Recitals

Equity Option Agreement

by Brookdale Living Cmntys Inc
July 16th, 1998
                            Equity Option Agreement

            This Equity Option  Agreement (this  "Agreement"),  dated as of June
17, 1998, is made and entered into by and among AH Michigan  Investor,  Inc., an
Ohio  corporation  (the  "Investor"),  AH  Michigan  Subordinated,  LLC, an Ohio
limited  liability  company (the  "Company"),  AH Michigan  CGP,  Inc.,  an Ohio
corporation (the "General Partner"),  AH Michigan Owner Limited Partnership,  an
Ohio  limited  partnership  (the  "Owner" and together  with the  Investor,  the
Company and the General Partner shall be  individually  referred to as an "Owner
Related  Entity" and shall be  collectively  referred  to as the "Owner  Related
Entities"),  and  Brookdale  Living  Communities,  Inc., a Delaware  corporation
("Brookdale").

                                   RECITALS

            WHEREAS,  the Company  was formed as of March  27,1998 by the filing
and recording of the  Company's  Articles of  Organization  in the Office of the
Secretary  of State of the State of Ohio,  pursuant  to an  Operating  Agreement
dated as of March 27, 1998 and amended and  restated  pursuant to an Amended and
Restated  Operating  Agreement  dated as of June 17,  1998  (as so  amended  and
restated, and as it may be further amended from time to time with the consent of
Brookdale, the "Operating Agreement");

            WHEREAS,  the  Investor  is the sole member of, and owns one hundred
percent (100%) of the membership interests (the "Membership  Interests") in, the
Company;

            WHEREAS,  the  Company  is the sole  limited  partner  of,  and owns
ninety-nine percent (99%) of the partnership interests (the "Limited Partnership
Interests")  in, the Owner,  for which a Certificate of Limited  Partnership was
filed  with the  Secretary  of State of the State of Ohio on March 27,  1998 and
which was organized under an Agreement of Limited  Partnership,  effective as of
March 27,  1998 and  amended and  restated  pursuant to an Amended and  Restated
Agreement  of Limited  Partnership  dated as of June 17, 1998 (as so amended and
restated, and as it may be further amended from time to time with the consent of
Brookdale, the "Partnership Agreement");

            WHEREAS,  the  Company  is the  sole  shareholder  in,  and owns one
hundred  percent  (100%) of the issued and  outstanding  shares of capital stock
(the "Capital Stock") of, the General Partner;

            WHEREAS,  the General  Partner is the sole  general  partner of, and
owns one percent (1%) of the  partnership  interests  (the "General  Partnership
Interest") in, the Owner;

            WHEREAS,  the Owner intends to develop a congregate housing facility
with an assisted living component for the elderly in Southfield,  Michigan which
is currently referred to as "The Heritage" (the "Project");

            WHEREAS,  Nomura Asset Capital  Corporation,  a Delaware corporation
(the "Senior  Lender"),  has agreed to make a loan to the Owner up to the sum of
$26,625,000 to fund a portion of the costs of the Project pursuant to a Building
Loan Agreement of even date herewith (as it may

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be amended from time to time with the consent of Brookdale,  the "Building  Loan
Agreement") among the Owner, BLC (as hereinafter  defined) and the Senior Lender
and a Loan  Agreement  of even date  herewith (as it may be amended from time to
time with the consent of Brookdale,  the "Senior Loan Agreement"  and,  together
with the Building Loan Agreement, the "Senior Loan Agreements") among the Owner,
BLC and the Senior Lender;

            WHEREAS,  Banc  One  Capital  Partners  IV,  Ltd.,  an Ohio  limited
liability company (the "Subordinate  Lender"), has agreed to loan to the Company
up to the sum of $__________,  pursuant to the terms of a certain Loan Agreement
of even date  herewith  (as it may be amended from time to time with the consent
of Brookdale,  the "Subordinate Loan Agreement")  between the Subordinate Lender
and the Company and as further evidenced by two certain promissory notes of even
date herewith (as amended or extended  from time to time,  and together with any
notes taken in substitution therefor,  the "Subordinate Notes"),  payable by the
Company to the Subordinate  Lender,  which the Company will contribute as equity
to the Owner to fund a portion of the costs of the Project;

            WHEREAS,  Brookdale Living Communities of Michigan, Inc., a Delaware
corporation  ("BLC") and  affiliate  of Brookdale  will be the  developer of the
Project pursuant to an Amended and Restated  Development  Agreement of even date
herewith (as it may be amended from time to time, the  "Development  Agreement")
between the Owner and BLC and will be the  manager of the Project  pursuant to a
Management  Agreement  of even date  herewith (as it may be amended from time to
time, the "Management Agreement") between the Owner and BLC;

            WHEREAS,  the Investor has made a capital contribution in the amount
of  $1,050,000  to the  Company,  which the Company has in turn  contributed  as
capital to the Owner to fund a portion of the costs of the Project; and

            WHEREAS,  the Investor is willing to grant an option to Brookdale to
purchase  the  Membership  Interests  upon the  terms and  conditions  set forth
herein.

            NOW, THEREFORE,  in consideration of the mutual agreements contained
herein  and  for  other  good  and  valuable  consideration,   the  receipt  and
sufficiency  of which are hereby  acknowledged,  the Owner Related  Entities and
Brookdale hereby agree as follows:

            1. The Option. The Investor hereby grants an irrevocable option (the
"Option")  to Brookdale  to purchase  the  Membership  Interests at the Purchase
Price (as  defined  in Section 3 hereof)  in  accordance  with the terms of this
Agreement.  The  Option  shall  terminate  and  expire on the date (the  "Option
Termination Date") that is the earliest of (a) ten (10) days after the principal
amount of the Subordinate Notes is due and payable,  on the stated maturity date
thereof,  as it may be extended pursuant to subsection 2.3(a) of the Subordinate
Loan Agreement, (b) thirty (30) days after the date specified by the Subordinate
Lender in a prior or  contemporaneous  notice to  Brookdale as the date on which
the unpaid  balance of all  principal  and interest  accrued on the  Subordinate
Notes has been  declared by the  Subordinate  Lender to be, or shall have become
automatically,  due and payable  pursuant to Section 8.2 of the Subordinate Loan
Agreement, and (c) the Exercise Date, as

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defined in the Intercreditor  and Subordination  Agreement of even date herewith
(as it may be amended from time to time, the  "Intercreditor  Agreement")  among
the Senior Lender, the Subordinate Lender, the Owner, the Company, the Investor,
the General Partner, BLC and Brookdale. In no event shall the Option Termination
Date be later than July 31, 2002.

            2. Triggering  Events.  The Option is exercisable by Brookdale on or
after the earliest to occur of the following events or dates (each a "Triggering
Event"):

                  (a) An election by the Company to prepay the Subordinate Notes
      in accordance with subsection 2.3(e) of the Subordinate Loan Agreement.

                  (b) Five days prior to the date on which the principal  amount
      of the  Subordinate  Notes  is due  and  payable,  whether  on the  stated
      maturity date thereof, as it may be extended pursuant to subsection 2.3(a)
      of the  Subordinated  Loan  Agreement,  or upon the  earlier  acceleration
      thereof.

                  (c) An Investor  Default (as defined in Section 15 hereof) has
occurred.

            3. Purchase Price. The "Purchase Price" for the Membership Interests
shall be an amount equal to  $1,050,000,  plus the amount  required to produce a
17.11% internal rate of return thereon, computed using the methodology described
in Schedule I attached hereto,  minus the aggregate amount of any  distributions
made by the  Company  to the  Investor  (excluding  distributions  permitted  by
paragraph (h) of Section 11).

