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, 1998

                                          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                   (I.R.S. Employer
                  jurisdiction of                  Identification No.)
                 incorporation or
                   organization)

          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 May 31, 1998, the Company had 17,800,000 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, 1998


                                                                       PAGE

          PART I - FINANCIAL INFORMATION

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

                    Consolidated Balance Sheets as of January 31, 1998 and
                    April 30, 1998

                    Consolidated Statements of Operations for the three
                    months ended April 30, 1997 and 1998

                    Consolidated Statements of Cash Flows for the three
                    months ended April 30, 1997 and 1998

                    Notes to Consolidated Financial Statements

          Item 2:   Management's Discussion and Analysis of Financial
                    Condition and Results of Operations . . . . . . .    8

          Item 3:   Quantitative and Qualitative Disclosures about
                    Market Risk . . . . . . . . . . . . . . . . . . .   18

          PART II - OTHER INFORMATION

          Item 1:   Legal Proceedings . . . . . . . . . . . . . . . .   19
          Item 2:   Changes in Securities and Use of Proceeds . . . .   19
          Item 6:   Exhibits and Reports on Form 8-K  . . . . . . . .   19


                                      1
     <PAGE>

                            PART I - FINANCIAL INFORMATION

          ITEM 1.   FINANCIAL STATEMENTS

          CONSOLIDATED BALANCE SHEETS
          (In Thousands, except per share data)
          -----------------------------------------------------------------

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

                                                    1998          1998
                                               -------------   -----------
           ASSETS

           Cash and cash equivalents . . . .      $ 11,964      $ 32,511

           Notes and receivables - net . . .       231,140       248,049

           Investments in partnerships . . .         3,924         4,263

           Construction in progress  . . . .        26,241        11,105

           Buildings, furniture and
            equipment - net  . . . . . . . .            --        19,145
                                        
           Other assets - net  . . . . . . .        22,530        21,659 
                                                  --------      --------

           Total assets  . . . . . . . . . .      $295,799      $336,732
                                                  ========      ========

           LIABILITIES AND STOCKHOLDERS' EQUITY

           Loans and accrued interest
            payable  . . . . . . . . . . . .      $161,850      $167,277

           Construction loan payable . . . .        22,595        25,064

           Notes and commissions payable . .         5,299         6,731

           Other liabilities . . . . . . . .         3,531        14,971

           Deferred income . . . . . . . . .        76,112        75,665
                                                  --------      --------

           Total liabilities . . . . . . . .       269,387       289,708
                                                  --------      --------

           Commitments and contingencies

           Stockholders' equity

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

           Common Stock, $.01 par value -
            shares authorized, 40,000,000;
            shares issued and outstanding,
            15,000,000 and 17,800,000,
            respectively . . . . . . . . . .           150           178

           Paid-in capital                          51,189        73,575

           Accumulated deficit                     (24,927)      (26,729)
                                                  --------      --------

           TOTAL STOCKHOLDERS' EQUITY  . . .        26,412        47,024
                                                  --------      --------

           Total liabilities and         
            stockholders' equity . . . . . .      $295,799      $336,732
                                                  ========      ========

          See Notes to Consolidated Financial Statements.


                                      2
     <PAGE>


          CONSOLIDATED STATEMENTS OF OPERATIONS
          (In Thousands, except per share data)
          ----------------------------------------------------------------

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

                                                  1997               1998
                                                --------           --------
           Revenues:
             Sales . . . . . . . . . . .        $ 9,679            $10,480
             Syndication fee income  . .          1,982              2,175
             Deferred income earned  . .            230                208
             Interest income . . . . . .          3,471              3,889
             Property management fees
               from related parties  . .            708                988
             Equity in earnings from
               partnerships  . . . . . .            114                158
             Adult living rental revenues            --                418 
             Other income  . . . . . . .             --                685
                                                 ------             ------
                                                 16,184             19,001
                                                 ------             ------

           Cost and Expenses:
             Cost of sales . . . . . . .          7,541              8,366
             Selling . . . . . . . . . .          2,158              2,110
             Interest  . . . . . . . . .          4,350              5,470
             General and administrative           1,842              2,484
             Adult living operating
               expenses  . . . . . . . .             --                946
             Officers' compensation  . .            300                300
             Depreciation and   
               amortization  . . . . . .            814              1,087
                                                 ------             ------
                                                 17,005             20,763
                                                 ------             ------
           Net loss before provision for
             taxes . . . . . . . . . . .           (821)            (1,762)
                                                       
           Provision for taxes . . . . .             --                 40
                                                 ------             ------
           
           Net loss  . . . . . . . . . .           (821)            (1,802)
                                                 ======             ======

           Loss per common share (basic   
             and diluted)  . . . . . . .       $   (.05)          $   (.10)
                                                 ======             ======

           Pro forma weighted average   
             common shares . . . . . . .         15,000             17,800
                                                 ======             ======

          See Notes to Consolidated Financial Statements.


                                      3
     <PAGE>


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

                                                  Three months ended April
                                                       30 (unaudited)
                                                  ------------------------
                                                      1997         1998
                                                   ----------   ----------
           Cash flows used from operating
            activities:
                       
             Net loss  . . . . . . . . . . . . .    $  (821)    $ (1,802)
                                                    -------     --------

             Adjustments to reconcile net income
               to net cash provided by operating
               activities:

              Depreciation and amortization  . .        814        1,087

              Deferred income earned . . . . . .       (230)        (208)

             Changes in operating assets and
               liabilities:

              Accrued interest on notes and
                  receivables  . . . . . . . . .      5,574        7,587

              Notes and receivables  . . . . . .     (8,540)     (24,496)

