SUBORDINATION AGREEMENT


         THIS  SUBORDINATION  AGREEMENT  ("Agreement") is entered into as of the
25th day of  January,  1999 by FBR  ASSET  INVESTMENT  CORPORATION,  a  Virginia
corporation  (referred  to herein as the  "Subordinator"),  in favor of  LaSALLE
NATIONAL BANK ("Bank").

                              W I T N E S S E T H:

         WHEREAS,  Brookdale Living  Communities,  Inc., a Delaware  corporation
(the "Borrower"),  and Bank have entered into that certain Loan Agreement, dated
April 27, 1998,  which Loan  Agreement  has been  amended by that certain  First
Amendment to Loan  Agreement  and  Documents  dated July 16, 1998,  that certain
Second  Amendment to Loan Agreement and Documents  dated October 14, 1998,  that
certain Third  Amendment to Loan Agreement and Documents dated October 20, 1998,
that certain Fourth  Amendment to Loan Agreement and Documents dated November 3,
1998,  that  certain  Fifth  Amendment to Loan  Agreement  and  Documents  dated
December  21, 1998,  and that certain  Sixth  Amendment  to Loan  Agreement  and
Documents  dated January 15, 1999,  and that certain  Seventh  Amendment to Loan
Agreement  and  Documents  dated  January  25,  1999 (as  amended to date and as
hereafter supplemented,  modified or amended, and including any promissory notes
executed in connection  therewith,  including  that certain  Fourth  Amended and
Restated Note dated January 15, 1999, the "Loan  Agreement";  capitalized  terms
used herein and not otherwise  defined shall have the meanings  ascribed to them
in the Loan Agreement).  A true, correct and complete copy of the Loan Agreement
is attached hereto as Exhibit A;

         WHEREAS,  the  Subordinator  and the  Borrower  have  entered into that
certain  Loan  Agreement,  dated  January 25, 1999 (as  hereafter  supplemented,
modified or amended,  the "Subordinated  Loan Agreement"),  a true,  correct and
complete copy of which is attached hereto as Exhibit B;

         WHEREAS,  the  provisions of the Loan  Agreement  prohibit the Borrower
from  entering  into the  transactions  contemplated  by the  Subordinated  Loan
Agreement without the consent of Bank;

         WHEREAS,  Bank has required,  as a condition precedent to consenting to
the  arrangements  contemplated by the  Subordinated  Loan  Agreement,  that the
Subordinator deliver this Agreement to Bank; and

         WHEREAS,  the Subordinator is willing to deliver this Agreement to Bank
in order to induce  Bank to  consent  to the  arrangements  contemplated  by the
Subordinated Loan Agreement.

                                   AGREEMENTS

         NOW, THEREFORE,  in consideration of the premises and of other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Subordinator hereby agrees with Bank as follows:

         1.   Reliance. The Subordinator acknowledges that Bank is consenting to
the  arrangements  contemplated by the  Subordinated  Loan Agreement in reliance
upon the  Subordinator's  agreement to  subordinate  all amounts that are now or
hereinafter  become  owing  by  the  Borrower  to  the  Subordinator  (including
principal,  interest,  fees, and expenses) in connection  with the  Subordinated
Loan Agreement and that certain  Promissory  Note, dated January 25, 1999 in the
original principal amount of $5,000,000.00  (the  "Subordinated  Note"), a true,
correct  and  complete  copy of which  is  attached  hereto  as  Exhibit  C. The
Subordinator  represents and warrants to Bank that the Borrower currently has no
obligations to the Subordinator other than the principal amount of (and interest
on) the Subordinated Note.

                                       -1-

<PAGE>



         2.   Subordination.  The  Subordinator  covenants  and agrees  that the
payment  of all  amounts  which  are due or  payable  from the  Borrower  to the
Subordinator  in connection  with the  Subordinated  Loan  Agreement  and/or the
Subordinated Note (including  principal,  interest,  fees, and expenses) and all
extensions, modifications,  refinancings and renewals thereof (collectively, the
"Subordinated Debt"), together with all rights to receive proceeds of collateral
or other security therefor, are hereby expressly subordinated, to the extent and
in the manner  hereinafter  set forth,  to the  performance  and  payment of the
Obligations  (as  defined in the Loan  Agreement)  of the  Borrower,  including,
without  limitation,  all  amounts  (including  principal,  interest,  fees  and
expenses)  owing  pursuant  to the Loan  Agreement  (collectively,  the  "Senior
Obligations"). The Subordinator further agrees and acknowledges that, subject to
the terms set forth herein,  the Subordinated  Loan Agreement,  the Subordinated
Note, and the Subordinator's rights under each shall in all cases be subordinate
to the Loan Agreement and the rights of Bank thereunder.

