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 September 30, 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)

 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 November 10, 1999,  11,574,749  shares of the  registrant's  Common Stock,
$0.01 par value per share, were outstanding.




<PAGE>

<TABLE>
<CAPTION>

                                         BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

                                                              FORM 10-Q

                                                                INDEX
                                                                -----

                                                                                                                        PAGE
                                                                                                                        ----
<S>                                                                                                                     <C>
PART I:  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED).                                                                               3

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

         Consolidated Statements of Operations for the three months and nine months ended September 30, 1999 and 1998    5

         Consolidated Statements of Cash Flows for the nine months ended September 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.                                                                              18

SIGNATURES                                                                                                              21

</TABLE>



<PAGE>



                          PART I: FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED).


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

         Brookdale  Living  Communities,  Inc. was  incorporated on September 4,
1996 and commenced operations upon the completion of its initial public offering
on May 7, 1997.  The  consolidated  financial  statements  of  Brookdale  Living
Communities,  Inc. and its subsidiaries (the "Company") represent the results of
operations  of 22  facilities  the  Company  operated  during the  period  ended
September 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
consolidated  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)




                                                                           September 30, 1999    December 31, 1998
                                                                           ------------------    -----------------
ASSETS                                                                         (unaudited)           (audited)

<S>                                                                          <C>                  <C>
Cash and cash equivalents..............................................      $       4,231        $       1,065
Short-term investments.................................................             41,000                   --
Accounts receivable....................................................              1,134                  379
Notes receivable.......................................................              4,753                3,486
Reimbursable development costs.........................................             11,328                9,815
Prepaid expenses and other.............................................              5,924                4,752
                                                                             -------------        -------------
      Total current assets.............................................             68,370               19,497
                                                                             -------------        -------------

Property, plant and equipment..........................................            134,136              115,801
Accumulated depreciation...............................................             (8,823)              (5,689)
                                                                             --------------       -------------
      Property, plant and equipment, net...............................            125,313              110,112
                                                                             -------------        -------------

Property under development.............................................              8,588               11,221
Cash and investments - restricted......................................              9,942                8,226
Investment certificates - restricted...................................             35,422               15,951
Letter of credit deposits..............................................                 --               13,919
Lease security deposits................................................             75,910               55,453
Other, net.............................................................             21,047               10,254
                                                                             -------------        -------------
      Total assets.....................................................      $     344,592        $     244,633
                                                                             =============        =============

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Current portion of long-term debt......................................      $         329        $       3,310
Unsecured line of credit...............................................                 --               10,997
Current portion of deferred gain on sale of property...................                806                  806
Accrued interest payable...............................................              1,676                  968
Accounts payable and accrued expenses..................................             13,183                9,234
Tenant refundable entrance fees and security deposits..................              6,656                5,838
Other..................................................................              3,415                  629
                                                                             -------------        -------------
      Total current liabilities........................................             26,065               31,782
                                                                             -------------        -------------

Long-term debt, less current portion...................................             92,322               92,570
Convertible subordinated notes.........................................            100,000                   --
Deferred lease liability...............................................              3,181                2,849
Deferred gain on sale of property, less current portion................             15,512               16,116
                                                                             -------------        -------------
      Total liabilities................................................            237,080              143,317
                                                                             -------------        -------------

STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 20,000 shares authorized, none issued.                 --                   --
Common stock, $.01 par value, 75,000 shares authorized, 11,575 and 11,572
    shares issued and outstanding at September 30, 1999 and
    December 31, 1998, respectively....................................                116                  116
Additional paid-in-capital.............................................             94,134               94,101
Accumulated earnings...................................................             15,406                7,099
Treasury stock, 153 common shares at September 30, 1999 at cost........             (2,144)                  --
                                                                             --------------       -------------
      Total stockholders' equity.......................................            107,512              101,316
                                                                             -------------        -------------
      Total liabilities and stockholders' equity.......................      $     344,592        $     244,633
                                                                             =============        =============


See accompanying notes to consolidated financial statements.

