****





**Form 10-K**





















|Ohio                                     | 34-1747603            
|---------------------------------------- | ----------------------
|(State or other jurisdiction of          | (I.R.S. Employer      
|incorporation or organization)           | Identification Number)
|                                         |                       
|5025 Swetland Court, Cleveland, 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                                                                |                              
|                                                                                                              |                              
|                                                                                                              |                              
|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 $144,272,900 as of March 14, 2000.                                                    
|                                                                                                             
|                                                                                                             
|The number of Common Shares outstanding as of March 14, 2000 was 19,604,350.                                 
|                                                                                                             
|DOCUMENTS INCORPORATED BY REFERENCE                                                                          
|(To The Extent Indicated Herein)                                                                             
|                                                                                                             
|Portions of the Annual Performance Report to Shareholders for the                                            
|fiscal year ended December 31, 1999 (in Parts II, III and IV).                                               
|Notice of Annual Meeting and Proxy Statement for the Annual Meeting                                          
|of Shareholders to be held on May 17, 2000 (in Part III).                                                    

****



**TABLE OF CONTENTS**

**FORM 10-K ANNUAL REPORT**

**FOR THE YEAR ENDED DECEMBER 31, 1999**

|                                                                         | **Page**
|------------------------------------------------------------------------ | --------
|                                                                         |         
|                                                                         |         
|                                                                         |         
|**************Item**                                                     | ****    
|**PART I**                                                               |         
|                                                                         |         
|1.	Business                                                              | 1       
|General Development of Business                                          | 1       
|MIGRA Merger                                                             | 1       
|Acquisitions, Dispositions and Developments                              | 2       
|Registration Statements                                                  | 3       
|Industry Segments                                                        | 3       
|Market Rate                                                              | 3       
|Affordable Housing                                                       | 3       
|Rental Assistance Program                                                | 3       
|Mortgage Insurance Program                                               | 4       
|Management and Service Operations                                        | 5       
|Unallocated Corporate Overhead                                           | 5       
|Competitive Conditions                                                   | 5       
|Customers                                                                | 5       
|Employees                                                                | 5       
|Available Information                                                    | 6       
|Reports to Security Holders                                              | 6       
|2.	Properties                                                            | 6       
|Company's Portfolio                                                      | 6       
|Noteholder Interest                                                      | 8       
|Indebtedness Encumbering the Properties                                  | 8       
|3.	Legal Proceedings                                                     | 8       
|4.	Submission of Matters to a Vote of Security Holders                   | 8       
|                                                                         |         
|**PART II**                                                              |         
|                                                                         |         
|5.	Market for Registrant's Common Equity and Related Stockholder Matters | 9       
|6.	Selected Financial and Other Data                                     | 9       
|7.	Management's Discussion and Analysis of Financial                     |         
|Condition and Results of Operations                                      | 13      
|7A.	Quantitative and Qualitative Disclosures About                       |         
|Market Risk                                                              | 30 & 35 
|8.	Financial Statements and Supplementary Data                           | 35      
|9.	Changes and Disagreements with Accountants                            |         
|on Accounting and Financial Disclosure                                   | 35      
|                                                                         |         
|**PART III**                                                             |         
|                                                                         |         
|10.	Directors and Executive Officers of the Registrant                   | 36      
|11.	Executive Compensation                                               | 38      
|12.	Security Ownership of Certain Beneficial                             |         
|Owners and Management                                                    | 38      
|13.	Certain Relationships and Related Transactions                       | 38      
|                                                                         |         
|*Glossary*                                                               | 39      
|                                                                         |         
|**PART IV**                                                              |         
|                                                                         |         
|14.	Exhibits, Financial Statement Schedules                              | 41      
|and Reports on Form 8-K                                                  |         

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



**Item 1.  Business**

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

AERC is a fully integrated multifamily investment company engaged in property, acquisition,
advisory and development management, disposition, operation and ownership activities.  AERC owns
substantially all of the economic interest in four corporations which provide management and other
services for the Company and third parties ("Service Companies").  The Company currently owns
properties and/or operates properties in 13 states across the United States.  The Company's portfolio
currently consists of a total of 140 properties of which 85 (70 Market Rate properties and 15 Affordable
Housing properties) are owned, directly or indirectly, by the Company or by a subsidiary of the Company;
eight properties in which the Company is a joint venture partner (one Market Rate property 2/3% owned;
four Market Rate properties 1/3% owned; two Market Rate properties 1/2% owned and one Affordable
Housing property 1/2% owned) and 47 non-owned properties (of which four are commercial properties)
managed by the Company or one of its Service Companies.  (Reference the Company's Portfolio
summary included in Item 2).  The consolidated financial statements of the Company include the
accounts of the Company, all subsidiaries, all qualified REIT subsidiaries, which include but are not
limited to, separate legal entities that were formed in connection with the project specific, nonrecourse
mortgage refinancing for which records, books of accounts and depository accounts must be maintained
that are separate and apart from any other person or entity; the Service Companies and an Operating
Partnership structured as a DownREIT of which 20% is owned by limited partners.

*MIGRA Merger:*  On June 30, 1998, MIG Realty Advisors, Inc. ("MIGRA") merged with AERC.
AERC acquired MIGRA's property management and advisory management businesses with several
institutional clients and the right to receive certain property and asset management fees; acquisition,
disposition and incentive fees; loan origination and consultation fees; and mortgage servicing fees.  MIG
II Realty Advisors, Inc. ("MIG"), MIGRA's successor, is a registered investment advisor and functions as
a real estate advisor to pension funds.  Collectively, MIG's institutional clients owned 18 properties
located in nine states (two in California; one in Colorado; four in Florida; one in Georgia; three in Illinois;
three in Michigan; one in Minnesota; one in Pennsylvania and two in Texas) at the time of the merger.
During 1999 and 1998, MIG sold two properties located in Minnesota and Michigan and two properties in
California, respectively on behalf of its institutional clients and recognized asset disposition fees of
approximately $467,500 and $247,000, respectively.  Additionally, during 1999, MIG acquired three
properties located in Virginia, Maryland and Georgia on behalf of its institutional clients and recognized
asset acquisition fees of approximately $233,700.  During the fourth quarter of 1999, MIG earned an
incentive fee of $2,615,800 related to its performance of an entire portfolio under a contract with an
institutional client.  Currently, MIG's institutional clients own 17 properties located in nine states (one in
Colorado; four in Florida; two in Georgia; three in Illinois; one in Maryland; two in Michigan; one in
Pennsylvania; two in Texas and one in Virginia).

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

*Acquisitions, Dispositions and Developments:* At the time of the IPO, in 1993, the Company
owned or was a joint venture partner in 46 multifamily properties (20 Market Rate properties, 14
Affordable Housing properties, two Congregate Care Facilities, nine joint venture Market Rate properties
and one joint venture Affordable Housing property).  Six of these Market Rate properties were sold and
one Affordable Housing property was transferred to the United States Department of Housing and Urban
Development ("HUD") during 1999.  The Company acquired 19 Market Rate properties during 1994 of
which one property represented two of the 1/2% interest joint venture Market Rate properties at the time
of the IPO which were combined into one operating property and eventually sold in 1999.  In 1995, the
Company acquired ten Market Rate  properties.  In 1996, the Company acquired six Market Rate
properties.  In 1997, the Company acquired eight Market Rate properties.  In 1998, the Company
acquired 13 Market Rate properties in connection with the MIGRA Related Transaction.  Additionally,
two newly developed properties were stabilized during 1998.  In 1999, a newly developed property was
stabilized.  The Company considers a newly developed property to be stabilized upon attaining 93%
occupancy.

During 1999, net cash proceeds of $36.8 million received from the sale of eight operating
properties resulted in a gain of $19.6 million.  The net cash proceeds received from the sale of five of the
eight operating properties of $13.4 million, resulting in a gain of $12.8 million, were placed in a trust
which restricted the Company's use of these funds for the exclusive purchase of other property of like-kind and qualifying use.  The Company used $2.3 million of the like-kind funds to acquire a 24 acre
parcel of land during 1999.  The remaining net cash proceeds and unutilized like-kind funds were used
to pay the Company's dividend and pay down a $20 million Medium-Term Note which matured in
September 1999.  Rainbow Terrace Apartments, an Affordable Housing property, was conveyed to HUD
by deed in lieu of foreclosure of approximately $1.8 million, resulting in a loss of approximately $67,000.

The Company sold an additional eight Market Rate properties located in Ohio on December 31,
1999 for an aggregate sales price of approximately $34 million.  To facilitate the sale, the Company
financed the sale with fixed rate debt maturing July 1, 2001.  Under the structure of the transaction, the
buyer may put the properties back to the Company, after March 1, 2001 but before June 2, 2001, at a
price equal to their fair market value less outstanding indebtedness then owing on the purchase money
financing.  The Company has a corresponding option to repurchase the properties on the same
monetary basis at any time prior to December 31, 2000.  The Company will continue to manage these
properties until all seller financing is repaid.  These sales will not be recognized for Generally Accepted
Accounting Principles ("GAAP")  purposes until the seller financing is repaid.  These eight properties are
classified as Properties held for sale in the Consolidated Balance Sheets.  For 1999, the Company's
earnings were not impacted by this transaction for GAAP reporting.

In December 1998, the Company sold an operating property for net cash proceeds of $10.7
million, resulting in a gain of $503,497.  The net cash proceeds were used to pay down the Company's
Line of Credit.

In December 1999, the Company acquired a 24 acre parcel of land for $2.3 million located in
Cranberry Township, Pennsylvania on which the Company plans to construct 250 units.  The purchase
price was financed using like-kind exchange funds from the sale of an operating property.

The Company is currently in the process of constructing or planning the construction of an
additional 1,865 units on four separate land parcels owned by the Company.  During 1999, the Company
completed the construction and leasing of 576 units at three of the Company's development properties.
Additionally, the Company owns five tracts of undeveloped land consisting of approximately 83 acres.

The Company is committed to further diversifying its portfolio from the concentration in the
Midwest.  The Company made significant progress in this initiative in 1998 with the merger of MIGRA
and the MIGRA Related Transaction when the Company expanded into markets outside the Midwest.
Currently, approximately 82% of the Company's units are located in Indiana, Ohio and Michigan.  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 or
unsecured debt financings, or the issuance of shares or units exchangeable into common shares.

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

***INDUSTRY SEGMENTS****.*The Company has four reportable segments:  (1) Market Rate
multifamily properties, (2) Affordable Housing multifamily properties, (3) Management and Service
Operations and (4) Unallocated Corporate Overhead.  The Company has identified these segments
because the discrete information is the basis upon which management makes decisions regarding
resource allocation and performance assessment.  All of the Company's segments are located in the
United States.  During the second quarter of 1999, management revised its reported segments to add a
new segment representing Unallocated Corporate Overhead.  For comparability purposes, the 1998 and
1997 presentations have been restated to reflect this revision to the Company's reportable segments.
The Company evaluates the performance of its segments and allocates resources to them based on
EBITDA.  EBITDA should not be considered as an alternative to net income (determined in accordance
with GAAP) as an indicator of the Company's financial performance or cash flow from operating
activities (determined in accordance with GAAP) or as a measure of the Company's liquidity, nor is it
necessarily indicative of sufficient cash flow to fund all of the Company's needs.  See Note 20 of the
Company's financial statements for the segment financial information.

*Market Rate:*The Market Rate properties are same store conventional multifamily residential
properties (the operations are not subject to regulation by HUD) and properties acquired or disposed of
within one year.

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

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

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

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

|**Property**                               | **Final Expiration Date**
|------------------------------------------ | -------------------------
|                                           |                          
|Shaker Park Gardens II                     | August 2000              
|Statesman II                               | November 2000            
|Tallmadge Acres                            | March 2001               
|Puritas Place                              | September 2011           
|Jennings Commons                           | November 2001            
|West High Apartments                       | November 2001            
|The Woodlands of North Royalton (39 units) | March 2002               
|Lakeshore Village (1/2% Joint Venture)     | October 2002             
|State Road Apartments                      | December 2016            
|St. James (Riverview)                      | November 2009            
|Twinsburg Apartments                       | June 2009                
|Village Towers                             | November 2009            
|Hillwood I                                 | July 2016                
|Ellet Development                          | December 2017            
|Sutliff Apartments II                      | November 2019            

Contract Rents are adjusted at least annually in accordance with the annual
adjustment factor method.  Annual adjustment factors are determined each year by HUD
and applied to then current Contract Rents.  The annual adjustment factors are
calculated by HUD for individual metropolitan areas based on either a local consumer
price index survey or pursuant to a formula which includes components reflecting
changes in market area rents and utility costs.

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.

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

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

The Company's Congregate Care Facilities were developed to bridge a gap in the housing
market for the elderly between traditional rental housing and skilled nursing homes.  The Congregate
Care Facilities are designed for older persons who do not require on site medical or custodial care but
have special concerns that are not fulfilled by traditional multifamily housing.  Residents of the
Company's Congregate Care Facilities pay market rental rates that are unregulated and are not
subsidized.

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



*Unallocated Corporate Overhead:*The Unallocated Corporate Overhead segment was
established in 1999 to better capture costs not specifically allocated to an individual segment and to
isolate these costs from the third party Management and Service Operations.

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

Given the Midwestern concentration of the Market Rate portfolio, management anticipates that
the Market Rate rental growth for existing assets will be a modest 2.5% over the next twelve months.
General market expectations for locations where the Company has significant concentrations are as
follows: Columbus, Ohio is experiencing construction levels consistent with recent employment growth;
Cleveland, Ohio continues to exhibit stability; Michigan markets are reestablishing their previous growth;
Indianapolis, Indiana has stabilized; Washington, D.C. and South Florida are in equilibrium with
significant additions to employment and multifamily supply; and Orlando, Florida and Atlanta, Georgia
are currently performing well in spite of significant construction.

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

*Employees:*The Company has approximately 1,025 employees; approximately 130 of whom
are located at the Company's headquarters.  The Company's headquarters office 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 a 3.7 acre parcel of adjacent land for further development or
expansion, all of which are owned by the Company under a ground lease.

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

***REPORTS TO SECURITY HOLDERS****.*The Company issues annual reports to its security
holders which contain financial information that has been examined and reported on, with an opinion
expressed by its independent public accountants, PricewaterhouseCoopers, LLC.

**Item 2.  The Properties**



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

|                                                            | **Total Number**  | **Total Number**
|----------------------------------------------------------- | ----------------- | ----------------
|                                                            | **of Properties** | **of Units**    
|**100% Owned by AERC:**                                     |                   |                 
|Market Rate Properties:                                     |                   |                 
|Arizona                                                     | 1                 | 204             
|Florida                                                     | 2                 | 668             
|Georgia                                                     | 2                 | 706             
|Indiana                                                     | 3                 | 836             
|Maryland                                                    | 3                 | 668             
|Michigan                                                    | 11                | 2,728           
|North Carolina                                              | 1                 | 276             
|Ohio*                                                       | 45                | 8,523           
|Ohio-2/3% Joint Venture                                     | 1                 | 320             
|Pennsylvania                                                | 1                 | 468             
|Texas                                                       | 1                 | 104             
|Total Market Rate Properties                                | 71                | 15,501          
|                                                            |                   |                 
|Affordable Housing Properties:                              |                   |                 
|Ohio                                                        | 13                | 1,335           
|Ohio - Congregate Care                                      | 2                 | 170             
|Total Affordable Housing Properties                         | 15                | 1,505           
|                                                            |                   |                 
|**Total Properties Included In The Consolidated Financial** |                   |                 
|**Statements Of AERC**                                      | **86**            | **17,006**      
|                                                            |                   |                 
|**Joint Ventures:**                                         |                   |                 
|1/3% Owned by AERC-Market Rate - Ohio                       | 4                 | 2,573           
|1/2% Owned by AERC-Market Rate - Ohio                       | 2                 | 416             
|1/2% Owned by AERC-Affordable Housing - Ohio                | 1                 | 108             
|**Total Joint Ventures**                                    | **7**             | **3,097**       
|                                                            |                   |                 
|**AERC Managed Properties:**                                |                   |                 
|Affordable Housing - Ohio                                   | 8                 | 1,901           
|                                                            |                   |                 
|**AEMC Managed Properties:**                                |                   |                 
|Affordable Housing - Ohio                                   | 18                | 3,248           
|Commercial - Ohio                                           | 4                 | 486,708 sq. ft. 
|Total AEMC Managed                                          | 22                |                 
|                                                            |                   |                 
|**MIG Managed Properties:**                                 |                   |                 
|Market Rate Properties:                                     |                   |                 
|Virginia                                                    | 1                 | 248             
|Texas                                                       | 2                 | 492             
|Georgia                                                     | 2                 | 830             
|Illinois                                                    | 3                 | 1,042           
|Colorado                                                    | 1                 | 258             
|Florida                                                     | 4                 | 1,402           
|Michigan                                                    | 2                 | 1,037           
|Pennsylvania                                                | 1                 | 396             
|Maryland                                                    | 1                 | 256             
|Total MIG Managed                                           | 17                | 5,961           
|**Total Managed Properties**                                | **47**            | **11,110**      
|**Total Company Portfolio**                                 | **140**           | **31,213**      
|                                                            |                   |                 
|                                                            |                   |                 
|                                                            | **Location**      | **Units**       
|**Construction Projects:**                                  | ****              |                 
|Berkley Manor                                               | Cranberry Twp, PA | 250             
|Idlewylde/Boggs Road-Phase I                                | Atlanta, GA       | 308             
|-Phase II                                                   |                   | 535             
|                                                            |                   | 843             
|                                                            |                   |                 
|Windsor at Kirkman Apartments                               | Orlando, FL       | 460             
|Village at Avon-Phase I                                     | Avon, OH          | 164             
|-Phase II                                                   |                   | 148             
|                                                            |                   | 312             
|Total Construction Projects                                 |                   | 1,865           
|                                                            |                   |                 
|**Undeveloped Land Parcels:**                               |                   | **Acres**       
|Aspen Lakes Land                                            | Grand Rapids, MI  | 19.5            
|Landings at the Preserve Land                               | Battle Creek, MI  | 4.3             
|Westlake Land                                               | Westlake, OH      | 39.0	    On Hold
|Wyndemere Land                                              | Franklin, OH      | 10.0            
|Mt. Sterling Land                                           | Columbus, OH      | 10.0            
|Total Undeveloped Land Parcels                              |                   | 82.8            

** On December 31, 1999, the Company sold eight Market Rate properties located in Ohio.  These sales were not recognized for GAAP purposes at
December 31, 1999 and accordingly, the Company's earnings were not impacted for GAAP reporting.  Although the Company sold these properties to
Ohio Residential Investment, LLC on December 31, 1999, the Company continues to report the properties as being owned.  This treatment is mandated
by GAAP reporting.*

*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 seven years of aggregate principal
amortization and interest.

*Indebtedness Encumbering the Properties:*AERC 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 Government Programs in Item 1).
During 1999, the Company received gross proceeds of $525.3 million from project specific nonrecourse
mortgage loans collateralized by 55 properties owned by qualified REIT subsidiaries.  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.  Currently, the Company has 63 properties
(62 Market Rate properties and one Affordable Housing property) which are encumbered and 23
properties (ten Market Rate properties and 13 Affordable Housing properties) which are unencumbered,
eight of which were the subject of the December 31, 1999 sale as previously discussed under
Acquisitions, Dispositions and Developments.

******Item 3.  Legal Proceedings**

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

On January 25, 2000, Associated Estates Management Company ("AEMC") filed suit in the
Cuyahoga County, Ohio Court of Common Pleas against Euclid Medical and Commercial Arts, an Ohio
limited partnership and its general partner, Metro City No. 1, an Ohio general partnership, seeking
damages in excess of $729,000.  Euclid Medical and Commercial Arts owns the Euclid Medical and
Office Building located in Euclid, Ohio.  AEMC was the property manager of that property until on or
about March 23, 1999.  Metro City No. 1 is 56% owned by the Company's Chairman of the Board and
CEO, his wife and his brothers-in-law, one of whom is a director of the Company.  In the normal course
of business, the Company had followed a practice for many years of advancing funds on behalf of, or
holding funds for the benefit of, affiliates, which owned real estate properties managed by the Company.
Euclid Medical and Office Building was one of those properties for which the Company so advanced
funds.  The suit seeks reimbursement for the funds advanced by the Company for the benefit of this
property.  Metro City No. 1 made a capital call to its partners requesting funds to pay this obligation.  The
Chairman of the Board, his wife and brothers-in-law have paid the Company their proportionate share of
the capital call, however, the remaining non-affiliated partners of Metro City No. 1 have refused to do so.

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

None

**PART II**

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



The following table shows the high and low closing sale prices of the Company's common
shares on the New York Stock Exchange (the "NYSE") for each quarter in 1999 and 1998 and the
dividends declared per common share with respect to each such quarter.

|               |             | Dividends Declared
|-------------- | ----------- | ------------------
|               | Price Range | Per Share         
|               | 1999        | 1998              
|               | High        | Low               
|               |             |                   
|First Quarter  | $12-5/16    | $10               
|Second Quarter | $12-7/16    | $10-3/16          
|Third Quarter  | $11-15/16   | $8-13/16          
|Fourth Quarter | $9-3/16     | $7                
|               |             |                   

(a)      A fourth quarter dividend of $0.375 per share was declared on January 4, 2000 and paid on February 1, 2000.

The number of holders of record of the Company's common shares at December 31, 1999 was
732.

The Company anticipates that dividends will be paid quarterly using net cash provided by
operations, loan proceeds or proceeds from the sale of properties.  Additionally, the Company will
continue to review the amount of its quarterly dividend on a quarterly basis.

