HOMESTEAD VILLAGE INC, 424B5, 1997-12-31

HOMESTEAD VILLAGE INC
424B5, 1997-12-31
HOTELS & MOTELS

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<PAGE>

FILED PURSUANT TO RULE NO. 424(b)(5)
REGISTRATION NO. 333-37803

PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED DECEMBER 29, 1997

LOGO
27,804,906 RIGHTS TO PURCHASE SHARES
6,951,227 SHARES OF COMMON STOCK

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

Homestead Village Incorporated ("Homestead") is committed to creating
significant shareholder value by becoming the leading developer, owner and
operator of moderately priced, extended-stay lodging properties throughout the
United States. Homestead's strategic focus is on the corporate business
traveler. Homestead has developed a proprietary operating system aimed at
ensuring its customers a consistent, high-quality, uniform lodging experience.
Homestead's development program targets infill locations proximate to major
business centers and convenient to services desired by its customers.
Homestead is building a national brand recognized and valued by its major
corporate customers by concentrating on delivering high-quality service and
product in desirable locations. The last reported sale price of Homestead's
shares of common stock, par value $.01 per share (the "Shares"), on the
American Stock Exchange (the "AMEX") on December 29, 1997 was $15. See "Price
Range of Shares".

This Prospectus Supplement relates to (a) 27,804,906 rights ("Rights") to
subscribe for and purchase Shares and (b) the 6,951,227 Shares that are
issuable by Homestead upon the exercise of the Rights. Homestead is issuing as
a dividend, at no cost, to each holder of Shares of record as of the close of
business on December 29, 1997 (the "Record Date"), one Right for each Share
held. Four Rights entitle the holder thereof to purchase one Share at a
subscription price (the "Subscription Price") equal to $15 per Share. Rights
will be evidenced by transferable certificates and will expire on January 15,
1998 at 5:00 p.m. Eastern Standard time, or such later date as Homestead may
determine in its sole discretion (the "Expiration Date"). The Rights will be
traded on the AMEX under the symbol "HSD.RT"; however, no assurance can be
given that a public market will develop or be sustained for the Rights. See
"The Offering".

A holder of Shares on the Record Date who validly exercises all of such
shareholder's Rights may also oversubscribe (the "Oversubscription
Privilege"), at the Subscription Price, for additional Shares covered by this
Prospectus Supplement that have not been purchased through the exercise of
Rights (the "Unsubscribed Shares"). Only holders of Shares on the Record Date
will be entitled to the Oversubscription Privilege.

Homestead's largest shareholder, Security Capital Group Incorporated
("Security Capital"), has agreed to exercise its Rights in full for the base
amount of 4,520,007 Shares and may seek to acquire additional Shares under the
Oversubscription Privilege or through the exercise of Rights it may acquire
from others. Purchases by Security Capital are subject to the availability of
Shares on the same terms applicable to other shareholders.

Shareholders of Homestead who do not exercise all of their Rights will own a
smaller relative equity ownership and voting interest in Homestead after
completion of this offering than if they were to exercise all of their Rights.
Shareholders who do not exercise their Rights may offer to sell them through a
securities broker up to the close of the AMEX on January 14, 1998, although no
assurance of a sale can be given. There is no minimum number of Shares
required to be sold as a condition to the consummation of this offering. See
"The Offering". Simultaneously with the offering of Shares to Rights holders,
Security Capital Markets Group Incorporated ("Capital Markets Group"), an
affiliate of Homestead, will act as placement agent to sell Unsubscribed
Shares and Additional Shares (as defined below) to third parties, on a best
efforts basis, at the Subscription Price. See "The Offering".

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

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

<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) HOMESTEAD(2)
------------ ------------ ------------
<S> <C> <C> <C>
Per Share................................ $ 15.00 $ 0.15 $ 14.85
Total(3)................................. $104,268,405 $1,042,684 $103,225,721
</TABLE>
- -------
(1) Homestead has agreed to indemnify the placement agent against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "The Offering--Unsubscribed Shares and Third Party Sales".
(2) Before deducting estimated expenses of $350,000 payable by Homestead.
(3) Assumes the sale of 6,951,227 Shares. Homestead has authorized an
additional 3,475,614 Shares (the "Additional Shares") for issuance in the
event that Homestead determines, in its sole and absolute discretion, to
accept subscriptions in excess of 6,951,227 Shares pursuant to the
Oversubscription Privilege or third party subscriptions. If all Additional
Shares are sold, the total Price to Public, Underwriting Discount and
Proceeds to Homestead would be $156,402,615, $1,564,026 and $154,838,589,
respectively.

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

The date of this Prospectus Supplement is December 29, 1997
<PAGE>

[Inside Front Cover]

Chart 1
- -------

[Property Picture]

Extended-Stay Lodging Targeting the Corporate Business Traveler

. Rooms Designed for the Business Traveler

. Superior Customer Service

. $209-$339 Standard Weekly Rate

. Exceptional Value for the Customer

Chart 2
- -------

[Geographic Distribution Chart - Growth in Properties Chart]

Chart 3
- -------

[Property Picture]

Capital Deployed into Strategic Markets

Homestead Deploys Capital into Markets with:

. High Concentration of Target Customers

. Strong Growth Fundamentals

. High Barriers to Entry

HOMESTEAD OR ITS AFFILIATES MAY ENGAGE IN TRANSACTIONS WHICH STABILIZE,
MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE RIGHTS. SUCH TRANSACTIONS MAY BE
EFFECTED ON THE AMERICAN STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

S-2
<PAGE>

Homestead Village(R) is a registered trademark of Homestead and all
references to the term "Homestead Village" herein shall include a reference to
such registered trademark. The term "in pre-development planning" means
developments in planning and owned (land has been acquired or is under a long-
term ground lease) and developments in planning and under control (land which
is under control through contingent contract or letter of intent) with
construction anticipated to commence within 12 months. Homestead categorizes
its operating properties (which include all properties not under construction
or in pre-development planning) as either "stabilized" or "pre-stabilized".
For purposes of this Prospectus, the term "stabilized" means those properties
which have been open for six months or achieved 80% occupancy as of the
beginning of a period and "pre-stabilized" means all other operating
properties.

HOMESTEAD VILLAGE INCORPORATED

Homestead is committed to creating significant shareholder value by becoming
the leading developer, owner and operator of moderately priced, extended-stay
lodging properties throughout the United States. Homestead's strategic focus
is on the corporate business traveler. Homestead has developed a proprietary
operating system aimed at ensuring its customers a consistent, high-quality,
uniform lodging experience. Homestead's development program targets infill
locations proximate to major business centers and convenient to services
desired by its customers. Homestead seeks to build a national brand recognized
and valued by its major corporate customers by concentrating on delivering
high-quality service and product in desirable locations.

Homestead has a five-year operating history in the extended-stay market.
Homestead's research and experience has better enabled it to develop a product
which responds to the extended-stay lodging needs of the corporate business
traveler. Homestead's research indicates that there is a significant and
growing amount of corporate demand for the extended-stay product, particularly
among business travelers on temporary assignment, undergoing relocation or in
training. Homestead's objective is to serve its targeted customer base by
providing exceptional customer service, locating in markets with high
concentrations of business activity and offering a purpose-built product at an
affordable price.

Homestead is committed to the establishment of a dominant and long-term
recognizable national brand name and brand presence in the moderately priced,
extended-stay lodging market place. Homestead believes that it can achieve
this objective through the following:

. A focus on the corporate business traveler through a concentrated
national and local sales and marketing effort.

. A focus on superior property locations and customer service.

. The Homestead proprietary operating system which provides a high-quality,
consistent experience for its customers through uniform operating
standards, a recruiting and training system that targets and trains
quality individuals, and a property reinvestment program that ensures
that Homestead properties remain up-to-date.

. A disciplined approach to capital deployment that targets strong growth
markets where Homestead's corporate customers are located.

. A research-driven approach that is focused on understanding the corporate
business traveler and the real estate fundamentals of the markets where
Homestead's customers are located.

As of December 29, 1997, Homestead operated 66 properties, and expects to
open eleven additional properties by the end of January 1998, all of which are
substantially completed. For the eleven months ended November 30, 1997,
average occupancy and average weekly rate for the 29 stabilized properties was
81.4% and $241 per week, respectively.

S-3
<PAGE>

Homestead has made the following significant advances during 1997:

. Homestead's focus on the corporate customer and establishment of major
corporate accounts has resulted in an increase in major corporate account
room nights from 94,000 for the nine months ended September 30, 1996 to
183,000 for the nine months ended September 30, 1997.

. As of November 30, 1997, there were 56 properties under construction,
seven of which were opened in December 1997, and the additional 49 are
expected to be completed by December 31, 1998, and 39 additional
development sites owned or under control. Homestead expects to invest a
total of $560 million in properties under construction and in planning
and owned.

. Homestead believes it has built the strongest management team in the
extended-stay lodging industry, with significant experience and depth in
the lodging and development business.

. Homestead's financial performance continues to be strong with earnings
before interest, income taxes, depreciation and amortization ("EBITDA")
increasing from $10,717,000 for the nine months ended September 30, 1996
to $12,893,000 for the nine months ended September 30, 1997, primarily as
a result of 21 more properties in operation at September 30, 1997 than at
September 30, 1996, and weekly revenue per available room ("RevPAR")
increasing from $175 for the year ended December 31, 1996 to $195 for the
nine months ended September 30, 1997, primarily as a result of increased
average weekly rates.

Homestead is affiliated with Security Capital, which is the principal
shareholder of Homestead. Homestead's affiliation with Security Capital
provides it with access to Security Capital's proprietary real estate research
and various other services which Security Capital offers to its affiliates.

Homestead is a Maryland corporation. Its executive offices are located at
2100 RiverEdge Parkway, Suite 900, Atlanta, Georgia 30328 and its telephone
number is (770) 303-2200.

The statements contained in this Prospectus Supplement that are not
historical facts are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). These forward-looking statements are based on current expectations,
estimates and projections about the industry and markets in which Homestead
operates and management's beliefs and assumptions. Words such as "expects",
"anticipates", "intends", "plans", "believes", "seeks", "estimates",
variations of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions which are
difficult to predict. Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in such forward-looking
statements. Among the important factors that could cause Homestead's actual
results to differ materially from those expressed in the forward-looking
statements are (i) changes in general economic conditions in its target
markets that could adversely affect demand for Homestead's properties, (ii)
Homestead's ability to open new properties on schedule, which may be affected
by factors outside the control of Homestead, (iii) the effects of increased or
unexpected competition with respect to one or more properties and (iv) changes
in financial markets and interest rates that could adversely affect
Homestead's cost of capital and its ability to meet its financing needs and
obligations.

S-4
<PAGE>

OFFERING INFORMATION

Securities Offered............. 27,804,906 Rights, exercisable for an
aggregate of 6,951,227 Shares, with 3,475,614
Additional Shares authorized for issuance to
cover excess subscriptions, if any, or for
sales to third parties.

Subscription Right............. One Right per Share issued as a dividend to
each holder of Shares on the Record Date.
Four Rights entitle the holder to purchase
one Share at the Subscription Price. See "The
Offering".

Oversubscription Privilege..... A holder of Shares on the Record Date who
validly exercises all of such shareholder's
Rights may also subscribe for Additional
Shares, at the Subscription Price, to the
extent all of the Shares covered by this
Prospectus Supplement have not been purchased
through the exercise of Rights or otherwise.
Only holders of Shares on the Record Date
will be entitled to the Oversubscription
Privilege. See "The Offering--Over-
subscription Privilege".

Third Party Sales.............. Simultaneously with the offering of Shares to
Rights holders, Capital Markets Group will
act as placement agent to sell Unsubscribed
Shares to third parties on a best efforts
basis, at the Subscription Price. See "The
Offering--Unsubscribed Shares and Third Party
Sales".

Expiration Date................ January 15, 1998 at 5:00 p.m. Eastern
Standard time, or such later date as
Homestead may determine in its sole
discretion. After such time, the Rights will
become void and have no value.

Subscription Price............. $15 per Share.

Transferability of Rights...... The Rights are transferable until their
expiration, subject to certain limitations,
and may be traded on the AMEX only up to the
close of the AMEX on January 14, 1998, the
business day preceding the Expiration Date.
See "The Offering--Method of Transferring
Rights".

Subscription Agent............. BankBoston, N.A., 150 Royall Street, Canton,
Massachusetts 02021.

Shares Outstanding Before 27,804,906
Offering.......................

Shares Outstanding After 34,756,133 (38,231,747 if all Additional
Offering....................... Shares are sold)

Use of Proceeds................ The repayment of outstanding indebtedness,
the acquisition of land for development,
construction of Homestead properties and
general corporate purposes. See "Use of
Proceeds".

S-5
<PAGE>

CERTAIN CONSIDERATIONS

SUBSTANTIAL GROWTH

Homestead has experienced rapid growth in its revenues, number of properties
and employees and the scope of its operations. This growth has resulted in,
and is expected to continue to create, new and increased responsibilities for
management personnel, as well as added demands on Homestead's operating and
financial systems. Homestead's growth will depend on the efforts of key
management personnel and Homestead's ability to attract or develop new
management personnel and to integrate these new employees into its overall
operations. If Homestead is unable to manage growth effectively, Homestead's
business and results of operations could be materially and adversely affected.

SUBSTANTIAL CAPITAL REQUIREMENTS

Homestead will require a substantial amount of additional capital over time
to finance its future growth, the amount of which will depend on a number of
factors including the number of properties Homestead constructs, the pace of
development activities and the cash flow generated by its properties. It is
anticipated that Homestead's total expected investment (as of November 30,
1997) in properties under construction will be approximately $447 million and
Homestead's total expected investment for properties in planning and owned
will be approximately $113 million. As a result, Homestead will seek to raise
substantial additional amounts of capital in 1998 and 1999. Homestead may seek
additional credit facilities and may issue long-term debt and additional
equity securities. No assurance can be given regarding the availability or
terms of such financing. Any future debt financings or issuances of preferred
stock by Homestead will be senior to the rights of the holders of Shares, and
any future issuances of Shares may result in the dilution of the then existing
shareholders' proportionate equity interests in Homestead.

COMPETITION

Each Homestead Village property is, or will be, located in a developed area
that includes competing properties. The number of competitors in a particular
area could have a material adverse effect on occupancy, average weekly rates
and RevPAR. Competition within the extended-stay lodging market has increased
substantially. In addition, since the lodging industry has historically been
characterized by cyclical trends, there can be no assurance that the current
state of supply/demand fundamentals will continue into the future. Competition
within the lodging industry is based generally on convenience of location,
price, range of services and guest amenities offered and quality of customer
service. Homestead considers the reasonableness of its room rates, the
location of its properties and the services and the guest amenities provided
by it to be among the most important competitive factors in the business. A
number of other lodging chains and developers are developing extended-stay
properties. In particular, some of these entities have targeted the moderately
priced segment of the extended-stay market in which Homestead competes.
Homestead competes for guests and for new development sites with certain of
these established entities which may have greater financial resources than
Homestead and better relationships with lenders and real estate sellers. These
entities may be able to accept more risk than Homestead can prudently manage.
Further, there can be no assurance that new or existing competitors will not
significantly reduce their rates or offer greater convenience, services or
amenities or significantly expand or improve properties in markets in which
Homestead competes, thereby materially adversely affecting Homestead's
business and results of operations.

S-6
<PAGE>

BUSINESS

BUSINESS STRATEGY

Homestead believes the extended-stay segment of the lodging industry offers
a tremendous growth opportunity. Industry data reveals that there is a
significant imbalance between supply and demand in this segment. Approximately
38% of business travel demand is for five days or more (Source: D.K. Shifflet
& Associates, Ltd.), however, the current supply of purpose-built extended-
stay product is limited. In addition, Homestead believes that the demand for
purpose-built extended-stay product will continue to increase as customer
awareness of the product increases. Homestead believes it is well positioned
to capture a significant portion of the extended-stay market share by
specifically targeting the corporate business traveler and markets that are
characterized by strong business climates. Homestead is building a national
brand by developing well positioned properties and providing consistently high
levels of quality in both physical facility and customer service.

Homestead is committed to providing shareholders with long-term sustainable
cash flow growth. Cash flow growth will be driven by Homestead's commitment to
building a national brand, focus on the corporate business traveler,
proprietary operating system and highly disciplined approach to capital
deployment.

Commitment to Building a National Brand

Homestead's ultimate goal is to build a national brand by providing
customers with a high-quality experience and locating in the markets for
corporate business travelers. Homestead expects that the combination of its
focus on the corporate business traveler, proprietary operating system and
disciplined deployment of capital will result in the realization of its goal.
Homestead's objective in building a national brand is to create a leading
position within the extended-stay sector. The benefit of an identifiable brand
is the ability to attract and retain customers which will result in increased
shareholder value due to higher property-level performance. To ensure maximum
control over its brand identity, Homestead has no plans to franchise the
Homestead Village concept.

Focus on the Corporate Business Traveler

Homestead is focused on providing the corporate business traveler on
temporary assignment, undergoing relocation or in training with a moderately
priced, extended-stay lodging product. To capture the corporate business
travelers' extended-stay demand, Homestead has established a sales and
marketing team that targets national and local businesses. The twelve sales
and marketing professionals supplement the marketing effort conducted at the
local level by the General Managers of each property by establishing
relationships with national users of the extended-stay product. Homestead's
focus on the corporate business traveler and establishment of major corporate
accounts has resulted in an increase in major corporate account room nights
from 94,000 for the nine months ended September 30, 1996 to 183,000 for the
nine months ended September 30, 1997. Homestead believes that an emphasis on
major national corporate accounts is critical to sustaining occupancy levels
that exceed market averages.

Homestead's five-year operating history and customer-level research provide
it with the competitive advantage of understanding the needs of the extended-
stay corporate business traveler. In developing its extended-stay lodging
product, Homestead relies on customer surveys, interviews and focus groups to
identify the specific needs and requirements of its customers. Understanding
its customers has allowed Homestead to

S-7
<PAGE>

design its properties and establish operating procedures to meet and exceed
the customer's needs and requirements.

Weekly room rates at Homestead Village properties appeal to value-conscious
corporate business travelers. Rates at Homestead properties typically range
between $209 and $339 for a standard room and compare favorably with average
weekly rates of over $500 for the majority of traditional extended-stay
hotels. Weekly rates at Homestead properties will vary significantly depending
on specific market factors and the size of the room.

Proprietary Operating System

Homestead has developed and is continuously refining its operating system
which combines a conveniently located, well-designed guest room with friendly
and efficient guest service, and an amenity program designed to meet the
specific needs of the extended-stay corporate business traveler. Management
believes that by offering this combination at an affordable price, it will
create an excellent price/value relationship that will appeal to the value-
conscious corporate business traveler.

Homestead's proprietary operating system is focused on providing a uniform,
consistently high-quality experience to the corporate business traveler. A key
component of the operating system is the operating standards Homestead has
created to ensure a consistent customer experience. In addition, Homestead's
recruiting and training process is centered around providing the highest level
of customer service to guests. The operating system results in a positive
lodging experience for guests and generates a willingness to use the product
again and in multiple locations.

Homestead's experience in operating 66 properties has provided it with the
opportunity to standardize its operating procedures to meet the specific needs
of extended-stay corporate business travelers. This standardization is aimed
at both providing a consistent guest experience and generating operating
efficiencies that will be further refined as Homestead adopts "best practices"
in the lodging industry. Homestead is also pursuing the standardization of its
supply purchases, which management believes will help to generate further
operating efficiencies and reduce costs through economies of scale and volume
discounts.