</TABLE>

                                                                 4
<PAGE>

<TABLE>
<CAPTION>

                                         BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

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



                                                              Three months ended September 30, Nine months ended September 30,
                                                                     1999          1998            1999           1998
                                                                     ----          ----            ----           ----
<S>                                                             <C>             <C>            <C>            <C>
REVENUE
Resident fees...............................................    $    24,899     $   18,868     $    73,087    $    51,723
Development fees............................................          1,640          1,542           4,941          4,120
Management fees.............................................            113             72             258            188
                                                                -----------     ----------     -----------    -----------
       Total revenue........................................         26,652         20,482          78,286         56,031
                                                                -----------     ----------     -----------    -----------

EXPENSES
Facility operating..........................................         13,475         10,715          39,163         28,993
General and administrative..................................          1,317          1,280           3,752          3,776
Lease expense...............................................          6,368          4,790          19,014         12,782
Depreciation and amortization...............................          1,568          1,146           4,250          3,577
Write-off of deferred financing costs.......................             --             --             273             --
                                                                -----------     ----------     -----------    -----------
       Total operating expenses.............................         22,728         17,931          66,452         49,128
                                                                -----------     ----------     -----------    -----------
       Income from operations...............................          3,924          2,551          11,834          6,903
Interest income.............................................          2,716          1,277           6,205          2,918
Interest expense............................................         (2,055)        (1,033)         (4,970)        (2,891)
                                                                ------------    -----------    ------------   ------------
       Income before income tax expense.....................          4,585          2,795          13,069          6,930
Income tax expense..........................................         (1,675)          (982)         (4,762)        (2,485)
                                                                ------------    -----------    ------------   ------------

       Net income...........................................    $     2,910     $    1,813     $     8,307    $     4,445
                                                                ===========     ==========     ===========    ===========

Basic earnings per common share.............................    $      0.25     $     0.19     $      0.72    $      0.47
                                                                ===========     ==========     ===========    ===========

Weighted average shares used for computing basic earnings
    per common share........................................         11,555          9,569          11,566          9,489
                                                                ===========     ==========     ===========    ===========

Diluted earnings per common share...........................    $      0.23     $     0.19     $      0.67    $      0.46
                                                                ===========     ==========     ===========    ===========

Weighted average shares used for computing diluted earnings
    per common share........................................         17,099          9,771          14,464          9,738
                                                                ===========     ==========     ===========    ===========


See accompanying notes to consolidated financial statements.


</TABLE>

                                                                 5
<PAGE>

<TABLE>
<CAPTION>

                                         BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

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


                                                                                    Nine months ended September 30,
                                                                                        1999               1998
                                                                                        ----               ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                             <C>                 <C>
    Net income...........................................................       $       8,307       $        4,445
    Adjustments to reconcile net income to net cash provided by operating
    activities:
       Depreciation and amortization.....................................               4,250                3,577
       Write-off of deferred financing costs.............................                 273                   --
       Deferred income taxes.............................................               4,762                2,437
       Change in deferred lease liability................................                 332                  826
       Deferred gain on sale of property.................................                (604)                (604)
       Changes in:
          Accounts receivable............................................                (755)                (387)
          Prepaid expenses and other.....................................              (7,858)              (7,367)
          Accrued interest payable.......................................                 708                  312
          Accounts payable and accrued expenses and other................               3,546                1,815
          Tenant refundable entrance fees and security deposits..........                 225                  (67)
                                                                                -------------       ---------------
              Net cash provided by operating activities..................              13,186                4,987
                                                                                -------------       --------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Lease security deposits and acquisitions.............................             (20,491)             (18,647)
    Increase in cash and investment certificates - restricted............              (1,196)                (280)
    Increase in investments - restricted.................................             (19,471)             (13,132)
    Proceeds from sale of property under development, net................               1,171                3,370
    Property under development, net of related payables .................             (12,691)             (15,680)
    Payments received on notes receivable................................               3,303                7,446
    Purchases of short-term investments..................................             (55,000)                  --
    Sales of short-term investments......................................              14,000                   --
    Additions to property, plant and equipment and reimbursable
       development costs, net of related accounts payable................              (9,812)              (4,940)
                                                                                --------------      ---------------
              Net cash used in investing activities......................            (100,187)             (41,863)
                                                                                --------------      ---------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Repayment of long-term debt..........................................              (3,229)                (213)
    Proceeds from unsecured lines of credit..............................              31,933               28,150
    Repayment of unsecured lines of credit...............................             (42,930)              (7,500)
    Proceeds from issuance of convertible subordinated notes, net of costs             94,286                   --
    Decrease (increase) in letter of credit deposits, net................              13,919               (1,333)
    Payment of financing costs...........................................              (1,701)                (957)
    Proceeds from issuance of common stock, net..........................                  33                5,847
    Purchases of treasury stock..........................................              (2,144)                  --
                                                                                --------------      --------------
              Net cash provided by financing activities..................              90,167               23,994
                                                                                -------------       --------------

