------------------------
(Address of principal executive offices)                   (Zip Code)

                                 (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 13, 1998,  9,572,802 shares of the Registrant's Common Stock, $0.01
par value per share, were outstanding.


<PAGE>


                       BROOKDALE LIVING COMMUNITIES, INC.
                                   FORM 10-Q/A

                                      INDEX
                                      -----
PART I:  FINANCIAL INFORMATION                                              Page
                                                                            ----
Item 1.  Financial Statements (Unaudited)......................................3


         Consolidated Balance Sheets of Brookdale Living 
         Communities, Inc. as of June 30, 1998 and as of December 31, 1997.....4

         Consolidated Statements of Operations of Brookdale Living 
         Communities, Inc. for the period from April 1, 1998 through 
         June 30, 1998 and for the period from May 7, 1997 through 
         June 30, 1997 and Combined  Statement of  Operations of
         Predecessor Properties  (predecessor to Brookdale Living 
         Communities,  Inc.) for the period from April 1, 1997
         through May 6, 1997...................................................5

         Consolidated Statements of Operations of Brookdale Living 
         Communities, Inc. for the period from January 1, 1998 through 
         June 30, 1998 and for the period from May 7, 1997 through 
         June 30, 1997 and Combined  Statement of  Operations of
         Predecessor Properties  (predecessor to Brookdale Living 
         Communities,  Inc.) for the period from January 1, 1997
         through May 6, 1997...................................................6

         Consolidated Statements of Operations of Brookdale Living 
         Communities, Inc. for the period from January 1, 1998 through 
         June 30, 1998 and for the period from May 7, 1997 through 
         June 30, 1997 and Combined  Statement of  Operations of
         Predecessor Properties  (predecessor to Brookdale Living 
         Communities,  Inc.) for the period from January 1, 1997
         through May 6, 1997...................................................7

         Notes to Consolidated and Combined Financial Statements of 
         Brookdale Living Communities, Inc. and Predecessor Properties 
         (predecessor to Brookdale Living Communities, Inc.)...................9


Item 2.  Management's  Discussion  and  Analysis  of  Financial  Condition  
         and  Results  of Operations..........................................12

Item 3.  Quantitative and Qualitative Disclosures About Market Risk...........16

PART II: OTHER INFORMATION....................................................17

Item 1.  Legal Proceedings....................................................17
Item 2.  Changes in Securities................................................17
Item 3.  Defaults Upon Senior Securities......................................17
Item 4.  Submission of Matters to a Vote of Security Holders..................17
Item 5.  Other Information....................................................17
Item 6.  Exhibits and Reports on Form 8-K.....................................17

Signatures ...................................................................23

                                      -2-
<PAGE>





                                    PART I: FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).


        The information furnished in the accompanying  consolidated and combined
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.  ("Brookdale")  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 and Subsidiaries  (the "Company")  represent the results of operations
of 15 facilities the Company operated during the period presented.  The combined
financial  statements  of  Predecessor  Properties  (the  "Predecessor"  to  the
Company) are  presented  for  comparative  purposes due to common  ownership and
management  and  represent  the  results of  operations  of the  entities  (five
facilities)  which  comprised  the  Predecessor  Properties  for the period from
January 1, 1997 to May 6, 1997.

        The  aforementioned  financial  statements should be read in conjunction
with the notes to the  financial  statements  and  Management's  Discussion  and
Analysis of Financial  Condition  and Results of  Operations  and the  financial
statements  for the period  ended  December 31, 1997  included in the  Company's
Annual Report on Form 10-K as filed with the Securities and Exchange  Commission
on March 31, 1998.



                                      -3-
<PAGE>



       BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES (THE "COMPANY")

                   CONSOLIDATED BALANCE SHEETS OF THE COMPANY
                                 (In Thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>

ASSETS                                                               June 30, 1998    December 31, 1997
                                                                     -------------    -----------------
<S>                                                                        <C>                <C>    
Cash and cash equivalents........................................   $        1,437      $        13,292
Accounts receivable..............................................              613                  214
Note receivable..................................................            1,903                    -
Prepaid expenses and other.......................................            6,430                3,077
                                                                     -------------      ---------------
     Total current assets........................................           10,383               16,583
                                                                     -------------      ---------------

Property, plant and equipment....................................          115,068              113,294
Accumulated depreciation.........................................           (3,946)              (2,164)
                                                                     -------------      ---------------
Property, plant and equipment, net...............................          111,122              111,130
                                                                     -------------      ---------------

Property under development.......................................            8,693               11,427
Cash and investments - restricted................................           19,701                5,920
Letter of credit deposits........................................           13,014               12,138
Lease security deposits..........................................           32,054               18,542
Other............................................................            8,824                7,429
                                                                     -------------      ---------------
     Total assets................................................   $      203,791      $       183,169
                                                                    ==============      ===============


LIABILITIES AND STOCKHOLDERS' EQUITY

Current portion of long-term debt................................   $          298      $           286
Unsecured line of credit.........................................            8,250                    -
Current portion of deferred gain on sale of property.............              806                  806
Accrued interest payable.........................................              494                  566
Accounts payable and accrued expenses............................            7,110                4,256
Other............................................................              993                  344
                                                                     -------------      ---------------
     Total current liabilities...................................           17,951                6,258
                                                                     -------------      ---------------

Long-term debt, less current portion.............................           95,729               95,881
Tenant entrance and security deposits............................            4,752                4,377
Deferred lease liability.........................................            2,425                1,811
Deferred gain on sale of property, less current portion..........           16,520               16,922
                                                                     -------------      ---------------
     Total liabilities...........................................          137,377              125,249
                                                                     -------------      ---------------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 75,000 shares authorized, 9,560
   and 9,175 shares issued and outstanding at June 30, 1998 and                    
   December 31, 1997, respectively..............................                96                   92
Additional paid-in-capital.......................................           63,241               57,383
Retained earnings................................................            3,077                  445
                                                                     -------------      ---------------
     Total stockholders' equity..................................           66,414               57,920
                                                                     -------------      ---------------
     Total liabilities and stockholders' equity..................   $      203,791      $       183,169
                                                                    ==============      ===============
                                                                                       
</TABLE>




See accompanying notes to consolidated and combined financial statements.



                                      -4-

<PAGE>



       BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES (THE "COMPANY")
          AND PREDECESSOR PROPERTIES (THE "PREDECESSOR" TO THE COMPANY)

            CONSOLIDATED STATEMENTS OF OPERATIONS OF THE COMPANY AND
               COMBINED STATEMENT OF OPERATIONS OF THE PREDECESSOR
                    (In Thousands, Except Per Share Amounts)
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                          Brookdale Living   Brookdale Living    Predecessor
                                                          Communities, Inc.  Communities, Inc.    Properties
                                                             period from       period from       period from
                                                            April 1, 1998      May 7, 1997      April 1, 1997
                                                               through           through           through
                                                            June 30, 1998     June 30, 1997      May 6, 1997
                                                          ----------------   ----------------   --------------

<S>                                                               <C>                <C>                 <C>  
Revenue
Resident fees.........................................    $         17,198   $          6,539   $        3,008
Development fees......................................               1,390                  -                -
Management fees.......................................                  63                 32                -
                                                          ----------------   ----------------   --------------
    Total revenue.....................................              18,651              6,571            3,008
                                                          ----------------   ----------------   --------------

Expenses
Facility operating....................................               9,691              3,483            1,677
General and administrative............................               1,204                478                -
Lease expense.........................................               4,141              1,544              866
Depreciation and amortization.........................               1,205                691              206
Property management fees..............................                   -                  -               59
                                                          ----------------   ----------------   --------------
    Total operating expenses..........................              16,241              6,196            2,808
                                                          ----------------   ----------------   --------------
    Income from operations............................               2,410                375              200
Interest income.......................................                 936                126               19
Interest expense......................................                (936)              (715)            (294)
                                                          ----------------   ----------------   --------------
    Income (loss) before minority interest expense and
      income tax (expense) benefit....................               2,410               (214)             (75)
Minority interest expense.............................                   -                  -              (56)
Income tax (expense) benefit..........................                (889)               133              (67)
                                                          ----------------   ----------------   --------------

    Net income (loss).................................    $          1,521   $            (81)  $         (198)
                                                          ================    ================   ===============

Basic earnings (loss) per common share................    $           0.16   $          (0.01)
                                                          ================    ================        

Weighted average shares used for computing basic
   earnings (loss) per common share ..................               9,487              6,844
                                                          ================    ================         
   

Diluted earnings (loss) per common share..............    $           0.16   $          (0.01)
                                                          ================    ================
Weighted average shares used for computing diluted
   earnings (loss) per common share                                  9,793              6,851
                                                          ================    ================
   
</TABLE>



See accompanying notes to consolidated and combined financial statements.



