PROPERTY OPTION AGREEMENT
                            -------------------------

         This Property Option Agreement (this  "Agreement"),  dated as of August
24, 1999, is made and entered into by and between AH Battery Park Owner, LLC, an
Ohio limited liability company (the "Grantor"), and Brookdale Living Communities
of New York-BPC, Inc., a Delaware corporation ("Brookdale").


                                    RECITALS
                                    --------

         WHEREAS,  the  Grantor  owns the  leasehold  interest  in certain  land
legally described on Schedule I attached hereto,  together with all fixtures and
improvements  thereon (such land,  fixtures and improvements,  together with any
additional  fixtures and improvements  constructed after the date hereof,  shall
collectively be referred to as the "Land") subject in all cases to the terms and
provisions  contained in that  certain  Ground Lease dated as of August 24, 1999
(the "Ground Lease") by and between  Grantor,  as lessee,  and Battery Park City
Authority, as lessor ("Lessor");

         WHEREAS,   the  Grantor  has  engaged  Brookdale  for  the  purpose  of
developing a senior  congregate and  non-licensed  assisted  living  facility in
Battery Park City, New York (the "Project") on the Land pursuant to that certain
Amended and Restated  Development  Agreement of even date herewith (as it may be
amended from time to time, the "Development  Agreement") between the Grantor and
Brookdale;

         WHEREAS, the Grantor has engaged Brookdale for the purpose of acting as
the manager of the Project pursuant to that certain Management Agreement of even
date  herewith  (as it  may be  amended  from  time  to  time,  the  "Management
Agreement") between the Grantor and Brookdale; and

         WHEREAS, Key Corporate Capital,  Inc., Fleet National Bank and European
American Bank  (collectively,  the "Senior Lender"),  have agreed to make a loan
(the  "Senior  Loan")  to the  Grantor  up to the sum of  $49,125,000  to fund a
portion of the costs of the Project  pursuant to (i) that certain  Building Loan
Agreement of even date herewith (as it may be amended from time to time with the
consent of Brookdale,  the "Senior Loan Agreement")  between the Grantor and the
Senior  Lender and (ii) the other "Loan  Documents"  (as such term is defined in
the Senior Loan Agreement; as the same may be amended from time to time with the
consent of Brookdale,  collectively with Senior Loan Agreement, the "Senior Loan
Documents").

         NOW,  THEREFORE,  in consideration of the mutual  agreements  contained
herein  and  for  other  good  and  valuable  consideration,   the  receipt  and
sufficiency of which are hereby acknowledged, Grantor and Brookdale hereby agree
as follows:

                                       1


<PAGE>

1.       The Option.
         -----------


         a.     The Owner hereby grants an irrevocable option (the " Option") to
                Brookdale   (or  its  nominee)  to  purchase  the  Property  (as
                hereinafter  defined)  subject to the Permitted  Exceptions  (as
                hereinafter  defined)  for the  Purchase  Price (as  hereinafter
                defined).

         b.     The Option shall  terminate  and expire on the date (the "Option
                Termination  Date")  that is thirty  (30) days  after the stated
                maturity date of the Senior Loan, as it may be extended.

2.       The Property. For purposes of this Agreement, the term "Property" shall
         mean any and all interests of the Owner in the following items: (a) the
         Land and the Ground Lease, (b) all personal property and other tangible
         property now or  hereinafter  located on the Land or used in connection
         with the  construction,  development,  operation or  maintenance of the
         Land,  including,  but not limited to, fixtures and equipment,  and (c)
         all  other  property  now or  hereafter  used in  connection  with  the
         operation or  maintenance of the Land,  including,  but not limited to,
         contracts,  leases, agreements,  guaranties,  plans and specifications,
         licenses,  books  and  records  and all  other  items  and  instruments
         pertaining to the Land and the Ground Lease.

3.       Purchase  Price.  The  purchase  price (the  "Purchase  Price") for the
         Property shall be the fair market value of the Property as agreed to by
         the parties (or if the parties do not agree to such fair market  value,
         then as reflected in an appraisal of the Property,  dated not more than
         six (6)  months  before  the  Closing  Date [as  defined  in  Section 4
         hereof],  by a qualified MAI appraiser selected by Brookdale,  less the
         then outstanding principal amount of the Senior Loan if the Senior Loan
         is being assumed by Brookdale (or its nominee).