              Commissions payable  . . . . . . .       (921)       1,637

              Other liabilities  . . . . . . . .     (1,353)      11,440
                                                 
              Deferred income  . . . . . . . . .       (265)        (240)
                                                    -------     --------
                                                     (4,921)      (3,193)
                                                    -------     -------- 

                Net cash used by operating 
                     activities  . . . . . . . .     (5,742)      (4,995)
                                                    -------     --------
           Cash flows used from investing
            activities:

             Increase in investments . . . . . .       (184)        (339)

             Building, furniture and equipment .         --       (2,798)
                                         
             Construction in progress  . . . . .     (1,757)      (1,259)
                                                    -------     --------


              Net cash used by investing             (1,941)      (4,396)
                  activities . . . . . . . . . .    -------     --------

           Cash flows provided (used) financing
            activities:

             Payments on loans payable . . . . .     (9,391)      (5,351)

             Proceeds from loans payable   . . .      6,102       10,779

             Proceeds from construction loan
               payable . . . . . . . . . . . . .      3,650        2,469

             Increase in other assets  . . . . .     (1,278)        (168)

             Payments of notes payable . . . . .        (34)        (205)

             Net proceeds from initial public  
               offering  . . . . . . . . . . . .         --       22,414
                                                    -------     --------

              Net cash provided (used) by  
                  financing activities . . . . .       (951)      29,938
                                                    -------     --------

             (Decrease) increase in cash and
                cash equivalents . . . . . . . .     (8,634)      20,547

             Cash and cash equivalents, 
               beginning of period . . . . . . .     14,111       11,964
                                                    -------     --------

             Cash and cash equivalents, end of
               period  . . . . . . . . . . . . .    $ 5,477     $ 32,511
                                                    =======     ========

             Supplemental information:
                                     
              Interest paid  . . . . . . . . . .    $ 4,466     $  5,266
                                                    =======     ========

          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, 1997 and 1998
          (In Thousands, except shares and 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 financial statements as of and for the
          periods ended April 30, 1997 and 1998 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 prior years 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, 1998.

               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 1997" refers to the
          fiscal year beginning on February 1, 1997) and (ii) all
          references to the Company, include the Company, its subsidiaries
          and its predecessors taken as a whole.

          1.   NEWLY DEVELOPED COMMUNITIES

               In March 1998, the Company announced the grand openings of
               two of its newly constructed adult living communities. 
               These two communities, which are located in Corpus Christi
               and Temple, Texas, contain a total of 268 apartment units
               offering both independent and assisted living services. 
               Such communities are owned and operated by the Company.  In
               March, 1998, the Company announced the grand openings of two
               newly constructed adult living communities which were
               developed as part of its $39 million development financing
               arrangement with Capstone Capital Corporation ("Capstone")
               and which are leased to the Company.  These two communities,
               which are located in El Paso and San Angelo, Texas,
               respectively, contain a total of 284 apartment units
               offering both independent and assisted living services.  The
               $39 million development financing arrangement with Capstone
               is providing financing for the development of four newly
               developed adult living communities, including two of the
               completed newly developed adult living communities described
               above.  The remaining two adult living communities being
               developed pursuant to the Capstone arrangement were placed
               in service in May, 1998.


          2.   CAPITALIZATION

               In March 1998, in an initial public offering of its common
               stock, the Company sold 2,800,000 shares of its common stock
               at 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 $22.4 million. 
               The Company intends to use approximately $19.4 million of
               the net proceeds to finance the development of new adult
               living communities and the remainder for working capital. 
               The Company has purchased a series of 30 day, 90 day and 180
               day treasury bills with the entire net proceeds pending
               application of such funds to the intended uses.


                                      5
     <PAGE>


          3.   COMMITMENTS AND CONTINGENCIES 

               The Company rents office space under a lease expiring
               February 2000.  Annual base rent under such lease is
               approximately $197.  The Company entered into a ten year
               lease for additional office space, commencing September 1,
               1991.  The annual base rent is approximately $150 and will
               increase 5% each year for ten years.

               On November 14, 1997, an investor in a limited partnership
               (the "First Partnership") which was formed to invest in a
               second partnership which was formed to develop and own an
               adult living community (the "Second Partnership"), filed a
               lawsuit, Palmer v. Country Estates Associates Limited
                        --------------------------------------------
               Partnership, et.al., in the United States District Court,
               -------------------
               District of New Jersey.  The Company has never managed the
               property owned by the Second Partnership and is not a
               general partner in the Second Partnership or the First
               Partnership.  A predecessor of the Company was a general
               partner of the Second Partnership.  The Company has never
               been a general partner of the First Partnership.  The
               defendants in the suits were the First Partnership, the
               general partners of the First Partnership, the Second
               Partnership, two affiliates of the Company, and the Company
               (collectively the "Defendants").  The Plaintiff alleged a
               breach of the First Partnership's partnership agreement,
               negligent misrepresentation, fraud, negligence, breach of
               guarantee and mail fraud.  The Plaintiff sought (i) the
               return of his original investment ($100), (ii) market
               interest on such investment for the period 1987-1997 and
               (iii) unspecified damages.  The parties have entered into a
               stipulation dismissing this lawsuit, with prejudice, without
               payment of any kind by the Company.

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

               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 adult living communities
               (each, an "Owning Partnership").  In a typical Syndication,
               the Company identifies an adult 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 adult 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
               insufficient to do so.  The Owning Partnership then
               distributes these amounts to the Investing Partnership


                                      6
     <PAGE>

           
               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 38
               Syndicated adult living communities and one nursing home
               that it manages by utilizing mortgage financing and by
               arranging for Syndications of 42 Investing Partnerships
               formed to acquire interests in the 38 Owning Partnerships
               that own the adult living communities and the nursing home. 
               The 38 Syndicated adult living communities and one nursing
               home 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 adult living communities
               and the one nursing home in its portfolio.  The Company is
               also the general partner of 33 of the 42 Investing
               Partnerships.  The mortgage financing of the Syndicated
               adult living communities and nursing home 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 $10.8 million in principal amount
               of mortgage debt relating to five Syndicated adult living
               communities and (ii) wholly-owned entities are liable as
               general partners for approximately $31.9 million in
               principal amount of mortgage debt relating to six Syndicated
               adult living communities and the one Syndicated nursing home
               managed by the Company as of April 30, 1998.  In the case of
               the general partner liabilities of the wholly-owned
               entities, the only assets of the Company at risk of loss are
               the general partner interests in the specific properties.

