****







**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 $155.4 million as of March 4, 2002.                                                    
|                                                                                                              
|The number of Common Shares outstanding as of March 4, 2002 was 19,466,977.                                   
|                                                                                                              
|DOCUMENTS INCORPORATED BY REFERENCE                                                                           
|(To The Extent Indicated Herein)                                                                              
|                                                                                                              
|Portions of the Annual Performance Report to Shareholders for the                                             
|fiscal year ended December 31, 2001 (in Parts II, III and IV).                                                
|Notice of Annual Meeting and Proxy Statement for the Annual Meeting                                           
|of Shareholders to be held on May 8, 2002 (in Part III).                                                      

****



**TABLE OF CONTENTS**

**FORM 10-K ANNUAL REPORT**

**FOR THE YEAR ENDED DECEMBER 31, 2001**

|                                                                         | **Page**
|------------------------------------------------------------------------ | --------
|**Item**                                                                 | ****    
|**PART I**                                                               |         
|1.	Business                                                              | 1       
|General Development of Business                                          | 1       
|Overview of Business Segments                                            | 1       
|Acquisition/Disposition                                                  | 2       
|Market Rate                                                              | 2       
|Affordable Housing                                                       | 2       
|Management and Service Companies                                         | 2       
|Strategy                                                                 | 2       
|Overall Portfolio Strategy                                               | 2       
|Financing and Leverage                                                   | 3       
|Market Rate Properties                                                   | 3       
|Affordable Housing                                                       | 4       
|Fee Management                                                           | 4       
|Advisory Business                                                        | 4       
|Income Taxes                                                             | 4       
|Competitive Conditions                                                   | 4       
|Customers                                                                | 4       
|Employees                                                                | 4       
|Available Information                                                    | 5       
|Reports to Security Holders                                              | 5       
|2.	The Properties                                                        | 5       
|Company's Portfolio                                                      | 5       
|Noteholder Interest                                                      | 7       
|Indebtedness Encumbering the Properties                                  | 7       
|3.	Legal Proceedings                                                     | 7       
|4.	Submission of Matters to a Vote of Security Holders                   | 7       
|Executive Officers of the Registrant and Other Key Employees             | 8       
|                                                                         |         
|**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                     | 14      
|Condition and Results of Operations                                      |         
|7A.	Quantitative and Qualitative Disclosures About Market Risk           | 29 & 30 
|8.	Financial Statements and Supplementary Data                           | 30      
|9.	Changes and Disagreements with Accountants                            |         
|on Accounting and Financial Disclosure                                   | 30      
|                                                                         |         
|**PART III**                                                             |         
|                                                                         |         
|10.	Directors and Executive Officers of the Registrant                   | 31      
|11.	Executive Compensation                                               | 31      
|12.	Security Ownership of Certain Beneficial Owners and Management       | 31      
|13.	Certain Relationships and Related Transactions                       | 31      
|*Glossary*                                                               | 32      
|**PART IV**                                                              |         
|                                                                         |         
|14.	Exhibits, Financial Statement Schedules and Reports on Form 8-K      | 34      

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 (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 in the business of acquiring, developing and operating
multifamily assets.  The Company 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'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 suitable for further development or expansion, both of
which are owned by the Company under a ground lease.



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
four corporations which provide management and other services for the Company and third parties ("Service
Companies").  The Company currently owns and/or operates properties in 14 states across the United
States.  The Company's portfolio currently consists of a total of 128 properties of which 74 (61 Market Rate
properties and 13 Affordable Housing properties) are owned, directly or indirectly, by the Company or by a
subsidiary of the Company; ten 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 three Market Rate properties 49.0% owned) and
44 non-owned properties (of which one is a commercial property) managed by the Company or one of its
subsidiaries.  (See Item 2 for a complete listing of the Company's Portfolio).  MIG II Realty Advisors, Inc.
("MIG") provides asset management services for 23 of the 44 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 and qualified REIT subsidiaries,
which include but are not limited to, separate legal entities that were formed in connection with 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
(which are taxed as a Taxable REIT Subsidiary ("TRS") under the REIT Modernization Act ("RMA")
implemented in 1999), a limited partnership 66.67% owned by the Company and an Operating Partnership
structured as a DownREIT of which an aggregate 85.0% is owned by the Company.

**OVERVIEW OF BUSINESS SEGMENTS**

****The Company has four reportable segments: (1) Acquisition/Disposition multifamily properties, (2)
Same Store Market Rate ("Market Rate") multifamily properties, (3) Affordable Housing multifamily
properties, and (4) Management and Service Operations.  The Company has identified these segments
based upon how management makes decisions regarding resource allocation and performance
assessment.  All of the Company's segments are located in the United States.  Effective January 1, 2001,
management revised its reported segments by showing Acquisition/Disposition properties as a separate
segment.  Previously, Acquisition/Disposition properties were included within the Market Rate segment.
Also, the previously reported Unallocated Corporate Overhead segment has been eliminated and the costs
previously allocated to this segment have been reallocated to the other four segments.  Management has
adjusted the reportable segments in order to reflect a better representation of the operations of the
Company.

The accounting policies of the reportable segments are the same as those described in Note 1,
"Basis of Presentation and Significant Accounting Policies" of the Notes to the Financial Statements
presented in Part II, Item 8 of this Form 10-K.  The Company previously evaluated the performance of its
reportable segments based on EBITDA; however, effective January 1, 2001, management changed its
evaluation performance measure to Net Operating Income ("NOI"), as the Company believes that NOI
represents a more accurate measure of the reportable segment's activity. NOI is determined by deducting
property operating and maintenance expenses from total revenues for the Acquisition/Disposition, Market
Rate and Affordable Housing segments and deducting service companies expense, which is included within
the general and administrative expenses in the Consolidated Statements of Income and painting service
expense from total revenues for the Management and Service Operations segment.  NOI should not be
considered as an alternative to net income [determined in accordance with Generally Accepted Accounting
Principals ("GAAP")], or 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.  Other real estate
companies may define NOI in a different manner.

See Note 18 of the Notes to the Financial Statements presented in Part II, Item 8 of this report on
Form 10-K for the segment financial information.

***Acquisition/Disposition***.The Acquisition/Disposition properties represent acquired or developed
properties which have not yet reached stabilization (the Company considers a property stabilized when its
occupancy rate reaches 93.0% or one year following the purchase or delivery of the final units, whichever
occurs first) and properties that have been sold.  Currently, the Company has two owned properties
classified to this segment.  Additionally, seven properties which were sold by the Company during 2001 are
also classified to this segment.  During 2001, approximately 6.2% of the total NOI of the Company was
generated by this segment.

***Market  Rate***.The Market Rate properties are same store conventional multifamily residential
properties.  Currently, the Company has 60 properties, of which two are congregate care facilities, classified
to this segment [the operations of which are not subject to regulations by U.S. Department of Housing and
Urban Development ("HUD")].  During 2001, approximately 83.3% of the total NOI of the Company was
generated by this segment.

***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.  Currently, the Company has 13 properties classified to this segment.
During 2001, approximately 6.7% of the total NOI of the Company was generated by this segment.

***Management and Service Operations***.The Management and Service Operations provide
management and advisory services to the Acquired, Market Rate and Affordable Housing properties which
are owned by the Company, as well as to clients and properties not owned by the Company.  During 2001,
approximately 3.8% of the total NOI of the Company was generated by this segment.

**STRATEGY**

***Overall Portfolio Strategy*.**The Company's primary business objectives are to maximize NOI 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'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.

The Company's operating strategy also focuses on pursuing co-investment opportunities with
various investors, including pension fund clients and local developers.  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.  This strategy
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 its co-investment partners.  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 investments 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.

***Dispositions/Acquisitions.***The Company has successfully disposed of over 23 properties during
the last three years generating gross sales proceeds in excess of $100.0 million.  Most of these were smaller
properties located in Northeast or Central Ohio.  Others were located in markets where the Company did
not have a significant presence.  The Company expects to continue selling non-strategic properties in order
to continue its policy of diversifying its property portfolio.  The Company intends to use sale proceeds
generated from new dispositions to acquire properties in Florida, Atlanta, Georgia, the Metro D.C. area and
other markets identified by the Company as having greater growth potential.

***Financing and Leverage****.* The Company believes that the use of borrowed funds in purchasing
properties helps to maximize the Company's return on the investments.  As of December 31, 2001,
conventional mortgages payable, which totaled $537.8 million, were comprised of 56 non-recourse loans,
each of which was collateralized by the respective real estate and resident leases.  Federally insured
mortgage debt, which totaled $10.7 million, encumbered four of the properties at December 31, 2001
(including one property that was funded through Industrial Development Bonds).  The Company's $12.0
million line of credit is secured by two properties.  Outstanding letters of credit totaling $4.0 million limit the
amount available under this line of credit to $8.0 million.  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 are presently
restricted up to an amount not to exceed $12.6 million.

Additionally, the Company had one Medium-Term Note outstanding with a balance of $105,000 at
December 31, 2001.  This note is unsecured.

***Market Rate Properties.*****  The consistent goal for the owned portfolio of multifamily assets is income
and value enhancement through reinvestment in these assets.  Internal growth is achieved through
realization of all marginal revenue opportunities, contained operating expenses and efficient management.
Management believes 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.

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 reduce exposure in the Midwest in order to achieve the goal of
holding a portfolio of economically and geographically diversified institutional quality multifamily assets.

The Company plans to continue its annual program of improvements to its properties and its
ongoing practice of regular maintenance and periodic renovation.

***Affordable Housing.***The Company's owned portfolio currently includes 13 properties (comprised
of 1,296 units) that were part of the portfolio at the time of the IPO, which are subject to regulation by HUD.

Although rent growth in these properties is limited due to regulatory restrictions, these properties
have provided a stabilizing influence on 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 21 affordable housing properties (4,010 units), owned by third parties.

***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 and provides a network for new personnel while generating fee income.

***Advisory Business.*****  MIG's advisory business is a component of the Company's overall operating
strategy.  A focus of this business is 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
may 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 would a 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.

**INCOME TAXES**

See Note 1 of the Notes to the Financial Statements presented in Part II, Item 8 of this Form 10-K.

**COMPETITIVE CONDITIONS**

See Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of
Operations" of this Form 10-K.

**CUSTOMERS**

The business of the Company, taken as a whole, is not dependent upon any single customer or a
few customers.

**EMPLOYEES**

At March 4, 2002, the Company employed approximately 950 people.  Satisfactory relations have
generally prevailed between the Company and its employees.

**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 and
its subsidiaries.

|                                       | **Total Number**  | **Total Number**
|-------------------------------------- | ----------------- | ----------------
|**Owned by the Company:**              | **of Properties** | **of Units**    
|Acquired Market Rate Properties:       |                   |                 
|Florida                                | 1                 | 460             
|Ohio                                   | 1                 | 312             
|                                       | 2                 | 772             
|Market Rate Properties:                |                   |                 
|Arizona                                | 1                 | 204             
|Florida                                | 2                 | 668             
|Georgia                                | 2                 | 706             
|Indiana                                | 3                 | 836             
|Maryland                               | 3                 | 668             
|Michigan                               | 11                | 2,888           
|North Carolina                         | 1                 | 276             
|Ohio                                   | 34                | 7,027           
|Pennsylvania                           | 1                 | 468             
|Texas                                  | 1                 | 104             
|                                       | 59                | 13,845          
|Affordable Housing Properties:         |                   |                 
|Ohio                                   | 13                | 1,296           
|Total owned by the Company             | 74                | 15,913          
|                                       |                   |                 
|**Joint Ventures:**                    |                   |                 
|Acquired Market Rate Properties:       |                   |                 
|49.00% owned - Georgia                 | 1                 | 80              
|49.00% owned - Pennsylvania            | 1                 | 140             
|                                       | 2                 | 220             
|Market Rate Properties:                |                   |                 
|66.67% owned - Ohio                    | 1                 | 320             
|50.00% owned - Ohio                    | 2                 | 494             
|33.33% owned - Ohio                    | 3                 | 2,444           
|49.00% owned - Georgia                 | 1                 | 308             
|****                                   | 7                 | 3,566           
|Affordable Housing                     |                   |                 
|50.00% owned - Ohio                    | 1                 | 108             
|**Total Joint Ventures**               | 10                | 3,894           
|                                       |                   |                 
|**Management and Service Operations:** |                   |                 
|**Managed for Pension Fund Clients:**  |                   |                 
|Market Rate Properties:                |                   |                 
|California                             | 2                 | 560             
|Colorado                               | 2                 | 680             
|Florida                                | 8                 | 2,675           
|Georgia                                | 2                 | 830             
|Illinois                               | 3                 | 1,042           
|Maryland                               | 1                 | 256             
|Michigan                               | 2                 | 681             
|Pennsylvania                           | 1                 | 396             
|Texas                                  | 1                 | 256             
|Virginia                               | 1                 | 248             
|                                       | 23                | 7,624           
|**Managed for Other Third Parties:**   |                   |                 
|Affordable Housing:                    |                   |                 
|Ohio                                   | 20                | 3,902           
|Commercial:                            |                   |                 
|Ohio                                   | 1                 | -               
|                                       | 21                | 3,902           
|**Total Managed Properties**           | **44**            | **11,526**      
|**Total Company Portfolio**            | **128**           | **31,333**      

|                               |                   |           |               
|------------------------------ | ----------------- | --------- | --------------
|                               |                   |           |               
|                               |                   |           | Anticipated   
|                               | **Location**      | **Units** | **Completion**
|**Construction Projects:**     | ****              |           |               
|Owned                          |                   |           |               
|Boynton Beach - Land           | Boynton Beach, FL | 229       | TBD*          
|Courtney Chase - Land          | Orlando, FL       | 288       | TBD*          
|                               |                   | **517**   |               
|Joint Ventures                 |                   |           |               
|Berkley Manor (49.00%)         | Cranberry Twp, PA | 112       | 2002          
|Idlewylde-Phase II (49.00%)    | Atlanta, GA       | 455       | 2003          
|                               |                   | **567**   |               
|Total Construction Projects    |                   | **1,084** |               
|                               |                   |           |               
|**Undeveloped Land Parcels:**  |                   | **Acres** |               
|Aspen Lakes Land               | Grand Rapids, MI  | 19.5      | On Hold       
|Landings at the Preserve Land  | Battle Creek, MI  | 4.3       | On Hold       
|Westlake Land                  | Westlake, OH      | 39.0      | On Hold       
|Wyndemere Land                 | Franklin, OH      | 10.0      | On Hold       
|Total Undeveloped Land Parcels |                   | **72.8**  |               

**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 ten 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 58 properties (56 Market Rate properties, one Affordable
Housing property and one which is a 66.67% owned joint venture) which are encumbered by debt totaling
$548.5 million, three properties which secure lines of credit and 14  properties (two Market Rate properties
and 12 Affordable Housing properties) which are unencumbered.

**Item 3.  Legal Proceedings**

For information concerning current legal proceedings, reference is made to Note 11 of the Notes
to Financial Statements presented in Part II, Item 8 of this report on Form 10-K.

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

None

**Executive Officers of the Registrant and Other Key Employees**

The Executive Officers of the Company as of February 28, 2002 are:

|Name                | Age | Position with the Company                                                 
|------------------- | --- | --------------------------------------------------------------------------
|Jeffrey I. Friedman | 50  | Chairman of the Board and Chief Executive Officer                         
|Louis E. Vogt       | 52  | President and Chief Operating Officer

President of MIG II Realty Advisors
|Martin A. Fishman   | 60  | Vice President, General Counsel and Secretary                             
|Lou Fatica          | 35  | Vice President, Treasurer 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 from 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 30 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.

Lou Fatica joined the Company in 1999 as Controller, and was promoted to Vice President-Controller during 2000.  Mr. Fatica has over 11 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.
Effective March 15, 2001, Mr. Fatica assumed the role of Vice President, Treasurer and Chief Financial
Officer of the Company.

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

Kathleen L. Alex joined the Company in 1998 through the acquisition of MIG Realty Advisors, Inc..
Ms. Alex joined MIG Realty Advisors in 1985 and has over 18 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. Alex
relinquished her position as Treasurer and Chief Financial Officer of the Company.  Ms. Alex currently
serves as Vice President and Chief Information Officer of the Company and Vice President and Chief
Financial Officer of MIG II Realty Advisors and is 45 years old.

Barbara E. Hasenstab, Vice President of Investor Relations and Corporate Communications,  joined
the Company in 1996 as Director of Investor Relations and was elected Vice President of Investor Relations
in 1998.  Ms. Hasenstab has 23 years of experience in investor relations, is a member of the National
Investor Relations Institute and is 48 years old.

JoAnn C. Hirsh joined the Company in 1997 as Director of Government Housing and is currently
Vice President of Operations, Northeast Ohio Region.  Ms. Hirsh has supervisory responsibility for the
Northeast Ohio region and the Affordable Housing properties.  Ms. Hirsh is responsible for compliance with
HUD regulations.  Ms. Hirsh has over 23 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 45 years
old.

William T. Hughes, Jr., Ph. D., Vice President, Director of Research and Portfolio, 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 36
years old.

Susan S. Kwarciak joined the Company in 1994 as a Controller, and Ms. Kwarciak is currently Vice
President of Portfolio, East.  Ms. Kwarciak is a CPA with over 11 years of experience and is 34 years old.

Daniel L. Powers joined the Company in 1998 through the acquisition of MIG Realty Advisors, Inc.
He is currently  Vice President of Operations, Western 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 22 years.  Mr. Powers is a Certified Property Manager
and is 48 years old.

Charles J. Stone joined the Company in 1998 through the acquisition of MIG Realty Advisors, Inc.
He is currently Vice President of Operations, Eastern Region with supervisory responsibility for properties
in Florida, Georgia, Maryland, North Carolina, Pennsylvania and Virginia.  Mr. Stone is 55 years old and has
over 28 years of real estate experience.

Steven C. Thrower joined the Company in 1998 through the acquisition of MIG Realty Advisors, Inc.
He is currently Vice President of Portfolio, West.  Mr. Thrower is 46 years old and has more than 16 years
of real estate experience.

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 43 years old.

**PART II**

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

The Company's common shares are traded on the New York Stock Exchange under the trading
symbol "AEC".