4.       Exercise of the Option. Brookdale may exercise the Option by giving the
         Owner at  least  five (5)  days'  prior  written  notice  (the  "Option
         Notice").  The Option  Notice shall  specify (a) the date (the "Closing
         Date") of the exercise of the Option,  which shall be not be later than
         the Option Termination Date. If Brookdale exercises the Option prior to
         the  Option  Termination  Date but fails to close  prior to the  Option
         Termination  Date due to no fault of  Grantor,  then the  Option  shall
         terminate and Brookdale's right shall cease and be null and void.

5.       Closing. Upon receipt of the Option Notice, the parties will schedule a
         closing  (the  "Closing")  to occur on the Closing Date at the Chicago,
         Illinois offices of counsel to Brookdale. If Brookdale (or its nominee)
         exercises the Option,  the Closing  shall occur in accordance  with the
         provisions of Section 7 hereof.

6.       Intentionally Omitted.
         ----------------------

                                       2

<PAGE>

7.       Closing of Purchase of Property.
         --------------------------------

         a.     At the Closing of the  purchase of the  Property,  the  Purchase
                Price shall be paid to the Owner by wire transfer of immediately
                available funds to an account designated by the Owner.

         b.     At the Closing of the purchase of the Property,  the Owner shall
                deliver  to  Brookdale  (or its  nominee)  the  following  items
                (collectively, the "Property Conveyance Documents"):

                i.       Bill of  Sale.  A bill of sale  (the  "Bill  of  Sale")
                         conveying,  transferring  and  otherwise  assigning  to
                         Brookdale (or its nominee) any and all of the Property,
                         other than the Land.

                ii.      Assignment of Leases and  Agreements.  An assignment of
                         leases and  agreements  (the  "Assignment  of  Leases")
                         conveying,  transferring  and  otherwise  assigning  to
                         Brookdale  (or its  nominee)  any and all rights in any
                         leases,   residency   agreements  or  other  agreements
                         affecting  the  Project  or the Land,  which  Brookdale
                         previously approved.

                iii.     Special  Warranty Deed. A Special  Warranty Deed and/or
                         Assignment of Lease (the "Deed") conveying to Brookdale
                         (or its nominee)  Owner's interest in and to the Ground
                         Lease,  subject  only  to  the  encumbrances  or  other
                         exceptions  (collectively,  the "Permitted Exceptions")
                         (A)  that  existed  on  the  Land  on the  date  of the
                         conveyance of the Land to the Owner, (B) created by the
                         lien of the Hard Cost  Mortgage,  Assignment  of Leases
                         and  Rents  and  Security  Agreement  and the Soft Cost
                         Mortgage,  Security  Agreement and Assignment of Leases
                         and  Rents  of  even  date  herewith   (together,   the
                         "Mortgages")  made by the Owner in favor of the  Senior
                         Lender and all other Senior Loan  Documents  unless the
                         Senior Loan is being  repaid,  (C) created by Brookdale
                         in  connection  with  actions  taken  by it  under  the
                         Development Agreement or the Management Agreement,  (D)
                         Permitted  Encumbrances  (as defined in the Senior Loan
                         Documents)   that  are   consented  to  in  writing  by
                         Brookdale and (E) the Ground Lease.

                iv.      Other  Documents.  Such other  documents or instruments
                         which  are   necessary  to  complete  and  perfect  the
                         conveyance  of Property to  Brookdale or its nominee as
                         contemplated  by  this  Agreement,  including,  without
                         limitation,    any   transfer   declarations,    1099-S
                         Solicitations,   owner's  affidavits  and

                                       3

<PAGE>

                         undertakings  required by the title company and similar
                         items required by local law or the title company.

         c.     The Owner and Brookdale shall each be solely responsible for its
                own costs  incurred in  connection  with the Closing;  provided,
                however,  that  Brookdale  shall (i) pay all costs in connection
                with  the  transfer  of the  Property,  including  transfer  and
                conveyance  taxes,  if any, and (ii) pay, or reimburse the Owner
                for,  all  reasonable  legal  fees  and  expenses  of the  Owner
                incurred  in  connection  with such  Closing in an amount not to
                exceed  $2,500  when  aggregated  with all other  legal fees and
                expenses  paid or  reimbursed  by Brookdale  pursuant to Section
                4(a) of the Equity Option Agreement.