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

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

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



|**Associated Estates Realty Corporation**                     |            |              |            
|------------------------------------------------------------- | ---------- | ------------ | -----------
|*(Dollars in thousands except per share*                      |            |              |            
|*amounts and average monthly rental revenue)*                 |            | (e)          | (e)        
|**                                                            | 1999       | 1998         | 1997       
|**Operating Data:**                                           |            |              |            
|***Revenue*:**                                                |            |              |            
|Rental                                                        | $143,136   | $132,514     | $101,640   
|Property and asset management, and acquisition and            |            |              |            
|disposition fees                                              | 10,919     | 6,200        | 3,752      
|Painting services                                             | 1,524      | 1,606        | 1,664      
|Interest                                                      | 1,618      | 1,164        | 926        
|Other                                                         | 1,483      | 1,524        | 828        
|Total revenue                                                 | 158,680    | 143,008      | 108,810    
|                                                              |            |              |            
|***Expenses and charges*:**                                   |            |              |            
|Property operating and maintenance expenses                   |            |              |            
|(before depreciation and amortization)                        | 64,643     | 58,653       | 43,230     
|Painting services                                             | 1,435      | 1,617        | 1,492      
|Preliminary project costs                                     | -          | 298          | 310        
|General and administrative                                    | 16,170     | 10,217       | 6,085      
|Write-off of software development costs                       | -          | 817          | -          
|Depreciation and amortization                                 | 35,146     | 24,899       | 19,266     
|Charge for funds advanced  to non-owned properties and other  | 150        | 292          | 1,764      
|Default waiver fee                                            | -          | 395          | -          
|Interest expense                                              | 38,264     | 29,050       | 19,144     
|Total expenses and charges                                    | 155,808    | 126,238      | 91,291     
|                                                              |            |              |            
|Income from operations                                        | 2,872      | 16,770       | 17,519     
|Equity in net income of joint ventures                        | 585        | 445          | 561        
|**Income before gain on sale of properties and land,**        |            |              |            
|**minority interest expense, extraordinary item and**         |            |              |            
|**cumulative effect of a change in accounting principle**     | 3,457      | 17,215       | 18,080     
|Gain on sale of properties and land                           | 19,630     | 503          | 1,608      
|Minority interest expense                                     | (241)      | (78)         | -          
|**Income before extraordinary item and cumulative effect of** |            |              |            
|**a change in accounting principle**                          | 22,846     | 17,640       | 19,688     
|Extraordinary item                                            | (3,456)    | (125)        | 1,024      
|Cumulative effect of a change in accounting principle         | 4,319      | -            | -          
|**Net income**                                                | $23,709    | $17,515      | $20,712    
|**Net income applicable to common shares**                    | $18,225    | $12,030      | $15,228    
|****                                                          |            |              |            
|**Earnings per common share  - Basic:**                       |            |              |            
|Income before extraordinary item and cumulative effect of a   |            |              |            
|change in accounting principle                                | $    .79   | $     .61    | $      .88 
|Net income                                                    | $    .83   | $     .61    | $      .94 
|Weighted average number of common shares outstanding          | 22,051     | 19,865       | 16,198     
|**Earnings per common share - Diluted:**                      |            |              |            
|Income before extraordinary item and cumulative effect of a   |            |              |            
|change in accounting principle                                | $     .79  | $        .60 | $       .88
|Net income                                                    | $     .83  | $        .60 | $       .94
|Weighted average number of common shares outstanding          | 22,053     | 20,060       | 16,216     
|                                                              |            |              |            
|**Dividends declared per common share**                       | $ 1.125    | $      1.86  | $      1.86
|                                                              |            |              |            
|***Other data*:**                                             |            |              |            
|Cash flow provided by (used in):                              |            |              |            
|Operating activities                                          | $ 39,998   | $   41,663   | $   29,936 
|Investing activities                                          | $  (9,008) | $(151,638)   | $(131,908) 
|Financing activities                                          | $   4,360  | $ 108,758    | $ 102,936  
|Funds From Operations (a)                                     | $ 32,001   | $   37,078   | $   34,651 
|                                                              |            |              |            
|Earnings before interest, depreciation and amortization (b)   | $ 78,835   | $   72,911   | $  58,495  
|Total properties (at end of period) - includes joint ventures | 93         | 101          | 88         
|                                                              |            |              |            
|Total multifamily units (at end of period)                    | 20,103     | 21,558       | 17,600     
|**Same Store Portfolio:**                                     |            |              |            
|Average monthly rental revenue per multifamily unit           | $      633 | $       593  | $       587
|Economic Occupancy (c)                                        | 92.8%      | 94.1%        | 94.0%      
|                                                              |            |              |            

|                                          | 1999      | 1998     | 1997     | 1996     | 1995    
|----------------------------------------- | --------- | -------- | -------- | -------- | --------
|**Balance Sheet Data at December 31:**    |           |          |          |          |         
|Real estate and other fixed assets before |           |          |          |          |         
|accumulated depreciation                  | $ 937,289 | $955,671 | $646,499 | $513,966 | $433,965
|Real estate and other fixed assets after  |           |          |          |          |         
|accumulated depreciation                  | 777,072   | 801,730  | 515,830  | 401,864  | 336,663 
|Total assets                              | 882,810   | 840,785  | 553,910  | 424,711  | 355,456 
|Total debt (d)                            | 579,186   | 503,905  | 318,170  | 217,813  | 171,234 
|Total shareholders' equity                | 238,182   | 259,188  | 181,158  | 158,016  | 139,170 

(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.  FFO is defined by NAREIT as net income (loss) before depreciation and amortization
of real estate assets, determined in accordance with generally accepted accounting principles
("GAAP"), excluding gains (or losses) from extraordinary items, unusual or non-recurring items
and sales of depreciated property.  FFO of unconsolidated partnerships and joint ventures is
determined on a similar basis.  Because the NAREIT definition does not define unusual or non-recurring items, differences between the Company's interpretation and other companies'
interpretations may vary which could affect the comparability of the Company's FFO to that
reported by other companies following the NAREIT definition.  Further, FFO presented herein is
not necessarily comparable to FFO presented by other real estate companies due to the fact that
not all real estate companies use the NAREIT definition. FFO should not be considered as an
alternative to net income (as determined in accordance with GAAP) as an indicator of the
Company's financial performance or to cash flows from operating activities (determined in
accordance with GAAP) 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.  The following lists the non-recurring items
the Company has considered in its determination of FFO for the years presented below.

|                                        | 1999           | 1998        | 1997       | 1996           | 1995          
|--------------------------------------- | -------------- | ----------- | ---------- | -------------- | --------------
|Non-recurring items:                    |                |             |            |                |               
|Write-off of receivable                 | $            - | $        92 | $    1,764 | $            - | $            -
|Accelerated LISA depreciation           | 950            | -           | -          | -              | -             
|Additional operating expenses           | 921            | -           | -          | -              | -             
|Allowance for receivable                | 150            | 200         | -          | -              | -             
|Local tax accrual                       | -              | 300         | -          | -              | -             
|Severance benefit                       | 644            | 267         | -          | -              | -             
|Preliminary project cost write-off      | -              | 300         | 310        | -              | -             
|Write-off of software development costs | -              | 817         | -          | -              | -             
|Default waiver fees                     | -              | 395         | -          | -              | -             
|                                        | $    2,665     | $   2,371   | $    2,074 | $            - | $            -

Effective January 1, 2000, NAREIT has redefined FFO.  The industry's supplemental performance
measure, FFO, should include all operating results, both recurring and non-recurring, except those
results defined as "extraordinary items" under generally accepted accounting principles (GAAP)
and gains and losses from sales of depreciable operating property.  Non-recurring items that are
not defined as "extraordinary" under GAAP will be reflected in the calculation of FFO.

(b)	Includes earnings before interest, depreciation and amortization ("EBITDA").  Income from joint
ventures was calculated on the same basis.  Management uses EBITDA as a measurement tool
for the Company since it believes EBITDA is the measure of performance most analogous to Net
Operating Income.  Net Operating Income is the customary measurement used in valuing real
property, which comprises the majority of the Company's asset base.  Income before interest,
depreciation and amortization does not represent cash generated from operating activities in
accordance with generally accepted accounting principles and is not necessarily indicative of cash
available to fund cash needs and should not be considered an alternative to net income as an
indicator of the Company's financial performance, cash flow from operating activities or as a
measure of the Company's liquidity.

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

(d)	Amount excludes the Company's share of mortgage indebtedness relating to the unconsolidated
joint ventures of approximately $17,254, $17,453, $17,752, $17,969, and $18,164 at December
31, 1999, 1998, 1997, 1996 and 1995, 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 21 to the financial statements.

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

*******Overview***

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

AERC is a fully integrated multifamily investment company engaged in property, acquisition,
advisory and development management, disposition, operation and ownership activities.  AERC owns
substantially all of the economic interest in four corporations which provide management and other
services for the Company and third parties ("Service Companies").  The Company currently owns
properties and/or operates properties in 13 states across the United States.  The Company's portfolio
currently consists of a total of 140 properties of which 85 (70 Market Rate properties and 15 Affordable
Housing properties) are owned, directly or indirectly, by the Company or by a subsidiary of the Company;
eight properties in which the Company is a joint venture partner (one Market Rate property 2/3% owned;
four Market Rate properties 1/3% owned; two Market Rate properties 1/2% owned and one Affordable
Housing property 1/2% owned) and 47 non-owned properties (of which four are commercial properties)
managed by the Company or one of its Service Companies.  The consolidated financial statements of
the Company include the accounts of the Company, all subsidiaries, all qualified REIT subsidiaries,
which include but are not limited to, separate legal entities that were formed in connection with the
project specific, nonrecourse mortgage refinancing for which records, books of accounts and depository
accounts must be maintained that are separate and apart from any other person or entity; the Service
Companies and an Operating Partnership structured as a DownREIT of which 20% is owned by limited
partners.

*MIGRA Merger:*  On June 30, 1998, MIG Realty Advisors, Inc. ("MIGRA") merged with AERC.
AERC acquired MIGRA's property management and advisory management businesses with several
institutional clients and the right to receive certain property and asset management fees; acquisition,
disposition and incentive fees; loan origination and consultation fees; and mortgage servicing fees.  MIG
II Realty Advisors, Inc. ("MIG"), MIGRA's successor, is a registered investment advisor and functions as
a real estate advisor to pension funds.  Collectively, MIG's institutional clients owned 18 properties
located in nine states (two in California; one in Colorado; four in Florida; one in Georgia; three in Illinois;
three in Michigan; one in Minnesota; one in Pennsylvania and two in Texas) at the time of the merger.
During 1999 and 1998, MIG sold two properties located in Minnesota and Michigan, and two properties
in California, respectively on behalf of its institutional clients and recognized asset disposition fees of
approximately $467,500 and $247,000, respectively.  Additionally, during 1999, MIG acquired three
properties located in Virginia, Maryland and Georgia on behalf of its institutional clients and recognized
asset acquisition fees of approximately $233,700.  During the fourth quarter of 1999, MIG earned an
incentive fee of $2,615,800 related to its performance of an entire portfolio under a contract with an
institutional client.  Currently, MIG's institutional clients own 17 properties located in nine states (one in
Colorado; four in Florida; two in Georgia; three in Illinois; one in Maryland; two in Michigan; one in
Pennsylvania; two in Texas and one in Virginia).

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

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

***Liquidity and Capital Resources***

The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Internal
Revenue Code of 1986, as amended, commencing with its taxable year ending December 31, 1993.
REITs are subject to a number of organizational and operational requirements including a requirement
that 95% of the income that would otherwise be considered as taxable income be distributed to
shareholders.  Providing the Company continues to qualify as a REIT, it will generally not be subject to a
Federal income tax on net income.  However, certain of the Company's Service Companies may be
subject to federal income tax.

The Company expects to meet its short-term liquidity requirements generally through its net
cash provided by operations, secured or unsecured borrowings and property sales proceeds.  The
Company believes that these sources will be sufficient to meet both operating requirements and the
payment of dividends in accordance with REIT requirements.  During 2000 and 2001, approximately
$13.7 million and $19.1 million, respectively, of the Company's debt will mature.  The Company believes
it has adequate alternatives available to provide for its liquidity needs including new secured borrowings
and property sales proceeds.

*Financing:*During 1999, the Company received gross proceeds of $525.3 million from project
specific, nonrecourse mortgage loans collateralized by 55 properties owned by qualified REIT
subsidiaries, having a net book value of $641.5 million.  These qualified REIT subsidiaries are separate
legal entities and maintain records, books of accounts and depository accounts separate and apart from
any other person or entity.  The proceeds from these loans were used to pay off the Company's floating
rate unsecured line of credit facility, to pay down most of its Senior and Medium-Term Notes and to
increase the Company's cash balances which may be used to fund construction in progress, fund joint
venture opportunities with pension fund clients, and buy back limited quantities of the Company's
common shares as authorized by the Board of Directors.  These mortgage loan documents require
escrow deposits for taxes and replacement of project assets.  The weighted average maturity of the
loans funded in 1999 is  9.8 years, and the weighted average interest rate is 7.68%.

*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 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 million. This new
structure is intended to give the Company more operating and financial flexibility than that available
under the indenture governing the notes.

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

Upon completion of the revised tender and the related financing, the Company's total debt
structure consists of approximately $568.2 million in long-term, secured, fixed rate financing,
encumbering approximately 63 properties (excluding 7 unconsolidated joint venture properties).  The
Company owns an additional 23 properties that are unencumbered, eight of which were the subject of
the December 31, 1999 sale as more fully discussed under Acquisition, development and dispositions.

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

*Line of Credit*:  Prior to its termination in May 1999, the Company had available a $250 million
revolving credit facility (the "Line of Credit") which contained various restrictive covenants.  At December
31, 1998, $226.0 million was outstanding under this facility.  The weighted average interest rate on
borrowings outstanding under the Line of Credit was 6.88% at December 31, 1998, representing a
variable rate based on the prime rate or LIBOR plus a specified spread, depending on the Company's
long term senior unsecured debt rating from Standard and Poor's and Moody's Investors Service.  An
annual commitment fee of 15 basis points on the maximum commitment, as defined in the agreement,
was payable annually in advance on each anniversary date.  In May 1999,  the Company  repaid all
outstanding obligations under this Line of Credit through proceeds received from financing project
specific, nonrecourse mortgage loans and accordingly, terminated the facility.  The Company recognized
an extraordinary charge of $1,808,742 which represents a $750,000 facility fee charge, a $126,559
breakage fee, and a $932,183 write off of deferred finance costs related to the line of credit facility.

MIGRA maintained a $500,000 line of credit facility ("MIGRA Line of Credit Facility") which the
Company assumed at the time of the merger.  At December 31, 1998, $446,565 was outstanding under
this facility; the outstanding balance was paid off on February 10, 1999 and the facility was terminated.
The weighted average interest rate on borrowings outstanding under the MIGRA Line of Credit Facility
was 9.85% at December 31, 1998.  In connection with the merger, the Company had assumed an
additional $500,000 line of credit facility that was paid off at maturity, on October 31, 1998.

On November 18, 1999, the Company entered into a $12 million secured line of credit facility
(the "Secured Line of Credit").  The facility is for a term of one year.  A $10,000 commitment deposit was
paid by the Company.  The Company's borrowings under this Secured Line of Credit bear interest at a
rate of, at the Borrower's option, at either the Prime Rate or LIBOR plus 200 basis points.  This Secured
Line of Credit will be utilized by the Company to provide working capital and for general corporate
purposes.   At December 31, 1999, there were no amounts outstanding under this facility.

*Senior and Medium-Term Notes:*  The Senior Notes issued during 1995 in the principal amounts
of $75 million and $10 million  accrued interest at 8.38% and 7.10%, respectively, and were to mature in
2000 and 2002, respectively.  Pursuant to the 1999 tender offer, as discussed above, the Company paid
off the $10 million Senior Note and paid down the $75 million Senior Note.  The balance of the $75
million Senior Note, net of unamortized discounts, was $8.5 million and $74.9 million at December 31,
1999 and 1998, respectively.

The Company had two Medium-Term Notes (the "MTN's") outstanding having an aggregate
balance of $709,000 and 11 MTN's outstanding with an aggregate balance of $112.5 million at
December 31, 1999 and 1998, respectively.  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 million MTN that matured in September 1999.  The two
remaining MTN's have principal amounts of $604,000 and $105,000 and bear interest at 7.33% and
6.88%, respectively, and mature in September 2001 and December 2004, respectively.  At December
31, 1998, the principal amounts of the MTN's ranged from $2.5 million to $20 million and bore interest
from 6.18% to 7.93% over terms ranging from two to 30 years (due 2000 to 2026) with a stated weighted
average maturity of 9.27 years.  The two MTN's outstanding at December 31, 1998 have stated terms of
30 years each and the holders have a right to repayment at five and seven years from the issue date of
the respective MTN.  The weighted average interest rate of the two MTN's is 7.26% for the year ended
December 31, 1999 and 6.99% for the 11 MTN's for the year ended December 31, 1998.

From time to time, the Company may enter into hedge agreements to minimize its exposure to
interest rate risks.  There were no interest rate protection agreements outstanding as of December 31,
1999 or 1998.  On February 25, 2000, the Company completed two reverse interest rate swaps.  The
notional amount of the swaps was approximately $66 million.  The effective spread on the hedged loans
is LIBOR plus 62 basis points and the floating rate on these hedged loans was 6.5% on February 25,
2000.  The swaps amortize monthly in accordance with the amortization of the hedged loans and expire
upon maturity of the loans.  These swaps were executed to hedge the fair market value of five fixed rate
loans.

Twenty-three (ten Market Rate properties which refers to the Same Store Core and
Acquired/Disposed Property portfolios and 13 Affordable Housing properties) of the Company's 86 (71
Market Rate properties and 15 Affordable Housing properties) wholly owned properties were
unencumbered at December 31, 1999 with annual EBITDA of approximately $13.3 million
(approximately $7.7 million represents the Market Rate properties and approximately $5.6 million
represents the Affordable Housing properties) and a historical gross cost basis of approximately $87
million (approximately $51 million represents the Market Rate properties and approximately $36 million
represents the Affordable Housing properties).  Eight of these properties were the subject of the
December 31, 1999 sale as more fully discussed under Acquisition, development and dispositions.  The
remaining 63 of the Company's wholly owned properties (all of which are Market Rate properties except
one which is a Affordable Housing property), have an historical gross cost basis of $790 million ($787.5
million represents the Market Rate properties and $2.6 million represents the Affordable Housing
property) and secured property specific debt of $569.9 million ($568.1 million relates to the Market Rate
properties and $1.8 million relates to the Affordable Housing Property) at December 31, 1999.
Unsecured debt, which totaled $9.2 million at December 31, 1999, consisted of $709,000 in Medium-Term Notes and $8.5 million of Senior Notes.  The Company's proportionate share of the mortgage debt
relating to the seven joint venture properties was $17.3 million at December 31, 1999.  The weighted
average interest rate on the secured, unsecured and the Company's proportionate share of the joint
venture debt was 7.72% at December 31, 1999.

*Registration statements:*

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

*Operating Partnership:*

In conjunction with the acquisition of the Operating Partnership, the Company issued a total of
522,032 operating partnership units ("OP units") which consist of 84,630 Class A OP units, 36,530 Class
B OP units, 115,124 Class C OP units, 62,313 Class D OP units, and 223,435 Class E OP units.
Pursuant to terms of the underlying agreements, the B and C OP units were exchanged into A OP units
during 1999.  The Company has the option to redeem, in certain circumstances, the Class A OP units for
common shares exchangeable on a one-for-one basis, or the cash equivalent amount.  The Class A OP
unitholders are entitled to receive cumulative distributions per OP unit equal to the per share
distributions on the Company's common shares.  During 1999, the Company charged $241,310 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 year ended December 31, 1999, the Class D
and Class E unitholders were not entitled to receive an allocation of net income and did not receive any
cash distributions from the Operating Partnership.

*Merger Contingent Consideration Paid and Payable:*

Subject to certain conditions, adjustments and achievements of specified performance goals, the
MIGRA Stockholders' Conversion Rights entitle the MIGRA Stockholders to receive (a) on the second
issuance date (June 30, 1999), an amount of $872,935 payable in common shares of the Company
using the average closing price of the common shares for the 20 trading days immediately preceding
June 30, 1999, (approximately 74,994 common shares at a price of $11.64 per share) subject to certain
price adjustments as provided for in the Merger Agreement and (b) on the third issuance date (June 30,
2000) $2,982,917 worth of common shares of the Company of which $872,935 is based on the average
closing price of the common shares for the 20 trading days immediately preceding the date the
consideration is to be paid and $2,109,982 is based on a closing price of $23.63 per the merger
agreement.  The obligation of the Company to issue common shares on the second issuance date was
contingent upon the issuance of a certificate of occupancy for the Windsor Pines property and the
MIGRA stockholders' submission to the Company of multifamily property acquisition opportunities with
an aggregate gross asset value of at least $50 million and an average yield of at least 85% of the pro
forma yield of the properties being acquired by the Company in connection with the acquisitions (the
"Minimum Yield").  The obligation of the Company to issue common shares on the third issuance date is
contingent upon the issuance of a certificate of occupancy for the Windsor at Kirkman property and the
MIGRA stockholders' submission to the Company of an additional $50 million of multifamily property
acquisition opportunities with the Minimum Yield.

In 1999, the Company issued 74,994 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.  These shares were entitled to the dividend payments which were declared
on June 21 and October 7, 1999, and amounted to $56,246.  Such shares were recorded at their, then,
fair value of $872,935 and increased the recorded amount of the intangible asset associated with the
purchase of MIGRA.

In October 1999, the Company settled some of the purchase price adjustments relating to the
assets and liabilities (as defined in the related agreement) assumed in connection with the MIGRA
merger.  The MIGRA merger agreement provided that such adjustment would be determined on the
one-year anniversary of the merger.  Accordingly, the Company paid a net of approximately $1.25
million with respect to the purchase price adjustment.  The consideration paid was funded by proceeds
from the sale, at par (including accrued interest) of a note receivable to affiliates (the former MIGRA
shareholders).  This purchase price adjustment increased the Company's recorded amount of the
intangible asset initially recorded at the date of the merger.

*Acquisitions, development and dispositions:*

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

*Acquisitions:*  During 1999, the Company acquired a 24 acre parcel of land for $2.3 million
located in Cranberry Township, Pennsylvania on which the Company plans to construct 250 units.  The
purchase price was financed using the like-kind exchange funds from the sale of a certain operating
property.

*Development:*The Company is currently in the process of constructing or planning the
construction of an additional 1,865 units on four separate land parcels owned by the Company as
follows:

|                              |                              | Additional | Anticipated
|----------------------------- | ---------------------------- | ---------- | -----------
|Property                      | Location                     | Units      | Completion 
|Berkley Manor                 | Cranberry Twp., Pennsylvania | 250        | 2001       
|Idlewylde-Phase I             | Atlanta, Georgia             | 308        | 2000       
|-Phase II                     |                              | 535        | 2002       
|                              |                              | 843        |            
|                              |                              |            |            
|Windsor at Kirkman Apartments | Orlando, Florida             | 460        | 2000       
|Village at Avon-Phase I       | Avon, Ohio                   | 164        | 2000       
|-Phase II                     |                              | 148        | 2001       
|                              |                              | 312        |            
|                              |                              | 1,865      |            

During 1999, the Company completed the construction and leasing of 576  units at three of the
Company's development properties.  Additionally, the Company owns five tracts of undeveloped land
consisting of approximately 83 acres.

*Advisory Acquisitions:*During 1999, MIG acquired three multifamily properties containing 938
units for certain advisory clients and recognized asset acquisition fees of approximately $233,700.  MIG
was also retained to provide asset and property management services.

*Potential Dispositions:*The Company continues to explore opportunities to dispose of five of its
joint venture properties, two of its Affordable Housing and congregate care multifamily properties and 18
Market Rate properties (14 located in Ohio and four located in Michigan) which include the eight
properties discussed below which resulted in a gain for federal income taxes.  The total income
contributed by all of these properties in 1999 was $4,951,147.

While in the short run, the sale of properties will likely result in a reduction in net income and
portfolio size for the REIT for year 2000; however,  it is expected that the proceeds will either be
redeployed into new growth opportunities or the REIT will continue to alter its capital structure, either
through retirement of debt or stock purchase.  Investment alternatives are chosen based on whether
they are anticipated to be accretive to earnings per share in the long run.  The proceeds from sales will
be allocated to investment alternatives with the highest projected marginal returns.

On February 22, 2000, the Company entered into a contract to sell three owned Northeast Ohio
Market Rate properties included in the 18 properties previously described.  The properties are expected
to be sold late in the first quarter or early in the second quarter.  These properties contributed
approximately $596,800 to net income before extraordinary items and cumulative effect during 1999.

*Advisory Dispositions:*During 1999, MIG sold two multifamily properties on behalf of two
different pension fund clients.  The Company recognized asset disposition fees of approximately
$467,500 and management fees of approximately $304,290 for the year ended December 31, 1999
related to the sale of these two properties.  Additionally, during the fourth quarter of 1999, the Company
earned an incentive fee of $2,615,800 related to the performance of an entire portfolio under a contract
with a current institutional client.

*Dispositions:*During 1999, the Company sold eight operating properties for net cash proceeds
of $36.8 million, resulting in a gain of $19.6 million.  During 1999, these properties contributed
approximately $1.6 million to net income before extraordinary items and cumulative effect. Net cash
proceeds from the sale of five of the eight operating properties of $13.4 million, resulting in a gain of
$12.8 million, were placed in a trust which restricted the Company's use of these funds for the exclusive
purchase of other property of like-kind and qualifying use.  The Company used $2.3 million of the like-kind funds to acquire a 24 acre parcel of land during 1999.  The remaining net proceeds and unutilized
like-kind funds were used to pay the Company's dividend and pay down a $20 million Medium-Term
Note which matured in September 1999.  Rainbow Terrace Apartments, an Affordable Housing property,
was conveyed to HUD by deed in lieu of foreclosure of approximately $1.8 million, resulting in a loss of
approximately $67,000 (Note 12).

The Company sold an additional eight Market Rate properties located in Ohio on December 31,
1999 for an aggregate sales price of approximately $34 million.  To facilitate the sale, the Company
financed the sale with fixed rate debt maturing July 1, 2001.  Under the structure of the transaction, the
Buyer may put the properties back to the Company, after March 1, 2001 but before June 2, 2001, at a
price equal to their fair market value less outstanding indebtedness then owing on the purchase money
financing.  The Company has a corresponding option to repurchase the properties on the same
monetary basis at any time prior to December 31, 2000.  The Company will continue to manage the
properties.  These sales will not be recognized for Generally Accepted Accounting Principles ("GAAP")
purposes until the seller financing is repaid.  These eight properties are classified as Properties held for
sale in the Consolidated Balance Sheets and are included in the 18 Market Rate properties previously
described as potential dispositions.  For 1999, the Company's earnings were not impacted by this
transaction for GAAP reporting.  These eight properties contributed approximately $2.0 million to
income before extraordinary items and cumulative effect during 1999.

