10-K

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

FORM 10-K

(Mark One)

/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]

For the Fiscal Year Ended December 31, 1999
or

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

Commission File Number: 000-22683

GABLES REALTY LIMITED PARTNERSHIP

(Exact name of Registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	58-2077966 (I.R.S. employer identification no.)
2859 Paces Ferry Road, Suite 1450 Atlanta, Georgia (Address of principal executive offices)	30339 (Zip Code)

Registrant's telephone number, including area code: (770) 436-4600

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Units of Limited Partnership Interest
(Title of Class)

   Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

(1) Yes X No      

(2) Yes X No      

   Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K / /

   As of March 17, 2000, the aggregate market value of the 5,415,418 common units of limited partnership interest ("Units") held by non-affiliates of the Registrant was $120,154,587, based upon the closing price of $22.1875 on the New York Stock Exchange composite tape on such date of the common shares of beneficial interest, par value $.01 per share, of Gables Residential Trust (the "Trust"), a Maryland real estate investment trust and the 100% owner of Gables GP, Inc., the sole general partner of the Registrant, into which Units are redeemable under certain circumstances at the election of the Trust. (For this computation, the Registrant has excluded the market value of all Units reported as beneficially owned by the Trust and by executive officers and directors of the Registrant; such exclusion shall not be deemed to constitute an admission that any such person is an "affiliate" of the Registrant.)

DOCUMENTS INCORPORATED BY REFERENCE

   Information contained in Gables Residential Trust's Proxy Statement relating to its Annual Meeting of Shareholders to be held May 16, 2000 is incorporated by reference in Part III, Items 10, 11 and 12.

FORM 10-K ANNUAL REPORT
FISCAL YEAR ENDED DECEMBER 31, 1999
TABLE OF CONTENTS

PART I
Item No.		Page No.
1.	Business	1
2.	Properties	17
3.	Legal Proceedings	23
4.	Submission of Matters to a Vote of Security Holders	23
PART II
5.	Market for Registrant's Common Equity and Related Shareholder Matters	23
6.	Selected Financial and Operating Information	24
7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
7A.	Quantitative and Qualitative Disclosures About Market Risk	44
8.	Financial Statements and Supplementary Data	45
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	45
PART III
10.	Directors and Executive Officers of the Registrant	45
11.	Executive Compensation	45
12.	Security Ownership of Certain Beneficial Owners and Management	45
13.	Certain Relationships and Related Transactions	45
PART IV
14.	Exhibits, Financial Statements and Schedule and Reports on Form 8-K	46

PART I

ITEM 1. BUSINESS

Introduction

    Gables Realty Limited Partnership (the "Operating Partnership" or "Gables") is the entity through which Gables Residential Trust (the "Trust"), a real estate investment trust (a "REIT"), conducts substantially all of its business and owns, either directly or indirectly through subsidiaries, substantially all of its assets. In 1993, the Trust was formed under Maryland law and the Operating Partnership was organized as a Delaware limited partnership to continue and expand the multifamily apartment community management, development, construction, acquisition and disposition operations of its privately owned predecessor organization. The Trust completed its initial public offering on January 26, 1994 (the "IPO") and its common shares are listed on the NYSE under the symbol GBP.

    The Trust controls the Operating Partnership through Gables GP, Inc. ("Gables GP"), a wholly-owned subsidiary and the sole general partner of the Operating Partnership. This structure is commonly referred to as an umbrella partnership REIT or UPREIT. At December 31, 1999, the Trust was a 79.8% economic owner of the common equity of the Operating Partnership. The Board of Directors of Gables GP, the members of which are the same as the members of the Board of Trustees of the Trust, manages the affairs of the Operating Partnership by directing the affairs of Gables GP. The Trust's limited partner and indirect general partner interests in the Operating Partnership entitle it to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to its ownership interest therein and entitle the Trust to vote on all matters requiring a vote of the limited partners.

    Generally, the other limited partners of the Operating Partnership are persons who contributed their direct or indirect interests in certain properties to the Operating Partnership primarily in connection with the IPO and the acquisition of Trammell Crow Residential South Florida. The Operating Partnership is obligated to redeem each common unit of limited partnership ("Unit") held by a person other than the Trust, at the request of the holder, for an amount equal to the fair market value of a common share at the time of such redemption, provided that the Trust, at its option, may elect to acquire any such Unit presented for redemption for one common share or cash. With each redemption, the Trust's percentage ownership interest in the Operating Partnership will increase. In addition, whenever the Trust issues common shares or preferred shares, it is obligated to contribute any net proceeds to the Operating Partnership and the Operating Partnership is obligated to issue an equivalent number of common or preferred Units, as applicable, to the Trust.