               As part of the Company's development program, on September
               18, 1996 the Company entered into a master development
               agreement with Capstone for 100% of the development cost of
               four adult living communities.  The maximum amount Capstone
               will fund per such agreement is approximately $37,764 of
               which $30,867 has been funded as of April 30, 1998. 
               Pursuant to the terms of the master development agreement,
               the Company was responsible for identifying up to four
               proposed adult living community sites and submitting a plan
               which includes plans, specifications, drawings, details and
               pro forma budgets necessary for the acquisition of such
               site, and the construction and operation of an assisted and
               independent living community.  Upon the acquisition of a
               site by Capstone, the Company was required to enter into an
               agreement relating specifically to the development of such
               site.  The dates of the four site specific development
               agreements are December 5, 1996, January 7, 1997, January
               28, 1997 and January 29, 1997.  Pursuant to each site
               specific agreement, the Company (i) agreed to develop the
               community for an agreed upon cost, (ii) was required to
               obtain or execute a construction contract for such
               community, and (iii) complete development within 15 months
               after the commencement of construction.  The Company is in
               compliance with its responsibilities under the master
               development agreement and the four site specific agreements.

               The Capstone financing arrangement provides that the Company
               will operate these four adult living communities pursuant to
               long-term 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 three five-year extension
               options.  The cumulative annual base rent which the Company
               is obligated to pay to Capstone for the two properties
               placed in service during the three months ended April 30,
               1998 is $1,866 with 3% per annum annual increases.  Under
               the terms of each lease, the Company has the option to


                                      7
     <PAGE>

           
               acquire the community after operating the community for four
               years.  The option price is equal to the sum of 100% of the
               cost incurred to develop the property and an additional 20%
               of such cost (which declines by 2 percentage points per year
               but in no event declines below 10%).  The four leases have
               cross-default provisions.  Each lease is a triple net lease,
               as the Company is responsible for all costs including, but
               not limited to, maintenance, repair, insurance, taxes,
               utilities, and compliance with legal and regulatory
               requirements.  The Company is required to maintain insurance
               and, in the event that the community is damaged or
               destroyed, such community would be restored to substantially
               the same condition it was in immediately before such damage
               or destruction, or the Company would be required to acquire
               the community for the option price described above.

          4.   NEW ACCOUNTING PRONOUNCEMENTS

               Statement No. 131, "Disclosures about Segments of an
               Enterprise and Related Information" establishes standards
               for the way that public business enterprises report
               information about operating segments in annual financial
               statements and requires that those enterprises report
               selected information about operating segments in interim
               financial reports issued to shareholders.  It also
               establishes standards for related disclosures about products
               and services, geographic areas, and major customers.  In
               accordance with Statement No. 131, the Company has elected
               not to apply this statement to its interim financial
               statements in Fiscal 1998; however, comparative information
               for interim periods in Fiscal 1998 will be reported in
               financial statements for interim periods in Fiscal 1999.


          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 1997" refers to the
          fiscal year beginning on February 1, 1997) and (ii) all
          references to the Company, include the Company, its subsidiaries
          and its predecessors taken as a whole.

          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:


                                      8
     <PAGE>

               1.   The potential impact of recent net losses and
                    anticipated operating losses.

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

               3.   The ability of the Company to pay Management Contract
                    Obligations from the cash flow generated by the
                    Syndicated adult living communities and the terms of
                    future Syndications.

               4.   The need for the Company to utilize cash from
                    operations and obtain additional financing to pursue
                    its new development program.

               5.   Changes in anticipated construction costs, operating
                    expenses and start-up losses relating to the Company's
                    new development program.

               6.   Unanticipated delays in the Company's new development
                    program, including without limitation, permitting,
                    licensing and construction delays.

               7.   The potential recourse and guarantee obligations of the
                    Company, including, but not limited to the correction
                    of hazardous environmental conditions, relating to the
                    mortgage financing of the adult living communities.

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

               9.   The potential liabilities arising from the Company's
                    status as the general partner of Syndicated adult
                    living communities.

               10.  The Company's ability to identify suitable development
                    opportunities, pursue such opportunities, complete
                    development, lease-up and effectively operate the adult
                    living communities.

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

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

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

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

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

               16.  Changes in general economic conditions, including, but
                    not limited to, factors particularly affecting real
                    estate.

          OVERVIEW

               The Company is a fully integrated provider of adult living
          accommodations and services which acquires, develops and manages
          adult living communities.  The Company's revenues have been, and
          are expected to continue to be, primarily derived from
          Syndication of partnerships it organizes to acquire existing
          adult living communities.  To the extent that the development
          plan to construct new adult living communities is successfully
          implemented, the Company anticipates that the percentage of its
          revenues derived from Syndications would decrease and the
          percentage of its revenues derived from newly constructed adult
          living communities would increase and, the Company believes, over
          time, become the primary source of the Company's revenues.  Due,
          in part, to anticipated start-up losses from the Company's newly
          developed adult living communities, the Company anticipates that
          it will incur operating losses for Fiscal 1998.


