****







**Form 10-K**























|Ohio                                        | 34-1747603            
|------------------------------------------- | ----------------------
|(State or other jurisdiction of             | (I.R.S. Employer      
|incorporation or organization)              | Identification Number)
|                                            |                       
|5025 Swetland Court, Richmond Heights, Ohio | 44143-1467            
|(Address of principal executive offices)    | (Zip Code)            
|                                            |                       





|                                                                                                               | Name of Each Exchange        
|-------------------------------------------------------------------------------------------------------------- | -----------------------------
|Title of Each Class                                                                                            | on Which Registered          
|                                                                                                               |                              
|Common Shares, without par value                                                                               | New York Stock Exchange, Inc.
|                                                                                                               |                              
|Depositary Shares, each representing                                                                           | New York Stock Exchange, Inc.
|1/10 of a Share of 9-3/4% Class A Cumulative                                                                   |                              
|Redeemable Preferred Shares, without par value                                                                 |                              
|                                                                                                              
|Securities registered pursuant to Section 12(g) of the Act: None                                              
|                                                                                                               |                              
|Indicate by check mark whether the registrant (1) has filed all reports required to be filed by  Section 13 or
|15(d) of the Securities Exchange Act of 1934 during the preceding 12 months  (or for such                     
|shorter period that the registrant was required to file such reports), and (2) has been                       
|subject to such filing requirements for the past 90 days. Yes [x] No [ ]                                      
|                                                                                                              
|Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not       
|contained herein, and will not be contained, to the best of registrant's knowledge,                           
|in definitive proxy or  information statements incorporated by reference in                                   
|Part III of this Form 10-K or any amendment to this Form 10-K. [ x ]                                          
|                                                                                                              
|The aggregate market value of the voting stock held by nonaffiliates                                          
|of the Registrant, was $145,083,200 as of March 9, 2001.                                                      
|                                                                                                              
|The number of Common Shares outstanding as of March 9, 2001 was 19,430,676.                                   
|                                                                                                              
|DOCUMENTS INCORPORATED BY REFERENCE                                                                           
|(To The Extent Indicated Herein)                                                                              
|                                                                                                              
|Portions of the Annual Performance Report to Shareholders for the                                             
|fiscal year ended December 31, 2000 (in Parts II, III and IV).                                                
|Notice of Annual Meeting and Proxy Statement for the Annual Meeting                                           
|of Shareholders to be held on May 15, 2001 (in Part III).                                                     

****



**TABLE OF CONTENTS**

**FORM 10-K ANNUAL REPORT**

**FOR THE YEAR ENDED DECEMBER 31, 2000**

|                                                                         | **Page**
|------------------------------------------------------------------------ | --------
|                                                                         |         
|******Item**                                                             | ****    
|**PART I**                                                               |         
|                                                                         |         
|1.	Business                                                              | 1       
|General Development of Business                                          | 1       
|MIGRA Merger                                                             | 1       
|Operations                                                               | 2       
|Financing and Leverage                                                   | 2       
|Registration Statements                                                  | 3       
|Industry Segments                                                        | 3       
|Market Rate                                                              | 3       
|Affordable Housing                                                       | 3       
|Rental Assistance Program                                                | 3       
|Mortgage Insurance Program                                               | 5       
|Management and Service Operations                                        | 5       
|Unallocated Corporate Overhead                                           | 5       
|Income Taxes                                                             | 5       
|Competitive Conditions                                                   | 5       
|Customers                                                                | 6       
|Employees                                                                | 6       
|Available Information                                                    | 6       
|Reports to Security Holders                                              | 6       
|2.	The Properties                                                        | 6       
|Company's Portfolio                                                      | 6       
|Noteholder Interest                                                      | 8       
|Indebtedness Encumbering the Properties                                  | 8       
|3.	Legal Proceedings                                                     | 8       
|4.	Submission of Matters to a Vote of Security Holders                   | 9       
|                                                                         |         
|**PART II**                                                              |         
|                                                                         |         
|5.	Market for Registrant's Common Equity and Related Stockholder Matters | 10      
|6.	Selected Financial and Other Data                                     | 10      
|7.	Management's Discussion and Analysis of Financial                     |         
|Condition and Results of Operations                                      | 13      
|7A.	Quantitative and Qualitative Disclosures About Market Risk           | 30 & 32 
|8.	Financial Statements and Supplementary Data                           | 32      
|9.	Changes and Disagreements with Accountants                            |         
|on Accounting and Financial Disclosure                                   | 32      
|                                                                         |         
|**PART III**                                                             |         
|                                                                         |         
|10.	Directors and Executive Officers of the Registrant                   | 33      
|11.	Executive Compensation                                               | 35      
|12.	Security Ownership of Certain Beneficial Owners and Management       | 35      
|13.	Certain Relationships and Related Transactions                       | 35      
|                                                                         |         
|*Glossary*                                                               | 36      
|                                                                         |         
|**PART IV**                                                              |         
|                                                                         |         
|14.	Exhibits, Financial Statement Schedules                              | 38      
|and Reports on Form 8-K                                                  |         

See "Glossary" for the definitions of certain capitalized terms used in this Form 10-K.



**Item 1.  Business**

***GENERAL DEVELOPMENT OF BUSINESS*.**Associated Estates Realty Corporation ("AERC"
or the "Company") is a self-administered and self-managed equity real estate investment trust ("REIT").
The Company was formed in July 1993 to continue the business of the Associated Estates Group
("AEG") which was then in the business of acquiring, developing and operating multifamily assets.
AERC became a publicly traded company through an initial public offering ("IPO"), of its common shares
in November 1993 and is currently traded on the New York Stock Exchange ("NYSE") under the ticker
symbol "AEC".

The Company is a fully integrated multifamily real estate company engaged in property
acquisition, advisory, development, management, disposition, operation and ownership activities.  The
Company owns substantially all of the economic interest in four corporations which provide management
and other services for the Company and third parties ("Service Companies").  The Company currently
owns properties and/or operates properties in 14 states across the United States.  The Company's
portfolio currently consists of a total of 136 properties of which 82 (69 Market Rate properties and 13
Affordable Housing properties) are owned, directly or indirectly, by the Company or by a subsidiary of the
Company; eight properties in which the Company is a joint venture partner (one Market Rate property
66.67% owned; three Market Rate properties 33.33% owned; two Market Rate properties 50.0% owned,
one Affordable Housing property 50.0% owned and one Market Rate property 49.0% owned) and 46
non-owned properties (of which one is a commercial property) managed by the Company or one of its
subsidiaries.  (Reference is made to the Company's Portfolio summary included in Item 2).  MIG II Realty
Advisors, Inc. ("MIG") provides asset management services for 21 of the 46 non-owned properties and
an additional seven non-managed properties, six of which are commercial properties.  The consolidated
financial statements of the Company include the accounts of the Company, all subsidiaries, all qualified
REIT subsidiaries, which include but are not limited to, separate legal entities that were formed in
connection with the project specific, nonrecourse mortgage refinancing for which records, books of
accounts and depository accounts must be maintained that are separate and apart from any other
person or entity; the Service Companies, a limited partnership 66.67% owned by the Company and an
Operating Partnership structured as a DownREIT of which an aggregate 80.0% is owned by the
Company.

*MIGRA Merger:*  On June 30, 1998, MIG Realty Advisors, Inc. ("MIGRA") merged with the
Company.  The Company acquired MIGRA's property management and advisory management
businesses with several institutional clients and the right to receive certain property and asset
management fees; acquisition, disposition and incentive fees; loan origination and consultation fees; and
mortgage servicing fees.  MIG (MIGRA's successor), is a registered investment advisor and functions as
a real estate advisor to pension funds.  Currently, MIG manages 21 properties owned by its pension fund
clients located in ten states (one in California; two in Colorado; seven in Florida; two in Georgia; three in
Illinois; one in Maryland; two in Michigan; one in Pennsylvania; one in Texas and one in Virginia).
During 1999 and 1998, MIG sold two properties located in Minnesota and Michigan and two properties in
California, respectively on behalf of its clients and recognized asset disposition fees of approximately
$467,500 and $247,000, respectively.  Additionally, during 2000 and 1999, MIG acquired eight
properties located in California, Colorado, Florida (2 properties), Georgia, Maryland, Michigan and
Virginia, respectively, on behalf of its clients and recognized asset acquisition fees of approximately
$351,600 and $233,700, respectively.  Also, MIG has acquired, on behalf of one of its pension fund
clients, one property in January, 2001.  During the fourth quarter of 1999, MIG earned an incentive fee of
$2.6 million related to the performance of an entire portfolio under a contract with an institutional client.

Additionally, in connection with the MIGRA merger, the Company acquired 13 multifamily
properties previously owned by MIGRA clients (three properties were owned in part by MIG Residential
Trust, the "MRT Properties"; eight properties were owned by MIG Residential REIT, Inc., the "MIG REIT
Properties"; one newly developed property and a property in development).  The acquisition of the
MIGRA advisory business, the MRT properties, the MIG REIT properties and the newly developed and
development properties is collectively referred to herein as the "MIGRA Related Transaction".  The
Company acquired interests in the partnerships that owned the development property and the newly
developed property, which were restructured in a DownREIT Operating Partnership.  MIG's asset and
property management, investment advisor and mortgage servicing operations, including those of the
prior MIGRA affiliates, are collectively referred to as the "MIGRA Operations".

*Operations:* The Company's primary business objectives are to increase distributions per share
and to increase the value of the Company's properties.  The Company's operating strategy is intended to
achieve these objectives.  One focus of this operating strategy is to maximize funds from operations
from the Company's properties, thereby enhancing their value through (i) rental rate increases to the
extent that competitive conditions permit; (ii) emphasis on expense controls consistent with the proper
maintenance of the properties; and (iii) strategic capital investments including changing the composition
of the portfolio in order to increase the competitive position of the portfolio.

The Company strives to maintain operating expenses at its properties at the lowest practical
levels while adequately maintaining its properties.  Maintenance and refurbishments are considered
critical to the long-term appreciation of the properties.  In 1999, the Company undertook a two and one-half year initiative to improve its properties in order to increase value and move price points.  During
1999, approximately $13.0 million in capital improvements were performed, approximately $5.0 million
of which was non-recurring investment capital.  After completing the capital expenditures in 1999, an
additional amount of approximately $5.0 million more was identified as capital in excess of routine
recurring capital (approximately $8.3 million per year).  During 2000, approximately $12.4 million was
spent on capital improvements of which approximately $4.0 million was investment capital.
Approximately $1.2 million of capital expenditures have been deferred into the first six months of 2001.

The Company's operating strategy also focuses on pursuing co-investment opportunities with
various investors, including pension fund clients, private organizations and high net worth investors.
These co-investments include both purchase and development opportunities with discretionary and non-discretionary funds.  Co-investment in the purchase of stabilized assets is expected to offer low volatility
and immediate income.  The development program allows the Company and its institutional partners to
seek the higher yields anticipated from development.  The expected equity investment is approximately
25-50% from the Company and approximately 50-75% from institutional investors.  The Company
believes this co-investment program allows it to increase operational efficiency in growth markets at a
more rapid pace than direct individual investments because it allows the Company to apply its expertise
in multifamily investment across both owned and advised assets.

The Company's operating strategy further focuses on the expansion of the portfolio of advised
clients.  The Company's investment capabilities are expanded by increasing assets acquired and
managed on behalf of pension fund clients.  Furthermore, the advised assets increase the operational
efficiency in markets where the Company may have limited penetration with its own assets.

*Financing and Leverage:*The Company believes that the use of borrowed funds in purchasing
properties can help to maximize the Company's investments.  As of December 31, 2000, conventional
mortgages payable, which totaled $542.8 million, were comprised of 58 non-recourse loans, each of
which was collateralized by the respective real estate and resident leases.  Federally insured mortgage
debt, which totaled $24.7 million, encumbered six of the properties at December 31, 2000 (including one
property that was funded through Industrial Development Bonds).  The Company's $12.0 million Line of
Credit is secured by two properties and the Company's $20.0 million revolving line of credit is secured by
one property.  The borrowings on the $20.0 million revolving line of credit is presently restricted up to an
amount not to exceed $12.6 million.  The remaining $7.4 million will be available upon completion of
certain requirements.  (See Note 7 of the Notes to the Financial Statements presented in Part II, Item 8
of this report.)

Additionally, the Company had two Medium Term Notes outstanding with a combined balance of
$709,000 at December 31, 2000. Both of these notes are unsecured.

*Registration Statements:*  The Company has a shelf registration statement on file with the
Securities and Exchange Commission relating to the proposed offering of up to $368.8 million of debt
securities, preferred shares, depositary shares, common shares and common share warrants.  The total
amount of the shelf filing includes a $102.5 million MTN Program of which MTN's totaling $40.0 million
have been issued leaving $62.5 million available.

***INDUSTRY SEGMENTS****.*The Company has four reportable segments:  (1) Market Rate
multifamily properties, (2) Affordable Housing multifamily properties, (3) Management and Service
Operations and (4) Unallocated Corporate Overhead.  The Company has identified these segments
because this discrete information is the basis upon which management makes decisions regarding
resource allocation and performance assessment.  All of the Company's segments are located in the
United States.  The Company evaluates the performance of its segments and allocates resources to
them based on Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA").  EBITDA
should not be considered as an alternative to net income [determined in accordance with Generally
Accepted Accounting Principles ("GAAP")] as an indicator of the Company's financial performance or
cash flow from operating activities (determined in accordance with GAAP) or as a measure of the
Company's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company's
needs.  (See Note 19 of the Notes to the Financial Statements presented in Part II, Item 8 of this report
for the segment financial information.)

*Market Rate:*The Market Rate properties are same store conventional multifamily residential
properties and the congregate care facilities [the operations of which are not subject to regulation by
U.S. Department of Housing and Urban Development ("HUD")] and properties acquired or disposed of
within one year.

*Affordable Housing:*The Affordable Housing properties are multifamily properties for which the
rents are subsidized and certain aspects of the operations are regulated by HUD pursuant to Section 8
of the National Housing Act of 1937.  The following summary of the rental assistance and/or the
mortgage insurance programs are qualified in their entirety by reference to the applicable Federal
statutes and the regulations promulgated thereunder.  There can be no assurance that the terms of such
programs will not change or that any such changes will not be detrimental to the Company.

*Rental Assistance Program:*  The Company currently is entitled to receive rental
assistance subsidies from HUD under Section 8 of the United States Housing Act of
1937, as amended (the "Rental Assistance Program").  Approximately 92.4% of the total
Affordable Housing rental units are eligible to receive rental assistance.

The Rental Assistance Program is a federal rent subsidy program designed to
assist in making housing available to low and very low income persons and families.
Under the Rental Assistance Program, HUD will make monthly housing assistance
payments ("HAP Payments") to or for the account of the applicable Company subsidiary
with respect to Contract Units on behalf of persons and families meeting HUD eligibility
requirements ("Eligible Residents").  The amount of each monthly HAP Payment with
respect to each Contract Unit is equal to the rent (the "Contract Rent") agreed to by HUD
pursuant to the terms of a Housing Assistance Payments Contract (a "HAP Contract"),
less the rent payment payable by the Eligible Resident for such month.  An Eligible
Resident is required to make rent payments (including a reasonable allowance for the
cost of utilities paid by the resident) not exceeding 30% of the Eligible Resident's
adjusted income.  Thus, the total rental income payable to, or for the account of, the
applicable Company subsidiary with respect to each Affordable Housing Property is
equal to the rent paid by Eligible Residents and the HAP Payments actually paid by
HUD pursuant to the applicable HAP Contract.

Below is a table setting forth the current expiration dates of the HAP Contracts
and the HAP revenue recognized for the Company's Affordable Housing properties:

|                                           | **Final**      | **Revenue**    
|------------------------------------------ | -------------- | ---------------
|                                           | **Expiration** | **Recognized** 
|**Property**                               | **Date**       | **During 2000**
|                                           |                |                
|Ellet Development                          | December 2017  | $427,274       
|Hillwood I                                 | July 2016      | 497,390        
|Jennings Commons                           | November 2001  | 304,354        
|Lakeshore Village (50.0% Joint Venture)    | October 2002   | 730,483*       
|Puritas Place                              | September 2011 | 680,709        
|St. James (Riverview)                      | November 2009  | 467,701        
|Shaker Park Gardens II                     | March 2002     | 735,673        
|State Road Apartments                      | December 2016  | 362,442        
|Statesman II                               | November 2001  | 262,686        
|Sutliff Apartments II                      | November 2019  | 809,322        
|Tallmadge Acres                            | March 2002     | 663,462        
|The Woodlands of North Royalton (39 units) | March 2002     | 177,776        
|Twinsburg Apartments                       | June 2009      | 453,755        
|Village Towers                             | November 2009  | 445,645        
|West High Apartments                       | November 2001  | 499,148        

*Amount shown represents 100% payment; the Company's share was $365,241.

Contract Rents are adjusted at least annually in accordance with the annual
adjustment factor method.  "Contract Renewal Request Forms" must be submitted by
the Company 120 days prior to the HAP anniversary date to HUD (or its corresponding
contract agent) in order to renew the existing HAP contract.  Current options available to
the Company for the expiring HAP contracts are as follows: (i) renew at rents below
market comparisons for properties that have a mortgage; (ii) renew at current rents plus
an operating cost adjustment factor for properties without a mortgage; or, (iii) opt out of
the Section 8 program.  Opting out of the Section 8 program requires an additional one-year notice to HUD (or the contract agent) and the affected residents.

Additionally, HUD may permit special additional adjustments to reflect increases
in actual and necessary expenses of owning and maintaining Contract Units which result
from substantial general increases in real property taxes, utility rates, insurance or
similar costs, upon demonstration that such general cost increases are not adequately
compensated for by the annual adjustments.  Generally, these types of adjustments are
only permitted if current rents are below the fair market rent threshold.

The Company believes, that upon expiration of the contracts, the contracts will be
renewed, or the Company will enter into another government subsidized or mortgage
restructuring program, or that the properties will be operated as conventional, market-rate
properties.

*Mortgage Insurance Program:*The mortgage indebtedness encumbering three
of the Affordable Housing properties is insured by HUD pursuant to the mortgage
insurance program administered under Section 221(d)(4) of the National Housing Act.

Owners of projects financed by loans insured by HUD under the HUD programs
previously described are required to enter into Regulatory Agreements with HUD which
remain in effect so long as the mortgage loan on the property is insured or held by HUD.
Each wholly owned subsidiary of the Company that benefits from a government program
has entered into a separate Regulatory Agreement in connection with the Property
owned by it.  The Regulatory Agreements contain certain covenants that restrict the
operation of the subject Properties.

*Management and Service Operations:*The Management and Service Operations provide
management and advisory services to the Market Rate and Affordable Housing properties which are
owned by the Company, as well as to clients and properties that are not owned, but are managed by the
Company.



*Unallocated Corporate Overhead:*The Unallocated Corporate Overhead segment was
established to better capture costs not specifically allocated to an individual segment and to isolate these
costs from the third party Management and Service Operations.

*Income Taxes:* The Company has elected to be taxed as a REIT under Sections 856 through
860 of the Internal Revenue Code of 1986, as amended, commencing with its taxable year ended
December 31, 1993.  REITs are subject to a number of organizational and operational requirements
including a requirement that 95.0% (90.0% after December 31, 2000) of the income that would otherwise
be considered as taxable income be distributed to shareholders.  Providing the Company continues to
qualify as a REIT, it will generally not be subject to a federal income tax on net income.  However,
certain of the Company's Service Companies may be subject to federal income tax.

On December 17, 1999, as part of a larger bill, the President signed into law the REIT
Modernization Act ("RMA").  Effective beginning January 1, 2001, the RMA has amended the tax rules
relating to the composition of a REIT's assets.  Under prior law, a REIT was precluded from owning
more than 10.0% of the outstanding voting securities of any one issuer, other than a wholly owned
subsidiary or another REIT.  Beginning in 2001, a REIT will remain subject to this current restriction and
will also be precluded from owning more than 10.0% of the value of all securities of any one issuer.

As an exception to this prohibition, a REIT will be allowed to own up to 100% of the securities of
a taxable REIT subsidiary ("TRS") that can provide non-customary services to REIT tenants and others
without disqualifying the rents that a REIT receives from its tenants.  However, no more than 20.0% of
the value of a REIT's total assets can be represented by securities of one or more TRS's.  The amount
of interest and other expenses from a TRS to a REIT will be limited to ensure that a TRS is subject to an
appropriate level of corporate tax.  The new 10.0% asset test will not apply to certain arrangements
(including third party subsidiaries) in place on July 12, 1999, provided that a subsidiary does not engage
in a "substantial new line of business" or acquire any "substantial asset", and a REIT does not acquire
any new securities in the subsidiary.  Under the RMA, a third party subsidiary will be able to convert tax
free into a TRS.  The Company intends to elect TRS status for all of its preferred stock subsidiaries for
2001.

*Competitive Conditions:*The following paragraphs may contain forward-looking statements
based on current judgments and current knowledge of management, which are subject to certain risks,
trends and uncertainties that could cause actual results to vary from those projected.  Accordingly,
readers are cautioned not to place undue reliance on forward-looking statements.  These forward-looking statements are intended to be covered by the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995.  Investors are cautioned that the Company's forward-looking statements
involve risks and uncertainties, including without limitation, changes in economic conditions in the
markets in which the Company owns properties, risks of a lessening of demand for the properties owned
by the Company, changes in government regulations affecting the Affordable Housing properties,
expiring HAP contracts, loss of contracts relating to third party management and advisory business, and
expenditures that cannot be anticipated such as utility rate and usage increases, unanticipated repairs,
additional staffing, insurance increases and real estate tax valuation reassessments.

Given the Midwestern concentration of the Market Rate portfolio, management anticipates that
the Market Rate rental growth for existing assets will be a modest 2.5% over the next twelve months.
General market expectations for locations where the Company has significant concentrations are as
follows: Columbus, Ohio is a dynamic market with growth in both employment and construction;
Cleveland, Ohio continues to exhibit stability; Michigan markets show minor signs of a slowing economy
but modest new supply; Indianapolis, Indiana is a dynamic market similar to Columbus; Washington,
D.C. and South Florida are in equilibrium with significant additions to employment and multifamily
supply; and Orlando, Florida and Atlanta, Georgia continue to perform well in spite of significant
construction.

*Customers:*The business of the Company taken as a whole is not dependent upon any single
customer or a small number customers.

*Employees:*The Company has approximately 984 employees; approximately 120 of whom are
located at the Company's headquarters.  The Company's headquarters is located at 5025 Swetland
Court in Richmond Heights, Ohio.  The headquarters is comprised of one office building of
approximately 41,000 square feet and an adjacent  3.7 acre parcel of land for further development or
expansion, all of which are owned by the Company subject to a ground lease.

***AVAILABLE INFORMATION****.*  The Company's SEC filings may be read and copied at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.  20549.  The public may also
obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  Additionally, the Company's filings can be accessed from the SEC's Internet site at
http://www.sec.gov or from the Company's Internet site at http://www.aecrealty.com.

***REPORTS TO SECURITY HOLDERS****.*The Company issues annual reports to its security
holders which contain financial statements.

**Item 2.  The Properties**



***COMPANY'S PORTFOLIO****:*The following table represents the Company's current portfolio
which consists of properties owned, directly or indirectly, by the Company or by a subsidiary of the
Company, properties in which the Company is a joint venture partner and properties managed by the
Company or one of its Service Companies.

|                                                  | **Total Number**  | **Total Number**
|------------------------------------------------- | ----------------- | ----------------
|**100% Owned by AERC:**                           | **of Properties** | **of Units**    
|Market Rate Properties:                           |                   |                 
|Arizona                                           | 1                 | 204             
|Florida                                           | 3                 | 1,128           
|Georgia                                           | 2                 | 706             
|Indiana                                           | 3                 | 836             
|Maryland                                          | 3                 | 668             
|Michigan                                          | 11                | 2,880           
|North Carolina                                    | 1                 | 276             
|Ohio*                                             | 43                | 8,534           
|Ohio-66.67% Joint Venture                         | 1                 | 320             
|Pennsylvania                                      | 1                 | 468             
|Texas                                             | 1                 | 104             
|Total Market Rate Properties                      | 70                | 16,124          
|Affordable Housing Properties - Ohio              | 13                | 1,335           
|                                                  |                   |                 
|**Total Properties Included In The Consolidated** |                   |                 
|**Financial Statements Of AERC**                  | **83**            | **17,459**      
|                                                  |                   |                 
|**Joint Ventures:**                               |                   |                 
|33.33% owned by AERC-Market Rate - Ohio           | 3                 | 2,447           
|50.00% owned by AERC-Market Rate - Ohio           | 2                 | 416             
|50.00% owned by AERC-Affordable Housing - Ohio    | 1                 | 108             
|49.00% owned by AERC-Market Rate-Georgia          | 1                 | 308             
|**Total Joint Ventures**                          | **7**             | **3,279**       
|                                                  |                   |                 
|**AERC Managed Properties:**                      |                   |                 
|Affordable Housing - Ohio                         | 7                 | 1,165           
|                                                  |                   |                 
|**AEMC Managed Properties:**                      |                   |                 
|Affordable Housing - Ohio                         | 17                | 3,232           
|Commercial - Ohio                                 | 1                 | 269,716 sq. ft. 
|Total AEMC Managed                                | 18                |                 
|                                                  |                   |                 
|**MIG Managed Properties:**                       |                   |                 
|Market Rate Properties:                           |                   |                 
|California                                        | 1                 | 272             
|Colorado                                          | 2                 | 680             
|Florida                                           | 7                 | 2,311           
|Georgia                                           | 2                 | 830             
|Illinois                                          | 3                 | 1,042           
|Maryland                                          | 1                 | 256             
|Michigan                                          | 2                 | 681             
|Pennsylvania                                      | 1                 | 396             
|Texas                                             | 1                 | 256             
|Virginia                                          | 1                 | 248             
|Total MIG Managed                                 | 21                | 6,972           
|**Total Managed Properties**                      | **46**            | **11,369**      
|**Total Company Portfolio**                       | **136**           | **32,107**      
|                                                  |                   |                 
|                                                  |                   |                 
|                                                  | **Location**      | **Units**       
|**Construction Projects:**                        | ****              |                 
|Owned                                             |                   |                 
|Village at Avon-Phase II                          | Avon, OH          | 148             
|Boynton Beach Land                                | Boynton Beach, FL | -               
|                                                  |                   | **148**         
|Joint Ventures                                    |                   |                 
|Berkley Manor (49.00%)                            | Cranberry Twp, PA | 252             
|Idlewylde/Boggs Road-Phase II (49.00%)            | Atlanta, GA       | 535             
|                                                  |                   | **787**         
|Total Construction Projects                       |                   | **935**         
|                                                  |                   |                 
|**Undeveloped Land Parcels:**                     |                   | **Acres**       
|Aspen Lakes Land                                  | Grand Rapids, MI  | 19.5            
|Landings at the Preserve Land                     | Battle Creek, MI  | 4.3             
|Westlake Land                                     | Westlake, OH      | 39.0            
|Wyndemere Land                                    | Franklin, OH      | 10.0            
|Total Undeveloped Land Parcels                    |                   | **72.8**        

** Included in totals are three Market Rate Properties which were sold December 31, 1999.  These sales were not recognized for GAAP purposes  and
accordingly, the Company's earnings were not impacted for GAAP reporting.  Although the Company sold these properties to Ohio Residential
Investment, LLC on December 31, 1999, the Company continues to report the properties as if no sale occurred.  This treatment is required by GAAP
reporting.*

***To Be Determined.*

*Noteholder Interest:*  Upon closing of the IPO, the Company acquired a noteholder interest in a
Market Rate property, in which one of the principals of the Company has a general partnership interest.
Since 1984, the property has been unable to generate sufficient cash flow to meet the scheduled interest
payments under these notes.  The noteholder is entitled to substantially all cash flows from operations.
The cumulative unpaid debt service on the notes is greater than nine years of aggregate principal
amortization and interest.

*Indebtedness Encumbering the Properties:*The Company financed and, in many cases,
refinanced the acquisition, development and rehabilitation of its properties with a variety of sources of
mortgage indebtedness.  Certain of the mortgage indebtedness is insured by HUD under programs
administered pursuant to Section 221(d)(4) of the National Housing Act.  (Reference is made to Affordable
Housing in Item 1).  Currently, the Company has 66 properties (64 Market Rate properties, one Affordable
Housing property and one which is a 66.67% owned joint venture) which are encumbered and 17
properties (five Market Rate properties and 12 Affordable Housing properties) which are unencumbered.

**Item 3.  Legal Proceedings**

Except as provided below, there are no material pending legal proceedings to which the
Company or any of its Subsidiaries or Service Companies is a party or of which any of their properties is
subject that is required to be reported pursuant to Item 103 of Regulation S-K.

On January 25, 2000, Associated Estates Management Company ("AEMC") filed suit in the
Cuyahoga County, Ohio Court of Common Pleas against Euclid Medical and Commercial Arts, an Ohio
limited partnership and its general partner, Metro City No. 1, an Ohio general partnership, seeking
damages in excess of $729,000.  Euclid Medical and Commercial Arts formerly owned the Euclid
Medical and Office Building located in Euclid, Ohio.  AEMC was the property manager of that property
until on or about March 23, 1999.  Metro City No. 1 is 56.0% owned by the Company's Chairman of the
Board and CEO, his wife and his brothers-in-law, one of whom is a director of the Company.  In the
normal course of business, the Company had followed a practice for many years of advancing funds on
behalf of, or holding funds for the benefit of, affiliates, which owned real estate properties managed by
the Company.  Euclid Medical and Office Building was one of those properties for which the Company so
advanced funds.  The suit seeks reimbursement for the funds advanced by the Company for the benefit
of this property.  Metro City No. 1 made a capital call to its partners requesting funds to pay this
obligation.  The Chairman of the Board, his wife and brothers-in-law have paid the Company their
proportionate share of the capital call; however, the remaining non-affiliated partners of Metro City No. 1
have refused to do so.  The Company believes the recorded amount of the receivable is stated at its net
realizable value.

A lawsuit is pending in the Harris County, Texas district court against MIG Realty Advisors, Inc.
(MIG's predecessor company) involving a claim for contribution and indemnity arising out of MIG Realty
Advisors, Inc. having served as an investment advisor to an advisory client in connection with the
acquisition of an apartment project located in Houston, Texas.  On or about December 30, 1998, the
advisory client that acquired the property filed suit against the seller, the consulting engineer who
performed the engineering due diligence and others seeking damages for defective conditions
discovered at the property that were allegedly concealed by the seller and not discovered by the
consulting engineer during the pre-purchase due diligence investigation conducted by the engineer.  The
consulting engineer filed a third party claim against MIG Realty Advisors, Inc., alleging that MIG Realty
Advisors, Inc. was responsible for the conduct of the due diligence investigation and consequently MIG
Realty Advisors, Inc., rather than the engineer was responsible for any damages suffered by the
advisory client.  The third party complaint does not specify the amount of damages being claimed, but
rather seeks contribution and indemnity for any judgment rendered against the consulting engineer
arising out of the complaint against it filed by the advisory client.  However, these potential claims may
be approximately $9.0 million.  The Company is vigorously defending against the claims brought by the
consulting engineer in the third party complaint and cannot predict the final outcome of this dispute.