                                      -5-
<PAGE>



       BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES (THE "COMPANY")
          AND PREDECESSOR PROPERTIES (THE "PREDECESSOR" TO THE COMPANY)

            CONSOLIDATED STATEMENTS OF OPERATIONS OF THE COMPANY AND
               COMBINED STATEMENT OF OPERATIONS OF THE PREDECESSOR
                    (In Thousands, Except Per Share Amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>


                                                          Brookdale Living      Brookdale Living        Predecessor
                                                          Communities, Inc.     Communities, Inc.        Properties
                                                             period from          period from           period from
                                                           January 1, 1998        May 7, 1997          January 1, 1997
                                                               through             through                 through
                                                            June 30, 1998       June 30, 1997            May 6, 1997              
                                                          ----------------      ----------------       ---------------

<S>                                                              <C>                <C>                <C>
Revenue  
Resident fees.........................................    $         32,855      $          6,539       $        10,473
Development fees......................................               2,578                     -                     -
Management fees.......................................                 116                    32                     -
                                                          ----------------      ----------------       ---------------
    Total revenue.....................................              35,549                 6,571                10,473
                                                          ----------------      ----------------       ---------------

Expenses
Facility operating....................................              18,278                 3,483                 5,872
General and administrative............................               2,496                   478                     -
Lease expense.........................................               7,992                 1,544                 3,042
Depreciation and amortization.........................               2,431                   691                   857
Property management fees..............................                   -                     -                   230
                                                          ----------------      ----------------       ---------------
    Total operating expenses..........................              31,197                 6,196                10,001
                                                          ----------------      ----------------       ---------------
    Income from operations............................               4,352                   375                   472
Interest income.......................................               1,641                   126                    68
Interest expense......................................              (1,858)                 (715)                 (830)
                                                          ----------------      ----------------       ---------------
    Income (loss) before minority interest expense and
      income tax (expense) benefit....................               4,135                  (214)                 (290)
Minority interest expense.............................                   -                     -                  (138)
Income tax (expense) benefit..........................              (1,503)                  133                  (236)
                                                          ----------------      ----------------       ---------------

    Net income (loss).................................    $          2,632      $            (81)      $          (664)
                                                          ================      ================       ===============

Basic earnings (loss) per common share................    $           0.28      $          (0.01)
                                                          ================      ================

Weighted average shares used for computing basic
   earnings (loss) per common share..................                9,448                 6,844
                                                          ================      ================
   
Diluted earnings (loss) per common share..............    $           0.27      $          (0.01)
                                                          ================      ================

Weighted average shares used for computing diluted
   earnings (loss) per common share                                  9,721                 6,851
                                                          ================      ================
</TABLE>





See accompanying notes to consolidated and combined financial statements.


                                      -6-


<PAGE>



       BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES (THE "COMPANY")
          AND PREDECESSOR PROPERTIES (THE "PREDECESSOR" TO THE COMPANY)

            CONSOLIDATED STATEMENTS OF CASH FLOWS OF THE COMPANY AND
               COMBINED STATEMENT OF CASH FLOWS OF THE PREDECESSOR
                    (In Thousands, Except Per Share Amounts)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                          Brookdale Living      Brookdale Living        Predecessor
                                                          Communities, Inc.     Communities, Inc.        Properties
                                                             period from          period from           period from
                                                           January 1, 1998        May 7, 1997          January 1, 1997
                                                               through             through                 through
                                                            June 30, 1998       June 30, 1997            May 6, 1997
                                                          ----------------      ----------------       ---------------
<S>                                                                    <C>                   <C>                   <C>
Cash Flows from Operating Activities
Net income (loss)....................................     $          2,632      $            (81)      $          (664)
   Adjustments to reconcile net income (loss) to net
   cash provided by operating activities:
     Depreciation and amortization...................                2,431                   691                   857
     Deferred income taxes...........................                1,536                  (133)                    -
     Minority interest expense.......................                    -                     -                   138
     Change in deferred lease liability..............                  614                   210                   419
     Deferred gain on sale of property...............                 (402)                 (122)                 (281)
     Changes in:
       Accounts receivable...........................                 (399)                  (85)                  (61)
       Prepaid expenses and other....................               (4,767)                 (740)                 (110)
       Accrued interest payable......................                  (72)                   98                   111
       Accounts payable and accrued expenses.........                2,854                 3,526                   431
       Tenant entrance and security deposits.........                 (108)                   38                    35
       Other current liabilities.....................                 (851)               (1,368)                1,022
                                                          ----------------      ----------------       ---------------
         Net cash provided by operating activities...                3,468                 2,034                 1,897
                                                          ----------------      ----------------       ---------------
Cash Flows from Investing Activities
   Lease security deposits and acquisitions..........              (12,638)              (30,266)                    -
   Proceeds from sale of property under development..                3,300                     -                     -
   Changes in cash and investments - restricted......              (12,758)                 (712)               (1,180)
   Property under development........................               (9,915)                 (427)                   (2)
   Payments received on notes receivable.............                7,446                     -                     -
   Reimbursable leasehold improvements...............                 (919)                    -                     -
   Additions to property, plant and equipment........               (1,961)                 (644)                 (149)
                                                          ----------------      ----------------       ---------------
         Net cash used in investing activities.......              (27,445)              (32,049)               (1,331)
                                                          ----------------      ----------------       ---------------
Cash Flows from Financing Activities
   Repayment of long-term debt.......................                 (140)                  (44)                    -
   Proceeds from unsecured line of credit............               10,750                     -                     -
   Repayment of unsecured line of credit.............               (2,500)                    -                     -
   Increase in letter of credit deposit..............                 (876)              (11,177)                    -
   Payment of deferred financing costs...............                 (504)                  (42)                 (287)
   Net distributions to partners.....................                    -                     -                (2,594)
   Proceeds from issuance of common stock, net.......                5,392                50,742                     -
                                                          ----------------      ----------------       ---------------
         Net  cash   provided  by  (used  in)  
         financing activities........................               12,122                39,479                (2,881)
                                                          ----------------      ----------------       ---------------
         Net  (decrease)   increase  in  cash  and  
         cash equivalents............................              (11,855)                9,464                (2,315)
         Cash  and  cash  equivalents  at  beginning   
         of period...................................               13,292                 1,915                 4,230
                                                          ----------------      ----------------       ---------------
         Cash and cash equivalents at end of period..     $          1,437      $         11,379       $         1,915
                                                          ================      ================       ===============
</TABLE>

See accompanying notes to consolidated and combined financial statements.


                                      -7-

<PAGE>



       BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES (THE "COMPANY")
          AND PREDECESSOR PROPERTIES (THE "PREDECESSOR" TO THE COMPANY)

            CONSOLIDATED STATEMENTS OF CASH FLOWS OF THE COMPANY AND
               COMBINED STATEMENT OF CASH FLOWS OF THE PREDECESSOR
                    (In Thousands, Except Per Share Amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>


                                                          Brookdale Living      Brookdale Living        Predecessor
                                                          Communities, Inc.     Communities, Inc.        Properties
                                                             period from          period from           period from
                                                           January 1, 1998        May 7, 1997          January 1, 1997
                                                               through             through                 through
                                                            June 30, 1998       June 30, 1997            May 6, 1997
                                                          ----------------      ----------------       ---------------

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

Interest paid, net of amounts capitalized............     $          1,930      $            636       $           723
                                                          ================      ================       ===============

Income taxes paid....................................     $            657      $              -       $             -
                                                          ================      ================       ===============

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 ...................     $         13,860      $         68,545       $             -
    Less: Consideration given
          Cash paid .................................               11,875                30,266                     -
                                                          ----------------      ----------------       ---------------

    Liabilities assumed .............................     $          1,985      $         38,279       $             -
                                                          ================      ================       ===============
</TABLE>



See accompanying notes to consolidated and combined financial statements.



                                      -8-
<PAGE>



       BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES (THE "COMPANY")
          AND PREDECESSOR PROPERTIES (THE "PREDECESSOR" TO THE COMPANY)

             NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
                    (In Thousands, Except Per Share Amounts)
                                   (Unaudited)

1.  Organization

     Brookdale  Living  Communities,  Inc.  ("Brookdale")  was  incorporated  in
Delaware on September 4, 1996 and commenced  operations  in connection  with its
initial  public  offering (the "IPO"),  which closed on May 7, 1997. On December
24, 1997, Brookdale completed a follow-on offering of 2,000 shares of its common
stock at $16.6875 per share (the "Follow-on Offering").


    The consolidated  financial statements of the Company include the properties
owned or  leased  by the  Company.  The  combined  financial  statements  of the
Predecessor Properties (defined below) include the facilities owned or leased by
the senior independent and assisted living division of The Prime Group, Inc. and
its affiliates  ("PGI"),  which consisted of the five facilities as indicated in
the table  below (PGI  owned or leased  The  Heritage,  The  Devonshire  and The
Hallmark  facilities  during the period from January 1, 1995 through May 6, 1997
and leased The  Springs of East Mesa and The Gables at Brighton  facilities  for
the period from December 27, 1996 through May 6, 1997). The following table sets
forth the properties owned, leased,  managed or under development by the Company
as of June 30, 1998 (collectively, the "Properties").