    The Operating Partnership may issue additional Units to acquire land parcels for the development of apartment communities or operating apartment communities in transactions that in certain circumstances defer some or all of the seller's tax consequences. The Operating Partnership believes that many potential sellers of multifamily residential properties have a low tax basis in their properties and would be more willing to sell the properties in transactions that defer federal income taxes. Offering Units instead of cash for properties may provide potential sellers partial federal income tax deferral.

Unless the context otherwise requires, all references to "we", "our" or "us" in this report refer collectively to the Trust and the Operating Partnership.

Business Objectives and Strategy

    We are one of the largest owners, operators and developers of multifamily apartment communities in markets that have high job growth and have shown resiliency to national economic downturns in the United States. Our objective is to increase shareholder value by producing consistent, high quality

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earnings that result in dividend growth and annual total returns which exceed the multifamily sector average. To achieve this objective, we employ a number of business strategies which are outlined below:

    Investment Strategy.  Our long-term investment strategy is research-driven and aimed at achieving sustainable growth in operating cash flow while reducing exposure to inherent volatility associated with real estate supply/demand dynamics. We believe the success of a real estate investment is predicated on three basic factors—(1 ) macro-market fundamentals, (2) specific sub-market dynamics, and (3) product decisions.

    Our objective is to have a portfolio of assets in approximately six to eight strategically selected markets that are complementary through economic diversity and characterized by high job growth and resiliency to national economic downturns. We believe such a portfolio will provide predictable growth in operating cash flow on a sustainable basis.

    Real estate is a cyclical business and, as a long-term owner and operator of apartment communities, we believe it is important to evaluate performance potential throughout various economic cycles. It is also our belief that job creation and household formation are key components of demand for apartment communities. Research has shown that certain markets in the United States create more jobs and are more resilient to national economic downturns than others. In addition, the industrial job base of various markets can provide economic diversity through portfolio allocation that, in turn, can reduce volatility in performance. These factors, along with other macro-demographic characteristics, have led us to identify markets in which to make real estate investments.

    We believe that within a macro-market environment, apartment communities located in different sub-markets can have different economic performance, and that specific sub-market locations are an important factor in determining the potential economic success of an investment. Factors that differentiate specific sub-markets within a macro-market include, among other items, proximity to employment centers, entertainment and shopping, quality of education systems, availability of land that could be used to introduce new apartment communities, and the local entitlement process. It is our belief that apartment communities located in close proximity to these areas and areas with high barriers to entry through lack of available land and/or difficult entitlement processes should produce economic performance that exceeds that of apartment communities in locations without those characteristics. We generally refer to our desired locations as "in-fill" or "master-planned community" locations versus suburban locations that lack many of these differentiating characteristics. A key component used to identify in-fill/master-planned communities is the average cost per square foot for single family housing. We believe the single family housing market is very efficient in pricing the quality of housing and the proximity of neighborhoods to employment centers, entertainment, shopping, and quality education systems. By identifying these highly desirable sub-markets where people are spending the most on a per square foot basis to live, and targeting them for investment, we believe we can achieve above-average economic performance from our apartment communities.

    The third component of our investment strategy is product specific. Our target customer is the affluent renter-by-choice who desires a high quality apartment community in which to live. We perform extensive market research, both internal and external, in an effort to design apartment communities that meet the current and future desires of our target customers. In addition, we invest for the long term by acquiring and developing apartment communities with high quality construction materials and amenities. We believe that long-term maintenance and capital expenditure requirements are reduced by investing additional capital up front in apartment communities built with quality construction materials. The timeless design and high quality of the product targeted to the affluent renter-by-choice also gives us a competitive advantage over many other apartment owners through our ability to sell assets to condominium converters at prices in excess of apartment valuations. We have received numerous local and national awards and recognition for the quality of our apartment communities.

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    In order to execute our investment strategy, we believe it is important to maintain a strong local presence in each of our markets. Through our local expertise, we stay abreast of current market conditions and can proactively adjust tactics in anticipation of changes in market fundamentals. In addition, we believe we have a competitive advantage over many other apartment community owners through the vertical integration of our organization. We have expertise in all facets of apartment community investment, including the disciplines of construction, development, acquisition and disposition. Since 1982, we have been involved in the development, acquisition and disposition of approximately 32,000, 20,000 and 24,000 apartment homes, respectively.

