FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


(Mark One)

[ X ]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                    SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 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: 0-21249

                          GRAND COURT LIFESTYLES, INC.
             (Exact name of registrant as specified in its charter)

              Delaware                               22-3423087
  (State or other jurisdiction of                 (I.R.S. Employer
   incorporation or organization)                Identification No.)


2650 North Military Trail, Suite 350, Boca Raton, Florida            33431
(Address of principal executive offices)                           (Zip code)

Registrant's telephone number, including area code  (561) 997-0323

         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 ____.

         At June 7, 1999, the Company had 17,684,000 shares of Common Stock,
$.01 par value, outstanding.



<PAGE>



                          GRAND COURT LIFESTYLES, INC.
                     INDEX TO QUARTERLY REPORT ON FORM 10-Q
                   FOR THE FISCAL QUARTER ENDED APRIL 30, 1999


                                                                            PAGE

PART I - FINANCIAL INFORMATION

Item 1:  Financial Statements and Supplementary Data....................       2

         Consolidated Balance Sheets as of January 31, 1999 and April 30, 1999

         Consolidated Statements of Operations for the three months
         ended April 30, 1998 and 1999 Consolidated Statements of Cash
         Flows for the three months ended April 30, 1998 and 1999

         Notes to Consolidated Financial Statements

Item 2:  Management's Discussion and Analysis of Financial Condition and
         Results of Operations...........................................    10

Item 3:  Quantitative and Qualitative Disclosures about Market Risk......    25

PART II - OTHER INFORMATION

Item 2:           Changes in Securities and Use of Proceeds.............     26
Item 6:           Exhibits and Reports on Form 8-K......................     26


                                        1

<PAGE>



                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, except per share data)
--------------------------------------------------------------------------------


                                                                       April 30,
                                                       January 31,   (Unaudited)
                                                     --------------   ---------

                                                          1999           1999
                                                     --------------  ----------

ASSETS

Cash and cash equivalents.........................      $ 22,784       $ 19,125

Notes and receivables - net.......................       227,104        232,677

Investments in partnerships.......................         4,945          8,038

Construction in progress..........................        11,617          9,184

Property, buildings and equipment - net...........        35,294         25,090

Other assets - net................................        17,570         20,134
                                                       ----------    ----------

Total assets......................................      $319,314       $314,248
                                                       ==========    ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Loans and accrued interest payable................      $169,781       $170,854

Construction and mortgage loans payable...........        35,286         25,870

Notes and commissions payable.....................         4,158          4,397

Other liabilities.................................         5,767          7,667

Deferred income...................................        68,596         68,264
                                                       ---------     ----------

Total liabilities.................................       283,588        277,052
                                                       ---------     ----------

Commitments and contingencies.....................

Stockholders' equity..............................

Preferred Stock, $.001 par value - authorized,
15,000 shares; none issued and outstanding........            --             --

Common Stock, $.01 par value - shares authorized
40,000 ; shares issued 17,800 ....................           178            178

Paid-in capital...................................         73,451        73,451

Treasury Stock - 20 shares at cost                             --          (138)

Accumulated deficit...............................        (37,903)      (36,295)
                                                       ----------    ----------

TOTAL STOCKHOLDERS' EQUITY........................         35,726        37,196
                                                       ----------    ----------

Total liabilities and stockholders' equity........       $319,314      $314,248
                                                       ==========    ==========

See Notes to Consolidated Financial Statements.


                                     2

<PAGE>



GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except per share data)
--------------------------------------------------------------------------------



                                                        Three months ended
                                                             April 30,
                                                            (unaudited)
                                                  ------------------------------


                                                        1998           1999
                                                  ---------------  -------------
Revenues:
   Sales....................................             $10,480     $18,215
   Syndication fee income...................               2,175       1,854
   Deferred income earned...................                 208         155
   Interest income..........................               3,889       2,826
   Property management fees from related
   parties..................................                 988       1,083
   Equity in earnings from partnerships.....                 158         171
   Senior living  revenues..................                 418       2,562
   Other income                                              685          --
                                                        --------     --------
                                                          19,001      26,866
                                                        --------     --------

Cost and Expenses:
   Cost of sales............................               8,366      10,144
   Selling..................................               2,110       1,556
   Interest.................................               5,470       5,711
   General and administrative...............               2,524       2,991
   Senior living operating expenses.........                 946       2,943
   Officers' compensation...................                 300         300
   Depreciation and amortization............               1,087       1,613
                                                         --------   --------
                                                          20,803      25,258
                                                         --------   --------
Net (loss) income...........................             (1,802)       1,608
                                                         ========   ========
(Loss) income per common share (basic and
diluted)....................................               (.11)         .09
                                                         ========   ========
Weighted average common shares..............             $16,384     $17,796
                                                         ========   ========

See Notes to Consolidated Financial Statements.


                                    3


<PAGE>



GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
--------------------------------------------------------------------------------


                                                    Three months ended April 30,
                                                             (unaudited)
                                                    ----------------------------

                                                         1998         1999
                                                    ------------- -------------
Cash flows used from operating activities:

   Net (loss) income.................................. $  (1,802)   $  1,608
                                                       ---------    --------
   Adjustments to reconcile net (loss) income to
      net cash used by
      operating activities:
      Depreciation and amortization...................     1,087       1,613
      Deferred income earned..........................      (208)       (155)
   Changes in operating assets and liabilities:
      Accrued interest on notes and receivables ......     7,587       9,900
      Notes and receivables...........................   (24,496)    (15,472)
      Commissions payable.............................     1,637         333
      Other liabilities...............................    11,440       1,900
      Deferred income.................................      (240)       (177)
                                                       ---------     -------
                                                          (3,193)     (2,058)
                                                       ---------     -------
        Net cash used by operating activities.........    (4,995)       (450)
                                                       ---------     -------

Cash flows used from investing activities:
   Increase in investments............................     (339)       (318)
    Cost of investment sold ..........................        --       2,429
   Building, furniture and equipment..................   (2,798)        (496)
   Construction in progress...........................   (1,259)      (4,052)
                                                       --------      -------
      Net cash used by investing activities...........   (4,396)      (2,437)
                                                       --------      -------
Cash flows provided (used) by financing
activities:
   Payments on loans payable..........................   (5,351)     (23,719)
   Proceeds from loans payable .......................    10,779      24,792
   Proceeds from construction loan payable............     2,469       2,320
   (Increase) in other assets.........................      (168)     (3,933)
   Payments of notes payable..........................      (205)        (94)
    Purchase for treasury stock.......................        --        (138)
   Net proceeds from initial public offering .........    22,414          --
                                                        --------    --------
   Net cash provided (used) by financing
   activities.........................................    29,938        (772)
                                                        --------    --------
(Decrease) increase in cash and cash equivalents......    20,547     (3,659)
Cash and cash equivalents, beginning of period........    11,964      22,784
                                                        --------    --------
Cash and cash equivalents, end of period..............    32,511      19,125
                                                        ========    ========

Supplemental information:

Interest paid.........................................  $  5,266    $  6,132
                                                        ========    ========



See Notes to Consolidated Financial Statements.

                                       4

<PAGE>

GRAND COURT LIFESTYLES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED APRIL 30, 1998 AND 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (UNAUDITED)

         The accompanying consolidated financial statements of Grand Court
Lifestyles, Inc. and its wholly-owned subsidiaries (the "Company") have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 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 (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The consolidated financial statements as of and for the periods
ended April 30, 1998 and 1999 are unaudited. The results of operations for the
interim periods are not necessarily indicative of the results of operations for
the fiscal year. Certain amounts in the prior period have been reclassified to
conform with current year presentation. These consolidated financial statements
should be read in connection with the financial statements and notes included
thereto in the Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1999.  The Company has no items of comprehensive income.

         Unless the context otherwise requires, (i) all references herein to a
"Fiscal" year refer to the fiscal year beginning on February 1 of that year (for
example, "Fiscal 1998" refers to the fiscal year beginning on February 1, 1998)
and (ii) all references to the Company, include the Company, its subsidiaries
and its predecessors taken as a whole.

1.       NEWLY DEVELOPED COMMUNITIES

         The Company completed construction of seven senior living communities
         (each a "Development Community"), all of which are in their initial
         lease-up phase. Four of these Development Communities were developed as
         part of its development financing arrangement with Capstone Capital
         Corporation ("Capstone") and are leased to and operated by the Company.
         These four communities contain a total of 552 apartment units offering
         both independent and assisted living services. The three remaining
         completed Development Communities contain a total of 410 apartment
         units offering both independent and assisted living services.

         In April 1999, the Company entered into joint venture arrangements
         regarding three completed and one substantially completed
         Development Communities, two of such joint venture arrangements being
         effective as of April 1, 1999 and the other two being effective as of
         May 1, 1999. Pursuant to each joint venture arrangement, the Company
         sold a 50% interest in the Development Communities to a third party.
         The Company realized a profit from each of the sales and earns
         management fees for managing each of the communities. The third party
         has the right to terminate the Company's management upon thirty days
         written notice. The third party receives a cumulative priority return
         on its investment from all cash flow generated by the community and any
         excess cash flow is shared 50% by the Company and 50% by the third
         party. For future periods, the Company will no longer consolidate into
         its consolidated financial statements the Development Communities that
         are subject to joint venture arrangements but will recognize its
         investment in these Development Communities under the equity basis of
         accounting.


                                             5
<PAGE>



         In addition, the Company has commenced construction on three additional
         Development Communities and has substantially completed construction on
         a fourth senior living community, which substantially completed
         community was the subject of the above-mentioned joint venture
         arrangements.