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

Owned Facilities:
-----------------
The Heritage (1)                        May 7, 1997
The Devonshire (1)                      May 7, 1997
Hawthorn Lakes (2)                      May 7, 1997
Edina Park Plaza (2)                    May 7, 1997

Leased Facilities:
------------------
The Hallmark (1)                        May 7, 1997
The Springs of East Mesa (1)            May 7, 1997
The Gables at Brighton (1)              May 7, 1997
The Park Place (2)                      May 7, 1997
The Gables at Farmington                November 24, 1997
The Classic at West Palm Beach          December 18, 1997
The Brendenwood Retirement Community    December 22, 1997
Harbor Village                          March 6, 1998
The Atrium of San  Jose                 May 12, 1998

Managed Facilities:
-------------------
The Island on Lake Travis (3)
The Kenwood (4)

Development Projects Under Construction:
----------------------------------------
Austin, Texas (5)
Southfield, Michigan (5)
Raleigh, North Carolina (5)

Projects In Development:
------------------------
Glen Ellyn, Illinois (5) (6)
New York (Battery Park City), New York

(1) Collectively  referred to as the  "Predecessor  Properties" 
(2) Collectively referred to as the "IPO  Properties"  
(3) Management  services  commenced May 7, 1997 
(4) Management services commenced July 1, 1997
(5) The Company is developing  these projects for third party owners and has the
    option to purchase these facilities 
(6) Construction commenced August 5, 1998


                                      -9-

<PAGE>



2.   Summary of Significant Accounting Policies

Basis of Presentation

  The  accompanying   unaudited  financial  statements  have  been  prepared  in
accordance with generally accepted  accounting  principles 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 generally  accepted  accounting  principles  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, 1997 included in the Company's  Annual Report on Form
10-K as filed with the  Securities  and Exchange  Commission  on March 31, 1998.
Significant  intercompany  accounts and  transactions  have been  eliminated  in
consolidation.

  Use of Estimates

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

  Development Fees

   
  Development fees related to development activities provided 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, which typically extend for
12 to 14 months.
    

  Reclassifications

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

3. Recent Developments

  On April 15, 1998, the Company purchased land in Raleigh,  North Carolina (the
"Raleigh  Project") for the purpose of developing a Brookdale  prototype  senior
independent and assisted living  facility.  The Company  acquired the land for a
total  consideration  of  approximately  $2,100 in cash.  On June 30, 1998,  the
Company sold the Raleigh Project to an unaffiliated third party. The sales price
for the Raleigh  Project was $2,903,  of which  $1,000 was  received in cash and
$1,903 was  received by the  delivery of a  promissory  note.  The note  accrues
interest at 9.0% per annum and is payable on  September  30,  1998.  The Company
continues to develop the Raleigh Project pursuant to a development agreement and
has an option to purchase the Raleigh Project.

  On April 27, 1998, the Company obtained a $15,000 unsecured  revolving line of
credit  from  LaSalle  National  Bank  to be  used  for  working  capital  or in
connection  with the  acquisition,  leasing  or  development  of real  property.
Interest accrues on the outstanding principal amount of the loan at a rate equal
to the prime  rate  plus  1/2% per annum  with  interest  payable  monthly.  The
outstanding  principal  amount of the loan and accrued but unpaid  interest  are
payable in full on April 26, 1999. The Company must pay an unused commitment fee
in an amount  equal to 1/4% per annum of the amount of the line of credit  which
is not  outstanding,  which fee is payable  quarterly (see Note 7 related to the
increase in the line of credit).

  On May 12, 1998, the Company  entered into an agreement to lease The Atrium of
San Jose facility,  a 292-unit  facility  located in San Jose,  California.  The
lease is an  operating  lease with an  initial  10-year  term and five  one-year
renewal terms,  and annual lease payments  ranging from $2,331 to $2,405 through
the initial lease term. The Company has an option to acquire this  facility.  In
connection   with  the  lease,   the  Company  funded  a  security   deposit  of
approximately $6,965.

  On May 12, 1998, the Company entered into a purchase agreement to acquire land
in  Sterling  Heights,  Michigan  for  approximately  $1,800 for the  purpose of
developing  a  Brookdale   prototype  senior  independent  and  assisted  living
facility.  The closing of the purchase of this  property is subject to customary
closing  contingencies,  and  there  can  be  no  assurance  that  such  closing
contingencies will be satisfied in a timely manner, if at all.

  On May 29, 1998, the Company filed a shelf registration  statement on Form S-3
with the Securities and Exchange  Commission for $200,000 in securities that may
include common stock,  preferred stock,  and debt securities (the  "Registration
Statement").  Debt securities covered by the Registration  Statement may include
debt which is  convertible  to common stock.  This  registration  is intended to
facilitate future public offerings of securities. The Registration Statement was
declared effective by the Securities and Exchange Commission on July 8, 1998.




                                      -10-
<PAGE>



     On June 25,  1998,  the Company  and Nomura  Asset  Management  Corporation
("NACC")  entered  into a master  financing  facility in which NACC will provide
financing,  in  the  aggregate  principal  amount  of up to  $100,000,  for  the
development and construction of senior independent living facilities. The owners
of the Austin, Texas and Southfield,  Michigan development projects have secured
loan commitments of $24,250 and $26,625, respectively under the master financing
facility.

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 the
property and state income taxes.

5. Earnings (Loss) Per Share

  The following table sets forth the  computation of basic and diluted  earnings
(loss) per share for the three months ended June 30, 1998,  the six months ended
June 30, 1998 and the period from May 7, 1997 through June 30, 1997.

<TABLE>
<CAPTION>

                                                                                           Period from
                                                         Three months     Six months       May 7, 1997
                                                            Ended           Ended            Through
                                                         June 30, 1998   June 30, 1998    June 30, 1997
                                                         -------------   -------------    -------------   
                                                             

<S>                                                      <C>              <C>              <C>        
      Numerator for basic and diluted earnings (loss)
      per common share................................   $    1,521       $     2,632      $      (81)  
      

      Denominator:
        Denominator for basic earnings (loss) per share
         -  weighted-average shares....................       9,487             9,448           6,844
         Effect of dilutive securities -
         Employee stock options........................         306               273               7
                                                         -------------   -------------    -------------
           Denominator for diluted earnings (loss) per
             share-adjusted weighted-average   
             shares and assumed conversions............       9,793             9,721           6,851
                                                         =============   =============    =============
             
      Basic earnings (loss) per share..................  $     0.16       $      0.28      $    (0.01)
                                                         =============   =============    =============

      Diluted  earnings (loss) per share...............  $     0.16       $      0.27      $    (0.01)
                                                         =============   =============    =============
</TABLE>

     During  the second  quarter  of 1998,  certain  employees  exercised  stock
options.  The Company  received a tax benefit  with  respect to the  exercise of
non-qualified stock options and the disqualifying disposition of incentive stock
options of $470 which was credited to additional paid-in capital.

6. Pro Forma Information

  On July 2, 1998, the Company entered into an agreement to lease The Chatfield,
a 125-unit  senior  independent  and assisted  living  facility  located in West
Hartford, Connecticut. The lease is an operating lease with an initial five year
term and five one-year  renewal terms,  and annual lease payment amounts ranging
from $1,013 to $1,034  through the initial lease term. The Company has an option
to acquire this  facility.  In connection  with the lease,  the Company funded a
security deposit of approximately $5,300.

  The  following  unaudited  pro  forma  condensed,  consolidated  and  combined
statements of operations of the Company for the three months ended June 30, 1998
and June 30,  1997 and the six months  ended June 30, 1998 and June 30, 1997 are
presented  as if, at  January  1, 1998 and  January 1,  1997,  the  Company  had
completed the IPO and Follow-on  Offering and purchased the Owned Facilities and
leased  the  Leased  Facilities  and The  Chatfield  facility  which was  leased
beginning  July 2, 1998. If The  Chatfield  facility was not included in the pro
forma  operations,  revenue,  net income,  basic  earnings per share and diluted
earnings per share would be $19,408, $1,602, $0.17 and $0.16, respectively,  for
the three  months  ended  June 30,  1998 and  $15,857,  $488,  $0.07 and  $0.07,
respectively,  for the three  months  ended June 30, 1997 and  $38,481,  $2,934,
$0.31 and  $0.30,  respectively,  for the six  months  ended  June 30,  1998 and
$34,125, $249, $0.04 and $0.04, respectively,  for the six months ended June 30,
1997.