    Operating Strategy.  We adhere to a strategy of owning and operating high quality, class AA/A apartment communities under the Gables® brand. We believe that such communities, when located in highly desirable areas to live and supplemented with high quality service and amenities, attract the affluent renter-by-choice who is willing to pay a premium for location preference, superior service and high quality communities. The resulting portfolio should maintain high levels of occupancy and rental rates. This, coupled with more predictable operating expenses and reduced capital expenditure requirements associated with high quality construction materials, should lead to operating margins that exceed national averages for the multifamily sector and sustainable growth in operating cash flow.

    We are continuing to pursue a long-standing strategy of brand name development by linking the "Gables" name to our communities. This strategy is intended to reinforce our reputation for excellent service and build recognition of our multifamily communities as a high quality, recognizable brand. We believe that increased consumer recognition of the "Gables" brand name in each of our markets enhances our ability to attract new residents, increases the markets' perception of our communities as high quality residential developments, and enhances our relationships with local authorities.

    We operate our communities to maximize sustainable cash flow growth and create long-term value. This is achieved by proactive marketing and leasing of apartment homes, providing the best possible resident service, generating economies of scale to lower expenses, and maintaining the communities to the highest standards. We believe that excellent service and branding thereof will distinguish us from our competitors, retain current residents and attract new prospects.

    We employ a number of operating strategies based on market fundamentals and prediction models in order to maximize the sustainability of growth in operating cash flow. Financial and marketing information is collected and distributed through local and wide-area networks from on-site computer systems at all of our communities, and effectively summarizes operating and marketing data critical for making accurate daily decisions. The system also compiles demographic profile information on prospective and current residents, allowing us to effectively target our customer base through our branding efforts. We also utilize the Internet extensively as a marketing tool to attract new customers through our award-winning web site at www.gables.com. Capturing and analyzing macro-market and sub-market data through our sophisticated operating systems allows us to perform analyses via our proprietary prediction models. As a result of these analyses, we may choose an operating strategy for a particular market aimed at maximizing rental rate growth while increasing short-term vacancy exposure. In other scenarios, a focus on maximizing occupancy at the expense of rental rate growth may deliver the best operating cash flow growth. We may also utilize different operating strategies for assets that are targeted for disposition in order to maximize the sales price based on current market underwriting conditions. These and other operating strategies are employed to maximize sustainable cash flow growth and create long-term value for shareholders.

    Human Resources Strategy.  Our aim is to be the employer of choice within the industry, with a mission of Taking Care of the Way People Live. A cornerstone of our strategy involves innovative human resource practices that we believe will attract and retain the highest calibre associates. Because of our long-established presence as a fully integrated apartment management, development, construction, acquisition and disposition company within our markets, we have the ability to offer multi-faceted

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career opportunities among the various disciplines within the industry. Approximately 8% of our associates have tenure in excess of 10 years. Average tenure for senior management, vice presidents and regional managers, and property managers is over thirteen years, ten years and five years, respectively. We believe the experience, expertise and depth of our bench strength is a competitive advantage.

    We believe our success with human resource strategies is primarily due to our empowerment of associates and our career development and training. By empowering associates to make decisions at a local level where the point of service occurs, we increase customer and associate satisfaction. We operate each of our apartment communities as a business unit. Property managers and staff are responsible for achieving specific economic goals associated with revenues, occupancy and expenses, in addition to maintaining assets to a high standard in order to ensure long-term success potential. Empowering associates with responsibility and encouraging decision making requires hiring the highest calibre associate and allocating extensive resources to training and career development.

    We are committed to training at all levels within the organization, from newly hired associates to the board of trustees. This commitment is aimed at ensuring the competitive advantage inherent in the expertise of our associates and deep bench strength, which facilitates succession planning at all levels. Our service-oriented philosophy is branded and reinforced through our "college of career development", Gables University. This comprehensive training system for our employees is overseen by full-time training coordinators and offers classes in a variety of different schools, such as the School of Leasing, School of People Resources and School of Maintenance Development. Additionally, there are "degree" programs which are completed with graduation ceremonies. Service is also reinforced with quarterly "I Made a Difference" recognition ceremonies, where personal achievement by associates is acknowledged by senior management in each of the markets where we operate. We believe recognition programs reinforce our culture and branding philosophy.