         3.   Payment Restrictions. Notwithstanding anything to the contrary set
forth in the Subordinated Loan Agreement and the Subordinated Note, the Borrower
shall not make and the Subordinator  shall not receive any payments of principal
(including without limitation proceeds of collateral or any other security) with
respect to the Subordinated Debt unless and until Bank has notified Subordinator
that the outstanding principal balance of the Senior Obligations and the Maximum
Revolving  Loan  Commitment  (as  defined  in  the  Loan  Agreement)  have  been
permanently  reduced to an amount not in excess of $15,000,000.00 as a result of
the  Mandatory  Permanent  Reduction or the  Voluntary  Permanent  Reduction (as
defined in the Seventh  Amendment) [in either case, the "Permanent  Reduction"],
and the Subordinator further agrees that, if any such payment is received by the
Subordinator prior to the aforestated notice from Bank to the Subordinator,  the
Subordinator  will  forthwith  pay the same to Bank to be  applied to the Senior
Obligations in such manner as Bank may elect;  provided,  however, that Borrower
shall not make and  Subordinator  shall not receive any payments of principal or
interest with respect to the Subordinated  Debt if an Event of Default under the
Loan Agreement then exists or if such payment shall cause the occurrence of such
Event of Default, or if payment of the Subordinated Debt has been accelerated by
the Subordinator.  Bank shall promptly notify the Subordinator in writing of the
Permanent Reduction,  if any, and of any Event of Default declared by Bank under
the Loan  Agreement.  With  respect to payments of interest on the  Subordinated
Debt prior to the expiration of any Standstill  Period (as defined herein),  the
Borrower  may make and the  Subordinator  may  receive  and retain  payments  of
interest  on the  Subordinated  Debt so long as (i) the same are made only on or
after the dates  when due  under the  Subordinated  Note and (ii) at the time of
such  payment,  and  after  giving  effect  thereto,  Subordinator  has not been
notified  by Bank that an Event of Default  has been  declared by Bank under the
Loan Agreement.  Subordinator  agrees to provide Bank with prompt written notice
of all  events  of  default  under  the  Subordinated  Loan  Agreement  and  the
Subordinated Note.

         4.   Standstill.  Except as  specifically  permitted in this paragraph,
until the Senior  Obligations are paid in full,  Subordinator shall not, without
the prior written consent of Bank, (i) demand,  sue for, take or receive from or
on behalf of the Borrower or any guarantor of the  Subordinated  Debt, by setoff
or in any other manner,  in the whole or any part of any moneys which may now or
hereafter be owing by the Borrower with respect to the  Subordinated  Debt; (ii)
initiate or participate  with others in any suit,  action or proceeding  against
the  Borrower to (A)  enforce  payment of or to collect the whole or any part of
the  Subordinated  Debt,  or (B)  commence or  intervene or join in any judicial
enforcement  of any of the  rights  and  remedies  under the  Subordinated  Loan
Agreement  or  applicable  law  with  respect  to the  Subordinated  Debt or the
Subordinated  Loan  Agreement  (including  the filing of any proof of claim in a
bankruptcy proceeding); or (iii) accelerate any Subordinated Debt (the foregoing
referred to herein as "Collection Action");  provided, however, upon the passage
of 90 days from the  occurrence of any Event of Default  under the  Subordinated
Loan Agreement or Subordinated Note (the "Standstill Period"), Subordinator may,
upon 5 business days prior written notice to Bank,  accelerate the  Subordinated
Debt or take any other Collection Action, further

                                       -2-

<PAGE>



provided  that (x) upon  receipt  of  Subordinator's  notice  that it intends to
pursue Collection Action against the Borrower,  Bank will promptly thereupon and
from time to time  thereafter  notify  Subordinator  of the amount of the Senior
Obligations,  and (y) any  amounts  collected  by the  Subordinator  directly or
indirectly  through such  Collection  Action shall be promptly paid over to Bank
and  applied  to  the  payment  of  the  Senior  Obligations  until  the  Senior
Obligations  have been paid in full,  and only  thereafter  may such  amounts be
applied to the Subordinated Debt.