*Management Contract Cancellation:*

During 1999, management contracts were terminated on the following managed but non-owned
properties:

|Effective                          |            | Management         | Approximate           | Approximate        | Approximate       
|---------------------------------- | ---------- | ------------------ | --------------------- | ------------------ | ------------------
|Date of                            | Management | Contract           | Management Fees       | Loss of Management | Annualized Loss of
|Termination                        | Company    | Canceled           | Collected During 1999 | Fees During 1999   | Management Fees   
|                                   |            |                    |                       |                    |                   
|**Affordable Housing Properties:** |            |                    |                      
|1/13/99                            | AERC       | Longwood Apts.     | $             -       | $ 292,000          | $  292,000        
|5/31/99                            | AEMC       | Brunswick ULA      | $   37,100            | $   51,900         | $    89,000       
|11/30/99                           | AERC       | Park Village Apts. | $   23,000            | $     2,100        | $    25,100       
|11/30/99                           | AERC       | Rainbow Terrace    | $ 231,900             | $   21,100         | $  253,000        
|12/01/99                           | AEMC       | Park Lane Villa    | $   94,000            | $     8,600        | $  102,600        
|                                   |            |                    |                       |                    |                   
|**Commercial Properties:**         |            |                    |                       |                   
|3/23/99                            | AEMC       | Euclid Medical &   |                       |                    |                   
|                                   |            | Commercial Arts    | $   20,500            | $  61,600          | $   82,100        
|10/01/99                           | AEMC       | Parkway I & II     | $   28,200            | $    9,400         | $   37,600        
|                                   |            |                    |                       |                    |                   
|**Market Rate Properties:**        |            |                    |                       |                   
|9/10/99                            | AEMC       | Franklin House     | $     8,000           | $    4,000         | $  12,000         
|                                   |            |                    |                       |                    |                   
|**Advisory Properties**            |            |                    |                       |                   
|9/24/99                            | MIG        | Willow Creek       | $ 150,700             | $  50,200          | $200,900          
|10/29/99                           | MIG        | Windemere          | $ 153,600             | $  30,700          | $184,300          

Additionally, the Company anticipates that the following management contracts on managed but
non-owned properties may be canceled during 2000 primarily because of pending sales:

|Effective                          |            | Management                              | Approximate          
|---------------------------------- | ---------- | --------------------------------------- | ---------------------
|Date of                            | Management | Contract                                | Management Fees      
|Termination                        | Company    | Canceled                                | Collected During 1999
|                                   |            |                                         |                      
|**Affordable Housing Properties:** |            |                                        
|4/00                               | AEMC       | Euclid Beach Villa                      | $ 179,000*           
|4/00                               | AEMC       | Euclid Beach Club Residence             | $   75,100*          
|                                   |            |                                         |                      
|**Commercial Properties:**         |            |                                        
|Undetermined                       | AEMC       | Mound Building                          | $  12,900            
|Undetermined                       | AEMC       | Garfield Mall                           | $  66,300            
|                                   |            |                                         |                      
|**Market Rate Properties:**        |            |                                        
|2/24/00                            | AEMC       | Brookview Commons                       | $  11,700**          
|2/24/00                            | AEMC       | Devonshire                              | $    2,800**         
|Undetermined                       | AERC       | Americana (1/3% Joint Venture)          | $ 137,800*           
|Undetermined                       | AERC       | Gates Mills Towers (1/3% Joint Venture) | $ 214,000*           
|Undetermined                       | AERC       | Watergate (1/3% Joint Venture)          | $ 241,400*           
|Undetermined                       | AERC       | Euclid House (1/3% Joint Venture)       | $     2,700*         
|Undetermined                       | AERC       | College Towers (1/2% Joint Venture)     | $   80,500*          
|Undetermined                       | AERC       | Richmond Park Apartments                | $ 170,900*           

*Net fees.

**Properties were sold on 2/24/00 by the owners.

*Dividends*:

On January 4, 2000, the Company declared a dividend of $0.375 per common share for the
quarter ending December 31, 1999 which was paid on February 1, 2000 to shareholders of record on
January 14, 2000.  The common share dividend policy is currently under review by the Board of
Directors.  On February 24, 2000, 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, 2000 to shareholders of record on March 1, 2000.

*Cash flow sources and applications:*

Net cash provided by operating activities decreased $1,664,900 from $41,662,800 to
$39,997,900 for the year ended December 31, 1999 when compared with the year ended December 31,
1998.  This decrease was primarily the result of a decrease in income before gains on sale of properties
and land, extraordinary items and the cumulative effect in accounting principle which was offset by
increases in accounts payable and accrued expenses, funds held for non-owned managed properties of
affiliates and joint ventures and restricted cash offset by decreases in accounts and notes receivable.

Net cash flows used for investing activities of $9,008,300 for the year ended December 31, 1999
were primarily used for the development of multifamily real estate properties and undeveloped land
parcels as well as additional fixed asset acquisitions related to the change in accounting to capitalize
expenditures that were previously expensed by the Company.

Net cash flows provided by financing activities of $4,360,600 for the year ended December 31,
1999 were primarily comprised of proceeds received from the financing of project specific, nonrecourse
mortgage loans on 55 properties.  Funds were also used to pay dividends on the Company's common
and preferred shares, repurchase of common shares as well as repayments on the Line of Credit and
Senior and Medium-Term Notes.

***RESULTS OF OPERATIONS***

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

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

Overall, total revenue increased $15,672,800 or 11.0% and total expenses increased
$29,570,500 or 23.4% for the year.  Net income applicable to common shares after deduction for the
dividends on the Company's preferred shares increased $6,194,200 or 51.5%.

During the year ended December 31, 1999, the Market Rate properties generated total revenues
of $133,872,800 and property operating and maintenance expenses of $60,616,800.  Of these amounts,
the Acquired/Disposed and Same Store Properties contributed total revenues of $48,142,600 and
$85,730,200, respectively, while incurring property operating and maintenance expenses of $22,249,200
and $38,367,600, respectively.  The Affordable Housing Properties generated total revenues of
$9,853,000 while incurring property operating and maintenance expenses of $3,946,900 for the year
ended December 31, 1999.

*Rental Revenues*:

Rental revenues increased $10,622,200 or 8.0% for the year.  Rental revenues from the
Acquired/Disposed Properties increased $9,927,800 for the year.  Increases in occupancy and unit rents
at the Same Store Properties and Affordable Housing Properties resulted in an increase of $553,000 or
0.59% and a decrease of $349 or 0%, respectively, in rental revenue from these properties.  The
balance of the increase resulted from increased rental revenues attributable to office space and other
miscellaneous rental revenue items collected by the Management and Service Operations.

*Other Revenues*:

Other income increased $414,100 or 15.4% for the year.  The increase is due primarily to the
receipt of NSF fees and late charges as well as interest income received on funds deposited into the
like-kind exchange fund as a result of the sale of certain operating properties.

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

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

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

*Property operating and maintenance expenses:*

Property operating and maintenance expenses increased $5,990,900 or 10.2% for the year.
Property operating and maintenance expenses at the Acquired/Disposed Properties increased
$4,555,800 for the year due primarily to the operating and maintenance expenses incurred at the 12
properties acquired in 1998, properties sold, as well as the repositioned properties and the newly
constructed properties of Bradford at Easton, The Village of Western Reserve and The Residence at
Barrington.  Property operating and maintenance expenses at the Same Store Properties increased
$1,655,400 or 4.1% when compared to the prior 12 month period primarily due to increases in
personnel, advertising, utilities, building and grounds repair and maintenance, real estate and local taxes
and other operating expenses.  Property operating and maintenance expenses at the Affordable
Housing Properties decreased $26,400  or 0.66% for the year due primarily to increases in personnel
and other operating expenses offset by decreases in building and grounds repair and maintenance.

*Other expenses:*

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

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

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

The Management and Service Operations recognized a charge for funds advanced to non-owned properties and other costs totaling $150,000 and $291,800 which was incurred during 1999 and
1998, respectively.  The 1999 charge of $150,000 and $200,000 of the 1998 charge represents a
reserve relating to advances to a formerly managed non-owned property.  The remaining $91,800
charge in 1998 represents a write-off for advanced funds of a managed but non-owned property.

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

Interest expense increased $9,213,000 or 31.7% for the year primarily due to the interest
incurred with respect to the project specific, nonrecourse mortgage financing collateralized by 55
properties owned by the REIT.  The increase represents the increased average borrowings and the
higher interest rates incurred.

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

*Extraordinary items:*

The extraordinary item of $3,456,600 recognized during 1999 represents a $750,000 facility fee
charge, $126,500 interest breakage fee and a $932,200 write off of deferred finance costs related to the
termination of the unsecured line of credit facility as well as approximately $1,647,900 related to the pay
off and paydown of the Senior and Medium-Term Notes associated with the tender offer of which
$1,524,700 represents the write off of deferred finance costs, $709,200 represents transaction costs
incurred, $105,800 represents a prepayment penalty related to the payoff of a first mortgage loan offset
in part by $691,800 representing the gain related to the tender.  In 1998, deferred financing costs of
$124,900 were written off due to the termination of the $100 million unsecured revolving credit facility.

*Cumulative effect:*

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

*Net income applicable to common shares:*

Net income applicable to common shares is reduced by dividends on the Perpetual Preferred
Shares of $5,484,400.

***Comparison of the year ended December 31, 1998 to the year ended December 31, 1997***

In the following discussion of the comparison of the year ended December 31, 1998 to the year
ended December 31, 1997, Market Rate properties refers to the Same Store Market Rate ("Same
Store")  and Acquired/Disposed Property portfolios.  Same Store Market Rate Properties represents the
34 wholly owned multifamily properties acquired by the Company at the time of the IPO and the 33
properties acquired in separate transactions by the Company during 1994 through 1996 and the
acquisition of the remaining 50% interest in two properties in which the Company was a joint venture
partner at the time of the IPO.  Acquired/Disposed Properties refers to the 26 properties acquired
between January 1, 1997 and December 31, 1998 as well as the newly constructed properties.

Overall, total revenue increased $34,197,900 or 31.4% and total expenses increased
$34,947,600 or 38.3% for the year.  Net income applicable to common shares after deduction for the
dividends on the Company's preferred shares decreased $3,197,600 or 21.0%.

During the year ended December 31, 1998, the Market Rate properties generated total revenues
of $118,984,000 and property operating and maintenance expenses of $51,834,800. Of these amounts,
the Acquired/Disposed and Same Store Properties contributed total revenues of $45,650,700 and
$73,333,300, respectively, while incurring property operating and maintenance expenses of $17,518,800
and $34,316,000, respectively.  The Affordable Housing Properties generated total revenues of
$14,169,100 while incurring property operating and maintenance expenses of $6,817,700 for the year
ended December 31, 1998.

*Rental Revenues*:

Rental revenues increased $30,874,800 or 30.4% for the year.  Rental revenues from the
Acquired/Disposed Properties increased $29,438,200 for the year.  Increases in occupancy and unit
rents at the Same Store Properties and Affordable Housing Properties resulted in a $1,547,500 or 2.1%
increase and $181,550 or 1.3% decrease, respectively, in rental revenue from these properties.  The
balance of the increase resulted from increased rental revenues attributable to office space and other
miscellaneous rental revenue items.

*Other Revenues*:

Other income increased $933,200 or 53.2% for the year.  The increase is  due primarily to real
estate tax refunds received and an increase in the amount of interest income earned in 1998.

The Company recognized property and asset management fee revenues of $4,704,800 and
$1,248,400 for the year ended December 31, 1998 as compared to $3,752,230 and $0, respectively, for
the year ended December 31, 1997.  The increase in property and asset management fee revenues is
primarily due to the  collection of these fees by MIGRA relating to their institutional investor clients.
During 1998, the Company recognized $247,000 of disposition fees relating to the sale of two properties
owned by advisory clients.

*Property operating and maintenance expenses:*

Property operating and maintenance expenses increased $15,422,600 or 35.7% for the year.
Property operating and maintenance expenses at the Acquired/Disposed Properties increased
$12,483,400 for the year due primarily to the operating and maintenance expenses incurred at the three
properties acquired during 1997, the 14 properties acquired in 1998, and the newly constructed
properties of Bradford at Easton, The Village of Western Reserve and The Residence at Barrington.
Property operating and maintenance expenses at the Same Store Properties increased $3,037,600, or
9.7% when compared to the prior 12 month period primarily due to increases in personnel, real estate
and local taxes and other operating expenses.  Property operating and maintenance expenses at the
Affordable Housing Properties decreased $98,400 or 1.4% for the year due primarily to decreases in
utilities and building and grounds repair and maintenance.

*Other expenses:*

Depreciation and amortization increased $5,633,100 or 29.2% for the year primarily due to the
increased depreciation expense recognized on the Acquired/Disposed Properties as well as the
amortization expense of the intangible assets.  The amortization expense related to the intangible assets
is reflected as a charge to the Management and Service Operations.

Cost associated with abandoned projects of $298,400 and $309,800 were expensed during
1998 and 1997, respectively.  These costs consist primarily of certain pre-development costs, such as
architectural, legal and accounting fees, that were incurred on projects that the Company determined it
would no longer pursue.  These costs are reflected as a charge to the Management and Service
Operations.

General and administrative expenses increased $4,131,600 or 67.9% for the year.  This
increase is primarily attributable to payroll and related expenses due to the acquisition of the MIGRA
advisory operations.  General and administrative expenses are costs related to the Management and
Service Operations.

The Management and Service Operations recognized a charge for funds advanced to non-owned properties and other costs totaling $291,800 and $1,764,000 for 1998 and 1997, respectively.
The 1998 charge primarily relates to a write-off of $91,800 and a reserve of $200,000 relating to
advances to two separate managed but non-owned properties.  The 1997 charge relates to the write-off
of two advances to managed but non-owned properties.

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

Interest expense increased $9,906,100 or 51.7% for the year primarily due to the interest
incurred with respect to the additional borrowings under the Line of Credit used for the acquisition and
construction of properties.

The gain on sale of operating property of $503,500 for 1998 resulted from the sale of an
operating property.  In 1997, the Company recognized a gain on sale of land from the sale of a 90 acre
parcel zoned for office and industrial use.

*Extraordinary items:*

In 1998, deferred financing costs of $124,900 were written off due to the refinancing of the Line
of Credit and were recognized as an extraordinary item in the Consolidated Statements of Income.

*Net income applicable to common shares:*

Net income applicable to common shares is equal to net income less dividends on the preferred
shares of $5,484,400.

***Equity in net income of joint ventures:*****

The combined equity in net income of joint ventures increased $140,300 or 31.5% for the year
ended December 31, 1999, and decreased $116,200 or 20.7% for the year ended December 31, 1998.
The increase from 1998 to 1999 is due primarily to decreased costs of operating the properties resulting
primarily from utilities, real estate taxes and building and grounds repair and maintenance.  The
decrease from 1997 to 1998 was primarily attributable to increased costs of operating the properties
resulting primarily from real estate taxes.

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, 1999, 1998 and 1997.

|                                                 | For the year ended December 31,
|------------------------------------------------ | -------------------------------
|                                                 | 1999                           
|Beneficial interests in joint venture operations |                                
|Rental revenue                                   | $6,957,900                     
|Cost of operations                               | 3,997,000                      
|                                                 | 2,960,900                      
|Interest income                                  | 15,900                         
|Interest expense                                 | (1,799,500)                    
|Depreciation                                     | (542,300)                      
|Amortization                                     | (50,000)                       
|Income before cumulative effect of a change      |                                
|in accounting principle                          | $    585,000                   

**Strategy**

**Overall Portfolio Strategy**

AERC is a fully integrated multifamily self-administered and self-managed equity real estate
investment trust engaged in property, acquisition, advisory and development management, disposition,
operation and ownership activities.

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

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

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

The Company's disciplined business planning for each property and its annual budgeting
process, complemented by a judicious capital expenditure program allows 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.

While in the short run, the sale of properties could potentially mean a reduction in net income
and portfolio size for the REIT for year 2000, it is expected that the proceeds will either be redeployed
into new growth opportunities or the REIT will continue to alter its capital structure, either through
retirement of debt or stock purchase.  Investment alternatives are chosen based on whether they are
anticipated to be accretive to earnings per share in the long run.  The proceeds from sales will be
allocated to investment alternatives with the highest projected marginal returns

Implementation of the Company's strategy includes 1) enhancement of the owned portfolio
through strategic allocation of capital improvements in existing assets, 2) investment in portfolio
enhancing apartment communities through acquisition and development, including strategic alliances
with others, 3) expansion of the advisory business through both separate account and co-investment
with institutional investors, and 4) stock repurchase, where the current market price is depressed and
other higher yielding investment opportunities are less attractive.

**Market Rate**

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

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

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

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

**Affordable Housing**

The Company's portfolio currently includes 15 properties (comprised of 1,505 units) which are
subject to regulation by HUD and which have been in the portfolio since prior to the IPO.

Although rent growth in these properties is limited due to regulatory restrictions, these properties
have provided a consistent return and offer a somewhat stabilizing influence to the portfolio.
Additionally, the Company has developed detailed systems and processes to effectively operate these
properties, which by their nature, exist within a complex, highly regulated environment.  Economic
efficiencies are realized in conjunction with the management of another 28 properties (5,229 units), on
behalf of others, making the affordable housing area potentially lucrative across segments.

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

**Management and Service Companies**

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

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

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

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

**Initiatives**

The Company adopted four initiatives in 1999 that have furthered the execution of the strategy
as delineated above.

1.	***Restructure of the balance sheet*****.  The Company replaced its floating rate, unsecured
line of credit with fixed rate mortgages on 55 properties, thereby extending the duration
of its debt and eliminating restrictive covenants which the Company believes
constrained its operational flexibility.  The Company has also purchased 3,135,180 of its
common shares to date in order to take advantage of the current low market price which
the Company believes is significantly below the Company's real estate net asset value.

2.	***Undertake significant capital expenditures in order to create value and move price
points in year 2000*.**The Company prepares a detailed business plan on every asset
each year which incorporates long term capital plans to ensure the specific property is
positioned to achieve the maximum return on invested capital.  Through a capital
allocation process, funding is approved for those projects which yield the marginal rates
of return in excess of corporate benchmarks.  In 1999, approximately $13,000,000 in
capital improvements were performed.

3.	***Decentralize various operational processes in order to create better execution at
the point of sale*****.  The Company completed implementation of a decentralized
operating environment in 1999.  Management of the properties is supervised by a team
of six real estate professionals which consist of an executive officer and five regional
vice presidents who together possess nearly 125 years or an average of 21 years of
experience in the property management industry.



The Company's management approach is to emphasize the "point of execution" which
means providing the site manager and staff with appropriate levels of authority and
responsibility to achieve corporate goals of service and financial benchmarks.  The
Company believes this concept simplifies and expedites the handling of management
tasks and on-site situations and helps ensure that the site staff provides quality service
to its residents.  Consistent with the Company's decentralization efforts, property
managers have been given additional responsibility and authority for the performance of
their properties, with an emphasis on increasing and improving information flow to allow
them to manage their property's bottom line growth.  In support of these efforts, the
Company performed a major hardware upgrade at all properties during 1999, rolled out
new processes to support the decentralized structure, and installed new property
management software. The Company expects this to lead to reduced costs of operation.

Additionally, enhanced information systems allow management to respond more quickly
to changes in the market place and to analyze future trends in order to make strategic
decisions about the allocation of capital and portfolio composition.  Site managers are
trained to monitor market conditions and  competitors and transfer this information to a
centralized data base which is then used in developing the portfolio strategy for the
Company and its clients.

4.	***Increased emphasis on our advisory business which includes pursuing co-investment opportunities with institutional pension fund clients through the
advisory subsidiary.*****These co-investments will include both purchase and
development opportunities with an emphasis on separate account clients with
discretionary and non-discretionary funds.  Co-investment in the purchase of stabilized
assets is expected to offer low volatility and immediate cash flow.  The development
program allows the Company and its institutional partners to seek high yields anticipated
with development.  The expected equity investment is 25-49% from AERC and 51-75%
from institutional investors.

Management believes this co-investment program may allow the Company to increase
operational efficiency in growth markets at a more rapid pace than direct individual
investments because it requires less capital resources from the Company but allows the
Company to apply its expertise in multifamily management.

The program is currently being marketed with one opportunity approved by an
institutional client.

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

**Quantitative and Qualitative Disclosures About Market Risk**

At December 31, 1999, the Company had $1.8 million of variable rate debt.  Additionally, the Company has interest rate risk associated with fixed rate debt
at maturity.

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

From time to time, the Company may enter into hedge agreements to minimize its exposure to interest rate risks.  There were no interest rate protection
agreements outstanding as of December 31, 1999 or 1998.  On February 25, 2000, the Company completed two reverse interest rate swaps.  The notional amount
of the swaps was approximately $66 million.  The effective spread on the hedged loans is LIBOR plus 62 basis points and the current floating rate on these hedged
loans is now 6.5%.  The swaps amortize monthly in accordance with the amortization of the hedged loans and expire upon maturity of the loans.  These swaps
were executed to hedge the fair market value of five fixed rate loans.

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, 1999** | **December 31, 1998**
|------------------------------ | ----------------------------- | ---------------------
|****                           |                               |                      
|**Long term debt**             | **2000**                      | **2001**             
|**Fixed:**                     |                               |                      
|Fixed rate mortgage debt       | $5,138,213                    | $16,722,369          
|Weighted average interest rate | 7.76%                         | 7.71%                
|                               |                               |                      
|MTN's                          | -                             | 604,000              
|Weighted average interest rate | -                             | 7.26%                
|                               |                               |                      
|Senior notes                   | 8,540,715                     | -                    
|Weighted average interest rate | 8.38%                         | -                    
|Total fixed rate debt          | $13,678,928                   | $17,326,369          
|                               |                               |                      
|Variable:                      |                               |                      
|Variable rate mortgage debt    | $       61,687                | $  1,724,328         
|                               | 10.0%                         | 10.0%                
|LIBOR based credit facility    | -                             | -                    
|Prime + 1% credit facility     | -                             | -                    
|Total variable rate debt       | $        61,687               | $  1,724,328         
|Total long term debt           | $ 13,740,615                  | $19,050,697          

******Sensitivity Analysis**

****At December 31, 1999 and 1998, 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 $585.2  million and $287.0 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.****

**Year 2000 Compliance**

The year 2000 issue ("Year 2000") is the result of computer programs being written using two
digits rather than four to define the applicable year.  Any of the Company's computer programs or
hardware that have date sensitive software or embedded chips may recognize a date using "00" as the
year 1900 rather than the year 2000.  This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability to process transactions,
pay vendors or engage in similar normal business activities.

The Company, to date, has not experienced any significant unusual events related to the Year
2000 issue.  The mission critical and non-mission critical operating systems, networking and accounting
software all appear to have made the transition to the Year 2000 smoothly and without incident.

Critical IT systems include, but are not limited to, operating and data networking and
communication systems, accounts receivable and rent collections, accounts payable and general ledger,
human resources and payroll, cash management and all IT hardware (such as servers, desktop/laptop
computers and data networking equipment).  Critical non-IT systems include telephone systems, fax
machines, copy machines and property environmental, access and security systems (such as elevators
and alarm systems).

The Company's plan to resolve the Year 2000 issue had involved the following four phases:
assessment, remediation, testing and implementation.  The Company identified non-IT systems at all
properties and had remediation, testing and contingency plans in place by year-end.

Much of the mission critical operating systems, networking and accounting software that was
purchased over the past few years had been represented by vendors to already be Year 2000 compliant.
The property management software currently being used at the Company's corporate offices and which
was rolled out to the properties during the second and third quarters of 1999 was affirmed by the vendor
to be tested and Year 2000 compliant.  Additional hardware upgrades at all of the properties and
software patches were complete before December 31, 1999.

There are no other planned costs to upgrade and convert systems for specific Year 2000 issues
since those related to Year 2000 were substantially incurred as part of an overall upgrade plan
implemented in 1999.

As part of the Company's Year 2000 readiness program, the Company queried various third
party vendors.  While many responses have been received to such queries (especially by banks and
other large financial institutions), many vendors did not respond.  To date, the Company is not aware of
any significant suppliers or vendors with a Year 2000 issue that would materially impact the Company's
results of operations, liquidity or capital resources.  The passage of time appears to demonstrate that
there are no residual Year 2000 issues that are impacting the Company.

**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 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.

**Rainbow Terrace**

On February 9, 1998, HUD notified the Company that Rainbow Terrace Apartments, Inc.
("RTA"), the Company's subsidiary corporation that owned Rainbow Terrace Apartments, was in default
under the terms of the Regulatory Agreement and Housing Assistance Payments Contract ("HAP
Contract") pertaining to this property.  Among other matters, HUD alleged that the property was poorly
managed and that RTA had failed to complete certain physical improvements to the property.  Moreover,
HUD claimed that RTA was not in compliance with numerous technical regulations concerning whether
certain expenses were properly chargeable to the property.  As provided in the Regulatory Agreement
and HAP Contract, in the event of a default, HUD had the right to exercise various remedies including
terminating future payments under the HAP Contract and foreclosing the government-insured mortgage
encumbering the property.