Homestead has invested substantially in the recruiting and training of its
regional and on-site personnel. Homestead currently has twelve separate
training modules with topics ranging from guest services and safety to
personal selling techniques. Training in these areas is conducted on a regular
basis and will ensure a consistent guest experience at every property.
Training design and organizational development are administered by corporate
professionals in conjunction with field implementation personnel located
within a geographic region. Homestead views its investment in training and
developing site-level personnel as being essential to delivering a high
customer service standard, and as consistent with its objective of becoming
the preeminent operator in the moderately priced, extended-stay lodging
industry.

Homestead properties are designed and built to uniform plans that are driven
by the needs of the extended-stay corporate business traveler. Rooms generally
contain 260 to 420 square feet of fully furnished living space, with a work
station/dining area and kitchen facilities that include a full-size
refrigerator, microwave, sink and cook-top. Timely capital expenditures as
well as the establishment of a preventative maintenance program will allow
Homestead to maintain high-quality and attractive rooms and properties for its
customers.

Disciplined Deployment of Capital

Homestead's strategy is to focus specifically on those markets with high
barriers to entry such as a limited availability of quality sites and
difficult entitlement processes. Homestead believes that over the long-term
high barriers to entry limit competition and result in sustainable cash flow
growth at the property level. Homestead strategically deploys its capital
using a disciplined approach to market and site selection. Homestead's 68

S-8
<PAGE>

development professionals focus on land acquisition, design and site planning,
the entitlement process and construction management. The development team
targets markets with a high concentration of corporate customers and strong
demographic and employment growth prospects. More than 60% of Homestead's total
development capital is committed to Northeast (Washington, D.C. to Boston,
Massachusetts) or West Coast (Seattle, Washington to San Diego, California)
strategic markets which have experienced high RevPAR growth in the last several
years. Homestead's affiliation with Security Capital Investment Research
Incorporated ("Security Capital Investment Research") allows it to more
effectively target markets where supply and demand factors result in high
occupancies and increasing weekly rates.

Homestead employs dedicated site acquisition professionals who evaluate each
site against a set of eighteen separate criteria where optimum standards have
been established. Homestead's properties are designed to offer excellent
locations with convenient access to major employment centers, retail and
restaurant support services and a residential environment that is attractive,
well landscaped and secure. In addition, Homestead minimizes risk by entering
into contingent contracts with landowners which allow it to conduct thorough
due diligence and obtain entitlements prior to taking title to a development
site.

When developing properties, Homestead's development team uses prototypical
designs to create customer expectations and development efficiencies. Homestead
has had the opportunity to evaluate and refine its product through its five-
year history of development. The designs were developed with the help of
customer focus groups and surveys that identified the needs of the corporate
business traveler. The prototypes result in standardized product development
regardless of the property's location and ensure a consistent lodging
experience for the corporate business traveler. The limited number of designs
also result in development efficiencies which translate into higher operating
yields. Homestead focuses on the quality of construction, materials and design
with a view towards minimizing long-term operation and maintenance costs.
Homestead's average property has approximately 136 extended-stay rooms and
takes approximately eight to ten months to construct.

Each investment transaction undergoes a detailed and comprehensive review by
operational and development senior management and a subsequent review by
Homestead's Investment Committee. Members of the Investment Committee include
David Dressler, Jr., Co-Chairman, Chief Investment Officer and President,
Michael Cryan, Co-Chairman and Chief Operating Officer, Jeffrey Allen and
Robert Morse, each a Managing Director, Gary DeLapp, a Senior Vice President,
and Laura Hamilton, a Vice President. The Investment Committee process is
designed to review both the specific investment as well as to ensure its
conformity with Homestead's investment policies and goals as set by the
Homestead Board of Directors (the "Board"). In addition, the Board specifically
approves all investments over $15 million.

The table below illustrates the growth in the Homestead product since it was
conceived and developed (amounts in thousands).

<TABLE>
<CAPTION>
TOTAL EXPECTED
INVESTMENT(1) HISTORICAL COST AT DECEMBER 31,(2)
-------------- ----------------------------------------
NOVEMBER 30,
1997 1996 1995 1994 1993 1992
-------------- -------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Operating Properties.... $339,046 $135,339 $ 77,537 $41,629 $ 8,894 $6,108
Properties in
development:
Properties under
construction......... 446,716 108,692 28,218 14,303 15,274 899
Properties in planning
and owned............ 113,062 12,256 4,440 4,281 -- --
-------- -------- -------- ------- ------- ------
Total............... $898,824 $256,287 $110,195 $60,213 $24,168 $7,007
======== ======== ======== ======= ======= ======
</TABLE>

S-9
<PAGE>

- --------
(1) Total expected investment represents budgeted development cost for
properties under construction and properties in planning and owned.
Properties in planning and owned represent projects where land has been
acquired or is under long-term lease and pre-construction planning
activities are in progress. Budgeted development cost includes the cost of
land, fees, permits, payments to contractors, architectural and
engineering fees and interest, property taxes and development overhead
costs to be capitalized during the development period. Land held for
future development or for sale which is less than 2.0% of property assets
based on historical cost as of November 30, 1997, are not included above.
(2) Such information aggregates the activity of both Security Capital Pacific
Trust ("PTR") and Security Capital Atlantic Incorporated ("ATLANTIC")
prior to the Mergers (defined below under "--The Company--Background").
The increase in cost of ATLANTIC properties, which occurred due to the use
of purchase accounting, is reflected on the date of the Mergers.

THE COMPANY

Background

Homestead was initially created in 1992 as a byproduct of the multifamily
development activities of PTR. PTR identified a customer need not ideally
addressed through its traditional multifamily garden apartment product or
through corporate apartments operated within a garden apartment context. PTR
believed that a product which offered greater flexibility of rental term, a
fully furnished studio apartment with cooking facilities and a focused array
of services (such as limited maid service, voice mail, cable or satellite
television) at an affordable price would meet the needs of a significant and
growing segment of demand from those business travelers on temporary
assignment, in training or relocating.

In conjunction with its research affiliate, Security Capital Investment
Research, PTR engaged in extensive study to determine an optimum approach to
what it originally termed "Corporate Affordable Housing". Beginning in 1992,
PTR initiated development projects in Dallas and Houston, Texas. It was PTR's
express intention to gain operating experience and to fully understand market
characteristics prior to committing to full-scale Homestead Village
development on a broad geographical basis. Security Capital funded the early
stages of development of the Homestead Village concept.

In January 1996, Security Capital began considering ways for ATLANTIC, PTR
and Security Capital to maximize shareholder value with respect to their
Homestead Village properties and operations. On May 21, 1996, ATLANTIC, PTR,
Security Capital and Homestead entered into a merger agreement, pursuant to
which each of ATLANTIC, PTR and Security Capital agreed to contribute, through
a series of merger transactions (the "Mergers"), all of their respective
assets relating to Homestead Village properties to Homestead in exchange for
Shares. ATLANTIC and PTR agreed to enter into the Funding Commitment
Agreements and Security Capital provided interim funding for Homestead
acquisitions prior to the closing of the Mergers, all in exchange for warrants
to purchase Shares ("Warrants"). ATLANTIC's and PTR's respective shareholders
approved the Homestead transaction on September 13, 1996 and September 12,
1996, respectively, and the closing of the Homestead transaction occurred on
October 17, 1996.

Homestead has a relationship with Security Capital which it intends to
continue through an Administrative Services Agreement and will enjoy the
benefits of Security Capital's organization and services. See "Certain
Relationships and Transactions--Administrative Services Agreement".

Properties and Operations

As of November 30, 1997, Homestead had developed, owned and operated 59
Homestead Village properties representing in the aggregate 8,090 rooms in 21
cities and had 56 Homestead Village properties under

S-10
<PAGE>

construction totaling 7,424 rooms within 15 of these cities as well as 16
additional cities. In addition, Homestead owned eight sites and controlled
through contracts 31 development sites for which it plans to initiate
construction within the next 12 months, for a total of 154 properties in 38
cities. Rooms in operation, under construction, or in pre-development planning
aggregate 20,821 rooms. In addition, its development staff of 68 professionals
is continually reviewing additional development opportunities.

The 56 Homestead Village properties under construction as of November 30,
1997 averaged 133 rooms at an expected average project cost of $8.0 million
with an expected average cost per room of approximately $60,200.

S-11
<PAGE>

HOMESTEAD VILLAGE PROPERTIES

Geographic Distribution

Homestead operating properties, properties under construction and properties
in planning and owned are located in 37 metropolitan areas in 24 states and
the District of Columbia. The table below demonstrates the geographic
distribution of Homestead's property investments (excluding land held for
future development and land held for sale) at November 30, 1997:

<TABLE>
<CAPTION>
NUMBER OF PROPERTIES PERCENTAGE OF
---------------------------------------- ASSETS BASED ON
UNDER IN PLANNING TOTAL EXPECTED
CITY OPERATING CONSTRUCTION AND OWNED TOTAL INVESTMENT(1)
- ---- --------- ------------ ----------- ----- ---------------
<S> <C> <C> <C> <C> <C>
Albuquerque, NM......... 2 -- -- 2 1%
Atlanta, GA............. 5 3 -- 8 7%
Austin, TX.............. 3 1 -- 4 2%
Birmingham, AL.......... -- 1 -- 1 1%
Boston, MA.............. -- 3 -- 3 3%
Charlotte, NC........... -- 1 -- 1 1%
Chicago, IL............. -- 3 -- 3 3%
Cleveland, OH........... -- 1 -- 1 1%
Dallas, TX.............. 9 -- -- 9 4%
Denver, CO.............. 4 -- -- 4 3%
Houston, TX............. 8 -- 1 9 5%
Jacksonville, FL........ 1 1 -- 2 1%
Kansas City, MO/KS...... 1 2 -- 3 2%
Las Vegas, NV........... -- 1 -- 1 1%
Los Angeles, CA......... -- 2 1 3 2%
Memphis, TN............. -- 1 -- 1 1%
Miami/Ft. Lauderdale,
FL..................... 2 4 1 7 6%
Milwaukee, WI........... -- 1 -- 1 1%
Minneapolis, MN......... -- 2 -- 2 1%
Nashville, TN........... -- 2 -- 2 2%
New York Metro, NY...... -- 1 1 2 7%
Orange County, CA....... 1 2 -- 3 3%
Orlando, FL............. -- 1 1 2 2%
Philadelphia, PA........ -- 3 -- 3 3%
Phoenix, AZ............. 4 1 -- 5 3%
Portland, OR............ 1 1 -- 2 2%
Raleigh, NC............. 2 2 -- 4 3%
Richmond, VA............ 1 1 -- 2 2%
Sacramento, CA.......... -- 1 -- 1 1%
Salt Lake City, UT...... 2 1 -- 3 2%
San Antonio, TX......... 3 -- -- 3 1%
San Diego, CA........... 1 1 -- 2 2%
San Francisco (Bay
Area), CA.............. 3 3 2 8 7%
Seattle, WA............. 2 2 -- 4 4%
St. Louis, MO........... -- 1 -- 1 1%
Tampa Area, FL.......... 3 -- -- 3 2%
Washington, DC.......... 1 6 1 8 7%
--- --- --- --- ----
Total............... 59 56 8 123 100%
=== === === === ====
</TABLE>
- --------
(1) Represents budgeted development cost for properties under construction and
properties in planning and owned. Properties in planning and owned
represent projects where land has been acquired and pre-construction
planning activities are in progress. Budgeted development cost includes
the cost of land, fees, permits, payments to contractors, architectural
and engineering fees and interest, property taxes and development overhead
costs to be capitalized during the development period. Land held for
future development or for sale, which is less than 2.0% of property assets
based on historical costs as of
November 30, 1997, are not included above.

S-12
<PAGE>

Properties Portfolio

The information in the following table is as of November 30, 1997 for
Homestead's 59 operating properties.

<TABLE>
<CAPTION>
YEAR
OPENED ROOMS
------ -----
<S> <C> <C>
OPERATING PROPERTIES:
Albuquerque, New Mexico:
Midtown/I-40(2)............................ 1997 138
Osuna/North I-25(2)........................ 1996 141
-----
Subtotal................................... 279
-----
Atlanta, Georgia:
Cumberland(3).............................. 1997 137
Gwinnet Place(3)........................... 1997 130
Executive Park/North Druid Hills(3)........ 1997 137
Peachtree (3).............................. 1996 137
Perimeter (3).............................. 1997 133
-----
Subtotal................................... 674
-----
Austin, Texas:
Austin Midtown(2).......................... 1996 145
Arboretum/Burnett(2)....................... 1995 133
Northwest/Pavillion(2)..................... 1996 132
-----
Subtotal................................... 410
-----
Dallas, Texas:
Coit Road/North Central (2)................ 1994 133
Forth Worth/Downtown(2).................... 1996 97
Las Colinas/Irving(2)...................... 1996 149
North Arlington/Six Flags(2)............... 1995 137
North Richland Hills(2).................... 1994 133
Skillman/Northeast(2)...................... 1992 131
South Arlington(2)......................... 1995 141
Stemmons/NW Highway(2)..................... (1) 189
Tollway/Addison(2)......................... 1993 119
-----
Subtotal................................... 1,229
-----
Denver, Colorado:
Denver Tech Center/Belleview(2)............ 1996 161
Cherry Creek(2)............................ 1997 108
Aurora/Iliff(2)............................ 1996 137
Inverness(2)............................... 1997 142
-----
Subtotal................................... 548
-----
Houston, Texas:
Astrodome/Med Center(2).................... 1995 163
Cypress Station/Bammel(2).................. 1994 134
Fuqua/Hobby Airport(2)..................... 1994 133
Park Ten(2)................................ 1994 134
Stafford/Sugarland(2)...................... 1994 133
West by Northwest/Hwy 290(2).................1994.. 133
Westheimer/Beltway(2)...................... 1994 133
Willowbrook/Northwest(2)................... 1995 137
-----
Subtotal................................... 1,100
-----
Jacksonville, Florida:
Southside/JTB(3)........................... 1997 137
-----
Kansas City, Missouri:
Shawnee Mission/Merriam(2)................. 1997 140
-----
</TABLE>

<TABLE>
<CAPTION>
YEAR
OPENED ROOMS
------ -----
<S> <C> <C>
Miami/Ft. Lauderdale, Florida:
Ft. Lauderdale(3)................................................. 1997 145
Miami Airport--Doral(3)........................................... 1997 149
-----
Subtotal.......................................................... 294
-----
Orange County, California:
Spectrum(2)....................................................... 1997 149
-----
Phoenix, Arizona:
North West Valley/Dunlap(2)....................................... 1996 141
Tempe(2).......................................................... 1996 149
Scottsdale(2)..................................................... 1995 120
Deer Valley/Union Hills(2)........................................ 1996 141
-----
Subtotal.......................................................... 551
-----
Portland, Oregon:
Sunset Corridor/Sunset East (2)................................... 1997 142
-----
Raleigh, North Carolina:
Research Triangle Park/RTP(3)..................................... 1997 125
North Raleigh(3).................................................. 1997 121
-----
Subtotal.......................................................... 246
-----
Richmond, Virginia:
Innsbrook/Upper Broad (3)......................................... 1997 141
-----
Salt Lake City, Utah:
Ft. Union(2)...................................................... 1997 132
South Valley/Redwood(2)........................................... 1997 138
-----
Subtotal.......................................................... 270
-----
San Antonio, Texas:
Airport/Bitters(2)................................................ 1995 153
Six Flags Fiesta/DeZavala(2)...................................... 1995 130
Medical Center/Fredricksburg(2)................................... 1994 135
-----
Subtotal.......................................................... 418
-----
San Diego, California:
Mission Valley(2)................................................. 1997 141
-----
San Francisco (Bay Area), California:
Milpitas(2)....................................................... 1997 118
San Mateo(2)...................................................... 1997 136
Sunnyvale(2)...................................................... 1997 144
-----
Subtotal.......................................................... 398
-----
Seattle, Washington:
Bellevue(2)....................................................... 1997 149
Redmond(2)........................................................ 1997 162
-----
Subtotal.......................................................... 311
-----
Tampa, Florida:
Brandon(3)........................................................ 1997 141
North Airport(3).................................................. 1997 121
Clearwater/St. Petersburg(3)...................................... 1997 113
-----
Subtotal.......................................................... 375
-----
Washington, D.C.:
BWI(3)............................................................ 1997 137
-----
Total Rooms--Operating Properties................................. 8,090
=====
</TABLE>
- --------
(1) Phase I (132 rooms) was developed in 1992 and Phase II (57 rooms) was
developed in 1995.
(2) Subject to deeds of trust securing convertible mortgage notes due to PTR
of $204,197,000 (carried at $184,432,000, net of unamortized discount at
November 30, 1997).
(3) Subject to deeds of trust securing convertible mortgage notes due to
ATLANTIC of $93,513,000 (carried at $105,602,000, net of unamortized
premium at November 30, 1997).

S-13
<PAGE>

The following table is as of November 30, 1997 for Homestead's properties
under construction and properties in planning and owned(1).
<TABLE>
<CAPTION>
ROOMS
-----
<S> <C>
PROPERTIES UNDER CONSTRUCTION:
Atlanta, Georgia:
Northlake(5)...................... 133
Roswell(3)........................ 141
Wildwood/Powers Ferry(5).......... 134
---
Subtotal.......................... 408
---
Austin, Texas:
Downtown/Townlake(5).............. 130
---
Birmingham, Alabama:
Perimeter Park South(5)........... 137
---
Boston, Massachusetts:
Burlington........................ 140
Marlborough(5).................... 134
Waltham(5)........................ 140
---
Subtotal.......................... 414
---
Charlotte, North Carolina:
I-77 Billy Graham Pkwy(5)......... 137
---
Chicago, Illinois:
Naperville(5)..................... 136
Schaumburg(5)..................... 136
Westmont(5)....................... 140
---
Subtotal.......................... 412
---
Cleveland, Ohio:
North Olmstead(5)................. 136
---
Jacksonville, Florida:
Baymeadows(5)..................... 134
---
Kansas City, Missouri:
Overland Park(5).................. 131
Plaza............................. 99
---
Subtotal.......................... 230
---
Las Vegas, Nevada:
Las Vegas Midtown(4).............. 122
---
Los Angeles, California:
LAX/El Segundo(2)................. 150
Monrovia(2)....................... 122
---
Subtotal.......................... 272
---
Memphis, Tennessee:
Memphis Airport(5)................ 134
---
Miami/Ft. Lauderdale, Florida:
Blue Lagoon(5).................... 149
Coral Springs--Northpoint(5)...... 124
Plantation(3)..................... 125
West Palm Beach(5)................ 137
---
Subtotal.......................... 535
---
Milwaukee, Wisconsin:
Brookfield(5)..................... 136
---
Minneapolis, Minnesota:
Eagan Lone Oak(5)................. 130
Eden Prairie(5)................... 97
---
Subtotal.......................... 227
---
Nashville, Tennessee:
Cool Springs(3)................... 137
Nashville Airport(3).............. 133
---
Subtotal.......................... 270
---
</TABLE>
<TABLE>
<CAPTION>
ROOMS
-----
<S> <C>
New York Metro, NY:
Hanover(5)........................ 140
-----
Orange County, California:
Brea(5)........................... 133
Cypress(5)........................ 134
-----
Subtotal.......................... 267
-----
Orlando, Florida:
Orlando Central Park(5)........... 134
-----
Philadelphia, Pennsylvania:
Christiana(5)..................... 140
King of Prussia(5)................ 140
Willow Grove(5)................... 136
-----
Subtotal.......................... 416
-----
Phoenix, Arizona:
Mesa(2)........................... 123
-----
Portland, Oregon:
Lake Oswego(2).................... 146
-----
Raleigh, North Carolina:
Durham(5)......................... 137
Crabtree Valley/Hwy 70(3)......... 138
-----
Subtotal.......................... 275
-----
Richmond, Virginia:
Midlothian(5)..................... 134
-----
Sacramento, California:
South Natomas(5).................. 143
-----
Salt Lake City, Utah:
Sugarhouse(5)..................... 105
-----
San Diego, California:
Mira Mesa(2)...................... 140
-----
San Francisco (Bay Area),
California:
Mountain View(2).................. 133
San Jose(2)....................... 152
San Ramon(2)...................... 147
-----
Subtotal.......................... 432
-----
Seattle, Washington:
N. Seattle/Mountain Lake
Terrace(2)....................... 117
Tukwila(2)........................ 93
-----
Subtotal.......................... 210
-----
St. Louis, Missouri:
St. Louis Airport(5).............. 136
-----
Washington, D.C.:
Dulles--North(3).................. 133
Dulles--South(3).................. 115
Fair Oaks(3)...................... 133
Germantown(3)..................... 132
Fairview Park/Merrifield(3)....... 128
Reston--Sunset(3)................. 148
-----
Subtotal.......................... 789
-----
Total Rooms--Properties Under
Construction...................... 7,424
=====
PROPERTIES IN PLANNING AND OWNED:
Total Rooms--Eight Properties in
Planning and Owned (of which six
are pledged as described in note
5 below)......................... 1,071
=====
</TABLE>
- --------
(1) Does not include land held for future development or for sale which is
less than 2.0% of property assets based on historical costs as of November
30, 1997.
(2) Subject to deeds of trust securing convertible mortgage notes due to PTR
of $204,197,000 (carried at $184,432,000, net of unamortized discount at
November 30, 1997).
(3) Subject to deeds of trust securing convertible mortgage notes due to
ATLANTIC of $93,513,000 (carried at $105,602,000, net of unamortized
premium at November 30, 1997).
(4) Under a long term ground lease.
(5) Pledged as collateral under a revolving credit agreement with Commerzbank
AG with total borrowings of $41,008,000 at November 30, 1997.