**Item 4.  Submission of Matters to a Vote of Security Holders**

None

**PART II**

**Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters**

The following table shows the high and low closing sale prices of the Company's common
shares on the New York Stock Exchange (the "NYSE") for each quarter in 2000 and 1999 and the
dividends declared per common share with respect to each such quarter.

|               |             | Dividends Declared
|-------------- | ----------- | ------------------
|               | Price Range | Per Share         
|               | 2000        | 1999              
|               | High        | Low               
|               |             |                   
|First Quarter  | $9.56       | $8.06             
|Second Quarter | $8.94       | $6.44             
|Third Quarter  | $8.25       | $7.13             
|Fourth Quarter | $8.75       | $7.81             
|               |             |                   

The number of holders of record of the Company's common shares at December 31, 2000 was
795.

The Company anticipates that dividends will be paid quarterly using net cash provided by
operations.

The Company maintains a dividend reinvestment plan under which shareholders may elect to
reinvest their dividends automatically in common shares of the Company.  Under the plan, the plan
agent purchases common shares in the open market on behalf of participating shareholders.

**Item 6.  Selected Financial and Other Data**

The following tables set forth selected financial and other data for the Company on a
consolidated basis.  The historical financial information contained in the tables has been derived from
and should be read in conjunction with (i) the financial statements and notes thereto of the Company
and (ii) Management's Discussion and Analysis of Financial Condition and Results of Operations of the
Company both included elsewhere herein.

|**Associated Estates Realty Corporation**                          |             |              |              |             
|------------------------------------------------------------------ | ----------- | ------------ | ------------ | ------------
|*(Dollars in thousands except per share*                           |             |              |              |             
|*amounts and average monthly rental revenue)*                      |             |              | (e)          | (e)         
|**                                                                 | 2000        | 1999         | 1998         | 1997        
|**Operating Data:**                                                |             |              |              |             
|***Revenues*:**                                                    |             |              |              |             
|Rental                                                             | $144,099    | $143,137     | $132,514     | $101,640    
|Property and asset management, and acquisition and                 |             |              |              |             
|disposition fees                                                   | 8,120       | 10,919       | 6,200        | 3,752       
|Painting services                                                  | 1,531       | 1,524        | 1,606        | 1,664       
|Other                                                              | 3,356       | 2,975        | 2,479        | 1,754       
|Total revenues                                                     | 157,106     | 158,555      | 142,799      | 108,810     
|                                                                   |             |              |              |             
|***Expenses and charges*:**                                        |             |              |              |             
|Property operating and maintenance expenses                        |             |              |              |             
|(before depreciation and amortization)                             | 64,108      | 64,667       | 58,736       | 44,994      
|Painting services                                                  | 1,558       | 1,435        | 1,617        | 1,492       
|Preliminary project costs                                          | -           | -            | 298          | 310         
|General and administrative                                         | 14,327      | 16,170       | 10,217       | 6,085       
|Write-off of software development costs                            | -           | -            | 817          | -           
|Depreciation and amortization                                      | 35,479      | 35,146       | 24,899       | 19,266      
|Default waiver fee                                                 | -           | -            | 395          | -           
|Interest expense                                                   | 43,640      | 38,264       | 29,050       | 19,144      
|Total expenses and charges                                         | 159,112     | 155,682      | 126,029      | 91,291      
|                                                                   |             |              |              |             
|(Loss) income from operations                                      | (2,006)     | 2,873        | 16,770       | 17,519      
|Equity in net (loss) income of joint ventures                      | (164)       | 585          | 445          | 561         
|**(Loss) income before gain on disposition of properties**         |             |              |              |             
|**and land, net, minority interest expense, extraordinary item**   |             |              |              |             
|**and cumulative effect of a change in accounting principle**      | (2,170)     | 3,458        | 17,215       | 18,080      
|Gain on disposition of properties and land, net                    | 7,512       | 19,630       | 503          | 1,608       
|Minority interest expense                                          | (400)       | (241)        | (78)         | -           
|**Income before extraordinary item and cumulative effect of**      |             |              |              |             
|**a change in accounting principle**                               | 4,942       | 22,847       | 17,640       | 19,688      
|Extraordinary item                                                 | -           | (3,457)      | (125)        | 1,024       
|Cumulative effect of a change in accounting principle              | -           | 4,319        | -            | -           
|**Net income**                                                     | $ 4,942     | $ 23,709     | $  17,515    | $  20,712   
|**Net (loss) income applicable to common shares**                  | $   (542)   | $ 18,225     | $  12,030    | $  15,228   
|****                                                               |             |              |              |             
|**Earnings per common share  - Basic:**                            |             |              |              |             
|(Loss) income before extraordinary item and cumulative effect      |             |              |              |             
|of a change in accounting principle                                | $    (.03)  | $       .79  | $        .61 | $        .88
|Net (loss) income                                                  | $    (.03)  | $       .83  | $        .61 | $        .94
|Weighted average number of common shares outstanding               | 19,733      | 22,051       | 19,865       | 16,198      
|**Earnings per common share - Diluted:**                           |             |              |              |             
|(Loss) income before extraordinary item and cumulative effect      |             |              |              |             
|of a change in accounting principle                                | $     (.03) | $        .79 | $        .60 | $        .88
|Net (loss) income                                                  | $     (.03) | $        .83 | $        .60 | $        .94
|Weighted average number of common shares outstanding               | 19,733      | 22,053       | 20,060       | 16,216      
|                                                                   |             |              |              |             
|**Dividends declared per common share**                            | $    1.25   | $    1.125   | $      1.86  | $      1.86 
|                                                                   |             |              |              |             
|***Other data*:**                                                  |             |              |              |             
|Cash flow provided by (used in):                                   |             |              |              |             
|Operating activities                                               | $ 31,557    | $ 40,130     | $   41,663   | $   29,936  
|Investing activities                                               | $(16,832)   | $  (9,140)   | $(151,638)   | $(131,908)  
|Financing activities                                               | $(50,545)   | $   4,360    | $ 108,758    | $ 102,936   
|Funds From Operations (a)                                          | $ 24,963    | $ 29,291     | $   37,076   | $   34,649  
|                                                                   |             |              |              |             
|Earnings before interest, taxes, depreciation and amortization (b) | $ 78,735    | $ 78,856     | $   72,911   | $  58,495   
|Total properties (at end of period) - includes joint ventures      | 90          | 93           | 101          | 88          
|                                                                   |             |              |              |             
|Total multifamily units (at end of period)                         | 20,738      | 20,103       | 21,558       | 17,600      
|**Same Store Portfolio:**                                          |             |              |              |             
|Average monthly rental revenue per multifamily unit                | $     644   | $      633   | $       593  | $       587 
|Economic Occupancy (c)                                             | 90.4%       | 92.8%        | 94.1%        | 94.0%       
|                                                                   |             |              |              |             

|                                          | 2000     | 1999     | 1998     | 1997     | 1996    
|----------------------------------------- | -------- | -------- | -------- | -------- | --------
|**Balance Sheet Data at December 31:**    |          |          |          |          |         
|Real estate and other fixed assets before |          |          |          |          |         
|accumulated depreciation                  | $926,782 | $937,289 | $955,671 | $646,499 | $513,966
|Real estate and other fixed assets after  |          |          |          |          |         
|accumulated depreciation                  | 742,182  | 777,072  | 801,730  | 515,830  | 401,864 
|Total assets                              | 819,559  | 882,810  | 840,785  | 553,910  | 424,711 
|Total debt (d)                            | 568,177  | 579,186  | 503,905  | 318,170  | 217,813 
|Total shareholders' equity                | 196,456  | 238,182  | 259,188  | 181,158  | 158,016 

(a)	The Company considers Funds From Operations ("FFO"), as defined by the National Association
of Real Estate Investment Trusts ("NAREIT"), to be one of the measures of the performance of an
equity REIT.

Effective January 1, 2000, NAREIT has redefined FFO to include all non-recurring transactions,
except those that are defined as extraordinary under GAAP.  FFO is defined generally as net
income (loss) applicable to common shareholders, excluding gains (losses) on the disposition of
properties and extraordinary items under GAAP, adjusted for depreciation on real estate assets
and amortization of intangible assets and adding the Company's proportionate share of FFO of its
unconsolidated joint ventures.  The Company has adopted this new definition effective January 1,
2000 and accordingly, has restated prior periods FFO.  FFO does not represent cash generated
from operating activities in accordance with GAAP and is not necessarily indicative of cash
available to fund cash needs and should not be considered an alternative to net income as an
indicator of the Company's operating performance or as an alternative to cash flow as a measure
of liquidity.  Certain other real estate companies may define FFO in a different manner.

(b)	Management uses EBITDA as a measurement tool for the Company since it believes EBITDA is
the measure of performance most analogous to Net Operating Income.  Net Operating Income is
the customary measurement used in valuing real property, which comprises the majority of the
Company's asset base.  EBITDA does not represent cash generated from operating activities in
accordance with GAAP and is not necessarily indicative of cash available to fund cash needs and
should not be considered an alternative to net income as an indicator of the Company's financial
performance, cash flow from operating activities or as a measure of the Company's liquidity.

(c)	Economic Occupancy is calculated as the actual rent revenue divided by the total rent expected to
be earned based on the market rental rate for all units.

(d)	Amount excludes the Company's share of mortgage indebtedness relating to the unconsolidated
joint ventures of approximately $24,986, $17,249, $17,453, $17,752 and $17,969 at December 31,
2000, 1999, 1998, 1997 and 1996, respectively.

(e)	These amounts do not include an adjustment to reflect the change in the Company's accounting
policy for accounting for certain replacements and improvements which was effective January 1,
1999.  (See Note 20 to the financial statements.)

**Item 7.	Management's Discussion and Analysis of Financial Condition and Results of
Operations**

The following discussion should be read in conjunction with the financial statements and
notes thereto included in Part II, Item 8 of the Report on Form 10-K.  Historical results and percentage
relationships set forth in the Consolidated Statements of Income contained in the financial statements,
including trends which might appear, should not be taken as indicative of future operations.  This
discussion may also contain forward-looking statements based on current judgments and current
knowledge of management, which are subject to certain risks, trends and uncertainties that could cause
actual results to vary from those projected.  Accordingly, readers are cautioned not to place undue
reliance on forward-looking statements.  These forward-looking statements are intended to be covered
by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Investors are
cautioned that the Company's forward-looking statements involve risks and uncertainty, including
without limitation, changes in economic conditions in the markets in which the Company owns
properties, risks of a lessening of demand for the apartments owned by the Company, changes in
government regulations affecting the Affordable Housing properties, changes in or termination of
contracts relating to third party management and advisory business, expiring HAP contracts, and
expenditures that cannot be anticipated such as utility rate and usage increases, unanticipated repairs,
additional staffing, insurance increases and real estate tax valuation reassessments.

***Liquidity and Capital Resources***

The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Internal
Revenue Code of 1986, as amended, commencing with its taxable year ended December 31, 1993.
REITs are subject to a number of organizational and operational requirements including a requirement
that 95.0% (90.0% after December 31, 2000) of the income that would otherwise be considered as
taxable income be distributed to shareholders.  Providing the Company continues to qualify as a REIT, it
will generally not be subject to a federal income tax on net income.  However, certain of the Company's
Service Companies may be subject to federal income tax.

The Company expects to meet its short-term liquidity requirements generally through its net
cash provided by operations, secured borrowings and property sales proceeds.  The Company believes
that these sources will be sufficient to meet both operating requirements and the payment of dividends in
accordance with REIT requirements.  During 2001 and 2002, approximately $17.3 million and $6.1
million, respectively, of the Company's debt will mature.  The Company believes it has adequate
alternatives available to provide for its liquidity needs.

*Financing:*At December 31, 2000, the Company had 58 conventional mortgages payable
aggregating $542.8 million, each collateralized by the respective real estate and resident leases having
a book value of $665.3 million.  These nonrecourse project specific loans accrue interest at fixed rates
ranging from 7.37% to 9.63%.  Fifty-four of these loans encumber properties owned by qualified REIT
subsidiaries which are separate legal entities and maintain records, books of accounts and depository
accounts separate and apart from any other person or entity.

During 1999, the Company received gross proceeds of $525.3 million from these project
specific, nonrecourse mortgage loans collateralized by 55 properties owned by qualified REIT
subsidiaries, having a then net book value of $641.5 million.  The proceeds from these loans were used
to pay off the Company's floating rate unsecured line of credit facility, to pay down most of its Senior and
Medium-Term Notes and to increase the Company's cash balances.  These mortgage loan documents
require escrow deposits for taxes and replacement of project assets.  During 2000, one of these loans
with a balance of $7.1 million, was assumed by the buyer of the property securing the loan.  For further
information on this sale, see Note 2 to the financial statements included in Part II, Item 8 of this report.
At December 31, 2000, the weighted average maturity of the remaining 54 loans funded in 1999 was
8.8 years, and the weighted average interest rate was 7.66%.

*Cash Tender Offers for Unsecured Debt Securities:*  On October 21, 1999, the Company
commenced cash tender offers and concurrent consent solicitations for all of the Company's outstanding
unsecured debt securities.  The vote of the holders of a simple majority of the principal amount of
outstanding notes voting together as one class was required to obtain the requisite consents.  The initial
offer provided for a discount to par; however, by November 3, 1999, the Company had not received the
requisite consents.  On November 3, 1999, the Company notified the noteholders that it would tender the
notes for par including a consent fee of $25 per $1,000 of par value.  On November 19, 1999, all debt
securities tendered, representing Senior and Medium-Term Notes totaling $168.2 million in principal,
were accepted and constituted a majority of the Company's outstanding notes pursuant to the amended
terms of its cash tender offers and concurrent consent solicitations.  Accordingly, the Company and the
trustee for the notes executed a supplemental indenture containing the proposed amendments approved
by noteholders, which became effective upon acceptance by the Company for payment of all notes
validly tendered pursuant to the tender offers.  The Company funded the tender offers with project
specific, non-recourse loans from The Chase Manhattan Bank.  The loans were collateralized by
individual mortgages on 29 properties with gross proceeds of $205.0 million, with a weighted average
term of 10.6 years and a weighted average interest rate of 7.86%.  The net proceeds, after repayment of
certain outstanding indebtedness and transaction costs, were approximately $180.0 million. This new
structure is intended to give the Company more operating and financial flexibility than that available
under the indenture governing the notes.

Under the revised terms of the offers and solicitations, investors who tendered their securities
prior to the Consent Date received the revised consideration of $975 per $1,000 principal amount plus a
Consent Fee of $25 per $1,000 note; investors who tendered after that date received the new purchase
price but not the Consent Fee.  Investors who had previously validly tendered their notes received the
increased purchase price, as well as the Consent Fee.  In either event, accrued and unpaid interest was
paid up to, but excluding, the settlement date of the tender offers.

Upon completion of this transaction, the Company recognized an extraordinary charge of
approximately $1.6 million which represented a write off of deferred finance costs of $1.5 million,
transaction costs of approximately $700,000, approximately $106,000 of which represents a prepayment
penalty related to the payoff of a first mortgage loan and offset by a gain related to the tender of
approximately $700,000.

*Line of Credit*:  Prior to its termination in May 1999, the Company had available a $250.0 million
revolving credit facility (the "Line of Credit") which contained various restrictive covenants.  In May 1999,
the Company repaid all outstanding obligations under this Line of Credit through proceeds received from
financing project specific, nonrecourse mortgage loans and accordingly, terminated the facility.  The
Company recognized an extraordinary charge of $1.8 million which represents a $750,000 facility fee
charge, a $127,000 breakage fee, and a $932,000 write off of deferred finance costs related to the line
of credit facility.

On November 18, 1999, the Company obtained a $12.0 million secured line of credit facility (the
"Secured Line of Credit") which is secured by two of the Company's properties.  During 2000, the
Secured Line of Credit was increased to $20.0 million.  The facility was for a term of one year with a
maturity date of October 31, 2000.  On November 1, 2000, this facility was reduced to $12.0 million and
extended for one year with the new maturity date being October 31, 2001.  The Company's borrowings
under the Secured Line of Credit bear interest at a rate of, at the Borrower's option, either the Prime
Rate or LIBOR plus 2.0%.  This Secured Line of Credit is utilized by the Company to provide working
capital and for general corporate purposes.   At December 31, 2000 and 1999, there were no amounts
outstanding under this facility.

On July 20, 2000, the Company entered into a $20.0 million revolving line of credit, which is
secured by one of the Company's properties.  The borrowings are presently restricted up to an amount
not to exceed $12.6 million.  The remaining $7.4 million will be available upon completion of certain
requirements.  The facility is for a term of three years.  The Company's borrowings under this revolving
line of credit bear interest at a rate of LIBOR plus 1.5%.  This revolving line of credit is utilized by the
Company to provide working capital and for general corporate purposes.  At December 31, 2000, there
were no amounts outstanding under this facility.

*Senior and Medium-Term Notes:*  The Senior Notes issued during 1995 in the principal amounts
of $75.0 million and $10.0 million accrued interest at 8.38% and 7.10%, respectively, and were to mature
in 2000 and 2002, respectively.  Pursuant to the 1999 tender offer, as discussed above, the Company
paid off the $10.0 million Senior Note and paid down the $75.0 million Senior Note.  The balance of the
$75.0 million Senior Note, net of unamortized discounts, was $8.5 million at December 31, 1999.  This
senior note matured April 15, 2000.  In accordance with the terms of the note, on April 15, 2000, the
Company paid $8.9 million which represented the outstanding balance and all interest accrued thereon.

The Company had two Medium-Term Notes (the "MTN's") outstanding having an aggregate
balance of $709,000 at December 31, 2000 and 1999.  Pursuant to the tender offer during 1999, as
discussed above, the Company paid off eight and paid down two of the MTN's with an aggregate
payment of $91.8 million.  Additionally, the Company paid off a $20.0 million MTN that matured in
September 1999.  The two remaining MTN's have principal amounts of $604,000 and $105,000 and
bear interest at 7.33% and 6.88%, respectively, and mature in September 2001 and December 2004,
respectively.  The weighted average interest rate of the two MTN's was 7.26% at December 31, 2000
and 1999.

*Hedge Agreements:*  From time to time, the Company may enter into hedge agreements to
minimize its exposure to interest rate risks.   On February 25, 2000, the Company completed two interest
rate swaps.  The notional amounts of the swaps were approximately $10.6 million (which commenced
March 1, 2000) and $54.8 million (which commenced March 10, 2000).  The swaps amortized monthly in
accordance with the amortization of the hedged loans and were to expire upon maturity of the loans.
These swaps were executed to hedge the fair market value of five fixed rate loans.  On December 11,
2000, the Company executed termination agreements for both swaps and received termination
payments totaling $3.2 million, which will be amortized over the remaining terms of the two swap
agreements (May 2007 for the $10.6 million swap and October 2007 for the $54.8 million swap).  There
were no interest rate protection agreements outstanding as of December 31, 2000 or 1999.

*Secured Mortgages:* Seventeen (five Market Rate properties which refers to the Same Store and
Acquired/Disposed Property portfolios and 12 Affordable Housing properties) of the Company's 83 (69
Market Rate properties, 13 Affordable Housing properties and one 66.67% owned joint venture)
properties which are consolidated for reporting purposes were unencumbered at December 31, 2000
with annual EBITDA of approximately $6.8 million (approximately $1.5 million represents the Market
Rate properties and approximately $5.3 million represents the Affordable Housing properties) and a
historical gross cost basis of approximately $54.4 million (approximately $18.2 million represents the
Market Rate properties and approximately $36.2 million represents the Affordable Housing properties).
The remaining 66 of the Company's wholly owned properties (all of which are Market Rate properties
except one which is an Affordable Housing property and one which is a 66.67% owned joint venture),
have an historical gross cost basis of $887.3 million ($873.5 million represents the Market Rate
properties, $4.0 million represents the Affordable Housing property and $9.8 million represents the
66.67% owned joint venture) and secured property specific debt of $567.5 million (approximately $558.4
million relates to the Market Rate properties, $2.8 million relates to the Affordable Housing Property and
$6.3 million relates to the 66.67% owned joint venture) at December 31, 2000.  The Company's
proportionate share of the mortgage debt relating to the seven joint venture properties was $25.0 million
at December 31, 2000.  The weighted average interest rate on the secured, unsecured and the
Company's proportionate share of the joint venture debt was 7.74% at December 31, 2000.

*Guaranties:* From time to time, the Company guarantees debt and other obligations of certain
unconsolidated joint ventures.  The following guaranty obligations are currently outstanding.  The
Company has guaranteed repayment of a $30.0 million construction loan in connection with the
Company's Idlewylde Phase II joint venture development.  For further details, see discussion under
"Acquisitions, Development and Dispositions".  The Company has further guaranteed completion of
certain improvements totaling $1.8 million in connection with the refinancing of Americana Apartments, a
joint venture property located in Euclid, Ohio, which obligation is secured by a $1.8 million letter of credit.
The Company also has guaranty obligations under a $220,000 letter of credit for the purpose of
guarantying certain equity contributions required by the construction lender in connection with the
Company's Berkley Manor joint venture development.  For further details, see discussion under
"Acquisitions, Development and Dispositions".  The Company is obligated under a $407,000
performance bond to the City of Boynton Beach, Florida, which guarantees performance by a Company
subsidiary of certain improvements in connection with the Company's proposed Boynton Beach joint
venture development.  For further details, see discussion under "Acquisitions, Development and
Dispositions".

*Registration Statements:*  The Company has a shelf registration statement on file with the
Securities and Exchange Commission relating to the proposed offering of up to $368.8 million of debt
securities, preferred shares, depositary shares, common shares and common share warrants.  The total
amount of the shelf filing includes a $102.5 million MTN Program of which MTN's totaling $40.0 million
have been issued leaving $62.5 million available.

*Operating Partnership:*  In conjunction with the acquisition of the Operating Partnership, the
Company issued a total of 522,032 operating partnership units ("OP units").  The Company has the
option to redeem, in certain circumstances, the OP units for common shares exchangeable on a one-for-one basis, or the cash equivalent amount.  In August 2000, 19,662 of the OP units were exchanged for
cash in the amount of $144,270, which represented a value of $7.34 per unit.  These units had a
recorded amount of $435,874 when issued.  The difference of the cash paid and the recorded amount
was $291,604 which reduced the recorded amount of the underlying real estate.  The OP unitholders are
entitled to receive cumulative distributions per OP unit equal to the per share distributions on the
Company's common shares.  The Company charged $400,071, $241,310 and $78,706 to "Minority
interest in operating partnership" in the Consolidated Statements of Income relating to the Class A
unitholders allocated share of net income for the years ended December 31, 2000, 1999 and 1998,
respectively.

*Merger Contingent Consideration:*  Subject to certain conditions, adjustments and achievements
of specified performance goals, the MIGRA Stockholders' Conversion Rights entitled the MIGRA
Stockholders to receive (a) on the second issuance date (June 30, 1999), an amount of $872,935
payable in common shares of the Company using the average closing price of the common shares for
the 20 trading days immediately preceding June 30, 1999, (74,994 common shares at a price of $11.64
per share) subject to certain price adjustments as provided for in the Merger Agreement and (b) on the
third issuance date (June 30, 2000) $1,482,797 worth of common shares of the Company of which
$893,340 was based on the average closing price of the common shares for the 20 trading days
immediately preceding the date the consideration was paid (127,620 common shares were issued at a
price of $7.00 per share) and $589,457 was based on a price of $6.60 (89,291 common shares were
issued).  The payment of the $1.5 million related to the third issuance date increased the Company's
recorded intangible asset.  This third anniversary payment represents the final payment pursuant to the
merger agreement.

In October 1999, the Company settled some of the purchase price adjustments relating to the
assets and liabilities (as defined in the related agreement) assumed in connection with the MIGRA
merger.  The MIGRA merger agreement provided that such adjustment would be determined on the
one-year anniversary of the merger.  Accordingly, the Company paid a net of approximately $1.3 million
with respect to the purchase price adjustment.  The consideration paid was funded by proceeds from the
sale, at par (including accrued interest) of a note receivable to affiliates (the former MIGRA
shareholders).  This purchase price adjustment increased the Company's recorded amount of the
intangible asset initially recorded at the date of the merger.

***Acquisitions, Development and Dispositions*****

Any future multifamily property acquisitions or developments would be financed with the most
appropriate sources of capital, which may include the assumption of mortgage indebtedness, bank and
other institutional borrowings, through the exchange of properties, undistributed earnings, secured debt
financings, or the issuance of shares or units exchangeable into common shares.

*Acquisitions:*  In May 2000, the Company and one of MIG's advisory clients completed a joint
venture agreement for a newly developed 308 unit Market Rate property and the adjacent land located
in Atlanta, Georgia.  The Company contributed land of $4.6 million and cash of $795,000 for its
proportionate share in the joint venture.  The contributed land is a 48 acre parcel of land on which a 535
unit multifamily Market Rate property is being developed by the joint venture.  (See Development below.)
At December 31, 2000, the joint venture had real estate assets of $29.2 million and a mortgage payable
of $17.2 million.  The Company owns 49.0% of this joint venture.

Effective December 1, 2000, the Company bought out the two partners in a joint venture
property, in which the Company was a 33.33% partner and became the 100% owner.  The property
which is located in Ohio has 126 units and real estate assets of $1.7 million at December 31, 2000.

*Development:*During 2000, the Company completed the construction and leasing of 268 units at
two of the Company's development properties.  During 1999, the Company completed the construction
and leasing of 576 units at three of the Company's development properties.  Additionally, the Company
owns four tracts of undeveloped land consisting of approximately 73 acres of land.  The Company is
currently in the process of constructing or planning the construction of an additional 935 units as follows:

|                                               |                    | Additional | Anticipated
|---------------------------------------------- | ------------------ | ---------- | -----------
|Property                                       | Location           | Units      | Completion 
|Village at Avon-Phase II                       | Avon, Ohio         | 148        | 2001       
|Boynton Beach Land                             | Boynton Beach, FL  | -          | TBD        
|Berkley Manor (49.0% owned Joint Venture)      | Cranberry Twp., PA | 252        | 2002       
|Idlewylde-Phase II (49.0% owned Joint Venture) | Atlanta, Georgia   | 535        | 2002       
|                                               |                    | 935        |            

In October 2000, the Company executed a joint venture agreement to develop a 252 unit
multifamily Market Rate property located in Cranberry Township, Pennsylvania.  The Company
contributed land with an estimated fair value of $2.0 million and received a capital credit of $152,000 for
its proportionate share in the joint venture.  The Company acquired this 24 acre parcel of land during
1999.   At the time of transfer, the land had a book value of $3.1 million, consequently, the Company
recorded a loss of $990,000 in connection with this transaction which is included in "Gain on disposition
of properties and land, net", in the Consolidated Statements of Income.  The 252 unit project to be built
on the land is scheduled to be completed in 2002.  At December 31, 2000, the joint venture had real
estate assets of $3.0 million and borrowings of $814,000.  The Company owns 49.0% of this joint
venture.

On November 30, 2000, the Company completed the purchase of a 6.9 acre land parcel for $5.2
million.  This land parcel is located in Boynton Beach, Florida.  The Company is currently negotiating
with a third party to form a joint venture partnership to complete development of this project.  The
Company plans to develop a 229 unit multifamily Market Rate complex, 38 boat slips, a 6,700 square
foot restaurant, 11,240 square foot specialty retail space, 9,800 square foot office space and a 2-story
parking deck on this land.

In November 2000, the Company and its joint venture partner commenced construction of
Idelwylde Phase II, which will add an additional 535 apartment units to Idelwylde Apartments, located in
the Atlanta, Georgia market area.  The total capitalized cost of Phase II, when completed, is expected to
be approximately $43.1 million.  Funding for this project consists of a $30.0 million construction loan and
$13.1 million equity financing.  The Company has guaranteed repayment of the construction loan.  The
project is scheduled for completion in 2002.

*Potential Acquisitions:* The Company is actively pursuing co-investment opportunities with one
or more of MIG's advisory clients.  On January 17, 2001, the Company acquired on behalf of an advisory
client, a market rate multifamily property containing 319 units located in Florida.  The Company was
retained to provide property and asset management services.

*Advisory Acquisitions:*During 2000, MIG acquired five Market Rate multifamily properties
containing an aggregate of 1,664 units on behalf of its advisory clients and recognized asset acquisition
fees of approximately $351,600.  During 1999, MIG acquired three multifamily properties containing 938
units for certain advisory clients and recognized asset acquisition fees of approximately $233,700.  For
the properties acquired in 2000 and 1999, the Company and MIG were retained to provide asset and
property management services for these properties.

*Potential Dispositions:*The Company is marketing 17 properties of which contracts are pending
on five of them.  These 17 properties are comprised of three of its Market Rate joint venture properties,
one of its Affordable Housing properties and 13 Market Rate properties (nine located in Ohio and four
located in Michigan) which include the three properties discussed in "Dispositions".

In the short run, the sale of properties will likely result in a reduction in net income and portfolio
size for the Company, however, it is expected that the proceeds will either be redeployed into new
growth opportunities or the REIT will continue to alter its capital structure.  Investment alternatives are
chosen based on whether they are anticipated to be accretive to earnings per share in the long run.  The
proceeds from sales will be allocated to investment alternatives with the highest projected marginal
returns.

*Advisory Dispositions:*During 1999, MIG sold two multifamily properties on behalf of two
different pension fund clients.  The Company recognized asset disposition fees of approximately
$467,500 and management fees of approximately $304,290 for the year ended December 31, 1999.
Additionally, during the fourth quarter of 1999, the Company earned an incentive fee of $2.6 million
related to the performance of an entire portfolio under a contract with an institutional client.  There were
no dispositions in 2000 and as such no disposition fees earned in 2000.

*Dispositions:*During 1999, the Company sold eight operating properties for net cash proceeds
of $36.8 million, resulting in a gain of $19.6 million.  During 1999, these properties contributed
approximately $1.6 million to net income before extraordinary items and the cumulative effect of a
change in accounting principle. Net cash proceeds from the sale of five of the eight operating properties
of $13.4 million, were placed in a trust which restricted the Company's use of these funds for the
exclusive purchase of other property of like-kind and qualifying use.  The Company used $2.3 million of
the like-kind funds to acquire a 24 acre parcel of land during 1999.  The remaining net proceeds and
unutilized like-kind funds were used to pay the Company's dividend and pay down a $20.0 million
Medium-Term Note which matured in September 1999.  Rainbow Terrace Apartments, an Affordable
Housing property, was conveyed to HUD by deed in lieu of foreclosure of approximately $1.8 million,
resulting in a loss of approximately $67,000.