         5.   Bankruptcy.   In  the  event  of  any  receivership,   insolvency,
bankruptcy, assignment for the benefit of creditors,  reorganization (whether or
not  pursuant  to  bankruptcy  laws),  sale of all or  substantially  all of the
assets,  dissolution,  liquidation  or any other  marshaling  of the  assets and
liabilities  of the Borrower (any one or more of the foregoing  referred to as a
"Proceeding"):

             a. All Senior  Obligations  first  shall be paid in full before any
         payment of or with respect to the Subordinated Debt is made.

             b. Until all Senior Obligations have been paid in full, any payment
         or distribution, whether in cash, property or securities which, but for
         the terms hereof,  otherwise would be payable or deliverable in respect
         of the Subordinated  Debt, shall be paid or delivered directly to Bank,
         to be held or applied by Bank in accordance  with the terms of the Loan
         Agreement.  Subordinator  irrevocably authorizes,  empowers and directs
         all receivers,  trustees,  liquidators,  custodians,  conservators  and
         other Persons (as defined in the Loan  Agreement)  having  authority to
         effect all such  payments and  distributions,  and further  irrevocably
         authorizes,  empowers and directs Bank to demand,  sue for, collect and
         receive, every such payment or distribution.

             c.  Subordinator  agrees not to initiate or  prosecute or encourage
         any other  Person to initiate or prosecute  any claim,  action or other
         proceeding  challenging the enforceability of the Senior Obligations or
         any liens and security interests securing the Senior Obligations.

             d.  Subordinator  agrees to execute,  verify,  deliver and file any
         proofs  of  claim  in  respect  of  the  Subordinated  Debt  reasonably
         requested by Bank in  connection  with any such  Proceeding  and hereby
         irrevocably  authorizes,  empowers  and  appoints  Bank their agent and
         attorney-in-fact to (i) execute,  verify,  deliver and file such proofs
         of claim upon the failure of  Subordinator  promptly to do so (and,  in
         any event,  prior to 30 days before the  expiration of the time to file
         any such proof);  and (ii) vote such claims in any such Proceeding upon
         the  failure  of  Subordinator  to do so  prior to 10 days  before  the
         expiration of the time to vote any such claims; provided, however, that
         Bank shall have no obligation to execute,  verify,  deliver or file any
         such proof of claim or to vote any such  claim.  In the event that Bank
         votes any such claim in accordance  with the authority  granted hereby,
         Subordinator shall not be entitled to change or withdraw such vote.

             e. The Senior  Obligations  shall  continue to be treated as Senior
         Obligations  and the  provisions of this  Agreement  shall  continue to
         govern the relative rights and priorities of Bank and Subordinator even
         if all or part of the Senior Obligations or the security interests,  if
         any,  securing  the Senior  Obligations  are  subordinated,  set aside,
         avoided or disallowed in connection  with any such  Proceeding and this
         Agreement  shall be reinstated if at any time any payment of any of the
         Senior  Obligations  is rescinded or must  otherwise be returned by any
         holder of the Senior Obligations or any representative of such holder.


                                       -3-

<PAGE>



         6.   No Modification of Subordinated  Debt. The Subordinator  covenants
and  agrees  that  the  Subordinator  will  not  amend  the  terms of any of the
Subordinated  Debt, and will not sell, assign or otherwise  transfer or encumber
any right to any Subordinated  Debt, any interest therein,  or any collateral or
other security therefor,  without the prior written consent of Bank, which shall
not be unreasonably withheld.

         7.   No Security. The Subordinator  represents and warrants to Bank, as
a material inducement to Bank to consent to the transactions contemplated by the
Subordinated  Loan Agreement and Subordinated  Note, that all amounts owing from
the Borrower to the  Subordinator  are unsecured and that no collateral has been
pledged by the Borrower in any fashion as security  for said amounts  owing from
the  Borrower  to  the   Subordinator.   Notwithstanding   the   foregoing   and
notwithstanding the order of filing of financing statements or any other matter,
Bank's liens and security interests in assets of the Borrower,  if any, shall at
all times be prior and senior to each and every lien and security  interest held
by the Subordinator,  if any, and the Subordinator hereby expressly subordinates
all of its liens and security  interests in assets of the  Borrower,  if any, to
each and every lien and security interest now or hereafter held by Bank, if any.