S-14
<PAGE>

EXTENDED-STAY MARKET

Homestead believes that the extended-stay market represents a unique
business opportunity and that the price/value relationship has enabled the
extended-stay market to achieve higher than industry average occupancy rates
and operating margins. Demand for extended-stay lodging has been stimulated by
the economic and social changes resulting from the increased volume of
corporate reorganizations and trends toward downsizing and outsourcing of
various functions, the break-up and geographic dispersion of the traditional
family and technological improvements which have allowed businesses to
relocate outside of large metropolitan areas. These changes have created new
accommodation needs for, among others, corporate executives and trainees,
consultants, sales representatives, construction workers and relocating
individuals.

Homestead uses accepted and widely-published industry data to determine the
need for new extended-stay lodging rooms. Based on this data, Homestead
believes there is current demand to support approximately 457,000 extended-
stay rooms nationwide, while at year-end 1996 there were only 53,000 purpose
built extended-stay rooms at approximately 450 separate locations--enough to
satisfy only 12% of the demand. Over two-thirds of the existing extended-stay
rooms are operated by companies who price them toward the upscale segment of
the extended-stay market. Further, at current industry estimates of
development, by the year 2000 supply will account for only 52% of then current
demand.

Moderately priced, extended-stay lodging offers the consumer a strong
economic inducement over its more expensive alternatives. Moreover, when set
against the current emphasis on controlling business travel expense as well as
the trend toward per diem travel and relocation reimbursement, the moderately
priced category provides a fresh and affordable alternative for guests whose
priorities demand close attention to value pricing. Homestead believes this
market segment offers the opportunity for profitable expansion and sustainable
cash flow growth for the next several years.

Moderately Priced, Extended-Stay Concept

Moderately priced, extended-stay lodging competes on the basis of price and
value compared to the extended-stay market generally, thereby providing an
economic inducement to guests who are already attracted to the extended-stay
concept. In addition, moderately priced, extended-stay lodging provides an
affordable lodging alternative for guests who are value conscious, have lower
incomes or are on limited expense accounts. Based on published occupancy rates
for other participants in the extended-stay market, Homestead believes that
there is a strong demand for moderately priced, extended-stay accommodations
and that in certain areas of the country there is no organized competition for
that business. Over two-thirds of these extended-stay properties were
controlled by competitors that are priced toward the upscale segment of the
extended-stay market.

COMPETITION

Competition within the extended-stay segment of the lodging industry has
begun to increase because the growth prospects of the segment have attracted
numerous participants from both within and outside of the industry. In
addition, since the lodging industry has historically been characterized by
cyclical trends, there can be no assurance that the current state of
supply/demand fundamentals will continue into the future. While the majority
of currently operating extended-stay properties are oriented toward the
upscale and mid-price segments, there are a number of companies that operate
within all segments of the industry. Homestead may compete for development
sites with any or all of these entities, some of which may have greater
financial resources than Homestead and better relationships with lenders and
sellers. These entities also may be willing to accept more risk than Homestead
considers prudent. Further, there can be no assurance that new or existing
competitors will not significantly reduce their room rates or offer greater
convenience, services or amenities or significantly expand, or improve or
develop properties in a market in which Homestead competes, thereby adversely
affecting Homestead's operations.

S-15
<PAGE>

ENVIRONMENTAL MATTERS

Under various federal, state and local laws and regulations, an owner or
operator of real estate may be liable for the costs of removal or remediation
of certain hazardous or toxic substances on such property. Such laws often
impose such liability without regard to whether the owner knew of, or was
responsible for, the presence of hazardous or toxic substances. Furthermore, a
person that arranges for the disposal or transports for disposal or treatment
a hazardous substance at a property owned by another may be liable for the
costs of removal or remediation of hazardous substances released into the
environment at that property. The costs of remediation or removal of such
substances may be substantial, and the presence of such substances, or the
failure to properly remediate such substances, may adversely affect the
owner's ability to sell such real estate or to borrow using such real estate
as collateral. In connection with the ownership and operation of its
properties, Homestead is potentially liable for any such costs.

Homestead has obtained Phase I Surveys on its existing properties and
intends to obtain Phase I Surveys prior to the purchase of any future
properties. The Phase I Surveys are intended to identify potential
environmental contamination and regulatory compliance concerns. Phase I
Surveys generally include historical reviews of the properties, reviews of
certain public records, preliminary investigations of the sites and
surrounding properties and the preparation and issuance of written reports.
Phase I Surveys generally do not include invasive procedures, such as soil
sampling or ground water analysis.

While some of these assessments have led to further investigation and
sampling, none of the environmental assessments has revealed, nor is Homestead
aware of, any environmental liability that management believes would have a
material adverse effect on Homestead's business, financial position or results
of operations. No assurance can be given, however, that these assessments and
investigations reveal all potential environmental liabilities, that no prior
owner or operator created any material environmental condition not known to
Homestead or the independent consultants or that future uses and conditions
(including, without limitation, guest actions or changes in applicable
environmental laws and regulations) will not result in the imposition of
environmental liabilities.

GOVERNMENTAL REGULATION

A number of states regulate the licensing of hotels by requiring
registration, disclosure statements and compliance with specific standards of
conduct. Homestead believes that each of its properties has the necessary
permits and approvals to operate its respective business, and Homestead
intends to continue to obtain such permits and approvals for its new
properties. In addition, Homestead is subject to laws governing its
relationship with employees, including minimum wage requirements, overtime,
working conditions and work permit requirements. An increase in the minimum
wage rate, employee benefit costs or other costs associated with employees
could adversely affect Homestead.

Under the Americans with Disabilities Act (the "ADA"), all public
accommodations are required to meet certain federal requirements related to
access and use by disabled persons. Although Homestead has attempted to
satisfy ADA requirements in the designs for its properties, no assurance can
be given that a material ADA claim will not be asserted against Homestead,
which could result in a judicial order requiring compliance, and the
expenditure of substantial sums to achieve compliance, an imposition of fines
or an award of damages to private litigants. These and other initiatives could
adversely affect Homestead as well as the lodging industry in general.

TRADEMARKS

The Homestead Village name and logo have been registered with the United
States Patent and Trademark office.

S-16
<PAGE>

INSURANCE

Homestead currently has the types and amounts of insurance coverage that it
considers appropriate for a company in its business. While management believes
that its insurance coverage is adequate, if Homestead were held liable for
amounts exceeding the limits of its insurance coverage or for claims outside
of the scope of its insurance coverage, Homestead's business, results of
operations or financial position could be materially and adversely affected.

EMPLOYEES

As of November 30,1997, Homestead employed approximately 983 employees
including 197 professionals and administrative employees and 786 on-site
personnel. Homestead expects that it will significantly increase the number of
its employees as it expands its business. Homestead's employees are not
subject to any collective bargaining agreements and management believes that
its relationship with its employees is good.

LEGAL PROCEEDINGS

Homestead is not a party to any litigation or claims, other than routine
matters incidental to the operation of the business of Homestead. To date, no
claims have had a material adverse effect on Homestead nor does Homestead
expect that the outcome of any pending claims will have such an effect.

S-17
<PAGE>

USE OF PROCEEDS

The net proceeds to Homestead from the sale of the Shares offered hereby,
net of payment of all expenses of the Offering, are expected to be
approximately $102,875,700 million ($154,488,600 million if all Additional
Shares are sold). The net proceeds are expected to be used for the following
purposes: (i) repayment of all borrowings under the interim credit agreement
and all or part of the revolving line of credit, (ii) the acquisition of sites
and development of additional extended-stay lodging properties, some of which
have not yet been identified, and (iii) general corporate purposes. As of
December 29, 1997, Homestead's indebtedness under the interim credit agreement
totaled $50.0 million and under the revolving line of credit totaled $46.8
million. Outstanding borrowings bear interest at the Eurodollar rate plus
2.625% per annum for the interim credit agreement and the Eurodollar rate plus
1.9% per annum for the revolving line of credit. The interim credit agreement
borrowings mature March 15, 1998 or upon the funding of the proceeds of this
Offering and the revolving line of credit matures May 5, 1998. The revolving
line of credit may be extended with lender approval. Proceeds from the
borrowings were used for the acquisition of sites and the development of
additional extended-stay lodging properties. Pending application of the net
proceeds as set forth above, such net proceeds not utilized to repay the
interim credit agreement borrowings will be invested in interest-bearing
accounts and short-term, interest-bearing securities.

PRICE RANGE OF SHARES

MARKET INFORMATION

The Shares are listed on the AMEX under the symbol "HSD". The following
table sets forth the high and low sales prices of the Shares as reported in
the AMEX Composite Tape for the periods indicated.

<TABLE>
<CAPTION>
HIGH LOW
------- ---------
<S> <C> <C>
1996:
Fourth Quarter (trading commenced October 31, 1996 on
a when-issued basis)................................ $19 $15
1997:
First Quarter........................................ $20 7/8 $16 5/8
Second Quarter....................................... $18 1/2 $15 7/8
Third Quarter........................................ $20 1/8 $16
Fourth Quarter (through December 29, 1997)........... $18 1/4 $13 11/16
</TABLE>

As of December 29, 1997, Homestead had approximately 27,804,906 Shares
outstanding, which were held of record by approximately 2,050 shareholders.

DIVIDEND POLICY

The declaration and payment of dividends by Homestead are subject to the
discretion of the Board. Any determination as to the payment of dividends will
depend upon the results of operations, capital requirements and financial
condition of Homestead and such other factors as the Board deems relevant.
Currently, the Board intends to follow a policy of retaining earnings to
finance Homestead's growth and for general corporate purposes and, therefore,
does not anticipate paying any cash dividends in the foreseeable future. In
addition, Homestead's line of credit arrangements restrict payment of
dividends without lender approval.

S-18
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of Homestead at September
30, 1997, and as adjusted to give effect to the Offering (assuming the sale of
6,951,227 Shares) and the application of the net proceeds therefrom. The table
should be read in conjunction with the financial statements of Homestead
incorporated by reference in the accompanying Prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------
(DOLLARS IN THOUSANDS)
HISTORICAL AS ADJUSTED(1)
---------- --------------
<S> <C> <C>
Convertible mortgage notes payable to affiliates,
net................................................. $259,981 $259,981
Shareholders' Equity:
Common Stock, $0.01 par value; 250,000,000 Shares
authorized; 25,360,013 Shares issued and
outstanding; 32,311,240 Shares issued as adjusted
(2)............................................... 254 324
Additional paid-in capital/contributed capital..... 291,762 394,568
Retained earnings.................................. 12,810 12,810
Less shares in escrow.............................. (11,990) (11,990)
Less deferred compensation......................... (967) (967)
-------- --------
Total Shareholders' Equity(3)...................... 291,869 394,745
-------- --------
Total Capitalization(3).......................... $551,850 $654,726
======== ========
</TABLE>
- --------
(1) It is expected that $96.8 million of the proceeds of the Offering will be
used to repay borrowings under the lines of credit.
(2) As of September 30, 1997, does not include 23,164,633 Shares issuable upon
conversion of outstanding convertible mortgage notes (26,226,573 shares
issuable upon conversion of outstanding convertible mortgage notes as of
December 29, 1997) or 1,290,371 Shares issuable upon exercise of
outstanding options (2,093,547 shares issuable upon exercise of outstanding
options as of December 29, 1997). Also does not include 2,444,893 shares
issued upon exercise of Warrants at $10 per Warrant from October 1, 1997
through the expiration date of the Warrants, October 29, 1997. At full
funding of the convertible mortgages from PTR and Atlantic 27,770,617
shares would be issuable upon conversion of the mortgage notes.
(3) If all Additional Shares are sold, total Shareholders' Equity and Total
Capitalization, as adjusted, will be $446,358,000 and $706,339,000,
respectively.

S-19
<PAGE>

SELECTED FINANCIAL DATA

The following table sets forth summary selected financial information
relating to the historical financial condition and results of operations of
Homestead for the nine-month periods ended September 30, 1997 and 1996 and the
years ended December 31, 1996, 1995, 1994, 1993 and 1992. On October 17, 1996,
Homestead acquired the subsidiaries of PTR relating to Homestead Village
properties (the "PTR Subsidiaries") in the Mergers. Prior to October 17, 1996,
Homestead had no significant activities, thus substantially all 1996 results of
operations through the date of the Mergers and all of the summary selected
financial information in 1995 and prior years represents that of the PTR
Subsidiaries. The following selected financial data is qualified in its
entirety by, and should be read in conjunction with, the historical financial
statements of Homestead incorporated by reference in the accompanying
Prospectus and the "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Prospectus Supplement or
incorporated by reference in the accompanying Prospectus (amounts in thousands,
except per share data and statistical data). Certain reclassifications have
been made in the 1993 through 1996 financial statements to conform to the 1997
presentation.

<TABLE>
<CAPTION>
NINE-MONTH PERIOD
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- -------- --------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS SUMMARY:
Revenues:
Room Revenue........... $ 40,421 $ 23,943 $ 33,071 $ 18,337 $ 7,827 $ 2,554 $ 377
Other Revenue.......... 829 354 492 366 165 59 --
--------- -------- --------- -------- -------- -------- -------
Total Revenues....... $ 41,250 $ 24,297 $ 33,563 $ 18,703 $ 7,992 $ 2,613 $ 377
========= ======== ========= ======== ======== ======== =======
Operating Expenses:
Property Operating
Expenses (1).......... 17,369 10,479 14,429 8,211 3,792 1,395 232
Property Management
Fees Paid to
Affiliate............. -- 1,630 1,737 1,018 460 145 22
Corporate Operating
Expenses.............. 10,988 182 2,700 333 180 66 7
Management Fees Paid to
Affiliate............. -- 1,289 1,412 989 332 109 9
Depreciation and
Amortization.......... 7,831 2,943 4,443 2,343 845 234 36
--------- -------- --------- -------- -------- -------- -------
Total Operating
Expenses............ $ 36,188 $ 16,523 $ 24,721 $ 12,894 $ 5,609 $ 1,949 $ 306
========= ======== ========= ======== ======== ======== =======
Operating Income........ $ 5,062 $ 7,774 $ 8,842 $ 5,809 $ 2,383 $ 664 $ 71
Interest Expense........ $ -- $ 4,070 $ 5,971 $ 2,958 $ 1,409 $ 255 $ 61
Net Income.............. $ 5,483 $ 3,734 $ 3,082 $ 2,851 $ 974 $ 409 $ 10
SHARE DATA:
Weighted average shares
outstanding:
Primary................ 24,985 N/A N/A N/A N/A N/A N/A
Fully diluted.......... 40,498 N/A N/A N/A N/A N/A N/A
Pro Forma(2)........... N/A 10,680 13,157 N/A N/A N/A N/A
Earnings per share:
Primary................ $ 0.22 N/A N/A N/A N/A N/A N/A
Fully diluted.......... $ 0.14 N/A N/A N/A N/A N/A N/A
Pro Forma(2)........... N/A $ 0.35 $ 0.23 N/A N/A N/A N/A
FINANCIAL POSITION:
Property and Equipment,
net.................... $ 532,513 $158,607 $ 255,608 $105,022 $ 59,099 $ 23,898 $ 6,972
Total Assets............ $ 630,324 $169,788 $ 324,625 $108,965 $ 60,866 $ 24,921 $ 7,076
Intercompany Debt....... $ -- $ 55,976 $ -- $ 80,144 $ 45,131 $ 19,290 $ 5,123
Line of Credit.......... $ 27,408 -- -- -- -- -- --
Convertible Mortgage
Notes Payable, net..... $ 259,981 $ 77,289 $ 101,309 $ -- $ -- $ -- $ --
Shareholders' Equity.... $ 291,869 $ 25,471 $ 204,003 $ 22,971 $ 12,068 $ 3,103 $ 1,586
OTHER DATA:
EBITDA (3).............. $ 12,893 $ 10,717 $ 13,285 $ 8,152 $ 3,228 $ 898 $ 107
Cash Provided by (used
in):
Operating Activities... $ 18,710 $ 10,366 $ 12,261 $ 6,019 $ 2,381 $ 599 $ 374
Investing Activities... $(262,382) $(58,863) $(115,453) $(48,116) $(35,474) $(15,751) $(7,007)
Financing Activities... $ 241,310 $ 51,887 $ 108,711 $ 43,065 $ 33,832 $ 15,275 $ 6,699
STATISTICAL DATA (FOR
ALL OPERATING
PROPERTIES):
Occupancy............... 77.2% 80.1% 78.8% 76.6% 75.9% 85.2% N/A(7)
Average Weekly Rate(4).. $ 252 $ 221 $ 222 $ 212 $ 186 $ 171 N/A(7)
Weekly RevPAR(5)........ $ 195 $ 177 $ 175 $ 162 $ 141 $ 146 N/A(7)
Number of Operating
Properties at Period
End.................... 50 29 31 20 12 3 2
Property Operating
Income Margin(6)....... 57.7% 50.3% 51.9% 50.7% 46.7% 41.1% N/A(7)
</TABLE>

S-20
<PAGE>

- --------
(1) Property operating expenses consist of all expenses directly related to
the operation of the properties and do not include an allocation of
corporate operating expenses. Property operating expenses include
primarily salaries and wages, utilities, insurance, maintenance and supply
costs and property taxes.
(2) Prior to the Mergers, the assets of Homestead were owned by subsidiaries
of PTR and ATLANTIC and were managed by subsidiaries of Security Capital.
The shares and equity interests of these entities differed substantially
from the Shares, Warrants and convertible mortgage notes outstanding after
the Mergers. Therefore, management does not believe that historical
earnings per share data is meaningful. Pro forma earnings per share assume
issuance of the Shares and Warrants for acquisition of the PTR
Subsidiaries as of the beginning of 1996 and Shares and Warrants issued to
Security Capital and ATLANTIC were outstanding since the Merger closing
date.
(3) EBITDA does not represent cash generated from operating activities in
accordance with GAAP, is not to be considered as an alternative to net
income or any other GAAP measurement of operating performance and is not
necessarily indicative of cash available to fund all cash needs. Homestead
has included EBITDA herein because Homestead believes that it is one
measure used by certain investors to determine operating cash flow.
EBITDA, as calculated above, may not be comparable to other similarly
titled measures of other companies. EBITDA for the nine months ended
September 30, 1997 includes approximately $227,000 of gain from the sale
of excess land.
(4) Average weekly rate is determined by dividing room revenue by the number
of guest room days occupied for the period and multiplying by seven.
(5) RevPAR is determined by dividing room revenue by the number of guest room
days available for the period and multiplying by seven.
(6) Property Operating Margin Income is property operating income (property
revenues less property operating expenses) divided by property revenues.
(7) Statistical information for the two property openings, which were pre-
stabilized in 1992, is not considered meaningful.

