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

                                    FORM 10-Q

[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934, for the Quarterly Period ended March 31, 1999.

                                       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                                 (Zip Code)
      executive offices)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes    X   No
    -----    -------
Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

As of August 16, 1999, 11,572,082 shares of the Registrant's Common Stock, $0.01
par value per share, were outstanding.



<PAGE>
              BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

                                    Form 10-Q

                                      INDEX
                                      -----

PART I:  FINANCIAL INFORMATION                                              Page
                                                                            ----

Item 1.  Financial Statements.                                                 3

         Consolidated  Balance Sheets as of June 30, 1999
         and as of December 31, 1998                                           4

         Consolidated  Statements  of  Operations  for the three
         months and six months ended June 30, 1999 and 1998                    5

         Consolidated Statements of Cash Flows for the six
         months ended June 30, 1999 and 1998                                   6

         Notes to Consolidated Financial Statements                            8

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations.                                           11

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

PART II:  OTHER INFORMATION                                                   18

Item 1.  Legal Proceedings.                                                   18
Item 2.  Changes in Securities and Use of Proceeds.                           18
Item 3.  Defaults Upon Senior Securities.                                     18
Item 4.  Submission of Matters to a Vote of Security Holders.                 18
Item 5.  Other Information.                                                   18
Item 6.  Exhibits and Reports on Form 8-K.                                    19

Signatures                                                                    22

                                       2

<PAGE>

                          PART I: FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited).


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

     Brookdale  Living  Communities,  Inc. was incorporated on September 4, 1996
and commenced  operations  upon the completion of its initial public offering on
May 7,  1997.  The  consolidated  financial  statements  of  Brookdale  and  its
Subsidiaries  (the  "Company")   represent  the  results  of  operations  of  19
facilities the Company operated during the period end June 30, 1999.

     The aforementioned  financial statements should be read in conjunction with
the notes to the consolidated  financial statements and Management's  Discussion
and Analysis of Financial  Condition and Results of Operations and the financial
statements for the year ended December 31, 1998 included in the Company's Annual
Report on Form 10-K as filed with the  Securities  and  Exchange  Commission  on
March 31, 1999.


                                       3

<PAGE>
<TABLE>
<CAPTION>


                                         BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

                                                     CONSOLIDATED BALANCE SHEETS
                                              (In Thousands, Except Par Value Amounts)


                                                                              June 30, 1999      December 31, 1998
                                                                               (unaudited)         (audited)
                                                                             -------------        -------------
<S>                                                                          <C>                  <C>
Assets

Cash and cash equivalents..............................................      $      17,560        $       1,065
Short-term investments.................................................             55,000                   --
Accounts receivable....................................................                766                  379
Notes receivable.......................................................              2,151                3,486
Reimbursable development costs.........................................             10,860                9,815
Prepaid expenses and other.............................................              7,674                4,752
                                                                             -------------        -------------
      Total current assets.............................................             94,011               19,497
                                                                             -------------        -------------

Property, plant and equipment..........................................            120,386              115,801
Accumulated depreciation...............................................             (7,667)              (5,689)
                                                                             --------------       -------------
Property, plant and equipment, net.....................................            112,719              110,112
                                                                             -------------        -------------

Property under development.............................................             18,400               11,221
Cash and investments - restricted......................................              9,298                8,226
Investment certificates - restricted...................................             20,802               15,951
Letter of credit deposits..............................................                 --               13,919
Lease security deposits................................................             66,737               55,453
Other, net.............................................................             17,484               10,254
                                                                             -------------        -------------
      Total assets.....................................................      $     339,451        $     244,633
                                                                             =============        =============

Liabilities and Stockholders' Equity

Liabilities
Current portion of long-term debt......................................      $         323        $       3,310
Unsecured line of credit...............................................                 --               10,997
Current portion of deferred gain on sale of property...................                806                  806
Accrued interest payable...............................................                373                  968
Accounts payable and accrued expenses..................................             12,197                9,234
Tenant refundable entrance fees and security deposits..................              6,459                5,838
Other..................................................................              1,384                  629
                                                                             -------------        -------------
      Total current liabilities........................................             21,542               31,782
                                                                             -------------        -------------

Long-term debt, less current portion...................................             92,406               92,570
Convertible subordinated notes.........................................            100,000                   --
Deferred lease liability...............................................              3,076                2,849
Deferred gain on sale of property, less current portion................             15,714               16,116
                                                                             -------------        -------------
      Total liabilities................................................            232,738              143,317
                                                                             -------------        -------------
Stockholders' Equity:
Preferred stock, $.01 par value, 20,000 authorized, none issued........                 --                   --
Common stock, $.01 par value, 75,000 shares authorized, 11,572 shares
    issued and outstanding at June 30, 1999 and December 31, 1998......                116                  116
Additional paid-in-capital.............................................             94,101               94,101
Accumulated earnings...................................................             12,496                7,099
                                                                             -------------        -------------
      Total stockholders' equity.......................................            106,713              101,316
                                                                             -------------        -------------
      Total liabilities and stockholders' equity.......................      $     339,451        $     244,633
                                                                             =============        =============

</TABLE>

See accompanying notes to consolidated financial statements.

                                       4

<PAGE>
<TABLE>
<CAPTION>

                                         BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

                                                CONSOLIDATED STATEMENTS OF OPERATIONS
                                              (In Thousands, Except Per Share Amounts)
                                                             (Unaudited)


                                                                Three months ended June 30,    Six months ended June 30,
                                                                   1999           1998            1999           1998
                                                                 --------       --------        --------       --------
<S>                                                             <C>             <C>            <C>            <C>
Revenue
Resident fees...............................................    $    24,410     $   17,198     $    48,188    $    32,855
Development fees............................................          1,635          1,390           3,301          2,578
Management fees.............................................             72             63             145            116
                                                                -----------     ----------     -----------    -----------
       Total revenue........................................         26,117         18,651          51,634         35,549
                                                                -----------     ----------     -----------    -----------

Expenses
Facility operating..........................................         12,896          9,691          25,688         18,278
General and administrative..................................          1,277          1,204           2,435          2,496
Lease expense...............................................          6,358          4,141          12,646          7,992
Depreciation and amortization...............................          1,320          1,205           2,682          2,431
Write-off of deferred financing costs.......................            273             --             273             --
                                                                -----------     ----------     -----------    -----------
       Total operating expenses.............................         22,124         16,241          43,724         31,197
                                                                -----------     ----------     -----------    -----------
       Income from operations...............................          3,993          2,410           7,910          4,352
Interest income.............................................          1,943            936           3,489          1,641
Interest expense............................................         (1,788)          (936)         (2,915)        (1,858)
                                                                ------------    -----------    ------------   ------------
       Income before income tax expense.....................          4,148          2,410           8,484          4,135
Income tax expense..........................................         (1,508)          (889)         (3,087)        (1,503)
                                                                ------------    -----------    ------------   ------------

       Net income...........................................    $     2,640     $    1,521     $     5,397    $     2,632
                                                                ===========     ==========     ===========    ===========

Basic earnings per common share.............................    $      0.23     $     0.16     $      0.47    $      0.28
                                                                ===========     ==========     ===========    ===========

Weighted average shares used for computing basic
    earnings per common share...............................         11,572          9,487          11,572          9,448
                                                                ===========     ==========     ===========    ===========

Diluted earnings per common share...........................    $      0.22     $     0.16     $      0.45    $      0.27
                                                                ===========     ==========     ===========    ===========

Weighted average shares used for computing diluted
    earnings per common share...............................         14,499          9,793          13,120          9,721
                                                                ===========     ==========     ===========    ===========

</TABLE>

See accompanying notes to consolidated financial statements.