The following table sets forth for the periods indicated the high and low closing sale prices per
common share as reported on the New York Stock Exchange (composite tape) and the dividends declared
per common share.

|               |             | Dividends Declared
|-------------- | ----------- | ------------------
|               | Price Range | Per Share         
|               | 2001        | 2000              
|               | High        | Low               
|               |             |                   
|First Quarter  | $ 8.85      | $8.00             
|Second Quarter | 10.66       | 8.16              
|Third Quarter  | 10.21       | 8.99              
|Fourth Quarter | 9.39        | 8.55              
|               |             |                   

(1)  The Company declared dividends of $.25 per share on January 3, 2001 and March 26, 2001.
Additionally, the Company declared dividends of $.375 per share on January 4, 2000 and March 31, 2000.
The timing of these declarations came about as a result of the fourth quarter 1999 dividend declaration being
deferred to January 4, 2000 and the fourth quarter 2000 dividend declaration being deferred to January 3,
2001.

On March 4, 2002, there were 845 holders of record of the Company's common shares.

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)      
|**                                                                   | 2001           | 2000      | 1999      | 1998     
|**Operating Data:**                                                  |                |           |           |          
|*Revenues*                                                           |                |           |           |          
|Rental                                                               | $ 142,514      | $	144,099 | $	143,137 | $	132,514
|Property and asset management, and acquisition and                   |                |           |           |          
|disposition fees                                                     | 8,123          | 8,120     | 10,918    | 6,200    
|Painting services                                                    | 2,196          | 1,530     | 1,524     | 1,606    
|Other                                                                | 4,287          | 3,357     | 2,976     | 2,479    
|Total revenues                                                       | 157,120        | 157,106   | 158,555   | 142,799  
|                                                                     |                |           |           |          
|*Expenses and charges*                                               | 158,116        | 159,112   | 155,683   | 126,029  
|                                                                     |                |           |           |          
|(Loss) income from operations                                        | (996)          | (2,006)   | 2,872     | 16,770   
|Equity in net (loss) income of joint ventures                        | (486)          | (164)     | 585       | 445      
|**(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**            | (1,482)        | (2,170)   | 3,457     | 17,215   
|Gain on disposition of properties and land, net                      | 7,047          | 7,512     | 19,630    | 503      
|Minority interest expense                                            | (479)          | (400)     | (241)     | (78)     
|**Income before extraordinary item and cumulative effect of**        |                |           |           |          
|**a change in accounting principle**                                 | 5,086          | 4,942     | 22,846    | 17,640   
|Extraordinary item                                                   | (179)          | -         | (3,456)   | (125)    
|Cumulative effect of a change in accounting principle                | -              | -         | 4,319     | -        
|**Net income**                                                       | $     4,907    | $	4,942   | $	23,709  | $	17,515 
|**Net (loss) income applicable to common shares**                    | $       (577)  | $	(542)   | $	18,225  | $	12,030 
|****                                                                 |                |           |           |          
|**Earnings per common share  - Basic:**                              |                |           |           |          
|(Loss) income before extraordinary item and cumulative effect        |                |           |           |          
|of a change in accounting principle                                  | $        (.02) | $	(.03)   | $	.79     | $	.61    
|Net (loss) income                                                    | $        (.03) | $	(.03)   | $	.83     | $	.61    
|Weighted average number of common shares outstanding                 | 19,415         | 19,733    | 22,051    | 19,865   
|**Earnings per common share - Diluted:**                             |                |           |           |          
|(Loss) income before extraordinary item and cumulative effect        |                |           |           |          
|of a change in accounting principle                                  | $        (.02) | $	(.03)   | $	.79     | $	.60    
|Net (loss) income                                                    | $        (.03) | $	(.03)   | $	.83     | $	.60    
|Weighted average number of common shares outstanding                 | 19,415         | 19,733    | 22,053    | 20,060   
|                                                                     |                |           |           |          
|**Dividends declared per common share**                              | $       1.25   | $	1.25    | $	1.125   | $	1.86   
|                                                                     |                |           |           |          
|***Other data*:**                                                    |                |           |           |          
|Funds From Operations (a) (f)                                        | $   25,708     | $	24,963  | $	29,291  | $	35,055 
|                                                                     |                |           |           |          
|Net Operating Income (b) (g)                                         | $   83,233     | $	84,842  | $	85,619  | $	74,765 
|Total properties (at end of period) - includes joint ventures        | 84             | 90        | 93        | 101      
|                                                                     |                |           |           |          
|Total multifamily units (at end of period) - includes joint ventures | 19,807         | 20,738    | 20,103    | 21,558   
|Average monthly rental revenue per multifamily unit                  | $        653   | $	646     | $	633     | $	593    
|Physical Occupancy (c)                                               | 90.5%          | 91.5%     | 93.4%     | 94.7%    
|                                                                     |                |           |           |          

|                                       | 2001      | 2000      | 1999      | 1998      | 1997     
|-------------------------------------- | --------- | --------- | --------- | --------- | ---------
|**Balance Sheet Data at December 31:** |           |           |           |           |          
|Real estate assets, net                | $ 716,079 | $ 742,183 | $ 777,072 | $ 801,730 | $ 515,830
|Total assets                           | 774,834   | 819,559   | 882,810   | 840,785   | 553,910  
|Total debt (d)                         | 552,069   | 568,177   | 579,186   | 503,905   | 318,170  
|Total shareholders' equity             | 171,996   | 196,456   | 238,182   | 259,188   | 181,158  

(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.

The Company defines FFO as the inclusion of all operating results applicable to common
shareholders, both recurring and non-recurring, except those defined as "extraordinary items" under
GAAP, adjusted for depreciation on real estate assets and amortization of intangible assets and gains
and losses from the disposition of properties and land.  Adjustments for joint ventures are calculated
to reflect FFO on the same basis.  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 Net Operating Income ("NOI") as its evaluation measure of the reportable
segments' activity.  NOI is determined by deducting property operating and maintenance expenses
from total revenues for the Acquisition/Disposition, Market Rate and Affordable Housing segments and
deducting service companies expense, which is included within the general and administrative
expense in the Consolidated Statements of Income and painting service expense from total revenues
for the Management and Service Operations segment.  NOI 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.  Other real estate companies may define NOI in a different manner.

(c)	Physical Occupancy represents the actual number of units leased divided by the total number of units
available at the end of the period.

(d)	Amount excludes the Company's share of mortgage indebtedness relating to the unconsolidated joint
ventures of approximately $42,245, $24,986, $17,249, $17,453 and $17,752 at December 31, 2001,
2000, 1999, 1998 and 1997, 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 19 to the financial statements).

(f)	Reconciliation of Funds From Operations to Net Income:

|                                                       | 2001     | 2000     | 1999     | 1998     | 1997    
|------------------------------------------------------ | -------- | -------- | -------- | -------- | --------
|Funds From Operations                                  | $ 25,708 | $ 24,963 | $ 29,291 | $ 35,055 | $ 30,969
|Depreciation - real estate assets                      | (31,095) | (30,605) | (29,900) | (22,705) | (17,926)
|Depreciation - real estate assets joint

venture       | (904)    | (691)    | (498)    | (426)    | (447)   
|Amortization of intangible assets                      | (1,156)  | (1,721)  | (1,161)  | (272)    | -       
|Gain on disposition of properties and land, net        | 7,047    | 7,512    | 19,630   | 504      | 1,608   
|Extraordinary item                                     | (179)    | -        | (3,456)  | (125)    | 1,024   
|Extraordinary item - joint ventures                    | 2        | -        | -        | -        | -       
|Cumulative effect of a change in

accounting principle | -        | -        | 4,319    | -        | -       
|Preferred stock dividends                              | 5,484    | 5,484    | 5,484    | 5,484    | 5,484   
|Net income                                             | $  4,907 | $ 4,942  | $ 23,709 | $ 17,515 | $ 20,712

(g)	Reconciliation of Net Operating Income to Net income:

|                                                | 2001       | 2000      | 1999     | 1998     | 1997    
|----------------------------------------------- | ---------- | --------- | -------- | -------- | --------
|Net Operating Income                            | $ 83,233   | $ 84,842  | $ 85,619 | $ 74,765 | $ 58,364
|Depreciation and amortization                   | (34,381)   | (34,363)  | (33,992) | (23,846) | (18,566)
|General and administrative expense              |            |           |          |          |         
|excluding service companies expense             | (6,875)    | (7,729)   | (9,337)  | (4,046)  | (2,434) 
|Interest expense                                | (42,973)   | (44,756)  | (39,418) | (30,103) | (19,845)
|Gain on disposition of properties and land, net | 7,047      | 7,512     | 19,630   | 504      | 1,608   
|Equity in net (loss) income of joint ventures   | (486)      | (164)     | 585      | 445      | 561     
|Minority interesting operating partnership      | (479)      | (400)     | (241)    | (79)     | -       
|Extraordinary item                              | (179)      | -         | (3,456)  | (125)    | 1,024   
|Cumulative effect of a change in accounting     |            |           |          |          |         
|principle                                       | -          | -         | 4,319    | -        | -       
|Net income                                      | $    4,907 | $   4,942 | $ 23,709 | $ 17,515 | $ 20,712

**Item 7.	Management's Discussion and Analysis of FinancialCondition 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 this 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 the
following:

changes in economic conditions in the markets in which the Company owns properties, including
interest rates, the overall level of economic activity, the availability of consumer credit and
mortgage financing, unemployment rates and other factors;

risks of a lessening of demand for the multifamily units owned or managed by the Company;

competition from other available apartments and change in market rental rates;

increases in property insurance costs;

inability to obtain terror insurance or if obtainable, then at reasonable rates;

changes in government regulations affecting the Affordable Housing properties;

changes in or termination of contracts relating to third party management and advisory business;

inability to renew current HAP contracts at existing rents;

weather and other conditions that might adversely affect operating expenses;

expenditures that cannot be anticipated such as utility rate and usage increases, unanticipated
repairs, additional staffing, and real estate tax valuation reassessments; and

changes in market conditions that may limit or prevent the Company from selling properties
identified for disposition, which may impede the Company's ability to continue to diversify its
portfolio.

***Overview***.  The Company is engaged principally in the ownership and operation of multifamily
residential units.  Additionally, the Company and its subsidiaries provide asset and management services
to third party owners of multifamily residential units for which the Company is paid fees.

***Federal Income Taxes*****.  The Company has elected to be taxed as a real estate investment trust
("REIT") under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, commencing
with its taxable year ending December 31, 1993.  REITs are subject to a number of organizational and
operational requirements including a requirement that 90.0% (95.0% prior to January 1, 2001) 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 federal income tax on net income.
However, the Company's Service Companies are subject to federal income tax.

On December 17, 1999, as part of a larger bill, the REIT Modernization Act ("RMA") was signed into
law.  Effective beginning January 1, 2001, the RMA has amended the tax rules relating to the composition
of a REIT's assets.  Under prior law, REIT's were 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 generally 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
intercompany interest and other expenses between a TRS and a REIT are subject to arms length
allocations.  The Company has elected TRS status for all of its service company subsidiaries for 2001.

***Critical Accounting Policies***.  The consolidated financial statements of the Company include
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 preparation of financial
statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions in certain circumstances that affect amounts
reported in the accompanying consolidated financial statements and related notes.  In preparing these
financial statements, management has utilized information available including industry practice and its own
past history in forming its estimates and judgments of certain amounts included in the financial statements,
giving due consideration to materiality.  It is possible that the ultimate outcome as anticipated by
management in formulating its estimates inherent in these financial statements may not materialize.
However, application of the accounting policies below involves the exercise of judgment and use of
assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.  In
addition, other companies may utilize different estimates, which may impact comparability of the Company's
results of operations to those of companies in similar businesses.

*Real Estate and Depreciation.*   Real estate assets are stated at the lower of cost or fair value, as
appropriate, less accumulated depreciation.  Costs related to the acquisition, development, construction and
improvement of properties are capitalized including interest, internal wages and benefits, real estate taxes
and insurance.  Capitalization usually begins with commencement of development activity and ends when
the property is ready for leasing.

Replacements and improvements, such as HVAC equipment, structural replacements, windows,
appliances, flooring, carpeting and kitchen/bath replacements and renovations are capitalized and
depreciated over their estimated useful lives as follows:

Buildings and improvements		5-30 years

Furniture, fixtures and equipment	5-10 years

The Company is required to make subjective assessments as to the useful lives of its properties for
purposes of determining the amount of depreciation to reflect on an annual basis with respect to those
properties.  These assessments have a direct impact on the Company's net income.

Ordinary repairs and maintenance, such as unit cleaning and painting and appliance repairs are
expensed.

The Company follows a practice of discontinuing the depreciation of assets specifically identified
by management as held for sale.  A valuation allowance is established for any asset so identified if in
management's opinion, the net sales price of the asset is less than its net book value.

*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 rental applications
submitted and approved by HUD.

Acquisition, management and disposition fees, and other fees are recognized when the related
services are performed and the earnings process is complete.  Servicing fee income related to pension fund
loans is recognized when earned and is included in other income in the Consolidated Statements of
Operations.

Rent concessions, including free rent and leasing commissions, incurred in connection with
residential property leases are capitalized and amortized on a straight-line basis over the terms of the related
leases (generally one year) and are charged as a reduction of rental revenue.

***Liquidity and Capital Resources.***The Company anticipates that it will meet its liquidity
requirements for the upcoming year generally through its net cash provided by operations, secured
borrowings (primarily through the use of the Company's two lines of credit, which had $17.1 million available
at December 31, 2001), property sales' proceeds and possible issuance of debt or equity securities.  The
Company believes that these sources will be sufficient to meet operating requirements, capital additions,
mortgage amortization payments and the payment of dividends in accordance with REIT requirements.

**The Company has a shelf registration statement on file with the Securities and Exchange
Commission relating to a possible offering of up to $368.8 million of debt securities, preferred shares,
depositary shares, common shares and common share warrants.  Although $62.5 million of MTN's remain
available under the shelf registration, it's unlikely that the Company will be able to access these MTN
securities in the near future.

While the Company currently estimates that its net cash from operations for 2002 should
approximate 2001, certain factors could adversely impact the Company's results of operations in 2002
including, but not limited to, low mortgage interest rates, continuation of a recessionary economy (primarily
employment levels) and higher than anticipated insurance costs.  If mortgage interest rates remain low,
tenants may elect to purchase their own home rather than rent, thereby adversely impacting occupancy
levels.  Occupancy levels could also be adversely impacted if the economy continues to remain weak or
further deteriorates as tenants may lose their jobs, default on their leases, and defer renting an apartment.
The Company's total rental revenue collections are impacted by a combination of rental rates, rent
concessions and occupancy levels, which the Company mat attempt to adjust from time to time in order to
maintain projected revenues.  Additionally, rising property insurance costs could dramatically increase the
Company's property operating expenses in 2002 impacting the Company's net cash provided by operations
and net income.  Moreover, terror insurance may no longer be offered by the company's insurance carriers,
or if available, may not be offered at affordable rates.  The Company believes that if net cash is below 2002
projections, the other sources previously mentioned will be sufficient to cover the liquidity requirements of
the Company.

***Financing and Other Commitments*****.  At December 31, 2001, the Company had 56 conventional
mortgages payable aggregating $537.8 million, each collateralized by the respective real estate and resident
leases having a book value of $646.7 million.  These nonrecourse project specific loans accrue interest at
fixed rates ranging from 6.36% to 9.63%.  Additionally, the Company had four HUD mortgage payables
aggregating $10.7 million, each collateralized by the respective real estate and residential leases having a
book value of $8.7 million.  These loans accrue interest at rates ranging from 5.02% to 7.50%.  On February
1, 2002, the Company completed the refinancing of a $10.9 million nonrecourse loan encumbering a market
rate property located in Cleveland, Ohio.  The new loan matures January 1, 2005 and the interest rate is
currently at a floating rate of 4.75% which is less than the rate on the previous loan of 9.61%.  The maturities
of the remaining loans range from 2003 to 2022.  The Company's intends to refinance each loan as it
matures.

In 2000, the Company caused to be obtained a $14.0 million first mortgage loan encumbering a
property owned by a subsidiary.  The loan provided for disbursement in two installments.  The first
installment of $9.8 million was disbursed in September 2000.  The balance of $4.2 million was disbursed
in March 2001.  The loan requires monthly interest-only payments at the rate of  7.76% through October 15,
2002, at which time payments of principal and interest are required through the maturity date of October 15,
2005.

The Company currently has 14 properties which are unencumbered, 12 of which are Affordable
Housing properties.  These 14 properties had net income of $2.5 million for the year ended December 31,
2001, and a book value of $10.5 million at December 31, 2001.  The Company believes that it should be
able to obtain financing on these properties should the need arise.

The Company currently has two lines of credit.  The first line of credit is a $20.0 million line secured
by one of the Company's properties.  Borrowings under this line are currently restricted up to an amount of
$12.6 million.  Borrowings under this line of credit bear interest at a rate of LIBOR plus 1.5% or
approximately 3.43% at December 31, 2001.  At December 31, 2001, there was $3.5 million outstanding
under this line.  There were no borrowings outstanding under this line of credit at December 31, 2000.  This
line of credit matures in July 2003.  Currently it is the Company's intention to obtain a three year extension
(the original term is for three years) when this loan matures.

The Company also has a $12.0 million line of credit which is secured by two of the Company's
properties and matured October 31, 2001.  This loan was extended to December 31, 2002.  It is the
Company's current intention to obtain a second one year extension upon maturity.  The Company's
borrowings under this line of credit bear interest at either the prime rate or LIBOR plus 2.0% at the
Borrower's option.  There were no borrowings outstanding at either December 31, 2001 or December 31,
2000; however, the amount currently available under this line of credit is limited to $8.0 million because of
outstanding letters of credit.

At December 31, 2001, the Company had one Medium-Term Note outstanding in the amount of
$105,000.  This loan bears interest at 6.88%, is unsecured and matures in December 2004.  Currently, it
is the Company's intention to repay this loan in full at maturity.  On September 18, 2001, in accordance with
the terms of the note, the Company repaid the $604,000 outstanding balance on one Medium-Term Note.
At December 31, 2000, both of these notes were outstanding.