2.       CAPITALIZATION

         In March 1998, in an initial public offering of its common stock, the
         Company sold 2,800 shares of its common stock at a price of $9.50 per
         share. The net proceeds, after deducting for all offering expenses,
         that the Company received as a result of this offering was $22,300. The
         Company intends to use approximately $19,300 of the net proceeds to
         finance the development of new senior living communities and the
         remaining $3,000 for working capital. As of April 30, 1999, $10,200 has
         been used to finance the development of new senior living communities
         and $1,600 has been used for working capital. The Company purchased a
         series of treasury bills with the remaining net proceeds pending
         application of such funds to the intended uses.

         In March 1999, the Board of Directors authorized the Company to
         purchase up to 300 shares of the Company's common stock at prevailing
         rates. As of April 30, 1999, the Company purchased 20 of such shares.

3.       COMMITMENTS AND CONTINGENCIES

         The Company rents office space under a lease expiring February 2000.
         Annual rent under such lease is approximately $206. The Company entered
         into a ten year lease for additional office space, commencing September
         1, 1991. The annual rent is approximately $330.

         The Company's revenues have been, and are expected to continue to be,
         primarily derived from the sales of partnership interests
         ("Syndications") of partnerships it organizes to acquire existing
         senior living communities (each, an "Owning Partnership"). In a typical
         Syndication, the Company identifies a senior living community suitable
         for acquisition and forms an Owning Partnership (in which it is the
         managing general partner and initially owns all of the partnership
         interests) to acquire the property. Another partnership (the "Investing
         Partnership") is also formed (in which the Company is also the general
         partner with a 1% interest) to purchase from the Company a 99%
         partnership interest in the Owning Partnership (the "Purchased
         Interest"), leaving the Company with a 1% interest in the Owning
         Partnership and a 1% interest in the Investing Partnership. The
         purchase price for the Purchased Interest is paid in part in cash and
         in part by a note from the Investing Partnership with a term of
         approximately five years ( a "Purchase Note"). Limited partners
         purchase partnership interests in the Investing Partnership by agreeing
         to make capital contributions over approximately five years to the
         Investing Partnership, which allows the Investing Partnership to pay
         the purchase price for the Purchased Interest, including the Purchase
         Note. The limited partnership agreement of the Investing Partnership
         provides that the limited partners are entitled to receive, for a
         period not to exceed five years, distributions equal to between 11% and
         12% per annum of their then paid-in scheduled capital contributions.
         Although the Company incurs certain costs in connection with acquiring
         a community and arranging for the Syndication of partnership interests,
         the Company makes a profit on the sale of the Purchased Interest. In
         addition, as part of the purchase price for the Purchased Interest paid
         by the Investing Partnership, the Company receives a 40% interest in
         sale and refinancing proceeds after certain priority payments to the
         limited partners. The Company also enters into a management contract
         with the Owning Partnership pursuant to which the Company agrees to
         manage the senior living community. As part of the management fee
         arrangements, the management contract requires the Company, for a
         period not to exceed five years, to pay to the Owning Partnership (to
         the extent that cash flows generated by the property are insufficient)
         amounts sufficient to fund (i) any operating cash deficiencies of such
         Owning Partnership and (ii) any part of such 11% to 12% return not paid
         from cash flow from the related property (which the Owning Partnerships
         distribute to the Investing Partnerships for distribution to limited
         partners) (collectively, the "Management Contract Obligations"). The
         Company, therefore, has no direct obligation to pay specified returns
         to limited partners. Rather, the Company is obligated pursuant to the
         management contract to pay to the Owning Partnership amounts sufficient
         to make the specified returns to the limited partners, to the extent
         the cash flows generated by the property are


                                         6

<PAGE>



         insufficient to do so. The Owning Partnership then distributes these
         amounts to the Investing Partnership which, in turn, distributes these
         amounts to the limited partners. As a result of the Management Contract
         Obligations, the Company and its stockholders bear the risks of
         operations and financial viability of the related property for such
         five-year period. The management contract, however, rewards the Company
         for successful management of the property by allowing the Company to
         retain any cash flow generated by the property in excess of the amount
         needed to satisfy the Management Contract Obligations as an incentive
         management fee. After the initial five-year period, the limited
         partners are entitled to the same specified rate of return, but only to
         the extent there is sufficient cash flow from the property, and any
         amounts of cash flow available after payment of the specified return to
         limited partners are shared as follows: 40% to the Company as an
         incentive management fee and 60% for distribution to the limited
         partners. The management contract is not terminable during this initial
         five-year period and is terminable thereafter by either party upon
         thirty to sixty days notice. The Company has arranged for the
         acquisition of the Syndicated senior living communities that it manages
         by utilizing mortgage financing and by arranging for Syndications of
         Investing Partnerships formed to acquire interests in the Owning
         Partnerships that own the senior living communities. The Syndicated
         senior living communities managed by the Company are owned by the
         respective Owning Partnerships and not by the Company. The Company is
         the managing general partner of all but one of the Owning Partnerships
         and manages all of the senior living communities in its portfolio. The
         Company is the general partner of most of the senior living Investing
         Partnerships. The mortgage financing of the Syndicated Communities and
         Syndicated Multi-Family Properties are generally without recourse to
         the general credit or assets of the Company except with respect to
         certain specified obligations, including, for example, costs incurred
         for the correction of hazardous environmental conditions. However,
         except for such non-recourse obligations, as a general partner, the
         Company, or a wholly-owned entity formed solely to be the general
         partner, is fully liable for all partnership obligations, including
         those presently unknown or unobserved, and unknown or future
         environmental liabilities. The cost of any such obligations or claims,
         if partially or wholly borne by the Company, could adversely affect the
         Company's business, operating results and financial condition. Although
         most of the mortgage loans are non-recourse, (i) the Company is liable
         as a general partner for approximately $12,738 in principal amount of
         mortgage debt relating to six Syndicated Communities and (ii)
         wholly-owned entities (whose only asset is a specific general partner
         interest) are liable as general partners for approximately $39,063 in
         principal amount of mortgage debt relating to eight Syndicated
         Communities managed by the Company as of April 30, 1999. In the case of
         the general partner liabilities of the wholly-owned entities (whose
         only asset is a specific general partner interest), the only assets of
         the Company at risk of loss are the interests in the wholly-owned
         entities.

         In addition, five of the Syndications have involved the construction
         of additional apartment units and common space at the existing senior
         living communities. The Owning Partnerships hire independent third
         party contractors to do the construction pursuant to guaranteed maximum
         price contracts. The new construction generates additional risks, such
         as increased costs due to change orders, which the Company believes are
         not material.

         As part of the Company's development program, on September 18, 1996 the
         Company entered into a master development agreement with Capstone
         pursuant to which Capstone funded 100% of the development cost of four
         Development Communities. The Capstone arrangement provides that the
         Company will operate these four Development Communities pursuant to
         long-term operating leases with Capstone, which leases were entered
         into upon the completion of construction and the satisfaction of
         certain other conditions. The initial term of each lease is 15 years
         with five-year extension options. The cumulative annual rent which the
         Company is obligated to pay to Capstone for the four Development
         Communities placed in service is $3,792.

         The Company has guaranteed the mortgages on the Development Communities
         subject to joint venture arrangements and such guarantees remain in
         effect.

         The Company is involved in legal proceedings which have arisen in the
         ordinary course of business.


                                           7

<PAGE>



         The Company intends to vigorously defend itself in these matters and
         does not believe that the outcome of these matters will have a material
         effect on its financial statements.

4.       NEW ACCOUNTING PRONOUNCEMENTS

         In June of 1998, the Financial Accounting Standards Board ("FASB")
         issued Statement No. 133, "Accounting for Derivative Instruments and
         Hedging Activities." This statement established accounting and
         reporting standards for derivative instruments, including certain
         derivative instruments embedded in other contracts, and for hedging
         activities. It is effective for all fiscal quarters of fiscal years
         beginning after June 15, 2000. The Company's use of derivative
         instruments has consisted of a treasury bill lock related to two
         specific debt financings. While the Company has not completed its
         analysis of Statement No. 133 and has not made a decision regarding the
         timing of adoption, it does not believe that adoption will have a
         material effect on its financial position and results of operations
         based on its current use of derivative instruments.

5.       SEGMENT REPORTING

         The Company views its business in the following three segments:

         1.       Syndication - Revenues are comprised of sales, syndication fee
                  income, property management fees, interest income, deferred
                  income earned and equity in earnings from partnerships
                  relating to the Syndicated Communities.

         2.       Multi-Family - Revenues are comprised of interest income and
                  recognition of deferred income from Syndicated Multi-Family
                  properties, which income is being recognized on the
                  installment method.

         3.       New Development - Revenues are derived from senior living
                  rental revenues from the Development Communities and from
                  sales and management fees from Development Communities subject
                  to joint venture arrangements.