                                       5

<PAGE>

<TABLE>
<CAPTION>


                                         BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

                                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                           (In Thousands)
                                                             (Unaudited)



                                                                                       Six months ended June 30,
                                                                                     1999                     1998
                                                                                    ------                   ------

<S>                                                                             <C>                 <C>
Cash Flows from Operating Activities
    Net income...........................................................       $       5,397       $        2,632
    Adjustments to reconcile net income to net cash provided by
    operating activities:
       Depreciation and amortization.....................................               2,682                2,431
       Write-off of deferred financing costs.............................                 273                   --
       Deferred income taxes.............................................               2,787                1,536
       Change in deferred lease liability................................                 227                  614
       Deferred gain on sale of property.................................                (402)                (402)
       Changes in:
          Accounts receivable............................................                (387)                (399)
          Prepaid expenses and other.....................................              (6,213)              (4,767)
          Accrued interest payable.......................................                (595)                 (72)
          Accounts payable and accrued expenses..........................               2,966                2,854
          Tenant refundable entrance fees and security deposits..........                 128                 (108)
          Other current liabilities......................................                (387)                (851)
                                                                                --------------      ---------------
              Net cash provided by operating activities..................               6,476                3,468
                                                                                -------------       --------------

Cash Flows from Investing Activities
    Lease security deposits and acquisitions.............................             (11,295)             (12,638)
    Increase in cash and investments - restricted........................                (579)             (12,758)
    Increase in investments - restricted.................................              (4,851)                  --
    Proceeds from sale of property under development, net................                 300                3,300
    Property under development, net of related payables .................              (8,048)              (9,915)
    Payments received on notes receivable................................               1,903                7,446
    Purchases of short-term investments..................................             (55,000)                  --
    Additions to property, plant and equipment and reimbursable
      development improvements, net of related accounts payable..........              (4,976)              (2,880)
                                                                                --------------      ---------------
              Net cash used in investing activities......................             (82,546)             (27,445)
                                                                                --------------      ---------------

Cash Flows from Financing Activities
    Repayment of long-term debt..........................................              (3,151)                (140)
    Proceeds from unsecured lines of credit..............................              31,933               10,750
    Repayment of unsecured lines of credit...............................             (42,930)              (2,500)
    Proceeds from issuance of convertible subordinated notes,
      net of costs.......................................................              94,294                   --
    Decrease (increase) in letter of credit deposit, net.................              13,919                 (876)
    Payment of financing costs...........................................              (1,500)                (504)
    Proceeds from issuance of common stock, net..........................                  --                5,392
                                                                                -------------       --------------
              Net cash provided by financing activities..................              92,565               12,122
                                                                                -------------       --------------

              Net increase (decrease) in cash and cash equivalents.......              16,495              (11,855)
              Cash and cash equivalents at beginning of period...........               1,065               13,292
                                                                                -------------       --------------
              Cash and cash equivalents at end of period.................       $      17,560       $        1,437
                                                                                =============       ==============


</TABLE>

See accompanying notes to consolidated financial statements.

                                       6

<PAGE>
<TABLE>
<CAPTION>


                                         BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

                                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                           (In Thousands)
                                                             (Unaudited)



                                                                                    Six months ended June 30,
                                                                                    1999                 1998
                                                                                   ------               ------
<S>                                                                             <C>                <C>
Supplemental Disclosure of Cash Flow Information:


Interest paid, net of amounts capitalized.............................          $       3,510      $         1,930
                                                                                =============      ===============

Income taxes paid.....................................................          $         486      $           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....................................          $      11,404      $        13,860
     Less: Cash consideration paid....................................                 10,911               11,875
                                                                                -------------      ---------------

     Liabilities assumed..............................................          $         493      $         1,985
                                                                                =============      ===============

</TABLE>

See accompanying notes to consolidated financial statements.


                                       7


<PAGE>


               BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

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

1.   Organization

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

     The consolidated financial statements of Brookdale Living Communities, Inc.
and its subsidiaries  (the "Company")  include the properties owned or leased by
the Company.  The Company operates in the senior independent and assisted living
segment.  The  properties  owned,  leased or  managed  by the  Company  or under
construction as of June 30, 1999  (collectively,  the  "Properties") are located
throughout the United States as indicated on the following table:

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

Owned Facilities:
-----------------
The Heritage of Des Plaines          May 7, 1997            Des Plaines, IL
The Devonshire                       May 7, 1997            Lisle, IL
Hawthorn Lakes                       May 7, 1997            Vernon Hills, IL
Edina Park Plaza                     May 7, 1997            Edina, MN

Leased Facilities:
The Hallmark                         May 7, 1997            Chicago, IL
The Springs of East Mesa             May 7, 1997            Mesa, AZ
The Gables at Brighton               May 7, 1997            Brighton, NY
The Park Place                       May 7, 1997            Spokane, WA
The Gables at Farmington             November 24, 1997      Farmington, CT
The Classic at West Palm Beach       December 18, 1997      West Palm Beach, FL
The Brendenwood Retirement
  Community                          December 22, 1997      Voorhees, NJ
Harbor Village                       March 6, 1998          Chicago, IL
The Atrium of San Jose               May 12, 1998           San Jose, CA
The Chatfield                        July 2, 1998           West Hartford, CT
Ponce de Leon                        October 21, 1998       Santa Fe, NM
Woodside Terrace                     December 22, 1998      Redwood City, CA
River Bay Club                       January 19, 1999       Quincy, MA

Managed Facilities:
-------------------
The Island on Lake Travis                                     Lago Vista, TX
The Kenwood                                                   Minneapolis, MN
Heritage at Gaines Ranch (1)                                  Austin, TX
Heritage at Southfield (1)                                    Southfield, MI

Development Projects Under Construction(2):
-------------------------------------------
Raleigh, North Carolina
Glen Ellyn, Illinois
New York (Battery Park City), New York

(1) These projects were developed by the Company,  commenced  operations in July
    1999 and are being  managed by the Company for third party  owners.
(2) The Company is developing these projects for third party owners.

                                       8

<PAGE>

              BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

2.    Summary of Significant Accounting Policies

Basis of Presentation

     The  accompanying  unaudited  financial  statements  have been  prepared in
accordance with 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, 1998 included in the Company's  Annual Report on Form
10-K, as filed with the Securities and Exchange Commission on March 31, 1999.