This controversy arose out of a Comprehensive Management Review of the property initiated by
HUD in the Spring of 1997, which included a complete physical inspection of the property.   In a series of
written responses to HUD, the Company stated its belief that it had corrected the management
deficiencies cited by HUD in the Comprehensive Management Review (other than the completion of
certain physical improvements to the property) and justified the expenditures questioned by HUD as
being properly chargeable to the property in accordance with HUD's regulations.  Moreover, the
Company stated its belief that it had repaired any physical deficiencies noted by HUD in its
Comprehensive Management Review that might pose a threat to the life and safety of its residents.

In June 1998, HUD notified the Company that all future Housing Assistance Payments ("HAP")
for RTA were abated and instructed the lender to accelerate the balance due under the mortgage.
Subsequent to the notification of the HAP abatements and the acceleration of the mortgage, the lender
advised the Company that the acceleration notification had been rescinded pursuant to HUD's
instruction.  HUD then notified the Company that the HAP payments would be reinstated and that HUD
was reviewing further information concerning RTA provided by the Company.  Thereafter, the Company
continued to receive the monthly HAP payments for RTA.

In June 1998, the Company filed a lawsuit against HUD seeking to compel HUD to review
certain budget based rent increases submitted to HUD by the Company in 1995.

From June 1998 through March 1999, the Company was involved in ongoing negotiations with
HUD for the purpose of resolving these and other disputes concerning other properties managed or
formerly managed by the Company or one of the Service Companies, which were similarly the subject of
Comprehensive Management Reviews initiated by HUD in the Spring of 1997.

On March 12, 1999, the Company, Associated Estates Management Company ("AEMC"), RTA,
PVA Limited Partnership ("PVA"), the owner of Park Village Apartments, and HUD, entered into a
comprehensive settlement agreement (the "Settlement Agreement") for the purpose of resolving certain
disputes concerning property operations at Rainbow Terrace Apartments, Park Village Apartments
("Park Village"), Longwood Apartments ("Longwood") and Vanguard Apartments ("Vanguard").
Longwood was managed by the Company until January 13, 1999.  Park Village was managed by the
Company until December 1999.  Vanguard was managed by AEMC until December 1997.  All four
properties are encumbered by HUD insured mortgages, governed by HUD imposed regulatory
agreements and subsidized by Section 8 Housing Assistance Payments.

Under the terms of the Settlement Agreement, HUD agreed to pay RTA a retroactive rent
increase totaling $1,784,467, which represented the outstanding receivable at December 1, 1999.  HUD
further agreed to release the Company, AEMC, RTA and the owners and principals of PVA, Longwood
and Vanguard from all claims (other than tax or criminal fraud claims) regarding the ownership or
operation of Rainbow Terrace Apartments, Park Village, Longwood and Vanguard.  Moreover, HUD
agreed not to issue a limited denial of participation, debarment or suspension, program fraud civil
remedy action or civil money penalty, resulting from the ownership or management of any of these
projects, or to deny eligibility to any of their owners, management agents or affiliates for participation in
any HUD program on such basis.

HUD's obligations under the Settlement Agreement were conditioned upon the performance by
the Company, RTA and PVA of certain obligations, the most significant of which was the obligation to
identify, on or before April 11, 1999, prospective purchasers for both Rainbow Terrace Apartments and
Park Village who were acceptable to HUD, and upon HUD's approval, convey those projects to such
purchasers.  Alternatively, if RTA and PVA were unable to identify prospective purchasers acceptable to
HUD, then RTA and PVA agreed to convey both projects to HUD pursuant to deeds in lieu of
foreclosure.  In either case (conveyance to a HUD approved purchaser or deed in lieu of foreclosure), no
remuneration was to be received by either RTA or PVA in return, except for the $1,784,467 retroactive
rent increase payable to RTA mentioned above.  At December 1, 1999, the Company had receivables of
$1,784,467 related to the 1995 and 1998 retroactive rental increase requests.  At December 1, 1999,
RTA had net assets of $1,827,319, including the retroactive rental receivable of $1,784,467 due from
HUD, and a remaining amount due under the mortgage of $1,935,123.  The Company has excluded
RTA's results of operations from its Consolidated Statement of Income for 1999.

During the third quarter, RTA, with respect to Rainbow Terrace Apartments, and PVA, with
respect to Park Village, entered into contracts to sell those properties, subject to, among other matters,
HUD approval.  Under the terms of the Settlement Agreement, HUD had the right to approve or
disapprove those prospective purchasers.  Alternatively, HUD had the right to require RTA and PVA to
convey these properties to HUD by deed in lieu of foreclosure.



On November 9, 1999, HUD notified RTA, PVA and the Company of its decision to elect to
receive deeds in lieu of foreclosure to those properties rather than requiring RTA and PVA to continue
further efforts to sell those properties to qualified purchasers.  On or about December 1, 1999, HUD paid
RTA the entire amount of the retroactive rent receivable in the amount of $1,784,467 and RTA and PVA
delivered to HUD deeds in lieu of foreclosure to Rainbow Terrace Apartments and Park Village
Apartments, respectively.  The Company recorded a loss of $67,000 due to the conveyance to HUD of
Rainbow Terrace Apartments.

**Affiliate Transactions**

In the normal course of business, the Company advances funds on behalf of, or holding funds
for the benefit of, affiliates and joint ventures.

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

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

**Expected Property Sales**

The Company sold eight Market Rate properties located in Ohio on December 31, 1999 for an
aggregate sales price of approximately $34 million.  To facilitate the sale, the Company financed the
sale with fixed rate debt maturing July 1, 2001.  Under the structure of the transaction, the buyer may put
the properties back to the Company, after March 1, 2001 but before June 2, 2001, at a price equal to
their fair market value less outstanding indebtedness then owing on the purchase money financing.  The
Company has a corresponding option to repurchase the properties on the same monetary basis at any
time prior to December 31, 2000.  The Company will continue to manage the properties.  These sales
will not be recognized for Generally Accepted Accounting Principles ("GAAP")  purposes until the seller
financing is repaid.  These eight properties are classified as Properties Held for Sale in the Consolidated
Balance Sheets.  For 1999, the Company's earnings were not impacted by this transaction for GAAP
reporting.

On February 22, 2000, the Company entered into a contract to sell eight owned properties.  Of
these eight, five were included in the previously referred December 31, 1999 sale.  It is expected that the
properties will be sold late in the first quarter or early in the second quarter of 2000.

**Housing Code Violations**

A number of lawsuits exist that are brought by the City of Cleveland's Housing Division alleging
housing code violations involving a number of properties located in the City of Cleveland, Ohio, now or
formerly owned or managed by the Company.  While the resolution of this matter cannot be predicted
with certainty, management believes that the final outcome of such matters will not have a material
adverse effect on the financial position or results of operations of the Company.

**Other**

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

**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 17, 2000, is
incorporated by reference in this Annual Report on Form 10-K.

The Executive Officers of the Company as of February 29, 2000 are:

|Name                | Age | Position with the Company                            
|------------------- | --- | -----------------------------------------------------
|Jeffrey I. Friedman | 48  | Chairman of the Board and Chief Executive Officer    
|Louis E. Vogt       | 50  | President and Chief Operating Officer                
|James A. Cote       | 53  | Vice President and President, MIG II Realty Advisors 
|Martin A. Fishman   | 58  | Vice President, General Counsel and Secretary        
|Kathleen L. Gutin   | 43  | Treasurer, Vice President and Chief Financial Officer

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

Louis E. Vogt joined the Company as Senior Vice President, Operations in 1998 through the
acquisition of MIG Realty Advisors, Inc..  On February 24, 2000, Mr. Vogt was elected President, Chief
Operating Officer and Director.  Mr. Vogt joined MIG Realty Advisors in 1992 and has over 28 years of
experience in real estate operations.  He is responsible for all asset and property management
operations including acquisitions and dispositions.

James A. Cote, Vice President and President, MIG II Realty Advisors, joined the Company in
1998 through the acquisition of MIG Realty Advisors, Inc..  Mr. Cote was with MIG Realty Advisors from
1992 until the acquisition.  Mr. Cote has extensive experience in all aspects of property acquisition,
asset management and dispositions.

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

Kathleen L. Gutin, Treasurer, Vice President and Chief Financial Officer, joined the Company in
1998 through the acquisition of MIG Realty Advisors, Inc..  Ms. Gutin joined MIG Realty Advisors in 1985
and has over 16 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).

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

*Gregory L. Golz, Vice President, Finance, joined the Company in 1998.   Mr. Golz was
previously employed by Kendal Financial Corporation as a founding Principal from 1994 to 1998.  He
specializes in mergers, acquisitions, securities and other capital markets transactions.  Mr. Golz is 39
years old.

Barbara E. Hasenstab joined the Company in 1996 as Director of Investor Relations and was
elected Vice President of Investor Relations in 1998.  Ms. Hasenstab has 21 years of experience in
investor relations and is a member of the National Investor Relations Institute and is 46 years old.
Effective February 24, 2000, Ms. Hasenstab's title has been changed to Vice President, Investor
Relations and Corporate Communications.

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

Nan R. Zieleniec joined AEG in 1990 and was elected Vice President of Human Resources in
1998, having responsibility for all areas of human resource planning and administration.  Ms. Zieleniec is
a member of the Society of Human Resource Management and American Compensation Association
and is 41 years old.

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

JoAnn C. Hirsh joined the Company in 1997 as Director of Government Housing and is currently
a Regional Vice President of Operations.  Ms. Hirsh has supervisory responsibility for the Affordable
Housing properties and is responsible for compliance with HUD regulations.  Ms. Hirsh has over 21
years of real estate experience and is a Certified Public Accountant, a member of the American Institute
of Certified Public Accountants (AICPA), the Ohio Society of CPA's, the National Network of Commercial
Real Estate Women and is 43 years old.

Richard Q. Mansfield joined the Company in 1995 and is currently a  Regional Vice President of
Operations.  He has been involved in multifamily property management for 22 years.  Mr. Mansfield has
supervisory responsibility for properties in northeast Ohio and is 44 years old.

Daniel L. Powers joined the Company in 1998 through the acquisition of MIG Realty Advisors,
Inc..  He is currently a Regional Vice President of Operations for the Central Region, with supervisory
responsibility for properties in Toledo, Ohio, Indiana and Michigan and has been involved in multifamily
property management for 20 years.  Mr. Powers is a Certified Property Manager and is 46 years old.

Charles J. Stone joined the Company in 1998 through the acquisition of MIG Realty Advisors,
Inc..  He is currently a Regional Vice President of Operations for the Eastern Region with supervisory
responsibility for properties in Florida, Georgia, Maryland, North Carolina and Pennsylvania.  Mr. Stone
is 53 years old and has over 26 years of real estate experience.

Steven C. Thrower joined the Company in 1998 through the acquisition of MIG Realty Advisors,
Inc..  He is currently a Regional Vice President for the Western Region with supervisory responsibility for
properties in Arizona and Texas.  Mr. Thrower is 44 years old and has more than 14 years of real estate
experience.

* Effective February 29, 2000, the position of Vice President, Finance has been eliminated and Mr. Golz has returned to
Kendal Financial Corporation.

******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 17, 2000 is incorporated by
reference in this Annual Report on Form 10-K.

**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 17, 2000 is incorporated by reference in this Annual Report on Form 10-K.

**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 17,
2000 is incorporated by reference in this Annual Report on Form 10-K.



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) The Children's Computer Co.

*"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.

*"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.

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

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

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

*"Funds From Operations" or "FFO"* means net income (computed in accordance with generally
accepted accounting principles), excluding gains (or losses) from sales of property and extraordinary
and nonrecurring items, plus depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures.

*"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.

*"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.

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

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

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

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

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

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



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

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



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

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

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

Report of Independent Accountants - Associated Estates Realty
Corporation.

Consolidated Balance Sheets at December 31, 1999 and 1998.

Consolidated Statements of Income for the three years ended
December 31, 1999, 1998 and 1997.

Consolidated Statements of Shareholders' Equity for the three years
ended December 31, 1999, 1998 and 1997.

Consolidated Statements of Cash Flows for the three years ended
December 31, 1999, 1998 and 1997.

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-42

III	Real Estate and Accumulated Depreciation				       F-43

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.

- A Current Report on Form 8-K dated November 18, 1999 was filed on December 2, 1999.

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

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

dated November 18, 1999 from AERC to The Chase Manhattan Bank                                                                                                                                                                                                                                                                                                                                                                                                                    |  | Exhibit 4.5b filed
herewith.                                                     
|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.                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.7    | $75 Million 8-3/8% Senior Note due April 15, 2000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | Exhibit 4.7 to Form 10-Q filed May 11, 1995.                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.8e   | Credit Agreement dated June 30, 1998, by and among Associated
Estates Realty Corporation, as Borrower; the banks and lending
institutions identified therein as Banks; National City Bank, as Agent and
Bank of America National Trust and Savings Association, as
Documentation Agent                                                                                                                                                                                                                                                                |  | Exhibit 4.8e to Form
10-Q filed August 14,
1998.                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.8f   | First Amendment to Credit Agreement by and among Associated Estates
Realty Corporation, as Borrower; National City Bank, as Managing Agent
for itself and on behalf of the Existing Banks and First Merit Bank, N.A.
and Southtrust Bank, N.A. as the New Banks.                                                                                                                                                                                                                                                                                      |  | Exhibit 4.8f to Form 10-Q filed November 16,
1998.                               
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.8g   | Second Amendment to Credit Agreement by and among Associated
Estates Realty Corporation, as Borrower, National City Bank, as
Managing Agent for itself and on behalf of the Existing Banks and
National City Bank, Bank of America National Commerzbank
Aktiengesellschaft.                                                                                                                                                                                                                                                                           |  | Exhibit 4.8g to Form
10Q filed November
16, 1998.                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.8h   | Third Amendment to Credit Agreement by and among Associated Estates
Realty Corporation, as Borrower, National City Bank, as Managing Agent,
Bank of America National Trust & Savings Association, as Documentation
Agent and the banks identified therein.                                                                                                                                                                                                                                                                                            |  | Exhibit 4.8h to Form
10-K filed March 30,
1999.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|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.                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.12   | Ten Million Dollar 7.10% Senior Notes Due 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | Exhibit 4.12 to Form
10-K filed March 28,
1996.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|4.13   | Loan Agreement between Associated Estates Realty Corporation and
National City Bank                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Exhibit 4.13 filed
herewith.                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10     | Associated Estates Realty Corporation Directors' Deferred Compensation
Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | Exhibit 10 to Form 10-Q filed November 14,
1996                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.1   | Registration Rights Agreement among the Company and certain holders
of the Company's Common Shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Exhibit 10.1 to Form S-11 filed September 2,
1993 (File No. 33-68276 as amended).
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.2   | Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | Exhibit 10.2 to Form S-11 filed September 2,
1993 (File No. 33-68276 as amended).
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.3   | Amended and Restated Employment Agreement between the Company
and Jeffrey I. Friedman.                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Exhibit 10.1 to Form
10-Q filed May 13,
1996.                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.4   | Equity-Based Incentive Compensation Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | Exhibit 10.4 to Form
10-K filed March 29,
1995.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.5   | Long-Term Incentive Compensation Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | Exhibit 10.5 to Form
10-K filed March 29,
1995.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.6   | Lease Agreement dated November 29, 1990 between Royal American
Management Corporation and Airport Partners Limited Partnership.                                                                                                                                                                                                                                                                                                                                                                                                                       |  | Exhibit 10.6 to Form
10-K filed March 29,
1995.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.7   | Sublease dated February 28, 1994 between the Company as Sublessee,
and Progressive Casualty Insurance Company, as Sublessor.                                                                                                                                                                                                                                                                                                                                                                                                                          |  | Exhibit 10.7 to Form
10-K filed March 29,
1995.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.8   | Assignment and Assumption Agreement dated May 17, 1994 between the
Company, as Assignee, and Airport Partners Limited Partnership, as
Assignor.                                                                                                                                                                                                                                                                                                                                                                                                       |  | Exhibit 10.8 to Form
10-K filed March 29,
1995.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.9   | Form of Restricted Agreement dated by and among the Company and Its
Independent Directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | Exhibit 10.9 to Form
10-K filed March 28,
1996.                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.10  | Pledge Agreement dated May 23, 1997 between Jeffrey I. Friedman and
the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | Exhibit 10.01 to Form
10-Q filed August 8,
1997                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.11  | Secured Promissory Note dated May 23, 1997 in the amount of
$1,671,000 executed by Jeffrey I. Friedman in favor of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                       |  | Exhibit 10.02 to Form
10-Q filed August 8,
1997                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.12  | Unsecured Promissory Note dated May 23, 1997 in the amount of
$1,671,000 executed by Jeffrey I. Friedman in favor of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                     |  | Exhibit 10.03 to Form
10-Q filed August 8,
1997                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.14  | Form of Share Option Agreement by and among the Company and Its
Independent Directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Exhibit 10.14 to Form
10-K filed March 30,
1993.                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.15  | Agreement dated March 11, 1999 by and among the Company and The
Milstein Affiliates                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Exhibit 10.15 to Form
10-Q filed May 17,
1999.                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.16  | Agreement dated March 11, 1999 by and among the Company and The
Milstein Affiliates                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Exhibit 10.16 to Form
10-Q filed May 17,
1999.                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.17  | Separation Agreement and Release dated January 8, 1999 by and
between the Company and Dennis W. Bikun                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | Exhibit 10.17 to Form
10-Q filed May 17,
1999.                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.18  | Separation Agreement and Release dated June 30, 1999 by and between
the Company and Larry E. Wright                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Exhibit 10.18 to Form
10-Q filed August 13,
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 filed
herewith.                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|10.20  | Agreement dated October 11, 1999 by and among the Company and
certain of the former holders (the "MIGRA Stockholders") of the issued
and outstanding shares of common stock of MIG Realty Advisors, Inc.
("MIGRA").                                                                                                                                                                                                                                                                                                                                   |  | Exhibit 10.20 filed
herewith.                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|18.1   | Letter regarding change in accounting principles                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | Exhibit 18.1 to Form
10-Q filed May 17,
1999.                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|21.1   | List of Subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | Exhibit 21.1

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

filed herewith.                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                  
|27     | Financial Data Schedule                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | Exhibit 27 filed
herewith.                                                       



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 15th day of
March, 2000.

**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 15th day of March, 2000.

|Signature               | Title                                                | Date          
|----------------------- | ---------------------------------------------------- | --------------
|                        |                                                      |               
|/s/ Jeffrey I. Friedman | Chairman of the Board and Chief Executive            | March 15, 2000
|Jeffrey I. Friedman     | Officer  (Principal Executive Officer)               |               
|                        |                                                      |               
|/s/ Louis E. Vogt       | President, Chief Operating Officer and Director      | March 15, 2000
|Louis E. Vogt           |                                                      |               
|                        |                                                      |               
|/s/ Kathleen L. Gutin   | Chief Financial Officer (Principal Financial Officer | March 15, 2000
|Kathleen L. Gutin       | and Principal Accounting Officer)                    |               
|                        |                                                      |               
|/s/ Albert T. Adams     | Director                                             | March 15, 2000
|Albert T. Adams         |                                                      |               
|                        |                                                      |               
|/s/ James M. Delaney    | Director                                             | March 15, 2000
|James M. Delaney        |                                                      |               
|                        |                                                      |               
|/s/ Gerald C. McDonough | Director                                             | March 15, 2000
|Gerald C. McDonough     |                                                      |               
|                        |                                                      |               
|/s/ Mark L. Milstein    | Director                                             | March 15, 2000
|Mark L. Milstein        |                                                      |               
|                        |                                                      |               
|/s/ Frank E. Mosier     | Director                                             | March 15, 2000
|Frank E. Mosier         |                                                      |               
|                        |                                                      |               
|/s/ Richard T. Schwarz  | Director                                             | March 15, 2000
|Richard T. Schwarz      |                                                      |               
|                        |                                                      |               
|/s/ Larry E. Wright     | Director                                             | March 15, 2000
|Larry E. Wright         |                                                      |               





|Financial Statements:                                                     | Page
|------------------------------------------------------------------------- | ----
|                                                                          |     
|Report of Independent Accountants                                         | F-2 
|Consolidated Balance Sheets at December 31, 1999 and 1998                 | F-3 
|Consolidated Statements of Income for the                                 |     
|three years ended December 31, 1999, 1998 and 1997                        | F-4 
|Consolidated Statements of Shareholders' Equity for the three years ended |     
|December 31, 1999, 1998 and 1997                                          | F-5 
|Consolidated Statements of Cash Flows for the three                       |     
|years ended December 31, 1999, 1998 and 1997                              | F-6 
|Notes to Financial Statements                                             | F-7 
|                                                                          |     
|Financial Statement Schedules:                                            |     
|II - Valuation and Qualifying Accounts                                    | F-42
|III - Real Estate and Accumulated Depreciation at December 31, 1999       | F-43
|                                                                          |     

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, 1999 and 1998, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States.  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,
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 the opinion expressed above.

As discussed in Notes 1 and 21 to the financial statements, in 1999, the Company changed its method
of accounting for certain replacements and improvements.

/s/ PricewaterhouseCoopers LLP

Cleveland, Ohio

March 7, 2000



**CONSOLIDATED BALANCE SHEETS**

|                                                                 | December 31, 
|---------------------------------------------------------------- | -------------
|                                                                 | 1999         
|**ASSETS**                                                       |              
|Real estate assets                                               |              
|Land                                                             | $ 91,015,251 
|Buildings and improvements                                       | 791,312,600  
|Furniture and fixtures                                           | 32,783,385   
|                                                                 | 915,111,236  
|Less:  accumulated depreciation                                  | (160,216,690)
|                                                                 | 754,894,546  
|Construction in progress                                         | 22,177,579   
|Real estate, net                                                 | 777,072,125  
|Properties held for sale, net of accumulated depreciation        | 18,475,144   
|Cash and cash equivalents                                        | 36,384,837   
|Restricted cash                                                  | 14,149,514   
|Accounts and notes receivable                                    |              
|Rents                                                            | 883,881      
|Affiliates and joint ventures                                    | 9,537,737    
|Other                                                            | 5,850,696    
|Intangible and other assets, net                                 | 20,455,766   
|                                                                 | $882,809,700 
|                                                                 |              
|**LIABILITIES AND SHAREHOLDERS' EQUITY**                         |              
|Secured debt                                                     | $569,936,189 
|Unsecured debt                                                   | 9,249,715    
|Total indebtedness                                               | 579,185,904  
|Accounts payable and accrued expenses                            | 22,192,289   
|Dividends payable                                                | -            
|Resident security deposits                                       | 5,454,435    
|Funds held on behalf of managed properties                       |              
|Affiliates and joint ventures                                    | 8,041,958    
|Other                                                            | 3,086,379    
|Accrued interest                                                 | 3,108,460    
|Accumulated losses and distributions of joint                    |              
|ventures in excess of investment and advances                    | 11,513,261   
|Total liabilities                                                | 632,582,686  
|                                                                 |              
|Operating partnership minority interest                          | 12,044,983   
|                                                                 |              
|Commitments and contingencies                                    | -            
|Shareholders' equity                                             |              
|Preferred shares, Class A cumulative, without                    |              
|par value; 3,000,000 authorized; 225,000 issued and outstanding  | 56,250,000   
|Common shares, without par value, $.10 stated value; 50,000,000  |              
|authorized; 22,716,720, and 22,621,958 issued and 21,172,340 and |              
|22,596,958 outstanding at December 31, 1999 and 1998,            |              
|respectively                                                     | 2,271,671    
|Paid-in capital                                                  | 278,056,478  
|Accumulated dividends in excess of net income                    | (82,442,424) 
|Accumulated other comprehensive income                           | (5,250)      
|Less:  Treasury shares, at cost, 1,544,380 and 25,000 shares     |              
|at December 31, 1999 and 1998, respectively                      | (15,948,444) 
|Total shareholders' equity                                       | 238,182,031  
|                                                                 | $882,809,700 