    A key component to achieving our objectives is the alignment of interests between associates and shareholders. Ownership of stock options and shares is held at all levels within our company and includes property and maintenance managers as well as members of the board of trustees. Approximately 400 of our associates have equity ownership in Gables, and therefore have their interests aligned with all other shareholders.

    Capital Strategy.  Our objective is to maximize return on invested capital. By doing so, we believe we will achieve growth in earnings per share and net asset value per share. An integral part of our capital strategy involves maintaining financial flexibility via a conservative balance sheet that is investment grade. We have investment grade, senior unsecured debt ratings from Moody's Investors Service and Standard and Poor's of Baa2 and BBB, respectively. Our preferred shares are also investment grade rated by those firms at baa3 and BBB-, respectively. We believe our conservative credit profile provides security for shareholders and is a competitive advantage over companies without the financial flexibility associated with investment grade balance sheets.

    Our attention to return on invested capital manifests itself through a very focused approach to managing our capital structure. We are able to recycle existing capital through asset dispositions, which allows us to re-deploy capital into investments with higher return potential. In certain situations, we may also capitalize on the arbitrage that exists between the private market valuation of our assets and a discounted public market valuation of our common shares by selling assets and repurchasing stock. We have access to capital through a variety of sources, including common equity, preferred equity and private equity via direct investment, in addition to internally generated equity through asset dispositions and retained cash flow.

    Ancillary Business Strategy.  We are involved in ancillary businesses related to our core business and competencies. These business lines include third-party property management, furnished corporate apartments, development and construction services, and asset disposition brokerage services. Our

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expertise in these areas stems from our core competencies. In addition, we are innovative in identifying and capitalizing on new services to our resident customers that provide for increases in earnings and high returns on invested capital. Regular feedback from resident customers and our clients provides avenues for enhanced service and earnings potential.

    As of December 31, 1999, we managed 46 multifamily communities for third parties, comprising approximately 15,600 apartment homes. These fee management contracts are maintained with a total of 23 owners. In addition to contributing to earnings, engaging in fee management allows us to create economies of scale by leveraging our management operations costs and providing access to development and acquisition opportunities, as well as providing additional market knowledge.

    1999 Significant Events.  During 1999, we announced a common equity repurchase program pursuant to which we are authorized to repurchase $100 million of our outstanding common shares and equivalents. The program is aimed at capitalizing on the arbitrage that exists between the private market valuations of our assets and the discounted public valuation of our common shares. Repurchases of our common shares are being funded by retained cash flow and asset disposition proceeds on a leverage neutral basis after first being utilized to pay down debt.

    We received gross sales proceeds of $98.5 million during 1999 through dispositions of existing assets. We sold three apartment communities in Atlanta, two in Memphis and one in Houston, comprising 676 apartment homes, 490 apartment homes and 412 apartment homes, respectively. We also sold an outparcel of land from an existing development community located in Dallas. With the sales proceeds, we repurchased 2.4 million common shares and equivalents at an average price of $23.51, for a total of $55.9 million.

    In 1999, we entered into a joint venture agreement with an affiliate of J.P. Morgan Investment Management, Inc. ("J.P. Morgan"). The business purpose of the Gables Residential Apartment Portfolio JV is to develop, own and operate eight multifamily apartment communities located in four of our markets. The capital budget for the development of the eight communities is $238 million and is being funded with 50% equity and 50% debt. The equity component is being funded 80% by J.P. Morgan and 20% by us. Our portion of the equity is being funded through contributions of cash and property. As of December 31, 1999, we had funded $22.2 million of our budgeted $23.8 million equity commitment to the joint venture. We serve as the managing member of the venture and have responsibility for all day-to-day operating matters. We also serve as the property manager, developer and general contractor for construction activities.

    We also completed a number of management succession initiatives in 1999. Chris Wheeler succeeded Marc Bromley as Chairman of the board of trustees on January 1, 2000 and as Chief Executive Officer in April, 1999. Mike Hefley succeeded John Rippel as Chief Operating Officer in May, 1999. Both John Rippel and Marc Bromley remain as members of the board of trustees.