              Net increase (decrease) in cash and cash equivalents.......               3,166              (12,882)
              Cash and cash equivalents at beginning of period...........               1,065               13,292
                                                                                -------------       --------------
              Cash and cash equivalents at end of period.................       $       4,231       $          410
                                                                                =============       ==============



See accompanying notes to consolidated financial statements.

</TABLE>

                                                                 6
<PAGE>

<TABLE>
<CAPTION>

                                         BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

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



                                                                                 Nine months ended September 30,
                                                                                    1999                 1998
                                                                                    ----                 ----
Supplemental Disclosure of Cash Flow Information:

<S>                                                                             <C>                <C>
Interest paid, net of amounts capitalized.............................          $       4,262      $         3,056
                                                                                =============      ===============

Income taxes paid.....................................................          $         514      $           651
                                                                                =============      ===============

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....................................          $      20,066      $        19,516
     Less - cash consideration paid...................................                 19,334               17,319
                                                                                -------------      ---------------

     Liabilities assumed..............................................          $         732      $         2,197
                                                                                =============      ===============



See accompanying notes to consolidated financial statements.


</TABLE>





                                                                 7



<PAGE>


               BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES

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

1.   ORGANIZATION

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

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

<TABLE>
<CAPTION>

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

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

Leased Facilities:
------------------
The Hallmark                                May 7, 1997                    Chicago, IL
The Springs of East Mesa                    May 7, 1997                    Mesa, AZ
The Gables at Brighton                      May 7, 1997                    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
Berkshire of Castleton                      September 14, 1999             Indianapolis, IN

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

Development Projects Under Construction (3):
-------------------------------------------
Raleigh, North Carolina
Glen Ellyn, Illinois
New York (Battery Park City), New York
Pittsburgh (Mount Lebanon), Pennsylvania

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

</TABLE>

                                       8
<PAGE>


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

    During July 1999, the Company opened two new facilities which were developed
by the Company and are now being  managed by the Company for third party owners.
The 218-unit Heritage of Southfield facility is located in Southfield, Michigan,
and the 208-unit Heritage of Gaines Ranch facility is located in Austin, Texas.

    On August 6, 1999, the Company sold certain  development rights to a site in
Huntley,  IL, to an  unaffiliated  third party.  The site was purchased  from an
affiliate of The Prime Group, Inc. and financed, in part, with the proceeds of a
loan made by the Company to the third  party.  The sales  price was  $2,903,  of
which $871 was  received in cash and $2,032 was  received  by the  delivery of a
promissory  note  bearing  interest at 12% which is secured by a mortgage on the
site. The Company will develop the site pursuant to a development agreement with
the owner.

    On August 24, 1999, construction financing of $49,125 was put into place for
the Battery Park City,  New York,  New York project.  The loan bears interest at
London  Interbank  Offered Rate  ("LIBOR")  plus 2.35% and matures  February 28,
2001.  The  unaffiliated  third party owner has entered into  interest rate lock
agreements  aggregating  $32,850 with respect to the floating rate constructions
debt. The repayment of this loan is guaranteed by Brookdale Living  Communities,
Inc. In connection with the construction financing, the third party owner repaid
the $1,400 promissory note, plus accrued interest, to the Company.

    On September  8, 1999,  the  Company's  Board of  Directors  authorized  the
Company to repurchase  up to 2,000 shares of its common stock.  At September 30,
1999, the Company had repurchased  153 shares at an aggregate  purchase price of
$2,144.

    On September  14, 1999,  the Company  entered into an agreement to lease the
Berkshire of  Castleton,  a 145-unit  senior  independent  and  assisted  living
facility located in Indianapolis,  Indiana. The lease is an operating lease with
an initial five-year term and five one-year renewal option periods.  The Company
has an option to acquire this facility at the end of the lease term.