            4. Exercise of the Option.  (a) Brookdale may exercise the Option by
giving the  Investor  and the Escrow  Agent (as defined in Section 17 hereof) at
least five (5) days' prior written  notice (the "Option  Notice"),  and if it is
exercising  the Option upon the  occurrence of a Triggering  Event  described in
paragraph (a) of Section 2 hereof, by giving the Subordinate Lender on behalf of
the Company  notice of an optional  prepayment  in  accordance  with  subsection
2.3(e) of the Subordinate  Loan  Agreement.  The Option Notice shall specify the
date (the "Closing Date") of the exercise of the Option, which shall be the date
of the repayment in full of the Subordinated Notes, and in any case shall not be
later than the Option Termination Date. If Brookdale  exercises the Option prior
to the Option  Termination  Date but fails to close prior to the Exercise  Date,
then the Option shall terminate and  Brookdale's  rights shall cease and be null
and  void.  The  Company  hereby  appoints  Brookdale  as its  true  and  lawful
attorney-in-fact  for  purposes  of giving  notice  of  optional  prepayment  in
accordance with  subsection  2.3(e) of the  Subordinate  Loan  Agreement,  which
appointment as  attorney-in-fact is irrevocable and is coupled with an interest.
Anything  herein to the  contrary  notwithstanding,  the  exercise of the Option
shall be  conditioned  upon the  repayment in full of the  Subordinate  Notes in
accordance with the Subordinate Loan Agreement.

                  (b) In the  event  that  at the  time of the  exercise  of the
      Option by  Brookdale,  it has not  exercised the option (the "Texas Equity
      Option")  granted to it pursuant to the Equity  Option  Agreement  of even
      date herewith among AH Texas Investor,  Inc., AH Texas  Subordinated,  LLC
      (the "Texas LLC"), AH Texas CGP, Inc., AH Texas Owner

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      Limited  Partnership  and Brookdale to purchase one hundred percent (100%)
      of the  membership  interests  in the Texas LLC, it shall be  obligated to
      exercise  such  option,  and to  satisfy  or  cause  to be  satisfied  the
      conditions to such exercise (including,  without limitation, the repayment
      in  full  of  the  subordinate  notes  issued  by  the  Texas  LLC  to the
      Subordinate Lender), prior to the termination thereof.

                  (c) In the event that  Brookdale  exercises  the Texas  Equity
      Option  prior to its  exercise of the  Option,  it shall be  obligated  to
      exercise  the  Option,  and  to  satisfy  or  cause  to be  satisfied  the
      conditions to such exercise (including,  without limitation, the repayment
      in full of the Subordinate Notes), prior to the Option Termination Date.

            5. Closing.  (a) Upon receipt of the Option Notice, the Investor and
Brookdale  shall schedule a closing (the "Closing") to occur on the Closing Date
at the  Chicago,  Illinois  offices of counsel to  Brookdale.  The  Investor and
Brookdale  shall  each be  solely  responsible  for its own  costs  incurred  in
connection  with the Closing;  provided,  however,  that Brookdale shall pay, or
reimburse  the  Investor  for,  all  reasonable  legal fees and  expenses of the
Investor  incurred  in  connection  with the  Closing in an amount not to exceed
$2,500 when aggregated with all other legal fees and expenses paid or reimbursed
by  Brookdale  pursuant  to clause  (ii) of  paragraph  6(c) and clause  (ii) of
paragraph  7(c) of the Property  Option  Agreement of even date herewith ( as it
may be amended from time to time,  the "Property  Option  Agreement")  among the
Company, the Owner and Brookdale.

                  (b) Contemporaneously  with the execution and delivery of this
      Agreement,  the Investor is  delivering  to the Escrow Agent an Assignment
      and  Acceptance  Agreement  in the form of Exhibit A attached  hereto (the
      "Assignment"  and  together  with  any  other  documents  and  instruments
      delivered  pursuant to clause (v) of paragraph (c) below,  the "Assignment
      Documents"), undated, but otherwise duly executed by the Investor.

                  (c) At the Closing, the Escrow Agent shall, in accordance with
      the  escrow  instructions  set forth in Section  17  hereof,  deliver  the
      Purchase  Price to the  Investor,  and the  Assignment to Brookdale or its
      nominee,  and the Investor  shall  deliver to Brookdale or its nominee the
      following items:

                    (i) the stock certificate(s) representing the Capital Stock;

                    (ii)   original   executed   copies   (or  if   unavailable,
          photocopies) of the Company's Articles of Organization,  the Operating
          Agreement,  the  Owner's  Certificate  of  Limited  Partnership,   the
          Partnership   Agreement   and  the  General   Partner's   Articles  of
          Incorporation and Regulations, all certified by an appropriate officer
          of the relevant  Owner Related Entity as of the Closing Date, as being
          true, correct,  complete and unamended (or if amended with the consent
          of  Brookdale,  certified to such effect) and in full force and effect
          as of such date;

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                    (iii) a certificate of an appropriate  officer of each Owner
          Related   Entity,   dated  the  Closing  Date,   certifying  that  the
          representations  and warranties of such Owner Related Entity set forth
          in the applicable Section of this Agreement are true and correct as of
          the Closing  Date as though made by such Owner  Related  Entity on the
          Closing Date;

                    (iv) the books and records of each Owner Related Entity; and

                    (v) such other  documents and instruments of transfer as are
          necessary to complete the transfer of the Membership Interests.

                  (d) The  representations  and  warranties  made  by the  Owner
      Related Entities as of the Closing Date shall survive the Closing.

                  (e) Prior to the  Closing,  Brookdale  shall  conduct  Uniform
      Commercial  Code,  tax  lien,  pending  suit and  judgment  and any  other
      appropriate searches against each of the Owner Related Entities.

            6. Grant of Security Interest.  (a) To secure the performance by the
Owner  Related  Entities  of  their  respective  obligations  hereunder  and the
repayment of any and all  indebtedness  and other  liabilities  arising from any
breach by any of the Owner Related  Entities of its obligations  hereunder,  the
Investor  hereby  grants to  Brookdale  a  continuing  security  interest in the
Membership  Interests and all proceeds thereof,  including,  without limitation,
the right to receive any and all payments or distributions of any and every kind
whatsoever,  whether in cash, property or otherwise,  at any time made, owing or
payable with respect to the Membership  Interests,  together with all applicable
rights,  powers and privileges of the Investor as the sole member and manager of
the Company  pursuant to the Operating  Agreement  (all of the  foregoing  being
hereinafter collectively referred to as the "Collateral"). The security interest
in  the  Collateral   granted  pursuant  to  the  preceding  sentence  shall  be
subordinate to the security interest of the Subordinate Lender in the Membership
Interests and the proceeds thereof (the "Subordinate  Lender Security Interest")
granted by the  Investor to the  Subordinate  Lender  pursuant  to the  Security
Agreement - Pledge and Assignment of Membership  Interests  dated as of the date
hereof (the "Subordinate  Lender Security  Agreement")  between the Investor and
the Subordinate Lender.