S-21
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the "Selected
Financial Data" and all of the financial statements and related notes thereto
incorporated by reference in the accompanying Prospectus. Historical results
and percentage relationships set forth in "Selected Financial Data" and the
Financial Statements of Homestead may not be indicative of future operations
of Homestead.

OVERVIEW

Homestead's operating results are substantially influenced by (i) the demand
for and supply of extended-stay lodging in Homestead's markets and submarkets,
(ii) occupancy and average weekly rate, (iii) the effectiveness of property
level operations and (iv) the pace and cost at which Homestead can develop
additional extended-stay lodging properties. Capital and credit market
conditions which affect Homestead's cost of capital may influence future
operating results.

Homestead's overall results of operations and financial position are
significantly influenced by its development activity. As of September 30,
1997, Homestead had developed, owned and operated 50 Homestead Village
properties representing in the aggregate 6,844 rooms in 18 cities and had 50
Homestead Village properties under construction totaling 6,665 rooms within
eleven of these cities as well as 15 additional cities. In addition, Homestead
owns 18 sites and controls through contracts 33 development sites for which it
plans to initiate construction within the next 12 months, for a total of 151
properties in 38 cities. Rooms in operation, under construction or in pre-
development planning aggregate 20,286 rooms.

Homestead's reported results in the financial statements incorporated by
reference are also affected by certain matters of financial presentation for
the Mergers. The Merger with the subsidiaries of PTR was accounted for as a
combination of entities under common control in a manner similar to a pooling
of interests, thus the historical financial results of the PTR Subsidiaries
are presented for all periods prior to October 17, 1996 and, as Homestead's
activities through September 30, 1996 were not significant, the financial
statements incorporated by reference consist predominantly of the activities
of the PTR Subsidiaries for the nine months ended September 30, 1996. The
Merger of the subsidiaries of ATLANTIC was accounted for as a purchase, thus
the development activities of the subsidiaries of ATLANTIC are not reflected
in the financial statements incorporated by reference until after the Merger
closing date. The Merger of the subsidiaries of Security Capital was also
accounted for as a purchase, thus the direct costs of personnel for property
management and corporate management are reflected in financial results only
after the Merger closing date.

RESULTS OF OPERATIONS FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

Net earnings increased $1.8 million (46.8%) for the nine months ended
September 30, 1997 as compared to the same period in 1996. The increase is
attributable to an increase of net property operating income of $11.7 million,
including $0.2 million of gain on the sale of excess land in 1997, and a
decrease in interest expense of $4.1 million, offset by an increase in
corporate operating expense of $9.5 million and an increase in depreciation
and amortization of $4.9 million.

Net property operating income increased by $11.7 million primarily as a
result of 21 more properties operating at September 30, 1997 than at September
30, 1996. The decrease in interest expense is attributable to the development
program as all interest costs incurred in the nine months ended September 30,
1997 were capitalized. The increase in depreciation was also due to the
additions to the property portfolio. The amortization increase was due to
amortization of the Homestead Village trademark and intangibles acquired in
the Mergers.

The increase of $9.5 million in corporate operating expenses, arising from
the post Merger change in corporate structure to an internally managed, stand
alone public company as compared to these expenses being absorbed by the PTR
REIT Manager, partially offset the above earnings increases.

S-22
<PAGE>

Property Operations

The following table sets forth certain information for Homestead's total
operating properties for the periods indicated (performance of the one
operating property acquired from ATLANTIC has been included from its opening
date of July 1, 1996 versus its acquisition date of October 17, 1996; inclusion
of its results in the table for such period has an insignificant effect on the
performance data presented):

<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ --------------------
1997 1996 1997 1996
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Occupancy............................ 77.2% 80.1% 76.6% 78.6%
Average Weekly Rate(1)............... $ 252 $ 221 $ 253 $ 224
Weekly RevPAR(2)..................... $ 195 $ 177 $ 194 $ 176
Number of Operating Properties at
Period End.......................... 50 29 50 29
Property Operating Income Margin..... 57.7% 50.3% 56.9% 52.0%
</TABLE>
- --------
(1) Average weekly rate is determined by dividing room revenue by the number of
guest room days occupied for the period and multiplying by seven.
(2) RevPAR is determined by dividing room revenue by the number of guest room
days available for the period and multiplying by seven.

Homestead's 21 property openings from the end of the third quarter of 1996
through the end of the third quarter of 1997 were the primary reason for the
reported room revenue increase of $16.7 million (68.8%) for the nine months
ended September 30, 1997 as compared to the same period in 1996. The increase
in room revenue was also due in part to an increase in the average weekly rate
of $31.81 (14.4%) in the first nine months ended September 30, 1997 compared to
1996 which was partially offset by lower occupancy in 1997 versus 1996.

Total property operating expenses increased from $12.1 million to $17.4
million over the same period, an increase of $5.3 million for the nine months
ended September 30, 1997. The increase is due primarily to an increase in the
number of operating properties as noted above. The RevPAR increase was the
primary reason for the improved property operating income margin of 57.7% in
1997.

Homestead Properties Fully Operating Throughout Both Periods

Homestead had 20 properties, representing 2,755 rooms, that were fully
operational throughout the nine months ended September 30, 1997 and 1996.
RevPAR for the nine months ended September 30, 1997 increased to $190.79 from
$180.46 for the same period in 1996. The RevPAR increase was due to an increase
in average weekly rates for such properties during the nine months ended
September 30, 1997 and 1996 to $240.37 from $218.97, respectively, an increase
of 9.8%. Partially offsetting the increase in average weekly rates was a
decline in average occupancy for such properties during the nine months ended
September 30, 1997 and 1996 to 79.4% from 82.4%, respectively. The 1997 decline
in occupancy is not projected to continue on a longer term basis and is the
direct result of implementing strategic pricing in certain markets, and for
third quarter 1997, occupancy for such properties averaged 83.0% versus second
quarter 1997 average occupancy of 80.9%. The RevPAR increase described above
improved the property operating income margin for comparable properties to
54.4% for the nine months ended September 30, 1997 compared to 48.6% for the
same period in 1996.

Corporate Operating Expenses

Corporate operating expenses increased $9.5 million for the nine months ended
September 30, 1997 as compared to the same period in 1996. This comparison is
affected by the fact that 1997 corporate expenses reflect a post Merger
operating basis while 1996 operations consist only of the corporate costs and
REIT management fee allocations from PTR to the PTR Subsidiaries. The increase
is also attributable to the change in corporate

S-23
<PAGE>

structure from external management to internal management and additional
corporate costs associated with the continued growth of the company. This
change in structure involves costs associated with operating as a public
company, recruiting, relocation, and personnel expenses and other costs to
create a corporate infrastructure, offset in part by capitalizing costs
related to information technology, and the acquisition, development or
improvement of real estate.

Depreciation and Amortization

Depreciation and amortization increased $4.9 million (166.1%) for the nine
months ended September 30, 1997 as compared to the same period in 1996.
Depreciation of the cost of properties and improvements is calculated using
the straight-line method over the estimated useful lives of the assets.
Depreciation expense increased approximately $3.8 million (130.1%) for the
nine months ended September 30, 1997 as compared to the same period in 1996.
The increase is due to new properties open for the nine months ended September
30, 1997 as compared to the same period in 1996. Homestead also recorded
$1,060,000 in amortization expense for the nine months ended September 30,
1997 as a result of the amortization of the Homestead Village trademark and
other intangibles acquired in the Mergers.

Interest Income

Interest income of $421,000 for the nine months ended September 30, 1997 was
a result of interest earned from investment of excess cash on hand.

Interest Cost

Total interest cost incurred of $14.4 million (interest before consideration
of interest costs capitalized for the period) increased by $8.3 million
(135.4%) for the nine months ended September 30, 1997 as compared to the same
period in 1996. The increase is due to the increase in investments in
operating and under construction properties and the corresponding increase in
capitalized interest of $12.4 million in the nine-month period ended September
30, 1997 over the same period in 1996. This increase in capitalized interest
is the result of Homestead's increased development activity.

ENVIRONMENTAL MATTERS

Homestead is not aware of, nor does it expect, any environmental condition
on its properties to have a material adverse effect upon its business, results
of operations or financial position.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 1997 Homestead had 50 properties in construction and 18
additional sites in planning and owned. Homestead also had 33 sites in
planning and under contractual control with acquisition and construction start
expected to occur within twelve months. Homestead intends to pursue additional
sites for acquisition and development with an expectation of 40 to 50
construction starts annually through the year 2000.

Unfunded development commitments for properties under construction as of
September 30, 1997 approximates $199 million. Expected future investment to
develop the properties in planning and owned as of September 30, 1997 is
approximately $136 million. The estimated total investment to acquire and
develop the properties in planning under contractual control approximates $315
million.

To fund its development program Homestead had available as of September 30,
1997 approximately $50.5 million under the funding commitment agreements from
PTR and ATLANTIC (approximately $20.5 million as of November 30, 1997),
outstanding warrants (of which $24.4 million was exercised prior to their
October 29, 1997 expiration date), cash from the line of credit described
below, and cash from operations in excess of operating needs. It is expected
that the funding commitment agreements will be substantially funded in the
first quarter of 1998.

S-24
<PAGE>

On May 6, 1997, Homestead entered into a secured revolving line of credit
facility with Commerzbank AG ("CAG"), as agent and lender, which provided for
borrowings of up to $50 million, subject to collateral requirements, with
borrowings bearing interest at the Eurodollar rate plus 2.5% per annum, and an
unfunded commitment fee of 0.325%. On August 25, 1997, Homestead amended the
line of credit agreement to provide for borrowings of up to $100 million,
subject to collateral requirements, and to lower the interest to the Eurodollar
rate plus 1.9% per annum. Additionally, the unfunded commitment fee was amended
to 0.25% if the average unfunded balance is greater than $50 million or 0.325%
if the average unfunded balances $50 million or less. The line of credit
matures May 1998 and may be extended with the approval of CAG. At September 30,
1997, borrowings under the line totaled $27.4 million at a weighted average
stated interest rate of 7.56%. The line requires maintenance of certain
financial covenants, specifically, aggregate indebtedness of no more than 65%
of gross asset value, as defined, or indebtedness secured by a lien of no more
than 60% of gross asset value, as defined. Homestead must also maintain a
minimum debt service coverage ratio of earnings before interest, income taxes,
depreciation, amortization and gains or losses on sales of assets to debt
service, as defined, of no less than 1.3 to 1 and not allow shareholders'
equity to be less than $204 million. The covenants also restrict payment of
dividends without lender approval. Homestead was in compliance with all such
covenants as of September 30, 1997.

On October 14, 1997, Homestead filed a shelf registration statement with the
Securities and Exchange Commission, which registration statement became
effective on November 18, 1997, registering the sale of up to $300 million of
Shares. The Shares issuable under the registration statement may be offered
from time to time, in amounts, at prices and on terms to be set forth at the
time of the offerings.

On November 25, 1997, Homestead obtained a $50 million interim credit
agreement with CAG which provides for borrowings, at Homestead's option, at
either the Eurodollar rate plus 2.625% or at base rate (the higher of 1/2 of 1%
in excess of the federal funds rate or the prime rate) plus 1%. Borrowings
under this agreement mature March 15, 1998 or upon the funding of the proceeds
of this Offering. During the term of this interim credit agreement, borrowings
under Homestead's $100 million secured revolving credit agreement with CAG are
limited to $50 million.

Capital resources in addition to those described above will be needed to fund
Homestead's planned developments. Homestead may seek additional credit facility
capacity and may issue long-term debt or additional equity securities. There
can be no assurance that Homestead will be able to obtain such funding as and
when required or on acceptable terms.

Operating Activities

Net cash flow provided by operating activities increased by $8.3 million
(81%) for the nine months ended September 30, 1997 as compared to the same
period in 1996. The increase is due primarily to Homestead's increased property
portfolio as described under "--Results of Operation for the Nine Months Ended
September 30, 1997 and 1996" as well as improvements in property operations.

Investing and Financing Activities

During the nine months ended September 30, 1997, Homestead invested $255.1
million in Homestead properties. The amounts invested in the nine months ended
September 30, 1997 were financed primarily from the proceeds of convertible
mortgage loans from PTR and ATLANTIC and additionally by proceeds from exercise
of Warrants and borrowings on the line of credit. The amounts invested in the
nine months ended September 30, 1996 were financed primarily by intercompany
borrowings by the PTR Subsidiaries from PTR.

SEASONALITY AND INFLATION

Based upon the operating history of Homestead properties, management believes
that occupancy and revenues may be lower than normal during the months of
December and January due to the holiday season. Because many of Homestead's
expenses do not fluctuate with occupancy, such declines in occupancy may cause
fluctuations or decreases in Homestead's quarterly earnings.

S-25
<PAGE>

The rate of inflation as measured by changes in the average consumer price
index has not had a material effect on the revenue or operating results of
Homestead in 1996. There can be no assurance, however, that inflation will not
affect future operating or construction costs.

DIVIDENDS

The Board intends to follow a policy of retaining earnings to finance
Homestead's growth and for general corporate purposes and, therefore, does not
anticipate paying any cash dividends in the foreseeable future.

S-26
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following are Homestead's directors and executive officers:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
David C. Dressler, Jr... 44 Co-Chairman, President, Chief Investment Officer and
Director(1)
Michael D. Cryan........ 46 Co-Chairman, Chief Operating Officer and Director(2)
John P. Frazee, Jr...... 53 Director(3)
Manuel A. Garcia III.... 54 Director(1)
John C. Schweitzer...... 53 Director (3)
C. Ronald Blankenship... 48 Advisory Director
Patricia G. Will........ 45 Advisory Director
Jeffrey B. Allen........ 49 Managing Director
Robert J. Morse......... 42 Managing Director
Robert C. Aldworth...... 44 Senior Vice President and Chief Financial Officer
Gary A. DeLapp.......... 38 Senior Vice President
Brian M. Fraser......... 33 Vice President
Robert W. Frost, Jr..... 50 Senior Vice President
Jeffrey A. Klopf........ 49 Senior Vice President and Secretary
John R. Patterson....... 46 Senior Vice President
Ken W. Pierce........... 40 Senior Vice President
</TABLE>
- --------
(1) Class I Director with a term expiring at the annual meeting of
shareholders to be held in 2000.
(2) Class II Director with a term expiring at the annual meeting of
shareholders to be held in 1998.
(3) Class III Director with a term expiring at the annual meeting of
shareholders to be held in 1999.

DAVID C. DRESSLER, JR.--44--Director; Co-Chairman and Chief Investment
Officer of Homestead since May 1996 and President since January 1996, where he
oversees all investment and capital allocation decisions; Co-Chairman of
Security Capital Investment Research from March 1995 to May 1996; Managing
Director of SCG Multifamily Development from January 1994 to August 1995;
Managing Director of PTR from May 1993 to May 1996 and Director of the PTR
REIT Manager from February 1995 to January 1997; Managing Director of Security
Capital (Atlantic) Incorporated (the "ATLANTIC REIT Manager") from April 1992
to May 1996; from 1984 to May 1991, Regional Partner, Trammell Crow
Residential based in Boston, Massachusetts (multifamily real estate
development and property management).

MICHAEL D. CRYAN--46--Director; Co-Chairman and Chief Operating Officer of
Homestead since October 1996, where he has overall responsibility for
operations; formerly with ITT Sheraton Corporation from August 1986 to August
1996, where his most recent position held was Director, Executive Vice
President and Chief Financial Officer. Prior thereto, Mr. Cryan held positions
with ITT Sheraton Corporation as Director of Acquisitions and Asset
Management, Director of Strategic Projects and Director of Operations North
America East; from December 1976 to August 1986 Mr. Cryan was with Arthur
Andersen & Co. where he was a member of the Worldwide Hospitality Specialty
Team focusing on profit improvement and specialty analysis for the hotel
industry and providing financial consulting services to real estate and
hospitality clients.

JOHN P. FRAZEE, JR.--53--Director; Chairman, President and Chief Executive
Officer of Paging Network Incorporated since August 1997. Formerly President
and Chief Operating Officer of Sprint Corporation; prior to the March 1993
merger with Sprint, Mr. Frazee was the Chairman and Chief Executive Officer of
Centel Corporation (a major telecommunications company he joined in 1972). He
is a member of the Board of Directors of Nalco Chemical Company, Dean Foods
Company, Cable Satellite Public Affairs Network ("C-SPAN") and Security
Capital. He is a trustee of Rush-Presbyterian-St. Luke's Medical Center, The
Newberry Library and Florida State University Foundation.

S-27
<PAGE>

MANUAL A. GARCIA III--54--Director; Chief Executive Officer of Davgar
Restaurants, Inc. since May 1969 where he is the owner/operator of ten Burger
King Restaurants in central Florida, five Pebbles Restaurants, Harvey's Bistro
and Manuel's on the 28th Restaurant in Orlando, Florida; Director of
Sprint/United Telephone, Security Capital Atlantic Incorporated (multifamily
properties), The Foundation for Orange County Public Schools, Florida State
University Seminole Boosters' Association, a Director and Member of the
Executive Committee of the Florida Citrus Sports Association and National
Director of Cities in Schools.

JOHN C. SCHWEITZER--53--Director; General Partner, G.P. Campbell Capital Ltd.
(real estate and investments) since 1976; Managing Partner, Continental
Properties Company, Austin, Texas (real estate and investments) since 1976;
Trustee, Security Capital Pacific Trust (multifamily properties) and Texas
Christian University; Director, Austin Smiles.

C. RONALD BLANKENSHIP--48--Advisory Director; Managing Director of Security
Capital since March 1991; Advisory Director of ATLANTIC from April 1996 to
September 1996; from June 1988 to March 1991, Regional Partner, Trammell Crow
Residential, Chicago, Illinois (multifamily real estate development and
property management); prior thereto, Executive Vice President and Chief
Financial Officer, The Mischer Corporation, Houston, Texas (multibusiness
holding company with investments primarily in real estate).

PATRICIA G. WILL--45--Director; Director of Belmont Corporation (a business
involved in owning and operating assisted living centers) since February 1997;
from 1993 until February 1997, independent real estate developer and
consultant; Trustee of Annunciation Orthodox School since 1991, where her board
service is closely associated with her capabilities as a developer and real
estate advisor; Trustee of Sisters of Charity Healthcare System from 1992 to
1994; from 1988 to 1992, Ms. Will operated Vacation Representatives, a family-
owned business providing technology and telemarketing services to the hotel and
airline industries.