    On September 30, 1999, the Company entered into an operating lease agreement
for  approximately  30,000  square  feet  of new  corporate  office  space.  The
operating  lease commences on March 1, 2000, has a term of 10 years and requires
the  payment  of base rent at $16.50 per square  foot  escalating  to $23.25 per
square foot plus operating  expenses (as defined) over the term of the lease.

                                       9
<PAGE>

In September  1999,  Prime Group Realty  Trust,  the successor to the office and
industrial divisions of The Prime Group,  Inc.,  exercised its option to acquire
the building.

     The Company has entered into  interest  rate lock  agreements  on behalf of
third party owners of  development  projects  with respect to interest  rates on
floating  rate  construction  debt.  The  agreements  are  designed to limit the
exposure to movements in floating interest rates on the development construction
project  loans,  and the Company is to be  reimbursed by the third party for any
payments  made  pursuant  to  the   agreements.   The  notional  amount  of  the
construction  loans being hedged is $53,500,  and the approximate  fair value of
such hedging contracts was $1,169 at September 30, 1999.

    In connection with the replacement credit  enhancements  obtained on May 27,
1999, 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,  the
Company purchased $65,000 of interest rate caps, with a strike price of 6.35%, a
fair value of $492 at September 30, 1999 and an expiration date of June 1, 2004.
The Company's reimbursement  obligations are non-recourse obligations secured by
mortgages on the  Devonshire  and Heritage of Des Plaines  facilities;  provided
however,  Brookdale  Living  Communities,  Inc. has a  guaranteed  reimbursement
obligation which is limited to $4,000.

4.  INCOME TAXES

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

5.  EARNINGS PER SHARE

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

<TABLE>
<CAPTION>
                                                              Three months ended September 30,    Nine months ended September 30,
                                                                  1999             1998               1999             1998
                                                              -------------    --------------     -------------    -------------
       <S>                                                      <C>               <C>                <C>             <C>
       Numerator:
       Numerator for basic earnings per common share            $   2,910         $   1,813          $  8,307        $   4,445
       Interest expense on convertible
           subordinated notes, net of tax                             941                --             1,421               --
                                                              -------------    --------------     -------------    -------------
       Numerator for diluted earnings per share                 $   3,851         $   1,813          $  9,728        $   4,445
                                                              =============    ==============     =============    =============
       Denominator:
        Denominator for basic earnings per common share -
              weighted-average shares                              11,555             9,569            11,566            9,489
        Effect of dilutive securities:
           Employee stock options                                      64               202               108              249
           Warrants                                                    --                --                --               --
           Convertible subordinated notes                           5,479                --             2,790               --
                                                              -------------    --------------     -------------    -------------
         Denominator for diluted earnings per common share -
               adjusted weighted-average shares and assumed
               conversions                                         17,099             9,771            14,464            9,738
                                                              =============    ==============     =============    =============

       Basic earnings per common share                          $    0.25         $    0.19          $   0.72         $   0.47
                                                              =============    ==============     =============    =============

       Diluted earnings per common share                        $    0.23         $    0.19          $   0.67         $   0.46
                                                              =============    ==============     =============    =============
</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 11,575 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.

<TABLE>
<CAPTION>
                                            Nine months                         Three months
                                        ended September 30,                  ended September 30,
                                        -------------------                  -------------------
                                          1999       1998                      1999       1998
                                          ----       ----                      ----       ----
         <S>                            <C>        <C>                      <C>         <C>
         Revenue                        $80,831    $75,050                  $27,242     $25,279
         Net income                       8,137      4,251                    3,099       1,747
         Basic earnings per share          0.70       0.37                     0.27        0.15
         Diluted earnings per share        0.64       0.37                     0.24        0.15

</TABLE>

                                       10
<PAGE>
    The pro forma information does not include interest income on available cash
from the proceeds of the 5.5% convertible subordinated notes.