                            April 30,
                       -------------------
                        1998         1999
                        ----         ----
                    (unaudited)  (unaudited)
Revenues
Syndication (a)      $  13,801    $  11,323
Multi-family (b)           208          155
New Development          1,103       12,562
                     ---------    ---------
Combined Segments    $  15,112    $  24,040
                     =========    =========

Interest Income
Syndication          $   1,688    $   1,366
Multi-family             1,742        1,407
New Development            459           53
                     ---------    ---------
Combined Segments    $   3,889    $   2,826
                     =========    =========

Operating Profit
(Loss)(c)
Syndication          $   1,616    $   1,386
Multi-family            (3,023)      (3,592)
New Development           (395)       3,814
                     ---------    ---------
Combined Segments    $  (1,802)   $   1,608
                     =========    =========

                           April 30,
                       -------------------
                        1998         1999
                        ----         ----
                    (unaudited)  (unaudited)

Interest Expense
Syndication           $1,284       $   896
Multi-family           3,570         3,817
New Development          616           998
                      ------       -------
Combined Segments     $5,470       $ 5,711
                      ======       =======

Depreciation and Amortization
Syndication           $  120       $   173
Multi-family             804         1,036
New Development          163           404
                      ------       -------
Combined Segments     $1,087       $ 1,613
                      ======       =======

Capital
Expenditures
Syndication           $   --       $    --
Multi-family              --            --
New Development        2,798        11,585
                      ------       -------
Combined Segments     $2,798       $11,585
                      ======       =======

                                        8

<PAGE>


Gross Assets
Syndication          $  41,944    $  31,886
Multi-family           237,210      231,487
New Development         57,578       50,875
                     ---------    ---------
Combined Segments    $ 336,732    $ 314,248
                     =========    =========



(a)    Includes non-cash income comprised of equity in earnings from
       unconsolidated affiliates.

(b)    Includes non-cash income comprised of deferred income earned.

(c)    Includes the allocation of certain expenses based upon either gross
       revenues or gross assets to the individual segments.

6.   SUMMARY INFORMATION

The Company entered into four joint venture arrangements regarding three
completed Development Communities and one substantially completed Development
Community two of such joint venture arrangements were effective on April 1, 1999
and the other two arrangements were effective as of May 1, 1999.  Pursuant to
the joint venture arrangements, the Company sold a 50% interest in the
Development Communities.  For future periods, the Company will record,  and in
the consolidated balance sheet as of April 30, 1999 the Company has recorded,
its retained interest in the joint venture arrangements under the equity method
of accounting. The following sets forth the combined financial information of
the joint ventures as of April 30, 1999.

ASSETS                                                ACTUAL    PRO-FORMA(1)
                                                      ------    ------------

Cash                                               $     373      $  1,139
Property, building and equipment-net                  10,615        31,264
Construction in progress                               7,549         7,549
Other assets                                              37            90
                                                     -------       -------

                                                   $  18,574      $ 40,042
                                                     =======       =======


LIABILITIES AND STOCKHOLDERS' EQUITY

Construction and mortgage loans payable            $  12,681      $ 26,980
Notes payable                                             34            96
Other liabilities                                        172           518
Stockholders' equity                                   5,687        12,448
                                                     -------       -------

                                                  $   18,574      $ 40,042
                                                     =======       =======

REVENUES

Senior living revenues                            $      451      $  1,218
                                                     -------       -------
EXPENSES

Senior living operating expenses                         371         1,011
Interest                                                 213           616
Depreciation                                              55           175
                                                     -------       -------
                                                         639         1,802
                                                     -------       -------
Net loss                                          $     (188)     $   (584)
                                                     =======       =======


(1)  Pro-forma information assumes all four joint venture arrangements were
     effective April 30, 1999.


                                        9


<PAGE>



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

         Unless the context otherwise requires, (i) all references herein to a
"Fiscal" year refer to the fiscal year beginning on February 1 of that year (for
example, "Fiscal 1998" refers to the fiscal year beginning on February 1, 1998)
and (ii) all references to the Company, include the Company, its subsidiaries
and its predecessors taken as a whole. Capitalized terms used but not defined
herein shall have the same meanings as set forth in the Company's annual report
on Form 10-K for the Fiscal Year ending January 31, 1999.


SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

         The Company is including the following cautionary statements to make
applicable and take advantage of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 for any forward-looking statements made
by, or on behalf, of the Company in this Quarterly Report on Form 10-Q.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance and underlying assumptions and
other statements which are other than statements of historical facts. Such
forward-looking statements may be identified, without limitation, by the use of
the words "anticipates", "estimates", "expects", "intends", "believes" and
similar expressions. From time to time, the Company or one of its subsidiaries
individually may publish or otherwise make available forward-looking statements
of this nature. All such forward-looking statements, whether written or oral,
and whether made by or on behalf of the Company or its subsidiaries, are
expressly qualified by these cautionary statements and any other cautionary
statements which may accompany the forward-looking statements. In addition, the
Company disclaims any obligation to update any forward-looking statements to
reflect events or circumstances after the date hereof.

         Forward-looking statements made by the Company are subject to risks and
uncertainties that could cause actual results or events to differ materially
from those expressed in, or implied by, the forward-looking statements. These
forward-looking statements include, among others, statements concerning the
Company's revenue and cost and expense trends, the number and economic impact of
anticipated acquisitions and new developments, planned capital expenditures and
financing needs and availability. Investors or other users of the
forward-looking statements are cautioned that such statements are not a
guarantee of future performance by the Company and that such forward-looking
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those expressed in, or implied by, such
statements. In addition to other factors and matters discussed elsewhere herein,
the following are some, but not all, of the important factors that, in the view
of the Company, could cause actual results to differ materially from those
discussed in the forward looking statements:

         1.       The ability of the Company to service its substantial debt
                  obligations.

         2.       The ability of the Company to pay Management Contract
                  Obligations from the cash flow generated by the Syndicated
                  Communities and the impact of the terms of future
                  Syndications.

         3.       The need for the Company to utilize cash from operations and
                  obtain additional financing to pursue its Development Plan.

         4.       The Company's ability to identify and Syndicate suitable
                  acquisition opportunities, a significant source of revenues
                  for the Company.

         5.       The Company's ability to identify suitable development
                  opportunities, pursue such opportunities, complete
                  development, lease-up and effectively operate the Development
                  Communities.

                                       10


<PAGE>





         6.       The ability of the Company to obtain sufficient joint venture
                  capital for its Development Program on favorable terms,
                  anticipated to be a significant source of revenues for the
                  Company.

         7.       The impact of mortgage defaults and/or foreclosures relating
                  to Multi-Family Properties (as defined below) on the Company's
                  ability to collect on its Multi-Family Notes (as defined
                  below).

         8.       Governmental regulatory actions and initiatives, including
                  without limitation, those relating to healthcare laws,
                  benefitting disabled persons, government mortgage insurance
                  and subsidy programs, environmental requirements and safety
                  requirements.

         9.       The ability to attract seniors with sufficient resources to
                  pay for the Company's services.

         10.      Changes in anticipated construction costs, operating expenses
                  and start-up losses relating to the Company's new Development
                  Plan.

         11.      Unanticipated delays in the Company's Development Plan
                  including, without limitation, permitting, licensing and
                  construction delays.

         12.      Changes in general economic conditions, including, but not
                  limited to, factors particularly affecting real estate and the
                  capital markets including, but not limited to, changes in
                  interest rates.

         13.      Changes in operating costs of senior living communities,
                  including without limitation, staffing and labor costs.

         14.      The Company's ability to attract and retain qualified
                  personnel.

         15.      Competitive factors affecting the long-term care services
                  industry.

         16.      The potential recourse and guarantee obligations of the
                  Company, including, without limitation, the correction of
                  hazardous environmental conditions relating to the mortgage
                  financing of the senior living communities.

         17.      The potential liabilities arising from the Company's status as
                  the general partner of Syndicated Communities.

         18.      The potential impact of recent net losses.

         19.      The potential impact of computer related Year 2000 problems on
                  the Company's operations, including the ability of the Company
                  and material third parties to identify and/or address all
                  material Year 2000 issues and implement contingency plans.

OVERVIEW

         The Company is a fully-integrated provider of senior living
accommodations and services which acquires, develops and manages senior living
communities which provide independent and assisted-living services. The
Company's revenues have been, and are expected to continue to be, primarily
derived from the sales of partnership interests ("Syndications") of partnerships
it organizes to acquire existing senior living communities ("Syndicated
Communities"). The Company has established a new development program (the
"Development Plan") pursuant to which it is building new senior living
communities which offer independent and assisted living services ("Development
Communities"). The Company currently owns the Development Communities pursuant
to joint venture arrangements or operates such communities pursuant to long-term
leases. To the extent that the Company's Development Plan is successfully
implemented, the Company anticipates that the percentage of its revenues derived
from Syndications would decrease and

                                       11


<PAGE>




the percentage of its revenues derived from the Development Communities would
increase and, the Company believes, over time, become the primary source of the
Company's revenues.

         Historically, the Company has arranged for the acquisition and
development of senior living communities and multi-family properties by
utilizing mortgage financing and Syndications. The multi-family properties,
which were Syndicated by the Company prior to 1986, are not owned or managed by
the Company. Such properties are owned by their respective Owning Partnerships
and are managed by third party managing agents. The senior living communities
Syndicated by the Company since 1986 are managed by the Company but are owned by
the respective Owning Partnerships and not by the Company.

         Future revenues, if any, of the Company relating to previously
Syndicated Communities would primarily arise in the form of (i) deferred income
earned on the sale of the Purchased Interests in the related Owning
Partnerships, (ii) management fees, (iii) amounts payable by the Investing
Partnerships to the Company in the event of the subsequent sale or refinancing
of such communities, (iv) interest income on purchase notes receivable, and (v)
earnings derived from the Company's equity interests in Owning Partnerships and
Investing Partnerships. Future revenues, if any, of the Company relating to
future Syndicated Communities would primarily arise from any initial profit
recognized upon completion of the Syndication and from the same items listed in
the previous sentence.

         The Company intends to continue to arrange for future acquisitions of
existing senior living communities by utilizing mortgage financing and by
arranging Syndications, and anticipates that between six and twelve communities
will be acquired and Syndicated in this manner during the next two years. Future
Syndications will require the allocation of funds generated by the Company to
cover the Company's initial costs relating to the Syndication transactions
(primarily any funds required to acquire the property above the amounts received
from the mortgage financing obtained, the costs of any improvements to the
property deemed necessary and the costs associated with arranging for the sale
of the partnership interests). The Company typically pays these costs from the
proceeds it receives from its sale of the Purchased Interests to the Investing
Partnership. In addition, future Syndications may require the allocation of the
Company's funds to satisfy any associated Management Contract Obligations
(including payment of required returns for distribution to limited partners)
that are not funded from the respective property's operations.