                                      -11-
<PAGE>



  These unaudited pro forma condensed,  consolidated and combined  statements of
operations  are  not  necessarily  indicative  of what  the  actual  results  of
operations of the Company would have been assuming the Company had completed the
transactions  described  in the  preceding  paragraph  at the  beginning of each
period presented,  nor do they purport to represent the results of operations of
the Company for future periods.

                                  Three months                    Six months
                                 ended June 30,                 ended June 30,
                                 --------------                 ---------------
                                 1998     1997                  1998      1997
                                 --------------                 ---------------
  Revenue                       $20,256  $16,706              $40,178   $35,822
  Net income                      1,630      515                2,994       303
  Basic earnings per share         0.17     0.08                 0.32      0.04
  Diluted earnings per share       0.17     0.08                 0.31      0.04

7. Subsequent Events

  On July 16, 1998, the Company increased its unsecured revolving line of credit
with LaSalle  National  Bank from $15,000 to $25,000.  The maturity date for the
amended line of credit was revised so that the loan must be paid down to $10,000
upon the completion of an offering of securities;  provided that, if an offering
has not occurred on or before  October 15,  1998,  the loan must be paid down to
$15,000  (see  Note 3).  The  line of  credit  will  continue  to bear  interest
according  to the  original  terms of the loan  agreement at prime plus 1/2% per
annum. As of August 13, 1998, the  outstanding  balance under the line of credit
was $15,750.

     On July 23,  1998,  the Company  sold a  development  site  located in Glen
Ellyn,  Illinois (the "Glen Ellyn Project") to an unaffiliated  third party. The
sales price for the Glen Ellyn  Project was $4,125 of which  $1,400 was received
in cash and $2,725 was received by the delivery of a promissory  note.  The note
accrues  interest at 9.0% per annum and is payable on September  30,  1998.  The
Company will develop the Glen Ellyn Project pursuant to a development  agreement
and has an option to purchase the Glen Ellyn Project.

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations.

  The following discussion is based on the Consolidated  Financial Statements of
the Company as of June 30, 1998 and December 31, 1997,  and for the periods from
January 1, 1998 through June 30, 1998 and from May 7, 1997 through June 30, 1997
and the Combined  Statement of  Operations  of  Predecessor  Properties  for the
periods from January 1, 1997 to May 6, 1997.  The  financial  statements  of the
Predecessor  Properties  combine the results of  operations  of five  properties
which  were  contributed  by  PGI  to  the  Company   simultaneously   with  the
consummation of its IPO and are now  consolidated in the Company's  consolidated
financial   statements.   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, (i) general economic conditions in the markets in
which the Company  operates,  (ii)  competitive  pressures  within the  industry
and/or  the  markets  in  which  the  Company  operates,  (iii)  the  successful
completion  of the  acquisition  of the  facilities  which the Company has under
contract,  the successful completion of development  activities,  the successful
integration  of newly acquired or leased  facilities  with the operations of the
Company's  existing  facilities,  fluctuations in operating  results,  occupancy
levels  in the  markets  in which the  Company  competes,  and/or  unanticipated
changes  in  expenses  or  capital  expenditures,  (iv)  the  effect  of  future
legislation  or  regulatory  changes on the Company's  operations  and (v) other
factors described from time to time in the Company's filings with the Securities
and Exchange Commission.  The forward-looking statements included in this report
are made only as of the date hereof.  The Company  undertakes  no  obligation to
update  such   forward-looking   statements  to  reflect  subsequent  events  or
circumstances.




                                      -12-
<PAGE>



Overview

  As of June 30, 1998, the Company  operated 15 senior  independent and assisted
living facilities containing a total of 3,372 units. Four of such facilities are
owned  by the  Company,  nine  facilities  are  leased  by the  Company  and two
facilities  (one of which is owned by PGI) are managed by Brookdale  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 certain  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  include meal service,  housekeeping
services  within  the  resident  units,  social  and  recreational   activities,
scheduled transportation,  security,  emergency call response, access to on-site
medical  services and 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.
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 plans to expand its supplemental  service offerings,  as
permitted by licensing,  in order to capture  incremental revenue and enable its
residents to remain in its facilities  longer. In addition,  where  practicable,
the Company may obtain  licensing to provide home health  services to residents.
Resident fees  typically are paid monthly by residents,  their families or other
responsible  parties.  As of June 30, 1998,  99.6% 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 from managing senior  independent and assisted
living  facilities  for  unaffiliated   third  parties  pursuant  to  management
contracts.  Management  services  income  consists  of  management  fees,  which
typically range from 3.0% to 5.0% of a managed  facility's total gross revenues.
All such fees are recognized as revenues when management services are rendered.

  The Company classifies its operating  expenses into the following  categories:
(i) facility  operating  expenses,  which include property 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, 1998 to six months ended June 30, 1997

  For the six months ended June 30, 1998,  results reflect the operations of the
Company's 15 facilities. For the six months ended June 30, 1997, results reflect
the  operations of the  Predecessor's  five  facilities,  the  operations of the
Company's three IPO Properties and the management by the Company of one facility
after the IPO.

  Revenue. Total revenue increased by $18.5 million, or 108.6%, to $35.5 million
for the six months  ended June 30, 1998 when  compared  to the six months  ended
June 30, 1997.  Resident fees  increased by $15.8  million,  or 93.1%,  to $32.9
million. Of this increase, approximately $783,000 (or a "same store" increase of
5.2%)  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 $15.0 million of such increase
reflects revenue from facilities acquired, leased or managed subsequent the IPO.
The remaining $2.7 million of the total revenue  increase  reflects revenue from
development  and management  fees  associated  with projects being developed and
managed by the  Company  for  unaffiliated  third  parties.  The Company has the
option to purchase such development properties.

  Operating  Expenses.  Total operating expenses increased by $15.0 million,  or
92.6%,  to $31.2 million for the six months ended June 30, 1998 when compared to
the six months ended June 30, 1997.  Facility  operating  expenses  increased by
$8.9 million,  or 95.4%,  to $18.3 million  primarily due to the addition of the
expenses of the  facilities  acquired or leased  subsequent to the IPO. From the
commencement  of its  operations on May 7, 1997,  the Company has managed all of
its facilities and, accordingly, incurred general and administrative expenses of
approximately  $2.5 million for the six months  ended June 30, 1998  compared to
$478,000 for the period from May 7, 1997 through June 30, 1997.  Prior to May 7,
1997, two of the Predecessor  Properties  incurred  property  management fees of
approximately $230,000.

  Lease  expense  increased by  approximately  $3.4 million,  or 74.3%,  to $8.0
million for the six months  ended June 30, 1998 when  compared to the six months
ended June 30,  1997 due  primarily  to the  addition  of lease  expense for the
facilities leased subsequent to the IPO.



                                     -13-
<PAGE>



Depreciation and amortization increased by approximately  $883,000, or 57.0%, to
$2.4  million for the six months  ended June 30,  1998 when  compared to the six
months ended June 30, 1997. This increase primarily reflects the depreciation of
the  step-up in basis of two of the  Predecessor  Properties  that  resulted  in
connection  with  the  IPO  and the  depreciation  of two of the IPO  Properties
acquired on May 7, 1997.

  Interest  expense  increased  by  approximately  $313,000,  or 20.3%,  to $1.9
million for the six months  ended June 30, 1998 when  compared to the six months
ended June 30, 1997  primarily  due to the  assumption  of debt on the  Hawthorn
Lakes and Edina Park Plaza  facilities in connection  with the purchase of these
properties  on May 7, 1997.  Interest  income  increased by  approximately  $1.4
million to $1.6 million for the six months ended June 30, 1998 when  compared to
the six months ended June 30, 1997 due to an increase in average  cash  balances
and various deposits and restricted investments.

  Net Income.  For the six months ended June 30, 1998, the Company generated net
income of approximately $2.6 million,  as compared to a net loss of $745,000 for
the six months ended June 30, 1997  primarily  due to the changes in revenue and
expenses  described  above.  Net income for the six months  ended June 30,  1998
versus the net loss for the six months ended June 30, 1997,  which  included the
Predecessor  Properties only, is not necessarily  comparable,  in the opinion of
management,  due to the  different  ownership  and  capital  structures  for the
respective periods.

Comparison  of three  months  ended June 30, 1998 to three months ended June 30,
1997

  For the three months ended June 30, 1998,  results  reflect the  operations of
the Company's 15 facilities.  For the three months ended June 30, 1997,  results
reflect the operations of the Predecessor's  five facilities,  the operations of
the  Company's  three IPO  Properties  and the  management by the Company of one
facility after the IPO.

  Revenue.  Total revenue increased by $9.1 million,  or 94.7%, to $18.7 million
for the three months ended June 30, 1998 when compared to the three months ended
June 30, 1997.  Resident  fees  increased by $7.7  million,  or 80.1%,  to $17.2
million. Of this increase, approximately $341,000 (or a "same store" increase of
4.5%)  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 $7.4 million of such increase
reflects revenue from facilities  acquired,  leased or managed subsequent to the
IPO. The remaining $1.4 million of the total revenue  increase  reflects revenue
from  development  and management  fees associated with projects being developed
and managed by the Company for unaffiliated  third parties.  The Company has the
option to purchase such development properties.