         8.   Modifications  of Senior  Obligations.  Bank  covenants and agrees
that it will not amend the terms of any of the Senior  Obligations  without  the
prior consent of Subordinator, which consent shall not be unreasonably withheld,
conditioned or delayed.  The Subordinator hereby waives and agrees not to assert
against  Bank any  rights  which a  guarantor  or  surety  with  respect  to any
indebtedness of the Borrower could exercise.

         9.   Legend.  So long as this Agreement is in effect,  the Subordinator
Agrees to insert on the Subordinated Note in a conspicuous  manner the following
legend:

            This Note and the  indebtedness  evidenced hereby are subordinate in
            the manner and to the extent set forth in that certain Subordination
            Agreement (the  "Subordination  Agreement")  dated January 25, 1999,
            among   FBR   Asset   Investment   Corporation,   Brookdale   Living
            Communities,  Inc.  (the  "Borrower"),  and  LaSalle  National  Bank
            ("Bank"), to the indebtedness owed by the Borrower to the holders of
            all of the notes issued  pursuant to that  certain  Loan  Agreement,
            dated April 27, 1998 as amended through the date hereof, between the
            Borrower  and  Bank,   as  such  Loan   Agreement  may  be  amended,
            supplemented,  or  otherwise  modified  from time to time;  and each
            holder of this Note, by its acceptance hereof, shall be bound by the
            provisions of the Subordination Agreement.

Further, the Subordinator covenants and agrees that it will upon request by Bank
execute and deliver such documents and take all such other actions,  as Bank may
require to more fully  effectuate the  subordination  intended by this Agreement
and to carry out the transactions intended hereby.

         10.  Further  Assurances.  Subordinator  at any time,  and from time to
time, after the execution and delivery of this Agreement, shall promptly execute
and deliver such further  documents  and do such further acts and things as Bank
reasonably  may  request  that may be  necessary  in order to  effect  fully the
purposes of this Agreement.

         11.  Notices.  Any notice or other communication  required or permitted
to be  given  hereunder  shall  be in  writing  and  may be  personally  served,
telecopied or sent by overnight  courier  service or United States  certified or
registered  mail and  shall be deemed to have  been  given (a) if  delivered  in
person,  when  delivered;   (b)  if  delivered  by  telecopy,  on  the  date  of
transmission  if transmitted  on a business day before 4:00 p.m.,  Chicago Time,
or, if not, on the next  succeeding  business day; (c) if delivered by overnight
courier, two business days after delivery to such courier properly addressed; or
(d) if by United States mail,

                                       -4-

<PAGE>



four business days after deposit in the United States mail,  postage prepaid and
properly  addressed.  Notices shall be addressed to the parties at the addresses
set forth on the signature page or to such other address as the party  addressed
shall have previously designated by written notice to the serving party given in
accordance with this paragraph.

         12.  Severability. In the event that any provision of this Agreement is
deemed to be invalid, illegal or unenforceable by reason of the operation of any
law  or by  reason  of  the  interpretation  placed  thereon  by  any  court  or
governmental  authority,  the  validity,  legality  and  enforceability  of  the
remaining  provisions  of this  Agreement  shall not in any way be  affected  or
impaired  thereby,  and the affected  provision shall be modified to the minimum
extent  permitted  by law so as most  fully to  achieve  the  intention  of this
Agreement.

         13.  Relative  Rights.  The provisions of this Agreement are solely for
the purpose of defining the relative rights of  Subordinator  and Bank and shall
not be deemed to create any rights or  priorities  in favor of any other Person,
including, without limitation, the Borrower.