         The Company has instituted a Development Plan pursuant to which it has
completed construction of seven Development Communities and substantially
completed an eighth Development Community as of April 30, 1999, and has
commenced construction on three additional communities. During the next two
years of the plan, the Company intends to commence construction on between 24
and 28 additional new Development Communities. The Company plans to own pursuant
to joint venture arrangements or lease pursuant to long-term operating leases or
similar arrangements the Development Communities that are being developed under
the plan. The Company will manage and operate each of the Development
Communities. The Company estimates that the cost of developing each of the new
Development Communities (including reserves necessary to carry the community
through its lease-up period) utilizing mortgage financing will be approximately
$10.5 million and utilizing long-term lease financing will be approximately $11
million. The Company expects to complete the construction of the substantially
complete Development Community by the end of the second quarter of Fiscal 1999
and expects to complete the construction of the remaining three Development
Communities under construction by the end of Fiscal 1999. These four Development
Communities, along with the seven communities already completed pursuant to the
Development Plan, contain an aggregate of 1,488 senior living apartment units.
The 24 to 28 additional new communities which the Company intends to commence
construction on over the next two years will contain between 3,024 and 3,528
additional senior living apartment units. The Company will use a substantial
portion of the proceeds of the Company's initial public offering which occurred
in March, 1998, funds generated by its business operations, mortgage
construction financing, the proceeds of joint venture arrangements for,
anticipated refinancings of construction financing on, and/or sale-leasebacks
of, completed Development Communities, and may complete additional new issuances
of debt or equity securities to finance the development, construction and
initial operating costs of additional Development Communities. Four of the
completed Development Communities are being operated by the Company pursuant to
long-term leases. The Company may use additional long-term leases or similar
arrangements which require the investment of little or no capital on the part of
the Company, to the extent necessary to proceed with this Development Plan. In
April 1999, the Company entered into joint venture arrangements regarding three
completed and one substantially completed Development Communities, two of such
joint venture arrangements being effective as of April 1, 1999 and the other two
being effective May 1, 1999.
                                       12


<PAGE>




Pursuant to each joint venture arrangement, the Company sold a 50% interest in a
Development Community to a third party. The Company realized a profit from each
of the sales and earns management fees for managing each of the communities. The
third party has the right to terminate the Company's management upon thirty days
written notice. The third party receives a cumulative priority return on its
investment from all cash flow generated by the community and any excess cash
flow is shared 50% by the Company and 50% by the third party. For future
periods, the Company will no longer consolidate these Development Communities
into its consolidated financial statements but will recognize its investment in
these Development Communities under the equity basis of accounting.

EARNINGS

The Company recorded net income of $1.6 million for the three months ended April
30, 1999, compared to a net loss of $1.8 million for the three months ended
April 30, 1998.

RESULTS OF OPERATION

()       Revenues - Overview

         Total revenues for the three months ended April 30, 1999 were $26.9
million as compared to $19.0 million for the three months ended April 30, 1998
representing an increase of $7.9 million or 41.6%.

()       Syndication Communities

         Revenues from this segment are derived from sales of general
partnership interests in Owning Partnerships to Investing Partnerships,
recognition of deferred income with respect to previous sales of general
partnership interests, interest on Purchase Notes received by the Company from
such Investing Partnerships as part of the purchase price paid for such general
partnership interests, property management fees received by the Company and the
Company's share of income and loss of the entities based upon its retained
general partnership interests.

                                                       APRIL 30,
                                      -----------------------------------------
                                                 1998               1999
                                                 ----               ----

Sales...............................           $10,480            $ 8,215
Syndication fee income..............             2,175              1,854
Interest income.....................             1,688              1,366
Property management fees from
   related parties..................               988              1,083
Equity in earnings from
   partnerships.....................               158                171
                                               -------            -------
Total revenues......................            15,489             12,689
                                               =======            =======
Cost of sales.......................             8,366              7,233
Selling.............................             1,801              1,446
Interest expense....................             1,284                896
General and administrative..........             2,057              1,413
Officers' compensation..............               245                142
Depreciation and amortization.......               120                173
                                               -------            -------
Total costs and expenses............            13,873             11,303
                                               -------            -------
Net income .........................           $ 1,616            $ 1,386
                                               =======            =======

         Sales for the three months ended April 30, 1999 were $8.2 million as
compared to $10.5 million for the three months ended April 30, 1998,
representing a decrease of $2.3 million, or 21.9%. The decrease was attributable
to the sale of fewer partnership units in the three months ended April 30, 1999
as compared to the three months ended April 30, 1998.

                                       13


<PAGE>


         The primary factors that affect the number of partnership units
available for sale are ( i) the availability of senior living communities for
Syndication, (ii) the terms of the Syndications and (iii) the initial cash flow
of the senior living communities being Syndicated. More favorable Syndication
terms along with a greater initial cash flow of the Syndicated Communities will
yield a greater number of units available to be sold. Syndication terms become
more favorable for the Company if there is an increase in the ratio of (a) the
purchase price paid to the Company by the Investing Partnership for its interest
in the Operating Partnership, to (b) the initial cash flow of the Syndicated
Community. The Syndications completed in the three months ended April 30, 1999
involved communities with lower initial cash flows , as partially offset by more
favorable Syndication terms, than the Syndications completed in the three months
ended April 30, 1998.

         Syndication fee income for the three months ended April 30, 1999 was
$1.9 million as compared to $2.2 million for the three months ended April 30,
1998 representing a decrease of $300,000 or 13.6%. The decrease was attributable
to less commissions and professional fees paid on a lower sales volume in the
three months ended April 30, 1999 as compared to the three months ended April
30, 1998.

         Interest income for the three months ended April 30, 1999 was $1.4
million as compared to $1.7 million in the three months ended April 30, 1998,
representing a decrease of $300,000, or 17.6%. The decrease is attributable to
less interest recognized on Senior Living Notes in the three months ended April
30, 1999 as compared to the three months ended April 30, 1998 due to sale of
fewer partnership units during the last twelve months as compared to prior
periods.

         Cost of sales (which includes (i) the cash portion of the purchase
price for Syndicated Communities plus related transaction costs and expenses,
(ii) any payments with respect to Management Contract Obligations other than
payments relating to previously established deferred income liabilities and
(iii) any increases in deferred income liabilities established in the relevant
periods) for the three months ended April 30, 1999 was $7.2 million as compared
to $8.4 million for the three months ended April 30, 1998, representing a
decrease of $1.2 million, or 14.3%. The decrease is attributable to a reduction
in the aggregate cash portion of the purchase price plus related transaction
costs and expenses paid for the Syndicated Communities as partially offset by
increased funding of Management Contract Obligations in the three months ended
April 30, 1999 as compared to the three months ended April 30, 1998. Cost of
Sales and selling expenses (as described below) as a percentage of sales and
syndication fee income was 86.2% in the three months ended April 30, 1999 as
compared to 80.3% in the three months ended April 30, 1998. The increase is
attributable to sales and syndication fee income decreasing more than the
decrease in cost of sales and selling expenses.

          Several factors, including the decline of the real estate market in
the late 1980's and early 1990's, which resulted in a number of distressed
property sales and limited competition from other prospective purchasers,
allowed the Company to acquire existing senior living communities at such time
on relatively favorable terms. Mortgage financing, however, was generally either
not available or available only on relatively unattractive terms during this
period, which made acquisitions more difficult because they either required
large outlays of cash or the use of mortgage financing on relatively unfavorable
terms. Several factors have contributed towards a trend to less favorable terms
for acquisitions of senior living communities, including a recovery in the
market for senior living communities and increased competition from other
prospective purchasers of senior living communities. The Company acquired senior
living communities on less favorable terms in the three months ended April 30,
1999 as compared to the three months ended April 30, 1998 and the Company
believes that the general trend towards less favorable acquisition terms
experienced in the past will continue in the future. In recent years, however,
the Company has been able to obtain mortgage financing for a greater percentage
of the purchase price and with more favorable terms (i.e., lower interest rates
and longer amortization periods) than in previous years. This factor, combined
with an overall reduction of interest rates, has partially offset the factors
that have led to more unfavorable acquisition terms. A significant change in
these or other factors (including, in particular, a significant rise in interest
rates) could prevent the Company from acquiring and Syndicating senior living
communities on terms favorable enough to offset the start-up losses of the
Development Communities as well as the Company's debt service obligations,
Management Contract Obligations and overhead expenses.

         Selling expenses for the three months ended April 30, 1999 was $1.4
million as compared to $1.8 million for the three months ended April 30, 1998,
representing a decrease of $400,000 or 22.2%. The decrease is attributable to

                                       14


<PAGE>


lower commissions paid on a lower sales volume for Syndications completed in the
three months ended April 30, 1999 as compared to the three months ended April
30, 1998.

()       Multi-Family Properties

         Revenues from this segment are comprised of interest income on the
Multi-Family Notes and recognition of deferred income from such Syndications,
which income is being recognized on the installment method.