            (b)  Subject  to the  rights  of the  Subordinate  Lender  under the
Subordinate  Lender  Security  Agreement,  the Investor does hereby  irrevocably
constitute and appoint Brookdale its true and lawful attorney-in-fact, with full
power of  substitution,  for the Investor and in its name,  place and stead,  to
ask,  demand,  collect,  receive,  receipt  for,  sue  for,  compound  and  give
acquittance  for any and all sums or  properties  which  may be or  become  due,
payable or  distributable  with  respect to the  Collateral,  with full power to
settle, adjust or compromise any claim thereunder as fully as the Investor could
do, and to endorse or sign the name of the  Investor  on all items,  instruments
and  commercial  paper  given in payment  or in part  payment  thereof,  and all
documents  of  satisfaction,  discharge  or receipt  required  or  requested  in
connection  therewith,  and,  in its  discretion,  to file any claim or take any
other  action  or  proceeding,  either  in its own  name  or in the  name of the
Investor,

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or otherwise,  which  Brookdale  may deem  necessary or  appropriate  to perfect
Brookdale's  security  interest in or collect or otherwise  realize upon any and
all of the Collateral,  or effect a transfer  thereof  pursuant to the Operating
Agreement  and this  Agreement,  or which may be  necessary  or  appropriate  to
protect and  preserve  the right,  title and interest of Brookdale in and to the
Collateral and the security intended to be afforded hereby.

            (c) Without  limiting the  foregoing,  the  Investor  agrees that it
will, upon request of Brookdale,  execute and deliver such further documents and
instruments  (including,  without limitation,  Uniform Commercial Code Financing
Statements)  and do and perform such other acts and things  (including,  without
limitation,  obtaining such consents hereto,  and giving such notices hereof, as
Brookdale  may  reasonably  request  from  time to time) as  Brookdale  may deem
necessary or appropriate to more effectively vest in and secure to Brookdale the
Collateral or other rights or interests due or hereafter to become due.

            (d) Upon the occurrence and continuance of an Investor  Default,  in
addition to the rights and remedies Brookdale may have hereunder,  it shall have
all the rights and remedies of a secured party under applicable law with respect
to the Collateral.  All costs and expenses of any kind whatsoever, of collection
and  enforcement  of the  obligations  secured  hereby or any rights or remedies
hereunder  (including  without  limitation,   all  costs  of  disposing  of  the
Collateral,  together  with court  costs and  reasonable  attorneys'  fees),  or
incurred in realizing upon the Collateral or in enforcing this Agreement,  shall
be deemed to be additional  obligations  secured hereby, and may be deducted and
retained by Brookdale  from the proceeds of  disposition  of the  Collateral and
applied to the payment and satisfaction of such costs and expenses.

            (e) The  security  interest of  Brookdale  in the  Collateral  shall
terminate  upon the earlier of the Closing or the Option  Termination  Date, and
upon such  termination,  Brookdale  shall  promptly  deliver to the Investor the
appropriate Uniform Commercial Code termination statements.

            7. Investor Representations. The Investor represents and warrants to
Brookdale as of the date hereof and as of the Closing Date as follows:

                  (a) The  Investor is a  corporation  duly  organized,  validly
      existing and in good standing  under the laws of the State of Ohio and has
      all  requisite  power and  authority  to execute,  deliver and perform its
      obligations  under this Agreement and the Assignment  Documents and to own
      and operate its property  and to carry on its  business as now  conducted.
      The Investor is duly qualified to do business in each  jurisdiction  where
      the  nature  of  its   operations   and   applicable   laws  require  such
      qualification,  except where the failure to be so qualified would not have
      a material adverse effect on the Investor.

                  (b) The execution,  delivery and performance of this Agreement
      by the Investor  have been,  and as of the Closing  Date,  the  execution,
      delivery and performance of the Assignment  Documents by the Investor will
      have been, duly  authorized by all necessary  corporate  action,  and this
      Agreement is, and when executed and delivered,  the  Assignment  Documents
      will  be,  the  legal,  valid  and  binding  obligation  of the  Investor,
      enforceable in

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      accordance  with its  terms,  except  as  enforcement  may be  limited  by
      bankruptcy,  insolvency or the laws or equitable  principles affecting the
      enforcement of creditors' rights generally.

                  (c) The execution, delivery and performance by the Investor of
      this Agreement do not, and the execution,  delivery and performance by the
      Investor of the Assignment Documents will not, contravene the terms of the
      Investor's  Articles of  Incorporation or Regulations,  true,  correct and
      complete  copies of which have been delivered to Brookdale,  conflict with
      or result in any breach or  contravention  of, or the creation of any lien
      under, any agreements or instruments to which it is a party or by which it
      or any of its  property  is bound or violate  any state or federal law and
      all required approvals  therefor,  if any, have been, or will have been as
      of the Closing Date, duly obtained.

                  (d) The Membership  Interests constitute all of the membership
      interests in the Company, and the Investor owns the Membership  Interests,
      free of any liens,  claims or  encumbrances,  other  than,  as of the date
      hereof,   the  Subordinate   Lender  Security  Interest  and  the  Special
      Management Interests (as defined in the Intercreditor Agreement).

                  (e) There is no litigation or other proceeding pending against
      the Investor which could have a material  adverse effect on the Investor's
      ability to consummate the transactions  contemplated by this Agreement and
      the Assignment Documents.

                  (f) The  Investor's  sole place of business is its address set
      forth for notices in paragraph (c) of Section 18 hereof.

            8. Company  Representations.The  Company  represents and warrants to
Brookdale as follows as of the date hereof and as of the Closing Date:

                  (a) The Company is a limited liability company duly organized,
      validly  existing and in good standing under the laws of the State of Ohio
      and has all requisite power and authority to execute,  deliver and perform
      its  obligations  under this Agreement and to own and operate its property
      and to  carry  on its  business  as now  conducted.  The  Company  is duly
      qualified  to do  business  in each  jurisdiction  where the nature of its
      operations and applicable  laws require such  qualification,  except where
      the failure to be so qualified would not have a material adverse effect on
      the Company.

                  (b) The execution,  delivery and performance of this Agreement
      by the Company have been duly  authorized by all necessary  organizational
      action,  and this Agreement is the legal,  valid and binding obligation of
      the  Company,   enforceable  in  accordance  with  its  terms,  except  as
      enforcement  may be  limited  by  bankruptcy,  insolvency  or the  laws or
      equitable  principles  affecting  the  enforcement  of  creditors'  rights
      generally.

                  (c) The execution,  delivery and performance by the Company of
      this Agreement do not  contravene  the terms of the Company's  Articles of
      Organization or the Operating Agreement, true, correct and complete copies
      of which have been delivered to

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      Brookdale,  conflict with or result in any breach or contravention  of, or
      the creation of any lien under,  any agreements or instruments to which it
      is a party or by which it or any of its  property  is bound or violate any
      state or federal law and all required  approvals  therefor,  if any,  have
      been duly obtained.

                  (d) The Company is the sole limited partner of the Owner,  and
      the Limited  Partnership  Interests  constitute  ninety-nine  (99%) of the
      partnership interests in, the Owner.

                  (e) Subject to the Senior  Lender's rights with respect to and
      any rights  that it may  acquire  upon the  acquisition  of the  Preferred
      Equity  and the  Warrants  (as such terms are  defined in the Senior  Loan
      Agreement), the Company owns the Limited Partnership Interests free of any
      liens, claims or encumbrances.

                  (f)  The  Membership  Interests  are  not  represented  by any
      certificates  and/or  similar  instruments,  and the  Operating  Agreement
      contains  a  description  of the  rights  of  Brookdale  pursuant  to this
      Agreement.

                  (g) There is no litigation or other proceeding pending against
      the Company  which could have a material  adverse  effect on the Company's
      ability to consummate the transactions contemplated by the Property Option
      Agreement and as of the Closing Date, if  applicable,  the  Assignment (as
      defined therein).

                  (h) All of the  representations  and warranties of the Company
      set forth in  Article V of the  Subordinate  Loan  Agreement  are true and
      correct  as though  such  representations  and  warranties  were set forth
      herein for Brookdale's benefit.