7.       SUBSEQUENT EVENTS

    On October  19,  1999,  the Company  obtained a $6,000  loan  secured by The
Willows,  a 54 unit assisted  living  addition at the Hawthorn Lakes facility in
Vernon Hills, Illinois. The loan bears interest at LIBOR plus 1.625%, payable in
monthly  installments  of  interest  only,  and matures on April 18,  2002.  The
Company  has a  guaranteed  reimbursement  obligation  under the loan,  which is
limited to 50% of the  amount  due under the loan plus $337  until the  facility
meets certain performance requirements.

     On October  21,  1999,  the  Company  entered  into a  definitive  purchase
agreement for the Benchmark of Hoffman Estates,  a 289 - unit independent living
community located in Hoffman Estates,  Illinois. The closing of this transaction
is subject to the completion of the Company's due diligence and other  customary
closing  contingencies.  There can be no assurance  that this  transaction  will
close in a timely manner, if at all.

    As of November 10, 1999,  the Company  purchased an additional 427 shares of
the  Company's  common  stock  bringing  the total to 580 shares at an aggregate
purchase price of $7,525 to date.

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

    The following  discussion is based on and should be read in conjunction with
the  Consolidated  Financial  Statements of the Company as of September 30, 1999
and December  31, 1998 and for the nine months and three months ended  September
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:

        - general  economic  conditions  in the  markets  in which  the  Company
          operates;
        - competitive  pressures within the industry and/or the markets in which
          the Company operates;
        - 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;
        - the  effect  of  future  legislation  or  regulatory  changes  on  the
          Company's operations; and
        - other factors  described  from time to time in the  Company's  filings
          with the Securities and Exchange Commission,  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  independent and assisted living services through
its owned, leased or managed  facilities.  As of September 30, 1999, the Company
operated 22 senior independent and assisted living facilities containing a total
of  approximately  4,813 units.  Four  facilities  are owned by the Company,  14
facilities are leased by the Company and four  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.

                                       11
<PAGE>
    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  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
September 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 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 NINE  MONTHS  ENDED  SEPTEMBER  30,  1999 TO  NINE  MONTHS  ENDED
SEPTEMBER 30, 1998

    For the nine months ended September 30, 1999, results reflect the operations
of the Company's 22  facilities.  For the nine months ended  September 30, 1998,
results reflect the operations of 16 facilities.

    Revenue.  Total revenue  increased by $22,255,  or 39.7%, to $78,286 for the
nine months  ended  September  30, 1999 when  compared to the nine months  ended
September 30, 1998. Resident fees increased by $21,364, or 41.3%, to $73,087. Of
the increase in total revenue,  approximately $2,445 (or a "same store" increase
of 5.3%) reflects an increase in resident fees at the facilities  that have been
operated during both periods, which resulted primarily from increases in monthly
charges  under  residency  agreements.  Approximately  $18,919 of such  increase
reflects  revenue from  facilities  first leased after  September 30, 1998.  The
remaining $891 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 $17,324 or 35.3%,
to $66,452 for the nine months  ended  September  30, 1999 when  compared to the
nine months ended September 30, 1998.  Facility  operating expenses increased by
$10,170 or 35.1%, to $39,163  primarily due to the expenses  associated with the
facilities first leased after September 30, 1998.

    Lease expense  increased by $6,232, or 48.8%, to $19,014 for the nine months
ended  September 30, 1999 when  compared to the nine months ended  September 30,
1998 due primarily to the lease expense  associated  with the  facilities  first
leased after  September 30, 1998.  Depreciation  and  amortization  increased by
$673,  or 18.8%,  to $4,250 for the nine months  ended  September  30, 1999 when
compared to the nine months ended  September 30, 1998.  This increase  primarily
reflects the depreciation of additional furniture, fixtures and equipment at the
corporate office and improvements at the facilities.

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

    Interest  income  increased  by $3,287,  or  112.6%,  to $6,205 for the nine
months ended September 30, 1999 when compared to the nine months ended September
30, 1998 due to the investment of the net proceeds from the issuance of $100,000
of 5.5%  convertible  subordinated  notes due 2009 and an  increase  in  various
deposits and restricted investments.

    Interest  expense  increased  by  $2,079,  or 71.9%,  to $4,970 for the nine
months ended September 30, 1999 when compared to the nine months ended September
30, 1998 due to increased  borrowings under the lines of credit and the issuance
of $100,000 of 5.5% convertible subordinated notes due 2009.