                                                             APRIL 30,
                                              ----------------------------------
                                                     1998             1999
                                                     ----             ----
Deferred income earned......................      $   208             $155

Interest income.............................        1,742            1,407
                                                  -------          -------
Total Revenues..............................        1,950            1,562
                                                  =======          =======
Selling.....................................          309              110
Interest expense............................        3,570            3,817
General and administrative..................          259              174
Officers compensation.......................           31               17
Depreciation and amortization...............          804            1,036
                                                  -------          -------
Total costs and expenses....................        4,973            5,154
                                                  -------          -------
Net loss....................................      $(3,023)         $(3,592)
                                                  =======          =======

         Interest income in the three months ended April 30, 1999 was $1.4
million as compared to $1.7 million in the three months ended April 30, 1998
representing a decrease of $300,000, or 17.6%. The decrease is primarily
attributable to the decrease in the remaining amount of investor notes, the
payment of which generates interest on the related Multi-Family Purchase Notes
as partially offset by an increase in the cashflow received by the underlying
MultiFamily Properties which also generates interest on the related Multi-Family
Purchase Notes.









                                       15


<PAGE>




()       DEVELOPMENT COMMUNITIES

                                                               APRIL 30,
                                                            --------------
                                                         1998             1999
                                                       --------         --------
Sales.........................................         $     --         $10,000
Senior living revenues........................              418           2,562
Other income..................................              685              --
Interest income...............................              459              53
                                                        -------         -------
Total revenues................................            1,562          12,615
                                                        =======         =======
Costs of sales................................               --           2,911
Senior living operating expenses..............              946           2,943
Interest expense..............................              616             998
General and administrative....................              207           1,404
Officers compensation.........................               25             141
Depreciation and amortization.................              163             404
                                                        -------         -------
Total costs and expenses......................            1,957           8,801
                                                        -------         -------
Net loss......................................          $  (395)        $ 3,814
                                                        =======         =======


         In April 1999, the Company entered into joint venture arrangements
regarding three completed and one substantially completed Development
Communities, two of such joint venture arrangements were effective as of April
1, 1999 and the other two arrangements were effective as of May 1, 1999.
Pursuant to each joint venture arrangement, the Company sold a 50% interest in
the Development Communities to a single unrelated third party, resulting in the
Company recognizing sales of $10.0 million for the two Development Communities
where joint venture arrangements were effective as of April 1, 1999. The
Company's cost of such interests was $2.9 million.

         The Company realized senior living revenues of $2.6 million in the
three months ended April 30, 1999 as compared to $400,000 in the three months
ended April 30, 1998, representing an increase of $2.2 million or 550%. The
senior living operating expenses were $2.9 million in the three months ended
April 30, 1999 as compared to $900,000 for the three month ended April 30, 1998,
representing an increase of $2.0 million or $222.2%. The increase in senior
living revenues and expenses is attributable to seven Development Communities
being in service during the three months ended April 30, 1999, as opposed to
there being three Development Communities in service in the three months ended
April 30, 1998. The seven Development Communities are in their initial lease-up
period and had an average occupancy of 61% during the three months ended April
30, 1999.

         Other income was $685,000 in the three months ended April 30, 1998. The
Company earned developer's fees in connection with the four Development
Communities which are owned by a third party and which the Company operates
pursuant to long-term leases. There was no other income in the three months
ended April 30, 1999.

Expenses-Overview

         The following expenses were allocated to each segment for reporting
purposes based upon either gross revenues or gross assets. The Company, however,
does not view these expenses as segment related but rather on a Company wide
basis.

         General and administrative expenses for the three months ended April
30, 1999 was $3.0 million as compared to $2.5 million for the three months ended
April 30, 1998, representing an increase of $500,000 or 20%. The increase is
primarily attributable to increases in salary costs and other office costs in
arranging for the acquisition of the Company's portfolio of Syndicated
Communities, in managing the Company's portfolio of Syndicated Communities and
in developing and managing the Company's portfolio of Development Communities
which portfolios, in the aggregate, were larger in the three months ended April
30, 1999 than in the three months ended April 30, 1998.

                                       16


<PAGE>


         Interest expenses was $5.7 million in the three months ended April 30,
1999 as compared to $5.5 million in the three months ended April 30, 1998,
representing an increase of $200,000 or 3.6%. The increase is primarily
attributable to (i) the increase in principal amount of debt, as offset by a
decrease in the interest rates related to such debt in the three months ended
April 30, 1999 as compared to the three months ended April 30, 1998, and (ii)
interest on construction loans payable on the three completed Development
Communities which the Company now owns pursuant to joint venture arrangements,
which a portion of the construction loan interest was capitalized in the three
months ended April 30, 1998 as these communities were then under construction.
Interest expense includes interest on debentures ("Debenture Debt") which are
secured by Multi-Family Notes (the "Purchase Note Collateral"). During the three
months ended April 30, 1999 and the three months ended April 30, 1998, the
Debenture Debt had an average interest rate of 11.8% and 12.05%, respectively.
Interest expense with respect to such debt for the three months ended April 30,
1999 and the three months ended April 30, 1998 was $2.3 million and $1.9
million, respectively. When the Debenture Debt was structured, cash flow
generated by the Purchase Note Collateral was not expected to fully fund the
amount necessary to pay interest on the Debenture Debt. As expected, for the
three months ended April 30, 1999 and the three months ended April 30, 1998 the
cash flow generated by the Purchase Note Collateral was less than the amount
required to pay interest on the Debenture Debt.

         Depreciation and amortization consists of (i) amortization of deferred
loan costs incurred in connection with debt issuances, (ii) amortization of
leasehold costs incurred in connection with four Development Communities which
the Company operates pursuant to long-term leases, and (iii) depreciation of
building, furniture and equipment of Development Communities which the
Company owns directly or pursuant to joint venture arrangements. Depreciation
and amortization was $1.6 million as compared to $1.1 million in the three
months ended April 30,1999 representing an increase of $500,000 or 45.5%.
The increase is attributable to (i) the increase in amortization of
deferred loan costs due to additional debt incurred by the Company, (ii) the
amortization of leasehold costs associated with the four Development Communities
operated by the Company pursuant to long-term leases as compared to only two
Development Communities being so operated in the same period of the prior year,
and (iii) the depreciation of buildings, furniture and equipment associated with
the Development Communities which the Company owns directly or pursuant to
joint venture arrangements.

LIQUIDITY AND CAPITAL RESOURCES

         The Company historically has financed operations through cash flow
generated by operations, Syndications and borrowings consisting of Investor Note
Debt, Unsecured Debt, Mortgage Debt and Debenture Debt. Now that the Company has
completed development of seven Development Communities, the ownership through
joint venture arrangements and/or operation of these communities is an
additional source of cash flow. The Company's principal liquidity requirements
are for payment of operating expenses, costs associated with development of
Development Communities, debt service obligations, and Management Contract
Obligations.

         Cash flows used by operating activities for the three months
ended April 30, 1999 were $500,000 and were comprised of (i) net income of $1.6
million plus (ii) adjustments for non-cash items of $1.4 million less (iii) the
net change in operating assets and liabilities of $3.5 million. The adjustments
for non-cash items is comprised of depreciation and amortization of $1.6
million, offset by deferred income earned of $200,000. Cash flows used by
operating activities for the three months ended April 30, 1998 were $5.0
million and were comprised of (i) net loss of $1.8 million plus (ii) adjustments
for non-cash items of $900,000 less (iii) the net change in operating assets and
liabilities of $4.1 million. The adjustments for non-cash items is comprised of
depreciation and amortization of $1.1 million, offset by deferred income earned
of $200,000.

         Net cash used by investing activities for the three months ended April
30, 1999 of $2.4 million was comprised of an increase of building, furniture and
equipment of $500,000, an increase in the cost of the Development Communities of
$4.1 million, an increase in investments in general partner interest in senior
living communities of $300,000 less the recovery on cost of investment of $2.5
million. Net cash used by investing activities for the three months ended April
30, 1998 of $4.4 million was comprised of an increase in building, furniture and
equipment of $2.8 million, an increase in the cost of the senior living
communities the Company is constructing of $1.3 million, and an increase in
investments in general partner interests in senior living communities of
$300,000.

                                       17

<PAGE>


         Net cash used by financing activities for the three months ended
April 30, 1999 of $800,000 was comprised of (i) proceeds from the issuance of
new debt of $24.8 million less debt repayments of $23.7 million plus (ii)
proceeds from construction mortgage financing of $2.3 million, less (iii)
payments of notes payable of $100,000 less (iv) the increase in other assets of
$3.9 million less (v) the purchase of treasury stock of $200,000. Net cash
provided by financing activities for the three months ended April 30, 1998 of
$29.9 million was comprised of (i) proceeds from the issuance of new debt of
$10.8 million less debt repayments of $5.4 million plus (ii) proceeds from
construction mortgage financings of $2.5 million, less (iii) payments of notes
payable of $200,000 less (iv) the increase in other assets of $200,000 plus (v)
the net proceeds of the initial public offering of $22.4 million.

         At January 31, 1999, the Company had total indebtedness, excluding
accrued interest and construction mortgage indebtedness on the Development
Communities, of $168.8 million, consisting of $69.8 million of Debenture Debt,
$72.5 million of Unsecured Debt, $5.0 million of Mortgage Debt and $21.5 million
of Investor Note Debt, and the Company had cash and cash equivalents at January
31, 1999 of $22.8 million. As of April 30, 1999, the Company decreased Investor
Note Debt from $21.5 million to $19.7 million, decreased Unsecured Debt from
$72.5 to $56.7 million and increased Debenture Debt from $69.8 million to $88.6
million. As a result, the total indebtedness increased from $168.8 million to
$170.0 million and the Company had cash and cash equivalents at April 30, 1999
of $19.1 million.