                                      9
     <PAGE>

               Future revenues, if any, of the Company relating to
          previously Syndicated adult living communities would primarily
          arise in the form of (i) deferred income earned on sales of the
          Purchased Interest in the related Owning Partnership,
          (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 Syndications of adult living 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 adult living communities by utilizing
          mortgage financing and Syndications, and anticipates that between
          six and twelve communities will be acquired 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 continually seeks adult living communities which
          it deems are good acquisition prospects.  In deciding which
          properties it has and will acquire, the Company's senior
          management exercises its business judgement to determine which
          properties are good acquisition candidates and what constitutes
          an acceptable purchase price.  There are no fixed criteria for
          these decisions, but rather, a number of factors are considered,
          including the size, location, occupancy history, physical
          condition, current income and expenses, quality of current
          management, local demographic and market conditions, existing
          competition and proposed entrants to the market.  

               The Company has instituted a development plan pursuant to
          which it has completed construction of six adult living
          communities as of June 12, 1998, is nearing completion of the
          construction of one additional community, has commenced
          construction on one additional community and intends to commence
          construction on between 30 and 34 additional new adult living
          communities over the next two years.  The Company plans to own or
          lease pursuant to long-term operating leases or similar
          arrangements the adult living communities that are being
          developed under the plan.  The Company will manage and operate
          each of the newly developed communities.  The Company does not
          intend to Syndicate any of its newly developed adult living
          communities.  The Company estimates that the cost of developing
          each new adult living community (including reserves necessary to
          carry the community through its lease-up period) utilizing
          mortgage financing will be approximately $9.5 million and
          utilizing long-term lease financing will be approximately $10
          million.  The Company expects to complete the construction of one
          of the two communities currently under construction by the end of
          the second quarter of fiscal 1998 and expects to complete
          construction of the remaining community under construction by the
          end of fiscal 1998.  These two adult living communities, along
          with the six communities already completed pursuant to the
          development plan, contain an aggregate of 1,104 adult living
          apartment units.  The 30 to 34 additional new communities which
          the Company intends to commence construction on over the next two
          years will contain between 4,260 and 4,828 additional adult
          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
          anticipated refinancings of construction financing on, and/or
          sale-leasebacks of, stabilized, newly constructed communities,
          and may complete additional issuances of debt or equity
          securities to finance the development, construction and initial
          operating costs of additional new adult living communities.  Four
          of the completed adult living 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.

          EARNINGS

               The Company recorded a net loss of $1.8 million for the
          three months ended April 30, 1998, compared to a net loss of
          $800,000 for the three months ended April 30, 1997.  The loss for
          the three months ended April 30, 1998 primarily reflects (i) an
          increase in interest expense due to an increase in the amount of


                                      10
     <PAGE>


          the Company's debt and an increase in the average interest rate
          of the Company's debt and (ii) start up losses from the Company's
          newly developed adult living communities during their initial
          lease-up periods.

          RESULTS OF OPERATION

          () Revenues

               Total revenues for the three months ended April 30, 1998 was
          $19.0 million as compared to $16.2 million for the three months
          ended April 30, 1997, representing an increase of $2.8 million or
          17.3%.

               Sales income for the three months ended April 30, 1998 was
          $10.5 million as compared to $9.7 million for the three months
          ended April 30, 1997, representing an increase of $800,000 or
          8.2%.  The increase in sales was attributable to the Syndication
          of properties with greater initial cash flow in the three months
          ended April 30, 1998, as partially offset by less favorable terms
          on Syndications completed in the three months ended April 30,
          1998 as compared to the Syndications completed in the three
          months ended April 30, 1997.  The terms of a Syndication become
          less favorable for the Company if there is a decrease 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 community.

               Syndication fee income for the three months ended April 30,
          1998 did not change significantly from Syndication fee income for
          the three months ended April 30, 1997.

               Deferred income earned for the three months ended April 30,
          1998 did not change from deferred income earned for the three
          months ended April 30, 1997.

               Interest income for the three months ended April 30, 1998
          was $3.9 million as compared to $3.5 million for the three months
          ended April 30, 1997, representing an increase of $400,000 or
          11.4%.  The increase is primarily attributable to interest earned
          on the treasury bills in which the Company invested its net
          proceeds from its initial public offering.

               Property management fees from related parties for the three
          months ended April 30, 1998 was $1.0 million as compared to
          $700,000 in the three months ended April 30, 1997, representing
          an increase of $300,000 or 42.9%.  The increase is primarily
          attributable to the cash flows from the underlying Owning
          Partnerships exceeding the specified rate of return to the
          limited partners in the three months ended April 30, 1998 to a
          greater extent than in the three months ended April 30, 1997.

               Equity in earnings from partnerships was $200,000 in the
          three months ended April 30, 1998 as compared to $100,000 in the
          three months ended April 30, 1997, representing an increase of
          $100,000 or 100%.  The increase is attributable to the
          Syndication of additional properties in which the Company retains
          a general partnership interest.

               Adult living rental revenues consist of revenues generated
          by the newly developed adult living communities which the Company
          either owns or operates pursuant to long-term leases.  Adult
          living rental revenues was $400,000 in the three months ended
          April 30, 1998.  There was no adult living rental revenue in the
          three months ended April 30, 1997.

               Other income was $685,000 in the three months ended April
          30, 1998.  This other income represents the developer's fees the
          Company has earned in connection with the two newly developed
          adult living communities the Company operates pursuant to long-
          term leases which were placed in service in the three months
          ended April 30, 1998.  There was no other income earned in the
          three months ended April 30, 1997.