                  (i) All of the  representations  and warranties of the Company
      set  forth in  Section 8 of the  Property  Option  Agreement  are true and
      correct.

                  (j) The Company has no outstanding liabilities,  contingent or
      otherwise,  other  than,  as of the  date  hereof,  (i)  the  indebtedness
      evidenced  by the  Subordinated  Notes  and  (ii)  liabilities  for  which
      Brookdale  or the  Subordinate  Lender  (or  any  one  or  more  of  their
      affiliates) is liable to the Company.

            9. General Partner  Representations.  The General Partner represents
and warrants to Brookdale as follows as of the date hereof and as of the Closing
Date:

                  (a) The  General  Partner  is a  corporation  duly  organized,
      validly  existing and in good standing under the laws of the State of Ohio
      and has all requisite power and authority to execute,  deliver and perform
      its  obligations  under this Agreement and to own and operate its property
      and to  carry  on its  business  as now  conducted.  The  Company  is duly
      qualified  to do  business  in each  jurisdiction  where the nature of its
      operations and

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      applicable laws require such qualification, except where the failure to be
      so  qualified  would not have a  material  adverse  effect on the  General
      Partner.

                  (b) The execution,  delivery and performance of this Agreement
      by the  Company  have  been duly  authorized  by all  necessary  corporate
      action,  and this Agreement is the legal,  valid and binding obligation of
      the  Company,   enforceable  in  accordance  with  its  terms,  except  as
      enforcement  may be  limited  by  bankruptcy,  insolvency,  or the laws or
      equitable  principles  affecting  the  enforcement  of  creditors'  rights
      generally.

                  (c) The  execution,  delivery and  performance  by the General
      Partner  of this  Agreement  do not  contravene  the terms of the  General
      Partners's  Articles of  Incorporation or Regulations,  true,  correct and
      complete  copies of which have been delivered to Brookdale,  conflict with
      or result in any breach or  contravention  of, or the creation of any lien
      under, any agreements or instruments to which it is a party or by which it
      or any of its  property  is bound or violate  any state or federal law and
      all required approvals therefor, if any, have been duly obtained.

                  (d) The  General  Partner is the sole  general  partner of the
      Owner, and the General Partnership  Interest  constitutes one percent (1%)
      of the partnership interests in, the Owner.

                  (e) Subject to the Senior  Lender's rights with respect to and
      any rights  that it may  acquire  upon the  acquisition  of the  Preferred
      Equity  and the  Warrants  (as such terms are  defined in the Senior  Loan
      Agreement), the General Partner owns the General Partnership Interest free
      of any liens, claims or encumbrances.

                  (f) All of the  representations  and warranties made on behalf
      of the  General  Partner  set forth in Article V of the  Subordinate  Loan
      Agreement  are  true  and  correct  as  though  such  representations  and
      warranties were set forth herein for Brookdale's benefit.

                  (g)  The  General  Partner  has  no  outstanding  liabilities,
      contingent  or  otherwise,  other than (i) those of Owner  referred  to in
      paragraph  (g) of  Section  10 hereof  for which it is liable by virtue of
      being general partner of Owner and (ii) liabilities for which Brookdale or
      the Subordinate  Lender (or one or more of their  affiliates) is liable to
      the General Partner.

            10.  Owner  Representations.  The Owner  represents  and warrants to
Brookdale as follows as of the date hereof and as of the Closing Date:

                  (a) The Owner is a limited partnership duly organized, validly
      existing and in good standing  under the laws of the State of Ohio and has
      all requisite  power and authority to execute and deliver this  Agreement,
      to perform its obligations  under Section 14 hereof and to own and operate
      its property and to carry on its business as now conducted.

                                     9





      The Owner is duly qualified to do business in each jurisdiction  where the
      nature of its operations and applicable  laws require such  qualification,
      except  where the  failure  to be so  qualified  would not have a material
      adverse effect on the Owner.

                  (b) The  execution  and  delivery  of this  Agreement  and the
      performance by the Owner of its  obligations  under Section 14 hereof have
      been  duly  authorized  by all  necessary  partnership  action,  and  this
      Agreement  is the  legal,  valid  and  binding  obligation  of the  Owner,
      enforceable in accordance  with its terms,  except as  enforcement  may be
      limited by  bankruptcy,  insolvency  or the laws or  equitable  principles
      affecting the enforcement of creditors' rights generally.

                  (c) The  execution  and  delivery  of this  Agreement  and the
      performance by the Owner of its obligations under Section 14 hereof do not
      contravene the terms of the  Partnership  Agreement,  a true,  correct and
      complete copy of which has been  delivered to Brookdale,  conflict with or
      result in any  breach or  contravention  of, or the  creation  of any lien
      under, any agreements or instruments to which it is a party or by which it
      or any of its  property  is bound or violate  any state or federal law and
      all required approvals therefor, if any, have been duly obtained

                  (d) There is no litigation or other proceeding pending against
      the Owner  which  could  have a  material  adverse  effect on the  Owner's
      ability to consummate the transactions contemplated by the Property Option
      Agreement  and  as of  the  Closing  Date,  if  applicable,  the  Property
      Conveyance Documents (as defined therein).

                  (e) All of the  representations  and warranties made on behalf
      of the Owner set forth in Article V of the Subordinate  Loan Agreement and
      Article IV of the Senior  Loan  Agreement  are true and  correct as though
      such  representations and warranties were set forth herein for Brookdale's
      benefit.

                  (f) All of the representations and warranties of the Owner set
      forth in Section 9 of the Property Option Agreement are true and correct.

                  (g) The Owner has no  outstanding  liabilities,  contingent or
      otherwise, other than those incurred under or permitted by the Senior Loan
      Agreements, any of the Loan Documents (as defined therein), the Management
      Agreement and, as of the date hereof, the Development Agreement.

            11.  Investor  Covenants.  Until the  earlier of the  Closing or the
Option  Termination Date, unless Brookdale  otherwise  consents in writing,  the
Investor:

                  (a) Shall preserve and maintain its legal  existence,  rights,
      franchises  and  privileges  in the State of Ohio,  and shall  qualify and
      remain  qualified  in each  jurisdiction  in which such  qualification  is
      necessary  or desirable  in view of its  business  and  operations  or the
      ownership of its property.

                                     10





                  (b) Shall at all times observe and comply with the  provisions
      of Articles Fifth,  Sixth and Tenth of its Articles of Incorporation as in
      effect on the date hereof.

                  (c) Shall not amend the Company's  Articles of Organization or
      the Operating Agreement and shall at all times observe and comply with the
      provisions thereof.

                  (d) Shall not cause or permit the dissolution of the Company.

                  (e) Shall not permit the  issuance of any  member's  interests
      (or any other  interests)  in the Company in  addition  to the  Membership
      Interests.

                  (f) Shall  continue  to own the  Membership  Interests  (which
      shall  continue to  constitute  100% of the  membership  interests  in the
      Company),  free of any  liens,  claims  or  encumbrances,  other  than the
      Subordinate  Lender Security Interest and the security interest created by
      this Agreement.

                  (g) Shall not file a  voluntary  petition  in  bankruptcy  and
      shall use its best  efforts  to contest  any  involuntary  petition  filed
      against it.

                  (h)  Shall  not  permit or  accept  any  distributions  by the
      Company,  other than  distributions to be applied to the payment of income
      taxes and funded by advances to the Company made by the Subordinate Lender
      pursuant to subsection 2.6(a) of the Subordinate Loan Agreement.

                  (i) Shall give  Brookdale  at least  thirty  (30) days'  prior
      written notice of any change in its place of business.