In addition, on December 31, 1999, the Company sold eight Market Rate properties located in
Ohio for an aggregate sales price of approximately $34.0 million.  To facilitate the sale, the Company
financed the sale with fixed rate debt maturing July 1, 2001.  Under the structure of the transaction, the
Buyer may put the properties back to the Company, after March 1, 2001 but before June 2, 2001, at a
price equal to their fair market value less outstanding indebtedness then owing on the purchase money
financing.  The Company had a corresponding option to repurchase the properties on the same
monetary basis at any time prior to December 31, 2000, which the Company elected not to exercise.
The sale transaction provided for the Company's continued management of those properties.  These
sales were not recognized for GAAP purposes until the seller financing was repaid.  During 2000, five of
these properties were sold in cash transactions for proceeds of $14.3 million, and accordingly, these five
property sales were recognized for GAAP purposes, and the resulting gain of $4.3 million was
recognized.  Additionally, a sixth property was sold for net cash proceeds of $2.2 million (an existing loan
of $7.1 million was assumed by the buyer), resulting in a gain of $4.2 million.  The net proceeds were
primarily used to purchase common shares of the Company and pay down outstanding balances on the
Company's two revolving lines of credit.  The three remaining properties at December 31, 2000 and all
eight properties at December 31, 1999 were classified as "Properties held for sale" in the Consolidated
Balance Sheets.  These three remaining properties are included in the 13 Market Rate properties
previously described in "Potential Dispositions".  These three properties generated approximately $1.5
million of net income during 2000.

*Management Contract Cancellation:*  During 2000, the Company's management contracts
associated with the following properties were terminated:

|Effective                   |            | Management          | Approximate        | Approximate       
|--------------------------- | ---------- | ------------------- | ------------------ | ------------------
|Date of                     | Management | Contract            | Management Fees    | Annualized Loss of
|Termination                 | Company    | Canceled            | Earned During 2000 | Management Fees   
|                            |            |                     |                    |                   
|**Market Rate Properties:** |            |                     |                   
|2/24/00                     | AEMC       | Brookview Commons   | $    1,300         | $  12,800         
|2/24/00                     | AEMC       | Devonshire          | $    1,000         | $    4,000        
|9/07/00                     | AEMC       | Richmond Park Apts. | $118,400           | $177,700          
|                            |            |                     |                    |                   
|**Commercial Properties:**  |            |                     |                   
|2/21/00                     | AEMC       | Mound Building      | $    1,000         | $  12,000         
|4/01/00                     | AEMC       | Cambridge Court     | $  18,800          | $  75,400         
|4/01/00                     | AEMC       | Eton Collection     | $    4,500         | $  18,000         

Additionally, the Company anticipates that the following management contracts on managed but
not wholly owned properties may be canceled primarily because of pending or proposed sales:

|Effective                          |            |                                           | Approximate       
|---------------------------------- | ---------- | ----------------------------------------- | ------------------
|Date of                            | Management | Managed                                   | Management Fees   
|Termination                        | Company    | Property                                  | Earned During 2000
|                                   |            |                                           |                   
|**Market Rate Properties:**        |            |                                          
|Undetermined                       | AERC       | Americana (33.33% Joint Venture)          | $135,200*         
|Undetermined                       | AERC       | Gates Mills Towers (33.33% Joint Venture) | $204,400*         
|Undetermined                       | AERC       | Watergate (33.33% Joint Venture)          | $240,800*         
|Undetermined                       | AERC       | College Towers (50.00% Joint Venture)     | $  86,300*        
|Undetermined                       | AERC       | Gates Mills III (66.67% Joint Venture)    | N/A               
|                                   |            |                                           |                   
|**Affordable Housing Properties:** |           
|3/08/01                            | AERC       | Jaelot                                    | $  88,800         
|3/31/01                            | AERC       | Spring Hill Villa                         | $  77,800         
|3/31/01                            | AEMC       | Warrensville Manor                        | $  49,000         
|                                   |            |                                          
|**Advisory Properties:**           |            |                                          
|01/02/01                           | MIG        | Park Place                                | $473,800**        
|01/25/01                           | MIG        | Kensington Square                         | $126,300          

*Net fees.

**During 2000, the Company wrote off approximately $200,000 related to the unamortized intangible asset attributed to the loss of the advisory
relationship with regards to this property.  This charge was recorded in "Depreciation and amortization" expense in the Consolidated Statements of
Income.

*Dividends*:  On January 3, 2001, the Company declared a dividend of $0.25 per common share
which was paid on February 1, 2001 to shareholders of record on January 16, 2001.  On February 19,
2001, the Company declared a dividend of $0.60938 per Depositary Share on its Class A Cumulative
Preferred Shares (the "Perpetual Preferred Shares") which will be paid on March 15, 2001 to
shareholders of record on March 1, 2001.

*Cash Flow Sources and Applications:*  Net cash provided by operating activities decreased
$8,572,500 from $40,129,900 to $31,557,400 for the year ended December 31, 2000 when compared
with the year ended December 31, 1999.  This decrease was primarily the result of a decrease in income
before gains on disposition of properties and land, extraordinary items and the cumulative effect of a
change in accounting principle, and a decrease in funds held for non-owned managed properties of
affiliates and joint ventures offset by an increase in accounts payable and accrued expenses, accounts
and notes receivable and other operating assets and liabilities.

Net cash flows used for investing activities of $16,831,600 for the year ended December 31,
2000 were primarily used for the development of multifamily real estate properties and other capital
expenditures and contributions and advances to joint venture partnerships primarily for capital
improvements and the Company's 49.0% pro rata share for the construction of 535 units with regards to
the joint venture partnership that the Company entered into in May 2000, net of funds received from the
sale of six operating properties.

Net cash flows used for financing activities of $50,544,900 for the year ended December 31,
2000 were primarily used to pay the Senior Note which matured April 15, 2000, to pay dividends on the
Company's common and preferred shares, to repurchase common shares and to pay principal payments
on secured debt.  Additionally, the Company obtained a mortgage loan in the amount of $14.0 million of
which $9.8 million has been funded.  The balance of $4.2 million will be funded upon completion of
certain conditions.

***RESULTS OF OPERATIONS***

*********Comparison of the year ended December 31, 2000 to the year ended December 31, 1999*:**

In the following discussion of the comparison of the year ended December 31, 2000 to the year
ended December 31, 1999, Market Rate properties refers to the Same Store Market Rate ("Same
Store") and Acquired/Disposed property portfolios.  Same Store properties represents 8 wholly owned
multifamily properties acquired by the Company at the time of the IPO and the 61 properties acquired in
separate transactions or developed by the Company during 1994 through 1998.  Acquired/Disposed
properties refers to a newly constructed property that has reached 93% stabilized occupancy but not for
an entire year, the newly constructed properties that have not reached 93% stabilized occupancy for an
entire year, two repositioned properties, the sale of the six Market Rate operating properties during 2000
and the sale of the eight Market Rate operating properties during 1999.

Overall, total revenue decreased $1,449,000 or 1.0% and total expenses increased $3,429,700
or 2.2% for the year.  Net income applicable to common shares after deduction for the dividends on the
Company's preferred shares decreased $18,766,900 or 103.0%.

During the year ended December 31, 2000, the Market Rate properties generated total revenues
of $136,057,600 while incurring property operating and maintenance expenses of $60,040,500.  Of
these amounts, the Acquired/Disposed and Same Store properties contributed total revenues of
$14,533,200 and $121,524,400, respectively, while incurring property operating and maintenance
expenses of $6,931,100 and $53,109,400, respectively.  The Affordable Housing properties generated
total revenues of $9,798,100 while incurring property operating and maintenance expenses of
$4,067,500 for the year ended December 31, 2000.

*Rental Revenues:* Rental revenues increased $962,200 or 0.7% for the year.  Rental revenues
from the Acquired/Disposed Properties decreased $1,644,600 or 10.3% for the year primarily due to the
$4,873,400 of rental revenues contributed in 1999 by the eight properties that were sold during 1999
offset by $2,919,100 contributed in 2000 by the six properties sold during 2000.  An increase in rental
rates at the Same Store Properties resulted in an increase of $3,096,000 or 2.6% in rental revenues
while a slight decline in occupancy at the Affordable Housing properties resulted in a decrease of
$34,400 in rental revenues.

*Other Revenues*:  Other income increased $380,700 or 12.8% for the year.  The increase was
due primarily to the establishment of a water and sewer reimbursement program in January 2000 offset
by a decrease in interest income.

The Company recognized property management and asset management fee revenues of
$5,140,400 and $2,628,200 for the year ended December 31, 2000, respectively, as compared to
$5,270,800 and $2,330,600, respectively, for the year ended December 31, 1999.  The net increase in
property management and asset management fee revenues was primarily due to the acquisition of
additional management contracts in 2000 offset by the loss of management contracts with managed but
non-owned properties and the sale of two advised properties in 1999.

The Company recognized asset acquisition fee revenue of $351,600 and $233,700 for the years
ended December 31, 2000 and 1999, respectively.  The fees relate to MIG acquiring five multifamily
properties on behalf of advised clients in 2000 and three multifamily properties on behalf of advised
clients in 1999.

The Company recognized $0 and $3,083,400 of asset disposition and incentive fees for the year
ended December 31, 2000 and 1999, respectively.  During 1999, MIG sold two properties which were
owned by advisory clients which resulted in disposition fees of $467,600.  Additionally, at the end of
1999, MIG earned a performance incentive fee of $2,615,800 related to an entire portfolio under a
contract with an institutional client.

*Property Operating and Maintenance Expenses:*  Property operating and maintenance expenses
decreased $559,800 or 0.9% for the year.  Property operating and maintenance expenses at the
Acquired/Disposed Properties decreased $1,891,300 or 21.8% for the year due primarily due to the
operating and maintenance expenses incurred at the eight properties sold in 1999, which totaled
$2,919,700, offset by $1,522,400 of expenses in 2000 incurred by the six properties sold during 2000.
Property operating and maintenance expenses at the Same Store Properties increased $1,093,100 or
2.1% when compared to the prior year primarily due to increases in personnel, and building and grounds
repair and maintenance offset by a decrease in real estate taxes and insurance.  Property operating and
maintenance expenses at the Affordable Housing Properties increased $238,400 or 6.2% for the year
primarily due to an increase in utility expense and repairs and maintenance.

*Other Expenses:*  Depreciation and amortization increased $333,200 or 1.0% for the year
primarily due to the increased amortization expense of the intangible assets associated with the
contingent consideration payments related to the merger with MIGRA and increased depreciation
expense recognized on the Acquired/Disposed Properties offset by the additional depreciation taken on
the Company's leasing information system resulting from the reduction in its estimated useful life which
was recognized in 1999.  The amortization expense related to the intangible assets was reflected as a
charge to the Management and Service Operations.

General and administrative expenses decreased $1,843,300 or 11.4% for the year.  This
decrease was primarily attributable to a decrease in payroll and related expenses and consulting and
professional fees incurred by the Company principally related to system processes, tax, accounting and
operations consulting services.  The decrease related to general and administrative expenses of
approximately $1,906,700 is included in Unallocated Corporate Overhead.

Interest expense increased $5,376,200 or 14.1% for the year primarily due to the interest
incurred with respect to the project specific, nonrecourse mortgage financing collateralized by 54
properties (26 were financed during the first half of 1999 and 29 were financed during the second half of
1999, of which one of these loans was assumed by the buyer of a property sold in 2000) net of the
interest incurred in 1999 on $168.2 million of Senior and Medium Term Notes which were repaid in
November 1999 and the payoff of an $8.6 million Senior Note in April 2000.  The increase represents the
increased average borrowings and the higher interest rates incurred when comparing 2000 to 1999.

The gain on disposition of properties and land of $7,511,900 for 2000 resulted from the sale of
six Market Rate operating properties net of a loss of $990,000 recorded in connection with the
contribution of a land parcel located in Cranberry Township, Pennsylvania to a joint venture partnership
in October 2000.  The gain on disposition of properties and land of $19,630,300 for 1999 resulted from
the sale of eight Market Rate operating properties.

*Extraordinary Items:*  The extraordinary item of $3,456,600 recognized during 1999 includes a
$750,000 facility fee charge, $126,500 interest breakage fee and a $932,200 write off of deferred
finance costs related to the termination of the unsecured line of credit facility, and approximately
$1,647,900 related to the pay off and paydown of the Senior and Medium-Term Notes associated with
the tender offer.  The $1,647,900 includes $1,524,700 which represents the write off of deferred finance
costs, $709,200 which represents transaction costs incurred and $105,800 which represents a
prepayment penalty related to the payoff of a first mortgage loan from which $691,800, representing the
gain related to the tender, was deducted.

*Cumulative Effect:*  Effective January 1, 1999, the Company changed its method of accounting
to capitalize expenditures for certain replacements and improvements, such as new HVAC equipment,
structural replacements, appliances, flooring, carpeting and kitchen/bath replacements and renovations.
Previously, these costs were charged to operations as incurred.  Ordinary repairs and maintenance,
such as unit cleaning and painting, and appliance repairs are expensed.  The Company believes the
change in the capitalization method provides an improved measure of the Company's capital
investment, provides a better matching of expenses with the related benefit of such expenditures,
including associated revenues, and is in the opinion of management, consistent with industry practice.
The cumulative effect of this change in accounting principle increased net income for the year ended
December 31, 1999 by $4,319,200 or $.19 per share (basic and diluted).  The effect of this change was
to increase income before cumulative effect of a change in accounting principle by $7,517,800 or $.34
per share (basic and diluted) for the year ended December 31, 1999.

*Net Income Applicable to Common Shares:*  Net income applicable to common shares
represents net income reduced by dividends on the Perpetual Preferred Shares of $5,484,400.

***Comparison of the year ended December 31, 1999 to the year ended December 31, 1998***

In the following discussion of the comparison of the year ended December 31, 1999 to the year
ended December 31, 1998, Market Rate properties refers to the Same Store and Acquired/Disposed
Property portfolios.  Same Store Market Rate Properties represents the 27 wholly owned multifamily
properties acquired by the Company at the time of the IPO and the 42 properties acquired in separate
transactions by the Company during 1994 through 1997.  Acquired/Disposed Properties refers to 17
properties which represent the properties acquired between January 1, 1998 and December 31, 1999 as
well as the newly constructed and repositioned properties, the sale of eight operating properties and the
transfer of Rainbow Terrace Apartments to HUD.

Overall, total revenue increased $15,756,000 or 11.0% and total expenses increased
$29,653,700 or 23.5% for the year.  Net income applicable to common shares after deduction for the
dividends on the Company's preferred shares increased $6,194,200 or 51.5%.

During the year ended December 31, 1999, the Market Rate properties generated total revenues
of $133,779,300 and property operating and maintenance expenses of $60,688,600.  Of these amounts,
the Acquired/Disposed and Same Store Properties contributed total revenues of $48,142,600 and
$85,636,700, respectively, while incurring property operating and maintenance expenses of $22,249,200
and $38,439,400, respectively.  The Affordable Housing Properties generated total revenues of
$9,820,400 while incurring property operating and maintenance expenses of $3,829,100 for the year
ended December 31, 1999.

*Rental Revenues*:  Rental revenues increased $10,622,200 or 8.0% for the year.  Rental
revenues from the Acquired/Disposed Properties increased $9,927,800 for the year.  Increases in
occupancy and unit rents at the Same Store Properties and Affordable Housing Properties resulted in an
increase of $553,000 or 0.6% and a decrease of $349 or 0.0%, respectively, in rental revenue from
these properties.  The balance of the increase resulted from increased rental revenues attributable to
office space and other miscellaneous rental revenue items collected by the Management and Service
Operations.

*Other Revenues*:  Other income increased $497,300 or 20.1% for the year.  The increase is due
primarily to the receipt of NSF fees and late charges as well as interest income received on funds
deposited into the like-kind exchange fund as a result of the sale of certain operating properties.

The Company recognized property management and asset management fee revenues of
$5,270,800 and $2,330,600 for the year ended December 31, 1999, respectively, as compared to
$4,704,800 and $1,248,400, respectively, for the year ended December 31, 1998.  The increase in
property management and asset management fee revenues is primarily due to the recognition of a full
year of property management and asset management fee revenues during 1999 versus only six months
during 1998 (from the MIGRA merger) as well as the collection of additional management fees as a
result of the three new advisory management contracts during 1999 and the collection of the property
management fee on Rainbow Terrace Apartments which the Company was entitled to during 1999.

For the year ended December 31, 1999, the Company recognized $233,700 of asset acquisition
fees relating to the acquisition of three multifamily properties on behalf of certain advisory clients of MIG.

The Company recognized $3,083,400 and $247,000 of asset disposition and incentive fees for
the year ended December 31, 1999 and 1998, respectively.  During 1999 and 1998, MIG sold two
properties each year which were owned by advisory clients of which $467,600 and $247,000,
respectively, in disposition fees were earned.  Additionally, during the fourth quarter of 1999, MIG earned
a performance incentive fee of $2,615,800 related to an entire portfolio under a contract with a current
institutional client.

*Property Operating and Maintenance Expenses:*  Property operating and maintenance expenses
increased $5,932,200 or 10.1% for the year.  Property operating and maintenance expenses at the
Acquired/Disposed Properties increased $4,413,900 for the year due primarily to the operating and
maintenance expenses incurred at the 12 properties acquired in 1998, the eight properties sold in 1999,
as well as the repositioned properties and the newly constructed properties of Bradford at Easton, The
Village of Western Reserve and The Residence at Barrington.  Property operating and maintenance
expenses at the Same Store Properties increased $1,491,900 or 4.1% when compared to the prior 12
month period primarily due to increases in personnel, advertising, utilities, building and grounds repair
and maintenance, real estate and local taxes and other operating expenses.  Property operating and
maintenance expenses at the Affordable Housing Properties increased $26,400 or 0.7% for the year due
primarily to increases in personnel and other operating expenses offset by decreases in building and
grounds repair and maintenance.

*Other Expenses:*  Depreciation and amortization increased $10,246,900 or 41.2% for the year
primarily due to the increased depreciation expense recognized on the Acquired/Disposed Properties,
the additional depreciation as a result of the adoption of the new capitalization policy and the accelerated
depreciation of the Company's leasing information system due to the reduction in its estimated useful life
as well as the amortization expense of the intangible assets associated with the MIGRA merger.  The
amortization expense related to the intangible assets is reflected as a charge to the Management and
Service Operations.

Cost associated with abandoned projects of $298,400 were expensed during 1998.  These costs
consist primarily of certain pre-development costs, such as architectural, legal and accounting fees, that
were incurred on projects that the Company determined it would no longer pursue.  These costs are
reflected as a charge to the Management and Service Operations.

General and administrative expenses increased $5,953,900 or 58.3% for the year.  This
increase is primarily attributable to payroll and related expenses and other consulting and professional
fees incurred by the Company principally related to system processes, tax, accounting and operations
consulting services.  Additionally, the Company recognized 12 months of expenses in 1999 versus six
months of expense in 1998 related to the MIGRA merger.  The increase related to general and
administrative expenses of approximately $5,410,300 is included in Unallocated Corporate Overhead.

During 1998, the Company wrote off $817,500 of expenditures which had been capitalized
relating to the Company's LISA® system, a proprietary automated leasing information system.  This
write-off relates to the Management and Service Operations and is reflected as a write-off of software
development costs in the Consolidated Statements of Income.

Interest expense increased $9,213,200 or 31.7% for the year primarily due to the interest
incurred with respect to the project specific, nonrecourse mortgage financing collateralized by 55
properties owned by the REIT.  The increase represents the increased average borrowings and the
higher interest rates incurred.

During 1999 and 1998, the gain on disposition of properties and land of $19,630,300 and
$503,500, respectively, resulted from the sale of eight properties and one property, respectively.

*Extraordinary Items:*The extraordinary item of $3,456,600 recognized during 1999 includes a
$750,000 facility fee charge, $126,500 interest breakage fee and a $932,200 write off of deferred
finance costs related to the termination of the unsecured line of credit facility and approximately
$1,647,900 related to the pay off and paydown of the Senior and Medium-Term Notes associated with
the tender offer.  The $1,647,900 includes $1,524,700 which represents the write off of deferred finance
costs, $709,200 which represents transaction costs incurred, $105,800 which represents a prepayment
penalty related to the payoff of a first mortgage loan from which $691,800 representing the gain related
to the tender was deducted.  In 1998, deferred financing costs of $124,900 were written off due to the
termination of the $100.0 million unsecured revolving credit facility.

*Cumulative Effect:*Effective January 1, 1999, the Company changed its method of accounting
to capitalize expenditures for certain replacements and improvements, such as new HVAC equipment,
structural replacements, appliances, flooring, carpeting and kitchen/bath replacements and renovations.
Previously, these costs were charged to operations as incurred.  Ordinary repairs and maintenance,
such as unit cleaning and painting, and appliance repairs are expensed.  The Company believes the
change in the capitalization method provides an improved measure of the Company's capital
investment, provides a better matching of expenses with the related benefit of such expenditures,
including associated revenues, and is in the opinion of management, consistent with industry practice.
The cumulative effect of this change in accounting principle increased net income for the year ended
December 31, 1999 by $4,319,200 or $.19 per share (basic and diluted).  The effect of this change was
to increase income before cumulative effect of a change in accounting principle by $7,517,800 or $.34
per share (basic and diluted) for the year ended December 31, 1999.  The pro forma amounts shown on
the income statement have been adjusted to reflect the retroactive application of the capitalization of
such expenditures and related depreciation for the year ended December 31, 1998 of which increased
net income by $839,400 or $.04 per share (basic and diluted).

*Net Income Applicable to Common Shares:*  Net income applicable to common shares is
reduced by dividends on the Preferred Shares of $5,484,400.

***Equity in net (loss) income of joint ventures*****

The combined equity in net (loss) income of joint ventures decreased $748,400 or 127.9% for
the year ended December 31, 2000, and increased $140,300 or 31.5% for the year ended December 31,
1999. The decrease from 1999 to 2000 was due primarily to an increase in the costs of operating the
properties resulting primarily from utilities, real estate taxes and building and grounds repair and
maintenance.  The increase from 1998 to 1999 was primarily attributable to decreased costs of
operating the properties resulting primarily from utilities, real estate taxes and building and grounds
repairs and maintenance.

The following table presents the historical statements of operations of the Company's beneficial
interest in the operations of the joint ventures for the years ended December 31, 2000, 1999 and 1998.

|                                                   | For the year ended December 31,
|-------------------------------------------------- | -------------------------------
|                                                   | 2000                           
|Beneficial interests in joint venture operations   |                                
|Rental revenue                                     | $7,596,900                     
|Cost of operations                                 | 4,871,100                      
|                                                   | 2,725,800                      
|Interest income                                    | 45,200                         
|Interest expense                                   | (2,091,800)                    
|Depreciation                                       | (763,700)                      
|Amortization                                       | (78,900)                       
|(Loss) income before cumulative effect of a change |                                
|in accounting principle                            | $ (163,400)                    

**STRATEGY**

**Overall Portfolio Strategy**

The Company is a fully integrated multifamily real estate company engaged in property
acquisition,  advisory, development, management, disposition, operation and ownership activities.

The Company seeks to maximize shareholder value by growing the magnitude and quality of
earnings generated by the Company's assets and activities.  Management believes this value is realized
in two principal ways; first, through skilled acquisition and disposition driven by investment research; and
secondly, through operations with a focus on quality of service supported by sophisticated technological
systems.

The Company offers a unique structure which combines a public operating company with an
institutional advisory business.  This combination affords the Company the opportunity to focus its
expertise in either the public or private multifamily investment market allowing continuity and dedication
to the investment process.  This efficiency maximizes shareholder value with active portfolio
management resulting in the continuous measurement of assets offering the greatest risk-adjusted
return to shareholders and clients.

The Company applies a disciplined approach to achieving portfolio balance through
diversification in deep economic markets.  The portfolio is actively managed through the ownership of
assets which provide the highest risk-adjusted rate of return to the portfolio.

The Company's disciplined business planning for each property and its annual budgeting
process, complemented by its capital expenditure program, allow the Company to identify opportunities
across the portfolio, thereby maximizing long term wealth creation.  A key element of this regimen is the
annual hold-sell analysis which challenges the continued investment in any one asset which is not
expected to produce specific benchmark yields.

In the short term, the sale of properties, if any, will result in a reduction in net income and
portfolio size for the Company; however, it is expected that the proceeds will either be redeployed into
new growth opportunities or the Company will continue to alter its capital structure, either through
retirement of debt or the repurchase of its common shares.  Investment alternatives are chosen based
on whether they are anticipated to be accretive to earnings per share in the long run.  The proceeds from
sales will be allocated to investment alternatives with the highest projected risk adjusted marginal
returns.

Implementation of the Company's strategy includes 1) enhancement of the owned portfolio
through strategic allocation of capital improvements in existing assets, 2) investment in portfolio
enhancing multifamily communities through acquisition and development, including strategic alliances
with others, 3) expansion of the advisory business through both separate account and co-investment
with institutional investors, and 4) repurchase of the Company's common shares, where the current
market price offers more attractive risk return opportunities than other investment opportunities.

**Market Rate**

The consistent goal for the owned portfolio of multifamily assets is income and value
enhancement through reinvestment in the assets and acquisition of new properties.  Internal growth is
achieved through realization of all marginal revenue opportunities, contained operational expenses and
efficient management.  Management believes new acquisitions (generally suburban, grade A-B
properties) and development opportunities available to the Company will enhance the income potential
to the Company.  The general investment goals include institutional quality properties in rent growth
locations of major metropolitan markets.

To achieve the goal of holding a portfolio of economically and geographically diversified
institutional quality multifamily assets, the Company plans to reduce exposure in the Midwest while
reinvesting in more strategically consistent dynamic markets, which offer greater revenue growth, such
as Atlanta, metro Washington D.C., Orlando, South Florida and Tampa.  The Company expects very
limited acquisitions on behalf of the Market Rate portfolio in the upcoming year; however, the Company
expects to have some co-investment acquisition opportunities.

While the portfolio stability offered in the Midwest markets is expected to be maintained with the
retention of certain assets, the ultimate goal is to own and operate significant units in multiple markets
across the nation.

The Company plans to continue its annual program of improvements to its properties and its
ongoing practice of regular maintenance and periodic renovation, wherever doing so yields long term
benefits.

**Affordable Housing**

The Company's portfolio currently includes 13 properties (comprised of 1,335 units) which are
subject to regulation by HUD, and which were in the portfolio prior to the IPO.

Although rent growth in these properties is limited due to regulatory restrictions, albeit declining
returns, these properties have provided a stabilizing influence to the portfolio.  Additionally, the Company
has developed detailed systems and processes to effectively operate these properties, which by their
nature, exist within a complex, highly regulated environment.  Economic efficiencies are realized in
conjunction with the management of another 25 properties (4,505 units), owned by third parties, making
the affordable housing area potentially lucrative across segments.

Notwithstanding the potential profitability associated with the efficient management in the
regulated environment, the Company continuously examines its ownership of all properties within the
context of its overall portfolio strategy.  There are no assurances that government policies affecting
these properties will not change causing future results to differ materially from the historical results.

**Management and Service Companies**

*Fee Management:*  Over the years, the Company has applied its management approach to the
management of properties for third parties.  The Company believes that third party property
management broadens the Company's knowledge of a market, creates opportunities for future
acquisitions, enhances purchasing power, provides a network for new personnel and generates fee
income.

*Advisory Business:* MIG's advisory business comprises a major component of the Company's
overall growth strategy.  A major focus of this business will be the acquisition of properties for separate
account clients with discretionary and non-discretionary funds.  The Company's investment capabilities
are expanded by increasing assets acquired and managed on behalf of pension fund clients.
Furthermore, the advised assets increase the operational efficiency in markets where the Company may
have limited penetration with its own assets, while requiring less in capital resources from the Company
than direct investment.

Another aspect of the advisory strategy is the opportunity to co-invest with institutional partners.
This form of investment not only diversifies the owned portfolio across markets while creating
operational efficiency, but also allows the Company to extend its investment and operational expertise to
MIG's institutional clients.  This distribution of experience and expertise provides acquisition, asset
management, property management and incentive fees to the Company which benefits its shareholders.

During the third quarter 2000, Louis Vogt, President and COO of the Company, assumed the
additional role of President of MIG Realty Advisors, Inc. when James Cote' resigned his position and
became an independent consultant.  Under his new consulting agreement, which expires in March,
2001, Mr. Cote' will provide services to MIG in connection with the servicing of certain pension fund
clients designated by MIG.

*Other:*  The Company will continue to explore ways to capitalize on its access to the significant
purchasing power of its broad resident base as an "e-commerce gatekeeper".  Currently, the Company
is analyzing certain opportunities that will allow it to further exploit its already advanced technological
infrastructure within its current property management platform.

**Strategic Initiatives**

The Company's strategic initiatives for 2001 include:

1.	**Increase risk-adjusted performance of the portfolio**.  Performance improvement will
be sought through active portfolio management including dispositions of non-strategic
assets.  Heavy emphasis will be placed on rebalancing the portfolio.

*Dispositions:*The Company is marketing 17 properties, of which contracts are pending
on five of them.  These 17 properties are comprised of three of its Market Rate joint
venture properties, one of its Affordable Housing properties, and 13 Market Rate
properties.  During 2000, five of the Market Rate properties located in Ohio which relate
to the December 31, 1999 transaction (previously described) were recognized as sales
under GAAP.  Additionally, during 2000, the Company sold one Northeast Ohio Market
Rate property.  In the short term, the sale of properties will likely result in a reduction in
net income and portfolio size for the Company; however, it is expected that the proceeds
will either be redeployed into new growth opportunities or the Company will continue to
alter its capital structure, either through retirement of debt or stock repurchase of
common shares.  Investment alternatives are chosen based on whether they are
anticipated to be accretive to earnings per share in the long run.  The proceeds from
sales will be allocated to investment alternatives with the highest projected marginal
returns.

*Co-investment:*The Company will continue to increase emphasis on MIG's advisory
business, which includes pursuing co-investment opportunities with pension fund clients.
These co-investments will include both purchase and development opportunities with
discretionary and non-discretionary funds.  Co-investment in the purchase of stabilized
assets is expected to offer low volatility and immediate cash flow.  The development
program allows the Company and its institutional partners to seek the higher yields
anticipated from development.  The expected equity investment is approximately 25-50% from AERC and approximately 50-75% from institutional investors.  In addition to
the co-investment plans with institutional pension fund clients, the Company is in various
stages of planning co-investments with other groups including private organizations and
high net worth investors.

Management believes this co-investment program may allow the Company to increase
operational efficiency in growth markets at a more rapid pace than direct individual
investments because it allows the Company to apply its expertise in multifamily
investment across both owned and advised assets.

*Capital Expenditures:*In 1999, the Company undertook a two and one-half year
initiative to improve its Properties in order to increase value and move price points.
During 1999, approximately $13.0 million in capital improvements were performed,
approximately $5.0 million of which was non-recurring investment capital.  After
completing the capital expenditures in 1999, an additional amount of approximately $5.0
million more was identified as capital in excess of routine recurring capital
(approximately $8.3 million per year).  During 2000, approximately $12.4 million was
spent on capital improvements of which approximately $4.0 million was investment
capital.  Approximately $1.2 million of capital expenditures have been deferred into the
first six months of 2001.