    Principles of Consolidation

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

    Use of Estimates

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

    Development Fees

     Development  fees related to  development  activities for projects owned by
third  parties  are  earned  over the  term of the  development.  Such  fees are
recognized  as revenues as the  development  services  are provided to the owner
during the pre-construction and construction periods, 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 May 14,  1999,  the Company  repaid a $5,000  unsecured  loan which bore
interest at 12% per annum and which had a maturity date of May 21, 1999.

     On April 14, 1999,  the Company  increased its unsecured  revolving line of
credit to $29,000,  and on April 26, 1999, extended the maturity date to May 21,
1999 (which was subsequently  extended to July 31, 1999). The line of credit was
repaid on May 14,  1999.  On July 31, 1999,  the lender  approved an increase in
such line to $35,000 and extended the maturity date to July 31, 2000. Borrowings
under the line of credit bear  interest  at prime plus 1/2% per annum  (8.25% at
June 30,  1999)  and a fee of 1/4% per annum is  charged  on the  unused  amount
available  under  the  line  of  credit.  As of June  30,  1999,  there  were no
borrowings  under the line of credit although letters of credit in the aggregate
amount of $5,400  were  issued  under the line of  credit,  reducing  the amount
available under the line of credit. The letters of credit expire on December 31,
1999.

     On May 14, 1999,  the Company issued in a private  transaction  $100,000 of
5.5% convertible subordinated notes due April 14, 2009 that are convertible into
5,479 shares of the Company's common stock (subject to certain adjustments). The
notes are redeemable by the Company at any time after May 14, 2002 at a price of
103%,  declining  ratably  to par after May 14,  2003.  In  connection  with the
issuance,  the  Company  entered  a  shareholders  agreement  which  allows  the
purchaser of the notes to designate  two  directors  to the  Company's  Board of
Directors, increasing the Board's size from seven to nine.

     On May 27, 1999, the Company obtained  replacement  credit  enhancements to
secure the payment of  principal  and interest on the $65,000  tax-exempt  bonds
secured by the Devonshire and Heritage of Des Plaines facilities.  In connection
with the  replacement  of the credit  enhancements,  the  Company  received  the
release of $14,464  that was on deposit  with the  previous  credit  enhancement
providers and wrote off $273 of previously deferred financing costs. The Company
entered into interest  rate caps for a notional aggregate amount of $65,000 with
a capped rate of 6.35% which had a fair value of $358 at June 30, 1999 and which
expire  June  1,  2004.  The  Company's  reimbursement   obligations  issued  in
connection with the replacement credit enhancements are

                                       9

<PAGE>

              BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

non-recourse  obligations secured by mortgages on the Devonshire and Heritage of
Des Plaines facilities;  provided,  however, Brookdale Living Communities,  Inc.
guaranteed such reimbursement obligations up to $4,000.

     On June 9, 1999, the Company sold certain  development  rights to a site in
Columbus, Ohio to an unaffiliated third party at cost. The sales price was $475,
of which $160 was  received in cash and $315 was  received by the  delivery of a
promissory note bearing  interest at 12% per annum. The Company will develop the
site pursuant to a development agreement with the owner.

     The Company has entered into  interest  rate lock  agreements  on behalf of
third party owners of  development  projects  with respect to interest  rates on
floating  rate  construction  debt.  The  agreements  are  designed to limit the
exposure to movements in floating interest rates on the development construction
project  loans and the  Company is to be  reimbursed  by the third party for any
payments  made  pursuant  to the  agreements.  As of May 14,  1999,  the Company
terminated  interest  rate locks with a notional  amount of $50,189 at a gain of
$19. The balance of the notional amount of the  construction  loans being hedged
is $53,500 and the approximate fair value of such hedging contracts is $812.

4.  Income Taxes

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

5.  Earnings Per Share

     The  following  table  sets  forth the  computation  of basic  and  diluted
earnings per share for the three and six months ended June 30, 1999 and 1998.

<TABLE>
<CAPTION>
                                                              Three months ended June 30,    Six Months Ended June 30,
                                                                   1999       1998              1999       1998
                                                                  ------     ------            ------     ------

<S>                                                           <C>          <C>               <C>          <C>
Numerator:

       Numerator for basic earnings per common share          $   2,640    $   1,521         $  5,397     $   2,632
       Interest expense on convertible subordinated notes,
           net of tax                                               480           --              480            --
                                                              ---------    ---------         --------     ---------
       Numerator for diluted earnings per share               $   3,120    $   1,521         $  5,877     $   2,632
                                                              =========    =========         ========     =========

Denominator:

       Denominator for basic earnings per common share -
           weighted-average shares                               11,572        9,487           11,572         9,448
       Effect of dilutive securities:
           Employee stock options                                    97          306              125           273
           Warrants                                                  --           --               --            --
           Convertible subordinated notes                         2,830           --            1,423            --
                                                              ---------    ---------         --------     ---------
       Denominator for diluted earnings per common
           share-adjusted weighted-average shares
           and assumed conversions                               14,499        9,793           13,120         9,721
                                                              =========    =========         ========     =========

       Basic earnings per common share                        $    0.23    $    0.16         $   0.47     $    0.28
                                                              =========    =========         ========     =========

       Diluted earnings per common share                      $    0.22    $    0.16         $   0.45     $    0.27
                                                              =========    =========         ========     =========
</TABLE>


6.  Pro Forma Information

     The following unaudited pro forma condensed and consolidated  statements of
operations  are  not  necessarily  indicative  of what  the  actual  results  of
operations of the Company would have been assuming the Company had leased all of
the Leased  Facilities and issued 11,572 shares and $100,000 of 5.5% convertible
subordinated  notes  at the  beginning  of each  period  presented,  nor do they
purport  to  represent  the  results of  operations  of the  Company  for future
periods.

                                          Six months           Three months
                                        ended June 30,         ended June 30
                                        --------------         -------------
                                       1999       1998        1999        1998
                                       ----       ----        ----        ----

       Revenue                      $51,939    $48,533      $26,117     $24,434
       Net income                     4,590      2,139        2,410       1,243
       Basic earnings per share        0.40       0.18         0.21        0.11
       Diluted earnings per share      0.38       0.18         0.20        0.10


    The proforma  information does not include interest income on available cash
from the proceeds of the 5.5% convertible subordinated notes.

                                       10

<PAGE>

              BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

7.  Subsequent Events

     On August 6, 1999, the Company  transferred to an unaffiliated  third party
its rights to acquire a development  site in Huntley,  IL, and the  unaffiliated
third party  acquired the site.  The  acquisition  of the site was financed,  in
part,  with the  proceeds of a loan made by the Company to the third  party.  In
connection  with this  transaction,  the  Company and the owner  entered  into a
development  agreement  pursuant  to which the owner  retained  the  Company  to
develop the site and agreed to reimburse  the Company for all costs  incurred or
to be incurred by the Company in connection with the acquisition and development
of the site. The owner's  obligation to repay the Company for the amounts loaned
for the acquisition of the site and to reimburse the Company for acquisition and
development  costs is evidenced by a promissory note in the principal  amount of
$2,032, which is secured by a mortgage on the site.