The Company leases certain equipment under capital leases.  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: $339,000 - 2002, $257,000 - 2003, $247,000 - 2004,
$208,000 - 2005, $110,000 - 2006 and $4.9 million thereafter.

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.  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.

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.

***Off-Balance Sheet Investments*****.  The Company accounts for its investments in unconsolidated
joint ventures under the equity method of accounting as the Company exercises significant influence, but
does not control these entities.  These investments are initially recorded at cost, as investments in joint
ventures and subsequently adjusted for equity in earnings and cash contributions and distributions.

Summarized financial information for these joint ventures is as follows:

**Balance sheet data**

|                               | December 31,
|------------------------------ | ------------
|(In thousands)                 | 2001        
|                               |             
|Real estate, net               | $ 86,623    
|Other assets                   | 4,357       
|                               | $ 90,980    
|                               |             
|Amounts payable to the Company | $      256  
|Mortgages payable              | 95,811      
|Other liabilities              | 4,739       
|Accumulated deficit            | (9,826)     
|                               | $ 90,980    

|**Operating data**                                       | For the years ended December 31,
|-------------------------------------------------------- | --------------------------------
|(In thousands)                                           | 2001                            
|                                                         |                                 
|Rental revenues                                          | $ 20,157                        
|Other revenues                                           | 726                             
|Operating and maintenance expenses                       | (14,528)                        
|Depreciation and amortization                            | (2,554)                         
|Interest expense                                         | (5,166)                         
|Net (loss) income before cumulative effect               | (1,365)                         
|Cumulative effect of a change in accounting principle    | -                               
|Net (loss) income                                        | $  (1,365)                      
|Company's proportionate interest in:                     |                                 
|Depreciation and amortization                            | $    1,052                      
|Interest expense                                         | 2,009                           
|*Cumulative effect of a change in accounting principle   | -                               
|                                                         |                                 
|(Loss) income of joint ventures before cumulative effect |                                 
|of a change in accounting principle                      | (486)                           

*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.

*Joint Venture Financing and Other Commitments.*The Americana Apartments, a property located
in Euclid, Ohio, in which the Company is a 33.33% joint venture partner, had an $11.6 million first mortgage
loan that matured in November, 2001. The maturity date of this loan was extended to May 1, 2002, and may
be extended for an additional six month period subject to the satisfaction of certain conditions.  The
Company's 33.33% share of this loan is approximately $3.9 million.

On July 16, 2001, the joint venture partners obtained a new loan in the amount of $17.2 million on
the Watergate Apartments, a property located in Euclid, Ohio, in which the Company owns a 33.33%
interest.   This loan matures August 1, 2004.  Approximately $14.0 million of the proceeds were used to
repay the maturing loan on the property and the balance will be used to pay for a portion of the
improvements to the property's underground garage.

On December 31, 2001, the Company and its partners completed the refinancing of a $6.1 million
HUD loan on a property in which the Company is a 66.67% owner.  The refinancing consisted of two loans.
The first loan is in the amount of $7.9 million.   This loan accrues interest at 6.36% and requires monthly
principal and interest payments until the maturity date of July 1, 2005, at which time all unpaid principal and
interest is due.  The second loan is in the amount of $6.0 million.  This loan accrues interest at the rate of
6.36% and requires monthly interest only payments until the maturity date of January 1, 2003, at which time
all unpaid principal and interest is due.  The proceeds of this loan are restricted.

The Company has guaranteed completion of certain improvements totaling $233,000 in connection
with the refinancing of the 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 $233,000 letter of
credit.  Additionally, in connection with the refinancing of the Watergate Apartments, a 949 unit multifamily
community located in Euclid, Ohio, in which the Company is a 33.33% joint venture partner, the Company
has guaranteed completion of certain improvements totaling approximately $7.0 million.  This obligation is
secured by a $3.5 million letter of credit.  Also, the Company provided 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 development.  Furthermore, the
Company has guaranteed construction cost overruns and the payment of a $30.0 million construction loan
in connection with the Idlewylde 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.  This loan
matures December 10, 2003 but has two one-year options to extend.  The Company currently intends to
refinance this construction loan with permanent financing at the appropriate time.  The Company also has
guaranty obligations under a $220,000 letter of credit for purposes of guaranteeing 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.

At December 31, 2001, five of the Company's joint venture investments had non-recourse first
mortgage loans.  The Company's share of these first mortgage loans was $28.8 million.  Additionally, the
two joint venture properties currently under construction had construction loans.  The first is the $30.0 million
loan previously mentioned.  The second is a $19.3 million construction loan.  The Company's share of the
borrowings at December 31, 2001 under these construction loans was $13.4 million.

***Operating Partnership**.*In conjunction with the settlement of the lawsuit in the Harris County,
Texas District Court against MIG Realty Advisors, Inc. ("MIGRA"), MIG's predecessor company (see Note
11 of the Notes to the Financial Statements presented in Part II, Item 8 of this report for further details
concerning the settlement), the former MIGRA shareholders redeemed 39,314 Operating Partnership units
("OP units") for cash in the amount of approximately $393,000, which represented a value of $10.00 per unit.
The proceeds of the redemption were used to satisfy certain indemnification obligations owed by the former
MIGRA stockholders to the Company in connection with this lawsuit.   These units had a recorded value of
approximately $929,000  when issued.  The difference between the redeemed value and the recorded value
was approximately $536,000, which reduced the recorded value of the underlying real estate.  In August
2000, 19,662 of the OP units were exchanged for cash in the amount of $144,000, which represented a
value of $7.34 per unit.  These units had a recorded amount of $436,000 when issued.  The difference of
the cash paid and the recorded amount was $292,000 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 $479,000, $400,000 and
$241,000 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, 2001, 2000 and
1999, respectively.

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

***Advisory Acquisitions and Dispositions*****.  During 2001, MIG acquired three multifamily properties,
(two located in Florida consisting of 683 total units and the other located in California consisting of 288 units)
on behalf of MIG advisory clients.  MIG was retained to provide asset property management services for all
three properties and a Company subsidiary was hired to provide property management services.  Also,
during 2001, one property was sold and management was terminated on a second property.  These two
properties had a total of 972 units.

Currently, approximately $40.0 million in assets are being listed for sale and additionally, MIG
continues to investigate acquisitions on behalf of other advisory clients.

***Dispositions***.  In June 2001, the Company completed the sale of four Market Rate properties
located in Central and Southwestern Ohio.  The buyer purchased the four properties for $5.1 million in gross
cash proceeds plus assumed mortgage obligations of $18.1 million.  The sale resulted in the Company
recording a gain of $3.3 million.  Additionally, in July 2001, the Company completed the sale of one Market
Rate property located in Northeast Ohio.  The buyer purchased the property for $158,000 in gross cash
proceeds plus the assumption of mortgage obligations of $7.2 million.  The sale resulted in a gain of  $2.7
million.  Also, in October 2001, the Company completed the sale of one Market Rate property located in
Northeast Ohio.  The buyer purchased the property for $5.0 million in gross cash proceeds.  The sale
resulted in a gain of  $585,000.  Furthermore, in November 2001, the Company completed the sale of a
property located in Northeast Ohio, in which the Company had been a 33.33% owner and had purchased
the other 66.67% ownership in December 2000.  The buyer purchased the property for $2.0 million in gross
cash proceeds.  The sale resulted in a gain of $423,000.

The Company is strategically marketing seven properties.  These seven properties are comprised
of one Affordable Housing property and 6 Market Rate properties (four located in Ohio and three located in
Michigan).  The Company has entered into a contract to sell one of these properties.  Also, on January 18,
2002, the Company completed the sale of another Market Rate property located in Ohio.  The buyer
purchased the property for a sales price of $4.0 million.  The sale resulted in an estimated gain of
approximately $250,000 which will be recognized in the quarter ending March 31, 2002.

On July 20, 2001, the Company entered into multiple agreements concerning the disposition of five
Market Rate joint venture properties located in Northeast Ohio.  Under the agreements, the Company would
eventually become the 100% fee owner of three of the properties and relinquish its ownership interest in two
of the properties (one property of which the Company is a 66.67% owner).  These transactions are
anticipated to be completed during the first half of 2002.

***Development***.  During 2001, the Company completed the construction and the last 16 units were
made available for occupancy at one of the Company's development properties.  During 2000, the Company
completed the construction of 268 units at two of the Company's development properties.  Additionally,
during 2001, two partnerships, in each of which the Company is a 49.0% joint venture partner, completed
the construction and commenced leasing 140 units of the scheduled 252 units at Berkley Manor and 80 units
of the scheduled 535 units for Idlewylde-Phase II.

The Company is in the process of constructing or planning the construction of an additional 1,084
units as follows:

|                                               |                    | Additional | Anticipated
|---------------------------------------------- | ------------------ | ---------- | -----------
|Property                                       | Location           | Units      | Completion 
|Boynton Beach-Land                             | Boynton Beach, FL  | 229        | TBD1       
|Courtney Chase-Land                            | Orlando, FL        | 288        | TBD1       
|Berkley Manor (49.0% owned Joint Venture)      | Cranberry Twp., PA | 112        | 2002       
|Idlewylde-Phase II (49.0% owned Joint Venture) | Atlanta, GA        | 455        | 2003       
|                                               |                    | 1,084      |            

1To Be Determined

In June 2001, the Company completed the purchase of a 27.8 acre land parcel for $2.1 million.  This
land parcel is located in Orlando, Florida.  The Company is currently negotiating with an advisory client to
form a joint venture partnership to complete development of this project.  The Company plans to develop
a 288 unit multifamily residential property on this land.

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.  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, 2001, the joint venture had real
estate assets of approximately $17.6 million and borrowings of $15.4 million.  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 intends to develop this site
as a multi-use facility, principally for market rate apartments and ancillary uses.

In November 2000, the Company and its joint venture partner commenced construction of Idelwylde
Apartments Phase II, which will add an additional 535 apartment units to the 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 any construction cost overruns and the
repayment of the construction loan.  The project is scheduled for completion in 2003.  At December 31,
2001, the joint venture had real estate assets of approximately $25.1 million and borrowings of $11.9 million.

***Management Contract Cancellation*****.  During 2001, the Company's management contracts
associated with the following properties were terminated:

|Effective                          |            | Management         | Approximate        | Approximate Annualized
|---------------------------------- | ---------- | ------------------ | ------------------ | ----------------------
|Date of                            | Management | Contract           | Management Fees    | Loss of Management    
|Termination                        | Company    | Canceled           | Earned During 2001 | Fees During 2001      
|                                   |            |                    | (In thousands)    
|**Affordable Housing Properties:** |            |                   
|3/8/01                             | AERC       | Jaelot             | $  6               | $ 74                  
|3/21/01                            | AERC       | Spring Hill Villa  | 11                 | 57                    
|3/21/01                            | AERC       | Warrensville Manor | 11                 | 40                    
|                                   |            |                    |                   
|**Market Rate Properties:**        |            |                    |                   
|11/30/01                           | AEMC       | Empire House       | 14                 | 1                     
|                                   |            |                    |                   
|**Advisory Properties:**           |            |                    |                   
|1/2/01                             | AERC       | Advised Assets     | -                  | 474                   
|1/25/01                            | AERC       | Advised Assets     | 3                  | 123                   

Additionally, the Company anticipates that the following management contracts may be canceled
during 2002 primarily because of proposed sales of the underlying properties:

|Effective                   |            |                                           | Approximate       
|--------------------------- | ---------- | ----------------------------------------- | ------------------
|Date of                     | Management |                                           | Management Fees   
|Termination                 | Company    | Management Contract Canceled              | Earned During 2001
|                            |            |                                           | (In thousands)    
|**Affordable Housing:**     |            |                                          
|Undetermined                | AEMC       | Hillwood II                               | $   95            
|                            |            |                                          
|**Market Rate Properties:** |            |                                          
|Undetermined                | AERC       | Americana (33.33% Joint Venture)          | 121*              
|Undetermined                | AERC       | Gates Mills Towers (33.33% Joint Venture) | 187*              
|Undetermined                | AERC       | Watergate (33.33% Joint Venture)          | 252*              
|Undetermined                | AERC       | College Towers (50.00% Joint Venture)     | 93*               
|                            |            |                                           |                   
|**Advisory Properties:**    |            |                                          
|Undetermined                | AERC       | Advised Assets                            | 217               
|Undetermined                | AERC       | Advised Assets                            | 119               
|*Net fees                  

***Dividends***.  On December 12, 2001, the Company declared a dividend of $0.25 per common share
which was paid on February 1, 2002 to shareholders of record on January 15, 2002.  On February 6, 2002,
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, 2002 to shareholders of record
on March 1, 2002.

***Cash Flows***.  Significant sources and uses of cash in the past three years are summarized as
follows, in thousands:

***Cash Sources (Uses):***

|                                      | For the year ended December 31,
|------------------------------------- | -------------------------------
|                                      | 2001                           
|Net cash from operating activities    | $ 24,672                       
|Real estate and fixed asset additions | (13,747)                       
|Net proceeds from sales of properties | 11,806                         
|Contributions to joint ventures       | (4,357)                        
|Increases (decreases) in debt, net    | 9,208                          
|Cash dividends paid                   | (24,893)                       
|Purchase of treasury shares           | (91)                           
|Cash increase (decrease)              | $   2,598                      

***Cash Flows from Operating Activities.***For 2001, cash flows from operating activities was $24.7
million as compared with $31.6 million in 2000 and $40.1 million in 1999.  The variances were primarily due
to the net activity of the following items:

(i)	For 2001, the net loss before the gain on sales of operating properties and the loss on
extinguishment of debt was $2.0 million compared to a net loss of $2.6 million for 2000, an
improvement of approximately $600,000.  This improvement was primarily the net result of a
reduction in expenses of $1.0 million net of an increase in equity in net loss of joint ventures of
$322,000.  For 1999, the net income before the gain on sales of operating properties, loss on
extinguishment of debt and cumulative effect of a change in accounting principle was $3.2
million.  When comparing 2000 to 1999, there was a decline of $5.8 million.  This decline was
primarily due to a decrease of $1.4 million in total revenues, an increase of $3.4 million in
expenses and a decline in the equity in net income (loss) in joint ventures of $749,000.

(ii)	For 2001, accounts and notes receivable and accounts and notes receivable of affiliates and
joint ventures decreased $5.5 million, while for 2000 they decreased $1.2 million.  This results
in an increase to cash flow from operations of $4.3 million which was primarily due to the
reimbursements made by the partners of several joint venture properties for funds that the
Company had advanced to these properties.  For 1999, they decreased approximately $2.0
million, which results in 2000 having a decrease to cash flow from operations of $800,000 when
comparing 2000 to 1999.

(iii)	For 2001, accounts payable and accrued expenses decreased cash flow from operations $3.0
million, a decrease of approximately $1.3 million when compared to 2000's decrease of $1.7
million.  This variance was primarily due to a decrease in accrued expenses due to the sale of
seven properties in 2001 and the timing of the payment of liabilities, thus lowering the necessity
of accruals, due to cash payments, at December 31, 2001 compared to December 31, 2000.
For 1999, this activity increased cash flow from operations $4.7 million.  Therefore, the variance
was a decrease of $6.4 million when comparing 2000 to 1999.  This decrease was primarily due
to an increase in accrued expenses in 2000, principally real estate taxes due to numerous
properties being reassessed in 2000 and an increase in the accrual for utilities.

(iv)	For 2001, other assets and liabilities decreased operating cash flow $1.4 million, while for 2000,
there was an increase of $1.3 million, a variance of $2.7 million.  This decrease was primarily
the result of the payment of the Company's insurance premium that increased substantially in
2001 due to an increase in premiums.

*********Cash Flows Used For Investing Activities***.  Cash used for investing activities was $6.3 million in
2001, $16.8 million in 2000 and $9.1 million in 1999.  Included in 2001 was $2.1 million for the purchase of
land in Orlando, Florida, $11.6 million used for capital improvements, and $4.4 million used for advances
to fund investment capital improvements to certain joint venture properties net of $11.8 million of net
proceeds from the sale of seven operating properties.  Included in 2000 was $5.2 million for the purchase
of land in Boynton Beach, Florida, $24.1 million used for the development of multifamily real estate and other
capital improvements, and $4.1 million used for investment capital improvements to certain joint venture
properties, net of $16.5 million of net proceeds from the sale of six properties.  The 1999 activity was
primarily the net result of $45.4 million used for the development of multifamily real estate properties and
other fixed asset additions, resulting from an increased capital improvements program which took effect
during the year, net of $36.8 million of net proceeds from the sale of nine properties.

***Cash Flows Used For/Provided By Financing Activities.***Cash used for financing activities was
$15.8 million in 2001 and $50.5 million in 2000, while cash provided by financing activities was $4.4 million
in 1999.  For 2001, cash flows used for financing activity were primarily $24.9 million used to pay dividends
on the Company's common and preferred shares, $91,000 for the net purchase of treasury shares, net of
a $9.2 million increase in debt borrowings.  For 2000, cash flows used for financing activity was primarily
$30.5 million used to pay dividends on the Company's common and preferred shares, $17.8 million for the
purchase of treasury shares, a $5.5 reduction in total indebtedness net of $3.2 million received from an
interest rate swap termination payment.  For 1999, cash flows provided by financing activities was primarily
the net result of proceeds received from the financing of project specific, nonrecourse mortgage loans on
54 properties less the repayment of senior and medium term note and the payoff of a line of credit (net
proceeds of approximately $60.5 million) net of $40.7 million paid for dividends on the Company's common
and preferred shares and $15.5 million for the purchase of treasury shares.

***RESULTS OF OPERATIONS FOR 2001 COMPARED WITH 2000 AND 2000 COMPARED WITH 1999***

In the following discussion of the comparison of the year ended December 31, 2001 to the year
ended December 31, 2000 and the year ended December 31, 2000 to the year ended December 31, 1999,
Market Rate properties refers to the Same Store Market Rate property portfolio.  Market Rate properties
represent 60 wholly owned properties and one property which is 66.67% owned.  Acquired/Disposed
properties represent two recently constructed properties that have not yet reached stabilization and
properties which have been sold.  Affordable Housing represents 13 properties subject to HUD regulations.