  Operating  Expenses.  Total operating expenses  increased by $7.2 million,  or
80.4%,  to $16.2  million for the three months ended June 30, 1998 when compared
to the three months ended June 30, 1997.  Facility  operating expenses increased
by $4.5 million,  or 87.8%, to $9.7 million primarily due to the addition of the
expenses of the  facilities  acquired or leased  subsequent to the IPO. From the
commencement  of operations  on May 7, 1997,  the Company has managed all of its
facilities and,  accordingly,  incurred general and  administrative  expenses of
approximately  $1.2 million for the three months ended June 30, 1998 compared to
$478,000 for the period from May 7, 1997  through June 30, 1997.  For the period
from  April 1, 1997  through  May 6,  1997,  two of the  Predecessor  Properties
incurred property management fees of approximately $59,000.

  Lease  expense  increased by  approximately  $1.7 million,  or 71.8%,  to $4.1
million  for the three  months  ended June 30,  1998 when  compared to the three
months  ended  June  30,  1997 due to the  addition  of  lease  expense  for the
facilities leased subsequent to the IPO. Depreciation and amortization increased
by approximately  $308,000, or 34.3%, to $1.2 million for the three months ended
June 30,  1998 when  compared  to the three  months  ended June 30,  1997.  This
increase  primarily  reflects the depreciation of the step-up in basis of two of
the  Predecessor  Properties  that resulted in  connection  with the IPO and the
depreciation of two of the IPO Properties acquired on May 7, 1997.

  Interest expense decreased by approximately  $73,000, or 7.2%, to $936,000 for
the three  months  ended June 30, 1998 when  compared to the three  months ended
June 30, 1997 primarily due to lower  floating  interest rates on the tax-exempt
bonds relating to The Heritage and The Devonshire facilities partially offset by
the debt on the Hawthorn Lakes and Edina Park Plaza facilities  purchased on May
7, 1997. Interest income increased by approximately $791,000 to $936,000 for the
three  months  ended June 30, 1998 when  compared to the three months ended June
30, 1997 due to an increase in average cash  balances  and various  deposits and
restricted investments.

  Net Income.  For the three months ended June 30, 1998,  the Company  generated
net income of approximately $1.5 million,  as compared to a net loss of $279,000
for the three months ended June 30, 1997 primarily due to the changes in revenue
and  expenses  described  above.  Net income for the three months ended June 30,
1998  versus  the net loss for the  three  months  ended  June 30,  1997,  which
included the Predecessor Properties only, is not necessarily comparable,  in the
opinion of management, due to the different ownership and capital structures for
the respective periods.



                                      -14-
<PAGE>



Liquidity and Capital Resources

  On December 24, 1997,  the Company  completed a follow-on  public  offering of
2,000,000  shares of common  stock,  $.01 par value per share,  at $16.6875  per
share. The underwriters of the offering exercised their  over-allotment  option,
and, on January 21, 1998,  the Company sold an additional  300,000 shares of the
Company's  common stock at $16.6875 per share.  The proceeds  from such offering
(including  the exercise of the  underwriters'  over-allotment  option),  net of
related  underwriting  discounts and  commissions  and offering  costs,  totaled
approximately $35.5 million ($4.6 million from the exercise of the underwriters'
over-allotment option). The Company used approximately $25.8 million of such net
proceeds to repay outstanding indebtedness and fund lease security deposits paid
subsequent to such  offering.  The remaining net proceeds were used to finance a
portion  of  subsequent   acquisitions,   leasing  and  developments  of  senior
independent and assisted  living  facilities and working capital and for general
corporate purposes.

  Cash   and   cash    equivalents    (which   does   not   include   cash   and
investments-restricted  of $19.7 million,  the letter of credit deposit of $13.0
million and lease security deposits of $32.1 million) decreased by $11.9 million
to $1.4  million  at June  30,  1998  primarily  due to  cash  utilized  for the
acquisition,  leasing  and  development  of  facilities  offset  in  part by the
proceeds from the exercise of the underwriters' over-allotment option related to
the Follow-on Offering.

  Net cash  provided by operating  activities  for the six months ended June 30,
1998  totaled  approximately  $3.5  million  as a result of  increased  property
operations  before  depreciation and  amortization  and properties  acquired and
leased subsequent to the IPO.

  Net cash used in investing activities totaled  approximately $27.4 million for
the six months ended June 30, 1998.  Investing activities included net cash used
for lease security  deposits in connection  with the lease of Harbor Village and
The  Atrium of San Jose  facilities  in the  amounts  of $5.3  million  and $7.0
million, respectively, cash paid for property under development of $9.9 million,
proceeds from the sale of property under  development of $3.3 million,  payments
received  on  notes  receivable  of  $7.4  million,  an  increase  in  cash  and
investments-restricted of $12.8 million and other uses of $3.1 million.

  Net cash provided by financing  activities was approximately $12.1 million for
the six months ended June 30, 1998.  Financing activities included proceeds from
the exercise of the underwriters' over-allotment option related to the follow-on
offering of $4.4  million,  $1.0  million  from the  exercise of employee  stock
options and net proceeds from an unsecured line of credit of $8.3 million offset
by other net uses of approximately $1.6 million.

  The Company currently plans to acquire or lease four to six senior independent
and assisted living facilities per year containing an aggregate of approximately
800 to 1,200 units and to commence  development of at least three new facilities
per year  containing  approximately  220 units.  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
$30.0 million, or approximately $135,000 per unit. At June 30, 1998, the Company
had several sites under consideration for development for new senior independent
and assisted living facilities, two of which were under construction. Subsequent
to such date, the Company commenced  construction on its Raleigh, North Carolina
and Glen Ellyn, Illinois projects. Capital expenditures related to the Company's
existing  facilities  are  estimated  to be  approximately  $3.0 million to $5.0
million in the  aggregate in 1998.  The Company  anticipates  that it will use a
combination of cash on hand,  additional  equity  financing and debt  financing,
lease  transactions  and cash generated from  operations to fund its acquisition
and  development  activities.  The  Company  currently  estimates  that the cash
generated from operations,  together with cash on hand, existing debt facilities
and commitments and anticipated future financing, will be sufficient to meet its
liquidity  needs for at least six  months.  Thereafter,  in order to achieve its
growth  plans,  the Company will be required to obtain a  substantial  amount of
additional  financing.  The Company presently has no commitment,  arrangement or
understanding  regarding  financing  to fund the debt  portion of the  Company's
acquisition and development plans other than the $100.0 million  commitment from
Nomura Asset  Capital  Corporation  for  development  projects.  There can be no
assurance  that the Company will be able to obtain the  financing  necessary for
its acquisition and development programs.

  As of June 30, 1998,  the Company had $65.0 million of long-term  indebtedness
in tax-exempt bonds with floating rates. The interest rates (exclusive of credit
enhancement  and other fees) on such debt  averaged  3.64% during the six months
ended June 30, 1998.  Such  tax-exempt  bonds  contain  covenants  requiring the
facilities to maintain a minimum number of units for income qualified residents.
The Company may obtain similar bond financing for future facilities.

  As of June 30, 1998, the Company also had $8.3 million  outstanding  under its
unsecured  line of credit at a floating  rate of prime plus 1/2%.  The  interest
rate on the line remained at 9% during the three months ended June 30, 1998.

  The Company is dependent on third-party financing for its acquisition, leasing
and development  programs.  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



                                      -15-
<PAGE>



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
program 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 and leasing plans and could therefore have
a  material  adverse  effect on the  Company's  growth  plans and on its  future
results of operations.

Impact of Recently Issued Accounting Standards

  In April 1998, the Accounting  Standards  Executive Committee issued Statement
of Position  98-5,  "Reporting  on the Cost of Start-Up  Activities"  (SOP 98-5)
which is effective for fiscal years  beginning after December 15, 1998. SOP 98-5
provides  guidance on  financial  reporting of start-up  costs and  organization
costs.  Adoption of SOP 98-5 is not anticipated to affect the financial position
or results of operations of the Company.

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 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  resident  agreements  allow  for
adjustments in the monthly fees payable  thereunder upon each anniversary of the
commencement of the residency  agreement,  thereby  enabling the Company to seek
increases in monthly fees due to  inflation  or other demand  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,  as of June 30, 1998,  approximately $73.3 million in principal amount
of the  Company's  indebtedness  bore  interest  at  floating  rates and  future
indebtedness  may bear  floating  rate  interest.  Inflation,  and its impact on
floating  interest  rates,  could affect the amount of interest  payments due on
such indebtedness.