    Apartment Portfolio.  As of December 31, 1999, we owned 79 multifamily apartment communities and had an indirect 25% general partner interest in two multifamily apartment communities, totaling 23,941 apartment homes. We also owned three multifamily apartment communities that were under development at December 31, 1999 and expected to comprise 940 apartment homes upon completion as well as an indirect 20% interest in eight apartment communities under development or in lease-up at December 31, 1999 and expected to comprise 2,471 apartment homes upon completion. We also own undeveloped sites on which we intend to develop eleven additional multifamily apartment communities expected to comprise an estimated 2,433 apartment homes, and have development rights to acquire additional sites on which we believe we could develop multifamily apartment communities comprising an estimated 2,453 apartment homes.

    Our apartment communities generate rental revenue and other income through the leasing of apartment homes to a diverse base of residents. We evaluate the performance of each of our apartment

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communities on an individual basis. However, because each of our apartment communities has similar economic characteristics, residents, and products and services, they have been aggregated into one reportable segment which comprise 95%, 96%, and 96% of our total revenues for the years ended December 31, 1999, 1998, and 1997, respectively.

    Management Structure.  We have been responsible for the development or acquisition of approximately 52,000 apartment homes since 1982 and our senior management team has, on average, in excess of 13 years experience in the multifamily industry. We provide a full range of integrated real estate services through a staff of approximately 1,260 employees who have expertise in property operations, development, acquisition, disposition and construction. We maintain offices in Atlanta, Boca Raton, Houston and Dallas, each with its own fully integrated organization, including experienced in-house management, development, acquisition, and disposition staffs with specific knowledge of the particular markets served. We believe that our competitive strength and growth potential lie in our in-depth knowledge of the changing opportunities available in each local market and in our locally focused management structure, which enables highly experienced development, acquisition, and disposition personnel to pursue opportunities in each market and highly experienced on-site managers to make the day-to-day decisions needed to maximize the performance of our existing properties. Our finance, accounting and administrative functions are controlled by a central staff located in Atlanta.

    Competitive Advantages.  We believe that we have several competitive advantages. These advantages include:

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A fully integrated organization: a fully integrated organization with a track record of approximately seventeen years in all phases of real estate property management, development, acquisition, disposition, construction, rehabilitation, financing and marketing.



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Product focus: a portfolio concentration of Class AA/A apartment communities that are targeted toward the affluent renter-by-choice, are located primarily in in-fill locations and master-planned communities, and include garden, townhome and higher density apartment communities.



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Local presence in multiple markets: an established local presence in each of our markets, which we serve through an experienced staff with superior knowledge of local markets and a culture which provides incentives for outstanding performance at all levels.



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Strategic portfolio diversification: an established market presence in strategically selected major markets that are geographically independent, rely on diverse economic foundations, and have shown job growth substantially above national averages and resiliency to national economic downturns.



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Brand recognition: a service-oriented philosophy which focuses on offering extensive resident amenities and services in high quality apartment homes to increase occupancy, rental rates and net operating income.

The Management Companies

    Our management operations, with respect to properties in which we do not have an interest, are conducted through subsidiaries of the Operating Partnership (the "Management Companies"). The Management Companies also provide other services to third parties, including construction, brokerage and corporate rental housing. A portion of these services are, or may also be, provided by the Operating Partnership directly, to the extent consistent with the gross income requirements for REITs under the Internal Revenue Code of 1986, as amended (the "Code"). To maintain our qualification as a REIT while realizing income from our fee management and related service business, the Operating Partnership owns 100% of the nonvoting common stock which represents 98.99% of the total equity of each Management Company and 1% of the voting common stock which represents .01% of the total equity of each Management Company. The non-voting common stock and voting common stock owned

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by the Operating Partnership together represent 99% of the equity interests in each Management Company. Executive officers of Gables GP hold, in the aggregate, the remaining 1% of the equity in each Management Company, representing 99% of the voting common stock. The voting common stock held by Gables GP's executive officers is subject to a provision of the bylaws of each Management Company that is designed to ensure that the stock will be held by officers of Gables GP at all times. This bylaw provision of each Management Company cannot be amended without the vote of 100% of the outstanding voting common stock of such company.

Competition

    All of our communities are located in developed areas that include other apartment communities. The number of competitive multifamily communities in a particular area could have a material effect on our ability to lease apartment homes at our present communities or any newly developed or acquired community, as well as on the rents charged. We may be competing for development and acquisition opportunities with others that have greater resources than we do, including other REITs. In addition, our communities must compete for residents against new and existing homes and condominiums. The home affordability index in all of our markets is above the national average. This competitive environment is partially offset by the propensity to rent for households in our markets which in all cases exceeds the national average.