**CONSOLIDATED STATEMENTS OF INCOME**

|                                                           | For the year ended December 31,
|---------------------------------------------------------- | -------------------------------
|                                                           | 1999                           
|Revenues                                                   |                                
|Rental                                                     | $143,136,606                   
|Property management fees                                   | 5,270,836                      
|Asset management fees                                      | 2,330,597                      
|Asset acquisition fees                                     | 233,745                        
|Asset disposition fees                                     | 3,083,359                      
|Painting services                                          | 1,524,029                      
|Other                                                      | 3,101,500                      
|                                                           | 158,680,672                    
|Expenses and charges                                       |                                
|Property operating and maintenance                         | 64,643,448                     
|Depreciation and amortization                              | 35,145,839                     
|Painting services                                          | 1,435,328                      
|Preliminary project costs                                  | -                              
|General and administrative                                 | 16,170,107                     
|Write-off of software development costs                    | -                              
|Charge for funds advanced to non-owned properties          |                                
|and other                                                  | 150,000                        
|Default waiver fee                                         | -                              
|Interest expense                                           | 38,263,518                     
|Total expenses and charges                                 | 155,808,240                    
|Income before gain on sale of properties and land,         |                                
|equity in net income of joint ventures, minority interest, |                                
|extraordinary items and cumulative effect of a change      |                                
|in accounting principle                                    | 2,872,432                      
|Gain on sale of properties and land                        | 19,630,303                     
|Equity in net income of joint ventures                     | 585,022                        
|Minority interest in operating partnership                 | (241,310)                      
|**Income before extraordinary item and cumulative effect** |                                
|**of a change in accounting principle**                    | 22,846,447                     
|Extraordinary (loss) or gain-extinguishment of debt        | (3,456,612)                    
|Cumulative effect of a change in accounting principle      | 4,319,162                      
|**Net income**                                             | $ 23,708,997                   
|****                                                       |                                
|**Net income applicable to common shares**                 | $ 18,224,571                   
|****                                                       |                                
|**Earnings per common share - basic:**                     |                                
|Income before extraordinary item and cumulative            |                                
|effect of a change in accounting principle                 | $              .79             
|Extraordinary item                                         | $             (.15)            
|Cumulative effect of a change in accounting principle      | $              .19             
|Net income                                                 | $              .83             
|                                                           |                                
|**Earnings per common share - diluted:**                   |                                
|Income before extraordinary item and cumulative            |                                
|effect of a change in accounting principle                 | $             .79              
|Extraordinary item                                         | $           (.15)              
|Cumulative effect of a change in accounting principle      | $            .19               
|Net income                                                 | $            .83               
|                                                           |                                
|**Pro forma amounts assuming the new capitalization**      |                                
|**policy is applied retroactively:**                       |                                
|Effect of new capitalization policy                        | $ (4,319,162)                  
|Net income                                                 | $19,389,835                    
|Net income applicable to common shares                     | $13,905,409                    
|**Earnings per common share - basic:**                     |                                
|Effect of new capitalization policy                        | $            (.19)             
|Net income applicable to common shares                     | $             .63              
|**Earnings per common share - diluted:**                   |                                
|Effect of new capitalization policy                        | $            (.19)             
|Net income applicable to common shares                     | $             .63              
|                                                           |                                
|**Dividends declared per common share**                    | $         1.125                
|                                                           |                                
|**Weighted average number of common shares**               |                                
|**outstanding	- Basic**                                    | 22,050,905                     
|**- Diluted**                                              | 22,052,899                     





**ASSOCIATED ESTATES REALTY CORPORATION**

**CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY**

|                                                                       |              |             |               |              |               |               |                      
|---------------------------------------------------------------------- | ------------ | ----------- | ------------- | ------------ | ------------- | ------------- | ---------------------
|                                                                       |              | Class A     |               |              | Accumulated   | Accumulated   |                      
|                                                                       |              | Cumulative  | Common Shares |              | Dividends in  | Other         | Treasury             
|                                                                       |              | Preferred   | (at $.10      | Paid-In      | Excess of     | Comprehensive | Shares               
|                                                                       | Total        | Shares      | stated value) | Capital      | Net Income    | Income        | (at cost)            
|                                                                       |              |             |               |              |               |               |                      
|Balance, December 31, 1996                                             | $158,016,198 | $56,250,000 | $1,532,238    | $133,091,535 | $(32,839,075) | $(18,500)     | $                   -
|Comprehensive income:                                                  |              |             |               |              |               |               |                      
|Net income                                                             | 20,712,369   | -           | -             | -            | 20,712,369    | -             | -                    
|Other comprehensive income:                                            |              |             |               |              |               |               |                      
|Unrealized gains on securities of $15,000, net of reclassification     |              |             |               |              |               |               |                      
|adjustment for gains included in net income of $0                      | 15,000       | -           | -             | -            | -             | 15,000        | -                    
|Total comprehensive income                                             | 20,727,369   | -           | -             | -            | 20,712,369    | 15,000        | -                    
|Issuance of 1,317 restricted common shares                             | -            | -           | 131           | (131)        | -             | -             | -                    
|Issuance of 1,750,000 common shares, net of underwriters'              |              |             |               |              |               |               |                      
|discounts and offering expenses of $2,286,806                          | 38,838,194   | -           | 175,000       | 38,663,194   | -             | -             | -                    
|Stock options exercised                                                | 1,717        | -           | 8             | 1,709        | -             | -             | -                    
|Common share dividends declared                                        | (30,940,979) | -           | -             | -            | (30,940,979)  | -             | -                    
|Preferred share dividends declared                                     | (5,484,421)  | -           | -             | -            | (5,484,421)   | -             | -                    
|Balance, December 31, 1997                                             | 181,158,078  | 56,250,000  | 1,707,377     | 171,756,307  | (48,552,106)  | (3,500)       | -                    
|Comprehensive income:                                                  |              |             |               |              |               |               |                      
|Net income                                                             | 17,514,762   | -           | -             | -            | 17,514,762    | -             | -                    
|Other comprehensive income:                                            |              |             |               |              |               |               |                      
|Reclassification adjustment for gains included in net income of $2,625 | 2,625        | -           | -             | -            | -             | 2,625         | -                    
|Total comprehensive income                                             | 17,517,387   | -           | -             | -            | 17,514,762    | 2,625         | -                    
|Issuance of 484 restricted common shares                               | -            | -           | 48            | (48)         | -             | -             | -                    
|Issuance of 5,547,701 common shares relating to the MIGRA merger       |              |             |               |              |               |               |                      
|and the acquisition of the MIG REIT properties                         | 106,063,359  | -           | 554,770       | 105,508,589  | -             | -             | -                    
|Additional costs relating to common share offering                     | (129,860)    | -           | -             | (129,860)    | -             | -             | -                    
|Purchase of 25,000 treasury shares                                     | (466,523)    | -           | -             | -            | -             | -             | (466,523)            
|Common share dividends declared                                        | (39,469,873) | -           | -             | -            | (39,469,873)  | -             | -                    
|Preferred share dividends declared                                     | (5,484,421)  | -           | -             | -            | (5,484,421)   | -             | -                    
|Balance, December 31, 1998                                             | 259,188,147  | 56,250,000  | 2,262,195     | 277,134,988  | (75,991,638)  | (875)         | (466,523)            
|Comprehensive income:                                                  |              |             |               |              |               |               |                      
|Net income                                                             | 23,708,997   | -           | -             | -            | 23,708,997    | -             | -                    
|Other comprehensive income:                                            |              |             |               |              |               |               |                      
|Reclassification adjustment for loss included in net income            |              |             |               |              |               |               |                      
|of ($4,375)                                                            | (4,375)      | -           | -             | -            | -             | (4,375)       | -                    
|Total comprehensive income                                             | 23,704,622   | -           | -             | -            | 23,708,997    | (4,375)       | -                    
|Issuance of 74,994 common shares relating to the                       |              |             |               |              |               |               |                      
|MIGRA merger contingent consideration                                  | 872,935      | -           | 7,499         | 865,436      | -             | -             | -                    
|Issuance of 21,000 restricted common shares                            | 260,400      | -           | 2,100         | 258,300      | -             | -             | -                    
|Retired 1,232 restricted common shares                                 | (24,972)     | -           | (123)         | (24,849)     | -             | -             | -                    
|Purchase of 1,519,380 treasury shares                                  | (15,481,921) | -           | -             | -            | -             | -             | (15,481,921)         
|Deferred compensation                                                  | (177,397)    | -           | -             | (177,397)    | -             | -             | -                    
|Common share dividends declared                                        | (24,675,357) | -           | -             | -            | (24,675,357)  | -             | -                    
|Preferred share dividends declared                                     | (5,484,426)  | -           | -             | -            | (5,484,426)   | -             | -                    
|Balance, December 31, 1999                                             | $238,182,031 | $56,250,000 | $2,271,671    | $278,056,478 | $(82,442,424) | $ (5,250)     | $(15,948,444)        







**ASSOCIATED ESTATES REALTY CORPORATION**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

|                                                                                         | For the year ended December 31,
|---------------------------------------------------------------------------------------- | -------------------------------
|                                                                                         | 1999                           
|Cash flow from operating activities:                                                     |                                
|Net income                                                                               | $23,708,997                    
|Adjustments to reconcile net income to net cash provided by operating activities:        |                                
|Depreciation and amortization                                                            | 35,145,839                     
|Cumulative effect of a change in accounting principle                                    | (4,319,162)                    
|Minority interest in operating partnership                                               | 241,310                        
|Write-off of software development costs                                                  | -                              
|Loss (gain) on extinguishment of debt                                                    | 3,456,612                      
|Gain on sale of properties and land                                                      | (19,630,303)                   
|Loss on conveyance of Rainbow Terrace Apartments to HUD                                  | 66,524                         
|Charge for funds advanced to non-owned properties and other                              | 150,000                        
|Equity in net income of joint ventures                                                   | (585,022)                      
|Earnings distributed from joint ventures                                                 | 390,753                        
|Net change in assets and liabilities (net of effect of the MIGRA merger for 1998         |                                
|amounts):	- Accounts and notes receivable                                                | (1,671,162)                    
|- Accounts and notes receivable of affiliates and joint ventures                         | 3,425,663                      
|- Accounts payable and accrued expenses                                                  | 4,699,452                      
|- Other operating assets and liabilities                                                 | (5,329,712)                    
|- Restricted cash                                                                        | (1,398,572)                    
|- Funds held for non-owned managed properties                                            | (1,041,919)                    
|- Funds held for non-owned managed properties of affiliates                              |                                
|and joint ventures                                                                       | 2,688,564                      
|Total adjustments                                                                        | 16,288,865                     
|Net cash flow provided by operations                                                     | 39,997,862                     
|Cash flow from investing activities:                                                     |                                
|Real estate and fixed asset additions acquired or developed (net of liabilities assumed) | (45,357,450)                   
|Net proceeds received from sale of properties                                            | 36,795,663                     
|Loans receivable - affiliate                                                             | -                              
|(Contributions to) distributions from joint ventures                                     | (446,496)                      
|Net cash flow used for investing activities                                              | (9,008,283)                    
|Cash flow from financing activities:                                                     |                                
|Principal payments on secured debt, net of required escrow deposits of $6,794,543        |                                
|at December 31, 1999                                                                     | (33,493,355)                   
|Proceeds from secured debt, net of required escrow deposits of                           |                                
|$6,794,543 at December 31, 1999                                                          | 518,527,457                    
|Principal payment on Senior and Medium-Term Notes                                        | (187,555,450)                  
|Proceeds from Senior and Medium-Term Notes                                               | -                              
|Proceeds from the issuance of common shares, net of $2,187,500 of underwriting           |                                
|commissions and $99,306 of offering expenses paid in 1997                                | -                              
|Line of Credit borrowings                                                                | 310,200,000                    
|Line of Credit repayments                                                                | (536,646,565)                  
|Deferred financing and offering costs                                                    | (8,839,778)                    
|Transaction costs paid related to debt extinguishment                                    | (1,682,416)                    
|Common share dividends paid and operating partnership distributions                      | (35,182,943)                   
|Preferred share dividends paid                                                           | (5,484,426)                    
|Purchase of treasury shares                                                              | (15,481,921)                   
|Stock options exercised                                                                  | -                              
|Net cash flow provided by financing activities                                           | 4,360,603                      
|Increase (decrease) in cash and cash equivalents                                         | 35,350,182                     
|Cash and cash equivalents, beginning of year                                             | 1,034,655                      
|Cash and cash equivalents, end of year                                                   | $ 36,384,837                   





**ASSOCIATED ESTATES REALTY CORPORATION**

**NOTES TO FINANCIAL STATEMENTS**

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

**Business**

Associated Estates Realty Corporation (the "Company") is a self-administered and self-managed real estate investment trust ("REIT") which specializes in the property, acquisition, advisory
and  development management, disposition, operation and ownership activities of multifamily properties.
In connection with the merger between the Company and MIG Realty Advisors, Inc. ("MIGRA") on June
30, 1998, the Company also acquired property management and advisory management businesses with
several institutional clients with  the right to receive certain property and asset management fees;
acquisition, disposition and incentive fees; loan origination and consultation fees; and mortgage
servicing fees.  MIG II Realty Advisors, Inc. ("MIG"), MIGRA's successor, is a registered investment
advisor and functions as a real estate advisor to pension funds.  MIG recognizes revenue primarily from
its client's real estate acquisitions and dispositions, loan origination and consultation, mortgage
servicing, asset and property management and construction lending activities.  MIG earns the majority of
its mortgage servicing fee revenue from two of its pension fund clients.  MIG's asset and property
management, investment advisor and mortgage servicing operations including those of the prior MIGRA
affiliates, are collectively referred to herein as the "MIGRA Operations".  Additionally, AERC owns
substantially all of the economic interest in four corporations which provide management and other
services for the Company and third parties.  These corporations are referred to herein as "Service
Companies".

The Company's portfolio at December 31, 1999 consists of a total of 142 properties of which 85
(70 Market Rate properties and 15 Affordable Housing properties) are owned, directly or indirectly, by
the Company or by a subsidiary of the Company; eight properties in which the Company is a joint
venture partner (one Market Rate property 2/3% owned; four Market Rate properties 1/3% owned; two
Market Rate properties 1/2% owned and one Affordable Housing property 1/2% owned) and 49 non-owned properties (of which four are commercial properties) managed by the Company or one of its
Service Companies which provide property and asset management, investment advisory, painting and
computer services as well as mortgage origination and servicing to both owned and non-owned
properties.

**Principles of Consolidation**

The accompanying consolidated financial statements include the accounts of the Company, all
subsidiaries, the Service Companies and the Operating Partnership structured as a DownREIT.  In
connection with the project specific, nonrecourse mortgage refinancing more fully described in Note 7,
separate legal entities, which are qualified REIT subsidiaries of the Company, were formed which are
included in the Company's consolidated financial statements.  These qualified REIT subsidiaries are
separate legal entities and maintain records, books of accounts and depository accounts separate and
apart from any other person or entity.  The Company holds preferred share interests in the Service
Companies which entitles it to receive 95% of the economic benefits from operations and which is
convertible into a majority interest in the voting common shares.  The outstanding voting common
shares of these Service Companies are held by an executive officer of the Company.  The Service
Companies are consolidated because, from a financial reporting perspective, the Company is entitled to
virtually all economic benefits and has operating control.  The preferred share interests are not an
impermissible investment for purposes of the Company's REIT qualification test.

The Company entered into an operating partnership structured as a DownREIT of which an
aggregate 20% 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 33-1/3% 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% or less owned by the Company, are
presented using the equity method of accounting.  Since the Company intends to fulfill its obligations as
a partner in the joint ventures, the Company has recognized its share of losses and distributions in
excess of its investment.

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

**Change in Estimates**

During the first quarter, the Company refined certain cutoff procedures and its estimation
process for the accumulation of property operating expense accrual adjustments.  This refinement was
facilitated, in part, by the migration to the decentralization of certain functions to the properties and also
by the upgrading of the Company's information systems.  This refinement had the effect of reducing net
income by approximately $632,000 or $.03 per share (basic and diluted) for the year ended December
31, 1999.  In addition, in connection with the Company's adoption of the change in its policy for
capitalizing certain replacements (Note 21), the Company reassessed its remaining useful lives of
certain appliances and floor covering it had capitalized upon the acquisition of a property.  This change
in useful lives together with the reduction in the estimated useful lives of certain software from 10 to 7
years had the effect of reducing income by approximately $905,600 or $.04 per share (basic and diluted)
for the year ended December 31, 1999.  Also, the Company had determined in December 1998 that it
would replace certain of its software during 1999.  Commencing January 1, 1999, the Company began
amortizing the remaining net book value over its revised estimated useful life of one year.  This change
had the effect of reducing net income by approximately $948,000 or $.04 per share (basic and diluted)
for the year ended December 31, 1999.

**Use of Estimates**

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

**Cash Equivalents**

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

**Real Estate and Depreciation**

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

Buildings and improvements		5 - 30 years

Furniture, fixtures and equipment		5 - 10 years

As more fully discussed in Note 21, effective January 1, 1999, the Company changed its method
of accounting to capitalize expenditures for certain replacements and improvements, such as new HVAC
equipment, structural replacements, appliances, flooring, carpeting and kitchen/bath replacements and
renovations.  Previously, these costs were charged to operations as incurred.  Ordinary repairs and
maintenance, such as suite 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 $4,319,162 or $.19 per share (basic and diluted).

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

**Impairment of Long-Lived Assets**

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

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

**Deferred Leasing and Financing Costs**

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

**Intangible Assets**

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

**Revenue Recognition**

The Company's residential property leases are for terms of generally one year or less.  Rental
income is recognized on the straight-line basis. Retroactive revenue increases related to budget based
Affordable Housing Properties are generally recognized based on applications submitted to the U.S.
Department of Housing and Urban Development ("HUD").

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

**Operating Partnership Minority Interest**

In conjunction with the acquisition of the operating partnership, the Company issued a total of
522,032 operating partnership units ("OP units") which consist of 84,630 Class A OP units, 36,530 Class
B OP units, 115,124 Class C OP units, 62,313 Class D OP units, and 223,435 Class E OP units.
Pursuant to terms of the underlying agreements, the B and C OP units were exchanged into Class A OP
units during 1999.  The Company has the option to redeem, in certain circumstances, the Class A OP
units for common shares exchangeable on a one-for-one basis, or the cash equivalent amount.  The
Class A unitholders are entitled to receive cumulative distributions per OP unit equal to the per share
distributions on the Company's common shares.  During 1999, the Company charged $241,310 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 year ended December 31, 1999, the Class D and
Class E unitholders were not entitled to receive an allocation of net income and did not receive any cash
distributions from the operating partnership.

**Income Taxes**

The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986 (the
"Code"), as amended.  As a REIT, the Company is entitled to a tax deduction for dividends paid to its
shareholders, thereby effectively subjecting the distributed net income of the Company to taxation at the
shareholder level only, provided it distributes at least 95% of its taxable income and meets certain other
qualifications.

The Service Companies operate as taxable C-corporations under the Code and have accounted
for income taxes in accordance with the provisions of Statement of Financial Accounting Standard
("SFAS") No. 109, Accounting for Income Taxes.  Taxes are provided for those Service Companies
having net profits for both financial statements and income tax purposes.  For one of the Service
Companies with a net operating loss carryforward, a deferred tax asset of $812,619 and a valuation
allowance of $326,533 exist at December 31, 1999.  The 1999 and 1998 net operating loss
carryforwards for the Service Companies, in the aggregate, are approximately $4,743,000 and
$5,361,000 and expire in the years 2009 to 2019.

The gross deferred tax assets were $2,223,492, $2,355,460 and $1,773,287 at December 31,
1999, 1998 and 1997, respectively, and relate principally to net operating losses of the Service
Companies.  Gross deferred tax liabilities of $486,085, $1,248,106 and $643,931 at December 31, 1999,
1998 and 1997, 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 $1,737,407, $1,107,354 and $1,129,356 at December 31, 1999, 1998 and 1997, respectively.  In
1999, the Company utilized approximately $768,000 of previously reserved net operating losses.  In
1998, the Company released a valuation allowance of approximately $663,000 primarily related to the
expected utilization of previously reserved net operating losses due to the merger; the effect of which
reduced goodwill.  The Company reserves for net deferred tax assets when management believes it is
more likely than not that they will not be realized.

At December 31, 1999 and 1998, the Company's net tax basis of properties exceeds the amount
set forth in the Company's Consolidated Balance Sheets by $28 million and $54 million, respectively.

**Derivative Financial Instruments**

The Company may, from time to time, enter into treasury lock arrangements or interest rate
swap contracts or similar instruments as hedges against changes in interest rates or the fair value of the
Company's liabilities.  The Company does not utilize these arrangements for trading or speculative
purposes.  At December 31, 1999 and 1998, there were no treasury lock arrangements, interest rate
swap contracts or other derivative instruments outstanding.

******Recent Accounting Pronouncements**

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities.  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.  The statement also provides for offsetting changes in fair value or cash flows of both the
derivative and the hedged asset or liability to be recognized in earnings in the same period; however,
any changes in fair value or cash flow that represent the ineffective portion of a hedge are required to be
recognized in earnings and cannot be deferred.  For derivative instruments not accounted for as hedges,
changes in fair value are required to be recognized in earnings.  The provisions of this statement
become effective for quarterly and annual reporting beginning June 15, 2000.  Although the statement
allows for early adoption in any quarterly period after June 1998, the Company has no plans to adopt the
provisions of SFAS No. 133 prior to the effective date.  The impact of adopting the provisions of this
statement on the Company's financial position, results of operations and cash flow subsequent to the
effective date is not currently estimable and will depend on the financial position of the Company and the
nature and purpose of the derivative instruments in use by management at that time.

**Reclassifications**

Certain reclassifications have been made to the 1998 and 1997 financial statements to conform
to the 1999 presentation.

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

**Development Activity**

Construction in progress, including the cost of land, for the development of multifamily properties
was $22,177,579 and $53,740,292 at December 31, 1999 and 1998, 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 $3,078,173, $2,704,434 and
$1,880,830 during the years ended December 31, 1999, 1998 and 1997, respectively.  During 1999, the
construction and leasing of 576 units at 3 properties were completed at a total cost of $71.0 million.
During 1998, two projects were completed consisting of an aggregate of 396 units located in Aurora,
Ohio and Streetsboro, Ohio at a total cost of construction of $32.9 million.  During 1998, the construction
and leasing of 184 additional units at two of the Company's properties were completed at a total cost of
$11.9 million.  During 1997, a 324 unit property located in Columbus, Ohio was completed at a total cost
of construction of $18.8 million.  During 1997, the construction and leasing of 175 additional units at
three of the Company's properties were completed at a total cost of $14.2 million.

The following schedule details construction in progress at December 31, 1999:

|                             |        |          |             |                   |          
|---------------------------- | ------ | -------- | ----------- | ----------------- | ---------
|                             |        |          | Placed in   |                   |          
|(dollars in thousands)       | Number | Costs    | Service     | December 31, 1999 | Estimated
|                             | of     | Incurred | through     | Land              | Building 
|Property                     | Units  | to Date  | 12/31/99    | Cost              | Cost     
|                             |        |          |             |                   |          
|ATLANTA, GEORGIA             |        |          |             |                   |          
|Idlewylde/Boggs Road-Phase I | 308    |          |             |                   |          
|-Phase II                    | 535    |          |             |                   |          
|                             | 843    | $  4,394 | -           | $3,955            | $    439 
|                             |        |          |             |                   |          
|ORLANDO, FLORIDA             |        |          |             |                   |          
|Windsor at Kirkman Apts.     | 460    | 48,666   | $43,213     | 504               | 4,949    
|                             |        |          |             |                   |          
|AVON, OHIO                   |        |          |             |                   |          
|Village at Avon-Phase I      | 164    |          |             |                   |          
|-Phase II                    | 148    |          |             |                   |          
|                             | 312    | 16,872   | 9,820       | 1,458             | 5,594    
|                             |        |          |             |                   |          
|CRANBERRY TWP, PENNSYLVANIA  |        |          |             |                   |          
|Berkley Manor                | 250    | 2,770    |             | 2,485             | 285      
|                             |        |          |             |                   |          
|Other                        | -      | 2,509    | -           | 1,517             | 992      
|                             | 1,865  | $75,211  | $53,033 (1) | $9,919            | $ 12,259 

(1l) Including land of $3,405

**Acquisition Activity**

During 1999, the Company acquired a 24 acre parcel of land for $2.3 million located in
Cranberry Township, Pennsylvania on which the Company plans to construct 250 units.  The purchase
price was financed using the like-kind exchange funds from the sale of a certain operating property.

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

On June 30, 1998, the Company consummated the remaining MIGRA Related Transaction,
except for the acquisition of the newly developed property.  As consideration for their interest in MIGRA
and the affiliated property management businesses, the shareholders of MIGRA received 408,314 of the
Company's common shares.  Subject to certain conditions, adjustments and achievements of specified
performance goals, the MIGRA Stockholders' Conversion Rights entitle the MIGRA Stockholders to
receive (a) on the second issuance date (June 30, 1999), an amount of $872,935 payable in common
shares of the Company using the average closing price of the common shares for the 20 trading days
immediately preceding June 30, 1999, (approximately 74,994 common shares at a price of $11.64 per
share) subject to certain price adjustments as provided for in the Merger Agreement and (b) on the third
issuance date (June 30, 2000) $2,982,917 worth of common shares of the Company of which $872,935
is based on the average closing price of the common shares for the 20 trading days immediately
preceding the date the consideration is to be paid and $2,109,982 is based on a closing price of $23.63
per the merger agreement.

