THIS NOTE AND THE  INDEBTEDNESS  EVIDENCED  HEREBY ARE SUBORDINATE IN THE MANNER
AND TO THE  EXTENT  SET  FORTH  IN THAT  CERTAIN  SUBORDINATION  AGREEMENT  (THE
"SUBORDINATION  AGREEMENT")  DATED JANUARY 25, 1999,  AMONG FBR ASSET INVESTMENT
CORPORATION,  BROOKDALE LIVING COMMUNITIES,  INC. (THE "BORROWER"),  AND LASALLE
NATIONAL BANK ("BANK"),  TO THE INDEBTEDNESS OWED BY THE BORROWER TO THE HOLDERS
OF ALL OF THE NOTES ISSUED PURSUANT TO THAT CERTAIN LOAN AGREEMENT,  DATED APRIL
27, 1998 AS AMENDED  THROUGH THE DATE HEREOF,  BETWEEN THE BORROWER AND BANK, AS
SUCH LOAN  AGREEMENT MAY BE AMENDED,  SUPPLEMENTED,  OR OTHERWISE  MODIFIED FROM
TIME TO TIME; AND EACH HOLDER OF THIS NOTE, BY ITS ACCEPTANCE  HEREOF,  SHALL BE
BOUND BY THE PROVISIONS OF THE SUBORDINATION AGREEMENT.


                                 PROMISSORY NOTE



$5,000,000                                                      January 25, 1999


         FOR VALUE RECEIVED,  the  undersigned,  BROOKDALE  LIVING  COMMUNITIES,
INC., a Delaware corporation, whose address is 77 West Wacker Drive, Suite 4400,
Chicago,  Illinois 60601 (the  "Borrower"),  promises to pay to the order of FBR
ASSET INVESTMENT CORPORATION,  a Virginia corporation,  whose address is Potomac
Tower, 1001 Nineteenth Street North, 18th Floor, Arlington,  Virginia 22209 (the
"Lender") on or before the Maturity  Date,  in lawful money of the United States
of America, the principal sum of FIVE MILLION DOLLARS ($5,000,000) plus interest
at the times and in the amounts  and manner as  provided  in the Loan  Agreement
(the  "Agreement"),  dated as of January 25, 1999,  between the Borrower and the
Lender.

         MAXIMUM  RATE OF  INTEREST:  It is  intended  that the rate of interest
hereon shall never exceed the maximum rate, if any, which may be legally charged
on the Loan evidenced by this Note ("Maximum  Rate"),  and if the provisions for
interest  contained  in this Note would result in a rate higher than the Maximum
Rate, interest shall nevertheless be limited to the Maximum Rate and any amounts
which may be paid toward interest in excess of the Maximum Rate shall be applied
to the reduction of principal,  or, at the option of the Lender, returned to the
Borrower.

         DUE  DATE:  All  indebtedness  evidenced  hereby  not paid  before  the
Maturity Date shall be due and payable on the Maturity Date.

         PLACE OF PAYMENT: All payments hereon shall be made, and all notices to
the Lender  required or authorized  hereby shall be given,  at the office of the
Lender at the 

<PAGE>

address  designated  in the heading of this Note,  or to such other place as the
Lender may from time to time direct by written notice to the Borrower.

         PAYMENT AND EXPENSES OF COLLECTION:  All amounts payable  hereunder are
payable by wire transfer in  immediately  available  funds to the account number
specified by the Lender, in lawful money of the United States. Payments remitted
by the Borrower via wire transfer  initiated  after 3:00 p.m. New York City time
shall be deemed to be received on the next Business Day. The Borrower  agrees to
pay all costs of  collection  when  incurred,  including,  without  limiting the
generality  of the  foregoing,  reasonable  attorneys'  fees  through  appellate
proceedings  and allocated cost of in-house  counsel,  and to perform and comply
with each of the covenants,  conditions,  provisions and agreements contained in
every  instrument now evidencing or securing said  indebtedness.  If any suit or
action be  instituted  to enforce this Note,  the  Borrower  promises to pay, in
addition to the cost and disbursements otherwise allowed by applicable Law, such
sums as the court may adjudge reasonable attorneys' fees in such suit or action.

         DEFAULTS:  Upon the happening of an Event of Default (as defined in the
Agreement),  the Lender  shall have all  rights  and  remedies  set forth in the
Agreement.

         The failure to exercise any of the rights and remedies set forth in the
Agreement shall not constitute a waiver of the right to exercise the same or any
other  option at any  subsequent  time in respect of the same event or any other
event. The acceptance by the Lender of any payment  hereunder which is less than
payment in full of all amounts due and payable at the time of such payment shall
not constitute a waiver of the right to exercise any of the foregoing rights and
remedies at that time or at any subsequent time or nullify any prior exercise of
any such rights and remedies  without the express  consent of Lender,  except as
and to the extent otherwise provided by applicable Law.