                  (j) Shall not take any  actions  that might  adversely  affect
      Brookdale's  rights  under,  or be  inconsistent  with the terms of,  this
      Agreement.

            12.  Company  Covenants.  Until the  earlier  of the  Closing or the
Option  Termination Date, unless Brookdale  otherwise  consents in writing,  the
Company:

                  (a)  Shall  not amend the  Articles  of  Incorporation  or the
      Regulations of the General Partner or amend or consent to the amendment of
      the Partnership Agreement,  and shall at all times observe and comply with
      the provisions thereof.

                  (b) Shall  continue to own the Limited  Partnership  Interests
      (which shall  continue to constitute 99% of the  partnership  interests in
      the Owner), free of any liens, claims or encumbrances.

                  (c) Shall  continue  to own the  Capital  Stock  (which  shall
      continue  to  constitute  one  hundred  percent  (100%) of the  issued and
      outstanding  capital  stock of the  General  Partner),  free of any liens,
      claims or encumbrances.

                                     11





                  (d) Shall not amend,  or request  any waiver of any  provision
      of,  the  Subordinate  Loan  Agreement  or any of the Loan  Documents  (as
      defined therein) to which it is a party.

                  (e) Shall comply with all of the  covenants  applicable  to it
      set forth in Articles 6 and 7 of the Subordinate Loan Agreement, and shall
      promptly deliver to Brookdale copies of all financial statements, reports,
      notices,  certificates  or other  writings  delivered  to the  Subordinate
      Lender pursuant thereto.

                  (f) Shall not permit or accept any  distributions by the Owner
      or any dividends by the General Partner.

                  (g) Shall not incur any liabilities or obligations, contingent
      or  otherwise,   except  expenses  incurred  in  the  ordinary  course  of
      administering  its  business  or  those  that  are  incurred  under or are
      necessary to comply with the provisions of the Subordinate Loan Agreement,
      and  shall not enter  into any  agreement  or  contract,  whether  oral or
      written,  except  this  Agreement,  the  Property  Option  Agreement,  the
      Intercreditor  Agreement,  the  Subordinate  Loan  Agreement  and the Loan
      Documents  (as  defined  therein) to which it is a party,  and  agreements
      entered into in the ordinary course of administering its business.

                  (h) Shall give  Brookdale  at least  thirty  (30) days'  prior
      written notice of any change in its place of business.

                  (i) Shall not take any  actions  that might  adversely  affect
      Brookdale's  rights  under,  or be  inconsistent  with the terms of,  this
      Agreement.

            13. General Partner  Covenants.  Until the earlier of the Closing or
the Option Termination Date, unless Brookdale otherwise consents in writing, the
General Partner:

                  (a)  Shall  not  amend  or  consent  to the  amendment  of the
      Partnership Agreement,  and shall at all times observe and comply with the
      provisions thereof.

                  (b) Shall not cause or permit the dissolution or winding up of
the Owner.

                  (c) Shall not permit the issuance of any interest in the Owner
      in  addition  to  the  Limited  Partnership   Interests  and  the  General
      Partnership Interest.

                  (d) Shall  continue  to own the General  Partnership  Interest
      (which shall continue to constitute the only general partnership  interest
      in, and one percent (1%) of the partnership interests) in, the Owner, free
      of any liens, claims or encumbrances.

                  (e) Shall comply with all of the  covenants  applicable  to it
      set forth in Articles 6 and 7 of the Subordinate Loan Agreement.


                                     12





                  (f) Shall not permit or accept any  partnership  distributions
      by the  Owner or the  payment  to itself of any  compensation  as  general
      partner of the Owner.

                  (g) Shall not declare or pay any dividends with respect to, or
      purchase or redeem,  or issue any options or other rights with respect to,
      any shares of the Capital Stock.

                  (h) Shall not incur any liabilities or obligations, contingent
      or  otherwise,   except  expenses  incurred  in  the  ordinary  course  of
      administering  its  business,  or enter into any  agreement  or  contract,
      whether oral or written, except this Agreement and, on behalf of the Owner
      as its general  partner,  agreements or contracts  into which the Owner is
      permitted to enter pursuant to paragraph (d) of Section 14 hereof.

                  (i) Shall not take any  actions  that might  adversely  affect
      Brookdale's  rights  under,  or be  inconsistent  with the terms of,  this
      Agreement.

            14. Owner Covenants.  Until the earlier of the Closing or the Option
Termination Date, unless Brookdale otherwise consents in writing, the Owner:

                  (a) Shall comply with all of the  covenants  applicable  to it
      set forth in Articles V, VI and VII of the Senior Loan Agreement and shall
      promptly deliver to Brookdale copies of all financial statements, reports,
      notices,  certificates  or other  writings  delivered to the Senior Lender
      pursuant thereto.
 .
                  (b) Shall not incur any liabilities or obligations, contingent
      or  otherwise,   except  expenses  incurred  in  the  ordinary  course  of
      administering  its  business  or  those  that  are  incurred  under or are
      necessary to comply or are permitted by with the  provisions of the Senior
      Loan  Agreements,  and shall not enter  into any  agreement  or  contract,
      whether  oral or  written,  except this  Agreement,  the  Property  Option
      Agreement,  the Intercreditor  Agreement,  the Senior Loan Agreement,  the
      Loan  Documents  (as  defined  therein)  to  which  it  is  a  party,  the
      Development Agreement and the Management Agreement, and agreements entered
      into in the ordinary course of administering its business.

                  (c) Shall  continue  to own the  Property  (as  defined in the
      Property Option  Agreement),  free of any liens,  claims or  encumbrances,
      other than Permitted Exceptions (as so defined).

                  (d) Shall not take any  actions  that might  adversely  affect
      Brookdale's  rights  under,  or be  inconsistent  with the terms of,  this
      Agreement  other than as may be required by the Senior Loan  Agreements or
      the Loan Documents (as defined therein).

            15.  Investor  Defaults.   An  "Investor  Default"  shall  mean  the
occurrence of one or more of the following described events:


                                     13





                  (a) A material  breach by any Owner  Related  Entity of any of
      the representations  and warranties  contained (or contained by reference)
      in Section 7, 8, 9 or 10 hereof on the date as of which made.

                  (b) Any Owner Related  Entity  defaults in the  performance or
      observation of any covenant of such Owner Related Entity contained in this
      Agreement  and such default shall  continue  without cure for fifteen (15)
      days after notice  thereof by Brookdale to such Owner  Related  Entity and
      the Subordinate Lender.

                  (c) An "Event of Default",  as defined in the Subordinate Loan
      Agreement,  occurs, which "Event of Default" has not been caused, directly
      or indirectly, by the Manager or Brookdale.

                  (d) An "Event of Default",  as defined in either of the Senior
      Loan  Agreements,  occurs,  which  "Event of Default" has not been caused,
      directly or indirectly, by the Manager or Brookdale.

                  (e) An "Event  of  Default",  as  defined  in the  Development
      Agreement, by the Owner occurs.

                  (f) An  "Event  of  Default",  as  defined  in the  Management
      Agreement, by the Owner occurs.

                  (g) The  Investor  makes  an  assignment  for the  benefit  of
creditors.

                  (h) The Investor  petitions or applies to any tribunal for the
      appointment of a trustee or receiver for itself or any substantial part of
      its assets or the Investor  commences any proceeding  relating to it under
      any bankruptcy,  reorganization,  arrangement, insolvency, readjustment of
      debt,  dissolution or liquidation law of any  jurisdiction  whether now or
      hereafter in effect.