In 1999, the Company issued 74,994 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.  These shares were entitled to the dividend payments which were declared
on June 21 and October 7, 1999, and amounted to $56,246.  Such shares were recorded at their, then,
fair value of $872,935 and increased the recorded amount of the intangible asset associated with the
purchase of MIGRA.

In October 1999, the Company settled the purchase price adjustment relating to the assets and
liabilities (as defined in the related agreement) assumed in connection with the MIGRA merger.  The
MIGRA merger agreement provided that such adjustment would be determined on the one-year
anniversary of the merger.  Accordingly, the Company paid a net of approximately $1.25 million with
respect to the purchase price adjustment.  The consideration paid was funded by proceeds from the
sale, at par (including accrued interest) of a note receivable to affiliates, (the former MIGRA
shareholders).  This purchase price adjustment increased the Company's recorded amount of the
intangible asset initially recorded at the date of the merger.

On June 30, 1998, the Company also acquired the MIG REIT Properties for $12.2 million in
cash, the issuance of 5,139,387 common shares of the Company and the assumption of approximately
$0.7 million in liabilities.

In connection with the MIGRA Related Transaction, the Company also acquired the general and
certain limited partnership interests in an operating partnership structured as a DownREIT that owned a
multifamily property in development.  In exchange for cash of $15.6 million, the Company received a
59% general partnership interest in AERC HP Advisors Limited Partnership ("HP Advisors"), an
operating partnership, which owns a parcel of real property located in Orlando, Florida upon which a 460
unit multifamily apartment complex, Windsor at Kirkman Apartments, was being constructed.  Certain
limited partners of HP Advisors received 459,719 OP units, representing four classes of limited
partnership interests, in exchange for their interests in Windsor at Kirkman Apartments.  Commencing
two years from the date of issuance, the holders of the Class A OP units can present such Class A OP
units for redemption to the operating partnership for cash, subject to certain conditions.  The Company
has the option to redeem, in certain circumstances, the Class A OP units for  common shares,
exchangeable on a one-for-one basis, or the cash equivalent amount.  The Class B and C OP units were
exchanged into Class A OP units during 1999 pursuant to terms of the underlying agreements.  The
Class E OP units, become exchangeable at the option of the Company into Class A OP units upon the
attainment of certain operating thresholds, two years from the date of the merger closing.

In October 1998, the final MIGRA Related Transaction was completed by the Company
acquiring the general and certain limited partnership interests in a partnership that owns a multifamily
property located in Pembroke Pines, Florida containing 368 units for a purchase price of approximately
$34.2 million.  In exchange for cash of $16.0 million and the assumption of mortgage indebtedness of
$16.5 million, the Company received an additional general partnership interest in HP Advisors.  Certain
limited partners of HP Advisors received 62,313 Class D OP units in exchange for their interests in the
property.  The Class D OP units are exchangeable into Class A OP units at the option of the Company,
subject to certain conditions, two years from the date of merger closing and upon the attainment of
certain operating thresholds.

The Company's right to exchange Class D and Class E OP units into Class A OP units is
conditioned upon obtaining certain certificates of occupancy, as set forth in the agreement, at the
Windsor at Kirkman Apartments property.

In connection with the MIGRA Related Transaction (without regard to payment of contingent
consideration or the settlement of the purchase price adjustment), the Company recorded the following
amounts: (i) accounts receivables and miscellaneous prepaid expenses of $2.9 million, (ii) intangible
assets of $ 4.2 million, (iii) real estate assets of $239.7 million, (iv) accounts payable and accrued
expenses of $4.8 million, (v) accrued real estate taxes of $0.5 million, (vi) security deposits of $0.8
million, (vii) mortgage indebtedness of $31.5 million, (viii) borrowings on the MIGRA Line of Credit
Facilities of $1.0 million, (ix) borrowings on the Company's Line of Credit of $90.1 million, (x) operating
partnership units of $12.0 million and (xi) common stock and additional paid in capital of $106.1 million.

During 1997, the Company acquired, in separate purchase transactions, eight multifamily
properties containing an aggregate of 1,762 units and two parcels of land consisting of 14.7 acres for an
aggregate purchase price of $105.1 million, of which $4.5 million represented liabilities assumed.  The
acquired properties are located in Clinton Township and Farmington Hills, Michigan; Indianapolis,
Indiana; and Cincinnati, Columbus and Toledo, Ohio.  The purchase price of these acquired properties
has been financed primarily with proceeds from borrowings on the Company's Line of Credit.

**Disposition Activity**

During 1999, the Company sold eight operating properties for net cash proceeds of $36.8
million, resulting in a gain of $19.6 million.  Net cash proceeds from the sale of five of the eight operating
properties of $13.4 million, resulting in a gain of $12.8 million, were placed in a trust which restricted the
Company's use of these funds for the exclusive purchase of other property of like-kind and qualifying
use.  The Company used $2.3 million of the like-kind funds to acquire a 24 acre parcel of land during
1999.  The remaining net proceeds and unutilized like-kind funds were used to pay the Company's
dividend and pay down a $20 million Medium-Term Note which matured in September 1999.  Rainbow
Terrace Apartments, an Affordable Housing property, was conveyed to HUD by deed in lieu of
foreclosure resulting in a loss of approximately $67,000 (Note 12).

The Company sold an additional eight Market Rate properties located in Ohio on December 31,
1999 for an aggregate sales price of approximately $34 million.  To facilitate the sale, the Company
financed the sale with fixed rate debt maturing July 1, 2001.  Under the structure of the transaction, the
buyer may put the properties back to the Company, after March 1, 2001 but before June 2, 2001, at a
price equal to their fair market value less outstanding indebtedness then owing on the purchase money
financing.  The Company has a corresponding option to repurchase the properties on the same
monetary basis at any time prior to December 31, 2000.  The Company will continue to manage the
properties.  These sales will not be recognized for Generally Accepted Accounting Principles ("GAAP")
purposes until the seller financing is repaid.  These eight properties are classified as Properties held for
sale in the Consolidated Balance Sheets.

In December 1998, the Company sold an operating property for net cash proceeds of $10.7
million, resulting in a gain of $503,497.  The net cash proceeds were used to pay down the Company's
Line of Credit.

In December 1997, the Company sold a 90 acre parcel of land zoned for office and industrial
use.  Net cash proceeds from the sale of $4.9 million, resulting in a gain of $1.6 million, were placed in a
trust which restricted the Company's use of these funds for the exclusive purchase of other property of
like-kind and qualifying use.  The like-kind exchange was consummated in 1998.

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

As discussed in Note 2, in 1999, the Company entered into sales contracts for eight Ohio Market
Rate properties.  The Company expects that for financial reporting purposes these properties will be sold
and accordingly, are presented in the Consolidated Balance Sheets as Properties held for sale.  These
eight properties contributed approximately $2.0 million to income before extraordinary items and
cumulative effect during 1999.

**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:

|                                          | 1999         | 1998         
|----------------------------------------- | ------------ | -------------
|                                          |              |              
|Resident security deposits                | $  1,386,413 | $     862,369
|Investor's escrow                         | 1,080,925    | 2,445,352    
|Escrow and reserve funds for replacements |              |              
|required by mortgagees                    | 11,682,176   | 3,411,142    
|                                          | $14,149,514  | $6,718,863   

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.  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, is excluded from
earnings and reported net of tax, where applicable, as a separate component of comprehensive income.
At December 31, 1999 and 1998, held to maturity securities included: treasury bills with a cost of
$505,088 and $848,917 and a fair value of $506,884 and $876,235, respectively, and certificates of
deposits with a cost and estimated fair value of $48,000 and $488,000 at December 31, 1999 and 1998,
respectively.  Available for sale investments included FHLMC securities with a cost of $99,500 at
December 31, 1999 and 1998.

******5.	INTANGIBLE AND OTHER ASSETS**

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

|                                     | 1999        | 1998       
|------------------------------------ | ----------- | -----------
|                                     |             |            
|Intangible assets                    | $ 6,561,530 | $ 4,218,106
|Deferred financing and leasing costs | 13,508,346  | 6,502,220  
|Less:  accumulated amortization      | (5,275,937) | (2,960,969)
|                                     | 14,793,939  | 7,759,357  
|Prepaid expenses                     | 3,650,095   | 3,914,114  
|Other assets                         | 2,011,732   | 1,420,501  
|                                     | $20,455,766 | $13,093,972

Amortization expense for intangible assets was $1,160,760, $272,344 and $0 for the years
ended December 31, 1999, 1998 and 1997, respectively.  Amortization expense for deferred finance and
leasing costs was $1,154,208, $1,052,907 and $700,118 for the years ended December 31, 1999, 1998
and 1997, respectively.

**6.	EXTRAORDINARY ITEMS AND OTHER CHARGES**

During 1999, upon pay off of its Line of Credit and paydown of $76,375,188 and $111,791,000
of its Senior and Medium-Term Notes and the early payment of three mortgage loans, the Company
wrote off the related unamortized deferred finance costs related to those debts.  In 1998, upon the
refinancing of the Line of Credit, unamortized deferred financing costs were written off.  In 1997, an
unamortized debt premium was written off upon the early repayment of mortgage debt.  These
transactions have been reflected as an extraordinary loss of $3,456,600 ($750,000 facility fee charge,
$126,500 interest breakage fee and a $932,200 write off of deferred finance costs related to the
termination of the unsecured line of credit facility and $1,524,700 write off of deferred finance costs,
$709,200 of transaction costs, $105,800 prepayment penalty related to the payoff of a first mortgage
loan and $691,800 of a gain related to the tender and paydown of the Senior and Medium-Term Notes)
and $124,900 and an extraordinary gain of $1,023,700 in 1999, 1998 and 1997, respectively.

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

During 1998 and 1997, the Company wrote off $91,827 and $1,764,044, respectively, of
receivables.  The 1998 receivable write-off was comprised of an advance to a former managed but non-owned, non-related party property.  The 1997 receivable write-off was principally comprised of two
advances to managed but non-owned, non-related party properties.  Additionally, in 1999 and 1998, the
Company reserved $150,000 and $200,000, respectively with respect to a receivable from an investor in
a managed but non-owned property.  This write-off and reserve is reflected as a charge for funds
advanced to non-owned properties and other in the Consolidated Statements of Income.

******7.	DEBT**

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

|                                          | 1999         | 1998       
|----------------------------------------- | ------------ | -----------
|                                          |              |            
|Conventional mortgage debt, maturing      |              |            
|at various dates to 2012                  | $544,603,752 | $52,176,354
|Federally insured mortgage debt, maturing |              |            
|at various dates to 2024                  | 25,332,437   | 27,866,313 
|                                          | $569,936,189 | $80,042,667

**Conventional Mortgage Debt**

Conventional mortgages payable are comprised of 57 and six loans at December 31, 1999 and
1998, respectively, 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 November 18, 1999 and
June 30, 1998, the Company paid off a variable rate loan of approximately $16.5 million (which was
refinanced as a project specific nonrecourse mortgage loan) and $8.1 million of mortgage notes,
respectively.  Additionally, during 1999, the Company refinanced two fixed rate mortgages totaling $14.9
million as project specific nonrecourse mortgages.  Mortgages payable are generally due in monthly
installments of principal and/or interest and mature at various dates through June 2012.  The weighted
average interest rate of the conventional fixed rate mortgages was 7.74% and 8.75% at December 31,
1999 and 1998, respectively.

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

**Federally Insured Mortgage Debt**

Federally insured mortgage debt which encumbered six and seven of the properties at
December 31, 1999 and 1998 (including one property which is funded through Industrial Development
Bonds) respectively, is insured by HUD pursuant to one of the mortgage insurance programs
administered under the National Housing Act of 1934.  These government-insured loans are
nonrecourse to the Company.  Payments of principal, interest and HUD mortgage insurance premiums
are made in equal monthly installments and mature at various dates through March 1, 2024.  During
1999, the Company transferred Rainbow Terrace Apartments to HUD along with the $1,935,123
mortgage payable (Note 12).  At December 31, 1999, five of the six federally insured mortgages have a
fixed rate and the remaining mortgage ($1,786,015) is variable rate.  Interest rates on the HUD-insured
indebtedness range from 7.0% to 10.125%.  The weighted average interest rate of the federally insured
mortgages was 8.27% and 7.63% at December 31, 1999 and 1998, 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.

Real estate assets pledged as collateral for all mortgage debt had a net book value of
$679,748,164 and $116,367,505 at December 31, 1999 and 1998, respectively.

Unsecured debt consists of the following:

|                                                      | 1999       | 1998         
|----------------------------------------------------- | ---------- | -------------
|Senior Notes, with interest payable quarterly, net of |            |              
|unamortized discounts of $2,285 and $84,097           | $8,540,715 | $  84,915,903
|Medium-Term Notes, with interest  payable quarterly   | 709,000    | 112,500,000  
|Line of Credit                                        | -          | 226,446,565  
|                                                      | $9,249,715 | $	423,862,468

***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 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 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 the revised tender and the related financing, the Company's total debt
structure consists of approximately $568.2 million in long-term, secured, fixed rate financing,
encumbering approximately 63 properties (excluding 7 unconsolidated joint venture properties).  The
Company owns an additional 23 properties that are unencumbered, eight of which were the subject of
the December 31, 1999 sale as more fully discussed in Note 2.

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 million and $10 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 million
Senior Note and paid down the $75 million Senior Note.  The balance of the $75 million Senior Note, net
of unamortized discounts, was $8.5 million and $74.9 million at December 31, 1999 and 1998,
respectively.

******Medium-Term Notes Program**

The Company had two Medium-Term Notes (the "MTN's") outstanding having an aggregate
balance of $709,000 and 11 MTN's outstanding with an aggregate balance of $112.5 million at
December 31, 1999 and 1998, respectively.  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 million MTN that matured in September 1999.  The two
remaining MTN's have principal amounts of $604,000 and $105,000 and bear interest at 7.33% and
6.88%, respectively, and mature in September 2001 and December 2004, respectively.  At December
31, 1998, the principal amounts of the MTN's ranged from $2.5 million to $20 million and bore interest
from 6.18% to 7.93% over terms ranging from two to 30 years (due 2000 to 2026) with a stated weighted
average maturity of 9.27 years.  The two MTN's outstanding at December 31, 1998, had stated terms of
30 years each and the holders had a right to repayment at five and seven years from the issue date of
the respective MTN.  The weighted average interest rate of the two MTN's is 7.26% for the year ended
December 31, 1999 and 6.99% for the 11 MTN's for the year ended December 31, 1998.

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, 1999, there was $62.5 million of additional MTN
borrowings available under the program.

From time to time, the Company may enter into hedge agreements to minimize its exposure to
interest rate risks.  There were no interest rate protection agreements outstanding as of December 31,
1999 or 1998.

**Line of Credit**

Prior to its termination in May 1999, the Company had available a $250 million revolving credit
facility (the "Line of Credit") which contained various restrictive covenants.  At December 31, 1998,
$226.0 million was outstanding under this facility.  The weighted average interest rate on borrowings
outstanding under the Line of Credit was 6.88% at December 31, 1998, representing a variable rate
based on the prime rate or LIBOR plus a specified spread, depending on the Company's long term
senior unsecured debt rating from Standard and Poor's and Moody's Investors Service.  An annual
commitment fee of 15 basis points on the maximum commitment, as defined in the agreement, was
payable annually in advance on each anniversary date.  In May 1999,  the Company  repaid all
outstanding obligations under this Line of Credit through proceeds received from financing project
specific, nonrecourse mortgage loans and accordingly, terminated the facility.  The Company recognized
an extraordinary charge of $1,808,742 which represents a $750,000 facility fee charge, a $126,559
breakage fee, and a $932,183 write off of deferred finance costs related to the line of credit facility.

At March 31, 1998, the Company was in violation of certain financial ratio covenants under the
Line of Credit.  The Company received waivers of those violations through June 30, 1998.  Additionally,
the Company had advised its bank group that it was not in compliance with one of the financial
covenants concerning the Company's net worth as of September 30, 1998.  The bank group continued
to make advances under the Line of Credit following the Company's notification that it was not in
compliance with the net worth covenant.  A $395,000 default waiver fee was paid in December 1998 and
is reflected in the Consolidated Statements of Income.  Due to the repayment of the amounts
outstanding, the Company was not required to, and did not determine compliance with, the financial
covenants for this facility during 1999.

MIGRA maintained a $500,000 line of credit facility ("MIGRA Line of Credit Facility") which the
Company assumed at the time of the merger.  At December 31, 1998, $446,565 was outstanding under
this facility which was paid off on February 10, 1999 and the facility was terminated.  The weighted
average interest rate on borrowings outstanding under the MIGRA Line of Credit Facility was 9.85% at
December 31, 1998.  In connection with the merger, the Company had assumed an additional $500,000
Line of Credit Facility that was paid off at maturity, on October 31, 1998.

On November 18, 1999, the Company entered into a $12 million secured line of credit facility
(the "Secured Line of Credit").  The facility is for a term of one year.  A $10,000 commitment deposit was
paid by the Company.  The Company's borrowings under this Secured Line of Credit bear interest at a
rate of, at the Borrower's option, either the Prime Rate or LIBOR plus 200 basis points.  This Secured
Line of Credit will be utilized by the Company to provide working capital and for general corporate
purposes.   At December 31, 1999, there were no amounts outstanding under this facility.

As of December 31, 1999, the scheduled maturities of secured and unsecured indebtedness for
each of the next five years and thereafter, are as follows:

|2000       | $  13,740,615
|---------- | -------------
|2001       | 19,050,697   
|2002       | 6,060,334    
|2003       | 6,548,035    
|2004       | 7,076,854    
|Thereafter | 526,709,369  
|           | $579,185,904 

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

At December 31, 1999, 1998 and 1997, the Company's interests in the joint venture partnerships
are as follows:

|                   | Ownership
|------------------ | ---------
|                   |          
|Americana          | 33-1/3%  
|Euclid House       | 33-1/3%  
|Gates Mills Towers | 33-1/3%  
|Watergate          | 33-1/3%  
|College Towers     | 50%      
|Highland House     | 50%      
|Lakeshore Village  | 50%      

Summarized financial information for these joint ventures is as follows:

**Balance sheet data**

|                               | 1999          | 1998         
|------------------------------ | ------------- | -------------
|                               |               |              
|Real estate, net               | $15,062,859   | $12,860,390  
|Other assets                   | 3,286,046     | 4,196,368    
|                               | $18,348,905   | $17,056,758  
|                               |               |              
|Amounts payable to the Company | $     152,810 | $     159,872
|Mortgages payable              | 49,711,810    | 50,374,723   
|Other liabilities              | 3,989,377     | 3,641,143    
|Accumulated deficit            | (35,505,092)  | (37,118,980) 
|                               | $18,348,905   | $17,056,758  

**Operating data**

|                                     | 1999          | 1998          | 1997         
|------------------------------------ | ------------- | ------------- | -------------
|                                     |               |               |              
|Rental revenues                      | $19,074,034   | $19,278,712   | $18,775,127  
|Other revenues                       | 114,005       | 174,774       | 129,490      
|Operating and maintenance expenses   | (11,207,637)  | (12,316,421)  | (11,020,783) 
|Depreciation and amortization        | (1,665,475)   | (1,316,451)   | (1,384,453)  
|Interest expense                     | (5,232,400)   | (4,803,070)   | (5,119,462)  
|Net income before cumulative effect  | 1,082,527     | 1,017,544     | 1,379,919    
|Cumulative effect of a change in     |               |               |              
|accounting principle                 | 1,465,666     | -             | -            
|Net income                           | $  2,548,193  | $  1,017,544  | $  1,379,919 
|Company's proportionate interest in: |               |               |              
|Depreciation and amortization        | $     592,264 | $     475,675 | $     496,983
|Interest expense                     | 1,799,524     | 1,656,652     | 1,763,156    
|*Cumulative effect of a change in    |               |               |              
|accounting principle                 | 523,292       | -             | -            
|Income of joint ventures before      |               |               |              
|cumulative effect of a change in     |               |               |              
|accounting principle                 | 585,022       | 444,692       | 560,934      

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

The Company recognized proportionate share net contributions of $55,743 for the year ended
December 31, 1999 and net distributions of $701,143 and $485,513 for the years ended December 31,
1998 and 1997, respectively.  Revenues from property management fees charged to joint ventures
aggregated $843,292, $784,111 and $764,338 for the years ended December 31, 1999, 1998 and 1997,
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 (Note 11).  Rent subsidies of $748,777, $739,278 and $785,883 for the years ended
December 31, 1999, 1998 and 1997, respectively, were received by the property.

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

***Management and Other Services***

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

Summarized affiliate and joint venture transaction activity follows:

|                                   | 1999        | 1998       | 1997      
|---------------------------------- | ----------- | ---------- | ----------
|Property management fee and other  |             |            |           
|miscellaneous service revenues     |             |            |           
|- affiliates                       | $ 2,505,522 | $2,283,066 | $2,416,850
|- joint ventures                   | 882,641     | 939,813    | 921,701   
|Painting service revenues          |             |            |           
|- affiliates                       | 480,122     | 350,014    | 460,218   
|- joint ventures                   | 219,598     | 322,831    | 165,956   
|Expenses incurred on behalf of and |             |            |           
|reimbursed by (1)	- affiliates     | 4,006,927   | 4,426,066  | 4,478,437 
|- joint ventures                   | 2,873,295   | 2,626,631  | 2,540,621 
|Interest income 	- affiliates      | 75,768      | 695,367    | 697,990   
|Interest expense	- affiliates      | (124,153)   | (344,448)  | (297,246) 
|- joint ventures                   | (26,096)    | (24,324)   | (24,091)  



(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 $5,298,524 and $6,677,611 at December 31, 1999 and 1998,
respectively.  Included in the 1998 amount was approximately $1.2 million due from a partnership owned
in part by certain officers of the Company which was assumed by the Company in connection with the
MIGRA merger and liquidated in October 1999.  Other miscellaneous payables due to affiliates and joint
venture properties aggregated $425,080 and $0 at December 31, 1999 and 1998, respectively.

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

In the normal course of business, the Company advances funds on behalf of, or holds funds for
the benefit of, affiliates and joint ventures.  Funds advanced to affiliates and joint ventures aggregated
$2,981,107 and $1,258,106 at December 31, 1999, respectively, and $5,555,732 and $880,057 at
December 31, 1998, respectively.  Except for insignificant amounts, advances to affiliates bear interest;
the weighted average rate charged was approximately 5.0% during 1999 and 1998.  The Company held
funds for the benefit of affiliates and joint ventures in the aggregate amount of $6,342,716 and
$1,274,162 at December 31, 1999, respectively, and $3,174,898 and $2,178,496 at December 31, 1998,
respectively.

During 1999 and 1998, the Company provided an additional reserve of $150,000 and $200,000,
respectively,  with respect to a receivable from a formerly managed non-owned property.  This reserve is
reflected as a charge for funds advanced to non-owned properties in the Consolidated Statements of
Income.

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

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

On January 25, 2000, Associated Estates Management ("AEMC") filed suit in the Cuyahoga
County, Ohio Court of Common Pleas against Euclid Medical and Commercial Arts, an Ohio limited
partnership and its general partner, Metro City No. 1, an Ohio general partnership, seeking damages in
excess of $729,000.  Euclid Medical and Commercial Arts owns the Euclid Medical and Office Building
located in Euclid, Ohio.  AEMC was the property manager of that property until on or about March 23,
1999.  Metro City No. 1 is 56% owned by the Company's Chairman of the Board and CEO, his wife and
his brothers-in-law, one of whom is a director of the Company.  In the normal course of business, the
Company had followed a practice for many years of advancing funds on behalf of, or holding funds for
the benefit of, affiliates, which owned real estate properties managed by the Company.  Euclid Medical
and Office Building was one of those properties for which the Company so advanced funds.  The suit
seeks reimbursement for the funds advanced by the Company for the benefit of this property.  Metro City
No. 1 made a capital call to its partners requesting funds to pay this obligation.  The Chairman of the
Board, his wife and brothers-in-law have paid the Company their proportionate share of the capital call,
however, the remaining non-affiliated partners of Metro City No. 1 have refused to do so.

***Notes receivable*****

At December 31, 1999 and 1998, two notes of equal amounts were receivable from the
Company's Chief Executive Officer aggregating $3,342,000 (included in "Accounts and notes
receivables-affiliates and joint ventures").   One of the notes is partially secured by 150,000 of the
Company's common shares; the other note is unsecured.  For the year ended December 31, 1999 and
1998, the interest rate charged on this note was approximately 6.7% and 5.57%, respectively, with
principal due May 1, 2002.  The Company recognized interest income of $226,997 and $227,833 for the
years ended December 31, 1999 and 1998, respectively, relating to these notes.