    The fee management business is highly competitive, and we face competition from a variety of local, regional and national firms. We compete against these firms by stressing the quality and experience of our employees, the services provided by us, and the market presence and experience we have developed over the past seventeen years. We may nevertheless lose some of our third party management business, particularly when such properties are sold.

Environmental Matters

    Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be required to investigate and clean up hazardous or toxic substances or petroleum product releases at such property, and may be held liable to a governmental entity or to third parties for property damage and for investigation and clean-up costs incurred by such parties in connection with the contamination. Such laws, ordinances and regulations typically impose clean-up responsibility and liability without regard to whether the owner knew of or caused the presence of the contaminants, and the liability under such laws has been interpreted to be joint and several unless the harm is divisible and there is a reasonable basis for allocation of responsibility. The cost of investigation, remediation or removal of such substances may be substantial, and the presence of such substances or the failure to properly remediate the contamination on such property may adversely affect the owner's ability to sell or rent such property or to borrow using such property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of such substances at the disposal or treatment facility, whether or not such facility is owned or operated by such person. In addition, some environmental laws create a lien on the contaminated site in favor of the government for damages and costs it incurs in connection with the contamination. Finally, the owner or operator of a site may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from a site. In connection with the ownership, operation, management and development of our communities and other real properties, we may be potentially liable for such damages and costs.

    Certain federal, state and local laws, ordinances and regulations govern the removal, encapsulation and disturbance of asbestos-containing materials ("ACMs") when such materials are in poor condition or in the event of construction, remodeling, renovation or demolition of a building. Such laws, ordinances and regulations may impose liability for release of ACMs and may provide for third parties

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to seek recovery from owners or operators of real properties for personal injury associated with ACMs. In connection with the ownership, operation, management and development of our communities and other real properties, we may be potentially liable for such costs.

    In addition, recent studies have linked radon, a naturally-occurring substance, to increased risks of lung cancer. While there are currently no state or federal requirements regarding the monitoring for, presence of, or exposure to radon in indoor air, the U.S. Environmental Protection Agency and the Surgeon General recommend testing residences for the presence of radon in indoor air, and the EPA further recommends that concentrations of radon in indoor air be limited to less than 4 picocuries per liter of air (the "Recommended Action Level"). The presence of radon in concentrations equal to or greater than the Recommended Action Level in a community may adversely affect our ability to rent apartment homes in that community and the market value of the community.

    Finally, recently-enacted federal legislation will eventually require owners and landlords of residential housing constructed prior to 1978 to disclose to potential tenants or purchasers any known lead-paint hazards and will impose treble damages for failure to so notify. In addition, lead-based paint in any of our communities may result in lead poisoning in children residing in that community if chips or particles of such lead-based paint are ingested, and we may be held liable under state laws for any such injuries caused by ingestion of lead-based paint by children living at our communities.

    Our assessments of our communities have not revealed any environmental liability that we believe would have a material adverse effect on our business, assets or results of operations, nor are we aware of any such material environmental liability. Nevertheless, it is possible that our assessments do not reveal all environmental liabilities or that there are material environmental liabilities of which we are unaware. Moreover, there can be no assurance that (1) future laws, ordinances or regulations will not impose any material environmental liability, or (2) the current environmental condition of our communities will not be affected by tenants, the condition of land or operations in the vicinity of the properties, such as the presence of underground storage tanks, or third parties unrelated to us.

    We believe that no ACMs were used in connection with the construction of our communities or will be used in connection with future construction. Our environmental assessments have revealed the presence of "potentially friable" ACMs at two of our communities. We have programs in place to maintain and monitor ACMs. We believe our communities are in compliance in all material respects with all federal, state and local laws, ordinances and regulations regarding hazardous or toxic substances or petroleum products. We have not been notified by any governmental authority and are not otherwise aware of any material non-compliance, liability or claim relating to hazardous or toxic substances or petroleum products in connection with any of our present properties that would involve substantial expenditure, and we do not believe that compliance with applicable environmental laws or regulations will have an adverse material effect on us, our financial condition or results of operations.