Readiness for Year 2000

  The Company is in the  process of  planning  the nature and extent of the work
required to make its systems and infrastructure Year 2000 compliant.  Based on a
recent  assessment,  the Company will have to modify or replace certain portions
of its hardware and software so that its systems  will  function  properly  with
respect  to  the  Year  2000  and  beyond.   The  Company   believes  that  with
modifications to existing software and conversions to new software applications,
in addition to hardware upgrades on certain  mechanical  systems,  the Year 2000
issue  will  not  pose  significant  operational  problems.   However,  if  such
modifications  and  conversions  are not made,  or are not completed in a timely
manner,  the Year 2000 issue could have a material  impact on the  operations of
the Company.

  The Company  continues  to evaluate  the Year 2000 issue and will utilize both
internal and external resources in order to reprogram, or replace,  systems that
are not in compliance with the Year 2000. The Company anticipates completing the
project no later than March 31,  1999.  The cost to complete the project has not
yet been determined.

  The project  completion  date is based on management's  best estimates,  which
were derived  utilizing  numerous  assumptions of future  events,  including the
ability  of third  parties to modify the  Company's  systems on a timely  basis.
There can be no guarantee that the project will be completed in a timely manner.
Specific factors that might delay completion of the project include, but are not
limited to, the availability of qualified  personnel,  the ability to locate and
correct all relevant  computer codes,  and similar  uncertainties.  Although the
Company  intends to continue  preparations  for Year 2000, it is not possible to
quantify  potential indirect effects resulting from the lack of readiness of any
third party with whom the Company conducts its business.


Item 3.    Quantitative and Qualitative Disclosures About Market Risk.

        Not Applicable.



                                      -16-
<PAGE>



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.

                  The Company's  Annual Meeting of Stockholders  was held on May
                  21,  1998.  At the  meeting,  stockholders  voted  on (i)  the
                  election  of  two   directors;   (ii)   ratification   of  the
                  appointment of Ernst & Young LLP as the Company's  independent
                  auditors  for 1998;  and (iii) the  approval of the  Company's
                  1998 Stock Incentive  Plan.  Voting on each such matter was as
                  follows:

                                   Votes        Votes     Withheld/     Broker
                                    For        Against   Abstentions   Non-Votes
                                 ----------  ---------   -----------   ---------
1. Election of Directors:
         Michael W. Reschke       8,985,257       -         47,000         -
         Dr. Bruce L. Gewertz     9,027,257       -          5,000         -

2. Ratification of Auditors       8,613,907    417,100       1,250         -

3. Approval of 1998 Stock 
     Incentive Plan               7,483,447  1,540,820       6,725         -

        Item 5.   Other Information.

                  None

        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 Securities and Exchange  Commission 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




                                      -17-
<PAGE>






  Exhibit
   Number                                     Description
  -------                                     -----------

    3.2      Amended  and  Restated  By-laws of the  Company,  as filed with the
             Securities and Exchange  Commission 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 Securities and Exchange Commission 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     Lease  dated as of May 11,  1998 by and  between  Brookdale  Living
             Communities of California,  Inc., as lessee, and Atrium of San Jose
             LLC, as  lessor-owner,  as filed with the  Securities  and Exchange
             Commission  on May 26, 1998 as Exhibit 10.1 to the  Company's  Form
             8-K dated May 12, 1998 (File No. 0-22253) and  incorporated  herein
             by reference

    10.2     Note and Deed of Trust Modification and Assumption  Agreement dated
             as of May 12, 1998 by and among LaSalle  National  Bank, as Trustee
             for  the  Registered  Holders  of DLJ  Mortgage  Acceptance  Corp.,
             Commercial  Mortgage  Pass-Through  Certificates,  Series  1996-CF1
             ("Trustee"),  Atrium  Venture,  The  Atrium  of San  Jose  LLC  and
             Brookdale Living Communities of California, Inc., as filed with the
             Securities and Exchange  Commission on May 26, 1998 as Exhibit 10.2
             to the Company's Form 8-K dated May 12, 1998 (File No. 0-22253) and
             incorporated herein by reference

    10.3     Leasehold Deed of Trust,  Assignment of Rents,  Security  Agreement
             and Fixture  Filing  dated as of May 12, 1998 by  Brookdale  Living
             Communities of California,  Inc. in favor of The Atrium of San Jose
             LLC, as filed with the  Securities  and Exchange  Commission on May
             26, 1998 as Exhibit  10.3 to the  Company's  Form 8-K dated May 12,
             1998 (File No. 0-22253) and incorporated herein by reference

    10.4     Pledge and Security Agreement dated as of May 12, 1998 by Brookdale
             Living  Communities of California,  Inc. and The Atrium of San Jose
             LLC in favor of Key  Corporate  Capital,  Inc.  and  SELCO  Service
             Corporation,  as filed with the Securities and Exchange  Commission
             on May 26, 1998 as Exhibit 10.4 to the Company's Form 8-K dated May
             12, 1998 (File No. 0-22253) and incorporated herein by reference

    10.5     Indemnity  and  Guaranty  Agreement  dated as of May 12,  1998 from
             Brookdale  Living  Communities  of  California,  Inc. and Brookdale
             Living  Communities,  Inc. in favor of  Trustee,  as filed with the
             Securities and Exchange  Commission on May 26, 1998 as Exhibit 10.5
             to the Company's Form 8-K dated May 12, 1998 (File No. 0-22253) and
             incorporated herein by reference

    10.6     Hazardous  Substances  Indemnity Agreement dated as of May 12, 1998
             from The Atrium of San Jose LLC,  Brookdale  Living  Communities of
             California, Inc. and Brookdale Living Communities, Inc. in favor of
             Trustee,  as filed with the Securities  and Exchange  Commission on
             May 26, 1998 as Exhibit  10.6 to the  Company's  Form 8-K dated May
             12, 1998 (File No. 0- 22253) and incorporated herein by reference

    10.7     Indemnity  and  Guaranty  Agreement  dated as of May 12,  1998 from
             Brookdale Living  Communities,  Inc. in favor of Healthcare  Realty
             Trust  Incorporated,  as filed  with the  Securities  and  Exchange
             Commission  on May 26, 1998 as Exhibit 10.7 to the  Company's  Form
             8-K dated May 12, 1998 (File No. 0-22253) and  incorporated  herein
             by reference

    10.8     Indemnity Agreement dated as of May 12, 1998 by and among Brookdale
             Living  Communities,  Inc.  in favor of The Atrium of San Jose LLC,
             Healthcare Realty Trust Incorporated,  Key Corporate Capital, Inc.,
             SELCO Service  Corporation and Wilmington  Trust Company,  as filed
             with the  Securities  and  Exchange  Commission  on May 26, 1998 as
             Exhibit 10.8 to the Company's Form 8-K dated May 12, 1998 (File No.
             0-22253) and incorporated herein by reference

    10.9     Master  Facility  Agreement,  dated  as of June  17,  1998,  by and
             between Brookdale Living Communities, Inc. and Nomura Asset Capital
             Corporation as filed with the Securities and Exchange Commission on
             July 16, 1998 as Exhibit 10.1 to the Company's  Form 8-K dated June
             25, 1998 (File No. 0-22253) and incorporated herein by reference




                                      -18-
<PAGE>






  Exhibit
   Number                                     Description
  -------                                     -----------

   10.10     Loan  Agreement,  dated as of June 17,  1998,  by and among  Nomura
             Asset Capital  Corporation,  AH Texas Owner Limited Partnership and
             BLC of  Texas-II,  L.P. as filed with the  Securities  and Exchange
             Commission on July 16, 1998 as Exhibit 10.2 to the  Company's  Form
             8-K dated June 25, 1998 (File No. 0-22253) and incorporated  herein
             by reference

   10.11     Building  Loan  Agreement,  dated as of June 17, 1998, by and among
             Nomura  Asset   Capital   Corporation,   AH  Texas  Owner   Limited
             Partnership and BLC of Texas-II,  L.P. as filed with the Securities
             and  Exchange  Commission  on July 16, 1998 as Exhibit  10.3 to the
             Company's  Form 8-K dated  June 25,  1998  (File No.  0-22253)  and
             incorporated herein by reference

   10.12     Guaranty of Payment of Note, Rate Lock Obligations,  Carrying Costs
             and Recourse Obligations, dated as of June 17, 1998, from Brookdale
             Living   Communities,   Inc.  in  favor  of  Nomura  Asset  Capital
             Corporation.  as filed with the Securities and Exchange  Commission
             on July 16, 1998 as Exhibit  10.4 to the  Company's  Form 8-K dated
             June 25,  1998  (File  No.  0-22253)  and  incorporated  herein  by
             reference