         Of the principal amount of total indebtedness at January 31, 1999
described above, $29.4 million becomes due in the fiscal year ending January 31,
2000; $35.3 million becomes due in the fiscal year ending January 31, 2001;
$38.3 million becomes due in the fiscal year ending January 31, 2002; $22.1
million becomes due in the fiscal year ending January 31, 2003; $10.1 million
becomes due in the fiscal year ending January 31, 2004, and the balance of $33.6
million becomes due thereafter. Of the amount maturing in the fiscal year ending
January 31, 2000, $1.9 million is Investor Note Debt of which the Company repaid
$1.5 million through the collection of investor notes and intends to repay the
balance through the collection of investor notes. The balance, approximately
$27.5 million, includes $7.9 million of Debenture Debt and $19.6 million of
Unsecured Debt of which $18.7 has been repaid through the issuance of new
Debenture Debt. The Company expects to repay a portion of the remaining debt
maturing in the current year with funds generated by the Company's business
operations and the balance of the indebtedness through the issuance of new debt.

         First mortgage loans were obtained to finance approximately 80% of the
cost of developing seven Development Communities. The interest rate on four of
the loans equals the 30-day LIBOR plus 2 3/4% per annum. The fifth loan bears
interest at the lender's prime rate plus 1.5% per annum. The sixth and seventh
loans bear interest at the lender's prime rate for the first fifteen months and
then converts to LIBOR plus 2 3/4% per annum for the following twenty-four
months. These loans mature between November, 1999 and February, 2001. As of
April 30, 1999, total funding under such first mortgage loans amounted to $38.6
million. In April, 1999, the Company entered into joint venture arrangements
regarding three completed and one substantially completed Development
Communities, two of such joint venture arrangements being effective as of April
1, 1999 and the other two being effective as of May 1, 1999. As a result, the
Company did not reflect the mortgages relating to the Development Communities
whose joint venture arrangements were effective April 1, 1999 on its
consolidated financial statements as of April 30, 1999. At April 30, 1999, the
total mortgages reflected in the Company's consolidated financial statements was
$25.9 million. The Company will not reflect the mortgages on the Development
Communities whose joint venture arrangements have been entered into effective
May 1, 1999 on its consolidated financial statements in future periods. The
Company has guaranteed the mortgages on the Development Communities subject to
joint venture arrangements and such guarantees remain in effect. The Company
intends to pursue similar joint venture arrangements regarding the additional
Development Communities to be developed. The Company intends to increase its
construction loans payable as it pursues its Development Plan.

         Pursuant to the Company's Development Plan, two limited partnerships,
in each of which the Company holds a 1% general partnership interest, have
issued limited partnership interests for aggregate capital contributions of $9.3
million, the net proceeds of which have been used to make second mortgage loans
to the Company to fund approximately 20% of the cost of developing three
Development Communities. Such second mortgage loans were entered into in 1996
and bear interest at the rate of 13.125%. These second mortgage loans mature
between November 2001 and March 2002. The Company repaid these second mortgage
loans in May, 1999 from a portion of the proceeds

                                       18

<PAGE>


from three of the four joint venture arrangements which the Company recently
entered into regarding four Development Communities.

         The Company's debt obligations contain various covenants and default
provisions, including provisions relating to, in some obligations, certain
Partnerships, Owning Partnerships or affiliates of the Company. At April 30,
1999, the Company had a net worth of $37.2 million. Pursuant to one obligation,
the Company is required to maintain a net worth of no less than $35.3 million.
Certain obligations of the Company contain covenants requiring the Company to
maintain maximum ratios of the Company's liabilities to its net worth. At April
30, 1999, the most restrictive covenant requires that the Company maintain a
ratio of liabilities to consolidated net worth of no more than 10 to 1. At April
30, 1999, the Company's ratio was 7.6 to 1. In addition, certain obligations of
the Company provide that an event of default will arise upon the occurrence of
a material adverse change in the financial condition of the Company or upon a
default in other obligations of the Company.

         The Company has utilized mortgage financing and Syndications to arrange
for the acquisitions of the Syndicated Communities which it operates. It intends
to continue this practice for future acquisitions of Syndicated Communities. The
limited partnership agreements of the Investing Partnerships provide that the
limited partners are entitled to receive for a period not to exceed five-years
specified distributions equal to 11% to 12% per annum of their then paid-in
scheduled capital contributions. Pursuant to the management contracts with the
Owning Partnerships, for such five-year period, the Company has Management
Contract Obligations. During the three months ended April 30, 1999, the
Syndicated Communities with respect to which the Company had such Management
Contract Obligations distributed to the Company, after payment of all operating
expenses and debt service, an aggregate of $2.1 million, for application to the
Company's Management Contract Obligations. During such period, the Company's
Management Contract Obligations exceeded such distributions by an aggregate of
$3.7 million. The $3.7 million of funding that was required in respect to
Management Contract Obligations in the three months ended April 30, 1999 was
primarily attributable to (i) an increase in the scheduled capital contributions
by the limited partners on which the Company is required to pay the specified
rate of return, (ii) a decrease in the average occupancy of certain Syndicated
Communities in the Company's portfolio, and (iii) an increase in operating
expenses of the same Syndicated Communities.

         The aggregate gross amount (before considering the cash flow from the
properties) of Management Contract Obligations relating solely to returns to
limited partners based on existing management contracts is $14.7 million for the
remaining portion of Fiscal 1999, which will increase to $20.5 million in Fiscal
2000, and decrease to $16.7 million in Fiscal 2001, decrease to $9.2 million in
Fiscal 2002, decrease to $3.4 million in Fiscal 2003 and decrease to $300,000 in
Fiscal 2004. Such amounts of Management Contract Obligations are calculated
based upon all remaining scheduled capital contributions with respect to fiscal
years 1999 through 2004. Actual amounts of Management Contract Obligations in
respect of such contracts will vary based upon the timing and amount of such
capital contributions. Furthermore, such amounts of Management Contract
Obligations are calculated without regard to Management Contract Obligations
relating to future Syndications.

         The aggregate amount of the Company's Management Contract Obligations
will depend upon a number of factors, including, among others, the expiration of
such obligations for certain partnerships, the cash flow generated by the
Syndicated Communities and the terms of future Syndications. The Company
anticipates that for at least two years the Management Contract Obligations with
respect to existing and future Syndications will exceed the cash flow generated
by the related Syndicated Communities, which will result in the need to utilize
funds generated by the Company from sources other than the operations of the
Syndicated Communities to make Management Contract Obligations payments. In
general, the payment of expenses arising from obligations of the Company,
including Management Contract Obligations, have priority over earnings that
might otherwise be available for distribution to shareholders. The Company
intends to structure future Syndications to minimize the likelihood that it will
be required to utilize the cash it generates to pay Management Contract
Obligations, but there can be no assurance that this will be the case.

         The initial five-year term of the management contracts and the related
Management Contract Obligations have expired for 13 Owning Partnerships and
their seventeen related Investing Partnerships. Although the Company has no
obligation to fund operating shortfalls after the five-year term of the
management contracts, as of April 30, 1999, the Company had advanced an
aggregate of approximately $2.7 million to nine of these Owning Partnerships to
fund

                                       19

<PAGE>


operating shortfalls. All such advances are recorded in the "notes and
receivables" on the Company's Consolidated Balance Sheet. Although the
Company did not do so in the three months ended April 30, 1999,
from time to time, the Company has also made discretionary payments to Owning
Partnerships beyond the Management Contract Obligations period for the purpose
of making distributions to limited partners.

         In the past, limited partners have been allowed to prepay capital
contributions. The percentage of the prepayments received upon the closings of
the sales of limited partnership interests in Investing Partnerships was 75.4%
for Fiscal 1998 and 54.6% for the three months ended April 30, 1999. Prepayments
of capital contributions do not result in the prepayment of the related Purchase
Notes held by the Company. Instead, such amounts are loaned to the Company by
the Investing Partnership. As a result of such loans and the crediting
provisions of the related purchase agreements, the Company records the Purchase
Notes net of such loans. Therefore, these prepayments act to reduce the recorded
value of the Company's note receivables and reduce interest income received by
the Company. Pursuant to the terms of the Syndication offerings, the Company has
the option not to accept future prepayments by limited partners of capital
contributions. The Company has not determined to what extent it will continue to
accept prepayments by limited partners of capital contributions.

         As of April 30, 1999, the Company holds 157 Purchase Notes
("Multi-Family Notes") which are secured by controlling interests in
Multi-Family Owning Partnerships which own 118 multi-family properties that were
Syndicated by the Company prior to 1986 (the "Multi-Family Properties").
Although it has no obligation to do so, the Company has also made advances to
various Multi-Family Owning Partnerships to support the operation of their
properties, which advances are included in the "notes and receivables" recorded
on the Company's Consolidated Balance Sheet. The Multi-Family Notes and related
advances entitle the Company to receive all cash flow and sale or refinancing
proceeds generated by the respective Multi-Family Property until the
Multi-Family Note and related advances are satisfied. As of April 30, 1999, the
recorded value, net of deferred income, of Multi-Family Notes was $100.9
million. All but approximately $3.9 million of the $64.6 million of advances
included in the "notes and receivable" recorded on the Company's Consolidated
Balance Sheet as of April 30, 1999 relate to advances to Multi-Family Owning
Partnerships.