8.       Intentionally Deleted.
         ----------------------

9.       Owner  Representations.  The Owner represents and warrants to Brookdale
         as follows as of the date hereof and as of the Closing Date:

         a.     The Owner is a limited liability company duly organized, validly
                existing  and in good  standing  under  the laws of the State of
                Ohio and has all  requisite  power  and  authority  to  execute,
                deliver and perform its obligations under this Agreement and the
                Property  Conveyance  Documents  and  to  own  and  operate  its
                property  and to carry on its  business  as now  conducted.  The
                Owner is duly  qualified  to do  business  in each  jurisdiction
                where the nature of its operations  and applicable  laws require
                such qualification,  except where the failure to be so qualified
                would not have a material adverse effect on the Owner.

         b.     The execution, delivery and performance of this Agreement by the
                Owner have been, and, if applicable, as of the Closing Date, the
                execution,  delivery and performance of the Property  Conveyance
                Documents by the Owner will have been,  duly  authorized  by all
                necessary  partnership  action,  and this Agreement is, and when
                executed  and  delivered,   each  of  the  Property   Conveyance
                Documents  will be, the legal,  valid and binding  obligation of
                the Owner,  enforceable in accordance with its terms,  except as
                enforcement may be limited by bankruptcy, insolvency or the laws
                or equitable  principles affecting the enforcement of creditors'
                rights generally.

         c.     The  execution,  delivery and  performance  by the Owner of this
                Agreement do not, and, if applicable,  the  execution,  delivery
                and  performance  by  the  Owner  of  the  Property   Conveyance
                Documents  will not,  contravene  the  terms of the  Partnership
                Agreement,   conflict   with  or   result   in  any   breach  or
                contravention  of,  or the  creation  of  any  lien  under,  any
                agreements or  instruments to which it is a party or by which it
                or any of its  property is bound or violate any state or federal
                law and all required

                                       4

<PAGE>

                approvals  therefor,  if any, have been of, if applicable,  will
                have been as of the Closing Date, duly obtained.

         d.     The Owner is the owner of the Property, subject to the Permitted
                Exceptions  and has full power and  authority  to sell,  convey,
                assign and transfer to Brookdale the Property, free and clear of
                all liens and encumbrances except the Permitted Exceptions.

         e.     There is no litigation or other  proceeding  pending against the
                Owner which could have a material  adverse effect on the Owner's
                ability to  consummate  the  transactions  contemplated  by this
                Agreement and the Property Conveyance Documents.

10.      Covenants.  Until the earlier of the Closing or the Option  Termination
         Date, unless Brookdale  otherwise consents in writing,  the Owner shall
         continue  to  own  the   Property,   free  of  any  liens,   claims  or
         encumbrances, other than Permitted Exceptions.

11.      Miscellaneous.
         --------------

         a.     Equitable Relief. Grantor and Brookdale agree that money damages
                or other remedy at law would not alone be sufficient or adequate
                remedy for any breach or violation of, or a default under,  this
                Agreement  by such  Grantor  and that,  in addition to all other
                remedies available to Brookdale,  Brookdale shall be entitled to
                an injunction  restraining such breach,  violation or default or
                threatened  breach,  violation  or  default  and  to  any  other
                equitable  relief,  including,   without  limitation,   specific
                performance, without bond or other security being required.

         b.     Notices.  Any notices required or permitted to be sent hereunder
                shall be delivered  personally or by facsimile(with  answer back
                acknowledged)   or  mailed,   certified  mail,   return  receipt
                requested,  or  delivered by  overnight  courier  service to the
                following  addresses,  or such other addresses as shall be given
                by notice delivered hereunder,  and shall be deemed to have been
                given upon delivery, if delivered personally,  upon receipt with
                answer back acknowledged,  if delivered by facsimile,  three (3)
                business  days after  mailing,  if mailed,  or one  business day
                after delivery to the courier,  if delivery by overnight courier
                service:

                                       5

<PAGE>

                  If to Grantor:          AH Battery Park Owner, LLC
                                          c/o Alliance Holdings, Inc.
                                          723 Electronic Drive
                                          Suite 300
                                          Horsham, Pennsylvania 19044
                                          Attention: David B. Fenkell
                                          Facsimile: (610) 902-0777

                  with a copy to:         Squire, Sanders & Dempsey, L.L.P.
                                          41 South High Street
                                          Columbus, Ohio 43215
                                          Attention: Paul F. Sefcovic
                                          Facsimile: (614) 365-2499

                  If to Brookdale:        Brookdale Living Communities of
                                            New York-BPC, Inc.
                                          c/o Brookdale Living Communities, Inc.
                                          77 West Wacker Drive
                                          Suite 4400
                                          Chicago, Illinois 60601
                                          Attention: Darryl W. Copeland, Jr.
                                          Facsimile: (312) 977-3699
                                          Attention: Robert J. Rudnik
                                          Facsimile: (312) 977-3769

         c.     Entire Agreement. This Agreement (including the schedule hereto)
                constitutes  the entire  agreement among the parties hereto with
                respect to the subject  matter hereof and  supersedes  all prior
                agreements  and  understandings,  oral and  written,  among  the
                parties hereto with respect to the subject matter hereof.

         d.     Binding  Effect;  Benefit.  This  Agreement  shall  inure to the
                benefit  of and be  binding  upon the  parties  hereto and their
                respective  successors  and  assigns.  Brookdale  may assign its
                rights under this Agreement  without the consent of Grantor.  In
                the  event  that   Brookdale   assigns  its  rights  under  this
                Agreement,  it shall so notify  the other  parties  hereto,  and
                references  herein to Brookdale shall be deemed to be references
                to the assignee to whom such rights have been  assigned upon the
                execution  and  delivery by  Brookdale  and such  assignee of an
                assignment  and  assumption   agreement  with  respect  to  this
                Agreement  and  delivery of a copy  thereof to each of the other
                parties hereto.

         e.     Amendment;  Waiver.  No  provision  of  this  Agreement  may  be
                amended,  waived or otherwise modified without the prior written
                consent of the parties hereto.

                                       6

<PAGE>

         f.     Section  Headings.   The  section  headings  contained  in  this
                Agreement are for  reference  purposes only and shall not affect
                the meaning or interpretation of this Agreement.

         g.     Counterparts.  This  Agreement  may be executed in any number of
                counterparts,  each of which  shall be deemed to be an  original
                and all of which together shall be deemed to be one and the same
                instrument.

         h.     Applicable   Law.  This  Agreement  shall  be  governed  by  and
                construed in  accordance  with the laws of the State of Illinois
                (without giving effect to principles of conflicts of law).

         i.     Waiver of Jury  Trial.  Each  party  hereto  (or  joining in the
                execution   hereof),   after   consulting   or  having  had  the
                opportunity to consult with counsel, knowingly,  voluntarily and
                intentionally  waives  any right any of them may have to a trial
                by jury in any  litigation  based  upon or  arising  out of this
                Agreement,  or any  of the  transactions  contemplated  by  this
                Agreement,  or  any  course  of  conduct,  dealing,   statements
                (whether  oral or  written)  or actions of any of them.  No such
                party shall seek to  consolidate,  by counterclaim or otherwise,
                any action in which a jury trial has been  waived with any other
                action in which a jury  trial  cannot be or has not been  waived
                unless failure to so consolidate  would result in a loss of such
                claim.

         j.     Mortgage.  The parties hereto acknowledge and agree that (i) the
                Option is subject and  subordinate  to the lien of the Mortgages
                and the Ground Lease,  and (ii) upon the entry of a final decree
                of foreclosure  with respect to the Property,  or the conveyance
                thereof  pursuant  to  a  power  of  sale,  if  applicable,   or
                conveyance  deed in lieu of  foreclosure,  the  Option  shall be
                extinguished  notwithstanding  that the Option  Termination Date
                may not yet have occurred.