**10.	NOTEHOLDER INTEREST**

The Company has a noteholder interest in one multifamily property which, since 1984, has been
unable to generate sufficient cash flow, as defined, to meet the scheduled interest payments under
notes payable to the Company.  Accordingly, the Company is entitled to all cash flows from operations.
To the extent that the cumulative unpaid debt service on the notes is greater than seven 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:

|                       | 1999        | 1998       
|---------------------- | ----------- | -----------
|Real estate, net       | $1,462,082  | $1,301,603 
|Other assets           | 1,225,843   | 836,997    
|                       | $2,687,925  | $2,138,600 
|                       |             |            
|Mortgage notes payable | $3,944,133  | $4,125,835 
|Other liabilities      | 393,022     | 370,090    
|Accumulated deficit    | (1,649,230) | (2,357,325)
|                       | $2,687,925  | $2,138,600 

|                                 | 1999        | 1998        | 1997       
|-------------------------------- | ----------- | ----------- | -----------
|Rental and other revenue         | $2,306,321  | $2,299,437  | $2,264,592 
|Property operating and           |             |             |            
|maintenance expenses             | (1,265,455) | (1,453,787) | (1,392,571)
|Depreciation and amortization    | (221,589)   | (151,814 )  | (148,224)  
|Interest expense                 | (301,484)   | (317,244)   | (325,764)  
|Cumulative effect of a change in |             |             |            
|accounting principle             | 190,301     | -           | -          
|Net income                       | $   708,094 | $  376,592  | $   398,033

******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:

|2000       | $ 1,013,560
|---------- | -----------
|2001       | 735,593    
|2002       | 502,974    
|2003       | 500,224    
|2004       | 449,560    
|Thereafter | 354,490    
|           | $3,556,401 

The Company leases certain equipment under capital leases.  Such equipment is included in
property, plant and equipment with a cost of $1,554,055 and accumulated depreciation of $934,970 at
December 31, 1999.  The Company also leases certain equipment under operating leases.  Future
minimum lease payments under all capital and noncancellable operating leases in which the Company
is the lessee, principally for ground leases, for each of the next five years and thereafter, are as follows:

|              | Capital   | Operating   
|------------- | --------- | ------------
|              |           |             
|2000          | $264,013  | $    229,055
|2001          | 140,485   | 196,703     
|2002          | 69,763    | 123,773     
|2003          | 5,302     | 101,261     
|2004          | -         | 101,261     
|Thereafter    | -         | 5,074,157   
|              | 479,563   | $ 5,826,210 
|Less interest | (57,717)  |             
|              | $ 421,846 |             

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 eight properties
included in the financial statements and expire at various dates from 2021 to 2086.  Rental revenues
derived from such properties were $9,638,081, $9,558,571 and $9,476,338 for the years ended
December 31, 1999, 1998 and 1997, respectively.  Furthermore, at the end of the term of the lease, any
remaining replacement reserves revert to the lessor.  Management believes that the replacement
reserves will be utilized for their intended purpose prior to the end of the lease term.  Such cash reserves
included in restricted cash were $1,183,610 and $1,257,605 at December 31, 1999 and 1998,
respectively.  With respect to such leases, the Company incurred ground rent expense of $101,261 for
each of the years ended December 31, 1999, 1998 and 1997.

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, 1999,
the net book value of this property was $1,553,882.

***Government Programs***

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 August 2000 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
$6,847,644, $10,403,845 and $11,004,881 for the years ended December 31, 1999, 1998 and 1997,
respectively, were recognized in income by the 15 wholly owned subsidiaries eligible for federal rent
subsidies.  As discussed in Note 7, certain obligations are insured by federal mortgage insurance
programs.  The Company believes, that upon expiration of the contracts, the contracts will be renewed,
or the Company will enter into another government subsidized or mortgage restructuring program, or
that the properties will be operated as conventional, market-rate apartments.

**Housing Code Violations**

A number of lawsuits exist that are brought by the City of Cleveland's Housing Division alleging
housing code violations involving a number of properties located in the City of Cleveland, Ohio, now or
formerly owned or managed by the Company.  While the resolution of this matter cannot be predicted
with certainty, management believes that the final outcome of such matters will not have a material
adverse effect on the financial position or results of operations of the Company.

**Other**

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

**12.	RAINBOW TERRACE APARTMENTS**

On February 9, 1998, HUD notified the Company that Rainbow Terrace Apartments, Inc.
("RTA"), the Company's subsidiary corporation that owned Rainbow Terrace Apartments, was in default
under the terms of the Regulatory Agreement and Housing Assistance Payments Contract ("HAP
Contract") pertaining to this property.  Among other matters, HUD alleged that the property was poorly
managed and that RTA had failed to complete certain physical improvements to the property.  Moreover,
HUD claimed that RTA was not in compliance with numerous technical regulations concerning whether
certain expenses were properly chargeable to the property.  As provided in the Regulatory Agreement
and HAP Contract, in the event of a default, HUD had the right to exercise various remedies including
terminating future payments under the HAP Contract and foreclosing the government-insured mortgage
encumbering the property.

This controversy arose out of a Comprehensive Management Review of the property initiated by
HUD in the Spring of 1997, which included a complete physical inspection of the property.   In a series of
written responses to HUD, the Company stated its belief that it had corrected the management
deficiencies cited by HUD in the Comprehensive Management Review (other than the completion of
certain physical improvements to the property) and justified the expenditures questioned by HUD as
being properly chargeable to the property in accordance with HUD's regulations.  Moreover, the
Company stated its belief that it had repaired any physical deficiencies noted by HUD in its
Comprehensive Management Review that might pose a threat to the life and safety of its residents.

In June 1998, HUD notified the Company that all future Housing Assistance Payments ("HAP")
for RTA were abated and instructed the lender to accelerate the balance due under the mortgage.
Subsequent to the notification of the HAP abatements and the acceleration of the mortgage, the lender
advised the Company that the acceleration notification had been rescinded pursuant to HUD's
instruction.  HUD then notified the Company that the HAP payments would be reinstated and that HUD
was reviewing further information concerning RTA provided by the Company.  Thereafter, the Company
continued to receive the monthly HAP payments for RTA.

In June 1998, the Company filed a lawsuit against HUD seeking to compel HUD to review
certain budget based rent increases submitted to HUD by the Company in 1995.

From June 1998 through March 1999, the Company was involved in ongoing negotiations with
HUD for the purpose of resolving these and other disputes concerning other properties managed or
formerly managed by the Company or one of the Service Companies, which were similarly the subject of
Comprehensive Management Reviews initiated by HUD in the Spring of 1997.

On March 12, 1999, the Company, Associated Estates Management Company ("AEMC"), RTA,
PVA Limited Partnership ("PVA"), the owner of Park Village Apartments, and HUD, entered into a
comprehensive settlement agreement (the "Settlement Agreement") for the purpose of resolving certain
disputes concerning property operations at Rainbow Terrace Apartments, Park Village Apartments
("Park Village"), Longwood Apartments ("Longwood") and Vanguard Apartments ("Vanguard").
Longwood was managed by the Company until January 13, 1999.  Park Village was managed by the
Company until December 1999.  Vanguard was managed by AEMC until December 1997.  All four
properties are encumbered by HUD insured mortgages, governed by HUD imposed regulatory
agreements and subsidized by Section 8 Housing Assistance Payments.

Under the terms of the Settlement Agreement, HUD agreed to pay RTA a retroactive rent
increase totaling $1,784,467, which represented the outstanding receivable at the date of the Settlement
Agreement and also at December 1, 1999.  HUD  further agreed to release the Company, AEMC, RTA
and the owners and principals of PVA, Longwood and Vanguard from all claims (other than tax or
criminal fraud claims) regarding the ownership or operation of Rainbow Terrace Apartments, Park
Village, Longwood and Vanguard.  Moreover, HUD  agreed not to issue a limited denial of participation,
debarment or suspension, program fraud civil remedy action or civil money penalty, resulting from the
ownership or management of any of these projects, or to deny eligibility to any of their owners,
management agents or affiliates for participation in any HUD program on such basis.

HUD's obligations under the Settlement Agreement were conditioned upon the performance by
the Company, RTA and PVA of certain obligations, the most significant of which was the obligation to
identify, on or before April 11, 1999, prospective purchasers for both Rainbow Terrace Apartments and
Park Village who were acceptable to HUD, and upon HUD's approval, convey those projects to such
purchasers.  Alternatively, if RTA and PVA were unable to identify prospective purchasers acceptable to
HUD, then RTA and PVA agreed to convey both projects to HUD pursuant to deeds in lieu of
foreclosure.  In either case (conveyance to a HUD approved purchaser or deed in lieu of foreclosure), no
remuneration was to be received by either RTA or PVA in return, except for the $1,784,467 retroactive
rent increase payable to RTA mentioned above.  At December 1, 1999, the Company had receivables of
$1,784,467 related to the 1995 and 1998 retroactive rental increase requests.  At December 1, 1999,
RTA had net assets of $1,827,319, including the retroactive rental receivable of $1,784,467 due from
HUD, and a remaining amount due under the mortgage of $1,935,123.  The Company has excluded
RTA's results of operations from its Consolidated Statement of Income for 1999.

During the third quarter of 1999, RTA, with respect to Rainbow Terrace Apartments, and PVA,
with respect to Park Village, entered into contracts to sell those properties, subject to, among other
matters, HUD approval.  Under the terms of the Settlement Agreement, HUD had the right to approve or
disapprove those prospective purchasers.  Alternatively, HUD had the right to require RTA and PVA to
convey these properties to HUD by deed in lieu of foreclosure.

On November 9, 1999, HUD notified RTA, PVA and the Company of its decision to elect to
receive deeds in lieu of foreclosure to those properties rather than requiring RTA and PVA to continue
further efforts to sell those properties to qualified purchasers.  On or about December 1, 1999, HUD paid
RTA the entire amount of the retroactive rent receivable in the amount of $1,784,467 and RTA and PVA
delivered to HUD deeds in lieu of foreclosure to Rainbow Terrace Apartments and Park Village
Apartments, respectively.  The Company recorded a loss of $67,000 due to the conveyance to HUD of
Rainbow Terrace Apartments

**13.	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 $569,936,189 and
$80,042,667 at December 31, 1999 and 1998, respectively, have an estimated aggregate fair value of
approximately $541,985,790 and $84,242,006, respectively.  The Line of Credit was carried at an
amount which approximated fair market value.  Estimated fair value is based on interest rates currently
available to the Company for issuance of debt with similar terms and remaining maturities.

Senior and Medium-Term Notes with an aggregate carrying value of $9,249,715 and
$197,415,903 at December 31, 1999 and 1998, respectively, have an estimated fair value of $9,413,022
and $210,908,014, respectively.

The Company may, from time to time, enter into interest rate agreements to manage interest
costs and risks associated with changing rates.  The Company does not utilize these agreements for
trading or speculative purposes.  These agreements, considered qualifying hedges, are not recorded in
the financial statements until the debt transaction is consummated and the agreement is settled.  There
were no such agreements at December 31, 1999 and 1998.

Disclosure about the fair value of financial instruments is based on pertinent information
available to management as of December 31, 1999 and 1998.  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.

******14.	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:

|                                                        | 1999               | 1998         | 1997      
|------------------------------------------------------- | ------------------ | ------------ | ----------
|Issuance of common shares in  connection with           |                    |              |           
|the acquisition of MIG REIT properties and the          |                    |              |           
|MIGRA merger including the first anniversary            |                    |              |           
|payment of the merger                                   | $          872,935 | $106,063,359 | $
-       
|Purchase price adjustment                               | 1,232,112          | -            | -         
|Issuance of OP units in connection with the             |                    |              |           
|acquisition of partnership interests in a               |                    |              |           
|development property and an operating property          | -                  | 11,956,174   | -         
|Assumption of mortgage debt in connection with          |                    |              |           
|the acquisition of properties                           | -                  | 31,468,622   | -         
|Assumption of liabilities in connection with the        |                    |              |           
|acquisition and disposition of properties               | 1,623,400          | 6,225,251    | 4,448,956 
|Dividends declared but not paid                         | -                  | 10,507,586   | 7,938,692 
|Capital lease obligations                               | -                  | 548,867      | 339,745   
|Offering expenses accrued                               | -                  | 37,022       | 37,771    
|Cash paid for interest (including capitalized interest) | 40,656,691         | 29,867,753   | 19,628,642
|In connection with the conveyance of RTA to HUD:        |                    |              |           
|Transfer of mortgage debt                               | 1,935,123          | -            | -         
|Transfer of other liabilities                           | 187,933            | -            | -         
|Transfer of accounts receivable-rent                    | 31,427             | -            | -         
|Transfer of escrows                                     | 762,464            | -            | -         
|Transfer of real estate assets, net                     | 1,395,689          | -            | -         

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

***Common Shares*****

In 1999, the Company issued 74,994 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.  These shares were entitled to the dividend payments which were declared
on June 21 and October 7, 1999, and amounted to $56,246.  Such shares were recorded at their, then,
fair value of $872,935 and increased the recorded amount of the intangible asset associated with the
purchase of MIGRA.

In June 1998, the Company issued 408,314 and 5,139,387 common shares relating to the
Company's merger of MIGRA and the related acquisition of eight multifamily properties, respectively.

On July 2, 1997, the Company completed an offering of 1,750,000 common shares at $23.50
per share.  The net proceeds of approximately $38.8 million were applied to reduce debt.

***Treasury Shares***

On June 29, 1998, the Company's Board of Directors authorized management to purchase, from
time to time, up to 1,000,000 common shares at market prices.  On June 21, 1999, the Company's
Board of Directors amended the Company's stock repurchase plan by authorizing up to an additional
2,000,000 common shares to be repurchased by the Company at market prices.  The timing of stock
purchases are made at the discretion of management.  During 1999 and 1998, 1,519,380 and 25,000
shares were repurchased at an aggregate cost of $15,481,921 and $466,523, respectively, The
repurchases were funded primarily from property sale and financing proceeds.

***Preferred Shares*****

At December 31, 1999, 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 are
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, 1999, 1998 or
1997.

**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% or more of the
then outstanding common shares of the Company or announces an offer to acquire 15% or more of the
Company's then outstanding common shares.

If a person or group acquires 15% 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% 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.

**16.	EARNINGS AND DIVIDENDS PER SHARE**

**Earnings Per Share**

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

|                                                            | For the year ended December 31,
|----------------------------------------------------------- | -------------------------------
|                                                            | 1999                           
|**Basic Earnings Per Share:**                               |                                
|Income before extraordinary item and cumulative effect      |                                
|of a change in accounting principle                         | $22,846,447                    
|Less: Preferred share dividends                             | (5,484,426)                    
|Income before extraordinary item and cumulative effect      |                                
|of a change in accounting principle applicable to           |                                
|common shares                                               | 17,362,021                     
|Less: Extraordinary item (loss) gain                        | (3,456,612)                    
|Add: Cumulative effect of a change in accounting            |                                
|principle                                                   | 4,319,162                      
|Net income applicable to common shares                      | $18,224,571                    
|                                                            |                                
|**Diluted Earnings Per Share:**                             |                                
|Income before extraordinary item and cumulative effect of a |                                
|change in accounting principle                              | $22,846,447                    
|Add:	Minority interest in operating partnership             | -                              
|Less:	Preferred share dividends                             | (5,484,426)                    
|Amortization expense  relating to contingent                |                                
|merger consideration                                        | -                              
|Income before extraordinary item and cumulative effect of a |                                
|change in accounting principle applicable to common         |                                
|shares                                                      | 17,362,021                     
|Less: Extraordinary item (loss) gain                        | (3,456,612)                    
|Add: Cumulative effect of a change in accounting            |                                
|principle                                                   | 4,319,162                      
|Net income applicable to common shares                      | $18,224,571                    
|                                                            |                                
|**Number of shares:**                                       |                                
|Basic-weighted average shares outstanding                   | 22,050,905                     
|Add:	Dilutive shares                                        | 1,994                          
|Operating partnership units                                 | -                              
|Contingent merger consideration                             | -                              
|Diluted -weighted average shares outstanding                | 22,052,899                     
|                                                            |                                
|**Earnings per common share - basic**                       |                                
|Income before extraordinary item and cumulative             | $             .79              
|effect of a change in accounting principle                  | $            (.15)             
|Extraordinary item                                          | $             .19              
|Cumulative effect of a change in accounting principle       | $             .83              
|Net income                                                  |                                
|                                                            |                                
|**Earnings per common share - diluted:**                    |                                
|Income before extraordinary item and cumulative             |                                
|effect of a change in accounting principle                  | $             .79              
|Extraordinary item                                          | $            (.15)             
|Cumulative effect of a change in accounting principle       | $             .19              
|Net income                                                  | $             .83              
|                                                            |                                
|**Pro forma amounts assuming the new capitalization**       |                                
|**policy is applied retroactively:**                        |                                
|Effect of new capitalization policy                         | $(4,319,162)                   
|Net income                                                  | $19,389,835                    
|Net income applicable to common shares                      | $13,905,409                    
|**Per share amount - Effect of new capitalization policy:** |                                
|Basic                                                       | $          (.19)               
|Diluted                                                     | $          (.19)               
|**Per share amount - Net income applicable to**             |                                
|**common shares:**                                          |                                
|Basic                                                       | $             .63              
|Diluted                                                     | $             .63              

Options to purchase 1,385,576, 1,310,874 and 988,674 common shares were outstanding at
December 31, 1999, 1998 and 1997, respectively (Note 17), of which has been reflected above using
the treasury stock method.

The exchange of operating partnership minority interests into common shares was not included
in the computation of diluted EPS for certain periods subsequent to their issuance as the effect of
assuming conversion for those periods was antidilutive (Note 1).  As of December 31, 1999 and 1998,
the Company plans to settle these OP units in cash.

******Dividends Per Share**

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

|            | For the year ended December 31, 1999
|----------- | ------------------------------------
|            |                                     
|            |                                     
|            |                                     
|            | Date Paid                           
|            |                                     
|1st quarter | 05/1/99                             
|2nd quarter | 08/2/99                             
|3rd quarter | 11/1/99                             
|4th quarter | N/A                                 
|            |                                     

*A fourth quarter dividend of $0.375 per share was declared on January 4, 2000 and paid on February 1, 2000.

|            | For the year ended December 31, 1998
|----------- | ------------------------------------
|            |                                     
|            |                                     
|            |                                     
|            | Date Paid                           
|            |                                     
|1st quarter | 5/1/98                              
|2nd quarter | 8/1/98                              
|3rd quarter | 10/31/98                            
|4th quarter | 1/15/99                             
|            |                                     

|            | For the year ended December 31, 1997
|----------- | ------------------------------------
|            |                                     
|            |                                     
|            |                                     
|            | Date Paid                           
|            |                                     
|1st quarter | 5/1/97                              
|2nd quarter | 8/1/97                              
|3rd quarter | 10/31/97                            
|4th quarter | 1/15/98                             
|            |                                     

Preferred dividends of $5,484,426, $5,484,421 and $5,484,421 were paid for the years ended
December 31, 1999, 1998 and 1997, respectively, of which $1,582,255, $276,963 and $0 was
designated as a capital gain dividend for the years ended December 31, 1999, 1998 and 1997,
respectively.

******17.	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% and 15%
(maximum employee contribution was 12% prior to February 1, 1999) of their gross wages.  The
Company matches such contributions at a rate of 25% up to a maximum participant contribution of 6%
(maximum employer contribution was 25% up to a maximum participant's contribution of 4% prior to
February 1, 1999).  The Company made contributions to this plan, of approximately $154,000, $76,000,
and $60,000 for the years ended December 31, 1999, 1998 and 1997, respectively.  Additionally, the
Company offers long-term disability and medical, dental and life insurance benefits to employees.

**AERC Share Option Plan**

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

|                                          |            | Granted and |           |            
|----------------------------------------- | ---------- | ----------- | --------- | -----------
|                                          | Authorized | Outstanding | Available | Exercisable
|                                          |            |             |           |            
|Balance at December 31, 1996              | 543,093    | 343,330     | 199,763   | 318,330    
|Granted (at $24.06 per share)             | -          | 190,000     | (190,000) | -          
|Forfeited (at $22.00 per share)           | -          | (3,000)     | 3,000     | (3,000)    
|Exercised (at $22.44 to $23.75 per share) | -          | (75)        | -         | (75)       
|Exercisable                               | -          | -           | -         | 8,334      
|Balance at December 31, 1997              | 543,093    | 530,255     | 12,763    | 323,589    
|Granted (at $12.50 per share)             | -          | 72,200      | (72,200)  | -          
|Forfeited (at $20.25 to $24.06 per share) | -          | (86,530)    | 86,530    | (39,864)   
|Exercisable                               | -          | -           | -         | 32,000     
|Balance at December 31, 1998              | 543,093    | 515,925     | 27,093    | 315,725    
|Granted (at $7.19 per share)              | -          | 142,000     | (142,000) | -          
|Forfeited (at $12.50 to $24.06 per share) | -          | (137,099)   | 137,099   | (33,500)   
|Exercisable                               | -          | -           | -         | 18,879     
|Balance at December 31, 1999              | 543,093    | 520,826     | 22,192    | 301,104    

The weighted average exercise prices of options outstanding at December 31, 1999, 1998 and
1997 were $17.24, $21.31 and $22.67 per share, respectively.  The weighted average exercise prices of
options exercisable at December 31, 1999, 1998 and 1997 were $21.60, $22.22 and $21.96 per share,
respectively.

**Equity-Based Incentive Compensation Plan**

The Equity-Based Incentive Compensation Plan ("the Omnibus Equity Plan"), an equity-based
incentive compensation plan, provides for the grant to participants of options to purchase common
shares, awards of common shares subject to restrictions on transfer, awards of common shares issuable
in the future upon satisfaction of certain conditions, rights to purchase common shares and other awards
based on common shares.  The option price with respect to the grant of options to purchase common
shares will be determined at the time of the grant but will not be less than 100% of the fair market value
of the common shares at the date of the grant or 110% in the case of a participant who, at the date of
grant, owns shares with more than 10% 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% 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 have been vested either in equal increments over
three years or at the end of nine years from the date of grant.  Those shares vesting at the end of a nine
year period have a feature which permits the acceleration of the vesting upon the Company achieving
certain financial benchmarks.  Option grants made from this Plan to date have been vested either in
equal increments over three years or five years beginning on the first anniversary of the date of grant or
at the end of nine years.  The accelerator described above also applied to the nine year grants.

Activity under the Omnibus Equity Plan is summarized as follows:

|                                                  |            | Granted and |           |            
|------------------------------------------------- | ---------- | ----------- | --------- | -----------
|                                                  | Authorized | Outstanding | Available | Exercisable
|                                                  |            |             |           |            
|Balance at December 31, 1996                      | 1,400,000  | 1,000       | 1,399,000 | -          
|Restricted shares granted (at $22.81 per share)   | -          | 878         | (878)     | -          
|Options granted (at $24.06 per share)             | -          | 491,000     | (491,000) | -          
|Forfeited (at $24.06 per share)                   | -          | (76,000)    | 76,000    | -          
|Balance at December 31, 1997                      | 1,400,000  | 416,878     | 983,122   | -          
|Restricted shares granted (at $20.66 per share)   | -          | 484         | (484)     | -          
|Options granted (at $24.06 per share)             | -          | 250,000     | (250,000) | -          
|Forfeited (at $22.8125 to $24.06 per share)       | -          | (10,800)    | 10,800    | -          
|Restricted shares exercised (at $22.81 per share) | -          | (1,000)     | -         | (1,000)    
|Exercisable                                       | -          | -           | -         | 82,800     
|Balance at December 31, 1998                      | 1,400,000  | 655,562     | 743,438   | 81,800     
|Restricted shares granted (at $12.50 per share)   | -          | 21,000      | (21,000)  | -          
|Options granted (at $10.38 to $12.50 per share)   | -          | 234,800     | (234,800) | -          
|Forfeited (at $22.8125 to $24.06 per share)       | -          | (88,439)    | 88,439    | -          
|Exercisable                                       | -          | -           | -         | 108,600    
|Balance at December 31, 1999                      | 1,400,000  | 822,923     | 576,077   | 190,400    
|                                                  |            |             |           |            

The weighted average exercise prices of options outstanding at December 31, 1999, 1998 and
1997 were $20.12, $24.01 and $23.95 per share, respectively.  The weighted average exercise prices of
options exercisable at December 31, 1999, 1998 and 1997 were $24.06, $24.06 and  $0 per share,
respectively.