                  (i)  Any  petitions  or   applications   are  filed,   or  any
      proceedings are commenced,  against the Investor  seeking the adjudication
      of it as bankrupt and the Investor by any act  indicates  its admission or
      consent  thereto,  or  acquiescence  therein,  or  any  order  is  entered
      appointing a trustee or receiver, or adjudicating the Investor bankrupt or
      insolvent,  or  approving  the petition in any such  proceedings  and such
      order remains unstayed or undischarged for more than sixty (60) days.

                  (j)  Any  order  is  entered  in any  proceeding  against  the
      Investor  decreeing the dissolution of the Investor and such order remains
      unstayed or undischarged for more than sixty (60) days.

                  (k) Any judgment or order is entered in any proceedings  which
      affects the Membership Interests,  the Limited Partnership Interests,  the
      Capital Stock or the General

                                     14





      Partnership  Interest,  or any lien, claim or other encumbrance  encumbers
      any thereof,  other than,  in the case of the  Membership  Interests,  the
      Subordinate Lender Security Interest and the Special Management Interests.

            16.  Notice of Certain  Events.  Owner and each other Owner  Related
Entity agrees to promptly give notice to Brookdale of:

                    (a) Any Investor  Default known to Owner or such other Owner
          Related Entity;

                    (b) Any notice of any  default or "Event of  Default" or any
          other  notice  received  from the Senior  Lender under the Senior Loan
          Agreements  (unless a copy of such notice is required to be  delivered
          to BLC and/or Brookdale pursuant thereto);

                    (c) Any notice of any  default or "Event of  Default" or any
          other  notice   received  from  the   Subordinate   Lender  under  the
          Subordinate  Loan Agreement  (unless a copy of such notice is required
          to be delivered to BLC and/or Brookdale pursuant thereto); and

                    (d) Any  notice  given by Owner or any other  Owner  Related
          Entity to the Senior Lender or the Subordinate Lender.

Each notice  pursuant to this Section 16 shall be  accompanied by a statement of
the chief  executive  officer of the relevant Owner Related Entity setting forth
the details of the occurrence  referred to therein and, if  applicable,  stating
what action such Owner Related Entity proposes to take with respect thereto.

      17. Appointment of Escrow Agent And Establishment of Escrow.

                  (a)  Brookdale  and the  Investor  agree  to  appoint  Squire,
      Sanders & Dempsey as Escrow  Agent (in such  capacity,  together  with any
      successor thereto, the "Escrow Agent") pursuant to the terms of the Escrow
      Agent  Appointment  Agreement  attached  hereto as Exhibit B (the  "Escrow
      Agent Appointment Agreement").

                  (b) Brookdale and the Investor  hereby  establish an escrow to
      hold the Assignment and to facilitate the Closing.

                  (c) The  Escrow  Agent  agrees to act in  accordance  with the
      Escrow Agent Appointment Agreement and this Section 17.

                  (d) On the Closing Date, Brookdale shall deliver to the Escrow
      Agent,  (i) the Purchase Price by wire transfer of  immediately  available
      funds to an account  designated  by the Escrow  Agent,  (ii) a certificate
      (the  "Purchase  Price  Certificate")  of  a  Treasurer  or  an  Assistant
      Treasurer  of  Brookdale,  dated the  Closing  Date or a date  within  the
      preceding five (5) days, stating that (A) a Triggering Event has occurred,
      (B) the Option Termination Date

                                     15





      has not occurred,  (C) in the event that Brookdale  desires the Assignment
      to be delivered to a nominee,  the name of such nominee,  (D) the Purchase
      Price has been  accurately  calculated in accordance with Section 3 hereof
      and Schedule I attached hereto, and showing such calculation,  and (iii) a
      letter from the Subordinate  Lender confirming the receipt of repayment in
      full of the  Subordinate  Notes in accordance  with the  Subordinate  Loan
      Agreement.

                  (e) On the Closing  Date,  upon receipt of the Purchase  Price
      and the  Purchase  Price  Certificate,  the  Escrow  Agent  shall take the
      following actions:

                        (i)   Date the Assignment  the Closing Date,  insert the
                              name of the "Assignee" in the preamble thereto and
                              deliver  the   Assignment   to  Brookdale  or  its
                              nominee; and

                        (ii)  Deliver the Purchase Price to the Investor by wire
                              transfer  of  immediately  available  funds  to an
                              account designated by the Investor.

                  (f) In the event that Brookdale  assigns its rights under this
      Agreement  pursuant  to  paragraph  (e) of Section 18 hereof,  it shall so
      notify the Escrow Agent.

            18.   Miscellaneous.

                  (a) Each Owner Related  Entity and Brookdale  agree that money
      damages or other remedy at law would not alone be  sufficient  or adequate
      remedy for any breach or violation of, or a default under,  this Agreement
      by such Owner Related  Entity and that, in addition to all other  remedies
      available  to  Brookdale,  Brookdale  shall be entitled  to an  injunction
      restraining  such  breach,  violation  or  default or  threatened  breach,
      violation or default and to any other equitable relief, including, without
      limitation,  specific  performance,  without bond or other  security being
      required.

                  (b) The Owner Related Entities  acknowledge and agree that (i)
      they are not intended to be  beneficiaries of the limitations set forth in
      the Intercreditor Agreement on the rights of Brookdale to take Enforcement
      Actions  (as  defined   therein)  and  to  enforce  any   representations,
      covenants,  warranties  or  obligations  of the Owner under or pursuant to
      this Agreement, and (ii) they may not seek to enforce such limitations.

                  (c)  Notices.  Any notices  required or  permitted  to be sent
      hereunder shall be delivered personally or by telecopier (with answer back
      acknowledged)  or mailed,  certified mail,  return receipt  requested,  or
      delivered by overnight courier service to the following addresses, or such
      other addresses as shall be given by notice delivered hereunder, and shall
      be deemed to have been given upon delivery, if delivered personally,  upon
      receipt with answer back acknowledged,  if delivered by telecopier,  three
      (3) business days after

                                     16





      mailing,  if mailed, or one business day after delivery to the courier, if
      delivery by overnight courier service:

                  If to the
                    Investor:             AH Michigan Investor, Inc.
                                          320 King of Prussia Road
                                          Suite 160
                                          Radnor, Pennsylvania 19087
                                          Attn: David B. Fenkell
                                          Fax: (610) 902-0777

                  with a copy to:
                            Squire, Sanders & Dempsey
                              41 South High Street
                              Columbus, Ohio 43215
                               Attn: Scott B. West
                               Fax: (614) 365-2499

                  If to the
                    Company:              AH Michigan Subordinated, LLC
                                          320 King of Prussia Road
                                          Suite 160
                                          Radnor, Pennsylvania 19087
                                          Attn: David B. Fenkell
                                          Fax: (610) 902-0777

                  with a copy to:
                            Squire, Sanders & Dempsey
                              41 South High Street
                              Columbus, Ohio 43215
                               Attn: Scott B. West
                               Fax: (614) 365-2499

                  If to the
                    General Partner:      AH Michigan CGP, Inc.
                                          320 King of Prussia Road
                                          Suite 160
                                          Radnor, Pennsylvania 19087
                                          Attn: David B. Fenkell
                                          Fax: (610) 902-0777

                  with a copy to:
                            Squire, Sanders & Dempsey
                              41 South High Street

                                     17





                              Columbus, Ohio 43215
                               Attn: Scott B. West
                               Fax: (614) 365-2499