         Fourteen of the Multi-Family Owning Partnerships are in default on
their respective mortgages. The Company neither owns nor manages these
properties, nor is it the general partner of any Multi-Family Owning
Partnerships, but rather, merely holds the related Multi-Family Notes and
related advances as receivables. The Company, therefore, has no liability in
connection with these mortgage defaults. In that these mortgages were insured by
the United States Department of Housing and Urban Development ("HUD"), HUD
became the holder of these mortgages after they went into default. In the past,
HUD has instituted initiatives to deal with its portfolio of defaulted
mortgages, such as selling such mortgages at auction. Although HUD has
discontinued this auction program, these auctions resulted in one of the
fourteen defaulted mortgages being sold to a third party, subject to an existing
workout agreement. The remaining thirteen defaulted mortgages are held by HUD,
with workout agreements in place regarding six of them with terms of from one to
nine years. HUD's policies regarding the granting of workout agreements have
become more restrictive in recent years and there can be no assurance that HUD
will renew these workout agreements or restructure the related mortgage debt
when these workout agreements expire. Similarly, there can be no assurance that
the related MultiFamily Owning Partnerships can obtain workout agreements or
restructure the related mortgage debt for the seven defaulted mortgages without
workout agreements currently in place. HUD has recently taken steps to foreclose
on four of the defaulted mortgages without workouts. Notwithstanding these
steps, the relevant Multi-Family Owning Partnerships are negotiating with HUD to
obtain workout agreements or mortgage restructurings (which are now possible
pursuant to new HUD policies) to cure the defaults. In view of the foregoing, it
is possible that the fourteen MultiFamily Owning Partnerships which are in
default of their mortgages will file bankruptcy petitions or take similar
actions seeking protection from the creditors and/or lose their properties
through foreclosure. As of April 30, 1999, the recorded value, net of deferred
income, of the Multi-Family Notes and the related advances held by the Company
relating to these fourteen Multi-Family Owning Partnerships was $29.9 million.
The Company has established reserves of $10.1 million to address the possibility
that these Multi-Family Notes and related advances may not be collected in full.
One of these fourteen remaining Multi-Family Owning Partnerships whose mortgage
is in default has had its application to refinance its mortgage loan accepted
and believes that the refinancing will close. Other Multi-Family Owning
Partnerships intend to cure their mortgage defaults by refinancing their
mortgages in the future, although there can be no assurance that this will be
the case. It should be noted, however, that in Fiscal 1998 and previous years,
six Multi-Family Owning
                                       20

<PAGE>

Partnerships whose mortgages had been in default cured those defaults by
refinancing their mortgages with new mortgage financings and now have fully
performing mortgages.

          The Multi-Family Properties were typically built or acquired with the
assistance of programs administered by HUD that provide mortgage insurance,
favorable financing terms and/or rental assistance payments to the owners. As a
condition to the receipt of assistance under these and other HUD programs, the
properties must comply with various HUD requirements, including limiting rents
on these properties to amounts approved by HUD. Most of the rental assistance
payment contracts relating to the Multi-Family Properties will expire over the
next few years. In view of the foregoing, there can be no assurance that other
Multi-Family Owning Partnerships will not default on their mortgages, file
bankruptcy petitions, and/or lose their properties through foreclosure. The
Company neither owns nor manages these properties, nor is it the general partner
of any Multi-Family Owning Partnerships, but rather, holds the MultiFamily Notes
and related advances as receivables. Any such future mortgage defaults could,
and any such future filings of bankruptcy petitions or the loss of any such
property through foreclosure would, cause the Company to realize a non-cash loss
equal to the recorded value of the applicable Multi-Family Note plus any related
advances, net of any deferred income recorded and any reserves for such
Multi-Family Note and advances previously established by the Company, which
would reduce such loss. In addition, the Company could be required to realize
such a non-cash loss even in the absence of mortgage defaults, bankruptcy
petitions or the loss of any such property through foreclosure if such note is
considered impaired. Such impairment would be measured under applicable
accounting rules. Such losses, if any, while non-cash in nature, could adversely
affect the Company's business, operating results and financial condition.

         HUD has introduced various initiatives to restructure its housing
subsidy programs by increasing reliance on prevailing market rents, and by
reducing spending on future rental assistance payment contracts by, among other
things, limiting the term and rent levels when renewing expiring contracts and
by restructuring mortgage debt on those properties where a decline in rental
revenues is anticipated. Due to uncertainty regarding the final policies that
will result from these initiatives and numerous other factors that affect each
property, which can change over time (including the local real estate market,
the provisions of the mortgage debt encumbering the property, prevailing
interest rates and the general state of the economy), the Company cannot
determine whether these initiatives will have an impact on the Multi-Family
Properties and, if there is an impact, whether the impact will be positive or
negative.

         Certain of the Multi-Family Owning Partnerships intend to take
advantage of the new HUD initiatives and/or improving market conditions to (i)
either refinance their HUD-insured mortgages with conventional mortgage
financing or restructure their HUD-insured mortgage debt, or (ii) sell their
Multi-Family Properties. In some cases, the MultiFamily Owning Partnerships will
make certain improvements to the properties and may not renew rental assistance
contracts as part of a strategy to reposition those Multi-Family Properties as
market-rate, non-subsidized properties. Seventeen of such Multi-Family Owning
Partnerships have refinanced their HUD-insured mortgages with conventional
mortgage financing, one Multi-Family Owning Partnerhship has received a
refinancing commitment and a number of others have applications for commitments
pending. To the extent that any of these Multi-Family Owning Partnerships
complete such actions, the Company believes that the ability of the Investing
Partnerships relating to the Multi-Family Properties (the "Multi-Family
Investing Partnerships") to make payments to the Company on their respective
MultiFamily Notes will be enhanced and accelerated. In Fiscal 1998, the Company
received $2.6 million of excess refinancing proceeds as holder of the related
Multi-Family Notes and expects to receive excess refinancing proceeds from the
refinancing of other Multi-Family Properties in Fiscal 1999. However, there can
be no assurance that these additional Multi-Family Owning Partnerships will be
able to refinance their mortgages or will be able to successfully reposition any
of the Multi-Family Properties.

         In addition, one Multi-Family Property and controlling interests in
eight Multi-Family Owning Partnerships were sold to third parties in Fiscal
1998. The Company succeeded to these controlling interests by acquiring the
collateral securing the related Multi-Family Notes upon such Notes becoming due
without being paid and concurrently selling such collateral to third parties.
The Company recognized $26.4 million in sale proceeds as a result of these sales
in Fiscal 1998. A significant portion of sales proceeds were generated from
sales to a single unrelated third party. Due to the fact that a Contract of Sale
has been entered into regarding one additional Multi-Family Property, a letter
of intent has been executed for the sale of one additional Multi-Family
Property, and other Multi-Family Owning Partnerships are currently negotiating
the terms of offers to purchase their properties, the Company expects to receive
additional sale

                                       21

<PAGE>


proceeds from any such transactions which occur in Fiscal 1999. There can be no
assurance, however, that additional sale transactions will actually close.

         The future growth of the Company will be based upon the continued
acquisition and Syndication of existing senior living communities and the
construction of Development Communities, which the Company presently does not
intend to Syndicate, but which may be owned pursuant to joint venture
arrangements.  The Company anticipates that it will acquire between six
and twelve existing senior living communities over the next two years. It is
anticipated that acquisitions of existing senior living communities will be
arranged by utilizing a combination of mortgage financing and Syndications. The
Company holds contracts to acquire senior living communities in Radcliff,
Kentucky and Denver, Colorado respectively. The Company regularly obtains
acquisition mortgage financing from two different commercial mortgage lenders
and, in view of its ready access to such mortgage financing, has not sought any
specific commitments or letters of intent with regard to future, unidentified
acquisitions. Similarly, the Company believes that it has sufficient ability to
arrange for acquisitions of existing senior living communities in part by
Syndications.

         In a typical Syndication, limited partners agree to pay their capital
contributions over a five-year period, and deliver notes representing the
portion of their capital contribution that has not been paid in cash. The
Company borrows against the notes delivered by limited partners to generate cash
when needed, including to pursue its Development Plan and to repay debt.

         The Company anticipates that the proceeds of the Company's initial
public offering, funds generated by its business operations and construction
mortgage financing will provide sufficient funds to pursue its Development Plan
(as described above) for at least 6 months at the projected rate of development.
The Company will use the proceeds of (i) anticipated joint venture arrangements
of Development Communities, (ii) refinancings or sale-leasebacks of stabilized
Development Communities at higher principal amounts than the original
construction financing, (iii) additional long-term leases or similar forms of
financing which require the investment of little or no capital on the part of
the Company, and/or (iv) funds which may be raised through the issuance of
securities, to continue with its Development Plan for more than the next 6
months at its projected rate of development. There can be no assurance that
funds generated by these potential sources will be available or sufficient to
complete the Company's Development Plan. In addition, there are a number of
circumstances beyond the Company's control and which the Company cannot predict
that may result in the Company's financial resources being inadequate to meet
its needs. A lack of available funds may require the Company to delay, scale
back or eliminate some of the Development Communities that are currently
contemplated in its Development Plan.

         The first new Development Communities developed pursuant to the
Company's Development Plan are in Texas. The Company has completed construction
with mortgage financing on three Development Communities in Texas. The Company
has commenced construction with mortgage financing on four Development
Communities in Texas. The Company has options to acquire sites in Knoxville,
Tennessee, Jackson, Tennessee, Evansville, Indiana and South Bend, Indiana, and
is actively negotiating to obtain control of additional sites in the Southeast
and Midwest. The Company is negotiating with several lenders to obtain financing
to develop these sites. The Company has entered into joint venture arrangements
with a third party pursuant to which it has sold 50% interests in four
Development Communities located in Texas. The Company intends to enter into
similar joint venture arrangements with regard to future Development Communities
it develops with mortgage financing.

         The Company has, and may in the future, utilize long-term lease
financing arrangements to develop and operate new Development Communities. The
Company has obtained financing of $37.7 million from Capstone for 100% of the
development cost of four Development Communities that are being operated by the
Company pursuant to long-term leases with Capstone.