Deferred compensation of $37,478, $34,000 and $30,600 at December 31, 1999, 1998 and
1997, respectively, has been reflected as a reduction of paid-in capital in the accompanying financial
statements relating to the issuance of 21,000 restricted shares in 1999, 484 restricted shares in 1998
and 1,317 restricted shares in 1997.

**Options Granted to Outside Directors**

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

|                              | Granted | Exercisable
|----------------------------- | ------- | -----------
|                              |         |            
|Balance at December 31, 1996  | 23,750  | 18,750     
|Granted (at $24.06 per share) | 20,000  | -          
|Exercisable                   | -       | 5,000      
|Balance at December 31, 1997  | 43,750  | 23,750     
|Exercisable                   | -       | 20,000     
|Balance at December 31, 1998  | 43,750  | 43,750     
|Granted (at $12.50 per share) | 20,000  | -          
|Balance at December 31, 1999  | 63,750  | 43,750     

The weighted average exercise prices of options outstanding at December 31, 1999 were
$19.67 per share, and at December 31, 1998 and 1997 were $22.94  per share.  The weighted average
exercise prices of options exercisable at December 31, 1999 were $22.94 per share, at December 31,
1998 were $22.94 per share and at December 31, 1997 were $22.00 per share.

**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:

|                                       |                   | 1999               | 1998              | 1997       
|-------------------------------------- | ----------------- | ------------------ | ----------------- | -----------
|Net income applicable to common shares
|                                       | As reported       | $18,224,571        | $12,030,341       | $15,227,948
|                                       | Pro forma         | $18,071,334        | $11,760,348       | $15,152,835
|                                      
|Income per common share               
|As reported 	- Basic                   | $             .83 | $              .61 | $             .94
|- Diluted                              | $             .83 | $              .60 | $             .94
|Pro forma	- Basic                      | $             .82 | $              .59 | $             .94
|- Diluted                              | $             .82 | $              .59 | $             .94

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:

|                                            | 1999       | 1998        | 1997     
|------------------------------------------- | ---------- | ----------- | ---------
|                                            |            |             |          
|Risk free interest rate or range            | 6.3%       | 4.7%-6.9%   | 5.8%-6.2%
|Dividend yield or range                     | 14.93%     | 7.8%-10.6%  | 7.8%     
|Expected life or range                      | 7.64 years | 7-8 years   | 7-8 years
|Expected volatility or range                | 25.98%     | 16.1%-21.6% | 16.3%    
|Weighted average per share fair value of an
|option granted  during the year             | $0.51      | $0.29       | $1.85    

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

**18.	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, 1999,
deferred amounts from participating executives were $29,164 representing 3,733 common shares.

**Executive Compensation and Employment Agreements**

The Company has a three year employment agreement with the President 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, 1999, 1998 and 1997, the
Company recognized expense of $272,160, $85,818 and $118,083, respectively, relating to this Plan.

**Long-Term Plan**

Participants in the Long-Term Plan, a long-term incentive compensation plan, will earn incentive
compensation over a three year period (the "Plan Period") based on specific levels of Funds From
Operations per share, as defined, that are established at the outset of the Plan Period.  Initial awards
under the Long-Term Plan were based on the Plan Period beginning January 1, 1995 and ending
December 31, 1997.  The Long-Term Plan terminates in 2005.  There were no charges to earnings
under this plan and no payments were made on the first eligibility date which occurred in 1998.
Beginning with the calendar year 1998, a new three year Plan Period commenced.  Payment of the
incentive compensation earned under the Long-Term Plan may be made in cash, restricted shares of
the Company's common shares or a combination thereof as determined by the Board of Directors.  The
second payment eligibility date is in 2001.  At December 31, 1999, no amount was earned under this
Plan and accordingly, there was no charge reflected on the Consolidated Statement of Income.

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

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

|********                                                    | 1998             
|----------------------------------------------------------- | -----------------
|                                                            | First            
|                                                            | Quarter          
|                                                            |                  
|Revenues                                                    | $30,708,805      
|Income before extraordinary item                            | 4,524,746        
|Net income                                                  | 4,524,746        
|Net income applicable to common shares                      | 3,153,641        
|                                                            |                  
|**Earnings Per Common Share-Basic:**                        |                  
|Income before extraordinary item applicable to              |                  
|common shares                                               | $             .18
|Net income applicable to common shares                      | $             .18
|Weighted average number of shares outstanding               |                  
|(in thousands)                                              | 17,072           
|                                                            |                  
|**Earnings Per Common Share-Diluted:**                      |                  
|Income before extraordinary item applicable to              |                  
|common shares                                               | $             .18
|Net income applicable to common shares                      | $             .18
|Weighted average number of shares outstanding               |                  
|(in thousands)                                              | 17,075           
|                                                            |                  
|**Pro forma amounts assuming the new**                      |                  
|**capitalization policy is applied retroactively:**         |                  
|Effect of new capitalization policy                         | $    134,302     
|Net income                                                  | $ 4,659,048      
|Net income applicable to common shares                      | $ 3,287,943      
|**Per share amount - Effect of new capitalization policy:** |                  
|Basic                                                       | $            .01 
|Diluted                                                     | $            .01 
|**Per share amount - Net income**                           |                  
|**applicable to common shares:**                            |                  
|Basic                                                       | $             .19
|Diluted                                                     | $             .19

During the fourth quarter ended December 31, 1998, the Company recorded the following
significant adjustments:

|Allowance for receivable                | $    200,000
|--------------------------------------- | ------------
|Write-off of receivable                 | 91,827      
|Local tax accrual                       | 330,000     
|Write-off of software development costs | 817,485     
|Retroactive rental receivable           | (431,000)   
|Real estate tax accrual adjustments     | 630,054     
|Severance benefit                       | 268,303     
|                                        | $1,906,669  

**20.	SEGMENT REPORTING**

In 1998, the Company adopted SFAS No. 131, Disclosures about Segments of an Enterprise
and Related Information.  The Company has four reportable segments: (1) Market-rate multifamily
properties, (2) Affordable Housing multifamily properties,  (3) Management and Service Operations and
(4) Unallocated Corporate Overhead.  The Company has identified these segments because the
discrete information is the basis upon which management makes decisions regarding resource
allocation and performance assessment.  The Market-rate multifamily properties are same store
conventional multifamily residential properties (the operations are not subject to regulation by HUD) and
properties acquired or disposed of within one year.  The Affordable Housing properties are multifamily
properties for which the rents are subsidized and certain aspects of the operations are regulated by HUD
pursuant to Section 8 of the National Housing Act of 1937.  The Management and Service Operations
provide management and advisory services to the Market-rate and Affordable Housing properties which
are owned by the Company, as well as to clients and properties that are not owned, but are managed by
the Company.  All of the Company's segments are located in the United States.  During the second
quarter of 1999, management revised its reported segments to add a new segment representing
Unallocated Corporate Overhead in order to better capture costs not specifically allocated to an
individual segment and to isolate these costs from the third party Management and Service Operations.
For comparability purposes, the 1998 and 1997 presentations have been restated to reflect this revision
to the Company's reportable segments.

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



Information on the Company's segments for the years ended December 31, 1999, 1998 and
1997 is as follows:

|                                       | For the year ended December 31, 1999
|-------------------------------------- | ------------------------------------
|                                       |                                     
|                                       |                                     
|                                       | Market-Rate                         
|                                       |                                     
|Total segment revenues                 | $134,063,994                        
|Elimination of intersegment revenues   | (191,215)                           
|Consolidated revenues                  | $133,872,779                        
|                                       |                                     
|Equity in net income of joint ventures | $       495,022                     
|                                       |                                     
|*EBITDA-including the proportionate    |                                     
|share of joint ventures                | $   77,078,463                      
|                                       |                                     
|Total assets                           | $795,334,864                        
|Capital expenditures, gross            | $  42,719,296                       



|                                       | For the year ended December 31, 1998
|-------------------------------------- | ------------------------------------
|                                       |                                     
|                                       |                                     
|                                       | Market-Rate                         
|                                       |                                     
|Total segment revenues                 | $123,362,776                        
|Elimination of intersegment revenues   | (193,690)                           
|Consolidated revenues                  | $123,169,086                        
|                                       |                                     
|Equity in net income of joint ventures | $       433,302                     
|                                       |                                     
|*EBITDA-including the proportionate    |                                     
|share of joint ventures                | $  71,756,045                       
|                                       |                                     
|Total assets                           | $787,686,190                        
|Capital expenditures, gross            | $316,976,705                        

|                                       | For the year ended December 31, 1997
|-------------------------------------- | ------------------------------------
|                                       |                                     
|                                       |                                     
|                                       | Market-Rate                         
|                                       |                                     
|Total segment revenues                 | $ 92,720,425                        
|Elimination of intersegment revenues   | (190,050)                           
|Consolidated revenues                  | $ 92,530,375                        
|                                       |                                     
|Equity in net income of joint ventures | $      537,828                      
|                                       |                                     
|*EBITDA-including the proportionate    |                                     
|share of joint ventures                | $ 53,050,687                        
|                                       |                                     
|Total assets                           | $502,567,946                        
|Capital expenditures, gross            | $132,707,065                        

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

A reconciliation of total segment EBITDA to total consolidated net income for the years ended
December 31, 1999, 1998 and 1997 is as follows:

|                                                      | 1999         | 1998         | 1997        
|----------------------------------------------------- | ------------ | ------------ | ------------
|                                                      |              |              |             
|Total EBITDA for reportable segments                  | $78,835,389  | $72,911,078  | $58,495,006 
|EBITDA-proportionate share of joint ventures          | (2,960,899)  | (2,555,349)  | (2,801,345) 
|Depreciation and amortization                         | (35,145,839) | (24,898,978) | (19,265,827)
|Interest expense                                      | (38,263,518) | (29,050,346) | (19,144,260)
|Interest income                                       | 1,618,103    | 1,164,189    | 925,979     
|Income taxes                                          | (867,092)    | (434,434)    | (128,726)   
|Gain on sale of properties and land                   | 19,630,303   | 503,497      | 1,607,829   
|Extraordinary (loss) gain                             | (3,456,612)  | (124,895)    | 1,023,713   
|Cumulative effect of a change in accounting principle | 4,319,162    | -            | -           
|Consolidated net income                               | $23,708,997  | $17,514,762  | $20,712,369 

**21.	CHANGE IN ACCOUNTING PRINCIPLE**

Effective January 1, 1999, the Company changed its method of accounting to capitalize
expenditures for certain replacements and improvements, such as new HVAC equipment, structural
replacements, appliances, flooring, carpeting and kitchen/bath replacements and renovations.
Previously, these costs were charged to operations as incurred.  Ordinary repairs and maintenance,
such as suite 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 $4,319,162 or $.19 per share (basic and diluted).  The effect of this change was
to increase income before cumulative effect of a change in accounting principle by $7,517,800 or $.34
per share (basic and diluted) for the year ended December 31, 1999.  The pro forma amounts
(unaudited) shown on the income statement have been adjusted to reflect the retroactive application of
the capitalization of such expenditures and related depreciation for the year ended December 31, 1998
and 1997 which increased net income by $839,400 or $.04 per share (basic and diluted) and $564,700
or $.03 per share (basic and diluted), respectively.

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

As more fully described in Note 2, during the year ended December 31, 1998, the Company
completed the acquisition of 14 multifamily properties (the "Acquired Properties") with 3,682 units for an
aggregate purchase price of $268.3 million.  The Company acquired no multifamily properties during
1999.  The multifamily property acquisitions are summarized as follows:

|                                      |                          |       | Month Acquired
|------------------------------------- | ------------------------ | ----- | --------------
|Multifamily Property                  | Location                 | Units | by the Company
|                                      |                          |       |               
|1998 Acquisitions:                    |                          |       |               
|Cypress Shores Apartments             | Coconut Creek, Florida   | 300   | February      
|Reflections Apartments                | Columbia, Maryland       | 184   | February      
|The Falls Apartments                  | Atlanta, Georgia         | 520   | February      
|Country Club Apartments               | Toledo, Ohio             | 316   | February      
|20th and Campbell Apartments          | Phoenix, Arizona         | 204   | June          
|Annen Woods Apartments                | Pikesville, Maryland     | 132   | June          
|Desert Oasis Apartments               | Palm Desert, California  | 320   | June          
|Fleetwood Apartments                  | Houston, Texas           | 104   | June          
|Hampton Point Apartments              | Silver Springs, Maryland | 352   | June          
|Morgan Place Apartments               | Atlanta, Georgia         | 186   | June          
|Peachtree Apartments                  | St. Louis, Missouri      | 156   | June          
|Windsor Falls Apartments              | Raleigh, North Carolina  | 276   | June          
|Steeplechase at Shiloh Crossing Apts. | Indianapolis, Indiana    | 264   | August        
|Windsor Pines                         | Pembroke Pines, Florida  | 368   | October       
|                                      |                          | 3,682 |               

|1997 Acquisitions:          |                        |       |         
|--------------------------- | ---------------------- | ----- | --------
|The Gables at White River   | Indianapolis, Indiana  | 228   | February
|Remington Place Apartments  | Cincinnati, Ohio       | 234   | April   
|Saw Mill Village Apartments | Columbus, Ohio         | 340   | April   
|Hawthorne Hills Apartments  | Toledo, Ohio           | 88    | May     
|Oak Bend Commons            | Columbus, Ohio         | 102   | May     
|Clinton Place Apartments    | Clinton Twp., Michigan | 202   | August  
|Waterstone Apartments       | Indianapolis, Indiana  | 344   | August  
|Spring Valley               | Detroit, Michigan      | 224   | October 
|                            |                        | 1,762 |         
|                            |                        | 5,444 |         

The operating results of the Acquired Properties are included in the results of operations of the
Company from the dates of acquisition.

The following unaudited supplemental pro forma operating data for 1997 is presented to reflect,
as of January 1, 1997, the effects of: (i) the six property acquisitions completed in 1997, (ii) the 12
property acquisitions completed in 1998, (iii) the merger of MIGRA, (iv) the offering of 1,750,000
common shares, and (v) the change in the capitalization policy.  The following unaudited supplemental
pro forma operating data for 1998 is presented to reflect, as of January 1, 1998, the effects of: (i) the 14
property acquisitions completed in 1998, (ii) the merger of MIGRA in 1998, (iii) the sale of a property in
1998, (iv) the sale of the eight operating properties in 1999, and (v) the change in the capitalization
policy.  The following unaudited supplemental pro forma operating data for 1999 is presented to reflect,
as of January 1, 1999, the effects of the sale of the eight operating properties in 1999.

|                                                                   | December 31,
|------------------------------------------------------------------ | ------------
|(In thousands, except per share amounts)                           | 1999        
|                                                                   |             
|Revenues                                                           | $153,775    
|*Net income                                                        | 1,600       
|*Net (loss) income applicable to common shares (Basic and Diluted) | (3,884)     
|Earnings per common share:                                         |             
|- Basic                                                            | $     (0.18)
|- Diluted                                                          | $     (0.18)
|Weighted average number of common shares outstanding:              |             
|- Basic                                                            | 22,051      
|- Diluted                                                          | 22,053      

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

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

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

**23.	SUBSEQUENT EVENTS**

**Dividends Declared**

On January 4, 2000, the Company declared a quarterly dividend of $0.375 per common share
for the quarter ending December 31, 1999, which was paid on February 1, 2000 to shareholders of
record on January 14, 2000.

On February 24, 2000, 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, 2000 to shareholders
of record on March 1, 2000.

**Treasury Shares Repurchased**

Subsequent to December 31, 1999, the Company repurchased 1,590,800 common shares at an
aggregate cost of $15,038,300.  The repurchases were funded primarily from operating cash flows and
proceeds received from the sale of operating properties.

**Common Share Buyback Authorization**

On February 25, 2000, the Company's board of directors authorized the repurchase of up to two
million of the Company's common shares.

**Management Contract Cancellation**

On February 24, 2000, two managed but non-owned properties were sold.  Accordingly, the
Company's management contracts were canceled.  The annual management fees for 1999 were
approximately $14,500.

**Properties Under Contract for Sale**

On February 22, 2000, the Company entered into a contract to sell three owned Northeast Ohio
Market Rate properties.  The properties are expected to be sold late in the first quarter or early in the
second quarter of 2000.

**Reverse Interest Rate Swaps**

On February 25, 2000, the Company completed two reverse interest rate swaps.  The notional
amount of the swaps was approximately $66 million.  The effective spread on the hedged loans is
LIBOR plus 62 basis points and the floating rate on these hedged loans was 6.5% on February 25, 2000.
The swaps amortize monthly in accordance with the amortization of the hedged loans and expire upon
maturity of the loans.  These swaps were executed to hedge the fair market value of five fixed rate
loans.



**SCHEDULE II**

**VALUATION AND QUALIFYING ACCOUNTS**

|Column A                        | Column B                        | Column C             | Column D                           | Column E               
|------------------------------- | ------------------------------- | -------------------- | ---------------------------------- | -----------------------
|                                |                                 | ADDITIONS            |                                    |                        
|                                | Balance at Beginning            | Charged to Costs     | Charged to Other                   |                        
|DESCRIPTION                     | of Period                       | and Expenses         | Accounts - Describe                | Deductions-Describe    
|                                |                                 |                      |                                    |                        
|Year ended December 31, 1999:   |                                 |                      |                                    |                        
|Deducted from asset accounts:   |                                 |                      |                                    |                        
|Allowance for doubtful accounts | $                             - | $          1,497,581 | $                                - | $       (1,271,414) (a)
|                                |                                 |                      |                                    |                        
|Year ended December 31, 1998:   |                                 |                      |                                    |                        
|Deducted from asset accounts:   |                                 |                      |                                    |                        
|Allowance for doubtful accounts | -                               | -                    | -                                  | -                      
|                                |                                 |                      |                                    |                        
|Year ended December 31, 1997:   |                                 |                      |                                    |                        
|Deducted from asset accounts:   |                                 |                      |                                    |                        
|Allowance for doubtful accounts | -                               | -                    | -                                  | -                      

(a) Uncollectible amounts written off.

|**S-2****ASSOCIATED ESTATES REALTY CORPORATION
	SCHEDULE III**
|--------------------------------------------------------------
|**REAL ESTATE AND ACCUMULATED DEPRECIATION**                  
|**December 31, 1999**                                         
|****                                                          
|                                                              
|                                                              
|                                                              
|****                                                          
|**Property**                                                  
|                                                              
|RESIDENTIAL MULTIFAMILY PROPERTIES                            
|**NORTHERN OHIO**                                             
|Barrington                                                    
|Bay Club                                                      
|Country Club Apartments                                       
|Edgewater Landing                                             
|Ellet                                                         
|Gates Mills Club                                              
|Gates Mills III                                               
|Hawthorne Hills Apartments                                    
|Hillwood I                                                    
|Holly Park                                                    
|Huntington Hills                                              
|Jennings                                                      
|KTC Properties                                                
|Mallard's Crossing                                            
|Pinecrest                                                     
|Portage Towers                                                
|Puritas Place                                                 
|Riverview Towers                                              
|Shaker Park Gardens                                           
|The Woodlands of North Royalton                               
|State Road                                                    
|Statesman II                                                  
|Sutliff II                                                    
|Tallmadge Acres                                               
|The Oaks                                                      
|The Triangle                                                  
|Timbers                                                       
|Twinsburg                                                     
|Vantage Villa                                                 
|Village at Avon                                               
|Village Towers                                                
|West High                                                     
|Westchester Townhouses                                        
|Western Reserve Village                                       
|Westlake Investment                                           
|Williamsburg at Greenwood Village                             

|**S-3ASSOCIATED ESTATES REALTY CORPORATION
					SCHEDULE III - Continued**
|--------------------------------------------------------------------------
|**REAL ESTATE AND ACCUMULATED DEPRECIATION**                              
|**December 31, 1999**                                                     
|****                                                                      
|                                                                          
|                                                                          
|                                                                          
|****                                                                      
|**Property**                                                              
|                                                                          
|Winchester (2)                                                            
|Winchester II                                                             
|                                                                          
|CENTRAL OHIO                                                              
|Arrowhead Station                                                         
|Bedford Commons                                                           
|Bolton Estates                                                            
|Bradford at Easton                                                        
|Residence at Christopher Wren                                             
|Colony Bay East                                                           
|Heathermoor                                                               
|Kensington Grove                                                          
|Lake Forest                                                               
|Muirwood Village at Bennell                                               
|Muirwood Village at London                                                
|Muirwood Village at Mt. Sterling                                          
|Muirwood Village at Zanesville                                            
|Oak Bend Commons Apartments                                               
|Pendleton Lakes East                                                      
|Perimeter Lakes                                                           
|The Residence at Newark                                                   
|Saw Mill Village                                                          
|Sheffield at Sylvan                                                       
|Sterling Park                                                             
|Residence at Turnberry                                                    
|Wyndemere                                                                 
|The Residence at Washington                                               
|                                                                          
|SOUTHERN OHIO                                                             
|Remington Place                                                           
|                                                                          
|MICHIGAN                                                                  
|Arbor Landings                                                            
|Aspen Lakes Apartments                                                    
|Central Park Place                                                        
|Country Place Apartments (3)                                              
|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, 1999**                                                             
|****                                                                              
|                                                                                  
|                                                                                  
|                                                                                  
|****                                                                              
|**Property**                                                                      
|                                                                                  
|FLORIDA                                                                           
|Cypress Shores                                                                    
|Windsor Pines                                                                     
|Kirkman                                                                           
|                                                                                  
|GEORGIA                                                                           
|The Falls                                                                         
|Morgan Place                                                                      
|                                                                                  
|MARYLAND                                                                          
|Reflections                                                                       
|Annen Woods                                                                       
|Hampton Pointe                                                                    
|                                                                                  
|NORTH CAROLINA                                                                    
|Windsor Falls                                                                     
|                                                                                  
|TEXAS                                                                             
|Fleetwood                                                                         
|                                                                                  
|ARIZONA                                                                           
|20th and Campbell                                                                 
|                                                                                  
|INDIANA                                                                           
|The Gables at White River                                                         
|Waterstone Apartments                                                             
|Steeplechase                                                                      
|                                                                                  
|                                                                                  
|PENNSYLVANIA                                                                      
|Chestnut Ridge                                                                    
|                                                                                  
|LAND HELD FOR DEVELOPMENT                                                         
|**NORTHERN OHIO**                                                                 
|Village at Avon                                                                   
|Westlake Investment                                                               
|                                                                                  
|CENTRAL OHIO                                                                      
|Muirwood Village at Mt. Sterling                                                  
|Wyndemere                                                                         

|**S-5ASSOCIATED ESTATES REALTY CORPORATION
					SCHEDULE III - Continued**
|--------------------------------------------------------------------------
|**REAL ESTATE AND ACCUMULATED DEPRECIATION**                              
|**December 31, 1999**                                                     
|****                                                                      
|                                                                          
|                                                                          
|                                                                          
|****                                                                      
|**Property**                                                              
|                                                                          
|FLORIDA                                                                   
|Kirkman                                                                   
|                                                                          
|GEORGIA                                                                   
|Boggs Road                                                                
|                                                                          
|MICHIGAN                                                                  
|Aspen Lakes Apts.                                                         
|The Landings at the Preserve                                              
|                                                                          
|PENNSYLVANIA                                                              
|Cranberry Land                                                            
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Management Service Companies                                              
|Land, Building & Improvements                                             
|**FURNITURE, FIXTURE & EQUIPMENT**                                        
|Construction in progress                                                  
|                                                                          

(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, 1999**                                                     
|****                                                                      
|                                                                          
|                                                                          
|                                                                          
|****                                                                      
|**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 33% INTEREST                                                   
|RESIDENTIAL MULTIFAMILY PROPERTIES                                        
|NORTHERN OHIO                                                             
|Americana                                                                 
|Euclid House                                                              
|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 $893 million and $886 million at
December 31, 1999 and 1998, respectively.

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

|                             | 1999          | 1998          
|---------------------------- | ------------- | --------------
|                             |               |               
|Balance, beginning of period | $ 955,671,325 | $  646,498,966
|Disposal of fixed assets     | (38,386,793)  | (11,150,879)  
|New acquisition properties   | 2,485,413     | 246,384,308   
|Improvements                 | 47,322,037    | 73,938,930    
|Balance, end of period       | $ 967,091,982 | $ 955,671,325 

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

|                             | 1999          | 1998         
|---------------------------- | ------------- | -------------
|                             |               |              
|Balance, beginning of period | $ 153,941,702 | $ 130,668,538
|Disposal of fixed assets     | (18,183,943)  | (570,806)    
|Depreciation for period      | 35,786,954    | 23,843,970   
|Balance, end of period       | $ 171,544,713 | $ 153,941,702