JEFFREY B. ALLEN--49--Managing Director of Homestead since August 1, 1997.
Prior thereto, Senior Vice President of PTR from September 1995 to August 1997
and the PTR REIT Manager from July 1995 to August 1997, where he had overall
responsibility for investments and operations in the Western Region; from
October 1981 to July 1995, Managing Director of Paragon Group, where he was
responsible for commercial and residential development and management
operations in the western region.

ROBERT J. MORSE--42--Managing Director of Homestead since December 1997; from
February 1997 to December 1997, President, Franchise Division ITT Sheraton
Corporation; from September 1995 to February 1997 Senior Vice President,
Director of Operations ITT Sheraton North American Division; and from May 1992
to September 1995 General Manager, Sheraton Boston Hotel and Towers.

ROBERT C. ALDWORTH--44--Senior Vice President and Chief Financial Officer of
Homestead since June 1997; from January 1996 to May 1997, Mr. Aldworth was with
L.A.T. Sportswear, Inc., where he was Executive Vice President and Chief
Operating Officer, responsible for manufacturing and distribution operations;
from January 1995 to November 1995, Executive and Chief Financial Officer of
Harry's Farmers Market, Inc.; from August 1991 to December 1994, Vice President
and Chief Financial Officer of Genrad, Inc.

GARY A. DELAPP--38--Senior Vice President of Homestead since December 1996
and Vice President from May 1996 to November 1996 where he is a member of the
operations group; Vice President of Homestead Village Managers Incorporated
from February 1996 to October 1996; from July 1983 to February 1996 with Vista
Host Inc. where his most recent position was Senior Vice President of
Operations.

BRIAN M. FRASER--34--Vice President of Homestead since December 1996 where he
oversees all aspects of human resources; from November 1993 to October 1996,
Human Resources Manager for Blockbuster Entertainment; from September 1992 to
September 1993, Director of Human Resources with First American Rental; and
from July 1985 to August 1992, Director of Human Resources Development for
Kinney Shoe Corporation.

S-28
<PAGE>

ROBERT W. FROST, JR.--50--Senior Vice President of Homestead since December
1996 and Vice President from May 1996 to November 1996, where he is a member
of the development group; from November 1995 to October 1996, Vice President
of Homestead Village Managers Incorporated; from February 1982 to November
1995, Vice President of Payless Shoesource, Inc. where he was responsible for
real estate and construction in a 23-state region.

JOHN R. PATTERSON--46--Senior Vice President of Homestead since May 1996
where he is a member of the operations group; Senior Vice President of
Homestead Village Managers Incorporated from June 1995 to October 1996; from
July 1993 to January 1995, a Senior Vice President in business development of
NationsBank in Atlanta; prior thereto, Division President and Partner of
Trammell Crow Residential.

KEN W. PIERCE--40--Senior Vice President of Homestead since March 1997 where
he oversees all marketing functions; from July 1982 to February 1997, Mr.
Pierce was with Holiday Inn Worldwide where his last position held was Vice
President of Relationship Marketing, responsible for developing and directing
marketing efforts targeting the business traveler and strategic corporate
alliances.

JEFFREY A. KLOPF--49--Senior Vice President of Homestead since May 1996 and
Secretary since January 1996; Senior Vice President and Secretary of PTR,
ATLANTIC and Security Capital since January 1996, where he provides securities
offerings and corporate acquisition services and oversees the provision of
legal services for affiliates of Security Capital; from January 1988 to
December 1995, partner of Mayer, Brown & Platt where he practiced corporate
and securities law.

OTHER OFFICERS OF HOMESTEAD

STEPHEN M. BENJAMIN--29--Vice President of Homestead since December 1996
where he has been a member of the development group since January 1996; prior
thereto, Mr. Benjamin was with PTR from May 1994 to December 1995, where he
was responsible for acquisitions in the Southwest region; from January 1990 to
April 1994, Associate with Cushman Wakefield in New York.

JOHN E. BIALLAS--36--Vice President of Homestead since May 1997, where he is
involved in strategic planning and research of new initiatives; from August
1996 to April 1997, a member of the Homestead Village development group; from
August 1995 to July 1996, a member of the Security Capital Group Incorporated
Management Development Group; prior thereto, a real estate financial analyst
with Goldman, Sachs & Co. and former member of the U.S. Air Force.

JEFFREY D. BROWN--31--Vice President of Homestead since May 1997, where he
has been a member of the operations group since July 1995; from August 1994 to
June 1995, a member of the Security Capital Group Incorporated Management
Development Group; prior thereto, from May 1988 to August 1992, Mr. Brown was
with Shurgard Storage Centers, where his last position was Cash Manager,
responsible for property level cash management, loan origination and
investment portfolio management.

LAURIE B. BURNS--35--Vice President of Homestead since May 1996 where she is
a member of the development group; from November 1995 to October 1996 Vice
President of Homestead Village Managers Incorporated; from March 1994 to
November 1995, Director of the Real Estate division of Apple South, Inc.; and
from June 1986 to March 1994, Ms. Burns was with Taco Bell Corporation where
her most recent position held was Director of the Real Estate Division.

ROBERT E. CLARK--37--Vice President, Treasurer and Controller of Homestead
since May 1996 where he has accounting and financial reporting
responsibilities; from September 1995 to October 1996 Vice President of
Homestead Village Managers Incorporated; from September 1990 to August 1995,
Director of accounting for

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the Residence Inn, Courtyard and Fairfield Inn divisions of Marriott
International; and from February 1989 to September 1990, Controller of business
travel programs for Marriott where he was responsible for all accounting and
finance for Marriott's marketing programs.

THOMAS A. COBB--40--Vice President of Homestead since December 1996 where he
has been a member of the development group since April 1996; from February 1993
to March 1996, President of Digital Telecom, Inc. where he was responsible for
management of all corporate office functions; from January 1989 to February
1993, Partner and Director of Construction for McDonald Development Company
where he was responsible for the development of industrial, office and
warehouse facilities.

CHARLES R. COLE--39--Vice President of Homestead since December 1997, where
he has been a member of the operations group since April 1997; from April 1997
to December 1997, Regional Director of Operations for Homestead. Prior thereto,
from April 1992 to April 1997, Mr. Cole was Vice President of Operations,
Raleigh, North Carolina, for Red Roof Inns, Inc.

MICHAEL J GOLDENBERG--32--Vice President of Homestead since December 1997,
where he has been a member of the operations group since February 1997; from
January 1996 to February 1997, Senior Manager of Financial Planning and
Analysis for Homestead; prior thereto, he was General Manager for Residence Inn
by Marriott International in Akron, Ohio from July 1993 to January 1996. From
April 1990 to July 1993 Mr. Goldenberg served as Operations Analyst for
Marriott International in Washington, DC.

BRADLEY P. GRIGGS--40--Vice President of Homestead since May 1996 where he is
a member of the development group; Vice President of Homestead Village Managers
Incorporated from September 1995 to October 1996; from November 1990 to
September 1995, Project Manager with The Fieldstone Company where he was
responsible for development of single family homes in the South California
region; and from November 1987 to November 1990, Operations Manager with M. J.
Brock and Sons, Inc. for Riverside and San Diego Counties.

A. DAVID HALE--39--Vice President of Homestead since December 1996 where he
is a member of the development group; Vice President of Homestead Village
Managers Incorporated from June 1995 to October 1996; from May 1992 to June
1995, Director of Land of Ryland Homes mid-Atlantic region; and from April 1989
to May 1992, Vice President of Acquisition and Development with Questar
Properties.

LAURA L. HAMILTON--34--Vice President of Homestead since May 1996 where she
supervises Homestead's due diligence group; Vice President of Homestead Village
Managers Incorporated from January 1996 to October 1996; Vice President of PTR
from June 1995 to January 1996 where she had been a member of the due diligence
group since April 1992; prior thereto Ms. Hamilton was a real estate paralegal
with the law firm of Poole, Kelly & Ramo in Albuquerque, New Mexico.

PETER A. JOBSON--36--Vice President of Homestead since December 1996, where
he has been a member of the development group since May 1995; prior thereto,
from February 1994 to May 1995 Mr. Jobson was Director of Development with
Paragon Group, where he was responsible for multifamily development in Florida;
from January 1991 to December 1994, partner in the acquisition of seven
commercial properties.

JEFFRY A. JONES--38--Vice President of Homestead since May 1996 where he is a
member of the development group; Vice President of Homestead Village Managers
Incorporated from June 1995 to October 1996; Vice President of PTR from
February 1995 to October 1996; from June 1993 to January 1995, Vice President
of SENTRE Partners where he was responsible for investment acquisitions and
development activities in Mexico; and from November 1989 to April 1993, a
Development Manager with Stark Companies International where he was responsible
for site acquisition and entitlement processing for residential and hotel
projects.

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ARTHUR G. MAY--38--Vice President of Homestead since May 1996 where he is a
member of the development group; Vice President of Homestead Village Managers
Incorporated from June 1995 to October 1996; Vice President of PTR from
September 1994 to October 1996; from August 1989 to September 1994, Vice
President and Chief Financial Officer at Western Development Group, Inc. where
he was responsible for residential development projects; prior thereto, Mr.
May was a Project Manager at J. R. Abbott Construction Co., Inc.

GREGG A. PLOUFF--40--Vice President of Homestead since May 1996 where he is
a member of the development group; Vice President of Homestead Village
Managers Incorporated from June 1995 to October 1996; Vice President of PTR
from March 1995 to October 1996; from July 1994 to March 1995, Vice President
of PACIFIC; from November 1993 to July 1994, a member of the acquisitions
group of PTR; prior to November 1993, Mr. Plouff served in an acquisitions
consulting capacity for PTR; prior thereto, Mr. Plouff was with Trammell Crow
Residential, most recently as a partner, where he was involved with
residential development in the Dallas, Chicago and Southern California
markets.

KENT K. POULSEN--63--Vice President of Homestead since March 1997 where he
is a member of the development group; prior thereto, Vice President of
ATLANTIC and the ATLANTIC REIT Manager from September 1995 to March 1997 where
he was a member of the development group; from April 1986 to May 1995,
Divisional Vice President for Construction of Trammell Crow Residential
Illinois Division.

JERRY D. QUINN--54--Vice President of Homestead since August 1996 where he
is a member of the development group; prior thereto, from June 1993 to July
1996, Mr. Quinn was Vice President of PTR, where he was responsible for
production of multifamily developments in the Central region; from May 1988 to
May 1993, Vice President with Lincoln Properties Company where he was
responsible for construction of multifamily projects.

MARK E. RILEY--39--Vice President of Homestead since May 1996 where he is a
member of the development group; Vice President of Homestead Village Managers
Incorporated from June 1995 to October 1996; from September 1993 to September
1994, co-founder of Southeast Lodges Development Company where he developed
economy extended-stay facilities in the Southeast; and from May 1990 to
September 1993, Vice President of Suburban Lodges of America Inc., where he
was responsible for franchising and financing activities of economy extended-
stay properties.

F. JOSEPH ROGERS--43--Vice President of Homestead since August 1996 where he
has accounting and financial reporting responsibilities; from October 1992 to
August 1996, Vice President of SCGroup Incorporated where he was responsible
for accounting and financial reporting for Security Capital; prior thereto,
Senior Manager with KPMG Peat Marwick.

SALLY J. ROWLING--44--Vice President of Homestead since December 1996 where
she is a member of the development group; prior thereto, Ms. Rowling was with
PTR from August 1993 to September 1996, where her last position held was Vice
President, responsible for special projects in the Northwest region; from
March 1988 to August 1993, Senior Analyst with WilsonSchanzer, Inc., where she
was responsible for the analysis of apartment acquisitions.

KAREN M. SCANLAND--53--Vice President of Homestead since September 1997,
where she has been a member of the Southwest Development group since October
1996; from November 1995 to September 1996, Ms. Scanland was a member of
Homestead's due diligence group. Prior thereto, she was a member of PTR's due
diligence group from June 1995 to November 1995. From December 1992 to June
1995, she served as a Vice President in charge of dispositions for GSE Realty,
a subsidiary of Guaranty Federal Bank F.S.B.

S. SCOTT STEWART--34--Vice President of Homestead since May 1996 where he is
a member of the development group; Vice President of Homestead Village
Managers Incorporated from June 1995 to October 1996; from May 1993 to January
1995, President of Potomac Land & Development Company; and from November 1991
to May 1993 with Providence Savings Bank as a Real Estate Owned Manager.

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STEVEN M. TANGNEY--43--Vice President of Homestead since December 1996, where
he has been a member of the development group since May 1996; from June 1994 to
May 1996 member of PTR's development group; prior thereto, from June 1993 to
June 1994, Project Manager with the Mount Diablo California Unified School
District; from December 1992 to June 1993, Senior Civil Engineer with the
Federal Emergency Management Agency; from June 1979 to October 1992,
Development Manager for Public Storage, Inc. where he was responsible for
acquisitions and development of commercial real estate.

MATTHEW B. WHALEN--31--Vice President of Homestead since December 1996 where
he has been a member of the Development Group since June 1995; from September
1993 to May 1995 with Crimson Partners where his last position held was Vice
President, responsible for management of construction projects, market
analysis, financial reporting and investor relations. Mr. Whalen founded
Crimson Homes, a home-building entity within Crimson Partners, in November
1993.

MANAGEMENT PHILOSOPHY

Homestead believes that the quality of management should be assessed in the
light of the following factors:

Management Depth/Succession. Management should have several senior executives
with the leadership, operational, investment and financial skills and
experience to oversee the entire operations of Homestead. Homestead believes
that several of its senior officers could serve as the principal executive
officer and continue Homestead's performance.

Strategic Vision. Management should have the strategic vision to determine an
investment focus that provides both favorable initial yields and strong long-
term growth prospects. Homestead will demonstrate its strategic vision by
focusing Homestead on the extended-stay lodging business in target markets
where demographic and supply factors will permit high occupancies at increasing
rates.

Research Capability. Management should have the means for researching both
markets and product to determine appropriate investment opportunities.
Homestead divides its target markets into multiple submarkets for analytical
purposes. Through its relationship with Security Capital Investment Research,
Homestead will have several professionals devoting substantial time to
research, on a submarket-by-submarket basis, who are closely supervised by the
executive officers of Homestead.

Investment Committee Process. Homestead has established an investment
committee process to provide discipline and guidance for the investment
activities of Homestead in order to achieve its long-term strategic objectives.
Committee members include Messrs. Dressler, Cryan, Allen, Morse, DeLapp and Ms.
Hamilton. The Investment Committee receives detailed written analyses and
research, in a standardized format, from Homestead's development and
acquisition personnel and evaluates all prospective investments pursuant to
uniform underwriting criteria prior to submission of investment recommendations
to the Board. The quality of the Investment Committee's process will be evident
from the ability of Homestead to achieve its investment goals, generally
exceeding its projected initial returns and growth from the extended-stay
lodging business.

Development Capability. Homestead develops its own properties and has no
plans or intentions of acquiring existing hotel properties and converting them
to the Homestead Village concept. Homestead's personnel have substantial
development experience. Homestead has 68 full-time professionals committed to
development activities, including seven full-time due diligence professionals.
Homestead has engaged in substantial development at attractive yields that have
generally exceeded projections.

Due Diligence Process. Management should have experienced personnel dedicated
to performing intelligent and thorough due diligence. Homestead has seven full-
time due diligence professionals and has developed uniform systems and
procedures for due diligence.

Operating Capability. Management can substantially improve cash flow by
actively and effectively managing assets. Homestead has 87 full time
operations, finance and accounting professionals and has devoted substantial
financial resources to developing value-added operating systems, which control
and effectively administer the operation of Homestead's extended-stay lodging
business.

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CERTAIN RELATIONSHIPS AND TRANSACTIONS

SECURITY CAPITAL INVESTOR AGREEMENT

Homestead and Security Capital have entered into the Security Capital
Investor Agreement which, among other things, provides that, without having
first consulted with the nominee of Security Capital designated in writing,
Homestead may not seek Board approval of (i) Homestead's annual budget, (ii)
incurring expenses in any year exceeding (A) any line item in the annual budget
by 20% and (B) the total expenses set forth in the annual budget by 5%, (iii)
acquisitions or dispositions in a single transaction or group of related
transactions where the aggregate purchase price paid or received exceeds $5
million, (iv) new contracts with a service provider (A) for investment
management, property management or leasing services, or (B) that reasonably
contemplates annual contract payments by Homestead in excess of $200,000, (v)
the declaration or payment of any dividend or other distribution, (vi) the
approval of stock option plans, (vii) the offer or sale of any shares of stock
of Homestead or any securities convertible into shares of stock of Homestead
(other than the sale or grant of any stock or grants of options or exercise of
options granted under any benefit option plan approved by stockholders) and
(viii) the incurrence, restructuring, renegotiation or repayment of
indebtedness for borrowed money in which the aggregate amount involved exceeds
$5 million. The Security Capital Investor Agreement also provides that, so long
as Security Capital owns at least 10% of the outstanding Shares, Homestead may
not increase the number of persons serving on the Board to more than seven
without the approval of Security Capital. Security Capital also will be
entitled to designate one or more persons as directors of Homestead, as
follows: (i) so long as Security Capital owns at least 10% but less than 30% of
the outstanding Shares, it is entitled to nominate one person; and (ii) so long
as Security Capital owns at least 30% of the outstanding Shares, it is entitled
to nominate that number of persons as shall bear approximately the same ratio
to the total number of members of the Board as the number of Shares
beneficially owned by Security Capital bears to the total number of outstanding
Shares, provided that Security Capital shall be entitled to designate no more
than two persons so long as the Board consists of no more than seven members.
Any person who is employed by Security Capital or who is an employee, a 25%
shareholder or a director of any corporation of which Security Capital is a 25%
shareholder (except for Homestead) shall be deemed to be a designee of Security
Capital. The nominee(s) of Security Capital may, but need not, be the same
person(s) nominated by either PTR pursuant to the PTR Investor Agreement or
ATLANTIC pursuant to the ATLANTIC Investor Agreement.

In addition, because Security Capital is an affiliate of Homestead, the
Security Capital Investor Agreement provides Security Capital with registration
rights pursuant to which, in certain specified circumstances, Security Capital
may request, and on not more than three occasions, registration of all of
Security Capital's Shares pursuant to Rule 415 under the Securities Act.

FUNDING COMMITMENT AGREEMENTS

Pursuant to funding commitment agreements dated October 17, 1996 (the
"Funding Commitment Agreements"), each of PTR and ATLANTIC agreed to make
convertible mortgage loans to Homestead after October 17, 1996 with face
amounts of up to $154,047,877 and $98,028,471, respectively. The obligations of
PTR and ATLANTIC are limited to a specific dollar amount for each property
identified in the respective Funding Commitment Agreements. Upon any
determination by Homestead to commence development of a property identified in
the Funding Commitment Agreement, Homestead is required to notify PTR or
ATLANTIC, as the case may be, and PTR or ATLANTIC, as the case may be, is
required to endeavor in good faith to fund up to the full amount of its
obligation with respect to such property. Homestead is required to complete the
development of such property consistent with the development plans for such
property. Each mortgage loan issued by Homestead pursuant to a Funding
Commitment Agreement is convertible into Shares on the basis of one Share for
every $11.50 of principal outstanding on the mortgage loan. The obligation of
Homestead to call for funding of, and the obligations of PTR and ATLANTIC to
provide funding for, the mortgage loans expires on March 31, 1998, except with
respect to properties for which Homestead has given notice that it intends to
develop. Interest on the mortgage loans accrues at the rate of 9% on the unpaid
principal balance, payable every six months. The mortgages are scheduled to
mature on October 31, 2006, and are not callable until May 28, 2001. Homestead
has pledged substantially all of the assets contributed by PTR or ATLANTIC, as
the case may

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be, as collateral for the mortgage loans. As of November 30, 1997, PTR and
ATLANTIC have funded approximately $123 million and $106 million,
respectively, under their respective Funding Commitment Agreements since the
date of the Mergers. It is expected that substantially all amounts will be
funded by the end of the first quarter of 1998.