   10.13     Guaranty of  Completion,  dated as of June 17,  1998,  by Brookdale
             Living   Communities,   Inc.  in  favor  of  Nomura  Asset  Capital
             Corporation as filed with the Securities and Exchange Commission on
             July 16, 1998 as Exhibit 10.5 to the Company's  Form 8-K dated June
             25, 1998 (File No. 0-22253) and incorporated herein by reference

   10.14     Environmental Indemnity Agreement,  dated as of June 17, 1998, from
             Brookdale Living Communities, Inc. in favor of Nomura Asset Capital
             Corporation as filed with the Securities and Exchange Commission on
             July 16, 1998 as Exhibit 10.6 to the Company's  Form 8-K dated June
             25, 1998 (File No. 0-22253) and incorporated herein by reference

   10.15     Loan Agreement,  dated as of June 17, 1998, by and between Banc One
             Capital Partners IV, Ltd. and AH Texas Subordinated,  LLC. as filed
             with the  Securities  and Exchange  Commission  on July 16, 1998 as
             Exhibit  10.7 to the  Company's  Form 8-K dated June 25, 1998 (File
             No. 0-22253) and incorporated herein by reference

   10.16     Guaranty  Agreement,  dated as of June  17,  1998,  from  Brookdale
             Living Communities,  Inc. in favor of Banc One Capital Partners IV,
             Ltd. as filed with the Securities  and Exchange  Commission on July
             16, 1998 as Exhibit 10.8 to the  Company's  Form 8-K dated June 25,
             1998 (File No. 0-22253) and incorporated herein by reference

   10.17     Guaranty of  Completion,  dated as of June 17,  1998,  by Brookdale
             Living Communities,  Inc. in favor of Banc One Capital Partners IV,
             Ltd. as filed with the Securities  and Exchange  Commission on July
             16, 1998 as Exhibit 10.9 to the  Company's  Form 8-K dated June 25,
             1998 (File No. 0-22253) and incorporated herein by reference
 
   10.18     Non-recourse  Guaranty  Agreement,  dated as of June 17, 1998, from
             Brookdale  Living  Communities,  Inc.  in favor of Banc One Capital
             Partners  IV,  Ltd.  as filed  with  the  Securities  and  Exchange
             Commission on July 16, 1998 as Exhibit 10.10 to the Company's  Form
             8-K dated June 25, 1998 (File No. 0-22253) and incorporated  herein
             by reference

   10.19     Environmental Indemnity Agreement,  dated as of June 17, 1998, from
             Brookdale  Living  Communities,  Inc.  in favor of Banc One Capital
             Partners  IV,  Ltd.  as filed  with  the  Securities  and  Exchange
             Commission on July 16, 1998 as Exhibit 10.11 to the Company's  Form
             8-K dated June 25, 1998 (File No. 0-22253) and incorporated  herein
             by reference

    10.20    Environmental Indemnity Agreement,  dated as of June 17, 1998, from
             Brookdale  Living  Communities,  Inc.  in favor of the  Indemnified
             Parties (as defined therein) and AH Texas Owner Limited Partnership
             as filed with the  Securities  and Exchange  Commission on July 16,
             1998 as Exhibit 10.12 to the Company's Form 8-K dated June 25, 1998
             (File No. 0-22253) and incorporated herein by reference

   10.21     Conditional Investment Agreement, dated as of June 17, 1998, by and
             between  Brookdale  Living  Communities,  Inc. and Banc One Capital
             Funding  Corporation  as filed  with the  Securities  and  Exchange
             Commission on July 16, 1998 as Exhibit 10.13 to the Company's  Form
             8-K dated June 25, 1998 (File No. 0-22253) and incorporated  herein
             by reference




                                      -19-
<PAGE>






  Exhibit
   Number                                     Description
  -------                                     -----------

   10.22     Warrant Certificate, dated as of June 17, 1998, issued by Brookdale
             Living Communities, Inc. in favor of Banc One Capital Markets, Inc.
             for  up to  5,000  shares  of  Common  Stock  of  Brookdale  Living
             Communities,  Inc.  as  filed  with  the  Securities  and  Exchange
             Commission on July 16, 1998 as Exhibit 10.14 to the Company's  Form
             8-K dated June 25, 1998 (File No. 0-22253) and incorporated  herein
             by reference

   10.23     Warrant Certificate, dated as of June 17, 1998, issued by Brookdale
             Living Communities,  Inc. in favor of Banc One Capital Partners IV,
             Ltd. for up to 20,000  shares of Common  Stock of Brookdale  Living
             Communities,  Inc.  as  filed  with  the  Securities  and  Exchange
             Commission on July 16, 1998 as Exhibit 10.15 to the Company's  Form
             8-K dated June 25, 1998 (File No. 0-22253) and incorporated  herein
             by reference

   10.24     Amended and Restated  Development  Agreement,  dated as of June 17,
             1998,  by and  between  BLC of  Texas-II,  L.P.  and AH Texas Owner
             Limited  Partnership  as filed  with the  Securities  and  Exchange
             Commission on July 16, 1998 as Exhibit 10.16 to the Company's  Form
             8-K dated June 25, 1998 (File No. 0-22253) and incorporated  herein
             by reference

   10.25     Management Agreement, dated as of June 17, 1998, by and between BLC
             of Texas-II,  L.P. and AH Texas Owner Limited  Partnership as filed
             with the  Securities  and Exchange  Commission  on July 16, 1998 as
             Exhibit 10.17 to the  Company's  Form 8-K dated June 25, 1998 (File
             No. 0-22253) and incorporated herein by reference

   10.26     Equity  Option  Agreement,  dated as of June 17, 1998, by and among
             Brookdale  Living   Communities,   Inc.,  AH  Texas  Owner  Limited
             Partnership, AH Texas Subordinated,  LLC, AH Texas CGP, Inc. and AH
             Texas  Investor,  Inc. as filed with the  Securities  and  Exchange
             Commission on July 16, 1998 as Exhibit 10.18 to the Company's  Form
             8-K dated June 25, 1998 (File No. 0-22253) and incorporated  herein
             by reference

   10.27     Property Option Agreement,  dated as of June 17, 1998, by and among
             Brookdale  Living   Communities,   Inc.,  AH  Texas  Owner  Limited
             Partnership  and AH Texas  Subordinated,  LLC.  as  filed  with the
             Securities  and  Exchange  Commission  on July 16,  1998 as Exhibit
             10.19 to the  Company's  Form 8-K  dated  June 25,  1998  (File No.
             0-22253) and incorporated herein by reference

   10.28     Loan  Agreement,  dated as of June 17,  1998,  by and among  Nomura
             Asset Capital  Corporation,  AH Michigan Owner Limited  Partnership
             and Brookdale  Living  Communities of Michigan,  Inc. as filed with
             the Securities and Exchange  Commission on July 16, 1998 as Exhibit
             10.20 to the  Company's  Form 8-K  dated  June 25,  1998  (File No.
             0-22253) and incorporated herein by reference

   10.29     Building  Loan  Agreement,  dated as of June 17, 1998, by and among
             Nomura  Asset  Capital  Corporation,   AH  Michigan  Owner  Limited
             Partnership and Brookdale Living  Communities of Michigan,  Inc. as
             filed with the Securities and Exchange  Commission on July 16, 1998
             as Exhibit  10.21 to the  Company's  Form 8-K dated  June 25,  1998
             (File No. 0-22253) and incorporated herein by reference

   10.30     Guaranty of Payment of Note, Rate Lock Obligations,  Carrying Costs
             and Recourse Obligations, dated as of June 17, 1998, from Brookdale
             Living   Communities,   Inc.  in  favor  of  Nomura  Asset  Capital
             Corporation as filed with the Securities and Exchange Commission on
             July 16, 1998 as Exhibit 10.22 to the Company's Form 8-K dated June
             25, 1998 (File No. 0- 22253) and incorporated herein by reference

   10.31     Guaranty of  Completion,  dated as of June 17,  1998,  by Brookdale
             Living   Communities,   Inc.  in  favor  of  Nomura  Asset  Capital
             Corporation as filed with the Securities and Exchange Commission on
             July 16, 1998 as Exhibit 10.23 to the Company's Form 8-K dated June
             25, 1998 (File No. 0-22253) and incorporated herein by reference

   10.32     Environmental Indemnity Agreement,  dated as of June 17, 1998, from
             Brookdale Living Communities, Inc. in favor of Nomura Asset Capital
             Corporation as filed with the Securities and Exchange Commission on
             July 16, 1998 as Exhibit 10.24 to the Company's Form 8-K dated June
             25, 1998 (File No. 0-22253) and incorporated herein by reference




                                      -20-
<PAGE>






  Exhibit
   Number                                     Description
  -------                                     -----------

   10.33     Loan Agreement,  dated as of June 17, 1998, by and between Banc One
             Capital  Partners  IV, Ltd.  and AH Michigan  Subordinated,  LLC as
             filed with the Securities and Exchange  Commission on July 16, 1998
             as Exhibit  10.25 to the  Company's  Form 8-K dated  June 25,  1998
             (File No. 0-22253) and incorporated herein by reference