The Company uses Net Operating Income ("NOI") as a measure of the performance of its
properties.  NOI is determined by deducting property operating and maintenance expenses from total
revenues for the Acquisition/Disposition, Market Rate and Affordable Housing segments and deducting
service companies expense, which is included within the general and administrative expense in the
Consolidated Statement of Income and painting service expense from total revenues for the Management
and Service Operations segment.  For the  year ended December 31, 2001, NOI was $83.2 million, a
decrease of $1.6 million when compared to the NOI of $84.8 million for the year ended December 31, 2000.
The NOI for 2000 was $800,000 lower than the NOI of $85.6 million for the year ended December 31, 1999.
The NOI for each of the four segments of the Company for the years ended December 31, 2001, 2000 and
1999 was as follows: Acquisition/Disposition $5.2 million, $7.9 million and $7.9  million, Market Rate $69.3
million, $68.1 million and $65.1 million, Affordable Housing $5.6 million, $5.7 million and $6.0 million and
Management and Service Operations $3.1 million, $3.1 million and $6.6 million, respectively.  The
components of NOI together with an explanation of the variances are described below:

Overall, total revenues increased $14,000 when comparing 2001 to 2000 and decreased $1.4 million
or 1.0% when comparing 2000 to 1999.  Total expenses decreased $996,000 or 0.6% when comparing 2001
to 2000 and increased $3.4 million or 2.2% when comparing 2000 to 1999.  Net income applicable to
common shares after deduction for the dividends on the Company's preferred shares decreased $35,000
or 6.5% when comparing 2001 to 2000 and decreased $18.8 million or $103.0% when comparing 2000 to
1999.

***Rental Revenues***.  Rental revenues decreased $1.6 million or 1.1%  when comparing 2001 to 2000
and increased $1.0 million or 0.7% when comparing 2000 to 1999.  Rental revenues from the
Acquired/Disposed properties decreased $3.7 million or 24.7% when comparing 2001 to 2000.  The rental
revenues from the two construction properties were $7.2 million for 2001 compared to $5.6 million for 2000,
an increase of $1.6 million or 28.5%.  Additionally, rental revenues for 2001 included $4.0 million of rental
revenues for properties sold in 2001 compared to $6.4 million for those same properties in 2000.  Also,
rental revenues for 2000 included $3.0 million for properties sold in 2000.  When comparing this segment
for 2000 compared to 1999, the two construction properties contributed $5.6 million compared to $1.6
million, an increase of $4.0 million or 250.0%.  Additionally, properties sold in 2000 contributed $3.0 million
compared to $4.2 million for those properties in 1999.  Also, 1999 included rental revenues of $4.9 million
for the nine properties sold in 1999.

Rental revenues for the Market Rate properties increased $2.0 million or 1.7% when comparing
2001 to 2000 and increased $3.1 million or 2.6% when comparing 2000 to 1999.  The average rental rate
per unit was $788 at the end of 2001 compared to $758 at the end of 2000 an increase of 4.0%.  The
Company anticipates that due to the slowing economy that rental rates for 2002 may grow at a much slower
rate of 0.0% to 1.0%.  At the end of 2001 and 2000, physical occupancy was 90.5% and 91.5%, respectively.
When comparing 2000 to 1999, the average rental rate increased $41 per unit or 5.7% from the $717 per
unit in 1999.  Also, physical occupancy decreased 1.9% from 93.4% in 1999.

Rental revenues for the Affordable Housing properties increased approximately $73,000 when
comparing 2001 to 2000 and decreased $34,000 when comparing 2000 to 1999.  These revenues are
primarily dependent upon the Company being entitled to receive rental assistance subsidies from HUD via
monthly housing assistance payments ("HAP Payments").  The amount of each monthly HAP Payment is
equal to the rent (the "Contract Rent") agreed to by HUD pursuant to the terms of a HAP Contract, less the
rent payment payable by the Eligible Resident for such month.

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:

|(In thousands)                             | Final           | Revenue Recognized During
|------------------------------------------ | --------------- | -------------------------
|Property                                   | Expiration Date | 2001                     
|                                           |                 |                          
|Ellet Development                          | December 2017   | $ 425                    
|Hillwood I                                 | July 2016       | 501                      
|Jennings Commons                           | November 2002   | 324                      
|Lakeshore Village (50.0% Joint Venture)(A) | October 2002    | 744                      
|Puritas Place                              | September 2011  | 680                      
|St. James (Riverview)                      | November 2009   | 463                      
|Shaker Park Gardens II                     | March 2002      | 766                      
|State Road Apartments                      | December 2016   | 370                      
|Statesman II                               | November 2002   | 288                      
|Sutliff Apartments II                      | November 2019   | 807                      
|Tallmadge Acres                            | March 2002      | 692                      
|Twinsburg Apartments                       | June 2009       | 445                      
|Village Towers                             | November 2009   | 443                      
|West High Apartments                       | November 2002   | 506                      

(A) Amounts shown represents 100.0% payment.

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.

The following represents the Company's current intentions concerning those HAP contracts which
expire in 2002.

*Shaker Park Gardens II*.  On November 13, 2000, the Company requested a referral to OMHAR
(Office of Multifamily Housing and Restructuring) for the restructuring of the mortgage and reduction of
Section 8 rents to comparable market rents, and to renew the Housing Assistance Payments ("HAP")
Contract which is being extended at current rents until March 30, 2002 (verbal approval to extend to June
30, 2002) to allow for completion of restructuring negotiations.  The maximum amount of the commitment
for housing assistance payments under the contract is $800,000.  The Company expects HUD to further
extend the term of the HAP contract and increase the maximum amount of the commitment until the
completion of HUD's processing of the Restructuring Application, which is anticipated to be on or before
June 30, 2002.  In the event that the Company and HUD fail to reach an agreement on the Restructuring
Application, the current contract rents most likely would be reduced to market rents.

*Lakeshore Village.*   Currently, the Company intends to renew the HAP contract for a one-year term.
It is likely that this property will be referred to OMHAR for restructuring as the current contract rents exceed
current market rents.   As such, restructuring the mortgage will be the only viable option to maintain an
assistance contract as the rents will be required to be marked down to market. During the restructuring
process, the Company anticipates that HUD will grant extension contracts in six month terms, at current
rents.  Based on our experience, we anticipate that the restructuring process will be completed in
approximately one year.  In the event that the Company and HUD fail to reach an agreement on the
Restructuring Application, the current contract rents most likely would be reduced to market rents.

*Tallmadge Acres*.  In November 2001, the Company requested a renewal of the current contract for
a one-year term with a rental increase of 2.87%, as calculated using the Operating Cost Adjustment Factor
("OCAF") published as of November 2001.  On February 11, 2002, HUD released the 2002 OCAFs.  The
OCAF for Ohio was increased to 4.0%.  Subsequently, the Company revised the renewal request using the
new OCAF.  The Company anticipates that HUD will renew the HAP contract based on the revised rent
increase request.

*Jennings Commons.*    In July 2002, the Company will request a renewal of the contract for a one-year term with an increase of 4.0%, as calculated using the OCAF published on February 11, 2002.  The
Company anticipates that HUD will renew the HAP contract based on the revised rent increase request.

*Statesman II.*    In July 2002, the Company will request a renewal of the contract for a one-year term
with an increase in rents of 4.0%, as calculated using the OCAF published on February 11, 2002.  The
Company anticipates that HUD will renew the HAP contract based on the revised rent increase request.

*West High Apartments.*    In July 2002, the Company will request a renewal of the contract for a one-year term with an increase of 4.0%, as calculated using the OCAF published on February 11, 2002.  The
Company anticipates that HUD will renew the HAP contract based on the revised rent increase request.

***Fees*****.  The management and service operations recognized fee income of $10.3 million for 2001
compared to $9.7 million for 2000, an increase of $600,000 or 6.2%.  When comparing the $9.7 million for
2000 to the $12.4 million for 1999, the decrease of $2.7 million or 21.8% was primarily due to a performance
incentive fee of $2.6 million that MIG earned at the end of 1999 related to an entire portfolio under a contract
with an institutional client.  The management and advisory fees attributed to properties owned by pension
fund clients are earned pursuant to contracts that are generally terminable upon 30 days notice.

***Other Revenues***.  Other income increased $930,000 or 27.7% when comparing 2001 to 2000, and
increased $381,000 or 12.8% when comparing 2000 to 1999.  The increase in 2001, when compared to
2000, was primarily due to revenues earned in connection with the Residential Utility Billings ("RUBS"")
program.  For 2001, the Company recognized $2.0 million of RUBS revenues compared to $896,000 in
2000.  The RUBS program was established in January 2000 and has shown growth each quarter since
commencement.  The Company believes that the program has now stabilized and anticipates that it will
provide a small increase in 2002 over 2001 assuming stabilized occupancy.  It should be noted that the
RUBS revenue is primarily recorded on the Market Rate properties.  Also, in comparing 2001 to 2000, the
management and service companies segment includes a one-time $363,000 supervisory fee which was
earned upon the sale of a non-owned Affordable Housing property.  Finally, it should be noted that interest
income decreased $781,000 or 61.0%  when comparing 2001 to 2000 as a result of less funds available to
invest.  The decrease was primarily related to the management and service companies segment.  The
$381,000 increase when comparing 2000 to 1999 was primarily due to the RUBS program net of a decline
in interest income.  The RUBS program primarily was recorded on the market rate segment while the decline
in interest income related to the management and service companies segment.

***Property Operating and Maintenance Expenses***.  Property operating and maintenance expenses
increased $1.4 million or 2.2% when comparing 2001 to 2000.  These expenses decreased $560,000 or
0.9% when comparing 2000 to 1999.  With regards to the acquisition/disposition properties, these expenses
decreased $917,000 or 12.7% when comparing 2001 to 2000.  When comparing 2000 to 1999, they
decreased $1.9 million or 21.8%.  The decrease, when comparing 2001 to 2000, was primarily the net result
of these expenses decreasing approximately $2.1 million when comparing the expenses for the properties
sold in 2001 and the properties sold in 2000, net of an increase of $1.1 million for the two construction
properties.  The decrease, when comparing 2000 to 1999, was primarily the net result of these expenses
decreasing approximately $3.3 million when comparing the expenses recorded for the properties sold in
2000 to the properties sold in 1999, net of an increase in expenses for the two construction properties of
approximately $1.8 million.  It should be noted that one of the two construction properties was completed
during 2000 and the other was completed during 2001.  Therefore, the Company anticipates that the
expenses incurred on a going forward basis for these two properties should be consistent with the later
quarters in 2001.

For the Market Rate properties, these expenses increased approximately $2.1 million or 4.0% when
comparing 2001 to 2000.  When comparing 2000 to 1999, these expenses increased $1.1 million or 2.1%.
The increase in these expenses, when comparing 2001 to 2000, was primarily due to personnel expense
which increased $1.4 million or 10.2% primarily as a result of reallocation of personnel resources by the
Company associated with the decentralization of property operations and increased costs.  Additionally,
contributing to the increase in 2001 compared to 2000 were utility costs which increased $546,000 or 8.3%
mainly because of increased gas costs as both usage and rates were higher in 2001 than 2000.  For 2002,
the Company has entered into agreements with certain of its largest gas suppliers for rates which are lower
than those charged in 2001.  The increase in these expenses, when comparing 2000 to 1999, was primarily
due to an increase in personnel expense and in repairs and maintenance offset by a decrease in real estate
taxes.

*********Other Expenses***.  The Company allocates general and administrative expenses to its four segments
based on an internal cost analysis.  An amount equal to 85.0% of the management and Service Companies'
revenues is classified as Service Companies' expense ($6.3 million for 2001, $6.5  million for 2000 and $6.7
million for 1999).  The balance of the general and administrative expenses is allocated to the other three
segments on a per unit basis (number of units in the segment divided by the total units in the portfolio).
Since the general and administrative expenses are allocated as described above, the Company believes
that a comparative analysis of the total expenses is more meaningful than by segments.  General and
administrative expenses decreased $1.2 million or 8.2 % when comparing 2001 to 2000 and decreased $1.8
million or 11.4% when comparing 2000 to 1999.  The decrease, when comparing 2001 to 2000, was
primarily attributable to a decrease in payroll and related expenses, mainly because of the refinement of
certain estimates used by the Company that resulted in allocating certain payroll and related expenses to
the properties and the elimination of certain corporate level positions.  Additionally, there was a decrease
in consulting and professional fees incurred by the Company.  The decrease when comparing 2000 and
1999 was also due primarily to a decrease in payroll and related expenses.  At the conclusion of 1999, the
Company instituted a plan to identify and eliminate approximately $3.0 million on an annualized basis in
general and administrative expense.  Implementation of changes to effect this reduction were completed
during 2000 and included reorganization of departments, reassignment of personnel, elimination of certain
corporate level positions, and the reduction in fees paid to outside consultants.  The Company believes that
2001 general and administrative expenses are reflective of the implementation of this plan as they are
approximately $3.0 million lower than the 1999 expenses.  The Company believes that the run rate for 2001
should continue in the upcoming year.

Interest expense decreased $1.8 million or 4.0% when comparing 2001 to 2000 and increased $5.4
million or 14.1% when comparing 2000 to 1999.  Interest expense for the Acquired/Disposed properties
decreased $933,000  when comparing 2001 to 2000.  Since the Company capitalizes interest costs on funds
used in construction, the related reduction of interest expense is recorded in the Acquired/Disposed
properties segment as this is the segment to which development properties are classified.  For 2001,
capitalized interest was $1.3 million compared to $1.0 million for 2000.  Interest expense for the
Acquired/Disposed properties increased approximately $2.5 million when comparing 2000 to 1999.
Capitalized interest for 1999 was $3.0 million, therefore, the 2000 interest expense was approximately $2.5
million higher as a result of the decrease in capitalized interest.

For the Market Rate properties, interest expense decreased $841,000 or 2.0% when comparing
2001 to 2000.  This decrease was primarily a result of lower outstanding balances as the majority of the first
mortgages secured by Market Rate properties require monthly principal amortization payments.  Also, there
were fewer loans outstanding as properties sold in 2001 with outstanding loans were assumed by the
buyers.  Interest expense for Market Rate properties increased approximately $20.4 million when comparing
2000 to 1999.  This increase was primarily due to the Company obtaining project specific, nonrecourse
mortgage loans collateralized by 54 properties during 1999.

For the management and service companies, interest expense decreased $4,000 when comparing
2001 to 2000.  The decrease when comparing 2000 to 1999 was approximately $18.0 million.  This
decrease was primarily the result of the Company paying off senior notes (resulting in a decrease of $6.1
million), medium term notes (resulting in a decrease of $6.7 million) and an unsecured line of credit
(resulting in a decrease of $5.2 million) with the proceeds from the 54 mortgage loans obtained during 1999,
as referenced above.

***Gain on Sales***.  The gain on disposition of properties and land, net, of $7.0 million for 2001 resulted
from the sale of seven Market Rate operating properties.  For 2000, the Company recorded a net gain of
$7.5 million which 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.  The $19.6 million gain recorded in 1999 resulted from the sale of eight Market
Rate operating properties.

***Extraordinary Items***.  The extraordinary item of $179,000 in 2001 represents the write off of
deferred finance costs related to the refinancing of a mortgage loan.  The extraordinary item of $3.5 million
recognized during 1999 includes a $750,000 facility fee charge, $127,000 interest cancellation penalty and
a $932,000 write off of deferred finance costs related to the termination of the unsecured line of credit facility,
and approximately $1.7 million related to the pay off and paydown of the Senior and Medium-Term Notes
associated with the tender offer.  The $1.7 million includes $1.5 million which represents the write off of
deferred finance costs, $709,000 which represents transaction costs incurred and $106,000 which
represents a prepayment penalty related to the payoff of a first mortgage loan from which $692,000,
representing the gain related to the tender, was deducted.  There were no extraordinary items in 2000.

***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, windows, 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.

***Equity in Net (Loss) Income of Joint Ventures***.  The combined equity in net (loss) income of joint
ventures decreased $322,000 or 196.3% for 2001 compared to 2000, and decreased $749,000 or 128.0%
for 2000 compared to 1999.  The decrease, when comparing 2001 to 2000, was primarily due to increased
depreciation expense in connection with three 49.0% investments made by the Company.  The first is the
Phase I investment in a 308 unit multifamily property in May 2000.  The second represents Phase II of this
property which currently is under construction, and has 80 units of the total 535 units now available for
leasing.  The third is a property under construction which commenced leasing units in August 2001 and has
140 units of the scheduled 252 units now available for leasing.  The decrease when comparing 2000 to 1999
was due primarily to an increase in the costs of operating the properties resulting primarily from utilities, real
estate taxes and repairs and maintenance.  Additionally, interest expense and depreciation also increased,
primarily due to the 49.0% joint venture which the Company invested in May 2000.

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, 2001, 2000 and 1999.

|                                                   | For the year ended December 31,
|-------------------------------------------------- | -------------------------------
|(In thousands)                                     | 2001                           
|Beneficial interests in joint venture operations   |                                
|Rental revenue                                     | $  7,942                       
|Cost of operations                                 | 5,415                          
|                                                   | 2,527                          
|Interest income                                    | 46                             
|Interest expense                                   | (2,031)                        
|Depreciation                                       | (1,028)                        
|(Loss) income before cumulative effect of a change |                                
|in accounting principle                            | $   (486)                      

On July 20, 2001, the Company entered into multiple agreements concerning the disposition of five
Market Rate joint venture properties located in Northeast Ohio.  Under the agreements, the Company would
eventually become the 100% fee owner of three of the properties and relinquish its ownership in two of the
properties (one property of which the Company is a 66.67% owner).  These transactions are anticipated to
be completed during the first half of 2002.