          () Cost of Sales

               Cost of sales (which includes (i) the cash portion of the
          purchase price for Syndicated adult living communities plus
          related transaction costs and expenses and (ii) any payments with
          respect to Management Contract Obligations) for the three months
          ended April 30, 1998 was $8.4 million as compared to $7.5 million
          for the three months ended April 30, 1997, representing an
          increase of $900,000 or 12%.  The increase was primarily


                                      11
     <PAGE>


          attributable to (i) the greater aggregate cash portion of the
          purchase prices of the adult living communities acquired and
          Syndicated in the three months ended April 30, 1998, as compared
          to the cash portion of the purchase prices of the adult living
          communities acquired and Syndicated in the three months ended
          April 30, 1997, and (ii) increased funding of the Management
          Contract Obligations in the three months ended April 30, 1998 as
          compared to such funding in the three months ended April 30,
          1997, as partially offset by a decrease in general costs and
          expenses in the three months ended April 30, 1998 as compared to
          general costs and expenses in the three months ended April 30,
          1997.  Cost of sales as a percentage of sales and syndication fee
          income was 66.1% in the three months ended April 30, 1998 as
          compared to 64.7% in the three months ended April 30, 1997.  The
          increase is attributable to (a) less favorable Syndication terms
          on Syndications completed and, (b) increased funding of
          Management Contract Obligations in the three months ended April
          30, 1998 as compared to the three months ended April 30, 1997, as
          partially offset by (i) more favorable terms when acquiring adult
          living communities (in view of the relationship between the
          initial cash flow generated by the properties and their purchase
          prices), and (ii) by the ability to obtain more favorable
          financing for the acquisitions.

               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 adult 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.  During the
          last several years, several factors have contributed towards a
          trend to less favorable terms for acquisitions of adult living
          communities, including a recovery in the market for adult living
          communities and increased competition from other prospective
          purchasers of adult living communities.  Although the Company
          acquired adult living communities on more favorable terms in the
          three months ended April 30, 1998 as compared to the previous
          fiscal quarter, the Company believes that the general trend
          towards less favorable acquisition terms will continue in the
          future.  The Company, however, has been able to obtain mortgage
          financing on increasingly favorable terms (i.e. the Company has
          obtained mortgages for a greater percentage of the purchase price
          and at preferred interest rates).  These factors, combined with
          an overall reduction of interest rates, have 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 communities on terms favorable enough
          to offset the start-up losses of newly-developed communities as
          well as the Company's debt service obligations, Management
          Contract Obligations and the Company's selling, and general and
          administrative expenses.

          () Selling Expenses

               Selling expenses for the three months ended April 30, 1998
          was $2.1 million as compared to $2.2 million for the three months
          ended April 30, 1997, representing a decrease of $100,000 or
          4.5%.  The decrease is attributable to a lower commission rate
          paid on a higher sales volume in the three months ended April 30,
          1998 as compared to the three months ended April 30, 1997.  

          () Interest Expense

               Interest expense for the three months ended April 30, 1998
          was $5.5 million as compared to $4.4 million for the three months
          ended April 30, 1997, representing an increase of $1.1 million or
          25%.  The increase is primarily attributable to (i) an increase
          in the principal amount of debt and an increase in interest rates
          for such debt during the three months ended April 30, 1998 as
          compared to the three months ended April 30, 1997, and (ii) the
          current period expense of interest on construction loans payable
          on the two newly developed adult living communities which the
          Company owns, which were placed in service in the three months
          ended April 30, 1998.  Such interest was capitalized during the
          periods these communities were under construction.  Interest
          expense included interest payments on debentures ("Debenture
          Debt") which had an average interest rate of 12.05% per annum in
          the three months ended April 30, 1997 and 1998, respectively, and
          was secured by the Purchase Notes the Company holds as a result
          of its Syndication of multi-family properties prior to 1986 (the
          "Purchase Note Collateral").  During the three months ended April
          30, 1998 and the three months ended April 30, 1997, total
          interest expense with respect to Debenture Debt was approximately
          $1.9 million and $2.1 million, respectively and the Purchase Note
          Collateral produced approximately $500,000 and $800,000,
          respectively, of interest and related payments to the Company,


                                      12
     <PAGE>


          which was $1.4 million and $1.3 million, respectively, less than
          the amount required to pay interest on the Debenture Debt.

          () General and Administrative Expenses

               General and administrative expenses were $2.5 million in the
          three months ended April 30, 1998 as compared to $1.8 million in
          the three months ended April 30, 1997, representing an increase
          of $700,000 or 38.9%.  The increase is attributable to (i)
          increases in professional fees, salary costs and other office
          expenses in managing and arranging for the acquisition of the
          Company's portfolio of Syndicated adult living communities, which
          portfolio, in the aggregate, was larger in the three months ended
          April 30, 1998 than the Company's portfolio in the three months
          ended April 30, 1997, and (ii) an increase in development-related
          overhead due to the completion of four newly developed adult
          living communities, which expenses were previously capitalized.

          () Adult living operating expenses

               Adult living operating expenses consist of operating
          expenses of the newly developed adult living communities which
          the Company either owns or operates pursuant to long-term leases. 
          Adult living operating expenses were $1.0 million in the three
          months ended April 30, 1998.  There was no adult living operating
          expenses in the three months ended April 30, 1997.

          () Officers' Compensation

               Officers' compensation for the three months ended April 30,
          1998 did not change from officers' compensation for the three
          months ended April 30, 1997.

          () Depreciation and Amortization

               Depreciation and amortization consists of (i) amortization
          of deferred debt expense incurred in connection with debt
          issuance, (ii) amortization of leasehold costs incurred in
          connection with two of the newly developed adult living
          communities which the Company operates pursuant to long-term
          leases, and (iii) depreciation of buildings, furniture and
          equipment on two of the newly developed adult living communities
          the Company owns directly.  Depreciation and amortization for the
          three months ended April 30, 1998 was $1.1 million as compared to
          $800,000 for the three months ended April 30, 1997, representing
          an increase of $300,000 or 37.5%.  The increase is primarily
          attributable to the increase in amortization of deferred loan
          costs due to the additional Debenture Debt and unsecured debt
          incurred by the Company in the three months ended April 30, 1998,
          as compared to the three months ended April 30, 1997.  The
          increase is also attributable to the amortization of leasehold
          costs associated with the two newly developed communities
          operated by the Company pursuant to long-term leases and
          depreciation of buildings, furniture and equipment associated
          with the two newly developed adult living communities owned by
          the Company.  