2.	**Restructure organization for efficiency.**  Now that the property managers operate in a
decentralized environment, with improved technology and processes, the Company
continues to focus its efforts on streamlining its corporate organization to take
advantage of the efficiencies that have been created by decentralization.

*General & Administrative*:  The Company announced a plan to identify and eliminate
approximately $3.0 million on an annualized basis in general and administrative
expenses during 2000.   Implementation of changes to effect this reduction were
completed during the fourth quarter of 2000 and include reorganization of departments
to reassign personnel, reduction in fees paid to outside consultants and the further
automation of processes to create efficiencies.  Through December 31, 2000, the
Company has achieved a reduction in its run-rate that translates to annualized savings
of approximately $3.0 million.

*Technology:*The Company is currently in the process of moving its reporting systems
and application processes to a web based system which will result in a more seamless
integration of all business processes and wider, quicker dissemination of corporate and
property information.  It is further anticipated that the corporate Intranet, which is
primarily currently used by employees, will be further developed to provide controlled
public access to current and prospective residents, clients and vendors and thereby
provide more efficient ways to execute transactions and share information.

********3.**Grow assets under management in the advisory business.**  In addition to the co-investment opportunities described in the portfolio performance strategy that
arise from
our institutional relationships, the Company is focused on expanding the portfolio of
advised clients.  Growth in this aspect of the Company requires limited incremental
capital.

As of the date of this filing, the current acquisition allocations stand at approximately
$81.0 million.  During the current year, the Company will seek to invest this allocation
and portions of new allocations to grow the assets under management.  The Company
acquired a total of approximately $166.2  million in multifamily properties for clients in
2000.

**Inflation**

Management's belief is that the effects of inflation would be minimal on the operational
performance of its portfolio primarily due to the high correlation between inflation and housing costs
combined with the short term nature, typically one year, of the leases.  The Company also faces limited
exposure to interest rate fluctuations due to its high proportion of fixed rate financing.

The market for the Affordable Housing properties is unique in that the residents of these
properties receive assistance under the Rental Assistance Program.  At many of the Affordable Housing
properties, waiting lists of qualified applicants are maintained which minimize the need to advertise
these units.  The average Economic Occupancy of these properties consistently exceeds 98%.
However, changes in these Government Programs could potentially create decreased rental revenues,
additional vacancies, require more marketing costs and in some cases, these properties may be
converted to Market Rate properties.

**Quantitative and Qualitative Disclosures About Market Risk**

At December 31, 2000, the Company had $1.7 million of variable rate debt.  Additionally, the Company has interest rate risk associated with fixed rate debt
at maturity.  Management has and will continue to manage interest rate risk as follows:  (i) maintain a conservative ratio of fixed rate, long term debt to total debt
such that variable rate exposure is kept at an acceptable level; (ii) consider hedges for certain long term variable and/or fixed rate debt through the use of interest
rate swaps or interest rate caps; and (iii) use treasury locks where appropriate to hedge rates on anticipated debt transactions.  Management uses various financial
models and advisors to achieve those objectives.

From time to time, the Company may enter into hedge agreements to minimize its exposure to interest rate risks.  On February 25, 2000, the Company
completed two interest rate swaps.  The notional amount of the swaps was approximately $65.4 million.  These swaps were executed to hedge the fair market
value of certain fixed rate loans.  The first swap was effective March 1, 2000 and the second swap was effective March 10, 2000.  For the year ended December
31, 2000, the Company recognized a credit to interest expense of $330,663.  On December 11, 2000, the Company executed termination agreements for both
swaps and received termination payments totaling $3.2 million, which will be amortized over the remaining terms of the two swap agreements (May 2007 for the
$10.6 million swap and October 2007 for the $54.8 million swap).  The table below provides information about the Company's financial instruments that are
sensitive to changes in interest rates.  For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity
dates.

|                               | **********December 31, 2000** | **December 31, 1999**
|------------------------------ | ----------------------------- | ---------------------
|****                           |                               |                      
|**Long term debt**             | **2001**                      | **2002**             
|**Fixed:**                     |                               |                      
|Fixed rate mortgage debt       | $16,664,725                   | $6,014,510           
|Weighted average interest rate | 7.84%                         | 7.84%                
|                               |                               |                      
|MTN's                          | 604,000                       | -                    
|Weighted average interest rate | 7.26%                         | -                    
|                               |                               |                      
|Senior notes                   | -                             | -                    
|Weighted average interest rate | -                             | -                    
|Total fixed rate debt          | 17,268,725                    | 6,014,510            
|                               |                               |                      
|Variable:                      |                               |                      
|Variable rate mortgage debt    | 68,147                        | 75,282               
|Weighted average interest rate | 10.0%                         | 10.0%                
|LIBOR based credit facilities* | -                             | -                    
|Total variable rate debt       | 68,147                        | 75,282               
|Total long term debt           | $17,336,872                   | $6,089,792           
|                               |                               |                      

*One LIBOR based credit facility matures in 2001 and the second LIBOR based credit facility matures in 2003.  At December 31, 2000, there were no borrowings outstanding on either facility.

**Sensitivity Analysis**

At December 31, 2000 and 1999, the Company estimates that a 100 basis point decrease in market interest rates would have changed the fair value of
fixed rate debt to a liability of $606.8 million and $585.2 million, respectively.  The sensitivity to changes in interest rates of the Company's fixed rate debt was
determined with a valuation model based upon changes that measure the net present value of such obligation which arise from the hypothetical estimate as
discussed above.

**CONTINGENCIES**

**Environmental**

There are no recorded amounts resulting from environmental liabilities and there are no known
material contingencies with respect thereto.  Future claims for environmental liabilities are not
measurable given the uncertainties surrounding whether there exists a basis for any such claims to be
asserted and, if so, whether any claims will, in fact, be asserted.  Furthermore, no condition is known to
exist that would give rise to a material liability for site restoration, post closure and monitoring
commitments, or other costs that may be incurred with respect to the sale or disposal of a property.
Phase I environmental audits have been completed on all of the Company's wholly owned and joint
venture properties.

**Pending Litigation**

A lawsuit is pending in the Harris County, Texas district court against MIG Realty Advisors, Inc.
(MIG's predecessor company) involving a claim for contribution and indemnity arising out of MIG Realty
Advisors, Inc. having served as an investment advisor to an advisory client in connection with the
acquisition of an apartment project located in Houston, Texas.  On or about December 30, 1998, the
advisory client that acquired the property filed suit against the seller, the consulting engineer who
performed the engineering due diligence and others seeking damages for defective conditions
discovered at the property that were allegedly concealed by the seller and not discovered by the
consulting engineer during the pre-purchase due diligence investigation conducted by the engineer.  The
consulting engineer filed a third party claim against MIG Realty Advisors, Inc., alleging that MIG Realty
Advisors, Inc. was responsible for the conduct of the due diligence investigation and consequently MIG
Realty Advisors, Inc., rather than the engineer was responsible for any damages suffered by the
advisory client.  The third party complaint does not specify the amount of damages being claimed, but
rather seeks contribution and indemnity for any judgment rendered against the consulting engineer
arising out of the complaint against it filed by the advisory client.  However, these potential claims may
be approximately $9.0 million.  The Company is vigorously defending against the claims brought by the
consulting engineer in the third party complaint.  The advisory client and MIG recently entered into a
tolling agreement for the purpose of tolling any claims that the advisory client may have against MIG in
connection with this apartment project.  The Company cannot predict the final outcome of this dispute.

Any damages in excess of $200,000 and $500,000 are expected to be covered by professional
liability insurance or third party indemnities, respectively, and accordingly, any adverse outcome is not
expected to have a material adverse effect on the financial condition of the Company.

The Company is also subject to other legal proceedings and claims which arise in the ordinary
course of its business.  Although occasional adverse decisions (or settlements) may occur, the Company
believes that the final disposition of such matters will not have a material adverse effect on the financial
position or results of operations of the Company.

**Expected Property Sales**

The Company sold eight Market Rate properties located in Ohio on December 31, 1999 for an
aggregate sales price of approximately $34.0 million.  To facilitate the sale, the Company financed the
sale with fixed rate debt maturing July 1, 2001.  Under the structure of the transaction, the buyer may put
the properties back to the Company, after March 1, 2001 but before June 2, 2001, at a price equal to
their fair market value less outstanding indebtedness then owing on the purchase money financing.  The
Company had a corresponding option to repurchase the properties on the same monetary basis at any
time prior to December 31, 2000, which the Company elected not to exercise.  The sale transaction
provided for the Company's continued management of those properties.  These sales will not be
recognized for GAAP purposes until the seller financing is repaid. During 2000, five of these properties
were sold in cash transactions for proceeds of $14.3 million.  The three remaining properties at
December 31, 2000 and all eight properties at December 31, 1999 were classified as "Properties held
for sale" in the Consolidated Balance Sheets.  The three remaining properties are included in the 13
Market Rate properties previously described as potential dispositions.

**Item 7A.  Quantitative and Qualitative Disclosures About Market Risk**

For a discussion of the Quantitative and Qualitative Disclosure about Market Risk and the
associated interest rate sensitivity, reference Management's Discussion and Analysis.

**Item 8.	Financial Statements and Supplementary Data**

The response to this item is included in a separate section at the end of this report.

**Item 9.	Changes and Disagreements with Accountants on Accounting and Financial Disclosure**

None.

**PART III**

**Item 10.  Directors and Executive Officers of the Registrant**

The information regarding the Company's Directors contained in the Notice of Annual Meeting
and Proxy Statement for the Annual Meeting of Shareholders to be held on May 15, 2001, is
incorporated by reference in this Annual Report on Form 10-K.  Such information will be filed with the
SEC no later than 120 days after the year covered by this report.

The Executive Officers of the Company as of February 28, 2001 are:

|Name                | Age | Position with the Company                                                 
|------------------- | --- | --------------------------------------------------------------------------
|Jeffrey I. Friedman | 49  | Chairman of the Board and Chief Executive Officer                         
|Louis E. Vogt       | 51  | President and Chief Operating Officer

President of MIG II Realty Advisors
|Martin A. Fishman   | 59  | Vice President, General Counsel and Secretary                             
|Kathleen L. Gutin   | 44  | Treasurer, Vice President and Chief Financial Officer                     

Jeffrey I. Friedman has served as Chairman of the Board and Chief Executive Officer of the
Company since its organization in 1993 and served as the Company's President since the Company's
organization until February 24, 2000.  Mr. Friedman joined AEG in 1974 and was the Chief Executive
Officer and President of Associated Estates Corporation, a company in the AEG group, from 1979 to
1993.

Louis E. Vogt joined the Company as Senior Vice President, Operations in 1998 through the
acquisition of MIG Realty Advisors, Inc.  Mr. Vogt was elected a Director in 1999, and on February 24,
2000, he was elected President and Chief Operating Officer.  During 2000, Mr. Vogt assumed the role of
President of MIG II Realty Advisors, Inc.  Mr. Vogt joined MIG Realty Advisors in 1992 and has over 29
years of experience in real estate operations.  He is responsible for all asset and property management
operations including acquisitions and dispositions.

Martin A. Fishman has been Vice President - General Counsel and Secretary of the Company
since its organization.  Mr. Fishman joined AEG in 1986 as Vice President - General Counsel of
Associated Estates Corporation, a position he held until the formation of the Company.

Kathleen L. Gutin, Treasurer, Vice President and Chief Financial Officer, joined the Company in
1998 through the acquisition of MIG Realty Advisors, Inc..  Ms. Gutin joined MIG Realty Advisors in 1985
and has over 17 years of real estate related accounting, finance and information technology experience.
She is a member of the American Institute of Certified Public Accountants (AICPA) and is a Chartered
Financial Analyst (CFA).  Effective March 15, 2001, Ms. Gutin will relinquish her position as Treasurer
and Chief Financial Officer of the Company.  Ms. Gutin will remain with the Company as Vice President
and Chief Information Officer and Vice President and Chief Financial Officer of MIG II Realty Advisors.

In addition to the executive officers named in the table above, the following persons have been
elected as officers of the Company by the Board of Directors and hold positions in senior management
with the Company as indicated:

Barbara E. Hasenstab joined the Company in 1996 as Director of Investor Relations and was
elected Vice President of Investor Relations in 1998.  Ms. Hasenstab has 22 years of experience in
investor relations and is a member of the National Investor Relations Institute and is 47 years old.
Effective February 24, 2000, Ms. Hasenstab's title was changed to Vice President, Investor Relations
and Corporate Communications.

William T. Hughes, Jr., Ph. D., Vice President-Research, joined the Company in 1998 through
the acquisition of MIG Realty Advisors, Inc.  Dr. Hughes joined MIG Realty Advisors in 1995.  He is
widely published in leading real estate books, journals and periodicals, and is a nationally recognized
expert in real estate markets.  He is a Chartered Financial Analyst (CFA) and is 35 years old.

Nan R. Zieleniec joined AEG in 1990 and was elected Vice President of Human Resources in
1998, having responsibility for all areas of human resource planning and administration and national
training.  Ms. Zieleniec is a member of the Society of Human Resource Management and American
Compensation Association and is 42 years old.

The following persons have been appointed as officers of the Company by the executive officers
of the Company:

Lou Fatica joined the Company in 1999 as Controller, and Mr. Fatica is currently Vice President-Controller.  Mr. Fatica has over 10 years of experience and is a Certified Public Accountant (CPA),
member of the American Institute of Certified Public Accountants (AICPA), the Ohio Society of CPA's
and is 34 years old.  Effective March 15, 2001, Mr. Fatica will assume the role of Treasurer, Vice
President and Chief Financial Officer of the Company.

JoAnn C. Hirsh joined the Company in 1997 as Director of Government Housing and is currently
a Regional Vice President of Operations.  Ms. Hirsh has supervisory responsibility for the Affordable
Housing properties and is responsible for compliance with HUD regulations.  Ms. Hirsh has over 22
years of real estate experience and is a CPA, member of the AICPA, the Ohio Society of CPA's, the
National Network of Commercial Real Estate Women and is 44 years old.

Susan S. Kwarciak joined the Company in 1994 as a Controller, and Ms. Kwarciak is currently a
Regional Vice President of Research and Portfolio Management for the Eastern Region.  Ms. Kwarciak
is a CPA with over 10 years of experience and is 33 years old.

Richard Q. Mansfield joined the Company in 1995 and is currently a Vice President of
Development.  He has been involved in multifamily property management for 23 years.  Mr. Mansfield
has supervisory responsibility for development and facilities throughout the portfolio and is 45 years old.

Daniel L. Powers joined the Company in 1998 through the acquisition of MIG Realty Advisors,
Inc.  He is currently a Regional Vice President of Operations for the Central and Southwestern Region,
with supervisory responsibility for properties in Arizona, California, Colorado, Illinois, Indiana, Michigan,
Southern and Western Ohio and Texas and has been involved in multifamily property management for
21 years.  Mr. Powers is a Certified Property Manager and is 47 years old.

Charles J. Stone joined the Company in 1998 through the acquisition of MIG Realty Advisors,
Inc.  He is currently a Regional Vice President of Operations for the Eastern Region with supervisory
responsibility for properties in Florida, Georgia, Maryland, North Carolina, Northeast Ohio, Pennsylvania
and Virginia.  Mr. Stone is 54 years old and has over 27 years of real estate experience.

Steven C. Thrower joined the Company in 1998 through the acquisition of MIG Realty Advisors,
Inc.  He is currently a Regional Vice President of Research and Portfolio Management for the Western
Region.  Mr. Thrower is 45 years old and has more than 15 years of real estate experience.

******Item 11.  Executive Compensation**

The information on Executive Compensation contained in the Notice of Annual Meeting and
Proxy Statement for the Annual Meeting of Shareholders to be held on May 15, 2001 is incorporated by
reference in this Annual Report on Form 10-K.  Such information will be filed with the SEC no later than
120 days after the year covered by this report.

**Item 12.  Security Ownership of Certain Beneficial Owners and Management**

The information on Security Ownership of Certain Beneficial Owners and Management
contained in the Notice of Annual Meeting and Proxy Statement for the Annual Meeting of Shareholders
to be held on May 15, 2001 is incorporated by reference in this Annual Report on Form 10-K.  Such
information will be filed with the SEC no later than 120 days after the year covered by this report.

**Item 13.  Certain Relationships and Related Transactions**

The information on Certain Relationships and Related Transactions contained in the Notice of
Annual Meeting and Proxy Statement for the Annual Meeting of Shareholders to be held on May 15,
2001 is incorporated by reference in this Annual Report on Form 10-K.  Such information will be filed
with the SEC no later than 120 days after the year covered by this report.



Unless the context otherwise requires, the following capitalized terms shall have the meanings
set forth below for the purposes of this Form 10-K.

*"AEG"* means the Associated Estates Group, which includes (i) various general partnerships,
limited partnerships and corporations which sold interests in 45 multi-family properties to the Company,
(ii) Associated Estates Corporation, (iii) A.E.C. Management Company, (iv) Estates Mortgage Company,
(v) Associated Health Care Management, Inc., (vi) Merit Management Corporation, (vii) Merit Painting
Services, Inc. and (viii) Children's Computer Company.

*"Affordable Housing Properties"* means multifamily Properties, the rents of which are subsidized
and certain aspects of the operations of which are regulated by HUD pursuant to Section 8 of the
National Housing Act of 1937.

*"Code"* means the Internal Revenue Code of 1986, as amended from time to time.

*"Company"* means Associated Estates Realty Corporation, an Ohio corporation, including,
where the context requires, its subsidiaries and the Service Companies.

*"Congregate Care Facility"* means a residential apartment community for elderly persons that
provides services to its residents which may include prepared meals, housekeeping and laundry service
and a variety of recreational and educational activities.

*"Contract Rent"* means monthly rental amounts, as determined by HUD, for each Contract Unit
payable pursuant to a HAP Contract.

*"Contract Unit"* means a unit contained in an Affordable Housing property for which the owner of
such property receives rent subsidies from HUD pursuant to a HAP Contract.

*"Distributable Cash Flow"* means Funds From Operations less scheduled mortgage debt
amortization payments and provisions for ongoing capitalized improvements to the Properties.

*"EBITDA"* means earnings before interest, taxes, depreciation and amortization.

*"Economic Occupancy"* means the actual rent revenue divided by the total rent expected to be
earned based on the market rental rate for all units.

*"Eligible Resident"* means a family or individual whose income, as determined in accordance
with HUD regulations, does not exceed income limits promulgated by HUD for the housing market area
and which meets certain other conditions specified in the regulations.

*"Funds From Operations" or "FFO"* means net income (computed in accordance with generally
accepted accounting principles), excluding gains (or losses) from the disposition of properties and
extraordinary items, plus depreciation on real estate assets and amortization of intangible assets, and
after adjustments for unconsolidated partnerships and joint ventures.  Although not specifically provided
for in the definition, management believes that the adjustment for amortization of intangible assets is
consistent with NAREIT's definition.

*"GAAP"* means generally accepted accounting principals.

*"HAP Contract"* means the agreement between HUD and the owner of an Affordable Housing
property which provides for rent subsidies to be paid by HUD to such owner and obligates such owner to
comply with certain HUD regulations governing certain aspects of its operations of such Affordable
Housing Properties.

*"HAP Payment"* means a housing assistance payment the owner of an Affordable Housing
property receives from HUD pursuant to a HAP Contract.

*"HUD"* means the United States Department of Housing and Urban Development.

*"IPO"* means initial public offering.  The Company completed an initial public offering of
7,250,000 common shares in November 1993, the proceeds of which were used to acquire the various
businesses from AEG.

*"Market Rate Properties"* means multifamily Properties which are operated as conventional
multifamily residential apartments, the operations of which are not subject to regulation by HUD.

*MIG"* means MIG II Realty Advisors, Inc., the successor to MIGRA, a registered investment
advisor and functions as a real estate advisor to pension clients.

*"MIGRA"* means MIG Realty Advisors, Inc., the company which merged with AERC on June 30,
1998.

*"National Housing Act"* means the National Housing Act, as amended from time to time.

*"Operating Partnerships"* means the acquired general and certain limited partnership interests of
a multifamily property in development as well as an operating multifamily property which were structured
as a DownREIT.

*"Physical Occupancy"*means the total number of units less the number of unoccupied units
divided by the total number of units expressed as a percentage.

*"Potential Unit Rent"* means the rent at which a unit is expected to be leased based on its market
value.

*"Regulatory Agreement"* means an agreement between HUD and the owner of a property, the
mortgage indebtedness of which is insured by HUD, pursuant to which certain aspects of the operations
of such property are regulated.

*"Same Store"* means Same Store Market Rate properties.  The Same Store concept is applied
to a REIT's rental income, operating expenses and/or net operating income from those properties which
have been owned and operated during the entire fiscal period of the prior year.

*"Service Companies"* means Associated Estates Management Company, Merit Management
Corporation, Merit Painting Services, Inc., Estates Mortgage Company, Children's Computer Company
and MIG II Realty Advisors, Inc. These are Service Companies in which Associated Estates Realty
Corporation owns substantially all of the economic interests in order to provide the Company with as
much of the economic benefits of such corporations' operations as possible while furthering the
Company's current intention of complying with the Code requirements for qualification as a REIT.



*"Unit"* means an apartment unit in a multifamily property.

*"Total Market Capitalization"* means the aggregate market value of the Company's outstanding
common and preferred shares and total long-term debt of the Company.



**Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K**

(a)	The following documents are filed as part of this Report.

1.	Financial Statements: The following documents are filed as part of this
report.

Report of Independent Accountants - Associated Estates Realty
Corporation.

Consolidated Balance Sheets at December 31, 2000 and 1999.

Consolidated Statements of Income for the three years ended
December 31, 2000, 1999 and 1998.

Consolidated Statements of Shareholders' Equity for the three years
ended December 31, 2000, 1999 and 1998.

Consolidated Statements of Cash Flows for the three years ended
December 31, 2000, 1999 and 1998.

Notes to Financial Statements.

2.	Financial Statement Schedules:  The following financial statement
schedules of Associated Estates Realty Corporation are filed as part of this
Report and should be read in conjunction with the Consolidated Financial
Statements of Associated Estates Realty Corporation.

Schedules										Page

II   Valuation and Qualifying Accounts						F-40

III	Real Estate and Accumulated Depreciation					F-41

Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set forth
therein is included in the Consolidated Financial Statements or Notes
thereto.

(b)	Exhibits:  The Exhibits listed on the accompanying Index to Exhibits immediately following the financial
statement schedules are filed as part of, or incorporated by reference into, this Report.

|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | **Filed herewith or**                                                            
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | **incorporated**                                                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | **herein by**                                                                    
|Number | **Title**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | **reference**                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|2.01   | Second Amended and Restated Agreement and Plan of Merger by  and
among the Company, MIG Realty Advisors, Inc.  ("MIGRA")  and the
MIGRA stockholders dated as of March 30, 1998                                                                                                                                                                                                                                                                                                                                                                       |  | Exhibit 2.01 to Form 8-K filed March 31, 1998.                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|3.1    | Second Amended and Restated Articles of Incorporation of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | Exhibit 3.1 to Form
S-11 filed June 30,
1994 (File No. 33-80950 as amended)      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|3.2    | Code of Regulations of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | Exhibit 3.2 to Form
S-11 filed June 30,
1994 (File No. 33-80950 as amended).     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.1    | Specimen Stock Certificate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | Exhibit 3.1 to Form S-11 filed September 2,
1993 (File No. 33-68276 as amended). 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.2    | Form of Indemnification Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | Exhibit 4.2 to Form S-11 filed September 2,
1993 (File No. 33-68276 as amended). 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.3    | Promissory Note dated October 23, 1991 from Triangle Properties Limited
Partnership, et. al., in favor of PFL Life Insurance Company; Open End
Mortgage from Triangle Properties Limited Partnership I, et. al., in favor of
PFL Life Insurance Company (The Registrant undertakes to provide
additional long-term loan documents upon request).                                                                                                                                                                                                      |  | Exhibit 4.3 to Form S-11 filed September 2,
1993 (File No. 33-68276 as amended). 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.4    | Promissory Note dated February 28, 1994 in the amount of $25 million.
Open-End Mortgage Deed and Security Agreement from AERC to
National City Bank (Westchester Townhouse); Open-End Mortgage Deed
and Security Agreement from AERC to National City Bank (Bay Club);
Open-End Mortgage Deed and Security Agreement from Winchester II
Apartments, Inc. to National City Bank (Winchester II Apartments); and
Open-End Mortgage Deed and Security Agreement from Portage Towers
Apartments, Inc. to  National City Bank (Portage Towers Apartments). |  | Exhibit 4.4 to Form  10-K filed March 31, 1993.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.5    | Form of Promissory Note and Form of Mortgage and Security Agreement
dated May 10, 1999 from AERC to The Chase Manhattan Bank.                                                                                                                                                                                                                                                                                                                                                                                                                         |  | Exhibit 4.5 to Form 10-Q filed August 13,
1999.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.5a   | Form of Promissory Note and Form of Mortgage and Security Agreement
dated September 10, 1999 from AERC to The Chase Manhattan Bank.                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Exhibit 4.5a to Form
10-Q filed November
12, 1999.                               
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.5b   | Form of Promissory Note and Form of Mortgage and Security Agreement

dated November 18, 1999 from AERC to The Chase Manhattan Bank                                                                                                                                                                                                                                                                                                                                                                                                                    |  | Exhibit 4.5b to Form
10-K filed March 15,
2000.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.6    | Indenture dated as of March 31, 1995 between Associated Estates Realty
Corporation and National City Bank.                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | Exhibit 4.6 to Form 10-Q filed May 11, 1995.                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.9    | Form of Medium-Term Note-Fixed Rate-Senior Security.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | Exhibit 4(I) to Form S-3
filed December 7, 1995
(File No. 33-80169) as
amended.  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.10   | Form of Preferred Share Certificate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | Exhibit 4.1 to Form 8-K
filed July 12, 1995.                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.11   | Form of Deposit Agreement and Depositary Receipt.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | Exhibit 4.2 to Form 8-K
filed July 12, 1995.                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.13   | Loan Agreement between Associated Estates Realty Corporation and
National City Bank                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Exhibit 4.13 to Form
10-K filed March 15,
2000.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.13a  | First Amendment to Loan Agreement between Associated Estates Realty
Corporation and National City Bank                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Exhibit 4.13a to Form
10-Q filed August 8,
2000.                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.13b  | Second Amendment to Loan Agreement between Associated Estates
Realty Corporation and National City Bank.                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | Exhibit 4.13b to Form
10-K filed herewith.                                       
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.14   | Guaranty Agreement dated November 28, 2000 from Associated Estates
Realty Corporation to Southtrust Bank                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | Exhibit 4.14 to Form
10-K filed herewith.                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10     | Associated Estates Realty Corporation Directors' Deferred Compensation
Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | Exhibit 10 to Form 10-Q filed November 14,
1996                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.1   | Registration Rights Agreement among the Company and certain holders
of the Company's Common Shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Exhibit 10.1 to Form S-11 filed September 2,
1993 (File No. 33-68276 as amended).
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.2   | Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | Exhibit 10.2 to Form S-11 filed September 2,
1993 (File No. 33-68276 as amended).
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.3   | Amended and Restated Employment Agreement between the Company
and Jeffrey I. Friedman.                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Exhibit 10.1 to Form
10-Q filed May 13,
1996.                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.4   | Equity-Based Incentive Compensation Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | Exhibit 10.4 to Form
10-K filed March 29,
1995.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.5   | Long-Term Incentive Compensation Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | Exhibit 10.5 to Form
10-K filed March 29,
1995.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.6   | Lease Agreement dated November 29, 1990 between Royal American
Management Corporation and Airport Partners Limited Partnership.                                                                                                                                                                                                                                                                                                                                                                                                                       |  | Exhibit 10.6 to Form
10-K filed March 29,
1995.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.7   | Sublease dated February 28, 1994 between the Company as Sublessee,
and Progressive Casualty Insurance Company, as Sublessor.                                                                                                                                                                                                                                                                                                                                                                                                                          |  | Exhibit 10.7 to Form
10-K filed March 29,
1995.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.8   | Assignment and Assumption Agreement dated May 17, 1994 between the
Company, as Assignee, and Airport Partners Limited Partnership, as
Assignor.                                                                                                                                                                                                                                                                                                                                                                                                       |  | Exhibit 10.8 to Form
10-K filed March 29,
1995.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.9   | Form of Restricted Agreement dated by and among the Company and Its
Independent Directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | Exhibit 10.9 to Form
10-K filed March 28,
1996.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.10  | Pledge Agreement dated May 23, 1997 between Jeffrey I. Friedman and
the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | Exhibit 10.01 to Form
10-Q filed August 8,
1997                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.11  | Secured Promissory Note dated May 23, 1997 in the amount of
$1,671,000 executed by Jeffrey I. Friedman in favor of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                       |  | Exhibit 10.02 to Form
10-Q filed August 8,
1997                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.12  | Unsecured Promissory Note dated May 23, 1997 in the amount of
$1,671,000 executed by Jeffrey I. Friedman in favor of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                     |  | Exhibit 10.03 to Form
10-Q filed August 8,
1997                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.14  | Form of Share Option Agreement by and among the Company and Its
Independent Directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Exhibit 10.14 to Form
10-K filed March 30,
1993.                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.15  | Agreement dated March 11, 1999 by and among the Company and The
Milstein Affiliates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | Exhibit 10.15 to Form
10-Q filed May 17,
1999.                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.16  | Agreement dated March 11, 1999 by and among the Company and The
Milstein Affiliates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | Exhibit 10.16 to Form
10-Q filed May 17,
1999.                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.19  | Amended and Restated Confidentiality and Noncompete Agreement
dated January 26, 2000 by and between the Company and James A.
Cote'.                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Exhibit 10.19 to Form
10-K filed March 15,
2000.                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.19a | Consulting Agreement between James A. Cote' and the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | Exhibit 10.19a to Form
10-K filed herewith.                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.20  | Agreement dated October 11, 1999 by and among the Company and
certain of the former holders (the "MIGRA Stockholders") of the issued
and outstanding shares of common stock of MIG Realty Advisors, Inc.
("MIGRA").                                                                                                                                                                                                                                                                                                                                   |  | Exhibit 10.20 to Form
10-K filed March 15,
2000.                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.21  | Swap Agreement dated February 16, 2000 by and among the Company
and National City Bank                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Exhibit 10.21 to Form
10-Q filed May 10,
2000.                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|18.1   | Letter regarding change in accounting principles                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | Exhibit 18.1 to Form
10-Q filed May 17,
1999.                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|21.1   | List of Subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | Exhibit 21.1

filed herewith.                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|23.1   | Consent of Independent Accountants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | Exhibit 23.1

filed herewith.                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  



Pursuant to the requirements of Section 13 or 15(d) 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, on the 12th day of
March, 2001.