***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.

**Quantitative and Qualitative Disclosures About Market Risk**

At December 31, 2001, 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 assist them in analyzing opportunities 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 $331,000.  On December 11, 2000, the Company executed termination agreements for both swaps and received termination
payments totaling $3.2 million, which are being amortized at the rate of $476,000 per year 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, 2001** | **December 31, 2000**
|------------------------------ | ----------------------------- | ---------------------
|**(In thousands)**             | ****                          |                      
|**Long term debt**             | **2002**                      | **2003**             
|**Fixed:**                     |                               |                      
|Fixed rate mortgage debt       | $ 16,555                      | $ 12,162             
|Weighted average interest rate | 8.98%                         | 7.07%                
|                               |                               |                      
|MTN's                          | -                             | -                    
|Weighted average interest rate | -                             | -                    
|                               |                               |                      
|Total fixed rate debt          | 16,555                        | 12,162               
|                               |                               |                      
|Variable:                      |                               |                      
|Variable rate mortgage debt    | 75                            | 83                   
|Weighted average interest rate | 5.02%                         | 5.02%                
|LIBOR based credit facilities* | 3,500                         | -                    
|Total variable rate debt       | 3,575                         | 83                   
|Total long term debt           | $ 20,130                      | $ 12,245             
|                               |                               |                      

*One LIBOR based credit facility matures in 2002 and the second LIBOR based credit facility matures in 2003.  At December 31, 2001, there was $3.5 million of borrowings outstanding on the facility that
matures in 2003.

**Sensitivity Analysis**.  At December 31, 2001 and 2000 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 $600.0 million and $606.8 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*****.  For a discussion of the pending litigation, see Note 11 of the Notes to the
Financial Statements presented in Part II, Item 8 of this report on Form 10-K.

**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 8, 2002, 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 information regarding executive officers and other key employees is set forth in Part I of this
Form 10-K under the heading "Executive Officers of the Registrant and Other Key Employees."

**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 8, 2002 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 8, 2002 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 8, 2002 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.

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

*"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 all operating results both recurring and non-recurring,
except those results defined as "extraordinary items" under GAAP, gains and losses from sales of
depreciable operating property and amortization of intangible assets.

*"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.

*"NOI"* means Net Operating Income.

*"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.

*"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 Painting Services,
Inc., Estates Mortgage Company, Children's Computer Company and MIG II Realty Advisors, Inc.



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



**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, 2001 and 2000.

Consolidated Statements of Income for the three years ended December
31, 2001, 2000 and 1999.

Consolidated Statements of Shareholders' Equity for the three years ended
December 31, 2001, 2000 and 1999.

Consolidated Statements of Cash Flows for the three years ended
December 31, 2001, 2000 and 1999.

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-37

III	Real Estate and Accumulated Depreciation					F-38

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.

(3)	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.

(b)	Reports on Form 8-K.

None



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 8th day of March,
2002.

**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 8th day of March, 2002.

|Signature               | Title                                                | Date         
|----------------------- | ---------------------------------------------------- | -------------
|                        |                                                      |              
|/s/ Jeffrey I. Friedman | Chairman of the Board and Chief Executive            | March 8, 2002
|Jeffrey I. Friedman     | Officer (Principal Executive Officer)                |              
|                        |                                                      |              
|/s/ Louis E. Vogt       | President, Chief Operating Officer and Director      | March 8, 2002
|Louis E. Vogt           |                                                      |              
|                        |                                                      |              
|/s/ Lou Fatica          | Chief Financial Officer (Principal Financial Officer | March 8, 2002
|Lou Fatica              | and Principal Accounting Officer)                    |              
|                        |                                                      |              
|/s/ Albert T. Adams     | Director                                             | March 8, 2002
|Albert T. Adams         |                                                      |              
|                        |                                                      |              
|/s/ James M. Delaney    | Director                                             | March 8, 2002
|James M. Delaney        |                                                      |              
|                        |                                                      |              
|/s/ Gerald C. McDonough | Director                                             | March 8, 2002
|Gerald C. McDonough     |                                                      |              
|                        |                                                      |              
|/s/ Mark L. Milstein    | Director                                             | March 8, 2002
|Mark L. Milstein        |                                                      |              
|                        |                                                      |              
|/s/ Frank E. Mosier     | Director                                             | March 8, 2002
|Frank E. Mosier         |                                                      |              
|                        |                                                      |              
|/s/ Richard T. Schwarz  | Director                                             | March 8, 2002
|Richard T. Schwarz      |                                                      |              
|                        |                                                      |              
|/s/ Larry E. Wright     | Director                                             | March 8, 2002
|Larry E. Wright         |                                                      |              



|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | **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       | Amended and Restated Loan Agreement between Associated Estates
Realty Corporation and National City Bank.                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | Exhibit 4.13 to Form
10-Q filed November
13, 2001                                
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.14       | Guaranty Agreement dated November 28, 2000 from Associated Estates
Realty Corporation to Southtrust Bank.                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | Exhibit 4.14 to Form
10-K filed March 13,
2001.                                  
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|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                                  
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.13      | Stock Purchase Agreements between the Company and Jeffrey I.
Friedman dated October 25, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | Exhibit 10.13 to Form
10-K filed herewith.                                       
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|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 March 13,
2001.                                
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|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.                                 
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.20a     | Settlement and Release Agreement dated November 30, 2001 by and
among the Company and certain of the former MIGRA Shareholders.                                                                                                                                                                                                                                                                                                                                                                                                                       |  | Exhibit 10.20a to Form
10-K filed herewith.                                      
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|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.                                   
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.22      | Year 2000 Equity Incentive Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | Exhibit 10.22 to Form
10-Q filed May 15,
2001.                                   
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|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 to Form
10-K filed herewith.                                        
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|23.1       | Consent of Independent Accountants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Exhibit 23.1 to Form
10-K filed herewith.                                        





|Financial Statements:                                               | Page
|------------------------------------------------------------------- | ----
|                                                                    |     
|Report of Independent Accountants                                   | F-2 
|Consolidated Balance Sheets at December 31, 2001 and 2000           | F-3 
|Consolidated Statements of Income for the                           |     
|three years ended December 31, 2001, 2000 and 1999                  | F-4 
|Consolidated Statements of Shareholders' Equity for the three       |     
|years ended December 31, 2001, 2000 and 1999                        | F-5 
|Consolidated Statements of Cash Flows for the three                 |     
|years ended December 31, 2001, 2000 and 1999                        | F-6 
|Notes to Financial Statements                                       | F-7 
|                                                                    |     
|Financial Statement Schedules:                                      |     
|II - Valuation and Qualifying Accounts                              | F-37
|III - Real Estate and Accumulated Depreciation at December 31, 2001 | F-38
|                                                                    |     

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, 2001 and 2000, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 2001 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 19 to the financial statements, in 1999, the Company changed its method of
accounting for certain replacements and improvements.

/s/ PricewaterhouseCoopers LLP

Cleveland, Ohio

March 8, 2002



**CONSOLIDATED BALANCE SHEETS**

|                                                                | December 31,
|--------------------------------------------------------------- | ------------
|(In thousands, except share amounts)                            | 2001        
|**ASSETS**                                                      |             
|Real estate assets                                              |             
|Land                                                            | $   90,965  
|Buildings and improvements                                      | 789,775     
|Furniture and fixtures                                          | 33,091      
|                                                                | 913,831     
|Less:  accumulated depreciation                                 | (208,039)   
|                                                                | 705,792     
|Construction in progress                                        | 10,287      
|Real estate, net                                                | 716,079     
|Properties held for sale, net of accumulated depreciation       | 4,105       
|Cash and cash equivalents                                       | 3,164       
|Restricted cash                                                 | 22,237      
|Accounts and notes receivable                                   |             
|Rents                                                           | 937         
|Affiliates and joint ventures                                   | 6,195       
|Other                                                           | 4,188       
|Investments in joint ventures, net                              | 2,230       
|Intangible and other assets, net                                | 15,699      
|                                                                | $ 774,834   
|                                                                |             
|**LIABILITIES AND SHAREHOLDERS' EQUITY**                        |             
|Secured debt                                                    | $ 551,964   
|Unsecured debt                                                  | 105         
|Total indebtedness                                              | 552,069     
|Accounts payable and accrued expenses                           | 21,073      
|Dividends payable                                               | 4,855       
|Resident security deposits                                      | 4,161       
|Funds held on behalf of managed properties                      |             
|Affiliates and joint ventures                                   | 5,449       
|Other                                                           | 1,761       
|Accrued interest                                                | 2,879       
|Accumulated losses and distributions of joint                   |             
|ventures in excess of investment and advances                   | -           
|Total liabilities                                               | 592,247     
|                                                                |             
|Operating partnership minority interest                         | 10,591      
|                                                                |             
|Commitments and contingencies                                   | -           
|                                                                |             
|Shareholders' equity                                            |             
|Preferred shares, Class A cumulative, without                   |             
|par value; 3,000,000 authorized; 225,000 issued and outstanding | 56,250      
|Common shares, without par value, $.10 stated value; 50,000,000 |             
|authorized; 22,995,764 issued and 19,421,406 and 19,349,584     |             
|outstanding at December 31, 2001 and 2000, respectively         | 2,300       
|Paid-in capital                                                 | 279,023     
|Accumulated distributions in excess of accumulated net income   | (132,844)   
|Accumulated other comprehensive loss                            | (45)        
|Less:  Treasury shares, at cost, 3,574,358 and 3,646,180 shares |             
|at December 31, 2001 and 2000, respectively                     | (32,688)    
|Total shareholders' equity                                      | 171,996     
|                                                                | $ 774,834   







**CONSOLIDATED STATEMENTS OF INCOME**

|                                                                      | For the year ended December 31,
|--------------------------------------------------------------------- | -------------------------------
|(In thousands, except per share amounts)                              | 2001                           
|Revenues                                                              |                                
|Rental                                                                | $ 142,514                      
|Property management fees                                              | 5,243                          
|Asset management fees                                                 | 2,880                          
|Asset acquisition fees                                                | -                              
|Asset disposition fees                                                | -                              
|Painting services                                                     | 2,196                          
|Other                                                                 | 4,287                          
|Total revenues                                                        | 157,120                        
|Expenses and charges                                                  |                                
|Property operating and maintenance                                    | 65,508                         
|Depreciation and amortization                                         | 34,381                         
|Painting services                                                     | 2,099                          
|General and administrative                                            | 13,155                         
|Interest expense                                                      | 42,973                         
|Total expenses and charges                                            | 158,116                        
|(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                                        | (996)                          
|Gain on disposition of properties and land, net                       | 7,047                          
|Equity in net (loss) income of joint ventures                         | (486)                          
|Minority interest in operating partnership                            | (479)                          
|**Income before extraordinary item and cumulative effect**            |                                
|**of a change in accounting principle**                               | 5,086                          
|Extraordinary item-early extinguishment of debt                       | (179)                          
|Cumulative effect of a change in accounting principle                 | -                              
|**Net income**                                                        | $     4,907                    
|****                                                                  |                                
|**Net (loss) income applicable to common shares**                     | $      (577)                   
|****                                                                  |                                
|**Earnings per common share - basic:**                                |                                
|(Loss) income before extraordinary item and cumulative                |                                
|effect of a change in accounting principle                            | $       (.02)                  
|Extraordinary item                                                    | $       (.01)                  
|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                            | $       (.02)                  
|Extraordinary item                                                    | $       (.01)                  
|Cumulative effect of a change in accounting principle                 | $            -                 
|Net (loss) income                                                     | $       (.03)                  
|                                                                      |                                
|**Dividends declared per common share**                               | $       1.25                   
|                                                                      |                                
|**Weighted average number of common shares**                          |                                
|**outstanding	- Basic**                                               | 19,415                         
|**- Diluted**                                                         | 19,415                         





**ASSOCIATED ESTATES REALTY CORPORATION**

**CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY**

|                                                                    |           |            |               |           | Accumulated   |               |             
|------------------------------------------------------------------- | --------- | ---------- | ------------- | --------- | ------------- | ------------- | ------------
|                                                                    |           | Class A    |               |           | Distributions | Accumulated   |             
|                                                                    |           | Cumulative | Common Shares |           | in Excess of  | Other         | Treasury    
|                                                                    |           | Preferred  | (at $.10      | Paid-In   | Accumulated   | Comprehensive | Shares      
|(In thousands, except share amounts)                                | Total     | Shares     | stated value) | Capital   | Net Income    | Loss          | (at cost)   
|                                                                    |           |            |               |           |               |               |             
|Balance, December 31, 1998                                          | $ 259,188 | $ 56,250   | $ 2,262       | $ 277,135 | $  (75,992)   | $  (1)        | $      (466)
|Comprehensive income:                                               |           |            |               |           |               |               |             
|Net income                                                          | 23,709    | -          | -             | -         | 23,709        | -             | -           
|Other comprehensive income:                                         |           |            |               |           |               |               |             
|Reclassification adjustment for loss included in net income of $(4) | (4)       | -          | -             | -         | -             | (4)           | -           
|Total comprehensive income                                          | 23,705    | -          | -             | -         | 23,709        | (4)           | -           
|Issuance of 74,994 common shares relating to the                    |           |            |               |           |               |               |             
|MIGRA merger contingent consideration                               | 873       | -          | 7             | 866       | -             | -             | -           
|Issuance of 21,000 restricted common shares                         | 260       | -          | 2             | 258       | -             | -             | -           
|Retired 1,232 restricted common shares                              | (25)      | -          | -             | (25)      | -             | -             | -           
|Purchase of 1,519,380 treasury shares                               | (15,482)  | -          | -             | -         | -             | -             | (15,482)    
|Deferred compensation                                               | (177)     | -          | -             | (177)     | -             | -             | -           
|Common share dividends declared                                     | (24,676)  | -          | -             | -         | (24,676)      | -             | -           
|Preferred share dividends declared                                  | (5,484)   | -          | -             | -         | (5,484)       | -             | -           
|Balance, December 31, 1999                                          | 238,182   | 56,250     | 2,271         | 278,057   | (82,443)      | (5)           | (15,948)    
|Comprehensive income:                                               |           |            |               |           |               |               |             
|Net income                                                          | 4,942     | -          | -             | -         | 4,942         | -             | -           
|Other comprehensive income:                                         |           |            |               |           |               |               |             
|Reclassification adjustment for gains included in net income of $3  | 3         | -          | -             | -         | -             | 3             | -           
|Total comprehensive income                                          | 4,945     | -          | -             | -         | 4,942         | 3             | -           
|Issuance of 6,333 common shares                                     | 2         | -          | 1             | 1         | -             | -             | -           
|Issuance of 216,911 common shares relating to the                   |           |            |               |           |               |               |             
|MIGRA merger contingent consideration                               | 1,483     | -          | 22            | 1,461     | -             | -             | -           
|Issuance of 64,700 restricted common shares                         | 531       | -          | 7             | 524       | -             | -             | -           
|Retired 8,900 restricted common shares                              | (97)      | -          | (1)           | (96)      | -             | -             | -           
|Purchase of 2,101,800 treasury shares                               | (17,760)  | -          | -             | -         | -             | -             | (17,760)    
|Deferred compensation                                               | (329)     | -          | -             | (329)     | -             | -             | -           
|Common share dividends declared                                     | (25,017)  | -          | -             | -         | (25,017)      | -             | -           
|Preferred share dividends declared                                  | (5,484)   | -          | -             | -         | (5,484)       | -             | -           
|Balance, December 31, 2000                                          | 196,456   | 56,250     | 2,300         | 279,618   | (108,002)     | (2)           | (33,708)    
|Comprehensive income:                                               |           |            |               |           |               |               |             
|Net income                                                          | 4,907     | -          | -             | -         | 4,907         | -             | -           
|Other comprehensive income:                                         |           |            |               |           |               |               |             
|Reclassification adjustment for gains included in net income of $2  | 2         | -          | -             | -         | -             | 2             | -           
|Company's portion of the unrealized loss on a derivative instrument |           |            |               |           |               |               |             
|held at a joint venture property                                    | (45)      | -          | -             | -         | -             | (45)          | -           
|Total comprehensive income                                          | 4,864     | -          | -             | -         | 4,907         | (43)          |             
|Issuance of 778 common shares from treasury shares                  | 8         | -          | -             | (1)       | -             | -             | 9           
|Issuance of 2,000 common shares relating to exercise of options     |           |            |               |           |               |               |             
|from treasury shares                                                | 19        | -          | -             | (10)      | -             | -             | 29          
|Issuance of 82,133 restricted common shares from treasury shares    | 713       | -          | -             | (385)     | -             | -             | 1,098       
|Purchase of 13,087 treasury shares                                  | (116)     | -          | -             | -         | -             | -             | (116)       
|Deferred compensation                                               | (199)     | -          | -             | (199)     | -             | -             | -           
|Common share dividends declared                                     | (24,265)  | -          | -             | -         | (24,265)      | -             | -           
|Preferred share dividends declared                                  | (5,484)   | -          | -             | -         | (5,484)       | -             | -           
|Balance, December 31, 2001                                          | $171,996  | $ 56,250   | $ 2,300       | $ 279,023 | $ (132,844)   | $ (45)        | $ (32,688)  







******ASSOCIATED ESTATES REALTY CORPORATION**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

****

|                                                                                  | For the year ended December 31,
|--------------------------------------------------------------------------------- | -------------------------------
|(In thousands)                                                                    | 2001                           
|Cash flow from operating activities:                                              |                                
|Net income                                                                        | $  4,907                       
|Adjustments to reconcile net income to net cash provided by operating activities: |                                
|Depreciation and amortization                                                     | 34,381                         
|Cumulative effect of a change in accounting principle                             | -                              
|Minority interest in operating partnership                                        | 479                            
|Loss on extinguishment of debt                                                    | 179                            
|Gain on disposition of properties and land, net                                   | (7,047)                        
|Loss on conveyance of Berkley Manor to joint venture partnership                  | -                              
|Loss on conveyance of Rainbow Terrace Apartments to HUD                           | -                              
|Equity in net loss (income) of joint ventures                                     | 486                            
|Earnings distributed from joint ventures                                          | 245                            
|Net change in assets and liabilities                                              |                                
|-   Accounts and notes receivable                                                 | (768)                          
|-   Accounts and notes receivable from affiliates and joint ventures              | 6,261                          
|-   Accounts payable and accrued expenses                                         | (2,999)                        
|-   Other operating assets and liabilities                                        | (1,359)                        
|-   Restricted cash                                                               | (7,800)                        
|-   Funds held for non-owned managed properties                                   | 381                            
|-   Funds held for non-owned managed properties of affiliates and joint ventures  | (2,674)                        
|Total adjustments                                                                 | 19,765                         
|Net cash flow provided by operations                                              | 24,672                         
|Cash flow from investing activities:                                              |                                
|Real estate and fixed asset additions acquired or developed                       | (13,747)                       
|Net proceeds received from sale of properties                                     | 11,806                         
|Contributions to joint ventures, net                                              | (4,357)                        
|Net cash flow used for investing activities                                       | (6,298)                        
|Cash flow from financing activities:                                              |                                
|Principal payments on secured debt                                                | (11,788)                       
|Proceeds from secured debt, net of required escrow                                |                                
|deposits of $6.8 million at December 31, 1999                                     | 18,100                         
|Proceeds from interest rate swap termination fee                                  | -                              
|Principal payment on Senior and Medium-Term Notes                                 | (604)                          
|Lines of credit borrowings                                                        | 43,100                         
|Lines of credit repayments                                                        | (39,600)                       
|Deferred financing costs                                                          | -                              
|Transaction costs paid related to debt extinguishment                             | -                              
|Common share dividends paid                                                       | (19,409)                       
|Preferred share dividends paid                                                    | (5,484)                        
|Purchase of treasury shares - net                                                 | (91)                           
|Net cash flow (used for) provided by financing activities                         | (15,776)                       
|Increase (decrease) in cash and cash equivalents                                  | 2,598                          
|Cash and cash equivalents, beginning of year                                      | 566                            
|Cash and cash equivalents, end of year                                            | $  3,164                       





**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 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.
Additionally, the Company owns four taxable REIT subsidiaries 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 at December 31, 2001 consisted of a total of 129 properties of which 75
(62 Market Rate properties and 13 Affordable Housing properties) are owned, directly or indirectly, by the
Company or by a subsidiary of the Company; ten 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 three Market Rate properties
49.0% owned) and 44 non-owned properties (of which one is a commercial property) managed by the
Company or one of its subsidiaries 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 entered into an Operating Partnership structured as a DownREIT of which an
aggregate 15.0% 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.