          LIQUIDITY AND CAPITAL RESOURCES

               The Company historically has financed operations through
          cash flow generated by operations, Syndications and borrowings
          consisting of debt secured by promissory notes from limited
          partners of the Syndicated partnerships ("Investor Note Debt"),
          unsecured debt ("Unsecured Debt"), mortgage debt ("Mortgage
          Debt") and Debenture Debt.  Now that the Company has completed
          development of six newly-developed adult living communities, the
          ownership and operation of these communities will be an
          additional source of cash flow.  The Company, however,
          anticipates that each newly developed adult living community will
          incur operating losses until it completes its initial lease-up. 
          The Company's principal liquidity requirements are for payment of
          operating expenses, costs associated with development of new
          adult living communities, debt service obligations, and
          Management Contract Obligations.

               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.  The net change in
          operating assets and liabilities of $4.1 million was primarily
          attributable to an increase in notes and receivables and accrued
          interest on notes and receivables of $16.9 million as offset by
          an increase of other liabilities of $11.4 million.  Approximately


                                      13
     <PAGE>


          89% of the increase in "notes and receivables" was attributable
          to an increase in Purchase Notes arising from the Syndication of
          adult living communities ("Adult Living Notes") due to new
          Syndications, as offset by principal reductions on Adult Living
          Notes relating to previous Syndications, and approximately 11% of
          the increase in "notes and receivables" was primarily
          attributable to an increase in advances made to Owning
          Partnerships which own Syndicated multi-family properties
          ("Multi-Family Owning Partnerships").  Other liabilities
          increased primarily due to an increase in unearned revenue for
          the amount of unsubscribed interests in adult living communities
          financed during the three months ended April 30, 1998.  Upon full
          subscription these amounts will be recognized as income.  Cash
          flows used by operating activities for the three months ended
          April 30, 1997 were $5.7 million and were comprised of: (i) net
          loss of $800,000 plus (ii) adjustments for non-cash items of
          $600,000 less (iii) the net change in operating assets and
          liabilities of $5.5 million.  The adjustments for non-cash items
          is comprised of depreciation and amortization of $800,000 less
          deferred income earned of $200,000.  

               Net cash used by investing activities for the three months
          ended April 30, 1998 of $4.4 million was comprised of an increase
          of building, furniture and equipment of $2.8 million, an increase
          in the cost of the adult living communities the Company is
          constructing of $1.3 million, and an increase in investments in
          general partner interests in adult living communities of
          $300,000.  Net cash used by investing activities in the three
          months ended April 30, 1997 of $1.9 million was comprised of the
          increase in the cost of the adult living communities the Company
          is constructing of $1.7 million and the increase in investments
          in general partner interests in adult living communities 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
          prepayments of $5.4 million plus (ii) proceeds from construction
          mortgage financing 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.  Net cash used by financing activities for the
          three months ended April 30, 1997 of $1.0 million was comprised
          of (i) proceeds from the issuance of new debt of $6.1 million
          less debt prepayments of $9.4 million plus (ii) proceeds from
          construction mortgage financing of $3.7 million, less (iii)
          payments of notes payable of $100,000 less (iv) the increase in
          other assets of $1.3 million.

               At January 31, 1998, the Company had total indebtedness,
          excluding accrued interest, of $160.9 million, consisting of
          $65.5 million of Debenture Debt, $66.2 million of Unsecured Debt,
          $5.0 million of Mortgage Debt and $24.2 million of Investor Note
          Debt, and the Company had cash and cash equivalents at January
          31, 1998 of $12.0 million.  As of April 30, 1998, the Company has
          increased Investor Note Debt from $24.2 million to $25.0 million
          and increased Unsecured Debt from $66.2 million to $70.7 million. 
          As a result, total indebtedness increased from $160.9 million to
          $166.2 million and the Company had cash and cash equivalents at
          April 30, 1998 of $32.5 million.

               Of the principal amount of total indebtedness at January 31,
          1998, $25.5 million becomes due in the fiscal year ending January
          31, 1999; $38.6 million becomes due in the fiscal year ending
          January 31, 2000; $25.6 million becomes due in the fiscal year
          ending January 31, 2001; $32.4 million becomes due in the fiscal
          year ending January 31, 2002; $15.1 million becomes due in the
          fiscal year ending January 31, 2003, and the balance of $23.7
          million becomes due thereafter.  Of the amount maturing in the
          fiscal year ending January 31, 1999, $2.3 million is Investor
          Note Debt, of which the Company repaid $1.9 million through the
          collection of investor notes and intends to pay the remaining
          $400,000 through the collection of investor notes.  The balance,
          approximately $23.2 million, includes $2.4 million of Debenture
          Debt and $20.8 million of Unsecured Debt, of which $1.8 million
          has been repaid.  The Company expects to repay the balance
          through funds generated by the Company's business operations
          and/or to refinance by the issuance of new debt.