    Net Income.  For the nine  months  ended  September  30,  1999,  the Company
generated  net income of  approximately  $8,307,  as compared to a net income of
$4,445 for the nine  months  ended  September  30,  1998,  due to the changes in
revenue and expenses described above.

                                       12
<PAGE>
COMPARISON  OF THREE  MONTHS  ENDED  SEPTEMBER  30, 1999 TO THREE  MONTHS  ENDED
SEPTEMBER 30, 1998

    For  the  three  months  ended  September  30,  1999,  results  reflect  the
operations of the Company's 22 facilities.  For the three months ended September
30, 1998, results reflect the operations of 16 facilities.

    Revenue.  Total revenue  increased by $6,170,  or 30.1%,  to $26,652 for the
three months ended  September  30, 1999 when  compared to the three months ended
September 30, 1998.  Resident fees increased by $6,031, or 32.0%, to $24,899. Of
the increase in total revenue,  approximately $1,172 (or a "same store" increase
of 7%) reflects an increase in resident  fees at the  facilities  that have been
operated during both periods, which resulted primarily from increases in monthly
charges  under  residency  agreements.  Approximately  $4,859  of such  increase
reflects  revenue from  facilities  first leased after  September 30, 1998.  The
remaining $139 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 $4,797, or 26.8%,
to $22,728 for the three months ended  September  30, 1999 when  compared to the
three months ended September 30, 1998.  Facility operating expenses increased by
$2,760, or 25.7%, to $13,475  primarily due to the expenses  associated with the
additional facilities leased after September 30, 1998.

    Lease expense  increased by $1,578, or 33.0%, to $6,368 for the three months
ended  September 30, 1999 when compared to the three months ended  September 30,
1998 due  primarily to the lease expense for the  facilities  first leased after
September 30, 1998.  Depreciation and amortization  increased by $422, or 36.8%,
to $1,568 for the three months  ended  September  30, 1999 when  compared to the
three months ended  September  30, 1998.  This increase  primarily  reflects the
depreciation  of additional  furniture,  fixtures and equipment at the corporate
office and improvements at the facilities.

    Interest income increased by approximately  $1,439, or 112.7%, to $2,716 for
the three  months  ended  September  30, 1999 when  compared to the three months
ended  September  30, 1998 due to the  investment  of the net proceeds  from the
issuance  of  $100,000 of 5.5%  convertible  subordinated  notes due 2009 and an
increase in various deposits and restricted investments.

    Interest expense  increased $1,022, or 98.9%, to $2,055 for the three months
ended  September 30, 1999 when compared to the three months ended  September 30,
1998 due to the issuance of $100,000 of 5.5% convertible  subordinated notes due
2009.

    Net Income.  For the three months  ended  September  30,  1999,  the Company
generated  net income of  approximately  $2,910,  as compared to a net income of
$1,813 for the three months  ended  September  30,  1998,  due to the changes in
revenue and expenses described above.

LIQUIDITY AND CAPITAL RESOURCES

    At September 30, 1999,  the Company had $4,231 in cash and cash  equivalents
and $41,000 million in short-term investments.

    Cash   and   cash   equivalents   (which   does   not   include   cash   and
investments-restricted of $9,942, short-term investments of $41,000,  investment
certificates  - restricted  of $35,422 and lease  security  deposits of $75,910)
increased by $3,166 to $4,231 at September  30, 1999 as compared to December 31,
1998,  primarily  due to the net proceeds  from the issuance of $100,000 of 5.5%
convertible  subordinated notes due 2009 and the release of the letter of credit
deposits upon the replacement credit  enhancements  securing the $65,000 million
tax-exempt  bonds  issued with  respect to the  Devonshire  and  Heritage of Des
Plaines  facilities,  offset by cash utilized for transaction  costs and by cash
used for the lease  security  deposits  on the River Bay Club and  Berkshire  of
Castleton  facilities  and the  repayment of the  unsecured  lines of credit and
long-term debt.

    Net  cash  provided  by  operating  activities  for the  nine  months  ended
September  30,  1999  totaled  approximately  $13,186  as a result of  increased
facility operations before depreciation and amortization and the commencement of
the lease of the River Bay Club and  Berkshire  of Castleton  facilities  leased
subsequent to December 31, 1998.