**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 19, 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, windows, 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.

The Company follows a practice of discontinuing the depreciation of assets specifically identified
by management as held for sale.  A valuation allowance is established for any asset so identified if in
management's opinion, the net sales price of the asset is less than its net book value.

**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, as well as the related goodwill.   The Company reviews its intangible
assets for impairment when the client terminates a contract that is not replaced with a new client contract
within one year.  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 rental applications submitted to and
approved by HUD.

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

Rent concessions, including free rent and leasing commissions, incurred in connection with
residential property leases are capitalized and amortized on a straight-line basis over the terms of the related
leases (generally one year) and are charged as a reduction of rental revenue.

**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 conjunction with the settlement of the lawsuit in Harris County, Texas District Court
against MIGRA (See Note 11 for further details concerning the settlement), the former MIGRA shareholders
redeemed 39,314 OP units for cash in the amount of approximately $393,000 which represented the
Company's common share price of $10.00 per unit on the day of redemption.  The proceeds of the
redemption were used to satisfy certain indemnification obligations owed by the former MIGRA shareholders
to the Company in connection with the lawsuit.  These units had a recorded value of approximately $929,000
when issued.  The difference between the effective purchase price of the minority interest and its recorded
value was approximately $536,000, which reduced the recorded value of the underlying real estate.  In
August 2000, 19,662 of the OP units were exchanged for cash in the amount of $144,000 which represented
a value of $7.34 per unit.  These units had a recorded amount of $436,000 when issued.  The difference of
the cash paid and the recorded amounts was $292,000, 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 $479,000,
$400,000 and $241,000 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, 2001,
2000 and 1999, 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 90.0% (95.0% before January 1, 2001) 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.  Effective January 1, 2001, the Service Companies have elected to
be treated as Taxable REIT Subsidiaries.  Taxes are provided for those Service Companies having net
profits for both financial statements and income tax purposes.  The 2001, 2000 and 1999 net operating loss
carryforwards for the Service Companies, in the aggregate, are approximately $7.2 million, $7.6 million and
$4.4 million, respectively, and expire during the years 2009 to 2021.

The gross deferred tax assets were $4.1 million, $3.7 million and $2.2 million at December 31, 2001,
2000 and 1999, respectively, and relate principally to net operating losses of the Service Companies.  Gross
deferred tax liabilities of $517,000, $349,000 and $486,000 at December 31, 2001, 2000 and 1999,
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 $3.6 million,
$3.4 million and $1.7 million at December 31, 2001, 2000 and 1999, respectively.  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, 2001 and 2000, the Company's net tax basis of properties exceeds the amount
set forth in the Company's Consolidated Balance Sheets by $55.2 million and $42.7 million, respectively.

******Reconciliation Between GAAP Net Income and Taxable Income**

The following reconciles GAAP net income to taxable income:

|(In thousands)                                           | Year Ended December 31,
|-------------------------------------------------------- | -----------------------
|                                                         | 2001                   
|GAAP net income                                          | $  4,907               
|Add:	GAAP net loss of Taxable REIT                       |                        
|Subsidiaries and minority interest in joint venture, net | 1,076                  
|GAAP net income from REIT operations (1)                 | 5,983                  
|                                                         |                        
|Add:	Book depreciation and amortization                  | 33,833                 
|Less:	Tax depreciation and amortization                  | (27,005)               
|Book/tax differences on gains (losses) from              |                        
|capital transactions                                     | (2,782)                
|Other book/tax differences, net                          | (2,040)                
|Taxable income before adjustments                        | 7,989                  
|Less: Capital gains                                      | (4,265)                
|Taxable income subject to dividend requirement           | $ 3,724                

(1) All adjustments to GAAP net income from REIT operations are net of amounts attributable to taxable REIT subsidiaries and minority
interests.

**Reconciliation Between Cash Dividends Paid and Dividends Paid Deduction**

(In thousands)
2001
2000
1999Cash dividends paid
$ 24,893
$ 30,501
$ 40,667Less: Dividends designated to prior year
-
-
(10,547)Plus:  Dividends designated from following year
-
-
-Less: Portion designated capital gain distribution
(4,265)
(1,276)
(12,131)Less: Return of Capital
(14,140)
(15,596)
(4,890)Dividends paid deduction
$  6,488
$ 13,629
$ 13,099

**Dividends Per Share**

Total dividends per common share and the related components for the years ended December 31,
2001, 2000 and 1999, as reported for income tax purposes, were as follows:

|For the year ended December 31, 2001
|------------------------------------
|                                    
|                                    
|                                    
|Date Paid                           
|                                    
|02/1/2001                           
|05/1/2001                           
|08/1/2001                           
|11/1/2001                           
|                                    

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

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

Preferred dividends of $5.5 million were paid for each of the years ended December 31, 2001, 2000
and 1999, of which $2.2 million, $448,000 and $1.6 million were designated as a capital gain dividend for
the years ended December 31, 2001, 2000 and 1999, respectively.

**Derivative Financial Instruments**

The Company adopted Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended, (referred to hereafter as "FAS 133"), on January
1, 2001.  The Company generally maintains an overall interest rate risk-management strategy that
incorporates the use of derivative instruments to minimize volatility in earnings that is caused by interest
rates, as well as changes in fair value on its fixed rate liabilities.  The Company does not enter into derivative
financial instrument contracts for trading or speculative purposes.  Derivative instruments that have and may
continue to be used as part of the Company's strategy include interest rate swaps and option contracts that
have indices related to the pricing of specific balance sheet liabilities.  All derivatives are formally
documented and recognized on the balance sheet at their fair value.  On the date that the Company enters
into a derivative contract, it designates the derivative as a hedge of the variability of cash flows that are to
be paid in connection with a recognized liability (a "cash flow hedge"), or to convert certain fixed-rate long-term debt to floating-rate debt (a "fair value hedge").  The effective portion of the change in fair value of a
derivative that is designated and qualifies as a cash flow hedge is recorded as a component of Other
comprehensive income (loss) until earnings are affected by the variability of cash flows of the hedged
transaction.  Changes in the fair value of a derivative that is highly effective and that is designated and
qualifies as a fair-value hedge,  along with changes in the fair value of the hedged liability that are
attributable to the hedged risk are recorded in current-period earnings.  The amount of hedge ineffectiveness
for the year ended December 31, 2001 was not material.  At December 31, 2001, a joint venture property
accounted for under the equity method of accounting, in which the Company has a 49.0% interest, had an
interest rate swap with a notional amount of $13.3 million and an interest rate of 2.85% that expires on
October 21, 2002.  Included as an adjustment to comprehensive income at December 31, 2001 is $45,000,
representing the Company's proportionate share of the other comprehensive loss adjustment  from the joint
venture.  As of December 31, 2001, the Company expects that within the next twelve months, it will
reclassify amounts recorded in Accumulated other comprehensive loss into earnings of approximately
$45,000.  No derivative instruments were outstanding at December 31, 2000.

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 are being 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 2001, the Company recorded a credit
to interest expense of $476,000 with regards to the amortization of the termination payments.  During the
year ended December 31, 2000, the Company recorded a credit to interest expense of $331,000 with
regards to the swaps.

**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 became
effective January 1, 2001.  The Company has adopted these provisions and the impact on the Company's
financial position, results of operations and cash flows is not material to the Company.

In June 2001, the FASB approved Statements of Financial Accounting Standards No. 141 "Business
Combinations" ("SFAS 141") and No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142") which are
effective July 1, 2001 and January 1, 2002, respectively, for the Company.  SFAS 141 requires that the
purchase method of accounting be used for all business combinations initiated after June 30, 2001.  The
Company has adopted SFAS 141; however, since June 30, 2001, there were no combinations by the
Company to which this standard would apply.  Under SFAS 142, amortization of goodwill, including goodwill
recorded in past business combinations, will discontinue upon adoption of this standard.  All goodwill and
intangible assets will be tested for impairment in accordance with the provisions of the SFAS 142.  The
impact of the impairment test on the Company's financial position, results of operations and cash flows is
not expected to be material to the Company.  As a result of the discontinuation of the amortization of
goodwill, the Company will recognize a reduction in amortization expense of approximately $690,000 for the
years ended December 31, 2002 and 2003 and $345,000 for the year ended December 31, 2004.

In August 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement Obligations" which
addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs.  This Statement requires that the fair value of a
liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable
estimate of the fair value can be made.  The associated asset retirement costs are capitalized as part of the
carrying amount of the long-lived asset.  This Statement will be effective at the beginning of 2003.  The
Company is currently assessing, but has not yet determined the impact of SFAS No. 143 on its financial
position or results of operations.

In October 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets".  This Statement supersedes SFAS No. 121 and requires that long-lived assets that are to be
disposed of by sale be measured at the lower of book value or fair value less costs to sell.  SFAS No. 144
retains the fundamental provisions of SFAS 121 for (a) recognition and measurement of the impairment of
long-lived assets to be held and used, and (b) measurement of long-lived assets to be disposed of by sale,
but broadens the definition of what constitutes a discontinued operation and how the results of a
discontinued operation are to be measured and presented.  This Statement will be effective for the first
quarter of 2002.  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.

**Reclassifications**

Certain reclassifications have been made to the 2000 and 1999 financial statements to conform to
the 2001 presentation.

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

**Development Activity**

Construction in progress, including the cost of land for the development of multifamily properties, was
$10.3 million and $7.5 million at December 31, 2001 and 2000, 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 $1.4 million, $1.1 million and $3.1 million during the years ended
December 31, 2001, 2000 and 1999, respectively.  During 2001, the Company completed the construction
of a property and the last 16 units were made available for occupancy.  In connection with the completion
of this construction, the final $1.7 million was transferred from construction in progress to buildings and
improvements.  During 2000, the construction and leasing of 268 units at two properties were completed
at a total cost of $20.6 million.

The following schedule details construction in progress at December 31, 2001:

|                       |        |          |           |                   |          
|---------------------- | ------ | -------- | --------- | ----------------- | ---------
|                       |        |          | Placed in |                   |          
|(dollars in thousands) | Number | Costs    | Service   | December 31, 2001 | Estimated
|                       | of     | Incurred | through   | Land              | Building 
|Property               | Units  | to Date  | 12/31/01  | Cost              | Cost     
|                       |        |          |           |                   |          
|ORLANDO, FLORIDA       |        |          |           |                   |          
|Courtney Chase Land    | 288    | $  2,145 | $  -      | $ 2,094           | $      51
|BOYNTON BEACH, FLORIDA |        |          |           |                   |          
|Boynton Beach Land     | 229    | 5,922    | -         | 4,802             | 1,120    
|OTHER                  | -      | 2,220    | -         | 602               | 1,618    
|                       | 517    | $10,287  | $  -      | $ 7,498           | $ 2,789  

* To Be Determined

******Acquisition Activity**

On June 29, 2001, the Company acquired a 27.8 acre parcel of land for $2.1 million located in
Orlando, Florida.  The Company is currently negotiating with an advisory client to form a joint venture
partnership to complete development of this project.  The proposed development of this project is for 288
multifamily Market Rate units.

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 is being 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 2003.  As of December 31, 2001,
80 units are available for occupancy.  In connection with the construction of the 535 units, the partnership
obtained a construction loan for $30.0 million.  This loan matures December 10, 2003, but has two one-year
options to extend.  As part of the loan agreement, the Company was required to guarantee the loan and any
construction cost overruns.  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, 2001, the joint venture had real estate assets
of $47.2 million and a mortgage payable of $29.1 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, 2001, the joint venture had 140 units
available for occupancy, real estate assets of $17.6 million and borrowings of $15.4 million.  The Company
owns 49.0% of this joint venture.

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 intends to develop this site as a multi-use facility, principally for
market rate apartments and ancillary uses.

**Disposition Activity**

During 2001, the Company sold seven operating properties for net cash proceeds of $11.8 million
and the buyers' assumption of $25.3 million of mortgage indebtedness.  An aggregate gain of $7.0 million
was recorded.

During 2000, the Company sold six operating properties for net cash proceeds of $16.5 million and
for one of the properties the buyer assumed $7.1 million of debt.  These six sales resulted in a gain of $8.5
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.  Additionally, Rainbow Terrace Apartments, an Affordable Housing
property, was conveyed to HUD by deed in lieu of foreclosure resulting in a loss of approximately $66,000.

**3.	PROPERTIES HELD FOR SALE**

At December 31, 2001, the Company had contracts to sell one Market Rate property and one
Affordable Housing property, which are presented in the Consolidated Balance Sheets as "Properties held
for sale".  For the year ended December 31, 2001, these two properties had an aggregate net income of
$336,000.  Additionally, had these two properties not been classified as held for sale, $188,000 of
depreciation would have been recorded.  At December 31, 2000, the Company had contracts to sell seven
Market Rate properties which were presented as "Properties held for sale".  One of the properties at
December 31, 2001 was included in a sale of eight properties on December 31, 1999.  To facilitate that sale,
the Company financed the sale with fixed rate debt maturing July 31, 2001, which was extended until
December 31, 2001.  These sales were not recognized for GAAP purposes until the seller financing was
repaid.  In December 2001, there were two properties on which the seller financing was not repaid, and as
such, the Company foreclosed on the notes on these two properties.  One of the two properties is currently
under a contract of sale and is one of the two properties classified as held for sale at December 31, 2001.
The remaining property has been reclassified  to "Real estate assets" and is no longer considered a
"Property held for sale" in the Consolidated Balance Sheet at December 31, 2001.  Upon reclassification,
the Company recorded a depreciation charge of $298,000 in the fourth quarter of 2001.

**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:

|                                          | 2001     | 2000     
|----------------------------------------- | -------- | ---------
|(In thousands)                            |          |          
|Resident security deposits                | $  1,746 | $   1,671
|Investor's escrow                         | 382      | 399      
|Escrow and reserve funds for replacements |          |          
|required by mortgagees                    | 20,109   | 12,714   
|                                          | $22,237  | $ 14,784 

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, 2001 and 2000, held to maturity securities included: treasury bills with a cost of $155,000  and $182,000
and a fair value of $158,000 and $184,000, respectively, and certificates of deposits with a cost and
estimated fair value of $34,000 at December 31, 2000.  Available for sale investments included FHLMC
securities with a cost of $100,000 at December 31, 2001 and 2000.

**5.	INTANGIBLE AND OTHER ASSETS**

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

|(In thousands)                       | 2001     | 2000     
|------------------------------------ | -------- | ---------
|                                     |          |          
|Intangible assets                    | $  7,130 | $   7,130
|Deferred financing and leasing costs | 13,850   | 13,630   
|Less: Accumulated amortization       | (10,227) | (7,693)  
|                                     | 10,753   | 13,067   
|Prepaid expenses                     | 4,285    | 3,343    
|Other assets                         | 661      | 565      
|                                     | $15,699  | $ 16,975 

Amortization expense for intangible assets was $1.2 million, $1.7 million and $1.2 million for the
years ended December 31, 2001, 2000 and 1999, respectively.  Amortization expense for deferred finance
and leasing costs was $1.3 million, $1.1 million and $1.2 million for the years ended December 31, 2001,
2000 and 1999, 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**

The extraordinary item of $179,000 in 2001 represents a write off of deferred finance costs related
to the refinancing, prior to maturity, of a mortgage loan.  The extraordinary item of $3.5 million recognized
during 1999 includes a $750,000 facility fee charge, $127,000 interest cancellation penalty and a $932,000
write off of deferred finance costs related to the termination of the unsecured line of credit facility, and
approximately $1.7 million related to the pay off and paydown of the Senior and Medium-Term Notes
associated with the tender offer.  The $1.7 million includes $1.5 million which represents the write off of
deferred finance costs, $709,000 which represents transaction costs incurred and $106,000 which
represents a prepayment penalty related to the payoff of a first mortgage loan from which $692,000,
representing the gain related to the tender, was deducted.  There were no extraordinary items in 2000.

**7.	DEBT**

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

|(In thousands)                            | 2001      | 2000     
|----------------------------------------- | --------- | ---------
|                                          |           |          
|Conventional mortgage debt, maturing      |           |          
|at various dates to 2012                  | $ 537,781 | $ 542,781
|Lines of credit, maturing 2002 and 2003   | 3,500     | -        
|Federally insured mortgage debt, maturing |           |          
|at various dates to 2022                  | 10,683    | 24,687   
|                                          | $ 551,964 | $ 567,468

Real estate assets pledged as collateral for all mortgage debt had a net book value of $706.6 million
and $680.9 million at December 31, 2001 and 2000, respectively.