               The Company's debt obligations contain various covenants and
          default provisions, including provisions relating to, in some
          obligations, certain Investing Partnerships, Owning Partnerships
          or affiliates of the Company.  The Company has experienced
          fluctuations in its net worth over the last several years.  At
          January 31, 1995, the Company had a net worth of $30.7 million,
          at January 31, 1996, the Company had a net worth of $34.8
          million, at January 31, 1997, the Company had a net worth of
          $32.0 million, at January 31, 1998, the Company had a net worth
          of $26.4 million and at April 30, 1998 the Company had a net
          worth of $47.0 million.  Pursuant to the Capstone agreements, the
          Company is required to maintain a net worth of no less than $37.6
          million.  Certain obligations of the Company contain covenants
          requiring the Company to maintain maximum ratios of the Company's
          liabilities to its net worth.  The most restrictive covenant
          requires that the Company maintain a ratio of "loans and accrued


                                      14
     <PAGE>


          interest payable" to consolidated net worth of no more than 7 to
          1.  At January 31, 1998 and April 30, 1998, the Company's loan
          and accrued interest to consolidated net worth ratio was 6.1 to 1
          and 3.6 to 1, respectively.  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 adult living communities
          it operates and intends to continue this practice for future
          acquisitions of existing adult living communities.  The Company
          does not intend to Syndicate its newly developed 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, 1998, the adult living 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 $2.5 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 $1.8 million.  The
          $1.8 million of funding that was required in respect to
          Management Contract Obligations for the three months ended April
          30, 1998 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, and
          (ii) a slight decrease in the average occupancy of certain adult
          living communities in the Company's portfolio, as partially
          offset by a decrease in operating expenses of the same adult
          living communities.

               The aggregate amount of Management Contract Obligations
          relating solely to returns to limited partners based on existing
          management contracts is $10.8 million for the remaining portion
          of Fiscal 1998, which will increase to $19.0 in Fiscal 1999, and
          decrease to $18.7 million in Fiscal 2000, decrease to $14.1
          million in Fiscal 2001 and decrease to $6.0 million in Fiscal
          2002, and decrease to $200,000 in Fiscal 2003.  Such amounts of
          Management Contract Obligations are calculated based upon all
          remaining scheduled capital contributions with respect to fiscal
          years 1998 through 2003.  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 any cash flow the related properties may
          generate, which would reduce such obligations, and are calculated
          without regard to the Management Contract Obligations and
          property cash flows 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 properties and the
          terms of future Syndications.  The Company anticipates that for
          at least the next two years, the aggregate Management Contract
          Obligations with respect to existing and future Syndications will
          exceed the aggregate cash flow generated by the related
          properties, which will result in the need to utilize cash
          generated by the Company from sources other than the operations
          of the Syndicated adult living communities to meet its Management
          Contract Obligations (including payment of specified returns for
          distribution to limited partners) for these periods.  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
          stockholders.  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 10
          Owning Partnerships and their fourteen related Investing
          Partnerships.  Although the Company has no obligation to fund
          operating shortfalls after the five-year term of the management
          contracts, during the three months ended April 30, 1998, the
          Company had advanced an aggregate of approximately $358,000 to
          three of these Owning Partnerships to fund operating shortfalls. 
          These advances are included in the "notes and receivables"
          recorded on the Company's Consolidated Balance Sheet.  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.


                                      15
     <PAGE>


               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 averaged 78.8% for Fiscal
          1997 and 37.9% for the three months end April 30, 1998. 
          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 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 offerings, the Company has the
          option not to accept future prepayments by limited partners of
          capital contributions.  The Company has not determined whether it
          will continue to accept prepayments by limited partners of
          capital contributions.

               The Company holds 169 Purchase Notes ("Multi-Family Notes")
          which are secured by controlling interests in Multi-Family Owning
          Partnerships which own 128 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 the 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, 1998, the recorded
          value, net of deferred income, of Multi-Family Notes was $107.5
          million.  All but approximately $2.0 million of the $62.2 million
          of advances included in the "notes and receivables" recorded on
          the Company's Consolidated Balance Sheet as of April 30, 1998
          relate to advances to Multi-Family Owning Partnerships.

               Fifteen 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.  As of April 30, 1998,
          the recorded value, net of deferred income, of the Multi-Family
          Notes and the related advances held by the Company relating to
          these fifteen Multi-Family Owning Partnerships was $32.8 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.  It is possible that the
          fifteen Multi-Family Owning Partnerships which are in default of
          their mortgages will file bankruptcy petitions or take similar
          actions seeking protection from their creditors and/or lose their
          properties through foreclosure.

               Many of the Multi-Family Properties are dependent to varying
          degrees on housing assistance payment contracts with the United
          States Department of Housing and Urban Development ("HUD"), most
          of which 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 Multi-Family 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, at any time in which the Company's financial statements are
          issued, 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.

               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.  HUD has
          introduced various initiatives to restructure its housing subsidy
          programs by increasing reliance on prevailing market rents, and


                                      16
     <PAGE>


          by reducing spending on future rental assistance payment
          contracts by, among other things, not 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) it is impossible for the Company to 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 either refinance their HUD-insured mortgages with
          conventional mortgage financing or restructure their HUD-insured
          mortgage debt.  In some cases, the Multi-Family 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.  Ten of such Multi-Family Owning
          Partnerships refinanced their HUD-insured mortgages with
          conventional mortgage financing, three of such Multi-Family
          Owning Partnerships have commitments for such conventional
          mortgage financing, 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 Multi-Family Notes will be enhanced and accelerated. 
          However, there can be no assurance that these additional Multi-
          Family Owning Partnership will be able to refinance their
          mortgages or will be able to successfully reposition any of the
          Multi-Family Properties.

               The future growth of the Company will be based upon the
          continued acquisition and Syndication of existing adult living
          communities and the development of newly-constructed adult living
          communities, which the Company does not intend to Syndicate.  The
          Company anticipates that it will acquire between six and twelve
          existing adult living communities over the next two years.  It is
          anticipated that acquisitions of existing adult living
          communities will be arranged by utilizing a combination of
          mortgage financing and Syndications.  In May, 1998, the Company
          entered into contracts to acquire two adult living communities in
          South Miami, Florida and Mayfield Heights, Ohio containing 96 and
          120 apartment units, respectively.  The Company regularly obtains
          acquisition mortgage financing from three 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 adult
          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 plan for the development of new adult
          living communities and to repay debt.  The Company's present
          Investor Note Debt lenders do not have sufficient lending
          capacity to meet all of the Company's future requirements. 
          However, the Company currently is negotiating with several new
          Investor Note Debt lenders which the Company believes will have
          sufficient lending capacity to meet all of the Company's
          foreseeable Investor Note Debt borrowing requirements on
          acceptable terms.