Pursuant to each Funding Commitment Agreement, PTR and ATLANTIC will provide
Homestead aggregate funding on such developments in the amounts of up to
approximately $138 million and $111 million, respectively, which amounts are
anticipated to be sufficient to substantially complete the development of the
respective Homestead Village properties contributed by them. PTR and ATLANTIC
will receive convertible mortgage notes in respect of such fundings with face
amounts of up to approximately $154 million and $98 million, respectively. The
effect of these provisions is that PTR will fund $898,000 for each $1,000,000
face amount of convertible mortgage loans and ATLANTIC will fund $1,133,535
for each $1,000,000 face amount of convertible mortgage loans. The face amount
of the convertible mortgage loans was determined based on a 9% interest rate
to provide an effective yield to each of PTR and ATLANTIC that is reflective
of the relative rates of return anticipated to be realized on all of the
properties contributed by PTR and ATLANTIC, respectively.

ATLANTIC AND PTR INVESTOR AGREEMENTS

ATLANTIC and PTR have each entered into an investor and registration rights
agreement with Homestead (the "ATLANTIC and PTR Investor Agreements") pursuant
to which ATLANTIC and PTR each are entitled to designate one person for
nomination to the Board, and Homestead will use its best efforts to cause the
election of such nominee(s), until March 31, 1998 and for so long thereafter
as PTR or ATLANTIC has the right to convert in excess of $20 million in
principal amount of loans made pursuant to their respective Funding Commitment
Agreement. Such nominee(s) may, but need not, be the same person(s) nominated
by Security Capital pursuant to the Security Capital Investor Agreement. In
addition, Homestead has granted to each of ATLANTIC and PTR registration
rights with respect to the issuance upon conversion and the distribution of
all of the Shares issuable upon conversion of the convertible mortgage notes.
Each of ATLANTIC and PTR may request three registrations pursuant to Rule 415
promulgated under the Securities Act of all Shares issued or issuable upon
conversion of the convertible mortgage notes. Such registrations, except for
the fees and disbursements of counsel to ATLANTIC or PTR, shall be at the
expense of Homestead.

ADMINISTRATIVE SERVICES AGREEMENT

As of October 17, 1996, Homestead entered into an administrative services
agreement with Security Capital (the "Administrative Services Agreement"),
pursuant to which Security Capital provides Homestead with administrative
services with respect to certain aspects of Homestead's business. These
services include, but are not limited to, insurance administration, accounts
payable administration, internal audit, cash management, human resources,
management information systems, tax and legal administration, research,
shareholder communications and investor relations. The fees payable to
Security Capital are based on identifiable costs incurred by Security Capital
on behalf of Homestead plus 20% to cover overhead. Any arrangements under the
Administrative Services Agreement for the provision of services are required
to be commercially reasonable and on terms not less favorable than those which
could be obtained from unaffiliated third parties. The Administrative Services
Agreement is for an initial term expiring on December 31, 1997 and is
automatically renewable for one-year terms, subject to approval by a majority
of the independent members of the Board and the approval by the disinterested
members of the Board of the annual compensation payable to Security Capital
for services rendered to Homestead. Homestead incurred fees of $1,620,000 to
Security Capital for administrative services provided in the nine-month period
ended September 30, 1997 and incurred fees of $375,000 for the period from
October 17, 1996 to December 31, 1996.

Homestead believes its relationship with Security Capital under this
agreement provides it with certain advantages, including access to greater
quality and depth of management personnel and resources, highly focused
research, information systems, insurance, cash management and legal support
provided at substantial economies of scale, than it could currently provide
internally.

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THE OFFERING

RIGHTS

Homestead is issuing as a dividend, at no cost, to each holder of Shares of
record as of the close of business on the Record Date, one Right for each
Share held by such holder on the Record Date. Four Rights entitle the holder
thereof to purchase one Share at the Subscription Price. The Rights are
evidenced by transferable Rights certificates, which shareholders will receive
with the delivery of this Prospectus Supplement. A holder of Rights may (a)
subscribe for Shares through the exercise of all of his or her Rights, thereby
preserving approximately the same relative equity ownership interest in
Homestead, (b) subscribe for Shares through the exercise of part of his or her
Rights and transfer or sell the remainder of his or her Rights, (c) transfer
or sell all of his or her Rights or (d) allow part or all of his or her Rights
to expire unexercised. In any of the latter three cases, the shareholder would
own a smaller relative equity ownership and voting interest in Homestead after
the Offering.

SUBSCRIPTION PRICE

The Subscription Price for one Share, which may be purchased upon the
exercise of four Rights, is $15.

EXPIRATION DATE

The Rights will expire and become void at 5:00 p.m. Eastern Standard time on
January 15, 1998 or such later date as Homestead may determine in its sole
discretion. The Rights will thereafter have no value. Notice will be given to
shareholders of record on the Record Date, by mail or by publication in a
newspaper of national circulation, of a new Expiration Date in the event
Homestead extends the period for the exercise of the Rights.

OVERSUBSCRIPTION PRIVILEGE

A holder of Shares on the Record Date who validly exercises all of the
Rights initially issued to such holder to the extent possible will have the
further right to exercise the Oversubscription Privilege for Unsubscribed
Shares at the Subscription Price. Only holders of Shares on the Record Date
will be entitled to the Oversubscription Privilege. Holders of Shares so
entitled to exercise the Oversubscription Privilege may subscribe for as many
Shares as desired (subject to the maximum number of Shares offered in the
Offering and certain other restrictions). See "--Limitation on Subscriptions".
If the demand for Shares pursuant to the Oversubscription Privilege exceeds
the number of Shares available, holders of Shares on the Record Date shall
participate in the Oversubscription Privilege (up to, but not exceeding, the
number of Shares oversubscribed for by each such holder) pro rata based upon
the number of Rights exercised by each such person (without regard to the
number of Shares oversubscribed for by each such person pursuant to the
Oversubscription Privilege), with fractional Shares adjusted in any manner
Homestead deems appropriate. Promptly after the Expiration Date, Homestead
will send each subscriber exercising the Oversubscription Privilege a written
confirmation of the number of Shares allocated to such subscriber under the
Oversubscription Privilege. Any amounts overpaid by subscribers will be
refunded promptly after the Expiration Date without interest.

UNSUBSCRIBED SHARES AND THIRD PARTY SALES

Homestead, with the assistance of Capital Markets Group, will,
simultaneously with the offering of Shares to Rights holders, seek third-party
investors to acquire Unsubscribed Shares, including Additional Shares, which
Homestead may offer in its sole discretion. Capital Markets Group will offer
the Unsubscribed Shares and Additional Shares, at the Subscription Price, on a
best-efforts basis in jurisdictions where it is authorized to do so. Homestead
will indemnify Capital Markets Group against certain civil liabilities,
including liabilities under the Securities Act. The Offering of the
Unsubscribed Shares and Additional Shares of Homestead, an affiliate of
Capital Markets Group, is being conducted in accordance with NASD Rule 2720.
No person has committed to underwrite the sale of Unsubscribed Shares or
Additional Shares to third parties. Homestead will pay a fee of 1% of the
total proceeds raised in the Offering to Capital Markets Group. Homestead has
agreed to pay the expenses of Capital Markets Group related to the Offering,
which expenses are not expected to exceed $25,000.

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Third-party investors who desire to purchase Unsubscribed Shares or
Additional Shares should mail or deliver the subscription form (the
"Subscription Form") to the Subscription Agent (as hereinafter defined) at the
appropriate address set forth under "--Subscription Agent". The Subscription
Form must be properly completed and duly executed. Subscription Forms may be
obtained by contacting Capital Markets Group at (505) 986-6506. Subscriptions
for less than 1,000 Shares from third-party investors will not be accepted. If
subscriptions exceed available Shares, Homestead may allocate available
Unsubscribed Shares or Additional Shares in Homestead's sole discretion.
Subscription Forms must be received by the Subscription Agent prior to 5:00
p.m. Eastern Standard time on the Expiration Date. Subscription Forms received
after such time will not be honored. On or promptly after January 16, 1998,
the business day after the Expiration Date, Capital Markets Group will send
each third-party investor a written confirmation of the number of Shares
allocated to such investor. On or prior to January 23, 1998, the fourth
business day after the Expiration Date, third-party investors must deliver
payment for the Shares subscribed for to the Subscription Agent by wire
transfer of immediately available funds, based upon such investor's prorated
allocation of Shares as notified by Homestead or Capital Markets Group.

Capital Markets Group is affiliated with Homestead and, acting as placement
agent, may be deemed to be an "underwriter" under the Securities Act in
connection with this offering.

LIMITATION ON SUBSCRIPTIONS

In its sole discretion, Homestead may reduce subscriptions to ensure that no
shareholder (other than Security Capital) will beneficially own more than 9.8%
of the Shares following the Offering. Homestead's Charter limits each
shareholder's beneficial ownership to 9.8% of the outstanding Shares without
approval of the Board. The Board has the authority pursuant to the Charter to
redeem any Shares in excess of such 9.8% limit. See "Description of Shares--
Restriction on Size of Holdings" in the accompanying Prospectus.

WITHDRAWAL

Homestead reserves the right to withdraw the Rights offering (and the
offering of Unsubscribed Shares and Additional Shares to third parties) at any
time prior to or on the Expiration Date and for any reason (including, without
limitation, the market price of the Shares), in which event all funds received
from subscribers will be refunded promptly without interest.

PRINCIPAL SHAREHOLDER

Security Capital has agreed to exercise its Rights in full for the base
amount of 4,520,007 Shares and may seek to acquire additional Shares under the
Oversubscription Privilege or through the exercise of Rights it may acquire
from others. Its purchases are subject to availability of Shares on the same
terms applicable to other shareholders.

SUBSCRIPTION AGENT

The subscription agent is BankBoston, N.A. (the "Subscription Agent"). The
address to which Rights Certificates, Subscription Forms, Notices of
Guaranteed Delivery and payments should be mailed or delivered is:

By Regular Mail: By Facsimile Transmission:
BankBoston, N.A. (781) 575-2232
Corporate Reorganization (781) 575-2233
P.O. Box 8029 (for Eligible Institutions Only)
Boston, Massachusetts 02266-8029 Fax Confirmation by Telephone
(781) 575-3120

By Hand: By Overnight Courier or Express
Securities Transfer & Reporting Mail:
Services, Inc. BankBoston, N.A.
c/o BankBoston, N.A. Corporate Reorganization
55 Broadway, Third Floor 150 Royall Street
New York, New York Canton, Massachusetts 02021

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Delivery of Rights Certificates, Subscription Forms, Notices of Guaranteed
Delivery and payments (other than wire transfers) other than as set forth above
will not constitute a valid delivery.

ANY QUESTIONS OR REQUESTS FOR ASSISTANCE CONCERNING THE METHOD OF SUBSCRIBING
FOR SHARES OR FOR ADDITIONAL COPIES OF THIS PROSPECTUS SUPPLEMENT SHOULD BE
DIRECTED TO HOMESTEAD'S INFORMATION AGENT, GEORGESON & COMPANY, INC., AT 1-800-
223-2064.

FRACTIONAL SHARES

No fractional Shares will be issued, and Homestead may adjust for fractional
Shares resulting from the exercise of the Oversubscription Privilege in any
manner it deems appropriate. Rights Certificates may not be divided in such a
manner as to create fractional Rights or permit holders to subscribe for a
greater number of Shares. Banks, trust companies, securities dealers and
brokers that hold Shares as nominees for more than one beneficial owner may
have a Rights Certificate divided by the Subscription Agent (see "--Method of
Transferring Rights"), or may, upon proper showing to the Subscription Agent,
exercise their Rights Certificates on the same basis as if the beneficial
owners were record holders on the Record Date. Homestead reserves the right to
deny any division of Rights Certificates if in its opinion the result would be
inconsistent with the intent of this privilege.

METHOD OF EXERCISING RIGHTS AND OVERSUBSCRIPTION PRIVILEGE

Shares may be subscribed for pursuant to the exercise of Rights and the
Oversubscription Privilege by properly completing and duly executing the Rights
Certificate accompanying this Prospectus Supplement and mailing or delivering
the Rights Certificate, together with payment of the full Subscription Price
for each Share subscribed for pursuant to the exercise of Rights and the
Oversubscription Privilege, to the Subscription Agent at the appropriate
address set forth above. Banks, trust companies, securities dealers and brokers
that hold Shares as nominee for more than one beneficial owner may, upon proper
showing to the Subscription Agent, exercise their Rights and Oversubscription
Privilege on the same basis as if the beneficial owners were record holders on
the Record Date. Payments must be made in United States currency by personal
check, cashier's check, bank draft or money order drawn on a bank located in
the United States payable to the order of "Homestead Rights Offering". In the
case of holders of Rights that are held of record through The Depository Trust
Company ("DTC"), such Rights may be exercised by instructing DTC to transfer
Rights from such holder's DTC account to the Subscription Agent's DTC account,
together with payment of the full Subscription Price. Except as described under
"--Late Delivery of Payments and Rights Certificates", to be accepted, the
properly completed and duly executed Rights Certificate and the payment must be
received by the Subscription Agent prior to 5:00 p.m. Eastern Standard time on
the Expiration Date. Rights Certificates received after such time will not be
honored.

A holder of Rights who exercises fewer than all of the Rights represented by
his or her Rights Certificate will receive from the Subscription Agent a new
Rights Certificate representing the unexercised Rights. No new Rights
Certificates will be issued after January 8, 1998. Neither Homestead nor the
Subscription Agent shall incur any liability if a Rights Certificate, furnished
by the Subscription Agent or otherwise, is not received in time to be
exercised, transferred or sold.

The instruction letter accompanying the Rights Certificate should be read
carefully and strictly followed. DO NOT SEND RIGHTS CERTIFICATES OR PAYMENTS TO
HOMESTEAD. Except as described under the captions "--Unsubscribed Shares and
Third Party Sales" and "--Late Delivery of Payments and Rights Certificates",
no subscription will be deemed to have been received until the Subscription
Agent has received delivery of a properly completed and duly executed Rights
Certificate and payment of the full Subscription Price. The risk of delivery of
all documents and payments is on subscribers, not Homestead or the Subscription
Agent. If the mail is used, it is recommended that insured, registered mail,
return receipt requested, be used and that a sufficient number of days be
allowed to ensure delivery to the Subscription Agent before the Expiration
Date.

S-37
<PAGE>

LATE DELIVERY OF PAYMENTS AND RIGHTS CERTIFICATES

If, prior to 5:00 p.m. Eastern Standard time on the Expiration Date, the
Subscription Agent has received a properly completed and duly executed Notice
of Guaranteed Delivery substantially in the form accompanying this Prospectus
Supplement (either by hand, mail, telegram or facsimile transmission)
specifying the name of the holder of Rights and the number of Shares
subscribed for (stating separately the number of Shares subscribed for
pursuant to the exercise of Rights and the Oversubscription Privilege) and
guaranteeing that the properly completed and duly executed Rights Certificate
and payment of the full Subscription Price for all Shares subscribed for will
be delivered to the Subscription Agent within three business days after the
Expiration Date, such subscription may be accepted, subject to the
Subscription Agent's withholding the certificates for the Shares until receipt
of the properly completed and duly executed Rights Certificate and payment of
such amount within such time period. In the case of holders of Rights that are
held of record through DTC, such Rights may be exercised by instructing DTC to
transfer Rights from such holder's DTC account to the Subscription Agent's DTC
account, together with payment of the full Subscription Price. The Notice of
Guaranteed Delivery must be guaranteed by a commercial bank, trust company or
credit union having an office, branch or agency in the United States or by a
member of the Stock Transfer Association approved medallion program such as
STAMP, SEMP or MSP. Notices of Guaranteed Delivery and payments should be
mailed or delivered to the appropriate addresses set forth under "--
Subscription Agent".

METHOD OF TRANSFERRING RIGHTS

Rights may be transferred in whole or in part to persons who are residents
of the United States. Rights may be transferred in whole by endorsing the
Rights Certificate for transfer. Rights may be transferred in part by
delivering to the Subscription Agent, at the appropriate addresses set forth
under "--Subscription Agent", a Rights Certificate that has been properly
endorsed for transfer, with instructions to reissue the Rights in part in the
name of the transferee and reissue the balance to the Rights holder. The
Rights Certificate must be received by the Subscription Agent by 5:00 p.m.
Eastern Standard time on January 8, 1998 for new Rights Certificates to be
issued. Unless arrangements are made for return overnight delivery, new Rights
Certificates to be issued on or about January 8, 1998 may not be received
prior to the Expiration Date. Any arrangements for, and the related expenses
of, overnight delivery of new Rights Certificates must be made by the
individual holder. Any questions regarding the transfer of Rights should be
directed to Homestead's information agent, Georgeson & Company, Inc., at 1-
800-223-2064.

All commissions, fees and other expenses (including brokerage commissions
and any transfer taxes) incurred in connection with the purchase, sale or
exercise of Rights are for the account of the transferor or the transferee of
the Rights, and none of such commissions, fees or expenses will be paid by
Homestead.

Pursuant to a listing application for the underlying Shares, the Rights will
be traded on the AMEX under the symbol "HSD.RT". Pursuant to the rules of the
AMEX, the Rights will be traded only up to the close of the AMEX on January
14, 1998, the business day preceding the Expiration Date. No assurance can be
given that a public market will develop or be sustained for the Rights.

VALIDITY OF SUBSCRIPTIONS

All questions with respect to the validity and form of the exercise of any
Rights or the Oversubscription Privilege or third-party subscriptions for
Unsubscribed Shares or Additional Shares (including time of receipt and
eligibility to participate in the Offering) will be determined solely by
Homestead, which determination shall be final and binding. Once made,
subscriptions and directions are irrevocable, and no alternative, conditional
or contingent subscriptions or directions will be accepted. Homestead reserves
the absolute right to reject any subscriptions or directions not properly
submitted or the acceptance of which, in the opinion of Homestead's counsel,
would be unlawful. Any irregularities in connection with subscriptions must be
cured prior to the Expiration Date unless waived by Homestead in its sole
discretion. Neither Homestead nor the Subscription Agent shall be under any
duty to give notification of defects in subscriptions or incur any liability
for failure to

S-38
<PAGE>

give such notification. A subscription will be deemed to have been accepted
(subject to Homestead's right to withdraw or terminate the Offering) only when
a properly completed and duly executed Subscription Form or Rights
Certificate, any other required documents and payment of the full Subscription
Price with respect to such subscription have been received by the Subscription
Agent. Homestead's interpretations of the terms and conditions of the Offering
shall be final and binding.

RIGHTS OF SUBSCRIBERS

Subscribers will have no rights as shareholders of Homestead with respect to
Shares subscribed for until certificates representing such Shares are issued
to them. Subscribers will have no right to revoke their subscriptions after
delivery to the Subscription Agent of a completed Rights Certificate or
Subscription Form and any other required documents.

SUBSCRIPTION PROCEEDS

All proceeds received by the Subscription Agent with respect to the exercise
of Rights and the Oversubscription Privilege and with respect to subscriptions
for Unsubscribed Shares or Additional Shares will be held by the Subscription
Agent. If the Offering is withdrawn or terminated for any reason, the
Subscription Agent will return promptly to each subscriber all funds received
from such subscriber. No interest will be paid on funds returned due to
withdrawal or termination of the Offering or the proration of
oversubscriptions (either pursuant to the Oversubscription Privilege or the
sale of Unsubscribed Shares or Additional Shares) or otherwise.