**ASSOCIATED ESTATES REALTY CORPORATION**

By /s/ Jeffrey I. Friedman

Jeffrey I. Friedman, Chairman of the Board,

and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities indicated on the 12th day of March, 2001.

|Signature               | Title                                                | Date          
|----------------------- | ---------------------------------------------------- | --------------
|                        |                                                      |               
|/s/ Jeffrey I. Friedman | Chairman of the Board and Chief Executive            | March 12, 2001
|Jeffrey I. Friedman     | Officer (Principal Executive Officer)                |               
|                        |                                                      |               
|/s/ Louis E. Vogt       | President, Chief Operating Officer and Director      | March 12, 2001
|Louis E. Vogt           |                                                      |               
|                        |                                                      |               
|/s/ Kathleen L. Gutin   | Chief Financial Officer (Principal Financial Officer | March 12, 2001
|Kathleen L. Gutin       | and Principal Accounting Officer)                    |               
|                        |                                                      |               
|/s/ Albert T. Adams     | Director                                             | March 12, 2001
|Albert T. Adams         |                                                      |               
|                        |                                                      |               
|/s/ James M. Delaney    | Director                                             | March 12, 2001
|James M. Delaney        |                                                      |               
|                        |                                                      |               
|/s/ Gerald C. McDonough | Director                                             | March 12, 2001
|Gerald C. McDonough     |                                                      |               
|                        |                                                      |               
|/s/ Mark L. Milstein    | Director                                             | March 12, 2001
|Mark L. Milstein        |                                                      |               
|                        |                                                      |               
|/s/ Frank E. Mosier     | Director                                             | March 12, 2001
|Frank E. Mosier         |                                                      |               
|                        |                                                      |               
|/s/ Richard T. Schwarz  | Director                                             | March 12, 2001
|Richard T. Schwarz      |                                                      |               
|                        |                                                      |               
|/s/ Larry E. Wright     | Director                                             | March 12, 2001
|Larry E. Wright         |                                                      |               





|Financial Statements:                                                     | Page
|------------------------------------------------------------------------- | ----
|                                                                          |     
|Report of Independent Accountants                                         | F-2 
|Consolidated Balance Sheets at December 31, 2000 and 1999                 | F-3 
|Consolidated Statements of Income for the                                 |     
|three years ended December 31, 2000, 1999 and 1998                        | F-4 
|Consolidated Statements of Shareholders' Equity for the three years ended |     
|December 31, 2000, 1999 and 1998                                          | F-5 
|Consolidated Statements of Cash Flows for the three                       |     
|years ended December 31, 2000, 1999 and 1998                              | F-6 
|Notes to Financial Statements                                             | F-7 
|                                                                          |     
|Financial Statement Schedules:                                            |     
|II - Valuation and Qualifying Accounts                                    | F-40
|III - Real Estate and Accumulated Depreciation at December 31, 2000       | F-41
|                                                                          |     

All other schedules are omitted because they are not applicable or the required information is shown in
the financial statements or notes thereto.



To the Board of Directors and Shareholders of

Associated Estates Realty Corporation

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in
all material respects, the financial position of Associated Estates Realty Corporation and its subsidiaries (the
"Company") at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2000 in conformity with accounting principles generally
accepted in the United States of America.  In addition, in our opinion, the financial statement schedules listed in
the accompanying index present fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.  These financial statements and financial
statement schedules are the responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedules based on our audits.  We conducted
our audits of these statements in accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

As discussed in Notes 1 and 20 to the financial statements, in 1999, the Company changed its method
of accounting for certain replacements and improvements.

/s/ PricewaterhouseCoopers LLP

Cleveland, Ohio

March 1, 2001



**CONSOLIDATED BALANCE SHEETS**

|                                                                 | December 31, 
|---------------------------------------------------------------- | -------------
|                                                                 | 2000         
|**ASSETS**                                                       |              
|Real estate assets                                               |              
|Land                                                             | $  92,082,722
|Buildings and improvements                                       | 794,907,854  
|Furniture and fixtures                                           | 32,248,635   
|                                                                 | 919,239,211  
|Less:  accumulated depreciation                                  | (184,600,179)
|                                                                 | 734,639,032  
|Construction in progress                                         | 7,542,813    
|Real estate, net                                                 | 742,181,845  
|Properties held for sale, net of accumulated depreciation        | 27,845,250   
|Cash and cash equivalents                                        | 565,692      
|Restricted cash                                                  | 14,784,250   
|Accounts and notes receivable                                    |              
|Rents                                                            | 864,387      
|Affiliates and joint ventures                                    | 12,456,292   
|Other                                                            | 3,886,113    
|Intangible and other assets, net                                 | 16,975,402   
|                                                                 | $819,559,231 
|                                                                 |              
|**LIABILITIES AND SHAREHOLDERS' EQUITY**                         |              
|Secured debt                                                     | $567,467,787 
|Unsecured debt                                                   | 709,000      
|Total indebtedness                                               | 568,176,787  
|Accounts payable and accrued expenses                            | 24,198,591   
|Resident security deposits                                       | 5,412,032    
|Funds held on behalf of managed properties                       |              
|Affiliates and joint ventures                                    | 8,123,509    
|Other                                                            | 1,379,807    
|Accrued interest                                                 | 2,941,584    
|Accumulated losses and distributions of joint                    |              
|ventures in excess of investment and advances, net               | 1,350,805    
|Total liabilities                                                | 611,583,115  
|                                                                 |              
|Operating partnership minority interest                          | 11,520,300   
|                                                                 |              
|Commitments and contingencies                                    | -            
|Shareholders' equity                                             |              
|Preferred shares, Class A cumulative, without                    |              
|par value; 3,000,000 authorized; 225,000 issued and outstanding  | 56,250,000   
|Common shares, without par value, $.10 stated value; 50,000,000  |              
|authorized; 22,995,764 and 22,716,720, issued and 19,349,584 and |              
|21,172,340 outstanding at December 31, 2000 and 1999,            |              
|respectively                                                     | 2,299,576    
|Paid-in capital                                                  | 279,618,520  
|Accumulated dividends in excess of net income                    | (108,002,039)
|Accumulated other comprehensive income                           | (1,875)      
|Less:  Treasury shares, at cost, 3,646,180 and 1,544,380 shares  |              
|at December 31, 2000 and 1999, respectively                      | (33,708,366) 
|Total shareholders' equity                                       | 196,455,816  
|                                                                 | $819,559,231 







**CONSOLIDATED STATEMENTS OF INCOME**

|                                                                      | For the year ended December 31,
|--------------------------------------------------------------------- | -------------------------------
|                                                                      | 2000                           
|Revenues                                                              |                                
|Rental                                                                | $144,098,827                   
|Property management fees                                              | 5,140,354                      
|Asset management fees                                                 | 2,628,181                      
|Asset acquisition fees                                                | 351,600                        
|Asset disposition fees                                                | -                              
|Painting services                                                     | 1,530,468                      
|Other                                                                 | 3,356,537                      
|Total revenues                                                        | 157,105,967                    
|Expenses and charges                                                  |                                
|Property operating and maintenance                                    | 64,107,978                     
|Depreciation and amortization                                         | 35,479,056                     
|Painting services                                                     | 1,558,631                      
|Preliminary project costs                                             | -                              
|General and administrative                                            | 14,326,836                     
|Write-off of software development costs                               | -                              
|Default waiver fee                                                    | -                              
|Interest expense                                                      | 43,639,740                     
|Total expenses and charges                                            | 159,112,241                    
|(Loss) income before gain on disposition of properties and land, net, |                                
|equity in net (loss) income of joint ventures, minority interest,     |                                
|extraordinary item and cumulative effect of a change                  |                                
|in accounting principle                                               | (2,006,274)                    
|Gain on disposition of properties and land, net                       | 7,511,889                      
|Equity in net (loss) income of joint ventures                         | (163,401)                      
|Minority interest in operating partnership                            | (400,071)                      
|**Income before extraordinary item and cumulative effect**            |                                
|**of a change in accounting principle**                               | 4,942,143                      
|Extraordinary item-extinguishment of debt                             | -                              
|Cumulative effect of a change in accounting principle                 | -                              
|**Net income**                                                        | $    4,942,143                 
|****                                                                  |                                
|**Net (loss) income applicable to common shares**                     | $      (542,283)               
|****                                                                  |                                
|**Earnings per common share - basic:**                                |                                
|(Loss) income before extraordinary item and cumulative                |                                
|effect of a change in accounting principle                            | $             (.03)            
|Extraordinary item                                                    | $                  -           
|Cumulative effect of a change in accounting principle                 | $                  -           
|Net (loss) income                                                     | $             (.03)            
|                                                                      |                                
|**Earnings per common share - diluted:**                              |                                
|(Loss) income before extraordinary item and cumulative                |                                
|effect of a change in accounting principle                            | $             (.03)            
|Extraordinary item                                                    | $                  -           
|Cumulative effect of a change in accounting principle                 | $                  -           
|Net (loss) income                                                     | $             (.03)            
|                                                                      |                                
|**Pro forma amounts assuming the new capitalization**                 |                                
|**policy is applied retroactively:**                                  |                                
|Effect of new capitalization policy                                   | $                   -          
|Net income                                                            | $    4,942,143                 
|Net (loss) income applicable to common shares                         | $      (542,283)               
|**Earnings per common share - basic:**                                |                                
|Effect of new capitalization policy                                   | $                   -          
|Net (loss) income applicable to common shares                         | $             (.03)            
|**Earnings per common share - diluted:**                              |                                
|Effect of new capitalization policy                                   | $                   -          
|Net (loss) income applicable to common shares                         | $             (.03)            
|                                                                      |                                
|**Dividends declared per common share**                               | $             1.25             
|                                                                      |                                
|**Weighted average number of common shares**                          |                                
|**outstanding	- Basic**                                               | 19,732,500                     
|**- Diluted**                                                         | 19,732,500                     





**ASSOCIATED ESTATES REALTY CORPORATION**

**CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY**

|                                                                       |              |             |               |              |                 |               |                 
|---------------------------------------------------------------------- | ------------ | ----------- | ------------- | ------------ | --------------- | ------------- | ----------------
|                                                                       |              | Class A     |               |              | Accumulated     | Accumulated   |                 
|                                                                       |              | Cumulative  | Common Shares |              | Dividends in    | Other         | Treasury        
|                                                                       |              | Preferred   | (at $.10      | Paid-In      | Excess of       | Comprehensive | Shares          
|                                                                       | Total        | Shares      | stated value) | Capital      | Net Income      | Income        | (at cost)       
|                                                                       |              |             |               |              |                 |               |                 
|Balance, December 31, 1997                                             | $181,158,078 | $56,250,000 | $1,707,377    | $171,756,307 | $  (48,552,106) | $(3,500)      | $              -
|Comprehensive income:                                                  |              |             |               |              |                 |               |                 
|Net income                                                             | 17,514,762   | -           | -             | -            | 17,514,762      | -             | -               
|Other comprehensive income:                                            |              |             |               |              |                 |               |                 
|Reclassification adjustment for gains included in net income of $2,625 | 2,625        | -           | -             | -            | -               | 2,625         | -               
|Total comprehensive income                                             | 17,517,387   | -           | -             | -            | 17,514,762      | 2,625         | -               
|Issuance of 484 restricted common shares                               | -            | -           | 48            | (48)         | -               | -             | -               
|Issuance of 5,547,701 common shares relating to the MIGRA merger       |              |             |               |              |                 |               |                 
|and the acquisition of the MIG REIT properties                         | 106,063,359  | -           | 554,770       | 105,508,589  | -               | -             | -               
|Additional costs relating to common share offering                     | (129,860)    | -           | -             | (129,860)    | -               | -             | -               
|Purchase of 25,000 treasury shares                                     | (466,523)    | -           | -             | -            | -               | -             | (466,523)       
|Common share dividends declared                                        | (39,469,873) | -           | -             | -            | (39,469,873)    | -             | -               
|Preferred share dividends declared                                     | (5,484,421)  | -           | -             | -            | (5,484,421)     | -             | -               
|Balance, December 31, 1998                                             | 259,188,147  | 56,250,000  | 2,262,195     | 277,134,988  | (75,991,638)    | (875)         | (466,523)       
|Comprehensive income:                                                  |              |             |               |              |                 |               |                 
|Net income                                                             | 23,708,997   | -           | -             | -            | 23,708,997      | -             | -               
|Other comprehensive income:                                            |              |             |               |              |                 |               |                 
|Reclassification adjustment for loss included in net income            |              |             |               |              |                 |               |                 
|of ($4,375)                                                            | (4,375)      | -           | -             | -            | -               | (4,375)       | -               
|Total comprehensive income                                             | 23,704,622   | -           | -             | -            | 23,708,997      | (4,375)       | -               
|Issuance of 74,994 common shares relating to the                       |              |             |               |              |                 |               |                 
|MIGRA merger contingent consideration                                  | 872,935      | -           | 7,499         | 865,436      | -               | -             | -               
|Issuance of 21,000 restricted common shares                            | 260,400      | -           | 2,100         | 258,300      | -               | -             | -               
|Retired 1,232 restricted common shares                                 | (24,972)     | -           | (123)         | (24,849)     | -               | -             | -               
|Purchase of 1,519,380 treasury shares                                  | (15,481,921) | -           | -             | -            | -               | -             | (15,481,921)    
|Deferred compensation                                                  | (177,397)    | -           | -             | (177,397)    | -               | -             | -               
|Common share dividends declared                                        | (24,675,357) | -           | -             | -            | (24,675,357)    | -             | -               
|Preferred share dividends declared                                     | (5,484,426)  | -           | -             | -            | (5,484,426)     | -             | -               
|Balance, December 31, 1999                                             | 238,182,031  | 56,250,000  | 2,271,671     | 278,056,478  | (82,442,424)    | (5,250)       | (15,948,444)    
|Comprehensive income:                                                  |              |             |               |              |                 |               |                 
|Net income                                                             | 4,942,143    | -           | -             | -            | 4,942,143       | -             | -               
|Other comprehensive income:                                            |              |             |               |              |                 |               |                 
|Reclassification adjustment for gains included in net income           |              |             |               |              |                 |               |                 
|of $3,375                                                              | 3,375        | -           | -             | -            | -               | 3,375         | -               
|Total comprehensive income                                             | 4,945,518    | -           | -             | -            | 4,942,143       | 3,375         | -               
|Issuance of 6,333 common shares                                        | 1,811        | -           | 633           | 1,178        |                 |               |                 
|Issuance of 216,911 common shares relating to the                      |              |             |               |              |                 |               |                 
|MIGRA merger contingent consideration                                  | 1,482,797    | -           | 21,692        | 1,461,105    | -               | -             | -               
|Issuance of 64,700 restricted common shares                            | 531,007      | -           | 6,470         | 524,537      | -               | -             | -               
|Retired 8,900 restricted common shares                                 | (96,525)     | -           | (890)         | (95,635)     | -               | -             | -               
|Purchase of 2,101,800 treasury shares                                  | (17,759,922) | -           | -             | -            | -               | -             | (17,759,922)    
|Deferred compensation                                                  | (329,143)    | -           | -             | (329,143)    | -               | -             | -               
|Common share dividends declared                                        | (25,017,332) | -           | -             | -            | (25,017,332)    | -             | -               
|Preferred share dividends declared                                     | (5,484,426)  | -           | -             | -            | (5,484,426)     | -             | -               
|Balance, December 31, 2000                                             | $196,455,816 | $56,250,000 | $2,299,576    | $279,618,520 | $(108,002,039)  | $ (1,875)     | $(33,708,366)   







**ASSOCIATED ESTATES REALTY CORPORATION**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

****

|                                                                                         | For the year ended December 31,
|---------------------------------------------------------------------------------------- | -------------------------------
|                                                                                         | 2000                           
|Cash flow from operating activities:                                                     |                                
|Net income                                                                               | $  4,942,143                   
|Adjustments to reconcile net income to net cash provided by operating activities:        |                                
|Depreciation and amortization                                                            | 35,479,056                     
|Cumulative effect of a change in accounting principle                                    | -                              
|Minority interest in operating partnership                                               | 400,071                        
|Write-off of software development costs                                                  | -                              
|Loss on extinguishment of debt                                                           | -                              
|Gain on disposition of properties and land                                               | (8,501,899)                    
|Loss on conveyance of Berkley Manor to joint venture partnership                         | 990,010                        
|Loss on conveyance of Rainbow Terrace Apartments to HUD                                  | -                              
|Equity in net loss (income) of joint ventures                                            | 163,401                        
|Earnings distributed from joint ventures                                                 | 607,615                        
|Net change in assets and liabilities (net of effect of the MIGRA merger for 1998         |                                
|amounts):	- Accounts and notes receivable                                                | 1,984,077                      
|- Accounts and notes receivable of affiliates and joint ventures                         | (779,693)                      
|- Accounts payable and accrued expenses                                                  | (1,656,887)                    
|- Other operating assets and liabilities                                                 | 189,256                        
|- Restricted cash                                                                        | (634,736)                      
|- Funds held for non-owned managed properties                                            | 81,551                         
|- Funds held for non-owned managed properties of affiliates                              |                                
|and joint ventures                                                                       | (1,706,573)                    
|Total adjustments                                                                        | 26,615,249                     
|Net cash flow provided by operations                                                     | 31,557,392                     
|Cash flow from investing activities:                                                     |                                
|Real estate and fixed asset additions acquired or developed (net of liabilities assumed) | (29,256,964)                   
|Net proceeds received from sale of properties                                            | 16,509,548                     
|(Contributions to) distributions from joint ventures                                     | (4,084,211)                    
|Net cash flow used for investing activities                                              | (16,831,627)                   
|Cash flow from financing activities:                                                     |                                
|Principal payments on secured debt                                                       | (6,728,168)                    
|Proceeds from secured debt, net of required escrow deposits of                           |                                
|$6,794,543 at December 31, 1999                                                          | 9,800,000                      
|Proceeds from interest rate swap termination fee                                         | 3,187,938                      
|Principal payment on Senior and Medium-Term Notes                                        | (8,543,000)                    
|Proceeds from Senior and Medium-Term Notes                                               | -                              
|Lines of Credit borrowings                                                               | 42,764,243                     
|Lines of Credit repayments                                                               | (42,764,243)                   
|Deferred financing costs                                                                 | -                              
|Transaction costs paid related to debt extinguishment                                    | -                              
|Common share dividends paid and operating partnership distributions                      | (25,017,332)                   
|Preferred share dividends paid                                                           | (5,484,426)                    
|Purchase of treasury shares                                                              | (17,759,922)                   
|Net cash flow (used for) provided by financing activities                                | (50,544,910)                   
|(Decrease) increase in cash and cash equivalents                                         | (35,819,145)                   
|Cash and cash equivalents, beginning of year                                             | 36,384,837                     
|Cash and cash equivalents, end of year                                                   | $    565,692                   





**ASSOCIATED ESTATES REALTY CORPORATION**

**NOTES TO FINANCIAL STATEMENTS**

**1.**	**BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES**

**Business**

Associated Estates Realty Corporation (the "Company") is a self-administered and self-managed real estate investment trust ("REIT") which specializes in the multifamily property
management, advisory, development, acquisition, disposition, operation and ownership activities.  The
Company and its affiliates receive certain property and asset management fees, acquisition, disposition
and incentive fees, loan origination and consultation fees, and mortgage servicing fees.  MIG II Realty
Advisors, Inc. ("MIG"), an affiliate of the Company, is a registered investment advisor and serves as a
real estate advisor to pension funds.  MIG recognizes revenue primarily from client generated
acquisition, disposition and incentive fees, loan origination, advisory, mortgage servicing, asset and
property management and construction lending activities.  MIG earns the majority of its mortgage
servicing fee revenue from two of its pension fund clients.  MIG's asset and property management,
investment advisor and mortgage servicing operations are collectively referred to herein as the "MIGRA
Operations".  Additionally, the Company owns substantially all of the economic interest in four
corporations which provide management and other services for the Company and third parties.  These
corporations are referred to herein as "Service Companies".

The Company's portfolio currently consists of a total of 136 properties of which 82 (69 Market
Rate properties and 13 Affordable Housing properties) are owned, directly or indirectly, by the Company
or by a subsidiary of the Company; eight properties in which the Company is a joint venture partner (one
Market Rate property 66.67% owned; three Market Rate properties 33.33% owned; two Market Rate
properties 50.0% owned, one Affordable Housing property 50.0% owned and one Market Rate property
49.0% owned) and 46 non-owned properties (of which one is a commercial property) managed by the
Company or one of its Service Companies which provide property and asset management, investment
advisory, painting and computer services to both owned and non-owned properties.  Additionally, MIG
provides asset management services for an additional seven properties, six of which are commercial
properties.

**Principles of Consolidation**

The accompanying consolidated financial statements include the accounts of the Company, all
subsidiaries, the Service Companies, a partnership in which the Company is a 66.67% owner and the
Operating Partnership structured as a DownREIT.  The qualified REIT subsidiaries of the Company
which were formed in connection with the project specific, nonrecourse mortgage refinancing are
included in the Company's consolidated financial statements.  These qualified REIT subsidiaries are
separate legal entities and maintain records, books of accounts and depository accounts separate and
apart from any other person or entity.

The Company holds preferred share interests in the Service Companies which entitles it to
receive 95.0% of the economic benefits from operations and which is convertible into a majority interest
in the voting common shares.  The outstanding voting common shares of these Service Companies are
held by an executive officer of the Company.  The Service Companies are consolidated because, from a
financial reporting perspective, the Company is entitled to virtually all economic benefits and has
operating control.  The preferred share interests are not an impermissible investment for purposes of the
Company's REIT qualification test.

The Company entered into an Operating Partnership structured as a DownREIT of which an
aggregate 20.0% is owned by limited partners.  Interests held by limited partners in real estate
partnerships controlled by the Company are reflected as "Operating partnership minority interest" in the
Consolidated Balance Sheets.  Capital contributions, distributions and profits and losses are allocated to
minority interests in accordance with the terms of the Operating Partnership agreement.

One property included in the financial statements is 33.33% owned by third party investors.  As
this property has an accumulated deficit, no recognition of the third party interest is reflected in the
financial statements since it is the Company's policy to recognize minority interest only to the extent that
the third party's investment and accumulated share of income exceeds distributions and its share of
accumulated losses.  Investments in joint ventures, that are 50.0% or less owned by the Company, are
presented using the equity method of accounting.  Since the Company intends to fulfill its obligations as
a partner in the joint ventures, the Company has recognized its share of losses and distributions in
excess of its investment.

All significant intercompany balances and transactions have been eliminated in consolidation.

**Change in Estimates**

In connection with the Company's adoption of the change in its policy for capitalizing certain
replacements (See Note 20), the Company reassessed its remaining useful lives of certain appliances
and floor covering it had capitalized upon the acquisition of a property.  This change in useful lives
together with the reduction in the estimated useful lives of certain software from 10 to 7 years had the
effect of reducing income by approximately $905,600 or $.05 per share (basic and diluted) and $905,600
or $.04 per share (basic and diluted) for the years ended December 31, 2000 and 1999, respectively.
Also, the Company had determined in December 1998 that it would replace certain of its software during
1999.  Commencing January 1, 1999, the Company began amortizing the remaining net book value over
its revised estimated useful life of one year.  This change had the effect of reducing net income by
approximately $948,000 or $.04 per share (basic and diluted) for the year ended December 31, 1999.

**Use of Estimates**

The preparation of financial statements in accordance with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements
and reported amounts of revenues and expenses during the reporting periods.  Actual results could
differ from these estimates.

**Cash Equivalents**

The Company considers highly liquid investments with an original maturity of three months or
less when purchased to be cash equivalents.

**Real Estate and Depreciation**

Real estate assets are stated at the lower of cost or fair value, as appropriate, less accumulated
depreciation. Included in construction in progress are parcels of undeveloped land held for future
development.  Depreciation is provided on a straight-line basis over the estimated useful lives of the
assets as follows:

Buildings and improvements		5 - 30 years

Furniture, fixtures and equipment		5 - 10 years

As more fully discussed in Note 20, effective January 1, 1999, the Company changed its method
of accounting to capitalize expenditures for certain replacements and improvements, such as new HVAC
equipment, structural replacements, appliances, flooring, carpeting and kitchen/bath replacements and
renovations.  Previously, these costs were charged to operations as incurred.  Ordinary repairs and
maintenance, such as unit cleaning and painting, and appliance repairs are expensed.  The Company
believes the change in the capitalization method provides an improved measure of the Company's
capital investment, provides a better matching of expenses with the related benefit of such expenditures,
including associated revenues, and is, in the opinion of management, consistent with industry practice.
The cumulative effect of this change in accounting principle increased net income for the year ended
December 31, 1999 by $4.3 million or $.19 per share (basic and diluted).

The Company capitalizes interest costs on funds used in construction, real estate taxes and
insurance from the commencement of development activity through the time the property is ready for
leasing.

**Impairment of Long-Lived Assets**

Management reviews the carrying value of real estate assets using estimated future cash flows,
including estimated proceeds from disposition, whenever an event or change in circumstance indicates
that the asset value may not be recoverable.

The Company uses the undiscounted cash flow method to determine impairment in the carrying
value of its long-lived assets.  Measurement of an impairment loss is determined by reducing the
carrying value of the assets to fair value.  Assets that are being held for sale or abandonment are
recorded at the lower of carrying value or fair value less cost to sell.

**Deferred Leasing and Financing Costs**

Costs incurred in obtaining long-term financing are deferred and amortized over the life of the
associated instrument on a straight-line basis, which approximates the effective interest method.
External costs incurred in the leasing of commercial and retail space are amortized on a straight-line
basis over the terms of the related lease agreements.

**Intangible Assets**

Intangible assets primarily represent the allocated purchase price from the MIG Realty Advisors,
Inc. ("MIGRA") merger associated with the acquired advisory, property management and mortgage
servicing contracts obtained from the merger, client relationships and the MIGRA management team as
well as the related goodwill.   The Company reviews its intangible assets for impairment should either of
the following impairment indicators occur:  (i) client terminates a contract that is not replaced with a new
client contract within one year or (ii) employment services of certain of the key employees retained by
the Company is terminated.  Upon any such occurrence or any other situation considered by
management to be an impairment indicator, the Company will assess the impact of the contract or
employment relationship terminated on the recoverability of the intangible assets and will write-off the
appropriate amount.  During 2000 and 1999, the recorded intangible asset was increased for the merger
contingent consideration paid as well as the purchase price adjustment as further discussed in Note 2.
The Company is amortizing its intangible assets on a straight-line basis over a six year period.

**Revenue Recognition**

The Company's residential property leases are for terms of generally one year or less.  Rental
income is recognized on the straight-line basis.  Retroactive revenue increases related to budget based
Affordable Housing Properties are generally recognized based on applications submitted to HUD that
have been approved.

Acquisition, management and disposition fees, interest income and other fees are recognized
when the related services are performed and the earnings process is complete.  Servicing fee income,
related to loans serviced on behalf of the pension funds, is recognized when earned and is included in
other income in the Consolidated Statements of Income.

**Operating Partnership Minority Interest**

In conjunction with the acquisition of the operating partnership, the Company issued a total of
522,032 operating partnership units ("OP units").  The Company has the option to redeem, in certain
circumstances, the OP units for common shares exchangeable on a one-for-one basis, or the cash
equivalent amount.  In August 2000, 19,662 of the OP units were exchanged for cash in the amount of
$144,270 which represented a value of $7.34 per unit.  These units had a recorded amount of $435,874
when issued.  The difference of the cash paid and the recorded amounts was $291,604 which reduced
the recorded amount of the underlying real estate.  The OP unitholders are entitled to receive cumulative
distributions per OP unit equal to the per share distributions on the Company's common shares.  The
Company charged $400,071, $241,310 and $78,706 to "Minority interest in operating partnership" in the
Consolidated Statements of Income relating to the OP unitholders allocated share of net income for the
years ended December 31, 2000, 1999 and 1998, respectively.

**Income Taxes**

The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986 (the
"Code"), as amended.  As a REIT, the Company is entitled to a tax deduction for dividends paid to its
shareholders, thereby effectively subjecting the distributed net income of the Company to taxation at the
shareholder level only, provided it distributes at least 95.0% (90.0% after December 31, 2000) of its
taxable income and meets certain other qualifications.

The Service Companies operate as taxable C-corporations under the Code and have accounted
for income taxes in accordance with the provisions of Statement of Financial Accounting Standard
("SFAS") No. 109, Accounting for Income Taxes.  Taxes are provided for those Service Companies
having net profits for both financial statements and income tax purposes.  The 2000 and 1999 net
operating loss carryforwards for the Service Companies, in the aggregate, are approximately $7.6 million
and $4.7 million and expire during the years 2009 to 2020.

The gross deferred tax assets were $3.1 million, $2.2 million and $2.4 million at December 31,
2000, 1999 and 1998, respectively, and relate principally to net operating losses of the Service
Companies.  Gross deferred tax liabilities of $349,000, $486,000 and $1.2 million at December 31, 2000,
1999 and 1998, respectively, relate primarily to the identifiable intangible assets acquired in connection
with the MIGRA merger and tax basis differences in fixed assets.  The deferred tax valuation allowance
was $2.8 million, $1.7 million and $1.1 million at December 31, 2000, 1999 and 1998, respectively.  In
1999, the Company utilized approximately $768,000 of previously reserved net operating losses.  In
1998, the Company released a valuation allowance of approximately $663,000 primarily related to the
expected utilization of previously reserved net operating losses due to the merger; the effect of which
reduced goodwill.  The Company reserves for net deferred tax assets when management believes it is
more likely than not that they will not be realized.

At December 31, 2000 and 1999, the Company's net tax basis of properties exceeds the amount
set forth in the Company's Consolidated Balance Sheets by $42.7 million and $28.0 million, respectively.

******Derivative Financial Instruments**

The Company may, from time to time, enter into derivative financial instruments as hedges
against changes in interest rates or fair values of the Company's liabilities.  The Company does not
utilize these arrangements for speculative purposes.  At December 31, 2000 and 1999, there were no
derivative financial instruments outstanding.

**Treasury Shares**

The Company records the purchase of Treasury shares at cost.  From time to time, the
Company may reissue these shares.  When the Company reissues the shares, the Company accounts
for the issuance based on the "First in, first out" method.

**Recent Accounting Pronouncements**

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, as amended by SFAS No. 137 and No. 138.  The provisions of this statement require
that derivative instruments be carried at fair value on the balance sheet.  The statement continues to
allow derivative instruments to be used to hedge various risks and sets forth specific criteria to be used
to determine when hedge accounting can be used.  For derivative instruments not accounted for as
hedges, changes in fair value are required to be recognized in earnings.  The provisions of this
statement become effective January 1, 2001.  The impact of adopting the provisions of this statement on
the Company's financial position, results of operations and cash flows is not material to the Company.

In December 1999, the SEC issued SAB 101, "Revenue Recognition in Financial Statements",
which provides guidance on the recognition, presentation and disclosure of revenue in financial
statements.  The Company implemented SAB 101 in the fourth quarter of 2000.  The adoption of this
bulletin did not have a material impact on the Company's results of operations or its financial position.

In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain Transactions
Involving Stock Compensation."  This interpretation clarifies the application of APB Opinion No. 25,
"Accounting for Stock Issued to Employees" for certain issues.  This interpretation became effective for
the Company on July 2000.  The adoption of this interpretation did not have a material impact on the
Company's results of operations or its financial position.