               The Company anticipates that the proceeds of the Company's
          recently completed 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 12 months at the projected rate of
          development.  The Company will use the proceeds of anticipated
          refinancings of construction financing on, and/or sale-leasebacks
          of, stabilized, newly constructed communities at higher principal
          amounts than the original construction financing, additional
          long-term leases or similar forms of financing which require the
          investment of little or no capital on the part of the Company, or
          may use funds raised through the issuance of additional debt or
          equity securities, to continue with its development plan for more
          than the next 12 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 adult living communities that are currently
          contemplated in its development plan.


                                      17
     <PAGE>

               The first new communities being constructed pursuant to the
          Company's development plan are in Texas.  The Company completed
          construction with mortgage financing for up to $7.0 million on an
          adult living community in Corpus Christi, Texas, for up to $7.3
          million on an adult living community in Temple, Texas and is
          nearing the completion of construction on a site in Round Rock,
          Texas, with mortgage financing for up to $7.6 million,
          respectively.  The Company has commenced construction with
          construction financing for $7.1 million on an adult living
          community in Tyler, Texas.  The Company has acquired additional
          sites in Amarillo, Fort Bend County and League City, Texas, holds
          options to acquire an additional site in Kansas and is
          negotiating with several additional lenders to obtain financing
          to develop these sites.

               The Company has, and may in the future, utilize long-term
          lease financing arrangements to develop and operate new
          communities.  The Company has obtained up to $39 million of
          financing from Capstone for 100% of the development cost of four
          adult living communities that are being operated by the Company
          pursuant to long-term leases with Capstone.  The Company has
          completed construction on all four of these communities in San
          Angelo, El Paso, Wichita Falls and Abilene, Texas, respectively. 
          Pursuant to this financing arrangement, Capstone acquired the
          properties and entered into a development agreement and a lease
          agreement with the Company with respect to each property.  Each
          development agreement required that construction commence within
          30 days after the acquisition of the property and be complete
          within 15 months of commencement.  Each lease agreement has a
          term of 15 years with three optional five-year renewal periods. 
          The agreement requires a covenant that each community financed by
          Capstone maintain annualized earnings before certain deductions
          of at least 1.25 times the rent from the respective adult living
          community.  The obligations under the development agreements and
          the leases are direct obligations of the Company.  The Company
          has been granted a right of first refusal and an option to
          purchase the properties.

               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 adult living 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.

               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.

          () NEW ACCOUNTING PRONOUNCEMENTS

               Statement No. 131, "Disclosures about Segments of an
          Enterprise and Related Information" establishes standards for the
          way that public business enterprises report information about
          operating segments in annual financial statements and requires
          that those enterprises report selected information about
          operating segments in interim financial reports issued to
          shareholders.  It also establishes standards for related
          disclosures about products and services, geographic areas, and
          major customers.  In accordance with Statement No. 131, the
          Company has elected not to apply this statement to its interim
          financial statements in Fiscal 1998; however, comparative
          information for interim periods in Fiscal 1998 will be reported
          in financial statements for interim periods in Fiscal 1999.


          ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
                    RISK.

               NOT APPLICABLE


                                      18
     <PAGE>

                             PART II - OTHER INFORMATION.

          ITEM 1.   LEGAL PROCEEDINGS.

          As reported in the Company's Annual Report on Form 10-K for the
          fiscal year ended January 31, 1998, on November 14, 1997, an
          investor in a limited partnership (the "First Partnership") which
          was formed to invest in a second partnership which was formed to
          develop and own an adult living community (the "Second
          Partnership"), filed a lawsuit, Palmer v. Country Estates
                                          -------------------------
          Associates Limited Partnership, et.al., in the United States 
          --------------------------------------
          District Court, District of New Jersey.  The Company has never
          managed the property owned by the Second Partnership and is not a
          general partner in the Second Partnership or the First
          Partnership.  A predecessor of the Company was a general partner
          of the Second Partnership.  The Company has never been a general
          partner of the First Partnership. The defendants in the suits
          were the First Partnership, the general partners of the First
          Partnership, the Second Partnership, two affiliates of the
          Company, and the Company (collectively the "Defendants").  The
          Plaintiff alleged a breach of the First Partnership's partnership
          agreement, negligent misrepresentation, fraud, negligence, breach
          of guarantee and mail fraud.  The Plaintiff sought (i) the return
          of his original investment ($100), (ii) market interest on such
          investment for the period 1987-1997 and (iii) unspecified
          damages.  In June, 1998, the parties entered into a stipulation
          dismissing this lawsuit, with prejudice, without payment of any
          kind by the Company.

          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 amount 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 22.4 million.  As of April 30, 1998, the Company's
          net proceeds have been used as follows:  $21.4 million has been
          used to purchase a series of 30 day, 90 day and 180 day treasury
          bills pending application of the funds, and $1.0 million has been
          used for the construction of plant, building and facilities.

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

               (a)  Exhibits

                Exhibit Number          Description of Exhibit
                --------------          ----------------------
                (27)                    Financial Data Schedule


               (b)  Reports on Form 8-K

                    None.


                                      19
     <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/ Paul Jawin
                                        ----------------------------------
                                        Paul Jawin
                                        Chief Financial Officer
                                        and Principal Financial Officer



          Dated: June 12, 1998




                                      20
     <PAGE>

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


          Exhibit 27                    Financial Data Schedule




                                      21