**Conventional Mortgage Debt**

Conventional mortgages payable are comprised of 56 loans at December 31, 2001 and 58 loans
at December 31, 2000,  each of which is collateralized by the respective real estate and resident leases.
These nonrecourse, project specific loans accrue interest at a fixed rate.  On December 31, 2001, the
Company and its partners completed the refinancing of a $6.1 million HUD loan on a property in which the
Company is a 66.67% owner.  The refinancing consisted of two loans.  The first loan is in the amount of $7.9
million.   This loan accrues interest at 6.36% and requires monthly principal and interest payment until the
maturity date of July 1, 2005, at which time all unpaid principal and interest is due.  The second loan is in
the amount of $6.0 million.  This loan accrues interest at the rate of  6.36% and requires monthly interest
only payments until the maturity date of January 1, 2003, at which time all unpaid principal and interest is
due.  The proceeds from this loan are restricted.  During 2000, the Company caused to be 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 in September  2000.
The balance of $4.2 million was disbursed in March 2001.  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.  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 7.77%, and 7.71% at December 31, 2001 and 2000,
respectively.

**Federally Insured Mortgage Debt**

Federally insured mortgage debt which encumbered four of the properties at December 31, 2001
and six of the properties at December 31, 2000 (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, 2022.  At December 31, 2001, three of the four
federally insured mortgages have a fixed rate and the remaining mortgage ($1.7 million) has a variable rate.
Interest rates on the HUD-insured indebtedness range from 5.0% to 7.5%.  The weighted average interest
rate of the federally insured mortgages was 6.62% and 8.27% at December 31, 2001 and 2000, respectively.

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.

**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 a Medium-Term Note (the "MTN") outstanding having an aggregate balance of
$105,000 at December 31, 2001 and two MTN's having an aggregate balance of $709,000 at December 31,
2000.  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.  In September, in accordance with the terms of the note,
the Company paid the $604,000 balance of one MTN.  The remaining MTN has a balance of $105,000,
bears interest at 6.88% and matures in December 2004.  The weighted average interest rate of the two
MTN's was 7.26% at December 31, 2000.

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, 2001, there was $62.5 million of additional MTN borrowings available under the
program.

**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.  The
facility was scheduled to mature October 31, 2001 and was extended to December 31, 2002.  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.  Letters of credit totaling $4.0 million limit the amount
available under this line of credit to $8.0 million.  At December 31,  2001 and 2000, 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, 2001, the borrowings were restricted up to an amount
not to exceed $12.6 million.  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, 2001, there
were $3.5 million of borrowings outstanding under this line of credit.  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.

As of December 31, 2001, the scheduled maturities of secured and unsecured indebtedness for
each of the next five years and thereafter, are as follows (in thousands):

|2002       | $  20,130
|---------- | ---------
|2003       | 12,245   
|2004       | 6,751    
|2005       | 28,447   
|2006       | 7,650    
|Thereafter | 476,846  
|           | $552,069 

Cash paid for interest was $41.8 million, $43.8 million and $40.7 million for the years ended
December 31, 2001, 2000 and 1999, respectively.

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

At December 31, 2001, the Company's interests in the joint venture partnerships were as follows:

|                   | Ownership
|------------------ | ---------
|                   |          
|Americana          | 33.33%   
|Gates Mills Towers | 33.33%   
|Watergate          | 33.33%   
|College Towers     | 50.00%   
|Highland House     | 50.00%   
|Lakeshore Village  | 50.00%   
|Idlewylde-Phase I  | 49.00%   
|Idlewylde-Phase II | 49.00%   
|Berkley Manor      | 49.00%   

Summarized financial information for these joint ventures is as follows:

**Balance sheet data**

|(In thousands)                 | 2001       | 2000      
|------------------------------ | ---------- | ----------
|                               |            |           
|Real estate, net               | $ 86,623   | $ 46,750  
|Other assets                   | 4,357      | 4,087     
|                               | $ 90,980   | $ 50,837  
|                               |            |           
|Amounts payable to the Company | $      256 | $      244
|Mortgages payable              | 95,811     | 64,866    
|Other liabilities              | 4,739      | 4,239     
|Accumulated deficit            | (9,826)    | (18,512)  
|                               | $ 90,980   | $ 50,837  

**Operating data**

|(In thousands)                                           | 2001       | 2000        | 1999     
|-------------------------------------------------------- | ---------- | ----------- | ---------
|                                                         |            |             |          
|Rental revenues                                          | $ 20,157   | $ 20,067    | $ 19,074 
|Other revenues                                           | 726        | 467         | 114      
|Operating and maintenance expenses                       | (14,528)   | (13,347)    | (11,208) 
|Depreciation and amortization                            | (2,554)    | (2,196)     | (1,666)  
|Interest expense                                         | (5,166)    | (5,708)     | (5,232)  
|Net (loss) income before cumulative effect               | (1,365)    | (717)       | 1,082    
|Cumulative effect of a change in accounting principle    | -          | -           | 1,466    
|Net (loss) income                                        | $  (1,365) | $     (717) | $  2,548 
|Company's proportionate interest in:                     |            |             |          
|Depreciation and amortization                            | $    1,052 | $      843  | $     592
|Interest expense                                         | 2,009      | 2,092       | 1,800    
|*Cumulative effect of a change in accounting principle   | -          | -           | 523      
|                                                         |            |             |          
|(Loss) income of joint ventures before cumulative effect |            |             |          
|of a change in accounting principle                      | (486)      | (164)       | 585      

*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's net contributions were $4.1 million, $1.3 million and $56,000 for the years ended
December 31, 2001, 2000 and 1999, respectively.  Revenues from property management fees charged to
joint ventures aggregated $896,000, $891,000 and $843,000 for the years ended December 31, 2001, 2000,
1999, 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 $744,000, $730,000 and $749,000 for the years ended December
31, 2001, 2000 and 1999, respectively, were received by the property.

On July 20, 2001, the Company entered into multiple agreements concerning the disposition of five
Market Rate joint venture properties located in Northeast Ohio.  Under the agreements, the Company would
eventually become the 100% fee owner of three of the properties and relinquish its ownership interest in two
of the properties (one property of which the Company is a 66.67% owner).  These transactions are
anticipated to be completed during the first half of 2002.

******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:

|(In thousands)                     | 2001    | 2000    | 1999   
|---------------------------------- | ------- | ------- | -------
|Property management fee and other  |         |         |        
|miscellaneous service revenues     |         |         |        
|- affiliates                       | $ 1,628 | $ 1,860 | $ 2,506
|- joint ventures                   | 947     | 965     | 883    
|Painting service revenues          |         |         |        
|- affiliates                       | 569     | 303     | 480    
|- joint ventures                   | 1,005   | 264     | 220    
|Expenses incurred on behalf of and |         |         |        
|reimbursed by (1)	- affiliates     | 4,040   | 4,208   | 4,007  
|- joint ventures                   | 3,161   | 3,010   | 2,873  
|Interest income 	- affiliates      | 199     | 264     | 303    
|Interest expense	- affiliates      | (123)   | (176)   | (124)  
|- joint ventures                   | (24)    | (27)    | (26)   



(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 $2.5 million and $4.9 million at December 31, 2001 and 2000,
respectively.  Other miscellaneous payables due to affiliates and joint venture properties aggregated
$109,000 and $2.9 million at December 31, 2001 and 2000, 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
$44,000 and $296,000 at December 31, 2001, respectively, and $573,000 and $3.6 million at December 31,
2000, respectively.  The Company held funds for the benefit of affiliates and joint ventures in the aggregate
amount of $3.8 million and $1.5 million at December 31, 2001, respectively, and $4.3 million and $950,000
at December 31, 2000, respectively.

***Service Companies***

On October 25, 2001, the Company purchased certain common stock interests in Service
Companies that were owned by the Company's Chief Executive Officer for an aggregate purchase price of
$64,000, which represented the estimated value at the date of purchase.  At December 31, 2001, the
Company owns 100% of these Service Companies.

***Notes Receivable*****

At December 31, 2001 and 2000, 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 years ended December 31, 2001 and 2000, the average interest rate
charged on these notes  was approximately 5.8% and 7.8%, respectively, with principal due May 1, 2002.
The Company recognized interest income of $199,000, $263,000 and $227,000 for the years ended
December 31, 2001, 2000 and 1999, 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 ten 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:

|(In thousands)         | 2001    | 2000   
|---------------------- | ------- | -------
|Real estate, net       | $1,678  | $ 1,790
|Other assets           | 382     | 124    
|                       | $2,060  | $ 1,914
|                       |         |        
|Mortgage notes payable | $3,540  | $ 3,749
|Other liabilities      | 771     | 412    
|Accumulated deficit    | (2,251) | (2,247)
|                       | $2,060  | $ 1,914

|(In thousands)                   | 2001        | 2000    | 1999   
|-------------------------------- | ----------- | ------- | -------
|Rental and other revenue         | $ 2,112     | $ 2,141 | $ 2,306
|Property operating and           |             |         |        
|maintenance expenses             | (1,556)     | (1,425) | (1,265)
|Depreciation and amortization    | (287)       | (254)   | (222)  
|Interest expense                 | (273)       | (289)   | (301)  
|Cumulative effect of a change in |             |         |        
|accounting principle             | -           | -       | 190    
|Net (loss) income                | $       (4) | $   173 | $   708

**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
(in thousands):

|2002       | $ 1,003
|---------- | -------
|2003       | 959    
|2004       | 908    
|2005       | 462    
|2006       | 236    
|Thereafter | 1,153  
|           | $ 4,721

The Company leases certain equipment under capital leases.  Such equipment is included in
property, plant and equipment with a cost of $349,000 and accumulated depreciation of $182,000 at
December 31, 2001.  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 (in thousands):

|              | Capital | Operating
|------------- | ------- | ---------
|              |         |          
|2002          | $ 22    | $   317  
|2003          | 22      | 235      
|2004          | 22      | 225      
|2005          | 21      | 187      
|2006          | 9       | 101      
|Thereafter    | -       | 4,872    
|              | 96      | $5,937   
|Less interest | (20)    |          
|              | $ 76    |          

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 $10.3 million, $9.8 million and $9.6 million for the years ended December 31, 2001,
2000 and 1999, 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 was
$1.0 million at December 31, 2001 and 2000.  With respect to such leases, the Company incurred ground
rent expense of $101,000 for each of the years ended December 31, 2001, 2000 and 1999.

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, 2001, the
net book value of this property was $1.3 million.

***Certain Joint Venture Commitments.***The Company has guaranteed completion of certain
improvements totaling $233,000 in connection with the refinancing of the 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 $233,000 letter of credit.  Additionally, in connection with the refinancing of the
Watergate Apartments, a 949 unit multifamily community located in Euclid, Ohio, in which the Company is
a 33.33% joint venture partner, the Company has guaranteed completion of certain improvements totaling
approximately $7.0 million.  This obligation is secured by a $3.5 million letter of credit.  Also, the Company
provided 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 development.  Furthermore, the Company has guaranteed construction cost overruns and
the payment of a $30.0 million construction loan in connection with the Idlewylde 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.  This loan matures December 10, 2003, but has two one-year options
to extend.  The Company also has guaranty obligations under a $220,000 letter of credit for purposes of
guaranteeing 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 March 2002 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 for each of the
years ended December 31, 2001, 2000 and 1999, were recognized in income by the 13 wholly owned
subsidiaries eligible for federal rent subsidies for the years ended December 31, 2001, 2000 and 1999,
respectively.  As discussed in Note 7, certain obligations are insured by federal mortgage insurance
programs.

**Pending Litigation**

The Company settled a lawsuit pending in the Harris County, Texas District Court against MIG
Realty Advisors, Inc. ("MIGRA") (MIG's predecessor company) and others involving a claim for contribution
and indemnity arising out of MIGRA 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 MIGRA, alleging that MIGRA  was responsible for the conduct of
the due diligence investigation and consequently MIGRA, rather than the engineer was responsible for any
damages suffered by the advisory client.  Some of the other defendants, including the seller and the general
contractor filed cross actions against MIGRA under the Texas contribution and proportionate liability statutes
alleging that MIGRA was responsible in whole or in part for the damages alleged to have been suffered by
the plaintiff advisory client.  The consulting engineer later amended its cross action to include similar claims
against MIGRA for contribution and determination of proportionate responsibility.  The advisory client and
MIGRA entered into a tolling agreement for the purpose of tolling any claims that the advisory client may
have had against MIGRA in connection with the apartment project.  The effect of the cross actions was to
attempt to make MIGRA potentially responsible for some or all of the claims of the advisory client
irrespective of whether MIGRA had been sued directly by the advisory client.  On March 28, 2001, the
Company entered into a settlement agreement, which had the effect of releasing MIGRA, the Company and
others from all liability in connection with the lawsuit.  The terms of the settlement agreement are
confidential.  In respect to the above settlement, the Company recorded a liability and a charge to its results
of operations to reflect the cash settlement.  In addition, the Company is entitled to indemnification from the
former MIGRA stockholders arising out of the Merger Agreement between the Company and MIGRA dated
April 16, 1998 which had the effect of offsetting a portion of the aforementioned costs recorded by the
Company.  The Company believes that the amounts not recovered under the aforementioned
indemnification, are covered under MIG's liability insurance policy.  Accordingly, the net amounts charged
to the Company's general and administrative expense in respect of the settlement were not material.

On August 10, 2001, Fluor Daniel, Inc. ("FDI") filed a Demand For Arbitration with the American
Arbitration Association ("AAA") arising out of construction services provided by FDI to MIG/Orlando
Development, LTD ("MOD"), an affiliate of the Company, pursuant to a construction contract between FDI
and MOD for the construction of a 460 suite apartment community located in Orlando, Florida.  FDI claims
that it suffered damages in performing the work because of the owner's breach of the construction contract.
FDI has not specified the amount of its damages, which it claims is yet to be determined; however, the
Company believes that its claim may exceed $3.0 million based on certain information which the Company
has obtained.  Both MOD and the Company are named as party defendants in this litigation.  MOD and the
Company have filed a counterclaim with the AAA against FDI seeking liquidated damages of $1.9 million
arising out of FDI's failure to complete the project in a timely manner as required by the terms of the
construction contract.  The MOD acquired this project in 1998 as part of the Company's acquisition of MIG
Realty Advisors from a group that includes persons who are now officers and directors of the Company,
which group could have a material interest adverse to the Company, because of indemnification obligations
owing to the Company in connection with this litigation.  The Company is vigorously defending this claim and
pursuing its counterclaim, but cannot predict the final outcome of this dispute.

On August 28, 2001, Helene Fien filed a complaint in the Court of Common Pleas, Cuyahoga
County, Ohio against the Company, its CEO, Jeffrey I. Friedman, AEC Management Company (a
corporation that merged with the Company at the time of the IPO in 1993) and Associated Estates
Corporation (a non-affiliated company).  The complaint alleges fraud, breach of fiduciary duty and
conversion against each of the defendants and a RICO claim against the individual defendant in connection
with various minority interests (5% or less) in pre IPO entities allegedly held by Mrs. Fien's deceased
husband at the time of his death in 1985.  The Complaint demands compensatory damages in the amount
of $10.0 million plus punitive damages, attorneys' fees, interests and costs.  The litigation is in a preliminary
stage.  The Company believes it has meritorious defenses and intends to vigorously defend this claim, but
cannot predict the final outcome of this dispute.

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 any such pending 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 $552.0 million and $567.5 million
at December 31, 2001 and 2000, respectively, have an estimated aggregate fair value of approximately
$568.0 million and $570.6 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.

The Medium-Term Note with an aggregate carrying value of $105,000 at December 31, 2001 and
2000, respectively, has an estimated fair value of $122,000 and $109,000, 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.

Disclosure about the fair value of financial instruments is based on pertinent information available
to management as of December 31, 2001 and 2000.  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:

|(In thousands)                                                    | 2001   | 2000    | 1999    
|----------------------------------------------------------------- | ------ | ------- | --------
|Issuance of common shares in connection with the MIGRA merger     |        |         |         
|including the second and third issuance dates                     | $	-    | $ 1,483 | $    873
|Purchase price adjustment                                         | -      | -       | 1,232   
|Assumption of mortgage debt in connection with the acquisition    |        |         |         
|of properties                                                     | -      | 1,545   | -       
|Assumption of liabilities in connection with the acquisition of   |        |         |         
|properties                                                        | -      | -       | 1,623   
|Dividends declared but not paid                                   | 4,855  | -       | -       
|Contributions of land to joint venture, net of loss on conveyance | -      | 6,755   | -       
|Adjustment for purchase of minority interest                      | 536    | 292     | -       
|Assumption of debt by purchaser of property                       | 25,316 | 7,086   | -       
|In connection with the conveyance of RTA to HUD:                  |        |         |         
|Transfer of mortgage debt                                         | -      | -       | 1,935   
|Transfer of other liabilities                                     | -      | -       | 188     
|Transfer of accounts receivable-rent                              | -      | -       | 31      
|Transfer of escrows                                               | -      | -       | 762     
|Transfer of real estate assets, net                               | -      | -       | 1,396   

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

***Common Shares*****

In 2000, the Company issued 216,911 common shares for the benefit of the former MIGRA
shareholders.  This issuance was made pursuant to the contingent consideration provisions of the MIGRA
merger agreement.  Such shares were recorded in the amount of $1.5 million and increased the recorded
amount of the intangible asset associated with the purchase of MIGRA.

***Treasury Shares***

The Company's Board of Directors has authorized the repurchase of up to five million of the
Company's common shares to be repurchased by the Company at market prices.  At December 31, 2001,
3,574,358 shares had been repurchased at an aggregate cost of approximately $32.7 million.  At December
31, 2000, 3,646,180 shares had been repurchased at an aggregate cost of approximately $33.7 million.  The
decline in Treasury Shares from 2000 to 2001 was due to the reissuance of shares from treasury shares
under various share programs of the Company (See Note 16).  The repurchases were funded primarily from
operating cash flows, refinancing proceeds and proceeds received from the sale of operating properties.
At December 31, 2001, the Company has 1,425,642 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, 2001, 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, 2001 or 2000.