    Net cash used in investing activities totaled approximately $100,187 for the
nine months ended September 30, 1999.  Investing  activities  included cash paid
for lease security  deposits in connection  with the lease of the River Bay Club
and  Berkshire  of  Castleton  facilities  of $19,334  and a $1,157  increase in
existing  lease  security  deposits,  the purchase of short-term  investments of
$55,000 from the net proceeds from the issuance of $100,000 of 5.5%  convertible
subordinated notes due 2009, the sale of $14,000 of such short-term investments,
an increase in  investment  certificates-restricted  of $19,471,  an increase in
property under development of $12,691 and other net uses of $6,534.

    Net cash provided by financing activities was approximately  $90,167 for the
nine months ended September 30, 1999.  Financing  activities included $94,286 of
net  proceeds  from the  issuance of $100,000 of 5.5%  convertible  subordinated
notes due

                                       13
<PAGE>


2009,  proceeds from unsecured lines of credit of $31,933 and $13,919 million of
letter of credit deposits  released in connection with the replacement of credit
enhancements  on $65,000  tax-exempt  bonds,  offset by repayments of $42,930 on
borrowings  under the  unsecured  lines of the credit,  repayments  of $3,229 on
long-term debt,  payments of $2,144 to acquire treasury stock and other net uses
of $1,668.

    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 September  30,  1999,  the Company had 4 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  $2,000 to
$3,000.  Capital expenditures for the remainder of 1999 related to the Company's
existing  facilities,  including projects under renovation,  are estimated to be
approximately $2,000 to $3,000 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
$100,000  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 $100,000  commitment  from The Capital  Company of America
(successor to Nomura Asset Capital  Corporation)  for development  projects,  of
which approximately  $51,000 was committed to the Austin,  Texas and Southfield,
Michigan development projects. The Company has an effective "shelf" registration
statement  pursuant  to which the  Company may issue up to $200,000 of equity or
debt  securities of which  $33,000 of common stock was issued in November  1998.
The Company  believes  that it has  sufficient  funds  available  to finance its
acquisition and development programs for at least the next 12 months.

    As of September 30, 1999, the Company had $65,000 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  3.28% during the nine months
ended  September 30, 1999, and the average  interest rate on such debt was 3.81%
at  September  30, 1999.  The Company  entered  into  interest  rate caps for an
aggregate notional amount of $65,000,  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:

        - require  the  Company to meet  certain  financial  tests and  maintain
          certain amounts of funds in escrow;
        - 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
        - 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

        - obtaining  required  governmental  permits for the construction of new
          facilities without experiencing significant delays;
        - completing  construction  of new  facilities  on schedule  and without
          going significantly over budget;
        - the ability to work with contractors and  subcontractors who construct
          the facilities;
        - increased  expenses  due to  delays  caused by  shortages  of labor or
          materials or adverse weather conditions; and
        - 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.

                                       14
<PAGE>
    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

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
September 30, 1999,  approximately  $65,000 in principal amount of the Company's
indebtedness bore interest at a floating rate of approximately  3.81% and future
indebtedness may bear floating rate interest.  The Company entered into interest
rate caps for an  aggregate  notional  amount of $65,000,  with a capped rate of
6.35% and an  expiration  date of 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 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 had not been Year 2000 compliant,
but was  remedied  during the second  quarter  1999.  In June 1999,  the Company
executed  a contract  for  replacement  software  at the  facilities  it owns or
operates and commenced implementation.

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
updated  assessment  in June  1999.  As of  November  10,  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.  The Company  executed a contract to
purchase  replacement software and commenced its implementation of this software
in June 1999,

                                       15
<PAGE>

with an expected  completion  date of January 2000.  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 was
substantially  completed in the third quarter of 1999. The Company will continue
to update these contingency plans throughout 1999.

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  $3,500 to $4,000,  of which
approximately $3,200 has been incurred through September 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 does not expect a material impact upon
the Company and its operations.  The Company has contingency  plans in the event
of  Year  2000  issues.  Such  plans  involve,   among  other  actions,   manual
workarounds, alternate vendors and suppliers, and adjusting staffing strategies.