                  If to the
                    Owner:                AH Michigan Owner Limited Partnership
                            320 King of Prussia Road
                                          Suite 160
                           Radnor, Pennsylvania 19087
                             Attn: David B. Fenkell
                               Fax: (610) 902-0777

                  with a copy to:
                            Squire, Sanders & Dempsey
                              41 South High Street
                              Columbus, Ohio 43215
                               Attn: Scott B. West
                               Fax: (614) 365-2499

                  If to Brookdale:        Brookdale Living
                                Communities, Inc.
                                          77 West Wacker Drive
                                          Suite 4400
                                          Chicago, Illinois 60601
                                          Attn:  Darryl W. Copeland, Jr.
                                          Fax:   (312) 977-3699
                                          Attn: Robert J. Rudnik
                                          Fax: (312) 977-3769

                   with a copy to:        Winston & Strawn
                              35 West Wacker Drive
                             Chicago, Illinois 60601
                              Attn: Wayne D. Boberg
                               Fax: (312) 558-5700


                  A copy of any notice sent  hereunder  shall be sent to (i) the
      Senior Lender at Nomura Asset  Capital  Corporation,  Two World  Financial
      Center,  Building  B, New York,  New York  10281-1198,  Attention:  Sheryl
      McAfee,  Telecopier:  (212) 667-1206, with copies to: Nomura Asset Capital
      Corporation,  Two World financial  Center,  Building B, New York, New York
      10281, Attention: Barry Funt, Telecopier: (212) 667-1567 and Dechert Price
      &  Rhoads,  90 State  House  Square,  12th  floor,  Hartford,  Connecticut
      06103-3702,  Attention:  Marc B.  Friedman,  Fax:  (860) 524-3930 (or such
      other address as shall be given by notice delivered  hereunder),  and (ii)
      the Escrow Agent at Squire, Sanders & Dempsey, 41 South

                                     18





High Street, Columbus, Ohio 43215, Attention: Scott B. West, Fax: (614) 365-2499
(or such other address as shall be given by notice delivered hereunder).

                  (d) Entire Agreement.  This Agreement  (including the schedule
      and exhibits  hereto)  constitutes the entire  agreement among the parties
      hereto with respect to the subject  matter hereof and supersedes all prior
      agreements and understandings,  oral and written, among the parties hereto
      with respect to the subject matter hereof.

                  (e) Binding Effect; Benefit. This Agreement shall inure to the
      benefit of and be binding  upon the  parties  hereto and their  respective
      successors  and  assigns.  Brookdale  may  assign  its  rights  under this
      Agreement without the consent of any Owner Related Entities.  In the event
      that Brookdale assigns its rights under this Agreement, it shall so notify
      the other  parties  hereto,  and  references  herein,  including,  without
      limitation,  in  Section 17 hereof,  and in the Escrow  Agent  Appointment
      Agreement,  to Brookdale  shall be deemed to be references to the assignee
      to whom such rights have been  assigned upon the execution and delivery by
      Brookdale and such assignee of an assignment and assumption agreement with
      respect  to the  Escrow  Appointment  Agreement  and  this  Agreement  and
      delivery  of a copy  thereof to each of the other  parties  hereto and the
      Escrow Agent.

                  (f)  No  Third  Party  Beneficiaries.  This  Agreement  is not
      intended  to and  does not  benefit  or  confer  rights  upon,  and is not
      intended to be and is not  enforceable  by, any  persons or  entities  not
      party to this Agreement,  including, without limitation, the Senior Lender
      and the Subordinate Lender.

                  (g) Amendment;  Waiver.  No provision of this Agreement may be
      amended, waived or otherwise modified without the prior written consent of
      the parties  hereto and the  Subordinate  Lender,  and, in the case of any
      amendment to, or waiver or  modification  of, the provisions of Section 17
      hereof, the acknowledgment and agreement of the Escrow Agent.

                  (h) Section Headings.  The section headings  contained in this
      Agreement are for reference purposes only and shall not affect the meaning
      or interpretation of this Agreement.

                  (i) Counterparts. This Agreement may be executed in any number
      of  counterparts,  each of which shall be deemed to be an original and all
      of which together shall be deemed to be one and the same instrument.

                  (j) Applicable  Law. This  Agreement  shall be governed by and
      construed in  accordance  with the laws of the State of Illinois  (without
      giving effect to principles of conflicts of law).

                  (k) Waiver of Jury Trial. Each party hereto,  after consulting
      or  having  had  the  opportunity  to  consult  with  counsel,  knowingly,
      voluntarily and intentionally waives

                                     19





      any right any of them may have to a trial by jury in any litigation  based
      upon  or  arising  out of  this  Agreement,  or  any  of the  transactions
      contemplated  by  this  Agreement,  or any  course  of  conduct,  dealing,
      statements  (whether  oral or written) or actions of any of them.  No such
      party shall seek to consolidate,  by counterclaim or otherwise, any action
      in which a jury  trial has been  waived  with any other  action in which a
      jury  trial  cannot  be or  has  not  been  waived  unless  failure  to so
      consolidate would result in a loss of such claim.

                  (l)  Limitation  of Personal  Liability.  Notwithstanding  any
      other  provision of this Agreement to the contrary,  (i) in no event shall
      any officer, director, member, partner, manager, shareholder, incorporator
      or agent of any Owner Related Entity be personally liable to Brookdale for
      any of such Owner Related Entity's  obligations under this Agreement,  and
      (ii) if the  Owner  defaults  in  connection  with any  representation  or
      covenant of the Owner set forth in this Agreement,  it will not create any
      personal  liability  against  the  Owner or any lien  rights  against  the
      Property.

                  (m) Intercreditor  Agreement.  The parties hereto  acknowledge
      the existence of the Intercreditor Agreement.


                                     20





            IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the date first above written.

                                    AH MICHIGAN INVESTOR, INC.


                         By:___________________________
                                    Name: David B. Fenkell
                                    Its: President


                          AH MICHIGAN SUBORDINATED, LLC
                                    By: AH Michigan Investor, Inc., its manager


                                          By: ___________________________
                             Name: David B. Fenkell
                                          Its: President


                                    AH MICHIGAN CGP, INC.


                         By:___________________________
                                    Name: David B. Fenkell
                                    Its: President


                      AH MICHIGAN OWNER LIMITED PARTNERSHIP
                 By: AH Michigan CGP, Inc., its general partner


                                          By:___________________________
                             Name: David B. Fenkell
                                          Its: President


                       BROOKDALE LIVING COMMUNITIES, INC.


                         By:___________________________
                         Name:_________________________
                        Its:____________________________

                                     21








                                   JOINDER

      The  undersigned  hereby  joins  in  the  execution  and  delivery  of the
foregoing  Agreement for the sole purpose of  acknowledging  and agreeing to the
provisions of Section 17 thereof.


                            SQUIRE, SANDERS & DEMPSEY


                                          ---------------------------------

                                          By:______________________________

                                          Name:____________________________



                                     22





                                  EXHIBIT A


                     ASSIGNMENT AND ACCEPTANCE AGREEMENT


      THIS AGREEMENT made as of ___________________,  by and between AH MICHIGAN
INVESTOR,      INC.,     an     Ohio     corporation      ("Assignor"),      and
_______________________________ ("Assignee").


                                 WITNESSETH:


      1. For good and valuable  consideration,  the receipt and  sufficiency  of
which are hereby acknowledged,  Assignor does hereby transfer, assign and convey
to Assignee a one hundred percent (100%) interest (the  "Interest") as Member in
AH MICHIGAN SUBORDINATED, LLC, an Ohio limited liability company (the "LLC").

      2.  Assignor  does hereby  warrant and  represent  that it is the sole and
lawful owner of the Interest herein  transferred,  free of any liens,  claims or
encumbrances and that it has full power and authority to make such transfer.