**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 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.

|(In thousands, except per share amounts)                    | For the year ended December 31,
|----------------------------------------------------------- | -------------------------------
|                                                            | 2001                           
|**Basic Earnings Per Share:**                               |                                
|Income before extraordinary item and cumulative effect      |                                
|of a change in accounting principle                         | $ 5,086                        
|Less:  Preferred share dividends                            | (5,484)                        
|(Loss) income before extraordinary item and cumulative      |                                
|effect of a change in accounting principle applicable to    |                                
|common shares                                               | (398)                          
|Less:  Extraordinary item                                   | (179)                          
|Add:	   Cumulative effect of a change in accounting         |                                
|principle                                                   | -                              
|Net (loss) income applicable to common shares               | $   (577)                      
|                                                            |                                
|**Diluted Earnings Per Share:**                             |                                
|Income before extraordinary item and cumulative effect of a |                                
|change in accounting principle                              | $ 5,086                        
|Less:  Preferred share dividends                            | (5,484)                        
|(Loss) income before extraordinary item and cumulative      |                                
|effect of a change in accounting principle applicable to    |                                
|common shares                                               | (398)                          
|Less:  Extraordinary item                                   | (179)                          
|Add:	   Cumulative effect of a change in accounting         |                                
|principle                                                   | -                              
|Net (loss) income applicable to common shares               | $   (577)                      
|                                                            |                                
|**Number of shares:**                                       |                                
|Basic-weighted average shares outstanding                   | 19,415                         
|Add:	   Dilutive shares                                     | -                              
|Diluted -weighted average shares outstanding                | 19,415                         
|                                                            |                                
|**Earnings per common share - basic**                       |                                
|(Loss) income before extraordinary item and                 |                                
|cumulative effect of a change in accounting principle       | $    (.02)                     
|Extraordinary item                                          | $    (.01)                     
|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                  | $    (.02)                     
|Extraordinary item                                          | $    (.01)                     
|Cumulative effect of a change in accounting principle       | $         -                    
|Net (loss) income                                           | $    (.03)                     
|                                                            |                                

Options to purchase 1.4 million of common shares were outstanding at December 31, 1999, (See
Note 16), which have been reflected above using the treasury stock method.  Approximately 3.2 million and
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 years ended December 31, 2001 and
2000, respectively.

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.

**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% of
their gross wages.  The Company matches such contributions at a rate of 50.0% up to a maximum
participant contribution of 6.0% (maximum employer contribution was 25.0% up to a maximum participant's
contribution of 6.0% prior to February 1, 2001).  The Company made contributions to this plan, of
approximately $271,000, $118,000 and $154,000 for the years ended December 31, 2001, 2000 and 1999,
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.

**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.  Cash dividends paid during the period
of restriction are recorded as a charge to "Accumulated distributions in excess of accumulated net income".

Deferred compensation of $211,000, $108,000 and $37,000 at December 31, 2001, 2000 and 1999,
respectively, has been reflected as a reduction of paid-in capital in the accompanying financial statements
relating to the issuance of 65,000 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 and approved by the board of directors.  Option awards
granted vest one year from the date of grant.

**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 the restricted shares or options issued under the EIP consist solely of treasury
shares.

Compensation expense of $189,000 and $99,000 at December 31, 2001 and 2000, respectively,
was recorded relating to the issuance of 82,133 restricted shares in 2001.

**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:

|(In thousands, except per share data)         | 2001        | 2000     | 1999       
|--------------------------------------------- | ----------- | -------- | -----------
|Net (loss) income applicable to common shares
|                                              | As reported | $  (577) | $ (542)    
|                                              | Pro forma   | (957)    | (827)      
|                                             
|(Loss) income per common share               
|As reported 	- Basic                          | $   (.03)   | $  (.03) | $       .83
|- Diluted                                     | (.03)       | (.03)    | 83         
|Pro forma	- Basic                             | (.05)       | (.04)    | .82        
|- Diluted                                     | (.05)       | (.04)    | .82        

A summary of the status of the Company's stock options granted as of December 31, 2001, 2000
and 1999 and the changes during the year ended on these dates is presented below:

|                                                   
|---------------------------------------------------
|                                                   
|                                                   
|                                                   
|                                                   
|                                                   
|                                                   
|Outstanding at beginning of year                   
|Granted                                            
|Exercised                                          
|Canceled                                           
|Outstanding at end of year                         
|Exercisable at end of year                         
|Weighted average fair value of all options

granted

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:

|                                 | 2001       | 2000       | 1999      
|-------------------------------- | ---------- | ---------- | ----------
|                                 |            |            |           
|Risk free interest rate or range | 4.9%       | 5.5%       | 6.3%      
|Dividend yield or range          | 10.89%     | 12.41%     | 14.93%    
|Expected life or range           | 7.57 years | 7.48 years | 7.64 years
|Expected volatility or range     | 26.71%     | 27.62%     | 25.98%    

The following table summarizes information about stock options outstanding at December 31, 2001:

|                 | Options Outstanding | Options Exercisable
|---------------- | ------------------- | -------------------
|                 |                     | Weighted           
|Range of         | Number              | Average            
|Exercise         | Outstanding at      | Exercise           
|Prices           | December 31, 2001   | Prices             
|                 |                     |                    
|$7.00 to $8.00   | 113,000             | $  7.19            
|$8.00 to $9.05   | 1,952,200           | 8.59               
|$10.00 to $11.75 | 42,000              | 10.23              
|$12.50 to $12.50 | 282,667             | 12.50              
|$22.00 to $24.10 | 811,175             | 23.39              
|$7.00 to $24.10  | 3,201,042           | $12.66             

**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, 2001 and 2000,
there no deferred amounts.

**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.  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, 2001, 2000 and 1999, the Company recognized expense of $179,000, $132,000 and
$272,000, 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 both 2001 and 2000, annual incentive opportunities
were linked to performance relative to a Funds From Operations ("FFO") 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 for 2000 and 100% in cash for 2001.  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, 2001, the Company recognized expense of $477,000 related to this plan.  Of this
amount, $189,000 represents amortization of the value of the restricted shares issued in relation to the 2000
financial performance (the value of these restricted shares are being amortized over a four year vesting
period).  At December 31, 2000, the Company recognized expense of $285,000 related 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 FFO 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 was in 2001.  At December 31, 2001 and
2000, no amounts were earned under this Plan and accordingly, there were no charges reflected on the
Consolidated Statements of Income.

******18.	SEGMENT REPORTING**

The Company has four reportable segments: (1) Acquisition/Disposition multifamily properties, (2)
Same Store Market Rate ("Market Rate") multifamily properties, (3) Affordable Housing multifamily
properties, and (4) Management and Service Operations.  The Company has identified these segments
based upon how management makes decisions regarding resource allocation and performance
assessment.  The Acquisition/Disposition properties represent acquired or developed properties which have
not yet reached stabilization (the Company considers a property stabilized when its occupancy rate reaches
93.0% or one year following the purchase or delivery of the final units, whichever occurs first) and properties
that have been sold.  The Market Rate multifamily properties are same store conventional multifamily
residential apartments.  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 Acquired, Market Rate and Affordable Housing properties which are owned by the Company, as well
as to clients and properties not owned by the Company.  All of the Company's segments are located in the
United States.  Effective January 1, 2001, management revised its reported segments by showing
Acquisition/Disposition properties as a separate segment.  Previously, Acquisition/Disposition properties
were included within the Market Rate segment.  Also, the Unallocated Corporate Overhead segment has
been eliminated and the costs previously allocated to this segment have been reallocated to the other four
segments.  Management has adjusted the reportable segments in order to reflect a better representation
of the operations of the Company.  For comparability purposes, the presentation for the years ended
December 31, 2000 and 1999 have been restated to reflect these revisions to the Company's reportable
segments.

The accounting policies of the reportable segments are the same as those described in the "Basis
of Presentation and Significant Accounting Policies".  The Company previously evaluated the performance
of its reportable segments based on EBITDA; however, effective January 1, 2001, management changed
its evaluation performance measure to Net Operating Income ("NOI"), as the Company believes that NOI
represents a more accurate measure of the reportable segment's activity. NOI is determined by deducting
property operating and maintenance expenses from total revenues for the Acquisition/Disposition, Market
Rate and Affordable Housing segments and deducting service companies expense, which is included within
the general and administrative expenses in the Consolidated Statements of Income and painting service
expense from total revenues for the Management and Service Operations segment.  NOI 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.  Certain other real estate companies may define NOI in a different manner.

Information on the Company's segments for the years ended December 31, 2001, 2000 and 1999
is as follows:

|                                              | For the year ended December 31, 2001
|--------------------------------------------- | ------------------------------------
|                                              |                                     
|                                              | Acquisition/                        
|(In thousands)                                | Disposition                         
|                                              |                                     
|Total segment revenues                        | $ 11,473                            
|Elimination of intersegment revenues          | -                                   
|Consolidated revenues                         | 11,473                              
|                                              |                                     
|Equity in net (loss) income of joint ventures | (186)                               
|                                              |                                     
|*NOI                                          | 5,187                               
|                                              |                                     
|Total assets                                  | 90,779                              

|                                              | For the year ended December 31, 2000
|--------------------------------------------- | ------------------------------------
|                                              |                                     
|                                              | Acquisition/                        
|(In thousands)                                | Disposition                         
|                                              |                                     
|Total segment revenues                        | $ 15,130                            
|Elimination of intersegment revenues          | (2)                                 
|Consolidated revenues                         | 15,128                              
|                                              |                                     
|Equity in net income (loss) of joint ventures | 2                                   
|                                              |                                     
|*NOI                                          | 7,923                               
|                                              |                                     
|Total assets                                  | 105,323                             

|                                       | For the year ended December 31, 1999
|-------------------------------------- | ------------------------------------
|                                       |                                     
|                                       | Acquisition/                        
|(In thousands)                         | Disposition                         
|                                       |                                     
|Total segment revenues                 | $ 17,060                            
|Elimination of intersegment revenues   | ( 3)                                
|Consolidated revenues                  | 17,057                              
|                                       |                                     
|Equity in net income of joint ventures | -                                   
|                                       |                                     
|NOI*                                   | 7,928                               
|                                       |                                     
|Total assets                           | 113,461                             

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

A reconciliation of total segment NOI to total consolidated net income for the years ended December
31, 2001, 2000 and 1999 is as follows:

|(In thousands)                                                           | 2001     | 2000      | 1999    
|------------------------------------------------------------------------ | -------- | --------- | --------
|                                                                         |          |           |         
|Total NOI for reporting segments                                         | $ 83,233 | $ 84,842  | $ 85,619
|Depreciation and amortization                                            | (34,381) | (34,363)  | (33,992)
|General and administrative expense (excluding service companies expense) | (6,875)  | (7,729)   | (9,337) 
|Interest expense                                                         | (42,973) | (44,756)  | (39,418)
|Gain on disposition of properties and land, net                          | 7,047    | 7,512     | 19,630  
|Equity in net (loss) income of joint ventures                            | (486)    | (164)     | 585     
|Minority Interest in operating partnership                               | (479)    | (400)     | (241)   
|Extraordinary item                                                       | (179)    | -         | (3,456) 
|Cumulative effect of a change in accounting principle                    | -        | -         | 4,319   
|Consolidated net income                                                  | $  4,907 | $   4,942 | $ 23,709

**19.	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, windows, 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.

**20.	SUBSEQUENT EVENTS**

**Dividends Declared**

On December 12,  2001, the Company declared a quarterly dividend of $0.25 per common share,
which was paid on February 1, 2002 to shareholders of record on January 16, 2002.

On February 6, 2002, 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, 2002 to shareholders of record
on March 1, 2002.

**Sale of Property**

On January 18, 2002, the Company completed the sale of a property located in Central Ohio.  The
buyer purchased the property for a sales price of $4.0 million.  The sale resulted in an estimated gain of
approximately $250,000 which will be recognized in the quarter ending March 31, 2002.

**Secured Debt**

On February 1, 2002, the Company completed the refinancing of $10.9 million of maturing debt.
The new loan requires monthly principal and interest payments through the maturity date of January 1, 2005.
The interest rate is equal to the Prime Rate or under certain conditions at a rate of LIBOR plus 2.0%.  The
Company is currently paying interest at the prime rate which is currently 4.75%.

**Notes Receivable**

On February 27, 2002, the Company's Board of Directors extended to May 1, 2005, the two notes
receivable from the Company's Chief Executive Officer.  These two notes aggregate $3.3 million and were
to mature May 1, 2002.  All other terms and conditions remain unchanged.

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

|****                                          | 2001        
|--------------------------------------------- | ------------
|                                              | First       
|(In thousands, except per share data)         | Quarter     
|                                              |             
|Revenues                                      | $ 39,638    
|(Loss) income before extraordinary item       | (587)       
|Extraordinary item                            | -           
|Net (loss) income                             | (587)       
|Net (loss) income applicable to common shares | (1,959)     
|                                              |             
|**Earnings Per Common Share-Basic:**          |             
|(Loss) income before extraordinary item       | $      (.10)
|Extraordinary item                            | -           
|Net (loss) income applicable to common shares | (.10)       
|Weighted average number of shares outstanding | 19,378      
|                                              |             
|**Earnings Per Common Share-Diluted:**        |             
|(Loss) income before extraordinary item       | $      (.10)
|Extraordinary item                            | -           
|Net (loss) income applicable to common shares | (.10)       
|Weighted average number of shares outstanding | 19,378      

|                                              | 2000       
|--------------------------------------------- | -----------
|                                              | First      
|(In thousands, except per share data)         | Quarter    
|                                              |            
|Revenues                                      | $ 38,280   
|Net (loss) income                             | (1,617)    
|Net (loss) income applicable to common shares | (2,988)    
|                                              |            
|**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     



**VALUATION AND QUALIFYING ACCOUNTS**

|Column A                        | Column B   | Column C   | Column D       | Column E    
|------------------------------- | ---------- | ---------- | -------------- | ------------
|                                |            | ADDITIONS  |                |             
|(In thousands)                  | Balance at | Charged to | Charged to     |             
|                                | Beginning  | Costs and  | Other Accounts | Deductions  
|DESCRIPTION                     | of Period  | Expenses   | Describe       | Describe    
|                                |            |            |                |             
|Year ended December 31, 2001:   |            |            |                |             
|Deducted from asset accounts:   |            |            |                |             
|Allowance for doubtful accounts | $ 197      | $  1,490   | $	-            | $ (1,563)(a)
|                                |            |            |                |             
|Year ended December 31, 2000:   |            |            |                |             
|Deducted from asset accounts:   |            |            |                |             
|Allowance for doubtful accounts | 226        | 1,366      | -              | (1,395)(a)  
|                                |            |            |                |             
|Year ended December 31, 1999:   |            |            |                |             
|Deducted from asset accounts:   |            |            |                |             
|Allowance for doubtful accounts | -          | 1,497      | -              | (1,271)(a)  

(a) Uncollectible amounts written off.

|**S-2****ASSOCIATED ESTATES REALTY CORPORATION
	SCHEDULE III**
|--------------------------------------------------------------
|**REAL ESTATE AND ACCUMULATED DEPRECIATION**                  
|**December 31, 2001**                                         
|****                                                          
|                                                              
|                                                              
|******(In thousands)**                                        
|****                                                          
|**Property**                                                  
|                                                              
|RESIDENTIAL MULTIFAMILY PROPERTIES                            
|**NORTHERN OHIO**                                             
|Barrington                                                    
|Bay Club                                                      
|Country Club Apartments                                       
|Ellet                                                         
|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                                           
|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, 2001**                                                 
|****                                                                  
|                                                                      
|                                                                      
|******(In thousands)**                                                
|****                                                                  
|**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                                            
|Oak Bend Commons Apartments                                           
|Pendleton Lakes East                                                  
|Perimeter Lakes                                                       
|Saw Mill Village                                                      
|Sterling Park                                                         
|Residence at Turnberry                                                
|                                                                      
|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, 2001**                                                 
|****                                                                  
|                                                                      
|                                                                      
|******(In thousands)**                                                
|****                                                                  
|**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**                                                     
|Westlake Investment                                                   
|                                                                      
|CENTRAL OHIO                                                          
|Wyndemere                                                             
|                                                                      
|                                                                      
|                                                                      
|                                                                      

|S-5ASSOCIATED ESTATES REALTY CORPORATION
					SCHEDULE III - Continued
|----------------------------------------------------------------------
|**REAL ESTATE AND ACCUMULATED DEPRECIATION**                          
|**December 31, 2001**                                                 
|****                                                                  
|                                                                      
|                                                                      
|******(In thousands)**                                                
|****                                                                  
|**Property**                                                          
|                                                                      
|FLORIDA                                                               
|Boynton Beach                                                         
|Courtney Chase                                                        
|                                                                      
|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, 2001**                                                     
|****                                                                      
|                                                                          
|                                                                          
|******(In thousands)**                                                    
|****                                                                      
|**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 33.33% 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 $904.9 million and $908.5
million at December 31, 2001 and 2000, respectively.

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

|(In thousands)                                            | 2001      | 2000     
|--------------------------------------------------------- | --------- | ---------
|                                                          |           |          
|Balance, beginning of period                              | $ 963,459 | $ 967,092
|Disposal of fixed assets                                  | (43,936)  | (25,996) 
|Contribution of land to partnership interests             | -         | (7,717)  
|New acquisition properties                                | 2,145     | 5,205    
|Purchase of remaining two-thirds interest in Euclid House | -         | 1,723    
|Improvements                                              | 10,640    | 23,152   
|Balance, end of period                                    | $ 932,308 | $ 963,459

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

|(In thousands)               | 2001      | 2000     
|---------------------------- | --------- | ---------
|                             |           |          
|Balance, beginning of period | $ 193,431 | $ 171,545
|Disposal of fixed assets     | (14,562)  | (10,757) 
|Depreciation for period      | 33,255    | 32,643   
|Balance, end of period       | $ 212,124 | $ 193,431
|                             |           |          
|                             |           |