FOREIGN SHAREHOLDERS

Rights Certificates will not be mailed to shareholders whose mailing address
is outside the United States or the Province of Ontario, Canada, but will
instead be held by the Subscription Agent for such shareholders' accounts
until transfer instructions are received. If no instructions are received
prior to 10:00 a.m. Eastern Standard time on the fifth business day preceding
the Expiration Date, the Subscription Agent will endeavor to sell the Rights
of such shareholders for their respective accounts. The net proceeds, if any,
from such sales (based on the average price received during such day) will be
distributed to such foreign holders. No assurances can be given that the
Subscription Agent will be able to sell such Rights.

The Rights issued pursuant to this Rights offering to residents of Ontario
are not transferable in Ontario and the Shares issued to residents of Ontario
upon exercise of Rights may not be sold or otherwise disposed of for value in
Ontario, except pursuant to either a prospectus or a statutory exemption
available only in specific and limited circumstances.

DELIVERY OF SHARES

Certificates for Shares purchased pursuant to the exercise of Rights will be
mailed as soon as practicable following the receipt of all required documents
and payment in full of the Subscription Price due for such Shares.
Certificates for Shares purchased pursuant to the exercise of the
Oversubscription Privilege or third-party subscriptions for Unsubscribed
Shares or Additional Shares will be mailed as soon as practicable after the
Expiration Date and the receipt of all required documents and payment in full
of the Subscription Price due for such Shares. In the case of shareholders
whose Shares are held through DTC and third-party investors who arrange for
delivery and payment through DTC, the appropriate participant account will be
credited. Any refunds in connection with subscriptions will be mailed as soon
as practicable after the Expiration Date without interest.

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS REGARDING THE OFFERING

The following discussion summarizes the material U.S. federal income tax
consequences of the Offering to Homestead and its shareholders. To the extent
such summary discusses matters of law, such summary represents the opinion of
Mayer, Brown & Platt. The following discussion is based upon the current
provisions of the

S-39
<PAGE>

Internal Revenue Code of 1986, as amended (the "Code"), its legislative
history, administrative pronouncements, judicial decisions and Treasury
Regulations, all of which are subject to change, possibly with retroactive
effect. The following discussion does not purport to be a complete discussion
of all U.S. federal income tax considerations relating to the Offering. The
following discussion does not address the tax consequences of the Offering
under state, local or non-U.S. tax laws. In addition, the following discussion
may not apply, in whole or in part, to particular categories of Homestead
shareholders, such as dealers in securities, insurance companies, foreign
persons, tax-exempt organizations and financial institutions. A tax ruling
from the Internal Revenue Service has not been requested. The discussion of
U.S. federal income tax considerations of the Offering set forth below assumes
that the Shares owned by a shareholder and the Shares issued pursuant to the
Offering constitute capital assets in the hands of such shareholder. It should
be noted that under current law, net capital gains of individuals are, under
certain circumstances, taxed at lower rates than items of ordinary income, and
the deductibility of capital losses is subject to limitations. THE FOLLOWING
DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY. ALL HOMESTEAD
SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS TO DETERMINE THE SPECIFIC
TAX CONSEQUENCES OF THE OFFERING, INCLUDING ANY STATE, LOCAL AND NON-U.S. TAX
CONSEQUENCES.

Taxation of Homestead's Shareholders

Receipt of Right. A shareholder (including a foreign shareholder) will not
recognize any gain or loss upon his or her receipt of a Right.

Tax Basis of Right. If a shareholder exercises or sells a Right, the tax
basis of such Right in the hands of the shareholder will be determined by
allocating the shareholder's existing tax basis of his or her Shares with
respect to which the Right was distributed ("Old Shares") between his or her
Old Shares and the Right, in proportion to their relative fair market values
on the date of distribution. If, however, the fair market value of the Rights
distributed to the shareholder (on the date of distribution) is less than 15%
of the fair market value of his or her Old Shares, the tax basis of each Right
will be deemed to be zero unless the shareholder affirmatively elects, by
attaching an election statement to his or her federal income tax return for
the year in which he or she receives his or her Rights, to compute the tax
basis of his or her Rights in accordance with the preceding sentence. Once
made, such an election is irrevocable. A Right will not be treated as having
any tax basis if it lapses and, therefore, the holder of an expired Right will
not recognize a loss for tax purposes.

Sale of Right. If a shareholder sells a Right, the shareholder will
generally recognize capital gain or loss in an amount equal to the difference
between the proceeds of the sale and the shareholder's tax basis of such
Right. Such gain or loss will be long-term capital gain or loss if the
shareholder's holding period for such Right (which will include the
shareholder's holding period for his or her Old Shares) is more than one year
from the date of sale.

Exercise of Right. No gain or loss will generally be recognized by a
shareholder (including a foreign shareholder) upon the purchase of a Share
pursuant to the exercise of a Right. The tax basis of the Shares purchased
pursuant to the exercise of the Rights will be equal to the sum of (a) the
shareholder's tax basis of the Rights exercised and (b) the Subscription Price
paid for such Shares. The holding period of the Shares purchased pursuant to
the exercise of Rights will commence on the date of exercise. Upon the
subsequent sale of such Shares (other than to Homestead pursuant to a
redemption), the shareholder will generally recognize capital gain or loss in
an amount equal to the difference between the proceeds of the sale and the
shareholder's tax basis of such Shares. Such gain or loss will be long-term
capital gain or loss if the shareholder's holding period for such Shares is
more than one year on the date of sale.

Foreign Persons. Gains from the sale of the Shares and the Rights by a
foreign person should not be subject to U.S. taxation, unless either (i) such
gain is effectively connected with such person's U.S. business or, in the case
of an individual foreign person, such person is present within the U.S. for
more than 182 days in such taxable year or (ii) such person held more than
five percent of the Shares at some time during the five-year period ending on
the date of the sale of the Shares or the Rights.

S-40
<PAGE>

Taxation of Homestead

Homestead will generally not recognize any gain or loss upon (a) the
issuance of Rights, (b) the receipt of cash for Shares pursuant to the
exercise of Rights or (c) the lapse of Rights.

VALIDITY OF SHARES

The validity of the Shares offered hereby will be passed upon for Homestead
by Mayer, Brown & Platt, Chicago, Illinois. Mayer, Brown & Platt has in the
past represented and is currently representing Homestead and certain of its
affiliates, including Security Capital.

S-41
<PAGE>

PROSPECTUS

HOMESTEAD VILLAGE INCORPORATED

$300,000,000

COMMON STOCK
(PAR VALUE $.01 PER SHARE)

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

Homestead Village Incorporated ("Homestead") may from time to time offer
shares of its Common Stock, par value $.01 per share (the "Shares"), in
amounts, at prices and on terms to be set forth in a supplement to this
Prospectus (a "Prospectus Supplement").

The Shares may be offered directly by Homestead, through agents designated
from time to time by Homestead, or to or through underwriters or dealers. If
any agents or underwriters are involved in the sale of any of the Shares,
their names, and any applicable purchase price, fee, commission or discount
arrangement between or among them, will be set forth, or will be calculable
from the information set forth, in the applicable Prospectus Supplement. See
"Plan of Distribution." No Shares may be sold without delivery of the
applicable Prospectus Supplement describing the method and terms of the
offering of such Shares.

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

THESE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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

THE DATE OF THIS PROSPECTUS IS DECEMBER 29, 1997.
<PAGE>

HOMESTEAD VILLAGE INCORPORATED

Homestead is a Maryland corporation. Its executive offices are located at
2100 RiverEdge Parkway, Atlanta, Georgia 30328, and its telephone number is
(770) 303-2200.

USE OF PROCEEDS

Unless otherwise described in the applicable Prospectus Supplement, the net
proceeds from the sale of Shares will be used for the acquisition of sites and
the development of additional extended-stay lodging properties as suitable
opportunities arise, for the repayment of certain outstanding indebtedness at
such time, for working capital purposes and, to a lesser extent, for capital
improvements to properties.

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<PAGE>

DESCRIPTION OF COMMON STOCK

GENERAL

The authorized stock of Homestead consists of 250,000,000 shares of common
stock, $0.01 par value per share. The board of directors of Homestead (the
"Board") may classify or reclassify any unissued shares of stock from time to
time by setting or changing the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends and other distributions,
qualifications or terms or conditions of redemption of such stock. No holder of
any class of stock of Homestead will have any preemptive right to subscribe to
any securities of Homestead except as may be granted by the Board in
authorizing the issuance of a class of preferred stock. Under Maryland law,
stockholders are generally not liable for a company's debts or obligations. For
a description of certain provisions that could have the effect of delaying,
deferring or preventing a change in control, see "Certain Provisions of
Maryland Law and of Homestead's Charter and Bylaws."

The outstanding Shares are fully paid and nonassessable. Each Share entitles
the holder to one vote on all matters requiring a vote of shareholders,
including the election of directors. Shareholders do not have the right to
cumulate their votes in the election of directors, which means that the holders
of a majority of the outstanding Shares can elect all of the directors then
standing for election. Shareholders are entitled to such dividends as may be
authorized from time to time by the directors out of assets legally available
therefor.

In the event of any liquidation, dissolution or winding-up of the affairs of
Homestead, holders of Shares are entitled, subject to the preferential rights
of holders of preferred stock, if any, to share ratably in the assets of
Homestead remaining after provision for payment of liabilities to creditors.

The transfer agent and registrar for the Shares is BankBoston, N.A., 150
Royall Street, Canton, Massachusetts 02021.

All Shares have equal distribution, liquidation and other rights, and have no
preference, appraisal, conversion or exchange rights. As of December 29, 1997,
27,804,906 Shares were issued and outstanding.

PURCHASE RIGHTS

On May 16, 1996, the Board authorized a dividend of one Purchase Right for
each Share outstanding at the close of business on May 16, 1996 (the "Rights
Record Date") to the holders of Shares of record as of the Rights Record Date.
The dividend was paid on the Rights Record Date. The holders of any additional
Shares issued after the Rights Record Date and before the redemption or
expiration of the Purchase Rights will also be entitled to one Purchase Right
for each such additional Share. Each Purchase Right entitles the registered
holder under certain circumstances to purchase from Homestead one-hundredth of
a Participating Preferred Share of Homestead at a price of $50.00 per one-
hundredth of a Participating Preferred Share (the "Purchase Price"), subject to
adjustment. The description and terms of the Purchase Rights are set forth in
the Rights Agreement dated as of May 16, 1996 between Homestead and BankBoston,
N.A., formerly known as The First National Bank of Boston, as rights agent (the
"Rights Agreement").

The Purchase Rights will be exercisable and will be evidenced by separate
certificates only after the earliest to occur of: (1) 10 business days
following a public announcement that a person or group of affiliated or
associated persons (excluding certain affiliates of Homestead) has acquired
beneficial ownership of 20% or more of the outstanding Shares (thereby becoming
an "Acquiring Person"); (2) 15 business days (or such later date as may be
determined by action of the Board prior to such time as any person or group of
affiliated persons becomes an Acquiring Person) following the commencement of,
or announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of persons (excluding certain affiliates of Homestead) of 25% or more of
the outstanding Shares; or (3) 10 business days (or such later date as may be
determined by action of the Board prior to such time as any person becomes an
Acquiring Person) after the date of filing by any person of, or the first
public announcement of the intention of any person to file, any application,
request, submission or other document with any federal or

3
<PAGE>

state regulatory authority seeking approval of, attempting to rebut any
presumption of control upon, or otherwise indicating an intention to enter
into, any transaction or series of transactions (other than a transaction in
which newly issued Shares are issued directly by Homestead) the consummation of
which would result in any person (excluding certain affiliates of Homestead)
becoming the beneficial owner of Shares aggregating 25% or more of the then
outstanding Shares (the first to occur of such dates being called the "Rights
Distribution Date"). With respect to any of the stock certificates outstanding
as of the Rights Record Date, until the Rights Distribution Date the Purchase
Rights will be evidenced by such stock certificate. Until the Rights
Distribution Date (or earlier redemption or expiration of the Purchase Rights),
new stock certificates issued after the Rights Record Date upon transfer or new
issuance of Shares will contain a notation incorporating the Rights Agreement
by reference. Notwithstanding the foregoing, if the Board in good faith
determines that a person who would otherwise be an Acquiring Person under the
Rights Agreement has become such inadvertently, and such person divests as
promptly as practicable a sufficient number of Shares so that such person would
no longer be an Acquiring Person, then such person shall not be deemed to be an
Acquiring Person for purposes of the Rights Agreement.

The Purchase Rights will expire on May 16, 2006 (the "Final Expiration
Date"), unless the Final Expiration Date is extended or unless the Purchase
Rights are earlier redeemed or exchanged by Homestead, in each case as
described below.

The Purchase Price payable, and the number of Participating Preferred Shares
or other securities or property issuable, upon exercise of the Purchase Rights
are subject to adjustment under certain circumstances from time to time to
prevent dilution. With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments require an adjustment of at least
1% in such Purchase Price.

Participating Preferred Shares purchasable upon exercise of the Purchase
Rights will not be redeemable. Each Participating Preferred Share will be
entitled to a minimum preferential quarterly distribution payment equal to the
greater of (i) $1 per share or (ii) 100 times the distribution declared per
Share. Each Participating Preferred Share will have 100 votes, voting together
with the Shares. If dividends payable on Participating Preferred Shares are in
arrears in an amount equal to at least six full quarterly dividends (whether or
not declared and whether or not consecutive), the holders of record of the
outstanding Participating Preferred Shares shall have the exclusive right,
voting separately as a single class, to elect two directors of Homestead until
such time as all arrears in dividends (whether or not declared) on the
Participating Preferred Shares shall have been paid or declared and set apart
for payment. In the event of liquidation, the holders of the Participating
Preferred Shares will be entitled to a minimum preferential liquidation payment
of $1 per share (plus any accrued and unpaid dividends) but will be entitled to
an aggregate payment of 100 times the payment made per Share. In the event of
any merger, consolidation or other transaction in which Shares are exchanged,
each Participating Preferred Share will be entitled to receive 100 times the
amount received per Share. In the event of issuance of Participating Preferred
Shares upon exercise of the Purchase Rights, in order to facilitate trading, a
depositary receipt may be issued for each one-hundredth of a Participating
Preferred Share. The Purchase Rights will be protected by customary
antidilution provisions.

In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person, proper provision will be made so that each holder
of a Purchase Right, other than Purchase Rights beneficially owned by the
Acquiring Person (which will thereafter be void), will thereafter have the
right to receive upon exercise a number of Shares having a market value
(determined in accordance with the Rights Agreement) of twice the Purchase
Price. In lieu of the issuance of Shares upon exercise of Purchase Rights, the
Board may under certain circumstances, and if there is an insufficient number
of Shares authorized but unissued or held by Homestead to permit the exercise
in full of the Purchase Rights, the Board is required to take such action as
may be necessary to cause Homestead to issue or pay upon the exercise of
Purchase Rights cash (including by way of a reduction of purchase price),
property, other securities or any combination of the foregoing having an
aggregate value equal to that of the Shares which otherwise would have been
issuable upon exercise of Purchase Rights.

4
<PAGE>

In the event that, after any person or group becomes an Acquiring Person,
Homestead is acquired in a merger or other business combination transaction or
50% or more of its consolidated assets or earning power are sold, proper
provision will be made so that each holder of a Purchase Right will thereafter
have the right to receive, upon the exercise thereof at the then current
Purchase Price, a number of shares of common stock of the acquiring company
having a market value (determined in accordance with the Rights Agreement) of
twice the Purchase Price.

At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by that person or group of 50% or more of the outstanding
Shares, the Board may exchange the Purchase Rights (other than Purchase Rights
owned by that person or group which will have become void), in whole or in
part, at an exchange ratio of one Share (or one-hundredth of a Participating
Preferred Share) per Purchase Right (subject to adjustment).

As soon as practicable after a Rights Distribution Date, Homestead is
obligated to use its best efforts to file a registration statement under the
Securities Act of 1933, as amended (the "Securities Act") relating to the
securities issuable upon exercise of Purchase Rights and to cause such
registration statement to become effective as soon as practicable.

At any time prior to the time a person or group of persons becomes an
Acquiring Person, the Board may redeem the Purchase Rights in whole, but not in
part, at a price of $0.01 per Purchase Right (the "Redemption Price") payable
in cash, Shares or any other form of consideration deemed appropriate by the
Board. The redemption of the Purchase Rights may be made effective at such
time, on such basis and with such conditions as the Board in its sole
discretion may establish. Immediately upon the effectiveness of any redemption
of the Purchase Rights, the right to exercise the Purchase Rights will
terminate and the only right of the holders of Purchase Rights will be to
receive the Redemption Price.

The terms of the Purchase Rights may be amended by the Board without the
consent of the holders of the Purchase Rights, except that from and after the
time any person or group of affiliated or associated persons becomes an
Acquiring Person no such amendment may adversely affect the interests of the
holders of the Purchase Rights.

The Purchase Rights have certain anti-takeover effects. The Purchase Rights
will cause substantial dilution to a person or group that attempts to acquire
Homestead on terms not approved by the Board, except pursuant to an offer
conditioned on a substantial number of Purchase Rights being acquired. The
Purchase Rights should not interfere with any merger or other business
combination approved by the Board since the Purchase Rights may be redeemed by
Homestead at the Redemption Price prior to the time that a person or group has
acquired beneficial ownership of 20% or more of the Shares. The Rights
Agreement specifying the terms of the Purchase Rights has been incorporated by
reference into the registration statement on Form S-3 of which this Prospectus
forms a part (together with all amendments and exhibits, the "Registration
Statement") and is incorporated herein by reference. The foregoing description
of the Purchase Rights does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, the Rights Agreement, including
the definitions therein of certain terms.

OTHER SECURITIES OF HOMESTEAD

PREFERRED STOCK

The Board is empowered by the Charter, without the approval of stockholders,
to cause shares of preferred stock to be issued in one or more series and to
determine, among other things, the number of preferred shares of each series
and the rights, preferences, powers and limitations of each series which may be
senior to the rights of Shares. The issuance of preferred stock could have the
effect of delaying, deferring or preventing a change in control of Homestead
and may adversely affect the voting and other rights of shareholders. No shares
of preferred stock are outstanding and Homestead has no present plans to issue
any preferred stock other than as contemplated by the Rights Agreement.

5
<PAGE>

CONVERTIBLE MORTGAGE NOTES

On October 17, 1996, Homestead assumed $67,285,743 principal amount of
convertible mortgage notes ($60,445,442 net of discount) of its predecessors in
connection with funding the acquisition and construction costs and expenses
incurred in connection with acquiring and developing various real properties as
Homestead Village(R) properties. Pursuant to Funding Commitment Agreements
entered into with Security Capital Pacific Trust ("PTR") and Security Capital
Atlantic Incorporated ("ATLANTIC"), PTR and ATLANTIC agreed to provide
Homestead additional funding on the respective Homestead Village(R) properties
contributed by them in the amounts of up to approximately $138 million and $111
million, respectively. PTR and ATLANTIC will receive convertible mortgage notes
in respect of such fundings with face amounts of up to approximately
$154 million and $98 million, respectively. The convertible mortgage notes
issued to PTR are being recorded for financial reporting purposes by Homestead
at a discount of approximately $23 million (including the discount assumed on
October 17,1996) and the convertible mortgage notes issued to ATLANTIC are
being recorded by Homestead at a premium of approximately $13 million, each of
which will be amortized as an adjustment to interest expense over the ten-year
term of the mortgage notes using the effective interest method. As of November
30, 1997, PTR and ATLANTIC had funded approximately $123 million and $106
million, respectively, under their respective Funding Commitment Agreement.