      3.  Assignee does hereby  accept the  foregoing  assignment  and agrees to
become a Member of the LLC.


                                          ASSIGNOR:
                           AH MICHIGAN INVESTOR, INC.

                                          By:___________________________
                                          Title:_________________________



                                          ASSIGNEE:

                                          By:___________________________
                                          Title:_________________________



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                                   EXHIBIT B

                      ESCROW AGENT APPOINTMENT AGREEMENT



            This Escrow Agent Appointment Agreement (this "Agreement"), dated as
of June __, 1998,  is made and entered  into by and among AH Michigan  Investor,
Inc., an Ohio corporation (the "Investor"),  Brookdale Living Communities, Inc.,
a Delaware corporation  ("Brookdale"),  and Squire, Sanders & Dempsey, as escrow
agent  hereunder (in such  capacity,  together with any successor  thereto,  the
"Escrow Agent").

                                   RECITALS


            WHEREAS,  the  Investor,  AH  Michigan  Subordinated,  LLC,  an Ohio
limited  liability  company (the  "Company"),  AH Michigan  CGP,  Inc.,  an Ohio
corporation (the "General Partner"),  AH Michigan Owner Limited Partnership,  an
Ohio limited  partnership,  and  Brookdale  have  entered into an Equity  Option
Agreement of even date  herewith  (as it may be amended  from time to time,  the
"Equity Option Agreement");

            WHEREAS,  pursuant to the Equity Option Agreement,  the Investor has
granted  an option to  Brookdale  to  purchase  the  membership  interests  (the
"Membership Interests") that it owns in the Company; and

            WHEREAS,  the Investor and Brookdale have requested the Escrow Agent
to act in the  capacity of escrow agent for the purpose of holding in escrow the
Assignment and Acceptance  Agreement pursuant to which the Membership  Interests
are to be conveyed,  and the Escrow Agent,  subject to the terms and  conditions
hereof, has agreed to do so.

            NOW, THEREFORE,  in consideration of the mutual agreements contained
herein  and  for  other  good  and  valuable  consideration,   the  receipt  and
sufficiency of which are hereby  acknowledged,  the Investor,  Brookdale and the
Escrow Agent hereby agree as follows:

            1.  Definitions.Unless  otherwise defined herein,  capitalized terms
used  herein  shall have the  meanings  ascribed  to them in the  Equity  Option
Agreement.

            2.  Appointment of Escrow Agent.  The Investor and Brookdale  hereby
designate the Escrow Agent to act as escrow agent for the purposes of performing
the  duties set forth in Section  17 of the  Equity  Option  Agreement,  and the
Escrow Agent accepts such  appointment,  all upon the terms and  conditions  set
forth in this Agreement.

            3. Administration.  It is agreed that the Escrow Agent shall have no
duties or responsibilities  whatsoever under the Equity Option Agreement or this
Agreement except as specifically provided herein; that in the absence of its own
negligence  the Escrow Agent shall be fully  protected and incur no liability to
anyone in acting upon any notice, written request, consent,

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certificate,  document,  or other paper reasonably  believed by it to be genuine
and to be signed or sent by the proper  persons;  that the Escrow Agent shall be
responsible  only for the  performance of its own  obligations  under the Equity
Option Agreement and this Agreement; and that the Escrow Agent shall be under no
obligation to commence,  continue or defend any suit or proceeding in connection
with the Equity Option  Agreement or this Agreement unless requested to do so by
the parties hereto and indemnified to its satisfaction.

            4. Expense of Escrow Agent. The Escrow Agent shall not be paid a fee
for acting as Escrow Agent under the Equity Option Agreement and this Agreement.
The Escrow  Agent shall not be liable for any  claims,  suits,  actions,  costs,
damages, liabilities or expenses (collectively, the "Liabilities") in connection
with the  performance  of its duties under the Equity  Option  Agreement or this
Agreement other than Liabilities  caused by the negligence or willful misconduct
of the Escrow Agent,  and Brookdale hereby agrees to indemnify and hold harmless
the Escrow  Agent from and against any and all  Liabilities  arising  from or in
connection  with any acts or omissions  taken by the Escrow Agent in  connection
with the Equity Option Agreement or this Agreement, other than those Liabilities
caused by the negligence or willful misconduct of the Escrow Agent.

            5. Termination of Agreement. This Agreement shall terminate upon the
earlier to occur of (a) the  performance of the duties of the Escrow Agent under
the Equity Option Agreement, and (b) the Option Termination Date. If the Closing
shall not have occurred on or prior to the Option  Termination  Date, the Escrow
Agent shall redeliver the Assignment to the Investor.

            6. Replacement of Escrow Agent. The Escrow Agent may resign,  or the
Investor  and  Brookdale  may agree to  discharge  the  Escrow  Agent,  from its
obligations  under the Equity Option  Agreement and this  Agreement at any time,
but in no event shall the Escrow Agent be released of its obligations  under the
Equity Option Agreement and this Agreement unless and until a substitute  escrow
agent has been designated and assumed its obligations.

            7. Governing Law. This Agreement  shall be governed by and construed
in accordance  with the laws of the State of Illinois  (without giving effect to
principles of conflicts of law).

            8.  Counterparts.  This  Agreement  may be executed in any number of
counterparts,  each of which shall be deemed to be an original  and all of which
together shall be deemed to be one and the same instrument.

            9. Notices.  Any notices  required or permitted to be sent hereunder
shall be delivered  personally or by telecopier (with answer back  acknowledged)
or mailed,  certified mail, return receipt requested,  or delivered by overnight
courier service to the following addresses,  or such other addresses as shall be
given by notice delivered hereunder, and shall be deemed to have been given upon
delivery, if delivered  personally,  upon receipt with answer back acknowledged,
if delivered by telecopier, three (3) business days after mailing, if mailed, or
one business day after delivery to the courier, if delivery by overnight courier
service:

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                  If to the
                    Investor:             AH Michigan Investor, Inc.
                                          320 King of Prussia Road
                                          Suite 160
                                          Radnor, Pennsylvania 19087
                                          Attn: David B. Fenkell
                                          Fax: (610) 902-0777

                  If to Brookdale:        Brookdale Living
                                Communities, Inc.
                                          77 West Wacker Drive
                                          Suite 4400
                                          Chicago, Illinois 60601
                                          Attn:  Darryl W. Copeland, Jr.
                                          Fax:   (312) 977-3699
                                          Attn: Robert J. Rudnik
                                          Fax: (312) 977-3769

                   with a copy to:        Winston & Strawn
                              35 West Wacker Drive
                             Chicago, Illinois 60601
                              Attn: Wayne D. Boberg
                               Fax: (312) 558-5700

                  If to the Escrow Agent: Squire, Sanders & Dempsey
                              41 South High Street
                              Columbus, Ohio 43215
                               Attn: Scott B. West
                               Fax: (614) 365-2499

            10.  Brookdale may assign its rights hereunder in connection with an
assignment  of its rights under the Equity Option  Agreement in accordance  with
the provisions of paragraph (e) of Section 18 thereof.

            11.  Amendment.  This  Agreement  may be  amended  only by a written
instrument executed by all parties hereto.


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            IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the date first above written.




                                    AH MICHIGAN INVESTOR, INC.


                         By:___________________________
                                    Name: David B. Fenkell
                                    Its:  President



                       BROOKDALE LIVING COMMUNITIES, INC.


                         By:___________________________
                         Name:_________________________
                        Its:____________________________


                                    SQUIRE, SANDERS & DEMPSEY


                        By:______________________________
                        Name:____________________________
                       Its:_______________________________











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