     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.  The Company is aware that
it is generally  believed that the world's Year 200 problem,  if corrected,  may
result in a  economic  crisis of global  proportions.  The  Company is unable to
determine  whether such  predictions are true or false. The Company expects that
the  nature  of its  income  should  serve as a hedge  against  any  short  term
disruptions of business.  However,  if the worst case Year 2000 scenarios  prove
true,  the Company  assumes that all  companies  (including  the Company) may be
adversely  affected  in  one  way  or  another.   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  September  30,  1999,  the  Company had $92,651 of
long-term debt at a weighted  average  interest rate of 5.13%.  Included therein
are mortgage notes of $27,651,  which bear fixed rates of interest  ranging from
8.0% to 8.525% through  maturity in 2027, and variable rate tax-exempt  bonds of
$27,000,  $6,000 and $32,000,  which are payable interest only until maturity in
2025, 2025 and 2019, respectively.

                                       16
<PAGE>

     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. The notional  aggregate amount of construction loans
being  hedged  is  $53,500  and the fair  value of such  hedging  contracts  was
approximately  $1,169 as of September 30, 1999.  The Company is to be reimbursed
by the third party for any  payments  made  pursuant to the  interest  rate lock
agreements.

     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  $650. The Company entered into interest rate caps for
its variable rate tax-exempt bonds for an aggregate  notional amount of $65,000,
with a strike price of 6.35%,  a fair value of $492 as of September 30, 1999 and
an expiration date of June 1, 2004.

     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 terms.  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>


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.

                     None

         ITEM 5.     Other Information.

                     None

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

(a)      EXHIBITS:
                                  EXHIBIT INDEX
EXHIBIT
NUMBER                             DESCRIPTION
------                             -----------

3.1      Restated  Certificate of Incorporation of 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     Building Loan  Agreement,  dated as of August 24, 1999, by and among AH
         Battery Park Owner,  LLC, Key Corporate  Capital Inc.,  Fleet  National
         Bank and European American Bank

10.2     Soft Cost Loan Agreement,  dated as of August 24, 1999, by and among AH
         Battery Park Owner,  LLC, Key Corporate  Capital Inc.,  Fleet  National
         Bank and European American Bank

10.3     Payment  Guaranty,  dated as of August 24,  1999,  issued by  Brookdale
         Living Communities, Inc. in favor of Key Corporate Capital Inc.

10.4     Completion  Guaranty,  dated as of August 24, 1999, issued by Brookdale
         Living Communities, Inc. for the benefit of Key Corporate Capital Inc.

10.5     Indemnity  Agreement,  dated as of August 24, 1999, issued by Brookdale
         Living Communities, Inc. in favor of AH Battery Park Owner, LLC

                                       18

<PAGE>

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

10.6     Property Option Agreement,  dated as of August 24, 1999, by and between
         AH Battery Park Owner,  LLC and  Brookdale  Living  Communities  of New
         York-BPC, Inc.

10.7     Equity Option  Agreement,  dated as of August 24, 1999, by and among AH
         Battery Park  Member,  LLC, AH Battery  Park Owner,  LLC and  Brookdale
         Living Communities of New York-BPC, Inc.

10.8     Amended  and  Restated  Development  Agreement,  dated as of August 24,
         1999, by and between AH Battery Park Owner,  LLC and  Brookdale  Living
         Communities of New York - BPC, Inc.

10.9     Management  Agreement,  dated as of August 24, 1999,  by and between AH
         Battery  Park  Owner,  LLC  and  Brookdale  Living  Communities  of New
         York-BPC, Inc.

12       Statements  Regarding  Computation  of Ratios of  Earnings  to Combined
         Fixed Charges and Preferred Stock Dividends

27       Financial Data Schedule

                                       19
<PAGE>

(b) REPORTS ON FORM 8-K:

      No  reports  on Form 8-K were  filed  during  the  period  covered by this
quarterly report.





                                       20
<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:  November 15, 1999           /s/ Mark J. Schulte
       -----------------           -------------------------------------------
                                   Mark J. Schulte
                                   President and
                                   Chief Executive Officer


Date:  November 15, 1999            /s/ Darryl W. Copeland, Jr.
       -----------------            ------------------------------------------
                                    Darryl W. Copeland, Jr.
                                    Executive Vice President and
                                    Chief Financial Officer



                                       21