**Reclassifications**

Certain reclassifications have been made to the 1999 and 1998 financial statements to conform
to the 2000 presentation.

**2.	DEVELOPMENT, ACQUISITION AND DISPOSITION ACTIVITY**

**Development Activity**

Construction in progress, including the cost of land, for the development of multifamily properties
was $7.5 million and $22.2 million at December 31, 2000 and 1999, respectively.  The Company
capitalizes interest costs on funds used in construction, real estate taxes and insurance from the
commencement of development activity through the time the property is ready for leasing.  Capitalized
interest, real estate taxes and insurance aggregated approximately $1.1 million, $3.1 million and $2.7
million during the years ended December 31, 2000, 1999 and 1998, respectively.  During 2000, the
construction and leasing of 268 units at two properties were completed at a total cost of $20.6 million.
During 1999, the construction and leasing of 576 units at three properties were completed at a total cost
of $71.0 million.

The following schedule details construction in progress at December 31, 2000:

|                         |        |          |           |                   |          
|------------------------ | ------ | -------- | --------- | ----------------- | ---------
|                         |        |          | Placed in |                   |          
|(dollars in thousands)   | Number | Costs    | Service   | December 31, 2000 | Estimated
|                         | of     | Incurred | through   | Land              | Building 
|Property                 | Units  | to Date  | 12/31/00  | Cost              | Cost     
|                         |        |          |           |                   |          
|AVON, OHIO               |        |          |           |                   |          
|Village at Avon-Phase II | 148    | $8,338   | $6,897    | $   110           | $1,331   
|BOYNTON BEACH, FLORIDA   |        |          |           |                   |          
|Boynton Beach Land       | -      | 5,245    | -         | 5,205             | 40       
|Other                    | -      | 857      | -         | -                 | 857      
|                         | 148    | $14,440  | $6,897    | $5,315            | $2,228   

***** To Be Determined****

**Acquisition Activity**

On May 15, 2000, the Company and one of MIG's advisory clients executed a joint venture
agreement for a newly developed 308 unit multifamily Market Rate property and the adjacent land
located in Atlanta, Georgia.  The Company's initial contribution included land of $4.6 million and cash of
$795,000 for its proportionate share in the joint venture.  The contributed land is a 48 acre parcel of land
on which a 535 unit multifamily Market Rate property will be developed.  This land is located adjacent to
the 308 unit property.  The 535 unit project to be built on the land is scheduled to be completed in 2002.
In connection with the construction of the 535 units, the partnership obtained a construction loan for
$30.0 million.  As part of the loan agreement, the Company has guaranteed the loan.  As guarantor, the
Company has agreed to perform all obligations under the loan agreement that the partnership is unable
to perform including, but not limited to, the payments of all amounts that may be due during the term of
the loan.  At December 31, 2000, the joint venture had real estate assets of $29.2 million and a
mortgage payable of $17.2 million.  The Company owns 49.0% of the joint venture.

On October 13, 2000, the Company executed a joint venture agreement to develop a 252 unit
multifamily Market Rate property located in Cranberry Township, Pennsylvania.  The 252 unit project is
scheduled to be completed in 2002.  The Company contributed land with an estimated fair value of $2.0
million and received a capital credit of $152,000 for its proportionate share in the joint venture.  At the
time of the transfer, the land had a book value of $3.1 million, consequently, the Company recorded a
loss of $990,000 in connection with this transaction which is included in "Gain on disposition of
properties and land, net" in the Consolidated Statements of Income.  At December 31, 2000, the joint
venture had real estate assets of $3.0 million and borrowings of $814,000.  The Company owns 49.0%
of this joint venture.  The Company acquired this 24 acre land parcel during 1999.

On November 30, 2000, the Company acquired a 6.9 acre parcel of land for $5.2 million located
in Boynton Beach, Florida.  The Company is currently negotiating with a third party to form a joint
venture partnership to complete development of this project.  The proposed development of this parcel
is for 229 multifamily Market Rate units, 38 boat slips, a 6,700 square foot restaurant, 11,240 square foot
specialty retail space, 9,800 square foot office space and a two-story parking deck.

Effective December 1, 2000, the Company bought out the two partners in a joint venture
property, in which the Company was a 33.33% partner, and became the 100% owner.  The property,
which is located in Ohio, has 126 units and real estate assets of $1.7 million at December 31, 2000.

The MIGRA merger, the related acquisition of eight multifamily properties from subsidiaries of
MIG Residential REIT, Inc. ("the MIG REIT properties") and one development property together with the
Company's purchase of the three properties which were owned in part by MIG Residential Trust (the
"MRT properties") and a newly developed property, are collectively referred to as the "MIGRA Related
Transaction".  During 1998, without regard to the merger of MIGRA and the related acquisition of the
eight MIG REIT Properties and the two properties held in the DownREIT, the Company acquired five
multifamily properties containing 1,584 units and two parcels of land containing 90 acres for an
aggregate purchase price of $99.1 million, including $15.6 million of liabilities assumed, principally
mortgage indebtedness of $15.0 million.  The acquired properties are located in Coconut Creek, Florida;
Duluth, Georgia; Columbia, Maryland; Indianapolis, Indiana; and Toledo, Ohio.  The land parcels are
located in Avon, Ohio and Atlanta, Georgia. The purchase price of the acquired properties was financed
using borrowings under an unsecured 90 day term loan of $44.5 million and borrowings under the
Company's Line of Credit of approximately $39.0 million.  Three of the five properties were the MRT
properties which were acquired in anticipation of the consummation of the remaining MIGRA Related
Transaction.  The aggregate purchase price of these properties was $59.5 million of which
approximately $15.3 million represented assumed liabilities.

On June 30, 1998, the Company consummated the remaining MIGRA Related Transaction,
except for the acquisition of the newly developed property.  As consideration for their interest in MIGRA
and the affiliated property management businesses, the shareholders of MIGRA received 408,314 of the
Company's common shares.  Subject to certain conditions, adjustments and achievements of specified
performance goals, the shareholders of MIGRA were entitled to receive common shares on the second
and third issuance dates, being June 30, 1999 and 2000, respectively.  In connection with the
achievement of certain contingencies, the MIGRA shareholders received 74,994 and 216,911 additional
common shares as of June 30, 1999 and 2000, respectively.  The payment of such contingent
consideration was recorded at $872,935 and $1,482,797 as of June 30, 1999 and 2000, respectively,
and increased the recorded amount of the intangible asset.  The payment as of June 30, 2000,
represents the final payment pursuant to the merger agreement.

In October 1999, the Company settled the purchase price adjustment relating to the assets and
liabilities (as defined in the related agreement) assumed in connection with the MIGRA merger.  The
MIGRA merger agreement provided that such adjustment would be determined on the one-year
anniversary of the merger.  Accordingly, the Company paid a net of approximately $1.3 million with
respect to the purchase price adjustment.  The consideration paid was funded by proceeds from the
sale, at par (including accrued interest) of a note receivable to affiliates, (the former MIGRA
shareholders).  This purchase price adjustment increased the Company's recorded amount of the
intangible asset initially recorded at the date of the merger.

In connection with the MIGRA Related Transaction (without regard to payment of contingent
consideration or the settlement of the purchase price adjustment), the Company recorded the following
amounts: (i) accounts receivables and miscellaneous prepaid expenses of $2.9 million, (ii) intangible
assets of $ 4.2 million, (iii) real estate assets of $239.7 million, (iv) accounts payable and accrued
expenses of $4.8 million, (v) accrued real estate taxes of approximately $500,000, (vi) security deposits
of approximately $800,000, (vii) mortgage indebtedness of $31.5 million, (viii) borrowings on the MIGRA
Line of Credit Facilities of $1.0 million, (ix) borrowings on the Company's Line of Credit of $90.1 million,
(x) operating partnership units of $12.0 million and (xi) common stock and additional paid in capital of
$106.1 million.

**Disposition Activity**

During 2000, the Company sold six operating properties for net cash proceeds of $16.5 million,
resulting in a gain of $8.5 million.  Five of the six operating properties were included in the eight Market
Rate properties which were sold on December 31, 1999, as further described below.  These five
properties provided net cash proceeds of $14.3 million, resulting in a gain of $4.3 million.  The sixth
property was sold, subject to an existing loan of $7.1 million.

During 1999, the Company sold eight operating properties for net cash proceeds of $36.8
million, resulting in a gain of $19.6 million.  Net cash proceeds from the sale of five of the eight operating
properties were $13.4 million, resulting in a gain of $12.8 million.  The cash proceeds were placed in a
trust which restricted the Company's use of these funds for the exclusive purchase of other property of
like-kind and qualifying use.  The Company used $2.3 million of the like-kind funds to acquire a 24 acre
parcel of land during 1999.  The remaining net proceeds and unutilized like-kind funds were used to pay
the Company's dividend and pay down a $20.0 million Medium-Term Note which matured in September
1999.  Additionally, Rainbow Terrace Apartments, an Affordable Housing property, was conveyed to
HUD by deed in lieu of foreclosure resulting in a loss of approximately $67,000.

The Company sold an additional eight Market Rate properties located in Ohio on December 31,
1999 for an aggregate sales price of approximately $34.0 million.  To facilitate the sale, the Company
financed the sale with fixed rate debt maturing July 1, 2001.  Under the structure of the transaction, the
buyer may put the properties back to the Company, after March 1, 2001 but before June 2, 2001, at a
price equal to their fair market value less outstanding indebtedness then owing on the purchase money
financing.  The Company had a corresponding option to repurchase the properties on the same
monetary basis at any time prior to December 31, 2000, which the Company elected not to exercise. The
sale provided for the Company's continued management of the properties.  These sales were not
recognized for GAAP purposes until the seller financing was repaid.  During 2000, five of these
properties were sold in cash transactions, and accordingly, the Company's note was settled, the put and
call provisions were terminated and the property sales were recognized for GAAP purposes.  The three
remaining properties and the total eight properties are classified as "Properties held for sale" in the
Consolidated Balance Sheets at December 31, 2000 and 1999, respectively.

In December 1998, the Company sold an operating property for net cash proceeds of $10.7
million, resulting in a gain of $503,497.

**3.**	**PROPERTIES HELD FOR SALE**

As discussed in Note 2, the Company entered into sales contracts for eight Ohio Market Rate
properties on December 31, 1999, five of which were sold during 2000.  The Company anticipates, for
financial reporting purposes, that the remaining three properties will be sold, and accordingly, they are
presented in the Consolidated Balance Sheets as "Properties held for sale" at December 31, 2000.
Additionally, the Company has contracts to sell four Market Rate properties which are presented in the
Consolidated Balance Sheets as "Properties held for sale" at December 31, 2000.

At December 31, 1999, the eight properties, which the Company entered into a sales contract on
December 31, 1999, as previously discussed, were presented as "Properties held for sale" in the
Consolidated Balance Sheets.

**4.**	**RESTRICTED CASH**

Restricted cash, some of which is required by HUD for certain government subsidized properties
and others which are required by the lenders, includes residents' security deposits, reserve funds for
replacements and other escrows held for the future payment of real estate taxes.  The reserve funds for
replacements are intended to provide cash to defray future costs that may be incurred to maintain the
associated property.  In addition, certain escrows are maintained in connection with mortgage servicing
operations.

Restricted cash is comprised of the following:

|                                          | 2000         | 1999        
|----------------------------------------- | ------------ | ------------
|                                          |              |             
|Resident security deposits                | $  1,671,515 | $  1,386,413
|Investor's escrow                         | 398,579      | 1,080,925   
|Escrow and reserve funds for replacements |              |             
|required by mortgagees                    | 12,714,156   | 11,682,176  
|                                          | $14,784,250  | $14,149,514 

Restricted resident security deposits are held in separate bank accounts in the name of the
properties for which the funds are being held.  Investor's escrow represent funds held by the Company
primarily for the payment of operating expenses associated with properties managed by the Company
on behalf of its pension fund clients.  These funds are held in short term investments.  Certain reserve
funds for replacements are invested in a combination of money market funds, U.S. treasury bills with
maturities less than 18 months, and collateralized mortgage obligations issued by the Federal Home
Loan Mortgage Company ("FHLMC") maturing in 2023.

Debt securities owned with a maturity at date of purchase of less than 18 months are classified
as "held to maturity" and securities with a maturity at date of purchase greater than 18 months are
classified as "available for sale".  Securities classified as held to maturity are measured at amortized
cost.  Securities classified as available for sale are measured at fair value.  Adjustments to fair value of
the securities available for sale, in the form of unrealized holding gains and losses, are excluded from
earnings and reported net of tax, where applicable, as a separate component of comprehensive income.
At December 31, 2000 and 1999, held to maturity securities included: treasury bills with a cost of
$182,400 and $505,088 and a fair value of $183,721 and $506,884, respectively, and certificates of
deposits with a cost and estimated fair value of $34,000 and $48,000 at December 31, 2000 and 1999,
respectively.  Available for sale investments included FHLMC securities with a cost of $99,500 at
December 31, 2000 and 1999.

**5.	INTANGIBLE AND OTHER ASSETS**

Intangible assets, deferred charges and prepaid expenses consist of the following:

|                                     | 2000        | 1999       
|------------------------------------ | ----------- | -----------
|                                     |             |            
|Intangible assets                    | $ 7,129,566 | $ 6,561,530
|Deferred financing and leasing costs | 13,630,532  | 13,508,346 
|Less: Accumulated amortization       | (7,692,878) | (5,275,937)
|                                     | 13,067,220  | 14,793,939 
|Prepaid expenses                     | 3,343,335   | 3,650,095  
|Other assets                         | 564,847     | 2,011,732  
|                                     | $16,975,402 | $20,455,766

Amortization expense for intangible assets was $1.7 million, $1.2 million and $272,344 for the
years ended December 31, 2000, 1999 and 1998, respectively.  Amortization expense for deferred
finance and leasing costs was $1.1 million, $1.2 million and $1.1 million for the years ended December
31, 2000, 1999 and 1998, respectively.  During 2000, the Company wrote off approximately $200,000
related to the unamortized amount attributed to the loss of an advisory relationship.  This charge was
recorded in "Depreciation and amortization" expense in the Consolidated Statements of Income.

**6.	EXTRAORDINARY ITEMS AND OTHER CHARGES**

During 1999, upon pay off of its Line of Credit and paydown of $76.3 million and $111.8 million
of its Senior and Medium-Term Notes and the early payment of three mortgage loans, the Company
wrote off the related unamortized deferred finance costs related to those debts.  In 1998, upon the
refinancing of the Line of Credit, unamortized deferred financing costs were written off.  These
transactions have been reflected as an extraordinary loss of $3.5 million ($750,000 facility fee charge,
$126,500 interest breakage fee and a $932,200 write off of deferred finance costs related to the
termination of the unsecured line of credit facility and $1.5 million write off of deferred finance costs,
$709,200 of transaction costs, $105,800 prepayment penalty related to the payoff of a first mortgage
loan net of a $691,800 gain related to the tender and paydown of the Senior and Medium-Term Notes)
and $124,900 in 1999 and 1998, respectively.

During 1998, the Company abandoned its efforts to convert its proprietary automated leasing
information system to a Windows© version.  Accordingly, the Company wrote off $817,485 of costs
which had been previously capitalized.  This write-off is reflected in the Consolidated Statements of
Income.

**7.	DEBT**

The Company's borrowings are represented by both secured and unsecured debt.  Secured
debt consists of the following:

|                                          | 2000         | 1999        
|----------------------------------------- | ------------ | ------------
|                                          |              |             
|Conventional mortgage debt, maturing      |              |             
|at various dates to 2012                  | $542,781,128 | $544,603,752
|Federally insured mortgage debt, maturing |              |             
|at various dates to 2024                  | 24,686,659   | 25,332,437  
|                                          | $567,467,787 | $569,936,189

Real estate assets pledged as collateral for all mortgage debt had a net book value of $680.9
million and $679.7 million at December 31, 2000 and 1999, respectively.

**Conventional Mortgage Debt**

Conventional mortgages payable are comprised of 58 loans at December 31, 2000 and 1999,
each of which is collateralized by the respective real estate and resident leases.   These nonrecourse,
project specific loans accrue interest at a fixed rate.  During 2000, the Company obtained a $14.0 million
first mortgage loan encumbering a property owned by a subsidiary.  The loan provides for disbursement
in two installments.  The first installment of $9.8 million was disbursed to the Company on September
28, 2000.  The distribution of the $4.2 million balance is contemplated to be distributed on or before
March 16, 2001, upon completion of certain conditions.  The loan requires monthly interest only
payments at the rate of 7.76% through October 15, 2002 at which time principal and interest payments
are required through the maturity date of October 15, 2005.  Also, during 2000, a mortgage with a
balance of $7.1 million on the underlying property was assumed by the buyer (see Note 2).  On
November 18, 1999, the Company paid off a variable rate loan of approximately $16.5 million (which
was refinanced as a project specific nonrecourse mortgage loan).  Additionally, during 1999, the
Company refinanced two fixed rate mortgages totaling $14.9 million as project specific nonrecourse
mortgages.  Mortgages payable are generally due in monthly installments of principal and/or interest and
mature at various dates through June 2012.  The weighted average interest rate of the conventional
fixed rate mortgages was 7.71%, and 7.74% at December 31, 2000 and 1999, respectively.

During 1999, the Company received gross proceeds of $525.3 million from project specific,
nonrecourse mortgage loans collateralized by 55 properties owned by qualified REIT subsidiaries,
having a net book value of $641.5 million.  These qualified REIT subsidiaries are separate legal entities
and maintain records, books of accounts and depository accounts separate and apart from any other
person or entity.  The proceeds from these loans were used to pay off the Company's floating rate
unsecured Line of Credit facility, to pay down most of its Senior and Medium-Term Notes and to
increase the Company's cash balances.  These mortgage loan documents require escrow deposits for
taxes and replacement of project assets.  The weighted average maturity of the loans funded in 1999
was 9.8 years, and the weighted average interest rate was 7.68%.

**Federally Insured Mortgage Debt**

Federally insured mortgage debt which encumbered six of the properties at December 31, 2000
and 1999 (including one property which is funded through Industrial Development Bonds) is insured by
HUD pursuant to one of the mortgage insurance programs administered under the National Housing Act
of 1934.  These government-insured loans are nonrecourse to the Company.  Payments of principal,
interest and HUD mortgage insurance premiums are made in equal monthly installments and mature at
various dates through March 1, 2024.  During 1999, the Company transferred Rainbow Terrace
Apartments to HUD along with the $1.9 million mortgage payable.  At December 31, 2000, five of the six
federally insured mortgages have a fixed rate and the remaining mortgage ($1.7 million) is variable rate.
Interest rates on the HUD-insured indebtedness range from 7.0% to 10.13%.  The weighted average
interest rate of the federally insured mortgages was 8.27% at December 31, 2000 and 1999.

Under certain of the mortgage agreements, the Company is required to make escrow deposits
for taxes, insurance and replacement of project assets.  The variable rate mortgage is also secured by a
letter of credit which is renewed annually.

**Interest Rate Swaps**

From time to time, the Company may enter into hedge agreements to minimize its exposure to
interest rate risks.  On February 25, 2000, the Company executed two interest rate swaps.  The notional
amounts of the swaps were approximately $10.6 million (which commenced March 1, 2000) and $54.8
million (which commenced March 10, 2000).  The swaps amortized monthly in accordance with the
amortization of the hedged loans and were to expire upon maturity of the loans.  These swaps were
executed to hedge the fair market value of five fixed rate loans.  On December 11, 2000, the Company
executed termination agreements for both swaps and received termination payments totaling $3.2
million, which will be amortized over the remaining terms of the two swap agreements (May 2007 for the
$10.6 million swap and October 2007 for the $54.8 million swap).  During the year ended December 31,
2000, the Company recorded a credit to interest expense of $330,663 with regards to the swaps.

There were no interest rate swap agreements in effect at December 31, 2000 or 1999.

**Cash Tender Offers for Unsecured Debt Securities**

On October 21, 1999, the Company commenced cash tender offers and concurrent consent
solicitations for all of the Company's outstanding unsecured debt securities.  The vote of the holders of a
simple majority of the principal amount of outstanding notes voting together as one class was required
to obtain the requisite consents.  The initial offer provided for a discount to par; however, by November
3, 1999, the Company had not received the requisite consents.  On November 3, 1999, the Company
notified the noteholders that it would tender the notes for par including a consent fee of $25 per $1,000
of par value.  On November 19, 1999, all debt securities tendered, representing Senior and Medium-Term Notes totaling $168.2 million in principal, were accepted and constituted a majority of the
Company's outstanding notes pursuant to the amended terms of its cash tender offers and concurrent
consent solicitations.  Accordingly, the Company and the trustee for the notes executed a supplemental
indenture containing the proposed amendments approved by noteholders, which became effective upon
acceptance by the Company for payment of all notes validly tendered pursuant to the tender offers.  The
Company funded the tender offers with project specific, non-recourse loans from The Chase Manhattan
Bank.  The loans were collateralized by individual mortgages on 29 properties with gross proceeds of
$205.0 million, with a weighted average term of 10.6 years and a weighted average interest rate of
7.86%.  The net proceeds, after repayment of certain outstanding indebtedness and transaction costs,
were approximately $180.0 million.

Under the revised terms of the offers and solicitations, investors who tendered their securities
prior to the Consent Date received the revised consideration of $975 per $1,000 principal amount plus a
Consent Fee of $25 per $1,000 Note; investors who tendered after that date received the new purchase
price but not the Consent Fee.  Investors who had previously validly tendered their notes received the
increased purchase price, as well as the Consent Fee.  In either event, accrued and unpaid interest was
paid up to, but excluding, the settlement date of the tender offers.

Upon completion of this transaction, the Company recognized an extraordinary charge of
approximately $1.5 million which represented a write off of deferred finance and other transaction costs
related to the termination of these unsecured debt securities.

**Senior Notes**

The Senior Notes issued during 1995 in the principal amounts of $75.0 million and $10.0 million
accrued interest at 8.38% and 7.10%, respectively, and were to mature in 2000 and 2002, respectively.
Pursuant to the tender offer during 1999, as discussed above, the Company paid off the $10.0 million
Senior Note and paid down the $75.0 million Senior Note.  The balance of the $75.0 million Senior Note,
net of unamortized discounts, was $8.5 million at December 31, 1999.  In accordance with the terms of
the note, on April 15, 2000, the Company paid $8.9 million which represented the outstanding balance
and all interest accrued thereon.

**Medium-Term Notes Program**

The Company had two Medium-Term Notes (the "MTN's") outstanding having an aggregate
balance of $709,000 at December 31, 2000 and 1999.  Pursuant to the tender offer during 1999, as
discussed above, the Company paid off eight and paid down two of the MTN's with an aggregate
payment of $91.8 million.  Additionally, the Company paid off a $20.0 million MTN that matured in
September 1999.  The two remaining MTN's have principal amounts of $604,000 and $105,000 and
bear interest at 7.33% and 6.88%, respectively, and mature in September 2001 and December 2004,
respectively.  The weighted average interest rate of the two MTN's was 7.26% at December 31, 2000
and 1999.

The Company's current MTN Program provides for the issuance, from time to time, of up to
$102.5 million of MTN's due nine months or more from the date of issue and may be subject to
redemption at the option of the Company or repayment at the option of the holder prior to the stated
maturity date.  These MTN's may bear interest at fixed rates or at floating rates and can be issued in
minimum denominations of $1,000.  At December 31, 2000, there was $62.5 million of additional MTN
borrowings available under the program.

Unsecured debt consists of the following:

|                                                      | 2000           | 1999      
|----------------------------------------------------- | -------------- | ----------
|Senior Notes, with interest payable quarterly, net of |                |           
|unamortized discounts of $2,285 at December 31, 1999  | $            - | $8,540,715
|Medium-Term Notes, with interest  payable quarterly   | 709,000        | 709,000   
|                                                      | $709,000       | $9,249,715

**Lines of Credit**

On November 18, 1999, the Company entered into a $12.0 million secured line of credit facility
(the "Secured Line of Credit").  This Secured Line of Credit is secured by two of the Company's
properties.  On May 12, 2000, the Secured Line of Credit was increased from $12.0 million to $20.0
million.  The facility which originally was scheduled to mature October 31, 2000, was  extended for one
additional year (matures October 31, 2001) and reduced from $20.0 million to $12.0 million.  The
Company's borrowings under the Secured Line of Credit bear interest at a rate of, either the prime rate
or LIBOR plus 2.0% at the Borrower's option.  The Secured Line of Credit is utilized by the Company to
provide working capital and for general corporate purposes.  At December 31,  2000 and 1999, there
were no borrowings outstanding under this facility.

On July 20, 2000, the Company entered into a $20.0 million revolving line of credit which is
secured by one of the Company's properties.  At December 31, 2000, the borrowings were restricted up
to an amount not to exceed $12.6 million.  The remaining $7.4 million may be available upon completion
of certain requirements.  The facility is for a term of three years.  The Company's borrowings under this
revolving line of credit bear interest at a rate of LIBOR plus 1.5%.  This revolving line of credit is utilized
by the Company to provide working capital and for general corporate purposes.  At December 31, 2000,
there were no borrowings outstanding under this facility.

Prior to its termination in May 1999, the Company had available a $250.0 million Line of Credit
which contained various restrictive covenants.  Interest on this line was payable at the prime rate or
LIBOR plus a specified spread, depending on the Company's long term senior unsecured debt rating
from Standard and Poor's and Moody's Investors Service.  An annual commitment fee of 15 basis points
on the maximum commitment, as defined in the agreement, was payable annually in advance on each
anniversary date.  In May 1999, the Company repaid all outstanding obligations under this Line of Credit
through proceeds received from financing project specific, nonrecourse mortgage loans and accordingly,
terminated the facility.  The Company recognized an extraordinary charge of $1.8 million which
represents a $750,000 facility fee charge, a $126,559 breakage fee, and a $932,183 write off of deferred
finance costs related to the Line of Credit.

MIGRA maintained a $500,000 line of credit facility which the Company assumed at the time of
the merger.  The outstanding balance of $446,565 was paid off on February 10, 1999 and the line of
credit facility was terminated.

As of December 31, 2000, the scheduled maturities of secured and unsecured indebtedness for
each of the next five years and thereafter, are as follows:

|2001       | $  17,336,872
|---------- | -------------
|2002       | 6,089,792    
|2003       | 6,672,062    
|2004       | 7,219,017    
|2005       | 17,226,641   
|Thereafter | 513,632,403  
|           | $568,176,787 

Cash paid for interest was $43.8 million, $40.7 million and $29.9 million for the years ended December
31, 2000, 1999 and 1998, respectively.

**8.	INVESTMENTS IN AND ADVANCES TO JOINT VENTURES**

At December 31, 2000, 1999 and 1998, the Company's interests in the joint venture partnerships
are as follows:

|                   | Ownership
|------------------ | ---------
|                   |          
|Americana          | 33.33%   
|Euclid House       | 0%(a)    
|Gates Mills Towers | 33.33%   
|Watergate          | 33.33%   
|College Towers     | 50.00%   
|Highland House     | 50.00%   
|Lakeshore Village  | 50.00%   
|Idlewylde          | 49.00%(b)
|Berkley Manor      | 49.00%(b)

(a) Effective December 1, 2000, the Company purchased its partners' interest in Euclid House.  Prior to the purchase, the Company
had a 33.33% ownership interest in this property.

(b) These two joint venture partnerships were entered into during the year ended December 31, 2000.

Summarized financial information for these joint ventures is as follows:

**Balance sheet data**

|                               | 2000          | 1999         
|------------------------------ | ------------- | -------------
|                               |               |              
|Real estate, net               | $46,750,093   | $15,062,859  
|Other assets                   | 4,087,067     | 3,286,046    
|                               | $50,837,160   | $18,348,905  
|                               |               |              
|Amounts payable to the Company | $     243,964 | $     152,810
|Mortgages payable              | 64,866,492    | 49,711,810   
|Other liabilities              | 4,239,208     | 3,989,377    
|Accumulated deficit            | (18,512,504)  | (35,505,092) 
|                               | $50,837,160   | $18,348,905  

**Operating data**

|                                           | 2000          | 1999          | 1998         
|------------------------------------------ | ------------- | ------------- | -------------
|                                           |               |               |              
|Rental revenues                            | $20,066,612   | $19,074,034   | $19,278,712  
|Other revenues                             | 467,048       | 114,005       | 174,774      
|Operating and maintenance expenses         | (13,347,094)  | (11,207,637)  | (12,316,421) 
|Depreciation and amortization              | (2,196,252)   | (1,665,475)   | (1,316,451)  
|Interest expense                           | (5,707,896)   | (5,232,400)   | (4,803,070)  
|Net (loss) income before cumulative effect | (717,582)     | 1,082,527     | 1,017,544    
|Cumulative effect of a change in           |               |               |              
|accounting principle                       | -             | 1,465,666     | -            
|Net (loss) income                          | $   (717,582) | $  2,548,193  | $  1,017,544 
|Company's proportionate interest in:       |               |               |              
|Depreciation and amortization              | $    842,564  | $     592,264 | $     475,675
|Interest expense                           | 2,091,668     | 1,799,524     | 1,656,652    
|*Cumulative effect of a change in          |               |               |              
|accounting principle                       | -             | 523,292       | -            
|(Loss) income of joint ventures before     |               |               |              
|cumulative effect of a change in           |               |               |              
|accounting principle                       | (163,401)     | 585,022       | 444,692      

*The Company's proportionate share of the cumulative effect of a change in accounting principle is included in the Company's
consolidated Cumulative effect of a change in accounting principle as presented in the Consolidated Statements of Income.

The Company recognized proportionate share net contributions of $1.3 million and $55,743 for
the years ended December 31, 2000 and 1999, respectively, and net distributions of $701,143 for the
year ended December 31,  1998.  Revenues from property management fees charged to joint ventures
aggregated $891,001, $843,292 and $784,111 for the years ended December 31, 2000, 1999 and 1998,
respectively.  The corresponding expenses are included in the operating and maintenance expenses of
the joint ventures, as set forth above.

Lakeshore Village is governed by regulations pursuant to the property's HUD rent subsidy and
mortgage insurance programs, which contain provisions governing certain aspects of the operations of
the property (See Note 11).  Rent subsidies of $730,483, $748,777 and $739,278 for the years ended
December 31, 2000, 1999 and 1998, respectively, were received by the property.

**9.	TRANSACTIONS WITH AFFILIATES AND JOINT VENTURES**

***Management and Other Services***

The Company provides management and other services to (and is reimbursed for certain
expenses incurred on behalf of) certain non-owned properties in which the Company's Chief Executive
Officer and/or other related parties have varying ownership interests.  The entities which own these
properties, as well as other related parties, are referred to as "affiliates".  The Company also provides
similar services to joint venture properties.