     During July 1999 Brookdale opened two new facilities that were developed by
the Company and are now being managed by the Company for third party owners. The
220-unit Heritage of Southfield facility is located in Southfield, Michigan, and
the 210-unit Heritage of Gaines Ranch is located in Austin, Texas.

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

     The following discussion is based on and should be read in conjunction with
the  Consolidated  Financial  Statements  of the Company as of June 30, 1999 and
December  31, 1998 and for the six months and three  months  ended June 30, 1999
and 1998, including the related notes, and other information appearing elsewhere
in this Form 10-Q. Historical results and any apparent percentage  relationships
with respect thereto are not necessarily indicative of future operations.

Cautionary Statements

     This quarterly  report on Form 10-Q contains  "forward-looking  statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. When
used in this report, the words "believes," "expects," "anticipates," "estimates"
and  similar  words  and   expressions   are  generally   intended  to  identify
forward-looking  statements.  Statements  that  describe  the  Company's  future
strategic  plans,  goals  or  objectives  are also  forward-looking  statements.
Readers  of this  report  are  cautioned  that any  forward-looking  statements,
including  those  regarding the intent,  belief or current  expectations  of the
Company or  management,  are not  guarantees of future  performance,  results or
events and involve risks and  uncertainties  and that actual  results and events
may differ materially from those in the  forward-looking  statements as a result
of  various  factors,  including,  but not  limited  to,  (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 by the
Company,  the successful  completion of development  activities,  the successful
integration  of  newly  acquired,   leased  or  developed  facilities  with  the
operations  of the  Company's  existing  facilities,  fluctuations  in operating
results or occupancy levels in the markets in which the Company competes, 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,  including  this Form 10-Q and  Brookdale's
1998 Annual report on Form 10-K. The forward-looking statements included in this
report  are made only as of the date  hereof.  Except as  required  by law,  the
Company  undertakes no obligation to update such  forward-looking  statements to
reflect subsequent events or circumstances.

Overview

     Brookdale  provides  seniors  assisted living  services  through its owned,
leased or managed  facilities.  As of June 30,  1999,  the  Company  operated 19
senior  independent and assisted living  facilities  containing a total of 4,188
units. Four facilities are owned by the Company, 13 facilities are leased by the
Company and two  facilities  (one of which is owned by an affiliate of The Prime
Group, Inc. ("PGI") are managed by the Company pursuant to management contracts.
The Company's senior  independent and assisted living facilities offer residents
a supportive, "home-like" setting as well as assistance with activities of daily
living. By providing residents a range of service options as their needs change,
the  Company  seeks to  achieve  greater  continuity  of care,  enabling  senior
residents to  "age-in-place"  and thereby  maintain their stay for a longer time
period.  The ability to allow  residents to  age-in-place  is  beneficial to the
Company's  residents  as well as  their  families  who are  burdened  with  care
decisions for their elderly relatives.

     The Company derives its revenues from resident fees,  development  fees and
management fees.  Resident fees consist of charges for leasing units,  providing
basic care  services  and, in certain  instances,  providing  supplemental  care
services to residents.  Basic care services include meals, 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,  and depending on
the particular  facility and as dictated by state  licensing  requirements,  the
Company also  provides  assistance  with  activities  of daily  living,  such as
dressing,  bathing,  eating and  medication  administration  or  reminders.  The
Company may expand its

                                       11

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              BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

supplemental service offerings,  as permitted by applicable licensing,  in order
to  capture  incremental  revenue  and  enable  its  residents  to remain in its
facilities longer. Resident fees typically are paid monthly by residents,  their
families or other  responsible  parties.  As of June 30,  1999,  over 99% of the
Company's revenue was derived from private pay sources.

     The Company derives  additional  revenue from  development  fees associated
with  developing   senior   independent  and  assisted  living   facilities  for
unaffiliated  third parties and management fees from managing senior independent
and assisted living  facilities for PGI and a third party 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 facility personnel
payroll and related costs,  food,  marketing and 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, 1999 to six months ended June 30, 1998

     For the six months ended June 30, 1999,  results  reflect the operations of
the  Company's 19  facilities.  For the six months ended June 30, 1998,  results
reflect the operations of 15 facilities.

     Revenue.  Total  revenue  increased by $16.1  million,  or 45.3%,  to $51.6
million for the six months  ended June 30, 1999 when  compared to the six months
ended June 30, 1998.  Resident fees  increased by $15.3  million,  or 46.7%,  to
$48.2 million. Of the increase in total revenue,  approximately $1.4 million (or
a "same store"  increase of 4.7%)  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
$13.9 million of such increase  reflects  revenue from  facilities  first leased
after June 30, 1998.  The remaining  $0.8 million of the total revenue  increase
reflects  increased revenue from development and management fees associated with
projects being developed or managed by the Company for third party owners.

     Operating Expenses. Total operating expenses increased by $12.5 million, or
40.2%,  to $43.7 million for the six months ended June 30, 1999 when compared to
the six months ended June 30, 1998.  Facility  operating  expenses  increased by
$7.4  million,  or  40.5%,  to  $25.7  million  primarily  due to  the  expenses
associated with the facilities first leased after December 31, 1998.

     Lease expense increased by $4.7 million, or 58.2%, to $12.6 million for the
six months  ended June 30, 1999 when  compared to the six months  ended June 30,
1998 due primarily to the lease expense  associated  with the  facilities  first
leased after December 31, 1998.  Depreciation and amortization increased by $0.3
million,  or 10.3%,  to $2.7 million for the six months ended June 30, 1999 when
compared to the six months ended June 30, 1998. This increase primarily reflects
the  depreciation  of  additional  furniture,  fixtures  and  equipment  at  the
corporate office.

     For the six months ended June 30, 1999 the Company  wrote-off  $0.3 million
of  deferred   financing  costs  in  connection  with  the  replacement   credit
enhancement for the $65.0 million of tax-exempt  bonds secured by the Devonshire
and Heritage of Des Plaines facilities.

     Interest income increased by $1.8 million,  or 112.6%,  to $3.5 million for
the six months  ended June 30, 1999 when  compared to the six months  ended June
30, 1998 due to the  investment  of the net proceeds from the issuance of $100.0
million  of 5.5%  convertible  subordinated  notes due 2009 and an  increase  in
various deposits and restricted investments.

     Interest expense increased $1.1 million,  or 56.9%, to $2.9 million for the
six months  ended June 30, 1999 when  compared to the six months  ended June 30,
1998 due to increased  borrowings  under the lines of credit and the issuance of
$100.0 million of 5.5% convertible subordinated notes due 2009.

     Net Income.  For the six months ended June 30, 1999, the Company  generated
net income of  approximately  $5.4 million,  as compared to a net income of $2.6
million for the six months  ended June 30,  1998,  due to the changes in revenue
and expenses described above.

Comparison  of three  months  ended June 30, 1999 to three months ended June 30,
1998.