         k.     Limitation  of  Personal  Liability.  Notwithstanding  any other
                provision  of this  Agreement to the  contrary,  (i) in no event
                shall  any  officer,   director,   member,   partner,   manager,
                shareholder,  incorporator  or agent of  Grantor  be  personally
                liable to Brookdale for any of such Grantor's  obligations under
                this  Agreement,  and (ii) if the Owner  defaults in  connection
                with any  representation  or  covenant of the Owner set forth in
                this  Agreement,  it will  not  create  any  personal  liability
                against the Owner.  Notwithstanding  any other provision of this
                Agreement  to the  contrary,  (i) in no event shall any officer,
                director, member, partner, manager, shareholder, incorporator or
                agent of  Brookdale be  personally  liable to Grantor for any of
                Brookdale's  obligations  under  this  Agreement,  and  (ii)  if
                Brookdale  defaults in

                                       7

<PAGE>

                connection with any  representation or covenant of Brookdale set
                forth  in  this  Agreement,  it will  not  create  any  personal
                liability against the Brookdale.

         l.     Confidentiality.  Grantor acknowledges that Brookdale may suffer
                irreparable harm if the information provided to Grantor pursuant
                to this  Agreement or this  Agreement was disclosed to any third
                parties. Accordingly,  Grantor shall keep this Agreement and all
                such information confidential and shall not disclose any of such
                information  not already known to the public to any party except
                Grantor's lenders, attorneys, accountants and other professional
                advisors in connection  with the  transactions  contemplated  by
                this  Agreement or as otherwise  required by law or court order.
                Grantor  shall  endeavor to  minimize  the number of persons who
                have  copies of this  Agreement  and shall  inform  each of such
                persons of the  confidential  nature thereof.  The provisions of
                this  Section  shall not  prohibit an  affiliate of Grantor from
                participating in other similar  transactions  with parties other
                than Brookdale or its affiliates.



                           [Signature Page to Follow]

                                       8

<PAGE>


         IN WITNESS  WHEREOF,  the undersigned  have executed and delivered this
Agreement as of the date first above written.

                              GRANTOR:

                              AH Battery Park Owner, LLC

                              By:  AH Battery Park Member, LLC,
                                   its sole member and manager

                                   By:  Alliance Holdings, Inc.,
                                        its sole member and manager


                                        By:  /s/ David B. Fenkell
                                             ----------------------------
                                             Name:     David B. Fenkell
                                             Its:      President


BROOKDALE:

BROOKDALE LIVING COMMUNITIES
OF NEW YORK-BPC, INC.


By:  /s/ Mark J. Schulte
     --------------------------
Name:     Mark J. Schulte
Its:      President

<PAGE>



STATE OF PENNSYLVANIA  )
                       ) SS.
COUNTY OF MONTGOMERY   )


         The foregoing  instrument was  acknowledged  before me this 18th day of
August, 1999, by David B. Fenkell, the President of Alliance Holdings,  Inc., as
member and manager of AH Battery Park Member,  LLC,  which is the sole member of
AH Battery Park Owner, LLC.


NOTARY SEAL
                                        /s/ Jospeh Hiltwine
                                        --------------------------
                                             NOTARY PUBLIC
                                    Montgomery County, Pennsylvania

<PAGE>


STATE OF ILLINOIS      )
                       )SS.
COUNTY OF COOK         )


         The foregoing  instrument was  acknowledged  before me this 16th day of
August,  1999, by Mark J. Schulte, the President of Brookdale Living Communities
of New York-BPC, Inc., on behalf of said corporation.


NOTARY SEAL
                                        /s/ Donna Jean Elrod
                                        --------------------------
                                             NOTARY PUBLIC
                                        Cook County, Illinois

<PAGE>



                                   SCHEDULE I
                                   ----------

                                LEGAL DESCRIPTION
                                -----------------




All that certain plot, piece or parcel of land, situate,  lying and being in the
Borough  of  Manhattan,  County of New  York,  City of New York and State of New
York, bounded and described as follows:

BEGINNING at the  intersection  of the southerly line of Chambers Street and the
westerly line of North End Avenue;

THENCE  southerly  along the  westerly  line of North End Avenue,  a distance of
196.00 feet to a point on the northerly line of Warren Street;

THENCE westerly along said northerly line of Warren Street, a distance of 100.00
feet to the division  line between  Parcel 20C on the west and Parcel 20B on the
east;

THENCE  northerly  along said  division  line at right  angles to the  preceding
course, a distance of 196.00 feet to the southerly line of Chambers Street;

THENCE  easterly  along said southerly  line of Chambers  Street,  a distance of
100.00 feet to the point of the BEGINNING.