Summarized affiliate and joint venture transaction activity was as follows:

|                                   | 2000       | 1999        | 1998      
|---------------------------------- | ---------- | ----------- | ----------
|Property management fee and other  |            |             |           
|miscellaneous service revenues     |            |             |           
|- affiliates                       | $1,859,903 | $ 2,505,522 | $2,283,066
|- joint ventures                   | 965,079    | 882,641     | 939,813   
|Painting service revenues          |            |             |           
|- affiliates                       | 303,057    | 480,122     | 350,014   
|- joint ventures                   | 263,937    | 219,598     | 322,831   
|Expenses incurred on behalf of and |            |             |           
|reimbursed by (1)	- affiliates     | 4,207,932  | 4,006,927   | 4,426,066 
|- joint ventures                   | 3,010,347  | 2,873,295   | 2,626,631 
|Interest income 	- affiliates      | 263,566    | 302,765     | 923,200   
|Interest expense	- affiliates      | (176,190)  | (124,153)   | (344,448) 
|- joint ventures                   | (27,492)   | (26,096)    | (24,324)  



(1)  *Primarily payroll and employee benefits, reimbursed at cost.*

Property management fees and notes and other miscellaneous receivables due from affiliates
and joint venture properties aggregated $4.9 million and $2.0 million at December 31, 2000 and 1999,
respectively.  Other miscellaneous payables due to affiliates and joint venture properties aggregated
$2.9 million and $425,080 at December 31, 2000 and 1999, respectively.

***Advances to Affiliates and Joint Ventures***

In the normal course of business, the Company has advanced funds on behalf of, or holds funds
for the benefit of, affiliates and joint ventures.  Funds advanced to affiliates and joint ventures
aggregated $573,061 and $3.6 million at December 31, 2000, respectively, and $3.0 million and $1.3
million at December 31, 1999, respectively.  The Company held funds for the benefit of affiliates and
joint ventures in the aggregate amount of $4.3 million and $950,218 at December 31, 2000, respectively,
and $6.3 million and $1.3 million at December 31, 1999, respectively.

As of December 31, 2000, the Company was negotiating an agreement to exchange its interest
in five of its joint venture properties.  Under the proposal, the Company would become the 100% fee
owner of three of the properties and relinquish its ownership in two of the properties (which includes the
one property where the Company is a 66.67% owner).

In February 1998, certain affiliated entities, which owed the Company a substantial amount of
the advances described above, made capital calls to their partners for the purpose of effecting
repayment of such advances.  Thereafter, approximately $4.0 million of advances were repaid pursuant
to such capital calls.  However, a corporation (the "Corporation") owned by a member of the Company's
Board of Directors, and his siblings (including the wife of the Company's Chairman and Chief Executive
Officer) which serves as general partner of certain affiliated entities, informed the Company that the
Corporation had caused the commencement of a review of approximately $2.9 million in expenditures
relating to certain HUD subsidized properties.  The Company believed that all expenditures were
appropriate and that the ultimate outcome of any disagreement would not have a material adverse effect
on the Company's financial position, results of operations or cash flows.

On March 11, 1999, the Company, the Corporation, certain shareholders of the Corporation and
others entered into a settlement agreement which resolved all disputes concerning the aforementioned
expenditures and other issues concerning the management by the Company or one of its Service
Companies of various properties owned by entities in which the Corporation was a general partner.
Pursuant to that settlement agreement, the Corporation and other affiliates funded all outstanding
advances made by the Company.  At December 31, 1998, amounts outstanding which were
subsequently funded in the first quarter of 1999 pursuant to the settlement agreement were $4.7 million.

On January 25, 2000, Associated Estates Management ("AEMC") filed suit in the Cuyahoga
County, Ohio Court of Common Pleas against Euclid Medical and Commercial Arts, an Ohio limited
partnership and its general partner, Metro City No. 1, an Ohio general partnership, seeking damages in
excess of $729,000.  Euclid Medical and Commercial Arts owns the Euclid Medical and Office Building
located in Euclid, Ohio.  AEMC was the property manager of that property until on or about March 23,
1999.  Metro City No. 1 is 56.0% owned by the Company's Chairman of the Board and CEO, his wife
and his brothers-in-law, one of whom is a director of the Company.  In the normal course of business,
the Company had followed a practice for many years of advancing funds on behalf of, or holding funds
for the benefit of, affiliates, which owned real estate properties managed by the Company.  Euclid
Medical and Office Building was one of those properties for which the Company so advanced funds.
The suit seeks reimbursement for the funds advanced by the Company for the benefit of this property.
Metro City No. 1 made a capital call to its partners requesting funds to pay this obligation.  The
Chairman of the Board, his wife and brothers-in-law have paid the Company their proportionate share of
the capital call, however, the remaining non-affiliated partners of Metro City No. 1 have refused to do so.
The Company believes the recorded amount of the receivable is stated at its net realizable value.

***Notes Receivable*****

At December 31, 2000 and 1999, two notes of equal amounts were receivable from the
Company's Chief Executive Officer aggregating $3.3 million (included in "Accounts and notes
receivables-affiliates and joint ventures").   One of the notes is partially secured by 150,000 of the
Company's common shares; the other note is unsecured.  For the year ended December 31, 2000 and
1999, the interest rate charged on this note was approximately 7.8% and 6.7%, respectively, with
principal due May 1, 2002.  The Company recognized interest income of $263,401, $226,997 and
$227,833 for the years ended December 31, 2000, 1999 and 1998, respectively, relating to these notes.

**10.	NOTEHOLDER INTEREST**

The Company has a noteholder interest in one multifamily property which, since 1984, has been
unable to generate sufficient cash flow, as defined, to meet the scheduled interest payments under
notes payable to the Company.  Accordingly, the Company is entitled to all cash flows from operations.
To the extent that the cumulative unpaid debt service on the notes is greater than nine years of
aggregate principal and interest amortization (the cumulative amount of debt service), which occurred in
1995, the Company can exercise its rights under a security agreement and foreclose on the property.
Because, in substance, the Company will eventually own title to the property, most likely through
foreclosure, the property is presented in the financial statements as if owned by the Company.
Summarized financial information for this property is as follows:

|                       | 2000        | 1999       
|---------------------- | ----------- | -----------
|Real estate, net       | $1,789,715  | $1,462,082 
|Other assets           | 124,229     | 1,225,843  
|                       | $1,913,944  | $2,687,925 
|                       |             |            
|Mortgage notes payable | $3,749,296  | $3,944,133 
|Other liabilities      | 411,638     | 393,022    
|Accumulated deficit    | (2,246,990) | (1,649,230)
|                       | $1,913,944  | $2,687,925 

|                                 | 2000        | 1999        | 1998       
|-------------------------------- | ----------- | ----------- | -----------
|Rental and other revenue         | $2,140,581  | $2,306,321  | $2,299,437 
|Property operating and           |             |             |            
|maintenance expenses             | (1,425,024) | (1,265,455) | (1,453,787)
|Depreciation and amortization    | (254,023)   | (221,589)   | (151,814)  
|Interest expense                 | (288,621)   | (301,484)   | (317,244)  
|Cumulative effect of a change in |             |             |            
|accounting principle             | -           | 190,301     | -          
|Net income                       | $   172,913 | $   708,094 | $  376,592 

******11.	COMMITMENTS AND CONTINGENCIES**

***Leases***

The Company owns one property which derives part of its rental revenues from commercial
tenants with noncancellable operating leases.  Future minimum lease payments to be received,
assuming no new or renegotiated leases, or option extensions, for each of the next five years and
thereafter, are as follows:

|2001       | $1,016,432
|---------- | ----------
|2002       | 753,761   
|2003       | 738,032   
|2004       | 687,368   
|2005       | 241,678   
|Thereafter | 237,507   
|           | $3,674,778

The Company leases certain equipment under capital leases.  Such equipment is included in
property, plant and equipment with a cost of $273,085 and accumulated depreciation of $128,189 at
December 31, 2000.  The Company also leases certain equipment and facilities under operating leases.
Future minimum lease payments under all capital and noncancellable operating leases in which the
Company is the lessee, principally for ground leases, for each of the next five years and thereafter, are
as follows:

|              | Capital | Operating  
|------------- | ------- | -----------
|              |         |            
|2001          | $66,390 | $   489,093
|2002          | -       | 317,111    
|2003          | -       | 234,851    
|2004          | -       | 224,863    
|2005          | -       | 187,620    
|Thereafter    | -       | 4,972,896  
|              | 66,390  | $6,426,434 
|Less interest | (1,875) |            
|              | $64,515 |            

Certain of the ground lease agreements contain provisions which, upon expiration of the lease,
require reversion of the land and building to the lessor.  Such provisions exist for nine properties
included in the financial statements and expire at various dates from 2021 to 2086.  Rental revenues
derived from such properties were $9.8 million, $9.6 million and $9.6 million for the years ended
December 31, 2000, 1999 and 1998, respectively.  Furthermore, at the end of the term of the lease, any
remaining replacement reserves revert to the lessor.  Management believes that the replacement
reserves will be utilized for their intended purpose prior to the end of the lease term.  Such cash reserves
included in restricted cash were $1.0 million and $1.2 million at December 31, 2000 and 1999,
respectively.  With respect to such leases, the Company incurred ground rent expense of $101,261 for
each of the years ended December 31, 2000, 1999 and 1998.

The Company owns one property which is subject to a warranty deed reversion provision.  This
provision requires that the assignment of fee simple title shall expire in 2037.  At December 31, 2000,
the net book value of this property was $1.5 million.

The Company has guaranteed the payment of a $30.0 million construction loan in connection
with the Idelwylde Apartments Phase II, a 535 unit multifamily community located in Atlanta, Georgia,
which is being developed by the Company and its pension fund joint venture partner.  The Company
also has guaranty obligations under a $220,000 letter of credit for purposes of guarantying certain equity
contributions required by the construction lender in connection with Berkley Manor, a 252 unit multifamily
community located in Cranberry Township, Pennsylvania, which is being developed by the Company
and its joint venture partner.

***Affordable Housing***

Certain of the Company's Affordable Housing properties are governed by rent subsidies and/or
mortgage insurance program regulations, which contain provisions governing certain aspects of the
operations of these properties.  Among other matters, such provisions may include a requirement to
maintain a reserve fund for replacements, the renting of properties to qualifying residents, and the
requirement to make distributions in accordance with certain regulations.  Certain approvals may be
required to encumber properties having rental subsidies.

The rent subsidy program provides that HUD will make monthly housing assistance payments to
a Company subsidiary on behalf of persons who reside in approved properties and who meet the
eligibility criteria.  The amount of the total monthly rental and the subsidy is determined at least annually
by HUD.  This arrangement is evidenced by a contract between HUD and the applicable Company
subsidiary.  Such contracts have scheduled expiration dates between November 2001 and November
2019.  HUD may abate subsidy payments if the applicable Company subsidiary defaults on any
obligations under such contracts and fails to cure each default after receiving notice thereof.  Rent
subsidies of $6.8 million, $6.8 million and $10.4 million for the years ended December 31, 2000, 1999
and 1998, respectively, were recognized in income by the 13, 13 and 14 wholly owned subsidiaries
eligible for federal rent subsidies for the years ended December 31, 2000, 1999 and 1998, respectively.
As discussed in Note 7, certain obligations are insured by federal mortgage insurance programs.  The
Company believes, that upon expiration of the contracts, the contracts will be renewed, or the Company
will enter into another government subsidized or mortgage restructuring program, or that the properties
will be operated as conventional, market-rate apartments.

**Pending Litigation**

A lawsuit is pending in the Harris County, Texas district court against MIG Realty Advisors, Inc.
(MIG's predecessor company) involving a claim for contribution and indemnity arising out of MIG Realty
Advisors, Inc. having served as an investment advisor to an advisory client in connection with the
acquisition of an apartment project located in Houston, Texas.  On or about December 30, 1998, the
advisory client that acquired the property filed suit against the seller, the consulting engineer who
performed the engineering due diligence and others seeking damages for defective conditions
discovered at the property that were allegedly concealed by the seller and not discovered by the
consulting engineer during the pre-purchase due diligence investigation conducted by the engineer.  The
consulting engineer filed a third party claim against MIG Realty Advisors, Inc., alleging that MIG Realty
Advisors, Inc. was responsible for the conduct of the due diligence investigation and consequently MIG
Realty Advisors, Inc., rather than the engineer was responsible for any damages suffered by the
advisory client.  The third party complaint does not specify the amount of damages being claimed, but
rather seeks contribution and indemnity for any judgment rendered against the consulting engineer
arising out of the complaint against it filed by the advisory client, however, these potential claims may be
approximately $9.0 million.  The Company is vigorously defending against the claims brought by the
consulting engineer in the third party complaint.  The advisory client and MIG recently entered into a
tolling agreement for the purpose of tolling any claims that the advisory client may have against MIG in
connection with this apartment project. The Company cannot predict the final outcome of this dispute.

**Other**

The Company is also subject to other legal proceedings and claims which arise in the ordinary
course of its business.  Although occasional adverse decisions (or settlements) may occur, the Company
believes that the final disposition of such matters will not have a material adverse effect on the financial
position or results of operations of the Company.

**12.	DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS**

The following disclosures of estimated fair value were determined by management using
available market information and appropriate valuation methodologies.  Considerable judgment is
necessary to interpret market data and develop estimated fair values.  Accordingly, the estimates
presented herein are not necessarily indicative of the amounts the Company could realize on disposition
of the financial instruments.  The use of different market assumptions and/or estimation methodologies
may have a material effect on the estimated fair value amounts.

Rents, accounts and notes receivable, accounts payable, accrued expenses and other liabilities
are carried at amounts which reasonably approximate corresponding fair values.

Mortgages and notes payable with an aggregate carrying value of $567.5 million and $570.0
million at December 31, 2000 and 1999, respectively, have an estimated aggregate fair value of
approximately $570.6 million and $542.0 million respectively.  Estimated fair value is based on interest
rates currently available to the Company for issuance of debt with similar terms and remaining
maturities.

Senior and Medium-Term Notes with an aggregate carrying value of $709,000 and $9.2 million
at December 31, 2000 and 1999, respectively, have an estimated fair value of $720,459 and $9.4
million, respectively.

The Company may, from time to time, enter into interest rate agreements to manage interest
costs and risks associated with changing rates.  The Company does not utilize these agreements for
trading or speculative purposes.  These agreements, considered qualifying hedges, are not recorded in
the financial statements until the debt transaction is consummated and the agreement is settled.  There
were no such agreements in place at December 31, 2000 and 1999.

Disclosure about the fair value of financial instruments is based on pertinent information
available to management as of December 31, 2000 and 1999.  Although management is not aware of
any factors that would significantly affect the fair value amounts, such amounts have not been
comprehensively revalued for purposes of these financial statements since these dates and current
estimates of fair value may differ significantly from the amounts presented herein.

**13.	SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION**

The following summarizes the non-cash investing and financing activities of the Company which
are not reflected in the Consolidated Statements of Cash Flows:

|                                                       | 2000       | 1999         | 1998        
|------------------------------------------------------ | ---------- | ------------ | ------------
|Issuance of common shares in connection with           |            |              |             
|the acquisition of MIG REIT properties and the         |            |              |             
|MIGRA merger including the second and third            |            |              |             
|issuance dates                                         | $1,482,797 | $    872,935 | $106,063,359
|Purchase price adjustment                              | -          | 1,232,112    | -           
|Issuance of OP units in connection with the            |            |              |             
|acquisition of partnership interests in a              |            |              |             
|development property and an operating property         | -          | -            | 11,956,174  
|Assumption of mortgage debt in connection with         |            |              |             
|the acquisition of properties                          | 1,545,050  | -            | 31,468,622  
|Assumption of liabilities in connection with the       |            |              |             
|acquisition of properties                              | -          | 1,623,400    | 6,225,251   
|Dividends declared but not paid                        | -          | -            | 10,507,586  
|Capital lease obligations                              | -          | -            | 548,867     
|Offering expenses accrued                              | -          | -            | 37,022      
|Contributions of land to joint venture, net of loss on |            |              |             
|conveyance                                             | 6,755,247  | -            | -           
|Adjustment for purchase of minority interest           | 291,604    | -            | -           
|Assumption of debt by purchaser of property            | 7,086,029  | -            | -           
|In connection with the conveyance of RTA to HUD:       |            |              |             
|Transfer of mortgage debt                              | -          | 1,935,123    | -           
|Transfer of other liabilities                          | -          | 187,933      | -           
|Transfer of accounts receivable-rent                   | -          | 31,427       | -           
|Transfer of escrows                                    | -          | 762,464      | -           
|Transfer of real estate assets, net                    | -          | 1,395,689    | -           

******14.	COMMON, TREASURY AND PREFERRED SHARES**

***Common Shares*****

In 2000 and 1999, the Company issued 216,911 and 74,994 common shares for the benefit of
the former MIGRA shareholders.  These issuances were made pursuant to the contingent consideration
provisions of the MIGRA merger agreement.  Such shares were recorded in the amount of $1.5 million
and $872,935 at December 31, 2000 and 1999, respectively, and increased the recorded amount of the
intangible asset associated with the purchase of MIGRA.

***Treasury Shares***

On February 25, 2000, the Company's Board of Directors authorized the repurchase of up to an
additional two million (aggregating a total of five million shares) of the Company's common shares to be
repurchased by the Company at market prices.  At December 31, 2000 and 1999, 3,646,180 and
1,544,380 shares had been repurchased at an aggregate cost of approximately $33.7 million and $15.9
million, respectively.  The repurchases were funded primarily from operating cash flows, refinancing
proceeds and proceeds received from the sale of operating properties.  At December 31, 2000, the
Company has 1,353,820 common shares available to be repurchased under this plan.  The timing of
stock purchases are made at the discretion of management.

***Preferred Shares*****

At December 31, 2000, 2,250,000 Depositary Shares were outstanding, each representing 1/10
of a share of the Company's 9.75% Class A Cumulative Redeemable Preferred Shares.  Dividends on
the preferred shares are cumulative from the date of issue and are payable quarterly.  Except in certain
circumstances relating to the preservation of the Company's status as a REIT, the preferred shares were
not redeemable prior to July 25, 2000.  On and after July 25, 2000, the preferred shares are redeemable
for cash at the option of the Company.

The Company is authorized to issue 3,000,000 Class B Cumulative Preferred Shares, without
par value, and 3,000,000 Noncumulative Preferred Shares, without par value.  There are no Class B
Cumulative or Noncumulative Preferred Shares issued or outstanding at December 31, 2000 or 1999.

**Shareholder Rights Plan**

During January 1999, the Company adopted a Shareholder Rights Plan.  To implement the
Plan, the Board of Directors declared a distribution of one Right for each of the Company's outstanding
common shares.  Each Right entitles the holder to purchase from the Company 1/1,000th of a Class B
Series I Cumulative Preferred Share (a "Preferred Share") at a purchase price of $40 per Right, subject
to adjustment.  One one-thousandth of a Preferred Share is intended to be approximately the economic
equivalent of one common share.  The Rights will expire on January 6, 2009, unless redeemed by the
Company as described below.

The Rights are not currently exercisable and trade with the Company's common shares.  The
Rights will become exercisable if a person or group becomes the beneficial owner of 15.0% or more of
the then outstanding common shares of the Company or announces an offer to acquire 15.0% or more
of the Company's then outstanding common shares.

If a person or group acquires 15.0% or more of the Company's outstanding common shares,
then each Right now owned by the acquiring person or its affiliates will entitle its holder to purchase, at
the Right's then-current exercise price, fractional preferred shares that are approximately the economic
equivalent of common shares (or, in certain circumstances, common shares, cash, property or other
securities of the Company) having a market value equal to twice the then-current exercise price.  In
addition, if, after the Rights become exercisable, the Company is acquired in a merger or other business
combination transaction with an acquiring person or its affiliates or sells 50.0% or more of its assets or
earnings power to an acquiring person or its affiliates, each Right will entitle its holder to purchase, at the
Right's then-current exercise price, a number of the acquiring Company's common shares having a
market value of twice the Right's exercise price.  The Board of Directors may redeem the Rights, in
whole, but not in part, at a price of $.01 per Right.

The distribution was made on January 29, 1999 to shareholders of record on that date.  The
initial distribution of Rights is not taxable to shareholders.

**15.	EARNINGS AND DIVIDENDS PER SHARE**

**Earnings Per Share**

Earnings per share ("EPS") has been computed pursuant to the provisions of SFAS No. 128.
The following table provides a reconciliation of both income before extraordinary item and cumulative
effect of a change in accounting principle and the number of common shares used in the computation of
basic EPS, which utilizes the weighted average number of common shares outstanding without regard to
dilutive potential common shares, and diluted EPS, which includes all such shares.

|                                                            | For the year ended December 31,
|----------------------------------------------------------- | -------------------------------
|                                                            | 2000                           
|**Basic Earnings Per Share:**                               |                                
|Income before extraordinary item and cumulative effect      |                                
|of a change in accounting principle                         | $4,942,143                     
|Less: Preferred share dividends                             | (5,484,426)                    
|(Loss) income before extraordinary item and cumulative      |                                
|effect of a change in accounting principle applicable to    |                                
|common shares                                               | (542,283)                      
|Less: Extraordinary item (loss)                             | -                              
|Add: Cumulative effect of a change in accounting            |                                
|principle                                                   | -                              
|Net (loss) income applicable to common shares               | $  (542,283)                   
|                                                            |                                
|**Diluted Earnings Per Share:**                             |                                
|Income before extraordinary item and cumulative effect of a |                                
|change in accounting principle                              | $4,942,143                     
|Add:	Minority interest in operating partnership             | -                              
|Less:	Preferred share dividends                             | (5,484,426)                    
|Amortization expense  relating to contingent                |                                
|merger consideration                                        | -                              
|(Loss) income before extraordinary item and cumulative      |                                
|effect of a change in accounting principle applicable to    |                                
|common shares                                               | (542,283)                      
|Less: Extraordinary item (loss)                             | -                              
|Add: Cumulative effect of a change in accounting            |                                
|principle                                                   | -                              
|Net (loss) income applicable to common shares               | $  (542,283)                   
|                                                            |                                
|**Number of shares:**                                       |                                
|Basic-weighted average shares outstanding                   | 19,732,500                     
|Add:	Dilutive shares                                        | -                              
|Operating partnership units                                 | -                              
|Contingent merger consideration                             | -                              
|Diluted -weighted average shares outstanding                | 19,732,500                     
|                                                            |                                
|**Earnings per common share - basic**                       |                                
|(Loss) income before extraordinary item and                 |                                
|cumulative effect of a change in accounting principle       | $         (.03)                
|Extraordinary item                                          | -                              
|Cumulative effect of a change in accounting principle       | -                              
|Net (loss) income                                           | $         (.03)                
|                                                            |                                
|**Earnings per common share - diluted:**                    |                                
|(Loss) income before extraordinary item and cumulative      |                                
|effect of a change in accounting principle                  | $         (.03)                
|Extraordinary item                                          | -                              
|Cumulative effect of a change in accounting principle       | -                              
|Net (loss) income                                           | $         (.03)                
|                                                            |                                
|**Pro forma amounts assuming the new capitalization**       |                                
|**policy is applied retroactively:**                        |                                
|Effect of new capitalization policy                         | $               -              
|Net income                                                  | $4,942,143                     
|Net (loss) income applicable to common shares               | $  (542,283)                   
|**Per share amount - Effect of new capitalization policy:** |                                
|Basic                                                       | $               -              
|Diluted                                                     | $               -              
|**Per share amount - Net income applicable to**             |                                
|**common shares:**                                          |                                
|Basic                                                       | $         (.03)                
|Diluted                                                     | $         (.03)                

Options to purchase 1.4 million and 1.3 million common shares were outstanding at December
31, 1999 and 1998, respectively (See Note 16), which have been reflected above using the treasury
stock method.  Approximately 1.8 million common share options were excluded from the dilutive
calculation as the inclusion would be antidilutive due to the net loss applicable to common shares for the
year ended December 31, 2000.

The exchange of operating partnership minority interests into common shares was not included
in the computation of diluted EPS for certain periods because the Company plans to settle these OP
units in cash.

******Dividends Per Share**

Total dividends per common share and the related components for the years ended December
31, 2000, 1999 and 1998, as reported for income tax purposes, were as follows:

|For the year ended December 31, 2000
|------------------------------------
|                                    
|                                    
|                                    
|Date Paid                           
|                                    
|02/1/00                             
|05/1/00                             
|08/1/00                             
|11/1/00                             
|                                    

|For the year ended December 31, 1999
|------------------------------------
|                                    
|                                    
|                                    
|Date Paid                           
|                                    
|05/1/99                             
|08/2/99                             
|11/1/99                             
|                                    

|For the year ended December 31, 1998
|------------------------------------
|                                    
|                                    
|                                    
|Date Paid                           
|                                    
|5/1/98                              
|8/1/98                              
|10/31/98                            
|1/15/99                             
|                                    

Preferred dividends of $5,484,426, $5,484,426 and $5,484,421 were paid for the years ended
December 31, 2000, 1999 and 1998, respectively, of which $447,975, $1,582,255 and $276,963 was
designated as a capital gain dividend for the years ended December 31, 2000, 1999 and 1998,
respectively.

**16.	EMPLOYEE BENEFIT PLANS**

**401(k) Plan**

The Company sponsors a defined contribution retirement plan pursuant to Section 401(k) of the
Internal Revenue Code, whereby eligible employees may elect to contribute between 1.0% and 15.0%
(maximum employee contribution was 12.0% prior to February 1, 1999) of their gross wages.  The
Company matches such contributions at a rate of 25.0% up to a maximum participant contribution of
6.0% (maximum employer contribution was 25.0% up to a maximum participant's contribution of 4.0%
prior to February 1, 1999).  The Company made contributions to this plan, of approximately $118,000,
$154,000 and $76,000 for the years ended December 31, 2000, 1999 and 1998, respectively.
Additionally, the Company offers long-term disability and medical, dental and life insurance benefits to
employees.

**AERC Share Option Plan**

The Company provides an incentive and nonqualified stock option plan (the "AERC Share
Option Plan") under which 543,093 of the Company's common shares are reserved for awards of share
options to eligible key employees.  Options may be granted at per share prices not less than fair market
value at the date of grant and must be exercisable within ten years thereof.  Option awards granted are
vested in equal annual increments over no fewer than three years, beginning on the first anniversary of
the date of grant.  Activity under the AERC Share Option Plan is summarized as follows:

|                                          |            | Granted and |           |            
|----------------------------------------- | ---------- | ----------- | --------- | -----------
|                                          | Authorized | Outstanding | Available | Exercisable
|                                          |            |             |           |            
|Balance at December 31, 1997              | 543,093    | 530,255     | 12,763    | 323,589    
|Granted (at $12.50 per share)             | -          | 72,200      | (72,200)  | -          
|Forfeited (at $20.25 to $24.06 per share) | -          | (86,530)    | 86,530    | (39,864)   
|Exercisable                               | -          | -           | -         | 32,000     
|Balance at December 31, 1998              | 543,093    | 515,925     | 27,093    | 315,725    
|Granted (at $7.19 per share)              | -          | 144,000     | (144,000) | -          
|Forfeited (at $12.50 to $24.06 per share) | -          | (137,099)   | 137,099   | (33,500)   
|Exercisable                               | -          | -           | -         | 18,879     
|Balance at December 31, 1999              | 543,093    | 522,826     | 20,192    | 301,104    
|Granted (at $8.06 per share)              | -          | 51,000      | (51,000)  | -          
|Forfeited (at $7.19 to $22.00 per share)  | -          | (40,500)    | 40,500    | (7,300)    
|Exercisable                               | -          | -           | -         | 66,767     
|Balance at December 31, 2000              | 543,093    | 533,326     | 9,692     | 360,571    

The weighted average exercise prices of options outstanding at December 31, 2000, 1999 and
1998 were $16.79, $17.24 and $21.31 per share, respectively.  The weighted average exercise prices of
options exercisable at December 31, 2000, 1999 and 1998 were $19.75, $21.60 and $22.22 per share,
respectively.

**Equity-Based Incentive Compensation Plan**

The Equity-Based Incentive Compensation Plan ("the Omnibus Equity Plan"), an equity-based
incentive compensation plan, provides for the grant to participants of options to purchase common
shares, awards of common shares subject to restrictions on transfer, awards of common shares issuable
in the future upon satisfaction of certain conditions, rights to purchase common shares and other awards
based on common shares.  The option price with respect to the grant of options to purchase common
shares will be determined at the time of the grant but will not be less than 100% of the fair market value
of the common shares at the date of the grant or 110% in the case of a participant who, at the date of
grant, owns shares with more than 10.0% of the total combined voting power of all classes of stock of
the Company.  The rights to purchase common shares will enable a participant to purchase common
shares (i) at the fair market value of such shares on the date of such grant or (ii) at 85.0% of such fair
market value on such date if the grant is made in lieu of cash compensation.  Under the terms of the
Omnibus Equity Plan, these grants and awards may not aggregate more than 1,400,000 common
shares and no participating employee may receive awards with respect to more than 250,000 common
shares during any calendar year.

Restricted share grants made from this Plan vest either in equal increments over three years or
at the end of nine years from the date of grant.  Those shares vesting at the end of a nine year period
have a feature which permits the acceleration of the vesting upon the Company achieving certain
financial benchmarks.  Option grants made from this Plan to date have been vested either in equal
increments over three years or five years beginning on the first anniversary of the date of grant or at the
end of nine years.  The accelerator described above also applied to the nine year grants.

Activity under the Omnibus Equity Plan is summarized as follows:

|                                                        |            | Granted and |           |            
|------------------------------------------------------- | ---------- | ----------- | --------- | -----------
|                                                        | Authorized | Outstanding | Available | Exercisable
|                                                        |            |             |           |            
|Balance at December 31, 1997                            | 1,400,000  | 416,878     | 983,122   | -          
|Restricted shares granted (at $20.66 per share)         | -          | 484         | (484)     | -          
|Options granted (at $24.06 per share)                   | -          | 250,000     | (250,000) | -          
|Forfeited (at $22.8125 to $24.06 per share)             | -          | (10,800)    | 10,800    | -          
|Vested restricted shares (at $22.81 per share)          | -          | (1,000)     | -         | (1,000)    
|Exercisable                                             | -          | -           | -         | 82,800     
|Balance at December 31, 1998                            | 1,400,000  | 655,562     | 743,438   | 81,800     
|Restricted shares granted (at $12.50 per share)         | -          | 21,000      | (21,000)  | -          
|Options granted (at $10.38 to $12.50 per share)         | -          | 288,800     | (288,800) | -          
|Forfeited (at $22.8125 to $24.06 per share)             | -          | (88,439)    | 88,439    | -          
|Exercisable                                             | -          | -           | -         | 108,600    
|Balance at December 31, 1999                            | 1,400,000  | 876,923     | 522,077   | 190,400    
|Restricted shares granted (at $7.38 to $8.69 per share) | -          | 70,823      | (70,823)  | -          
|Options granted (at $8.06 to $8.63 per share)           | -          | 500,400     | (500,400) | -          
|Forfeited (at $8.63 to $24.06 per share)                | -          | (219,100)   | 219,100   | -          
|Vested restricted shares (at $8.69 per share)           | -          | (6,123)     | -         | (6,123)    
|Exercisable                                             | -          | -           | -         | 77,834     
|Balance at December 31, 2000                            | 1,400,000  | 1,222,923   | 169,954   | 262,111    

The weighted average exercise prices of options outstanding at December 31, 2000, 1999 and
1998 were $14.75, $20.12 and $24.01 per share, respectively.  The weighted average exercise prices of
options exercisable at December 31, 2000, 1999 and 1998 were $23.82, $24.06 and $24.06 per share,
respectively.