     For the three months ended June 30, 1999, results reflect the operations of
the Company's 19 facilities.  For the three months ended June 30, 1998,  results
reflect the operations of 15 facilities.

                                       12

<PAGE>

              BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

     Revenue.  Total  revenue  increased  by $7.5  million,  or 40.0%,  to $26.1
million  for the three  months  ended June 30,  1999 when  compared to the three
months ended June 30, 1998.  Resident fees increased by $7.2 million,  or 41.9%,
to $24.4 million.  Of the increase in total revenue,  approximately $1.0 million
(or a "same store"  increase of 6.0%)  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  $6.3 million of such increase  reflects  revenue from  facilities
first  leased  after  April 1, 1998.  The  remaining  $0.2  million of the total
revenue increase reflects increased revenue from development and management fees
associated  with  projects  being  developed or managed by the Company for third
party owners.

     Operating Expenses.  Total operating expenses increased by $5.9 million, or
36.2%,  to $22.1  million for the three months ended June 30, 1999 when compared
to the three months ended June 30,1998. Facility operating expenses increased by
$3.2  million,  or  33.1%,  to  $12.9  million  primarily  due to  the  expenses
associated with the additional facilities leased after April 1, 1998.

     Lease expense increased by $2.2 million,  or 53.5%, to $6.4 million for the
three  months  ended June 30, 1999 when  compared to the three months ended June
30, 1998 due  primarily  to the lease  expense for the  facilities  first leased
after  December  31,  1998.  Depreciation  and  amortization  increased  by $0.1
million,  or 9.5%, to $1.3 million for the three months ended June 30, 1999 when
compared  to the three  months  ended June 30,  1998.  This  increase  primarily
reflects the depreciation of additional furniture, fixtures and equipment at the
corporate office.

     For the three  months  ended June 30,  1999,  the  Company  wrote-off  $0.3
million of deferred  financing costs in connection  with the replacement  credit
enhancements for the $65.0 million of tax-exempt bonds secured by the Devonshire
and Heritage of Des Plaines facilities.

     Interest income increased by approximately $1.0 million, or 107.6%, to $1.9
million  for the three  months  ended June 30,  1999 when  compared to the three
months ended June 30, 1998 due to the  investment  of the net proceeds  from the
issuance of $100.0 million of 5.5% convertible  subordinated  notes due 2009 and
an increase in various deposits and restricted investments.

     Interest expense increased $0.9 million,  or 91.0%, to $1.8 million for the
three  months  ended June 30, 1999 when  compared to the three months ended June
30, 1998 due to increased borrowings under the Company's lines of credit and the
issuance of $100.0 million of 5.5% convertible subordinated notes due 2009.

     Net Income. For the three months ended June 30, 1999, the Company generated
net income of  approximately  $2.6 million,  as compared to a net income of $1.5
million for the three months ended June 30, 1998,  due to the changes in revenue
and expenses described above.

Liquidity and Capital Resources

     Cash   and   cash   equivalents   (which   does   not   include   cash  and
investments-restricted of $9.3 million, short-term investments of $55.0 million,
investment  certificates  of $20.8 million and lease security  deposits of $66.7
million)  increased  by $16.5  million  to  $17.6  million  at June 30,  1999 as
compared  to December  31,  1998,  primarily  due to the net  proceeds  from the
issuance  of  $100.0  of 5.5%  convertible  subordinated  notes due 2009 and the
release  of  the  letter  of  credit  deposits  upon  the   replacement   credit
enhancements  securing  the  $65.0  million  tax-exempt  bonds,  offset  by cash
utilized for transaction costs; offset by cash used for the leasing of the River
Bay Club  facility  and  repayment  of the  unsecured  lines of credit  and note
payable.

     Net cash provided by operating activities for the six months ended June 30,
1999  totaled  approximately  $6.5  million  as a result of  increased  facility
operations  before  depreciation  and  amortization  and the commencement of the
lease of the River Bay Club facility leased subsequent to December 31, 1998.

     Net cash used in investing  activities totaled  approximately $82.5 million
for the six months ended June 30, 1999.  Investing activities included cash paid
for lease security  deposits in connection  with the lease of the River Bay Club
facility of $10.9 million and a $0.4 million increase in existing lease security
deposits,  the purchase of short-term  investments of $55.0 million from the net
proceeds from the issuance of $100.0  million of 5.5%  convertible  subordinated
notes  due 2009,  an  increase  in  investment  certificates-restricted  of $4.9
million, an increase in property under development of $8.0 million and other net
uses of $3.3 million.

     Net cash provided by financing  activities was approximately  $92.6 million
for the six months  ended June 30, 1999.  Financing  activities  included  $94.3
million net  proceeds  from the issuance of $100.0  million of 5.5%  convertible
subordinated  notes due 2009,  proceeds from unsecured  lines of credit of $31.9
million and $13.9  million of letter of credit  deposits  released in connection
with the  replacement of credit  enhancements on $65 million  tax-exempt  bonds,
offset by repayments of $42.9 million on borrowings under the unsecured lines of
the  credit,  repayments  of $3.1  million  on  long-term  debt and  payment  of
financing costs of $1.5 million.

                                       13

<PAGE>

              BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

     The  Company  currently  plans to  acquire  or lease at least 4 to 6 senior
independent and assisted  living  facilities per year containing an aggregate of
approximately  800 to 1,200 units and to commence  development for third parties
of at least 3 new facilities per year each 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 $35 million,  or approximately  $159,000 per unit.
At June 30, 1999, the Company had 5 facilities  under  construction  and several
sites  under  development  for  new  senior   independent  and  assisted  living
facilities.  The Company's  estimated capital  expenditures for the remainder of
1999 relating to sites under development aggregate approximately $5.0 million to
$10.0  million.  Capital  expenditures  for the remainder of 1999 related to the
Company's existing facilities, including renovation projects are estimated to be
approximately  $3.0  million  to $6.0  million  in the  aggregate.  The  Company
anticipates  that it will use a combination  of cash on hand,  borrowings  under
lines of  credit  or  otherwise,  lease  transactions  and cash  generated  from
operations to fund its acquisition and development activities.  On May 14, 1999,
the Company  issued $100.0 million of 5.5 % convertible  subordinated  notes due
2009. The convertible subordinated notes bear interest at 5.5% per annum payable
semi-annually  on  June  30  and  December  31 of  each  year.  The  convertible
subordinated  notes are  convertible  into 5,479 shares of the Company's  common
stock,  subject  to  adjustment,  in  certain  circumstances.   The  convertible
subordinated  notes are redeemable at the option of Brookdale  beginning May 14,
2002, at specified premiums.  The holders of the convertible  subordinated notes
may require  Brookdale to  repurchase  the notes upon the  occurrence of certain
merger events, as described in the convertible  subordinated notes. In addition,
in June,  1998 Brookdale  received a $100.0 million  commitment from The Capital
Company  of  America  (successor  to  Nomura  Asset  Capital   Corporation)  for
development  projects, of which approximately $51.0 million was committed to the
Austin,  Texas  and  Southfield,  Michigan  development  projects.  The  Company
believes that it has sufficient  funds  available to finance its acquisition and
development programs for at least the next 18 months.