         The Company is actively engaged in negotiations with other mortgage and
long-term lease lenders to provide additional construction financing. The
Company anticipates that most of the construction mortgage loans it obtains to
finance the development and lease-up costs of new Development Communities will
contain terms where the lender will fund at least 80% of such costs, requiring
the Company to contribute approximately 20% of such costs.


                                       22

<PAGE>


         STOCK BUYBACK

         On March 22, 1999, the Board of Directors authorized the Company to
purchase up to 300,000 shares of the Company's common stock. As of June 7, 1999,
the Company had purchased 116,000 shares at an average price of $6.07 per share.

         Other than as described herein, management is not aware of any other
trends, events, commitments or uncertainties that will, or are likely to,
materially impact the Company's liquidity.

         YEAR 2000 UPDATE

         Year 2000 Overview - The Year 2000 issue is the result of many computer
systems and non-information technology systems which rely upon embedded computer
technology using only the last two digits to refer to a year and therefore being
unable to distinguish between the years 1900 and 2000. If not corrected, many
computer applications that are date sensitive could fail or create erroneous
results. As part of the process of upgrading its internal computer hardware and
software and in anticipation of the Year 2000 issue, the Company began to audit,
inventory, modify and replace its mission critical software and hardware
(including personal computers, spread sheets, and word processing) in its Fort
Lee, New Jersey and Boca Raton, Florida corporate offices in 1997 ("Year 2000
Project"). During 1998, the Company's Year 2000 Project was extended to include
software and hardware located at the Syndicated Communities and the Development
Communities, "embedded technology" (such as telephones, fax machines, copiers
and postage machines), property and corporate facilities (such as security/fire
systems, emergency call systems, elevators, and HVAC systems) and business
relationships with governmental agencies, utilities and material third party
vendors, and service providers.

         The Company has separate computer hardware and software systems at each
of its Fort Lee, New Jersey and Boca Raton, Florida offices. Each office has an
intra-office network. None of the Syndicated Communities or Development
Communities are part of a computer network. The Company is using a multi-step
approach in conducting its Year 2000 Project. These steps are: inventory,
assessment, remediation and testing, and contingency planning. The first step,
an inventory of all systems and devices with potential year 2000 problems has
been completed. The next step, an assessment of such inventory to determine the
state of year 2000 readiness for material systems and devices has also been
completed for the Company's two offices and it has been completed at the
majority of the Syndicated Communities and Development Communities. A majority
of the remediation and testing of the Company's software and hardware has
already been completed and full completion is anticipated to occur by July 31,
1999. To date, the Company has updated or replaced the following financial and
accounting systems with Year 2000 compliant systems: accounting servers and
related hardware, accounts payable systems, accounts receivable systems, general
ledgers, cash management programs and payroll systems. In addition, the Company
has updated its construction server and data base as well as the network
software located in the Company's two offices and replaced substantially all of
the desk-top personal computers located therein.

         However, even if the Company is successful in becoming year 2000
compliant, the Company remains at risk from year 2000 failures caused by key
third parties. The Company has therefore initiated efforts with key third
parties to assess and wherever possible remediate Year 2000 issues. In most
cases, the Company will be relying upon statements from such entities as to the
Year 2000 readiness of their systems and will not attempt any independent
verification. To date, the Company has not received sufficient information from
such entities to complete its assessment of their year 2000 compliance. In
addition, the Company cannot predict the outcome of other companies' remediation
efforts.

         Year 2000 Costs - The total cost associated with the Year 2000 Project
to become Year 2000 compliant is not expected to be material to the Company's
financial position. The Company currently plans to complete the Year 2000
Project by July 31, 1999. The cost of the Company's total Year 2000 Project is
based on presently available information. The Company does not separately track
the internal costs incurred for the Year 2000 Project. Such costs are
principally the related payroll costs for its information systems group. The
total remaining cost of the year 2000 Project is estimated at approximately
$50,000. Substantially all of this $50,000 is related to the cost to replace
software and computers. To date, the Company incurred approximately $25,000
related to the Year 2000 Project.

                                       23

<PAGE>


Substantially all of this $25,000 is related to the cost to replace software and
computers. The costs of the project and the date on which the Company plans to
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events including the
continued availability of certain resources, third parties' Year 2000
preparedness and other factors.

         Risks - The failure to correct a material Year 2000 problem could
result in an interruption in, or a failure of, certain normal business
activities or operations. The Company believes that all material Year 2000
problems which are within its control will be corrected by July 31, 1999 and
therefore such problems are not anticipated to have a material adverse affect on
the Company's financial position and results of operations. Even if the Company
successfully remediates its year 2000 issues, it can be materially and adversely
affected by failures of third parties to remediate their own Year 2000 issues.
The Company believes that the most reasonably likely worst case scenario is the
loss of utility service (telecommunications and power) at the Company's
corporate offices, and all or some of the senior living communities it operates.
Based upon procedures which are currently in place and the contingency plans
which are being prepared and anticipated to be put in place, such a scenario is
not expected to have a material adverse affect on the Company's financial
position and results of operations.

         Contingency Plans - Contingency plans are anticipated to be prepared so
that the Company's critical business processes can be expected to continue to
function on January 1, 2000 and beyond. Such plans are anticipated to be
developed by July 31, 1999. These plans will attempt to mitigate both internal
risks as well as potential risks due to business relationships with third
parties.

         NEW ACCOUNTING PRONOUNCEMENTS

         In June of 1998, the FASB issued Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It is effective for all fiscal quarters of fiscal years beginning after June 15,
2000.  The Company's use of derivative instruments has consisted of treasury
bill locks related to two specific mortgage debt financings. While the Company
has not completed its analysis of Statement No. 133 and has not made a decision
regarding the timing of adoption, it does not believe that adoption will have a
material effect on its financial position and results of operations based on its
current use of derivative instruments.



                                       24

<PAGE>


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a discussion of market risk sensitive instruments, see the Company's Form
10-K for the fiscal year ended January 31, 1999. There has been no subsequent
material change to the Company's exposure to market risk.














                                       25

<PAGE>




                          PART II - OTHER INFORMATION.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

The effective date of the registration statements (Nos. 333-05955 and 333-43331)
for the Company's initial public offering of its common stock, $.01 par value,
was March 13, 1998. The offering commenced on March 16, 1998. The managing
underwriter of the offering was Royce Investment Group, Inc. ("Royce"). Pursuant
to the offering, the Company sold to the public 2,800,000 shares of its common
stock at an initial offering price of $9.50 per share. The aggregate price of
the offering registered by the Company was $26.6 million. On April 29, 1998,
pursuant to an over-allotment option granted to the underwriters, John Luciani
and Bernard M. Rodin (the "Selling Shareholders") each sold 173,030 shares of
the Company's common stock to the public at a price of $9.50 per share. The
aggregate price of the shares offered by and registered on behalf of the Selling
Shareholders was $3,287,600. Under the terms of the offering, the Company
incurred underwriting discounts of $1.6 million, and the Selling Shareholders
incurred aggregate underwriting discounts of $197,250. The Company incurred the
following expenses in connection with the offering: (i) a non-accountable
expense allowance paid to Royce in the amount of $798,000, (ii) a consulting fee
paid to Royce in the amount of $266,000, and (iii) other expenses related to the
offering in the amount of $1.5 million.

The net proceeds that the Company received as a result of the offering were
$22.3 million. As of April 30, 1999, the Company's net proceeds have been used
as follows: $10.2 million has been used for the purchase of land and towards the
construction of plant, building and facilities and $1.6 million has been used
for working capital and the remainder has been used to purchase treasury bills
pending application of the funds.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

    (a)  Exhibits

             Exhibit Number     Description of Exhibit
             --------------     ----------------------
             4.0(c)             First Supplemental Indenture, dated as of May 3,
                                1999, of 11% Series A Notes, due December 15,
                                2005, between the Company and The Bank of
                                New York (the "First Supplemental Indenture").
             4.0(d)             Supplemental Officers Certificate No. 2, dated
                                May 3, 1999, under Sections 102, 301, 1201 and
                                1207 of the Indenture of 11% Series A Notes,
                                due December 15, 2005.
             10.14              Line of Credit Agreement from Key Corporate
                                Capital, Inc. to Grand Court - Greatwood, L.P.,
                                dated as of October 30, 1998.
             10.14(a)           Transaction Guarantee by the Company to Grand
                                Court - Greatwood, L.P., dated as of October 30,
                                1998.
             27                 Financial Data Schedule

    (b)  Reports on Form 8-K
         None.

                                 26

<PAGE>


                                    SIGNATURE


         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.


                                       GRAND COURT LIFESTYLES, INC.
                                       (Registrant)



                                       /s/ Bernard M. Rodin
                                       --------------------
                                       Bernard M. Rodin
                                       President
                                       and Principal Financial Officer




Dated: June 14,  1999
















                                       27

<PAGE>


                                  EXHIBIT INDEX
                                  -------------


4.0(c)     First Supplemental Indenture, dated as of May 3, 1999, of 11% Series
           A Notes, due December 15, 2005, between the Company and The Bank of
           New York (the "First Supplemental Indenture").

4.0(d)     Supplemental Officers Certificate No. 2, dated May 3, 1999, under
           Sections 102, 301, 1201 and 1207 of the Indenture of 11% Series A
           Notes, due December 15, 2005.

10.14      Line of Credit Agreement from Key Corporate Capital, Inc. to Grand
           Court - Greatwood, L.P., dated as of October 30, 1998.

10.14(a)   Transaction Guarantee by the Company to Grand Court - Greatwood,
           L.P., dated as of October 30, 1998.


27         Financial Data Schedule.

















                                       28