Deferred compensation of $108,495, $37,478 and $34,000 at December 31, 2000, 1999 and
1998, respectively, has been reflected as a reduction of paid-in capital in the accompanying financial
statements relating to the issuance of 64,700 restricted shares in 2000 and 21,000 restricted shares in
1999.

**Options Granted to Outside Directors**

The Company has granted options to outside directors on a periodic basis since the initial public
offering ("IPO").  The option awards are determined by the Company's Executive Compensation
Committee and approved by the board of directors.  Option awards granted vest one year from the date
of grant.  Activity is summarized as follows:

|                                        | Granted | Exercisable
|--------------------------------------- | ------- | -----------
|                                        |         |            
|Balance at December 31, 1997            | 43,750  | 23,750     
|Exercisable                             | -       | 20,000     
|Balance at December 31, 1998            | 43,750  | 43,750     
|Granted (at $11.75 to $12.50 per share) | 25,000  | -          
|Balance at December 31, 1999            | 68,750  | 43,750     
|Granted (at $8.63 per share)            | 35,000  | -          
|Exercisable                             | -       | 25,000     
|Balance at December 31, 2000            | 103,750 | 68,750     

The weighted average exercise prices of options outstanding at December 31, 2000 were
$15.56 per share, at December 31, 1999 were $19.67 per share and at December 31, 1998 were $22.94
per share.  The weighted average exercise prices of options exercisable at December 31, 2000 were
$19.09 per share and at December 31, 1999 and 1998 were $22.94 per share.

**Year 2001 Equity Incentive Plan**

The Company's Year 2001 Equity Incentive Plan (the "EIP") was adopted by the Board on
December 8, 2000 and operates substantially the same as the Equity-Based Incentive and Share Option
Plans.  The EIP, however, allows for participation by directors as well as employees, does not allow for
the grant of incentive stock options and shares issued under the EIP consist solely of treasury shares.

**SFAS No. 123**

The Company does not recognize compensation cost for stock options when the option exercise
price equals or exceeds the market value on the date of the grant.  Had compensation cost for the
Company's stock-based compensation plans been determined based on the fair values of the options
granted at the grant dates, consistent with the method of SFAS No. 123, the Company's net income and
earnings per share at December 31 would have been as follows:

|                                              | 2000           | 1999              | 1998              
|--------------------------------------------- | -------------- | ----------------- | ------------------
|Net (loss) income applicable to common shares
|                                              | As reported    | $(542,283)        | $18,224,571       
|                                              | Pro forma      | $(826,905)        | $18,071,334       
|                                             
|(Loss) income per common share               
|As reported 	- Basic                          | $        (.03) | $             .83 | $              .61
|- Diluted                                     | $        (.03) | $             .83 | $              .60
|Pro forma	- Basic                             | $        (.04) | $             .82 | $              .59
|- Diluted                                     | $        (.04) | $             .82 | $              .59

The fair value of each option grant was estimated on the date of grant using the Black-Scholes
options pricing model at December 31 using the following assumptions:

|                                      | 2000       | 1999       | 1998       
|------------------------------------- | ---------- | ---------- | -----------
|                                      |            |            |            
|Risk free interest rate or range      | 5.5%       | 6.3%       | 4.7%-6.9%  
|Dividend yield or range               | 12.41%     | 14.93%     | 7.8%-10.6% 
|Expected life or range                | 7.48 years | 7.64 years | 7-8 years  
|Expected volatility or range          | 27.62%     | 25.98%     | 16.1%-21.6%
|Weighted average per share fair value
|of an option granted during the year  | $0.45      | $0.51      | $0.29      

The pro forma effect on net income as set forth above is not representative of the pro forma
effect on net income in future years because it does not take into consideration pro forma compensation
expense related to grants made prior to 1996.

**17.	EXECUTIVE COMPENSATION**

**Executive Deferred Compensation Plan**

The Company's Executive Deferred Compensation Plan (the "EDCP") was adopted by the
Board of Directors on July 1, 1999.  The EDCP was implemented to allow key employees the option of
deferring receipt of compensation otherwise payable to them by the Company for their services and to
create an opportunity for appreciation of the amount deferred upon appreciation of the Company's
Common Shares.  Any shares deferred are subject to the terms of the Equity-Based Incentive
Compensation Plan.

Prior to January 1 of the EDCP year, any executive officer of the Company may elect to defer all
or a portion of their eligible compensation (base salary and bonus) and such amount will be credited to a
deferral account maintained on behalf of the executive.  Amounts credited to the deferral account are
converted to "share units" and represent deferred share awards under the Company's Equity-Based
Incentive Compensation Plan.  The deferral account is vested at all times.  At December 31, 2000, there
were no deferred amounts.  At December 31, 1999 deferred amounts were $29,164 representing 3,733
common shares.  These amounts related to one executive officer whose employment terminated in
2000; the accrued amounts were paid in 2000.

**Executive Compensation and Employment Agreements**

The Company has a three year employment agreement with the Chairman and Chief Executive
Officer.  This agreement, dated January 1, 1996, is automatically extended for an additional year at the
end of each year of the agreement, subject to the right of either party to terminate by giving one year's
prior written notice.  The Company entered into an employment agreement with the Executive Vice
President (former Chairman, President and Chief Executive Officer of MIGRA) for a period of three years
which was subsequently terminated effective July 1, 1999.  The Company charged $550,000 in 1999 to
general and administrative expense related to the severance of this individual.  During 2000, the
Company entered into a consulting agreement with a former Vice President and former President of MIG
II Realty Advisors, who resigned these positions during 2000.  Under the consulting agreement, the
former officer will provide services to MIG in connection with the servicing of certain pension fund clients
designated by MIG.  Additionally, the Company has non-compete and severance agreements with
certain other executive officers.

**Supplemental Employee Retirement Plan**

The Company's Supplemental Executive Retirement Plan (the "SERP") was adopted by the
Board of Directors on January 1, 1997.  This Plan was implemented to provide competitive retirement
benefits for executive officers and to act as a retention incentive.  This non-qualified, unfunded, defined
contribution plan extends to certain named officers of the Company nominated by the Chief Executive
Officer and approved by the Executive Compensation Committee of the Board.  The SERP provides for
the Company to make a contribution to the account of each of the participating officers at the end of
each Plan year.  The contribution, which is a percentage of eligible earnings (including base salary and
payments under the Annual Incentive Plan), is set by the Committee at the beginning of each SERP
year.  Contributions will not be taxable to the participant (other than social security and federal
unemployment taxes) until distribution.  The account balances earn interest each year at a rate that
approximates the Company's average cost of capital.  The Executive Compensation Committee
approves the interest rate at the beginning of each year.  At December 31, 2000, 1999 and 1998, the
Company recognized expense of $132,186, $272,160 and $85,818, respectively, relating to this Plan.

******Annual Incentive Plan**

Through the Annual Incentive Plan, executives are rewarded for short-term financial
performance and achievement of established corporate objectives.  In 2000, annual incentive
opportunities were linked to performance relative to a Funds from Operations benchmark, as defined, as
well as performance against individual goals.  Annual incentive opportunities are set at the beginning of
each plan year for eligible participants.  Award payouts for performance against the financial benchmark
are delivered in restricted shares.  Award payouts for performance against individual objectives are
delivered 50.0% in cash and 50.0% in restricted shares.  If performance under the financial portion of the
plan exceeds the benchmark, the participant's award is subject to a multiplier of up to one and one-half
times the established award opportunity.  This additional award is paid in restricted shares.  At
December 31, 2000, the Company recognized expense of $285,000 relating to this plan.

**Long-Term Plan**

Participants in the Long-Term Plan, a long-term incentive compensation plan, will earn incentive
compensation over a three year period (the "Plan Period") based on specific levels of Funds From
Operations per share, as defined, that are established at the outset of the Plan Period.  Initial awards
under the Long-Term Plan were based on the Plan Period beginning January 1, 1995 and ending
December 31, 1997.  The Long-Term Plan terminates in 2005.  There were no charges to earnings
under this plan and no payments were made on the first eligibility date which occurred in 1998.
Beginning with the calendar year 1998, a new three year Plan Period commenced.  Payment of the
incentive compensation earned under the Long-Term Plan may be made in cash, restricted shares of
the Company's common shares or a combination thereof as determined by the Board of Directors.  The
second payment eligibility date is in 2001.  At December 31, 2000, no amount was earned under this
Plan and accordingly, there was no charge reflected on the Consolidated Statement of Income.

******18.	QUARTERLY FINANCIAL INFORMATION (UNAUDITED)**

|****                                          | 2000              
|--------------------------------------------- | ------------------
|                                              | First             
|                                              | Quarter           
|                                              |                   
|Revenues                                      | $38,279,503       
|Net (loss) income                             | (1,617,263)       
|Net (loss) income applicable to common shares | (2,988,371)       
|                                              |                   
|**Earnings Per Common Share-Basic:**          |                   
|Net (loss) income applicable to common shares | $            (.15)
|Weighted average number of shares outstanding |                   
|(in thousands)                                | 20,279            
|                                              |                   
|**Earnings Per Common Share-Diluted:**        |                   
|Net (loss) income applicable to common shares | $            (.15)
|Weighted average number of shares outstanding |                   
|(in thousands)                                | 20,279            

|                                                    | 1999               
|--------------------------------------------------- | -------------------
|                                                    | First              
|                                                    | Quarter            
|                                                    |                    
|Revenues                                            | $38,016,051        
|Income before extraordinary item and cumulative     |                    
|effect of a change in accounting principle          | 1,869,878          
|Extraordinary item                                  | -                  
|Cumulative effect                                   | 4,319,162          
|Net income                                          | 6,189,040          
|Net income (loss) applicable to common shares       | 4,817,935          
|                                                    |                    
|**Earnings Per Common Share-Basic:**                |                    
|Income (loss) before extraordinary item and         |                    
|cumulative effect of a change in accounting         |                    
|principle applicable to common shares               | $             .02  
|Extraordinary item                                  | $                 -
|Cumulative effect                                   | $             .19  
|Net income (loss) applicable to common shares       | $              21  
|Weighted average number of shares outstanding       |                    
|(in thousands)                                      | 22,666             
|                                                    |                    
|**Earnings Per Common Share-Diluted:**              |                    
|Income (loss) before extraordinary item and         |                    
|cumulative effect of a change in accounting         |                    
|principle applicable to common shares               | $             .02  
|Extraordinary item                                  | $                - 
|Cumulative effect                                   | $             .19  
|Net income (loss) applicable to common shares       | $             .21  
|Weighted average number of shares outstanding       |                    
|(in thousands)                                      | 22,666             
|                                                    |                    
|**Pro forma amounts assuming the new**              |                    
|**capitalization policy is applied retroactively:** |                    
|Net income                                          | $  1,869,878       
|Net income (loss) applicable to common shares       | $     498,773      
|**Per share amount - Net income (loss)**            |                    
|**applicable to common shares:**                    |                    
|Basic                                               | $              .02 
|Diluted                                             | $              .02 

**19.	SEGMENT REPORTING**

The Company has four reportable segments: (1) Market-rate multifamily properties, (2)
Affordable Housing multifamily properties, (3) Management and Service Operations and (4) Unallocated
Corporate Overhead.  The Company has identified these segments because the discrete information is
the basis upon which management makes decisions regarding resource allocation and performance
assessment.  The Market-rate multifamily properties are same store conventional multifamily residential
properties (the operations are not subject to regulation by HUD) and properties acquired or disposed of
within one year.  The Affordable Housing properties are multifamily properties for which the rents are
subsidized and certain aspects of the operations are regulated by HUD pursuant to Section 8 of the
National Housing Act of 1937.  The Management and Service Operations provide management and
advisory services to the Market-rate and Affordable Housing properties which are owned by the
Company, as well as to clients and properties that are not owned, but are managed by the Company.
Unallocated Corporate Overhead represents costs not specifically allocated to an individual segment.
All of the Company's segments are located in the United States.

The accounting policies of the segments are the same as those described in the "Basis of
Presentation and Significant Accounting Policies".  The Company evaluates the performance of its
segments and allocates resources to them based on EBITDA.  EBITDA should not be considered as an
alternative to net income (determined in accordance with GAAP), as an indicator of the Company's
financial performance, cash flow from operating activities (determined in accordance with GAAP) or as a
measure of the Company's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the
Company's needs.

Information on the Company's segments for the years ended December 31, 2000, 1999 and
1998 is as follows:

|                                     | For the year ended December 31, 2000
|------------------------------------ | ------------------------------------
|                                     |                                     
|                                     |                                     
|                                     | Market-Rate                         
|                                     |                                     
|Total segment revenues               | $136,249,765                        
|Elimination of intersegment revenues | (192,200)                           
|Consolidated revenues                | 136,057,565                         
|                                     |                                     
|Equity in net (loss) income of joint |                                     
|ventures                             | (132,916)                           
|                                     |                                     
|*EBITDA-including the proportionate  |                                     
|share of joint ventures              | 78,980,405                          
|                                     |                                     
|Total assets                         | 771,856,274                         
|Capital expenditures, gross          | 28,529,361                          

|                                       | For the year ended December 31, 1999
|-------------------------------------- | ------------------------------------
|                                       |                                     
|                                       |                                     
|                                       | Market-Rate                         
|                                       |                                     
|Total segment revenues                 | $133,970,528                        
|Elimination of intersegment revenues   | (191,215)                           
|Consolidated revenues                  | 133,779,313                         
|                                       |                                     
|Equity in net income of joint ventures | 495,022                             
|                                       |                                     
|*EBITDA-including the proportionate    |                                     
|share of joint ventures                | 77,043,665                          
|                                       |                                     
|Total assets                           | 795,334,864                         
|Capital expenditures, gross            | 47,364,003                          

|                                       | For the year ended December 31, 1998
|-------------------------------------- | ------------------------------------
|                                       |                                     
|                                       |                                     
|                                       | Market-Rate                         
|                                       |                                     
|Total segment revenues                 | $123,227,338                        
|Elimination of intersegment revenues   | (193,690)                           
|Consolidated revenues                  | 123,033,648                         
|                                       |                                     
|Equity in net income of joint ventures | 433,302                             
|                                       |                                     
|*EBITDA-including the proportionate    |                                     
|share of joint ventures                | 71,756,045                          
|                                       |                                     
|Total assets                           | 787,686,190                         
|Capital expenditures, gross            | 316,976,705                         

* Intersegment revenues and expenses have been eliminated in the computation of EBITDA for each of the segments.

A reconciliation of total segment EBITDA to total consolidated net income for the years ended
December 31, 2000, 1999 and 1998 is as follows:

|                                                      | 2000         | 1999         | 1998        
|----------------------------------------------------- | ------------ | ------------ | ------------
|                                                      |              |              |             
|Total EBITDA for reportable segments*                 | $78,734,651  | $78,855,516  | $72,911,078 
|EBITDA-proportionate share of joint ventures          | (2,725,797)  | (2,960,899)  | (2,555,349) 
|Depreciation and amortization                         | (35,479,056) | (35,145,839) | (24,898,978)
|Interest expense                                      | (43,639,740) | (38,263,518) | (29,050,346)
|Interest income                                       | 1,280,845    | 1,618,103    | 1,164,189   
|Income taxes                                          | (740,649)    | (887,219)    | (434,434)   
|Gain on disposition of properties and land, net       | 7,511,889    | 19,630,303   | 503,497     
|Extraordinary loss                                    | -            | (3,456,612)  | (124,895)   
|Cumulative effect of a change in accounting principle | -            | 4,319,162    | -           
|Consolidated net income                               | $4,942,143   | $23,708,997  | $17,514,762 

*Net of equity (loss) income of joint ventures

******20.	CHANGE IN ACCOUNTING PRINCIPLE**

Effective January 1, 1999, the Company changed its method of accounting to capitalize
expenditures for certain replacements and improvements, such as new HVAC equipment, structural
replacements, appliances, flooring, carpeting and kitchen/bath replacements and renovations.
Previously, these costs were charged to operations as incurred.  Ordinary repairs and maintenance,
such as unit cleaning and painting, and appliance repairs are expensed.  The Company believes the
change in the capitalization method provides an improved measure of the Company's capital
investment, provides a better matching of expenses with the related benefit of such expenditures,
including associated revenues, and is in the opinion of management, consistent with industry practice.
The cumulative effect of this change in accounting principle increased net income for the year ended
December 31, 1999 by $4.3 million or $.19 per share (basic and diluted).  The effect of this change was
to increase income before cumulative effect of a change in accounting principle by $7.5 million or $.34
per share (basic and diluted) for the year ended December 31, 1999.  The pro forma amounts
(unaudited) shown on the income statement have been adjusted to reflect the retroactive application of
the capitalization of such expenditures and related depreciation for the year ended December 31, 1998
which increased net income by $839,400 or $.04 per share (basic and diluted)

**21.	PRO FORMA CONDENSED FINANCIAL INFORMATION (UNAUDITED)**

The following unaudited supplemental pro forma operating data for 1998 is presented to reflect,
as of January 1, 1998, the effects of: (i) the 14 property acquisitions completed in 1998, (ii) the merger of
MIGRA in 1998, (iii) the sale of a property in 1998, (iv) the sale of the eight operating properties in 1999,
and (v) the change in the capitalization policy.  The following unaudited supplemental pro forma
operating data for 1999 is presented to reflect, as of January 1, 1999, the effects of: (i) the sale of the
eight operating properties in 1999, (ii) the sale of six operating properties in 2000, and (iii) the buyout in
2000 of the 66.67% partners in Euclid House.  The following unaudited supplemental pro forma
operating data for 2000 is presented to reflect, as of January 1, 2000, the effects of: (i) the sale of six
operating properties in 2000 and (ii) the buyout of the 66.67% partners in Euclid House.

|                                                                   | December 31,
|------------------------------------------------------------------ | ------------
|(In thousands, except per share amounts)                           | 2000        
|                                                                   |             
|Revenues                                                           | $154,730    
|*Net (loss) income                                                 | (4,545)     
|*Net (loss) income applicable to common shares (Basic and Diluted) | (10,030)    
|Earnings per common share:                                         |             
|- Basic                                                            | $     (0.51)
|- Diluted                                                          | $     (0.51)
|Weighted average number of common shares outstanding:              |             
|- Basic                                                            | 19,733      
|- Diluted                                                          | 19,733      

*Before extraordinary item and cumulative effect of a change in accounting principle.

The 1999 and 1998 pro forma financial information does not include the revenue and expenses
for the period January 1 through the date the properties were acquired by the Company for Windsor at
Kirkman Apartments, Windsor Pines and Steeplechase at Shiloh Crossing Apartments which are
properties that were acquired in 1998.  Additionally, the 1999 pro forma financial information does not
include the Company's 49.0% interest in the two joint venture partnerships entered into during 2000.
The revenue and expenses of the aforementioned properties were excluded from the pro forma financial
information for 1998 as they were under construction during substantially all of the periods prior to their
acquisition.

The unaudited pro forma condensed statement of operations is not necessarily indicative of
what the actual results of operations of the Company would have been assuming the transactions had
been completed as set forth, nor does it purport to represent the results of operations of future periods of
the Company.

**22.	SUBSEQUENT EVENTS**

**Dividends Declared**

On January 3, 2001, the Company declared a quarterly dividend of $0.25 per common share,
which was paid on February 1, 2001 to shareholders of record on January 16, 2001.

On February 19, 2001, the Company declared a quarterly dividend of $0.60938 per Depositary
Share on its Class A Cumulative Preferred Shares which will be paid on March 15, 2001 to shareholders
of record on March 1, 2001.

**Advisory Acquisition**

On January 17, 2001, the Company acquired on behalf of an advisory client, a market rate
multifamily property containing 319 units located in Florida.  The Company was retained to provide
property and asset management services.

**Management Contract Cancellation**

On January 2, 2001 and January 25, 2001, the management contracts for two properties owned
by advisory clients were canceled.  The asset and property management fees for 2000 were
approximately $473,800 and $126,300, respectively.

**Guaranties**

Subsequent to December 31, 2000, the Company guaranteed completion of certain
improvements totaling $1.8 million in connection with the refinancing of Americana Apartments, a 738
unit multifamily community located in Euclid, Ohio, in which the Company is a 33.33% joint venture
partner.  This obligation is secured by a $1.8 million letter of credit.  Also, subsequent to December 31,
2000, the Company obtained a $407,000 performance bond to the City of Boynton Beach, Florida, which
guarantees performance by a Company subsidiary of certain improvements in connection with the
Company's proposed Boynton Beach joint venture development.



**SCHEDULE II**

**VALUATION AND QUALIFYING ACCOUNTS**

|Column A                        | Column B             | Column C         | Column D                           | Column E           
|------------------------------- | -------------------- | ---------------- | ---------------------------------- | -------------------
|                                |                      | ADDITIONS        |                                    |                    
|                                | Balance at Beginning | Charged to Costs | Charged to Other                   |                    
|DESCRIPTION                     | of Period            | and Expenses     | Accounts - Describe                | Deductions-Describe
|                                |                      |                  |                                    |                    
|Year ended December 31, 2000:   |                      |                  |                                    |                    
|Deducted from asset accounts:   |                      |                  |                                    |                    
|Allowance for doubtful accounts | $226,167             | $1,366,184       | $                                - | $(1,395,031)(a)    
|                                |                      |                  |                                    |                    
|Year ended December 31, 1999:   |                      |                  |                                    |                    
|Deducted from asset accounts:   |                      |                  |                                    |                    
|Allowance for doubtful accounts | -                    | 1,497,581        | -                                  | (1,271,414)(a)     
|                                |                      |                  |                                    |                    
|Year ended December 31, 1998:   |                      |                  |                                    |                    
|Deducted from asset accounts:   |                      |                  |                                    |                    
|Allowance for doubtful accounts | -                    | -                | -                                  | -                  

(a) Uncollectible amounts written off.

|**S-2****ASSOCIATED ESTATES REALTY CORPORATION
	SCHEDULE III**
|--------------------------------------------------------------
|**REAL ESTATE AND ACCUMULATED DEPRECIATION**                  
|**December 31, 2000**                                         
|****                                                          
|                                                              
|                                                              
|                                                              
|****                                                          
|**Property**                                                  
|                                                              
|RESIDENTIAL MULTIFAMILY PROPERTIES                            
|**NORTHERN OHIO**                                             
|Barrington                                                    
|Bay Club                                                      
|Country Club Apartments                                       
|Edgewater Landing                                             
|Ellet                                                         
|Euclid House                                                  
|Gates Mills Club                                              
|Gates Mills III                                               
|Hawthorne Hills Apartments                                    
|Hillwood I                                                    
|Jennings                                                      
|KTC Properties                                                
|Mallard's Crossing                                            
|Portage Towers                                                
|Puritas Place                                                 
|Riverview Towers                                              
|Shaker Park Gardens                                           
|The Woodlands of North Royalton                               
|State Road                                                    
|Statesman II                                                  
|Sutliff II                                                    
|Tallmadge Acres                                               
|The Oaks                                                      
|The Triangle                                                  
|Twinsburg                                                     
|Vantage Villa                                                 
|Village at Avon                                               
|Village Towers                                                
|West High                                                     
|Westchester Townhouses                                        
|Western Reserve Village                                       
|Westlake Investment                                           
|Williamsburg at Greenwood Village                             
|Winchester (2)                                                
|Winchester II                                                 
|                                                              

|S-3ASSOCIATED ESTATES REALTY CORPORATION
					SCHEDULE III - Continued
|----------------------------------------------------------------------
|**REAL ESTATE AND ACCUMULATED DEPRECIATION**                          
|**December 31, 2000**                                                 
|****                                                                  
|                                                                      
|                                                                      
|                                                                      
|****                                                                  
|**Property**                                                          
|                                                                      
|                                                                      
|CENTRAL OHIO                                                          
|Arrowhead Station                                                     
|Bedford Commons                                                       
|Bolton Estates                                                        
|Bradford at Easton                                                    
|Residence at Christopher Wren                                         
|Colony Bay East                                                       
|Heathermoor                                                           
|Kensington Grove                                                      
|Lake Forest                                                           
|Muirwood Village at Bennell                                           
|Muirwood Village at London                                            
|Muirwood Village at Zanesville                                        
|Oak Bend Commons Apartments                                           
|Pendleton Lakes East                                                  
|Perimeter Lakes                                                       
|The Residence at Newark                                               
|Saw Mill Village                                                      
|Sheffield at Sylvan                                                   
|Sterling Park                                                         
|Residence at Turnberry                                                
|Wyndemere                                                             
|                                                                      
|SOUTHERN OHIO                                                         
|Remington Place                                                       
|                                                                      
|MICHIGAN                                                              
|Arbor Landings                                                        
|Aspen Lakes Apartments                                                
|Central Park Place                                                    
|Country Place Apartments                                              
|Clinton Place Apartments                                              
|Georgetown Park Apartments                                            
|Oaks and Woods at Hampton                                             
|The Landings at the Preserve                                          
|Spring Brook Apartments                                               
|Spring Valley Apartments                                              
|Summer Ridge                                                          
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                      

|S-4ASSOCIATED ESTATES REALTY CORPORATION
					SCHEDULE III - Continued
|----------------------------------------------------------------------
|**REAL ESTATE AND ACCUMULATED DEPRECIATION**                          
|**December 31, 2000**                                                 
|****                                                                  
|                                                                      
|                                                                      
|                                                                      
|****                                                                  
|**Property**                                                          
|                                                                      
|FLORIDA                                                               
|Cypress Shores                                                        
|Windsor Pines                                                         
|Kirkman                                                               
|                                                                      
|GEORGIA                                                               
|The Falls                                                             
|Morgan Place                                                          
|                                                                      
|MARYLAND                                                              
|Reflections                                                           
|Annen Woods                                                           
|Hampton Pointe                                                        
|                                                                      
|NORTH CAROLINA                                                        
|Windsor Falls                                                         
|                                                                      
|TEXAS                                                                 
|Fleetwood                                                             
|                                                                      
|ARIZONA                                                               
|20th and Campbell                                                     
|                                                                      
|INDIANA                                                               
|The Gables at White River                                             
|Waterstone Apartments                                                 
|Steeplechase                                                          
|                                                                      
|                                                                      
|PENNSYLVANIA                                                          
|Chestnut Ridge                                                        
|                                                                      
|LAND HELD FOR DEVELOPMENT                                             
|**NORTHERN OHIO**                                                     
|Village at Avon                                                       
|Westlake Investment                                                   
|                                                                      
|CENTRAL OHIO                                                          
|Wyndemere                                                             
|                                                                      
|FLORIDA                                                               
|Boynton Beach                                                         

|**S-5ASSOCIATED ESTATES REALTY CORPORATION
					SCHEDULE III - Continued**
|--------------------------------------------------------------------------
|**REAL ESTATE AND ACCUMULATED DEPRECIATION**                              
|**December 31, 2000**                                                     
|****                                                                      
|                                                                          
|                                                                          
|                                                                          
|****                                                                      
|**Property**                                                              
|                                                                          
|MICHIGAN                                                                  
|Aspen Lakes Apts.                                                         
|The Landings at the Preserve                                              
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Management Service Companies                                              
|Land, Building & Improvements                                             
|**FURNITURE, FIXTURE & EQUIPMENT**                                        
|Construction in progress                                                  
|**GRAND TOTALS**                                                          

(1)	Encumbrances include mortgage debt, deferred liability and other obligations secured by the real estate assets.

(2)	Improvements include the purchase price adjustment for certain properties in which cash was paid to unrelated third parties to acquire their interests.

|**S-6ASSOCIATED ESTATES REALTY CORPORATION
					SCHEDULE III - Continued**
|--------------------------------------------------------------------------
|**REAL ESTATE AND ACCUMULATED DEPRECIATION**                              
|**December 31, 2000**                                                     
|****                                                                      
|                                                                          
|                                                                          
|                                                                          
|****                                                                      
|**Property**                                                              
|                                                                          
|JOINT VENTURE PROPERTIES                                                  
|INVESTMENTS IN WHICH                                                      
|**AERC HAS A 50% INTEREST**                                               
|**RESIDENTIAL MULTIFAMILY PROPERTIES**                                    
|**NORTHERN OHIO**                                                         
|College Towers                                                            
|Highland House                                                            
|Lakeshore Village                                                         
|                                                                          
|                                                                          
|INVESTMENTS IN WHICH AERC                                                 
|**HAS A 49% INTEREST**                                                    
|RESIDENTIAL MULTIFAMILY PROPERTIES                                        
|**GEORGIA**                                                               
|Idlewylde - Phase I                                                       
|Idlewylde - Phase II                                                      
|                                                                          
|PENNSYLVANIA                                                              
|Berkley Manor                                                             
|                                                                          
|                                                                          
|INVESTMENTS IN WHICH                                                      
|AERC HAS A 33% INTEREST                                                   
|RESIDENTIAL MULTIFAMILY PROPERTIES                                        
|NORTHERN OHIO                                                             
|Americana                                                                 
|Gates Mills Towers                                                        
|Watergate                                                                 
|                                                                          
|                                                                          
|Land, Building and Improvements                                           
|Furniture, Fixtures and Equipment                                         
|Construction in Progress                                                  
|                                                                          
|                                                                          

(1)	Encumbrances include mortgage debt and other obligations secured by the real estate assets.

(2)	Improvements include the purchase price adjustment for certain properties in which cash was paid to unrelated third parties to acquire their interests.









The Aggregate Cost for Federal Income Tax purposes was approximately $908.5 million and $893.0 million
at December 31, 2000 and 1999, respectively.

The changes in Total Real Estate Assets for the years ended December 31, are as follows:

|                                                          | 2000         | 1999         
|--------------------------------------------------------- | ------------ | -------------
|                                                          |              |              
|Balance, beginning of period                              | $967,091,982 | $ 955,671,325
|Disposal of fixed assets                                  | (25,996,181) | (38,386,793) 
|Contribution of land to partnership interests             | (7,717,201)  | -            
|New acquisition properties                                | 5,204,574    | 2,485,413    
|Purchase of remaining two-thirds interest in Euclid House | 1,722,726    | -            
|Improvements                                              | 23,151,631   | 47,322,037   
|Balance, end of period                                    | $963,457,531 | $ 967,091,982

The changes in Accumulated Depreciation for the years ended December 31, are as follows:

|                             | 2000         | 1999         
|---------------------------- | ------------ | -------------
|                             |              |              
|Balance, beginning of period | $171,544,713 | $ 153,941,702
|Disposal of fixed assets     | (10,757,417) | (18,183,943) 
|Depreciation for period      | 32,643,140   | 35,786,954   
|Balance, end of period       | $193,430,436 | $ 171,544,713