     As  of  June  30,  1999,   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  3.3%
during the six months ended June 30, 1999, and the average interest rate on such
debt was 3.6% at June 30, 1999. The Company  entered into interest rate caps for
an aggregate  notional amount of $65.0 million with a capped rate of 6.35% which
expires June 1, 2004.  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.

     The Company is  dependent on  third-party  financing  for its  acquisition,
leasing and development programs.  Financing obtained in the future is generally
expected to contain terms and conditions and representations and warranties that
are  customary  for such loans and may  contain  financing  covenants  and other
restrictions  that (i) require the Company to meet certain  financial  tests and
maintain certain amounts of funds in escrow, (ii) limit, among other things, the
ability of the Company to borrow additional funds,  dispose of assets and engage
in mergers or other business  combinations and (iii) restrict the ability of the
Company to operate competing  facilities within certain distances from mortgaged
facilities.  There  can  be  no  assurance  that  financing  for  the  Company's
acquisition  and  development  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.

     The  ability of the Company to achieve  its  development  plans will depend
upon a variety of  factors,  many of which will be outside  its  control.  These
factors  may  include  (i)  obtaining  required  governmental  permits  for  the
construction of new facilities without  experiencing  significant  delays;  (ii)
completing  construction  of  new  facilities  on  schedule  and  without  going
significantly  over  budget;  (iii) the  ability  to work with  contractors  and
subcontractors  who construct the  facilities;  (iv)  increased  expenses due to
delays caused by shortages of labor or materials or adverse weather  conditions;
and (v) changes in laws and regulations or how existing laws and regulations are
interpreted  and applied.  The Company cannot assure that it will not experience
delays in completing  facilities under construction or in development or that it
will be able  to  identify  suitable  sites  at  acceptable  prices  for  future
development activities. If it fails to achieve its development plans, its growth
could slow, which would adversely impact its revenues and results of operations.

     The  Company's  growth plan includes the  acquisition  or lease of assisted
living   facilities   already  in  operation.   The  success  of  the  Company's
acquisitions  will be  determined by numerous  factors,  including the Company's
ability  to  identify  suitable  acquisition  candidates,  competition  for such
acquisitions,  the purchase  price,  lease terms and  conditions,  the financial
performance of the facilities  after  acquisition and the ability of the Company
to effectively  integrate and operate acquired facilities.  Any failure to do so
may  have a  material  adverse  effect  on  the  Company's  business,  financial
condition, revenues and earnings.

     The long-term care industry is highly  competitive  and the assisted living
segment is becoming  increasingly  competitive.  The Company  competes with many
other companies that provide similar long-term care  alternatives,  such as home
health care agencies,  facility-based service programs,  retirement communities,
convalescent  centers and other  assisted  living  providers.  In  pursuing  the
Company's development and operations strategies, the Company has experienced and
expects to  continue  to  experience  increased  competition  in its  efforts to
develop, acquire and lease, assisted living facilities.  Some of the present and
potential  competitors of the Company are significantly  larger and have, or may
obtain, greater financial resources than the

                                       14

<PAGE>

              BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

Company.  Consequently,  the Company  cannot  assure that it will not  encounter
increased  competition  that could  limit its  ability to attract  residents  or
expand its business,  which could have a material adverse effect on its revenues
and earnings.

Impact of Inflation

     Resident fees from senior  independent and assisted living facilities owned
or leased by the Company, management fees from facilities managed by the Company
for third parties and development fees from facilities  developed by the Company
for third parties are the Company's  primary sources of revenue.  These revenues
are affected by monthly  resident fee rates and facility  occupancy  rates.  The
rates charged for senior  independent  and assisted  living  services are highly
dependent upon local market conditions and the competitive  environment in which
the facilities operate.  Substantially all of the Company's residency agreements
allow for adjustments in the monthly fees payable thereunder not less frequently
than every 12 or 13 months,  thereby  enabling the Company to seek  increases in
monthly fees due to inflation,  demand or other factors. Any such increase would
be subject to market and competitive conditions. The Company believes,  however,
that the  ability  to adjust  the  monthly  fees  payable  under  the  residency
agreements  on an annual  basis  serves to reduce the risk to the Company of the
adverse effect of inflation.  In addition,  employee  compensation  expense is a
principal  cost element of facility  operations and is also dependent upon local
market conditions. There can be no assurance that resident fees will increase or
that costs will not increase due to inflation or other causes.  In addition,  at
June 30, 1999,  approximately $65.0 million in principal amount of the Company's
indebtedness  bore interest at a floating rate of approximately  3.6% and future
indebtedness may bear floating rate interest.  The Company entered into interest
rate caps for an aggregate  notional  amount of $65.0 million with a capped rate
of 6.35%  which  expires  June 1, 2004.  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 has  implemented a program to mitigate the potential  impact of
the Year 2000 Issue  throughout  the  Company.  The  Company's  program has been
structured to address its internal  computer systems and  applications,  network
services   operations,   facilities   operations  and  third-party  vendors  and
suppliers. The Company believes that it is taking the necessary steps within its
control to mitigate the potential impact of the Year 2000 Issue on the Company.


Information Systems

     The Company has upgraded its accounting and human resources systems, and is
in the process of upgrading its property  management  and marketing  systems for
the Year 2000 Issue.  The Company  expects that the  replacement  of its systems
will  mitigate the impact of the Year 2000 Issue on its  accounting  operations.
The corporate  software selection has been completed and a contract was executed
in the third quarter of 1998 to commence  development and  implementation in the
fourth  quarter  of 1998.  The  corporate  software  was  installed  and  became
operational on May 1, 1999. The Company has one vendor software  package that is
used to process property level accounting information at each facility which was
not Year 2000 compliant but has been remedied during the second quarter 1999. In
June 1999,  the  Company  executed a contract  for  replacement  software at the
facilities it owns or operates.

Facilities

     The Company has  completed an  assessment  of each  facility,  including an
assessment  of  infrastructure  equipment  such as  elevator,  HVAC and security
systems,  and other critical  service  provider  readiness  issues.  The Company
completed  its  preliminary  assessment  by December 31, 1998 and  completed the
update assessment in June, 1999. As of August 3, 1999, the Company's  assessment
of the  facilities  and  infrastructure  equipment  did not  indicate  that  any
significant costs will need to be incurred to mitigate the Year 2000 Issue.

     The  aforementioned  vendor  software  package at each facility is used for
resident billing and payable processing.  As noted above, the Company executed a
contract  to  purchase   replacement   software.   The  Company   commenced  its
implementation  in June 1999 with an expected  completion date of November 1999.
The Company has  undertaken  contingency  planning for each of its facilities as
necessary.

Third-Party Vendors and Suppliers

     The Company's  approach to  third-party  suppliers  involves the process of
identification  and  prioritization of critical suppliers and communicating with
them about their  plans and  progress in  addressing  the Year 2000 Issue.  This
evaluation,  including  prioritization of critical suppliers, and the subsequent
contingency planning was undertaken during the first quarter of 1999 and will be
substantially completed in the third quarter of 1999.