         WAIVERS: To the extent permitted by applicable Law, the Borrower waives
diligence,  presentment,  protest and demand and also notice of protest, demand,
dishonor and  nonpayment of this Note,  and expressly  agrees that this Note, or
any payment  hereunder,  may be extended from time to time,  and consents to the
acceptance  of  collateral,  the release of any  collateral  for this Note,  the
release of any party  primarily or secondarily  liable hereon,  and that it will
not be necessary  for the Lender,  in order to enforce  payment of this Note, to
first institute or exhaust  Lender's  remedies against the Borrower or any other
party  liable  hereon or  against  any  collateral  for this  Note.  None of the
foregoing  shall  affect the  liability  of the  Borrower  and any  endorsers or
guarantors  hereof.  No extension  of time for the payment of this Note,  or any
installment  hereof,  made by  agreement  by the  Lender  with any person now or
hereafter  liable for the payment of this Note, shall affect the liability under
this  Note  of the  Borrower,  even  if the  Borrower  is not a  party  to  such
agreement;  provided, however, the Lender and the Borrower, by written agreement
between them, may affect the liability of the Borrower.

         TERMINOLOGY:  Any  reference  herein to the  Lender  shall be deemed to
include and apply to every  subsequent  holder of this Note.  Capitalized  terms
used but not defined

<PAGE>

herein shall have the meanings assigned to such terms in the Agreement. Words of
masculine  or  neuter  import  shall  be read as if  written  in the  neuter  or
masculine or feminine when appropriate.

         AGREEMENT:  Reference is made to the  Agreement  for  provisions  as to
payments, collateral and acceleration.

THIS NOTE IS GOVERNED BY THE PROVISIONS OF THE AGREEMENT  WHICH IS  INCORPORATED
HEREIN BY  REFERENCE,  AND IN THE EVENT ANY TERMS OF THIS NOTE ARE  INCONSISTENT
WITH THE TERMS OF THE  AGREEMENT,  THE TERMS OF THE AGREEMENT  SHALL GOVERN THIS
NOTE.  NOTWITHSTANDING  THE  FOREGOING  SENTENCE,  NO  REFERENCE  HEREIN  TO THE
AGREEMENT  AND NO  PROVISION  OF THIS NOTE OR OF THE  AGREEMENT  SHALL  ALTER OR
IMPAIR THE OBLIGATION OF THE BORROWER,  WHICH IS ABSOLUTE AND UNCONDITIONAL,  TO
PAY THE  PRINCIPAL OF AND INTEREST ON THIS NOTE AT THE  RESPECTIVE  TIMES AND AT
THE RATES HEREIN PRESCRIBED.

         GOVERNING  LAW;  CONSENT  TO  FORUM;  IMMUNITIES:  This  Note  and  the
Agreement  shall be governed by and construed in accordance with the Laws of the
Commonwealth  of Virginia,  without  giving effect to the conflict of laws rules
therein.  The parties  hereto hereby consent and agree that the Circuit Court of
Arlington  County,  Virginia,  or, at the  Lender's  option,  the United  States
District  Court for the  Eastern  District  of  Virginia,  shall have  exclusive
jurisdiction  to hear and determine  any claims or disputes  between the parties
hereto  pertaining to the Note or the Agreement or to any matter  arising out of
or related to the Note or the Agreement. The parties hereto expressly submit and
consent in advance to such  jurisdiction  in any action or suit commenced in any
such court,  and hereby waive any objection which it may have based upon lack of
personal jurisdiction, improper venue or forum non conveniens and hereby consent
to the granting of such legal or equitable  relief as is deemed  appropriate  by
such court. Each party hereto irrevocably  consents to the service of process by
registered  or  certified  mail,  postage  prepaid,  to it at its address  given
pursuant to Section 10.01 of the Agreement. Nothing in the Agreement or the Note
shall be deemed or  operate  to affect  the right of the  Lender to serve  legal
process in any other  manner  permitted  by  applicable  Law, or to preclude the
enforcement by the Lender of any judgment or order obtained in such forum or the
taking of any action  under the  Agreement  or the Note to  enforce  same in any
other appropriate forum or jurisdiction.

         To the  extent  that the  Borrower  has or may  hereafter  acquire  any
immunity from the  jurisdiction of any court or from any legal process  (whether
through service or notice,  attachment  prior to judgment,  attachment in aid of
execution,  execution  or  otherwise)  with  respect  to  the  Borrower  or  the
Borrower's  property,  the Borrower hereby  irrevocably  waives such immunity in
respect of its obligations under the Agreement.

<PAGE>

         To  the  extent   permitted  by  applicable   Law,  each  party  hereto
irrevocably  waives any right such party may have to  consequential  or punitive
damages from any other party and hereby  agrees not to assert any claim for such
damages.


                                        BROOKDALE LIVING COMMUNITIES, INC.


                                        By:  /s/ Darryl W. Copeland, Jr.
                                             ----------------------------------
                                             Name:  Darryl W. Copeland, Jr.
                                             Title: Executive Vice President and
                                                    Chief Financial Officer