         14.  Conflict.  In the event of any conflict between any term, covenant
or condition of this Agreement and any term, covenant or condition of any of the
Subordinated  Note  or  Subordinated  Loan  Agreement,  the  provisions  of this
Agreement  shall  control and govern.  For  purposes of this  paragraph,  to the
extent  that  any  provisions  of the  Subordinated  Note or  Subordinated  Loan
Agreement provide rights,  remedies and benefits to Bank that exceed the rights,
remedies and benefits provided to Bank under this Agreement,  such provisions of
the  Subordinated  Note and/or  Subordinated  Loan Agreement  shall be deemed to
supplement, and not to conflict with, the provisions hereof.

         15.  Term of Agreement.  This Agreement  shall  constitute a continuing
agreement  of  subordination  and  shall  continue  in effect  until all  Senior
Obligations  of the  Borrower  shall be paid and  satisfied  in full and  Bank's
obligations under the Loan Agreement shall have been terminated.

         16.  Governing  Law.  This  Agreement  shall be deemed to be a contract
made under and shall be construed in accordance with and governed by the laws of
the State of Illinois.

         17.  Jurisdiction  and  Venue.  For  the  purposes  of  any  action  or
proceeding  involving this  Agreement or the subject matter of the  transactions
contemplated by this Agreement, the Subordinator hereby expressly submits to the
jurisdiction  of all federal and state  courts  located in the State of Illinois
and consents that any order,  process,  notice of motion or other application to
or by any of said courts or a judge thereof may be served within or without such
court's  jurisdiction  by  registered  mail or by personal  service,  provided a
reasonable time for appearance is allowed. To the extent permitted by applicable
law, the Subordinator hereby irrevocably waives any objection that it may now or
hereafter have to the laying of venue of any suit, action or proceeding  arising
out of or  relating  to this  Agreement  brought in any  federal or state  court
sitting in Cook County, State of Illinois,  and, to the extent permitted by law,
hereby  further  irrevocably  waives  any claim  that any such  suit,  action or
proceeding brought in any such court has been brought in an inconvenient forum.

         18.  Waiver of Jury. THE SUBORDINATOR HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY  WAIVES (TO THE EXTENT  PERMITTED BY APPLICABLE  LAW) ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY OF ANY  DISPUTE  ARISING  UNDER OR  RELATING TO THIS
AGREEMENT  OR THE  SUBJECT  MATTER  OF THE  TRANSACTIONS  CONTEMPLATED  BY  THIS
AGREEMENT AND AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING
WITHOUT A JURY.

                                       -5-

<PAGE>



         19.  Successors;  Assigns.  This  Agreement  shall be binding  upon and
inure to the benefit of each party hereto, its successors and assigns.

         IN WITNESS WHEREOF,  this Agreement has been executed as of the day and
year first above written.


                              FBR ASSET INVESTMENT CORPORATION
                              Address:  Potomac Tower
                                        1001 Nineteenth Street North, 18th Floor
                                        Arlington, Virginia 22209
                                        Attention: Ms. Elaine M. Clancy


                              By:  /s/ Elaine M. Clancy
                                   -------------------------------------------
                              Its: Chief Financial Officer


                              LASALLE NATIONAL BANK
                              Address:  135 South LaSalle Street
                                        Chicago, Illinois 60603
                                        Attention: Jeffrey B. Steele


                              By:  /s/ David E. Heise
                                   -------------------------------------------
                              Its: Commercial Banking Officer


                                       -6-

<PAGE>



                          ACKNOWLEDGMENT AND AGREEMENT



         The  undersigned  hereby  acknowledges  the  matters  set  forth in the
foregoing Subordination  Agreement,  and agrees for the benefit of Bank (i) that
it will make no payment which is  prohibited by the terms of such  Subordination
Agreement and (ii) that, to the extent  permitted by applicable  law, it will on
request by Bank execute and deliver all documents which may reasonably be deemed
necessary or desirable by Bank to evidence and protect  Bank's rights under such
Subordination Agreement.

         Dated:     January 25, 1999.

                              BROOKDALE LIVING COMMUNITIES, INC.


                              By:  /s/ Darryl W. Copeland, Jr.
                                   -------------------------------------------
                              Its: Executive Vice President




 







<PAGE>



                                    EXHIBIT A

                                 LOAN AGREEMENT


                                                        
<PAGE>



                                    EXHIBIT B

                           SUBORDINATED LOAN AGREEMENT



                                                        

<PAGE>


                                    EXHIBIT C

                                SUBORDINATED NOTE