                                       15

<PAGE>

              BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

Costs

     The final  cost to  complete  the  projects  discussed  above,  which  were
undertaken  primarily to  facilitate  Company  growth and not just for Year 2000
readiness,  has not yet been  determined;  however,  the  estimated  total cost,
including  capital  expenditures,  will approximate $3.0 million to $4.0 million
through December 31, 1999, of which approximately $2.5 million has been incurred
through  June 30,  1999.  The  Company's  costs  include  the  costs of  outside
consultants and contractors and hardware and software replacements and upgrades.

     The Company  anticipates  that cash on hand, cash generated from operations
and additional debt  financings  will provide  sufficient cash to fund Year 2000
compliance  expenditures.  The Company's allocation of other personnel resources
and planned  expenditures  has not resulted in the  deferral of any  information
technology  projects.  Remediation  costs,  other than the planned  expenditures
described above, are not expected to be material.

Risks

     Management believes that the Company's information  technology and embedded
systems at the facilities  will be  substantially  Year 2000 compliant  prior to
January 1, 2000. While the Company exercises no control over such third parties,
the  Company  may face  potential  Year 2000  related  risks and may  experience
business  interruption to its operations as a result of third-party  vendors and
suppliers failing to address their Year 2000 compliance  issues. The Company has
substantially  completed its assessment of third-party  vendors and suppliers to
identify Year 2000 compliance  issues and is assessing the potential impact upon
the Company and its operations.

     Project  completion dates are 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 business. Further, given the inherent
uncertainty in any Year 2000 assessment, there may be claims against the Company
based on Year 2000 Issues not currently anticipated by the Company.

    Readers are cautioned that forward-looking  statements contained in the Year
2000 disclosure  should be read in conjunction with "Cautionary  Statements" set
forth above.

Item 3.       Quantitative and Qualitative Disclosures About Market Risk.

     The  Company  is  exposed  to  interest  rate risk  primarily  through  its
borrowing and leasing  activities.  There is inherent risk from  borrowings  and
leasing as they mature or expire and are renewed at market rates.  The extent of
this risk is not  quantifiable  or  predictable  because of the  variability  of
future  interest  rates and the Company's  future  financing  requirements.  The
Company does not enter into financial  instruments  transactions  for trading or
other speculative purposes.

     Long-term  debt - As of June 30,  1999 the  Company  had $92.7  million  of
long-term debt at a weighted  average  interest rate of 4.96%.  Included therein
are mortgage  notes of $27.7 million which bear fixed rates of interest  ranging
from 8.0% to 8.525% through maturity in 2027 when the loans mature, and variable
rate tax-exempt bonds of $27.0 million, $6.0 million and $32.0 million which are
payable interest only until maturity in 2025 and 2019, respectively.

     For fixed rate debt,  changes in interest rates  generally  affect the fair
value, but not earnings or cash flows. Conversely, changes in interest rates for
variable  rate debt  generally  do not impact fair value,  but do affect  future
earnings and cash flows.

     The Company has entered into  interest  rate lock  agreements  on behalf of
third party owners of development  projects to limit their exposure to movements
in variable  interest rates of which $50.2 million were terminated as of May 14,
1999. The notional  aggregate amount of construction  loans is $53.5 million and
the fair value is approximately $0.8 million. The Company is to be reimbursed by
the third party for any payments made pursuant to the agreements.  In connection
with the $65.0 million  variable  rate  tax-exempt  bonds the Company  purchased
interest rate caps at 6.35% a fair value of $0.4 million at June 30, 1999 expire
June 1, 2004.

     If interest rates on the Company's variable rate debt, including tax-exempt
bonds,  increased by 1  percentage  point,  the annual  interest  expense  would
increase by approximately  $0.7 million.  The Company entered into interest rate
caps for an  aggregate  notional  amount of $65.0  million with a capped rate of
6.35% which expire June 1, 2004.

                                       16

<PAGE>

     Lease  expense - The Company has entered into  operating  leases which have
fixed terms and are subject to renewal at the option of the Company. The Company
has an option to purchase  all but four of these  facilities  prior to or at the
end of the  respective  lease term.  Four of the  facilities  leases require the
payment of additional rent of 10% of the excess of each year's revenue  compared
to 1998.

                                       17

<PAGE>

              BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

PART II:  OTHER INFORMATION

         Item 1.     Legal Proceedings.

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

         Item 2.     Changes in Securities and Use of Proceeds.

                     None

         Item 3.     Defaults Upon Senior Securities.

                     None

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

                     On May 20,1999, Brookdale Living Communities, Inc. held its
                     1999  annual  meeting  of  stockholders  at 35 West  Wacker
                     Drive, Chicago, Illinois. The annual meeting was called for
                     the following purposes:

                    (1)  to elect two  directors  for terms of three years each;
                    (2)  to  ratify  the  appointment  of  Ernst & Young  LLP as
                         Brookdale's independent auditors;
                    (3)  to approve the 1999 Stock Incentive Plan; and
                    (4)  to transact  such other  business as may properly  come
                         before the annual meeting.

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

<TABLE>
                                                                                                  Withheld
                                                                                                Authority to
                           Directors                                For                             Vote
                           ---------                                ---                         ------------
                     <S>                                       <C>                              <C>
                     Darryl W. Copeland                          9,496,716                         194,265
                                                               -----------                      ------------
                     Darryl W. Hartley-Leonard                   9,555,716                         135,265
                                                               -----------                      ------------
</TABLE>

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

                     Michael W. Reschke,  Mark J. Schulte,  Wayne D. Boberg, Dr.
                     Bruce L. Gewertz and Daniel J. Hennessy.

                     Paul H. Warren and Mark H. Tabak were  appointed  directors
                     on May 14, 1999 and May 20, 1999,  respectively.  Daniel J.
                     Hennessy  resigned  as a director  on May 20,  1999,  and a
                     replacement director has not yet been appointed.

                     The  appointment  of  Ernst  &  Young  LLP  as  Brookdale's
                     independent  auditors was ratified at the meeting. The vote
                     tabulation was as follows:  9,689,016  votes (99.98% of the
                     total eligible votes excluding  broker-non-votes) were cast
                     for the  ratification  of Ernst & Young LLP as  Brookdale's
                     independent  auditors,  0 votes (0% of the  total  eligible
                     votes  excluding  broker-non-votes)  were cast against such
                     approval and 1,965 votes (0.02% of the total eligible votes
                     casts, excluding broker-non-votes) were abstentions.

                     The 1999  Stock  Incentive  Plan was also  approved  at the
                     meeting.  The vote  tabulation  was as  follows:  6,861,153
                     votes  (70.84%  of  the  total  eligible  votes   excluding
                     broker-non-votes)  were cast for approval of the 1999 Stock
                     Incentive  Plan,  2,819,806  votes  (29.11%  of  the  total
                     eligible votes cast, excluding  broker-non-votes) were cast
                     against  such  approval and 4,715 votes (0.05% of the total
                     eligible  votes  cast,  excluding   broker-non-votes)  were
                     abstentions.