   10.34     Guaranty  Agreement,  dated as of June  17,  1998,  from  Brookdale
             Living Communities,  Inc. in favor of Banc One Capital Partners IV,
             Ltd. as filed with the Securities  and Exchange  Commission on July
             16, 1998 as Exhibit 10.26 to the Company's  Form 8-K dated June 25,
             1998 (File No. 0-22253) and incorporated herein by reference

   10.35     Guaranty of  Completion,  dated as of June 17,  1998,  by Brookdale
             Living Communities,  Inc. in favor of Banc One Capital Partners IV,
             Ltd. as filed with the Securities  and Exchange  Commission on July
             16, 1998 as Exhibit 10.27 to the Company's  Form 8-K dated June 25,
             1998 (File No. 0-22253) and incorporated herein by reference

   10.36     Non-recourse  Guaranty  Agreement,  dated as of June 17, 1998, from
             Brookdale  Living  Communities,  Inc.  in favor of Banc One Capital
             Partners  IV,  Ltd.  as filed  with  the  Securities  and  Exchange
             Commission on July 16, 1998 as Exhibit 10.28 to the Company's  Form
             8-K dated June 25, 1998 (File No. 0-22253) and incorporated  herein
             by reference

   10.37     Environmental Indemnity Agreement,  dated as of June 17, 1998, from
             Brookdale  Living  Communities,  Inc.  in favor of Banc One Capital
             Partners  IV,  Ltd.  as filed  with  the  Securities  and  Exchange
             Commission on July 16, 1998 as Exhibit 10.29 to the Company's  Form
             8-K dated June 25, 1998 (File No. 0-22253) and incorporated  herein
             by reference

   10.38     Environmental Indemnity Agreement,  dated as of June 17, 1998, from
             Brookdale  Living  Communities,  Inc.  in favor of the  Indemnified
             Parties  (as  defined   therein)  and  AH  Michigan  Owner  Limited
             Partnership as filed with the Securities and Exchange Commission on
             July 16, 1998 as Exhibit 10.30 to the Company's Form 8-K dated June
             25, 1998 (File No. 0- 22253) and incorporated herein by reference

   10.39     Conditional Investment Agreement, dated as of June 17, 1998, by and
             between  Brookdale  Living  Communities,  Inc. and Banc One Capital
             Funding  Corporation  as filed  with the  Securities  and  Exchange
             Commission on July 16, 1998 as Exhibit 10.31 to the Company's  Form
             8-K dated June 25, 1998 (File No. 0-22253) and incorporated  herein
             by reference

   10.40     Warrant Certificate, dated as of June 17, 1998, issued by Brookdale
             Living Communities, Inc. in favor of Banc One Capital Markets, Inc.
             for  up to  5,000  shares  of  Common  Stock  of  Brookdale  Living
             Communities,  Inc.  as  filed  with  the  Securities  and  Exchange
             Commission on July 16, 1998 as Exhibit 10.32 to the Company's  Form
             8-K dated June 25, 1998 (File No. 0-22253) and incorporated  herein
             by reference

   10.41     Warrant Certificate, dated as of June 17, 1998, issued by Brookdale
             Living Communities,  Inc. in favor of Banc One Capital Partners IV,
             Ltd. for up to 20,000  shares of Common  Stock of Brookdale  Living
             Communities,  Inc.  as  filed  with  the  Securities  and  Exchange
             Commission on July 16, 1998 as Exhibit 10.33 to the Company's  Form
             8-K dated June 25, 1998 (File No. 0-22253) and incorporated  herein
             by reference

   10.42     Amended and Restated  Development  Agreement,  dated as of June 17,
             1998, by and between Brookdale Living Communities of Michigan, Inc.
             and AH  Michigan  Owner  Limited  Partnership  as  filed  with  the
             Securities  and  Exchange  Commission  on July 16,  1998 as Exhibit
             10.34 to the  Company's  Form 8-K  dated  June 25,  1998  (File No.
             0-22253) and incorporated herein by reference

   10.43     Management  Agreement,  dated as of June 17,  1998,  by and between
             Brookdale  Living  Communities  of  Michigan,  Inc. and AH Michigan
             Owner Limited Partnership as filed with the Securities and Exchange
             Commission on July 16, 1998 as Exhibit 10.35 to the Company's  Form
             8-K dated June 25, 1998 (File No. 0-22253) and incorporated  herein
             by reference

   10.44     Equity  Option  Agreement,  dated as of June 17, 1998, by and among
             Brookdale  Living  Communities,  Inc.,  AH Michigan  Owner  Limited
             Partnership,  AH Michigan Subordinated,  LLC, AH Michigan CGP, Inc.
             and AH Michigan  Investor,  Inc. as filed with the  Securities  and
             Exchange  Commission  on July  16,  1998 as  Exhibit  10.36  to the
             Company's  Form 8-K dated  June 25,  1998  (File No.  0-22253)  and
             incorporated herein by reference



                                      -21-

<PAGE>






   10.45     Property Option Agreement,  dated as of June 17, 1998, by and among
             Brookdale  Living  Communities,  Inc.,  AH Michigan  Owner  Limited
             Partnership  and AH Michigan  Subordinated,  LLC. as filed with the
             Securities  and  Exchange  Commission  on July 16,  1998 as Exhibit
             10.37 to the  Company's  Form 8-K  dated  June 25,  1998  (File No.
             0-22253) and incorporated herein by reference

   10.46     Purchase  and Sale  Agreement,  dated as of June 30,  1998,  by and
             between AH North Carolina Owner Limited  Partnership  and Brookdale
             Living  Communities  of North  Carolina,  Inc.,  and  guaranteed by
             Brookdale Living Communities, Inc. as filed with the Securities and
             Exchange  Commission  on  July  17,  1998  as  Exhibit  10.1 to the
             Company's  Form 8-K dated  June 30,  1998  (File No.  0-22253)  and
             incorporated herein by reference

   10.47     Note,  dated  June 30,  1998,  issued  by AH North  Carolina  Owner
             Limited  Partnership  in favor of Brookdale  Living  Communities of
             North Carolina,  Inc. in the principal  amount of  $1,902,776.97 as
             filed with the Securities and Exchange  Commission on July 17, 1998
             as Exhibit 10.2 to the Company's Form 8-K dated June 30, 1998 (File
             No. 0-22253) and incorporated herein by reference

   10.48     Development Agreement, dated as of June 30, 1998, by and between AH
             North  Carolina  Owner Limited  Partnership  and  Brookdale  Living
             Communities  of North  Carolina,  Inc., and guaranteed by Brookdale
             Living Communities,  Inc. as filed with the Securities and Exchange
             Commission on July 17, 1998 as Exhibit 10.3 to the  Company's  Form
             8-K dated June 30, 1998 (File No. 0-22253) and incorporated  herein
             by reference

   10.49     Guaranty  Agreement,  dated as of June 30, 1998, issued by AH North
             Carolina CPG, Inc. and AH North Carolina Subordinated, LLC in favor
             of Brookdale  Living  Communities of North Carolina,  Inc. as filed
             with the  Securities  and Exchange  Commission  on July 17, 1998 as
             Exhibit  10.4 to the  Company's  Form 8-K dated June 30, 1998 (File
             No. 0-22253) and incorporated herein by reference

   10.50     Collateral  Assignment of Partnership  Interests,  dated as of June
             30,  1998,  issued  by AH North  Carolina  CPG,  Inc.  and AH North
             Carolina  Subordinated,  LLC for the  benefit of  Brookdale  Living
             Communities  of North  Carolina,  Inc. as filed with the Securities
             and  Exchange  Commission  on July 17, 1998 as Exhibit  10.5 to the
             Company's  Form 8-K dated  June 30,  1998  (File No.  0-22253)  and
             incorporated herein by reference 

   10.51*    Loan  Agreement  dated  as of April  27,  1998 by and  between  the
             Company and LaSalle National Bank 

   10.52*    Note dated  April 27,  1998  issued by the  Company  payable to the
             order of LaSalle National Bank

   27*       Financial Data Schedule

---------------
*  Previously filed.



(b)     Reports on Form 8-K:

  On May 26, 1998,  the Company filed a Current Report on Form 8-K dated May 12,
1998 with the Securities and Exchange  Commission  announcing pursuant to Item 5
of Form 8-K the lease of The Atrium of San Jose which commenced on May 12, 1998.




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<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:  March 30, 1999                     /s/ Mark J. Schulte
       -----------------------------      -------------------
                                          Mark J. Schulte
                                          President and
                                          Chief Executive Officer


Date:  March 30, 1999                      /s/ Darryl W. Copeland, Jr.
       -----------------------------       ---------------------------
                                           Darryl W. Copeland, Jr.
                                           Executive Vice President and
                                           Chief Financial Officer








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