Interest on the convertible mortgage notes accrues at the rate of 9% on the
unpaid principal balance payable every six months. The convertible mortgage
notes are scheduled to mature on October 31, 2006 and are callable on or after
May 28, 2001. Homestead has pledged substantially all of the assets contributed
by PTR or ATLANTIC, as the case may be, as collateral for the mortgage loans.
PTR and ATLANTIC have the right to convert all of the outstanding principal
amount of the convertible mortgage notes into Shares on the basis of one Share
for each $11.50 aggregate principal amount outstanding on the convertible
mortgage notes being converted. This conversion rate is subject to adjustment
on substantially the same terms as the Warrants.

CERTAIN PROVISIONS OF MARYLAND LAW AND OF
HOMESTEAD'S CHARTER AND BYLAWS

The following paragraphs summarize certain provisions of Maryland law and the
Charter and Bylaws. The summary does not purport to be complete and is subject
to and qualified in its entirety by reference to the Charter and Bylaws, copies
of which have been incorporated by reference as exhibits to the Registration
Statement and to Maryland law.

CLASSIFICATION OF THE BOARD

Homestead's Bylaws provide that the number of directors may be established by
the Board but may not be fewer than three nor more than fifteen. Any vacancy
will be filled, at any regular meeting or at any special meeting called for
that purpose, by a majority of the remaining directors, except that a vacancy
resulting from an increase in the number of directors will be filled by a
majority of the entire Board. Pursuant to the Charter, the directors are
divided into three classes. At the 1997 annual meeting of shareholders, one
class was elected to hold office initially for a term expiring at the annual
meeting of shareholders to be held in 1998, another class was elected to hold
office initially for a term expiring at the annual meeting of shareholders to
be held in 1999 and another class was elected to hold office initially for a
term expiring at the annual meeting of shareholders to be held in 2000. As the
term of each class expires, directors in that class will be elected for a term
of three years and until their successors are duly elected and qualify.
Homestead believes that classification of the Board will help to assure the
continuity and stability of Homestead's business strategies and policies as
determined by the Board.

The classified director provision could have the effect of making the
replacement of incumbent directors more time-consuming and difficult, which
could discourage a third party from making a tender offer or otherwise
attempting to obtain control of Homestead, even though such an attempt might be
beneficial to Homestead and its shareholders. At least two annual meetings of
shareholders, instead of one, will generally be required to effect

6
<PAGE>

a change in a majority of the Board. Thus, the classified board provision could
increase the likelihood that incumbent directors will retain their positions.

DIRECTOR LIABILITY LIMITATION AND INDEMNIFICATION

Maryland law permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except to liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Charter contains
such a provision which eliminates such liability to the maximum extent
permitted by Maryland law.

Homestead's officers and directors are and will be indemnified under the
Charter against certain liabilities. The Charter provides that Homestead will,
to the maximum extent permitted by Maryland law in effect from time to time,
indemnify and pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to (a) any individual who is a present or former
director or officer of Homestead or (b) any individual who, while a director of
Homestead and at the request of Homestead, serves or has served another
corporation, partnership, joint venture, trust, employee benefit plan or any
other enterprise as a director, officer, partner or trustee of such
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise. Homestead has the power, with the approval of the Board, to provide
such indemnification and advancement of expenses to a person who served a
predecessor of Homestead in any of the capacities described in (a) or (b) above
and to any employee or agent of Homestead or its predecessors.

Maryland law requires a corporation (unless its charter provides otherwise,
which the Charter does not) to indemnify a director or officer who has been
successful, on the merits or otherwise, in the defense of any proceeding to
which he or she is made a party by reason of his or her service in that
capacity. Maryland law permits a corporation to indemnify its present and
former directors and officers, among others, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them in
connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities unless it is established that (a)
the act or omission of the director or officer was material to the matter
giving rise to the proceeding and (i) was committed in bad faith or (ii) was
the result of active and deliberate dishonesty, (b) the director or officer
actually received an improper personal benefit in money, property or services
or (c) in the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was unlawful. However, a
Maryland corporation may not indemnify for an adverse judgment in a suit by or
in the right of the corporation. Maryland law permits Homestead to advance
reasonable expenses to a director or officer upon Homestead's receipt of (a) a
written affirmation by the director or officer of his or her good faith belief
that he or she has met the standard of conduct necessary for indemnification by
Homestead as authorized by the Bylaws and (b) a written statement by or on his
or her behalf to repay the amount paid or reimbursed by Homestead if it shall
ultimately be determined that the standard of conduct was not met.

Additionally, Homestead has entered into indemnity agreements with each of
its officers and directors which provide for reimbursement of all expenses and
liabilities of such officer or director, arising out of any lawsuit or claim
against such officer or director due to the fact that he or she was or is
serving as an officer or director, except for such liabilities and expenses (a)
the payment of which is judicially determined to be unlawful, (b) relating to
claims under Section 16(b) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") or (c) relating to judicially determined criminal
violations.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Homestead
pursuant to the foregoing provisions, Homestead has been informed that in the
opinion of the Securities and Exchange Commission (the "Commission") such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.

7
<PAGE>

BUSINESS COMBINATIONS

Under the Maryland General Corporation Law (the "MGCL"), certain "business
combinations" (including a merger, consolidation, share exchange or, in certain
circumstances, an asset transfer or issuance or reclassification of equity
securities) between a Maryland corporation and any person who beneficially owns
10% or more of the voting power of the corporation's shares or an affiliate of
the corporation who, at any time within the two-year period prior to the date
in question, was the beneficial owner of 10% or more of the voting power of the
then-outstanding voting stock of the corporation (an "Interested Stockholder")
or an affiliate of such an Interested Stockholder are prohibited for five years
after the most recent date on which the Interested Stockholder becomes an
Interested Stockholder. Thereafter, any such business combination must be
recommended by the board of directors of such corporation and approved by the
affirmative vote of at least (a) 80% of the votes entitled to be cast by
holders of outstanding voting shares of the corporation and (b) two-thirds of
the votes entitled to be cast by holders of outstanding voting shares of the
corporation other than shares held by the Interested Stockholder with whom (or
with whose affiliate) the business combination is to be effected, unless, among
other conditions, the corporation's common stockholders receive a minimum price
(as defined in the MGCL) for their shares and the consideration is received in
cash or in the same form as previously paid by the Interested Stockholder for
its shares. These provisions of the MGCL do not apply, however, to business
combinations that are approved or exempted by the board of directors of the
corporation prior to the time that the Interested Stockholder becomes an
Interested Stockholder. The Board has exempted from these provisions of the
MGCL any business combination with Security Capital Group Incorporated
("Security Capital") and its affiliates and successors. As a result, Security
Capital and its affiliates and successors may be able to enter into business
combinations with Homestead that may not be in the best interests of its
shareholders without compliance by Homestead with the super-majority vote
requirements and other provisions of the statute.

CONTROL SHARE ACQUISITIONS

Maryland law provides that "Control Shares" of a Maryland corporation
acquired in a "Control Share acquisition" have no voting rights except to the
extent approved by a vote of two-thirds of the votes entitled to be cast on the
matter, excluding shares of stock owned by the acquiror or by officers or
directors who are employees of the corporation. "Control Shares" are voting
shares of stock which, if aggregated with all other such shares of stock
previously acquired by the acquiror, or in respect of which the acquiror is
able to exercise or direct the exercise of voting power, would entitle the
acquiror to exercise voting power in electing directors within one of the
following ranges of voting power (except solely by virtue of a revocable
proxy): (i) one-fifth or more but less than one-third, (ii) one-third or more
but less than a majority, or (iii) a majority or more of all voting power.
Control Shares do not include shares the acquiring person is then entitled to
vote as a result of having previously obtained stockholder approval. A "Control
Share acquisition" means the acquisition of Control Shares, subject to certain
exceptions.

A person who has made or proposes to make a Control Share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the board of directors to call a special meeting of stockholders to
be held within 50 days of demand to consider the voting rights of the shares.
If no request for a meeting is made, the corporation may itself present the
question at any stockholders meeting.

If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute,
then, subject to certain conditions and limitations, the corporation may redeem
any or all of the Control Shares (except those for which voting rights have
previously been approved) for fair value determined, without regard to the
absence of voting rights for the Control Shares, as of the date of the last
Control Share acquisition or of any meeting of stockholders at which the voting
rights of such shares are considered and not approved. If voting rights for
Control Shares are approved at a stockholders meeting and the acquiror becomes
entitled to vote a majority of the shares entitled to vote, all other
stockholders may exercise appraisal rights. The fair value of the shares as
determined for purposes of such appraisal rights may not be less than the
highest price per share paid by the acquiror in the Control Share acquisition.

8
<PAGE>

The Control Share acquisition statute does not apply to shares acquired in a
merger, consolidation or share exchange if the corporation is a party to the
transaction or to acquisitions approved or exempted by the charter or bylaws of
the corporation.

Homestead's Bylaws contain a provision exempting Security Capital and its
affiliates and successors from the provisions of the Control Share acquisition
statute.

ADVANCE NOTICE PROVISIONS

For nominations or other business to be properly brought before an annual
meeting of shareholders by a shareholder, the Bylaws require such shareholder
to deliver a notice to the Secretary, absent specified circumstances, not less
than 60 days nor more than 90 days prior to the first anniversary of the
preceding year's annual meeting setting forth: (i) as to each person whom the
shareholder proposes to nominate for election or reelection as a director, all
information relating to such person that is required to be disclosed in
solicitations of proxies for the election of directors, pursuant to Regulation
14A of the Exchange Act; (ii) as to any other business that the shareholder
proposed to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest in such business of such
shareholder and of the beneficial owner, if any, on whose behalf the nomination
or proposal is made; and (iii) as to the shareholder giving the notice and
beneficial owner, if any, on whose behalf the nomination or proposal is made,
(x) the name and address of such shareholder as they appear on the books, and
of such beneficial owner and (y) the number of shares of each class of stock of
Homestead which are owned beneficially and of record by such shareholder and
such beneficial owner, if any.

PLAN OF DISTRIBUTION

Homestead may sell Shares to one or more underwriters or dealers for public
offering and sale by them or may sell Shares to investors directly or through
agents, which agents may be affiliated with Homestead. Direct sales to
investors may be accomplished through subscription offerings or through
subscription rights distributed to Homestead shareholders and direct placements
to third parties. In connection with subscription offerings or the distribution
of subscription rights to shareholders, if all the underlying Shares are not
subscribed for, Homestead may sell such unsubscribed Shares to third parties
directly or through agents and, in addition, whether or not all of the
underlying Shares are subscribed for, Homestead may concurrently offer
additional Shares to third parties directly or through agents, which agents may
be affiliated with Homestead. Any underwriter, dealer or agent involved in the
offer and sale of Shares will be named in the applicable Prospectus Supplement.

The distribution of Shares may be effected from time to time in one or more
transactions at a fixed price or prices, which may be changed, at prices
related to the prevailing market prices at the time of sale or at negotiated
prices (any of which may represent a discount from the prevailing market
price). Homestead also may, from time to time, authorize underwriters acting as
Homestead's agents to offer and sell Shares upon the terms and conditions set
forth in the applicable Prospectus Supplement. In connection with the sale of
Shares, underwriters may be deemed to have received compensation from Homestead
in the form of underwriting discounts or commissions and may also receive
commissions from purchasers of Shares for whom they may act as agent.
Underwriters may sell Shares to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act
as agent.

Any underwriting compensation paid by Homestead to underwriters or agents in
connection with the offering of Shares, and any discounts, concessions or
commissions allowed by underwriters to participating dealers, will be set forth
in the applicable Prospectus Supplement. Underwriters, dealers and agents
participating in the distribution of Shares may be deemed to be underwriters,
and any discounts and commissions received by them and any profit realized by
them on resale of Shares may be deemed to be underwriting discounts and
commissions, under the Securities Act. Underwriters, dealers and agents may be
entitled, under agreements

9
<PAGE>

entered into with Homestead, to indemnification against and contribution
toward certain civil liabilities, including liabilities under the Securities
Act. Any such indemnification agreements will be described in the applicable
Prospectus Supplement.

If so indicated in the applicable Prospectus Supplement, Homestead will
authorize dealers acting as Homestead's agents to solicit offers by certain
institutions to purchase Shares from Homestead at the public offering price
set forth in such Prospectus Supplement pursuant to Delayed Delivery Contracts
("Contracts") providing for payment and delivery on the date or dates stated
in such Prospectus Supplement. Each Contract will be for an amount not less
than, and the aggregate principal amount of Shares sold pursuant to Contracts
shall be not less nor more than, the respective amounts stated in the
applicable Prospectus Supplement. Institutions with whom Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions, and other institutions but will in all cases be subject to the
approval of Homestead. Contracts will not be subject to any conditions except
(i) the purchase by an institution of Shares covered by its Contracts shall
not at the time of delivery be prohibited under the laws of any jurisdiction
in the United States to which such institution is subject, and (ii) if Shares
are being sold to underwriters, Homestead shall have sold to such underwriters
the total principal amount of Shares less the principal amount thereof covered
by Contracts.

Certain of the underwriters and their affiliates may be customers of, engage
in transactions with and perform services for Homestead and its subsidiaries
and affiliates in the ordinary course of business.

EXPERTS

The financial statements and schedule of Homestead appearing in Homestead's
Annual Report on Form 10-K for the year ended December 31, 1996, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
financial statements and schedule are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.

With respect to the unaudited condensed interim financial information for
the three-month period ended March 31, 1997, the three- and six-month periods
ended June 30, 1997 and the three- and nine-month periods ended September 30,
1997, incorporated by reference in this Prospectus, Ernst & Young LLP has
reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their
separate reports, included in Homestead's Quarterly Report on Form 10-Q for
the quarters ended March 31, 1997, June 30, 1997 and September 30, 1997, and
incorporated herein by reference, state that they did not audit and they do
not express an opinion on that interim financial information. Accordingly, the
degree of reliance on their reports on such information should be restricted
considering the limited nature of the review procedures applied. The
independent auditors are not subject to the liability provisions of Section 11
of the Securities Act for their reports on the unaudited interim financial
information because those reports are not a "report" or a "part' of the
Registration Statement prepared or certified by the auditors within the
meaning of Sections 7 and 11 of the Securities Act.

The financial statements and related schedule of Homestead as of and for the
years ended December 31, 1995 and 1994, incorporated by reference herein and
in the Registration Statement, have been audited by KPMG Peat Marwick LLP,
independent certified public accountants, to the extent and for the periods
indicated in their report, which has been incorporated by reference herein and
in the Registration Statement in reliance upon the authority of said firm as
experts in accounting and auditing.

10
<PAGE>

VALIDITY OF SHARES

The validity of the Shares will be passed upon for Homestead by Mayer, Brown
& Platt, Chicago, Illinois. Mayer, Brown & Platt has in the past represented
and is currently representing Homestead and certain of its affiliates,
including Security Capital.

AVAILABLE INFORMATION

Homestead is subject to the informational requirements of the Exchange Act,
and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549; 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511;
and 7 World Trade Center, 13th Floor, New York, New York 10048, and are also
available on the Commission's worldwide web site at http://www.sec.gov. Copies
of such material can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Homestead's outstanding Shares are listed on the American Stock Exchange (the
"AMEX") under the symbol "HSD," and all such reports, proxy statements and
other information filed by Homestead with the AMEX may be inspected at the
AMEX's offices at 86 Trinity Place, New York, New York 10006.

This Prospectus constitutes part of the Registration Statement filed by
Homestead with the Commission under the Securities Act. This Prospectus does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information, reference is hereby made to the
Registration Statement. Statements made in this Prospectus concerning the
contents of any documents referred to herein are not necessarily complete, and
in each case are qualified in all respects by reference to the copy of such
document filed with the Commission.

INCORPORATION BY REFERENCE

The following documents filed by Homestead with the Commission (File No. 1-
12269) pursuant to the Exchange Act are incorporated herein by reference:

(a) Homestead's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;

(b) Homestead's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997;
(c) Homestead's Current Report on Form 8-K dated December 12, 1997, as
amended; and

(d) The description of Homestead's Shares and preferred share purchase
rights contained in Homestead's registration statements on Form 8-A filed
on October 7, 1996.

All documents subsequently filed by Homestead pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering of the Shares shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein, or in any subsequently filed document
which is also or is deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.

Homestead will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any or all of the information
incorporated herein by reference, other than exhibits to such information
unless such exhibits are specifically incorporated by reference into such
documents. Requests should be addressed to Secretary, Homestead Village
Incorporated, 2100 RiverEdge Parkway, Atlanta, Georgia 30328, telephone number:
(770) 303-2200.

11
<PAGE>
OPERATING HIGHLIGHTS

Chart 1
- -------

listing of major corporate accounts
increase in major corporate account room nights chart

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

Focus on Corporate Customer

Major Corporate Accounts/1/

Allstate Intel
Andersen Consulting Lockheed Martin
AT&T Lucent Technologies
Boeing MCI
Compaq Morrison Knudsen
Dell Motorola
EDS Northern Telecom
Fujitsu Oracle
General Electric Raytheon
General Motors Southwestern Bell
GTE Sprint
Honeywell State Farm
IBM Texas Instruments

Room Nights from Major Corporate Accounts
(Nine months Ended Sept. 30)

[BAR CHART GOES HERE]

200,000

150,000

100,000

50,000

95% Growth

94,000

183,000

1996

1997

/1/ Major corporate accounts defined as customers who have generated more than
500 room nights.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Chart 2
- -------

RevPAR growth chart

Operating System Driving RevPAR Growth

Operating System

. Sales and Marketing Effort
Targeting Business Traveler

. High Quality Service and
Product in Desirable Locations

. Recruiting and Training of
Customer-Focused Employees

. Reinvesting in Product Ensures
High Quality Properties

RevPAR Growth/1/

[BAR CHART GOES HERE]

12.0%

9.0%

6.0%

3.0%

10.4%

10.6%

10.2%

Q1 1997 Q2 1997 Q3 1997

/1/ Year over year growth rate in RevPAR for all operating properties.

Chart 3
- -------
- --------------------------------------------------------------------------------
Commitment to Building a National Brand Chart

Building a National Brand

Value-Added Operating System

Targeted Corporate Sales Force

Commit Capital to R&D

Research-Based Capital Deployment

Superior Management

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<PAGE>

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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE AC-
COMPANYING PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTA-
TIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUP-
PLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
TO WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANY-
ING PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF HOME-
STEAD SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS COR-
RECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Homestead Village Incorporated............................................ S-3
Offering Information...................................................... S-5
Certain Considerations.................................................... S-6
Business.................................................................. S-7
Use of Proceeds........................................................... S-18
Price Range of Shares..................................................... S-18
Capitalization............................................................ S-19
Selected Financial Data................................................... S-20
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... S-22
Management................................................................ S-27
Certain Relationships and Transactions.................................... S-33
The Offering.............................................................. S-35
Validity of Shares........................................................ S-41

PROSPECTUS
Homestead Village Incorporated............................................ 2
Use of Proceeds........................................................... 2
Description of Common Stock............................................... 3
Other Securities of Homestead............................................. 5
Certain Provisions of Maryland Law and of Homestead's Charter and Bylaws.. 6
Plan of Distribution...................................................... 9
Experts................................................................... 10
Validity of Shares........................................................ 11
Available Information..................................................... 11
Incorporation by Reference................................................ 11
</TABLE>

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LOGO

27,804,906 RIGHTS TO PURCHASE SHARES

6,951,227 SHARES OF COMMON STOCK
(PAR VALUE $.01 PER SHARE)

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PROSPECTUS SUPPLEMENT

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