         Item 5.     Other Information.

                     None

                                       18

<PAGE>

              BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

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

(a)      Exhibits:
                                  EXHIBIT INDEX
      Exhibit
      Number                           Description
      -------                          -----------

        3.1         Restated  Certificate of  Incorporation  of Brookdale Living
                    Communities, Inc., 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

        3.2         Amended   and   Restated   By-laws   of   Brookdale   Living
                    Communities, Inc., 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 Brookdale
                    Living  Communities,  Inc., 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         Note Purchase Agreement,  dated as of April 27, 1999, by and
                    between  Brookdale  Living  Communities,   Inc.  and  Health
                    Partners,   as  filed  with  the   Securities  and  Exchange
                    Commission  on May 19, 1999 as Exhibit 10.1 to the Company's
                    Form 8-K  dated  April  27,  1999  (File  No.  0-22253)  and
                    incorporated herein by reference

       10.2         Indenture,  dated  as  of  May  14,  1999,  by  and  between
                    Brookdale Living Communities, Inc. and State Street Bank and
                    Trust Company,  as Trustee, as filed with the Securities and
                    Exchange  Commission  on May 19, 1999 as Exhibit 10.2 to the
                    Company's  Form 8-K dated April 27, 1999 (File No.  0-22253)
                    and incorporated herein by reference

       10.3         Supplemental  Indenture,  dated as of May 14,  1999,  by and
                    between Brookdale Living Communities,  Inc. and State Street
                    Bank and  Trust  Company,  as  Trustee,  as  filed  with the
                    Securities  and  Exchange  Commission  on May  19,  1999  as
                    Exhibit 10.3 to the Company's  Form 8-K dated April 27, 1999
                    (File No. 0-22253) and incorporated herein by reference

       10.4         Registration Rights Agreement,  dated as of May 14, 1999, by
                    and between  Brookdale Living  Communities,  Inc. and Health
                    Partners,   as  filed  with  the   Securities  and  Exchange
                    Commission  on May 19, 1999 as Exhibit 10.4 to the Company's
                    Form 8-K  dated  April  27,  1999  (File  No.  0-22253)  and
                    incorporated herein by reference

       10.5         Stockholders  Agreement,  dated as of May 14,  1999,  by and
                    among Brookdale Living Communities, Inc. and the signatories
                    listed  therein,  as filed with the  Securities and Exchange
                    Commission  on May 19, 1999 as Exhibit 10.5 to the Company's
                    Form 8-K  dated  April  27,  1999  (File  No.  0-22253)  and
                    incorporated herein by reference

       10.6         Limited  Guaranty,  dated as of May 27, 1999, by and between
                    Brookdale  Living  Communities,  Inc.  and Glaser  Financial
                    Group,  Inc.,  as filed  with the  Securities  and  Exchange
                    Commission on June 21, 1999 as Exhibit 10.1 to the Company's
                    Form  8-K  dated  May  27,  1999  (File  No.   0-22253)  and
                    incorporated herein by reference

       10.7         Reimbursement  and  Security  Agreement,  dated as of May 1,
                    1999, by and between Federal Home Loan Mortgage  Corporation
                    and The Ponds of Pembroke Limited Partnership, as filed with
                    the Securities  and Exchange  Commission on June 21, 1999 as
                    Exhibit  10.2 to the  Company's  Form 8-K dated May 27, 1999
                    (File No. 0-22253) and incorporated herein by reference

       10.8         Reimbursement  and  Security  Agreement,  dated as of May 1,
                    1999, by and between Federal Home Loan Mortgage  Corporation
                    and River Oaks  Partners,  as filed with the  Securities and
                    Exchange  Commission on June 21, 1999 as Exhibit 10.3 to the
                    Company's Form 8-K dated May 27, 1999 (File No. 0-22253) and
                    incorporated herein by reference

       10.9         Reimbursement  and  Security  Agreement,  dated as of May 1,
                    1999, by and between Federal Home Loan Mortgage  Corporation
                    and The Ponds of Pembroke Limited Partnership, as filed with
                    the Securities  and Exchange  Commission on June 21, 1999 as
                    Exhibit  10.4 to the  Company's  Form 8-K dated May 27, 1999
                    (File No. 0-22253) and incorporated herein by reference

                                       19

<PAGE>

              BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

       10.10        Ninth Amendment to Loan Agreement and Documents, dated as of
                    April 14, 1999, by and between Brookdale Living Communities,
                    Inc. and LaSalle National Bank

       10.11        Tenth Amendment to Loan Agreement and Documents, dated as of
                    April 26, 1999, by and between Brookdale Living Communities,
                    Inc. and LaSalle National Bank

       10.12        Eleventh Amendment to Loan Agreement and Documents, dated as
                    of  May  21,   1999,   by  and  between   Brookdale   Living
                    Communities, Inc. and LaSalle National Bank

       10.13        1998 Brookdale Living Communities, Inc. Stock Incentive Plan

       10.14        1999 Brookdale Living Communities, Inc. Stock Incentive Plan

       12           Computation  of Ratio of Earnings to Combined  Fixed Charges
                    and Preferred Stock Dividends

       27           Financial Data Schedule

                                       20

<PAGE>

              BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

(b)   Reports on Form 8-K:

      On April 29, 1999,  the Company  filed a Current  Report on Form 8-K dated
April 27, 1999 with the Securities and Exchange  Commission  announcing pursuant
to Item 5 of Form 8-K the execution of a definitive  agreement for the sale in a
private placement of $100.0 million of its 5.5% Convertible  Subordinated  Notes
due 2009.

      On May 19,  1999,  the  Company  filed a Current  Report on Form 8-K dated
April 27, 1999 with the Securities and Exchange  Commission  announcing pursuant
to Item 5 of Form  8-K  the  sale of  $100.0  million  of its  5.5%  Convertible
Subordinated Notes due 2009.

      On June 21, 1999, the Company filed a Current Report on Form 8-K dated May
27, 1999 with the Securities and Exchange Commission announcing pursuant to Item
5 of Form 8-K the  issuance of  replacement  credit  enhancements  to secure the
payment of principal and interest on tax-exempt bonds with a current outstanding
aggregate  principal  balance of $65.0  million and the release of $14.5 million
previously  on  deposit  as  collateral  with the  previous  credit  enhancement
providers.


                                       21



<PAGE>



                                   SIGNATURES


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


                                   BROOKDALE LIVING COMMUNITIES, INC.
                                   Registrant


Date:  August 16, 1999             /s/ Mark J. Schulte
       ---------------              ------------------------------------------
                                   Mark J. Schulte
                                   President and
                                   Chief Executive Officer


Date:  August 16, 1999              /s/ Darryl W. Copeland, Jr.
       ---------------              ------------------------------------------
                                    Darryl W. Copeland, Jr.
                                    Executive Vice President and
                                    Chief Financial Officer

                                       22