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Costs of Compliance with Americans with Disabilities Act and Similar Laws

    Under the Americans with Disabilities Act of 1990 (the "ADA"), all places of public accommodation are required to meet certain federal requirements related to access and use by disabled persons. These requirements became effective in 1992. We believe that our communities are substantially in compliance with present requirements of the ADA as they apply to multifamily dwellings. A number of additional federal, state and local laws exist which also may require modifications to our communities or regulate certain further renovations with respect to access by disabled persons. For example, the Fair Housing Amendments Act of 1988 (the "FHAA") requires apartment communities first occupied after March 13, 1990 to be accessible to the handicapped. Non-compliance with the FHAA could result in the imposition of fines or an award of damages to private litigants. We believe that our communities that are subject to the FHAA are substantially in compliance with this law.

    Additional legislation may impose further burdens or restrictions on owners with respect to access by disabled persons. The ultimate amount of the cost of compliance with the ADA or related legislation is not currently ascertainable, and while these costs are not expected to have a material effect on us, they could be substantial. Limitations or restrictions on the completion of certain renovations may limit application of our investment strategy in certain instances or reduce overall returns on our investments.

Insurance

    We carry comprehensive liability, fire, extended coverage and rental loss insurance with respect to all of our completed communities, with policy specifications, insured limits and deductibles customarily carried for similar properties. We carry similar insurance with respect to our development properties, but with certain appropriate exceptions given the undeveloped nature of these properties. There are, however, certain types of losses, such as losses arising from acts of war, that are not generally insured because they are either uninsurable or not economically insurable. Should an uninsured loss or a loss in excess of insured limits occur, we could lose our capital invested in a particular property as well as the anticipated future revenues from the property and would continue to be obligated on any mortgage indebtedness or other obligations related to the property. Any uninsured loss or loss in excess of insured limits would adversely affect us.

Employees

    We provide a full range of real estate services through a staff of approximately 1,260 employees, including an experienced management team. There are no collective bargaining agreements with any of our employees. We believe relations with our employees are excellent.

Tax Matters

    We have elected to be taxed as a REIT under the Code and intend to maintain our qualification as a REIT in the future. In order to qualify as a REIT, we must distribute annually 95% of our taxable income, as defined in the Code, to our shareholders and satisfy certain other requirements. As a result, we generally will not be subject to federal income taxation at the corporate level on the income we distribute to shareholders. We currently utilize our Management Companies to provide management and other services to third parties that a REIT may be prohibited from providing. The taxable income of these Management Companies, if any, is subject to tax at regular corporate rates.

Policies with Respect to Significant Business Activities

    The following is a discussion of our investment, financing and other significant policies. These policies have been determined by our board of trustees and may be amended or revised from time to

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time by the board of trustees without a vote of the shareholders, except that (1) we cannot change our policy of holding assets and conducting business only through the Operating Partnership, the Management Companies and other permitted subsidiaries without the consent of the holders of Units as provided in the partnership agreement of the Operating Partnership, (2) changes in policies with respect to conflicts of interest must be consistent with legal requirements, and (3) we cannot take any action intended to terminate our qualification as a REIT without the approval of the holders of two-thirds of our common shares.

    Investment Policies.  We will conduct all our investment activities through the Operating Partnership and its subsidiaries. Our investment objectives are to provide quarterly cash distributions and achieve long-term capital appreciation through increases in our value. We may purchase income-producing multifamily apartments or other types of properties for long-term investment, expand and improve the communities presently owned or other properties purchased, or sell communities or other properties, in whole or in part, when circumstances warrant. We may also participate with third parties in apartment community ownership through joint ventures or other types of co-ownership. Equity investments may be subject to existing mortgage financing and other indebtedness or financing or indebtedness incurred in connection with acquiring or refinancing these investments. Debt service on such financing or indebtedness will have a priority over common shares and any distributions thereon.

    While we emphasize equity real estate investments in multifamily apartment communities, we may, at the discretion of the board of trustees, invest in other types of equity real estate investments and mortgages, including participating or convertible mortgages and other real estate interests. We currently intend to invest in apartment communities in specifically identified markets. However, future development or investment activities will not be limited to any geographic area or product type or to a specified percentage of our assets. We will not have any limit on the amount or percent of our assets invested in one property. Subject to the percentage of ownership limitations and gross income and asset tests necessary for REIT qualification, we may also invest in securities of other REITs, other entities engaged in real estate activities or securities of other issuers, including for the purpose of exercising control over such entities, although we do not presently intend to do so and have not done so in the past. We may enter into joint ventures or partnerships for the purpose of obtaining an equity interest in a particular property in accordance with our investment policies. These investments may permit us to own interests in larger assets without unduly restricting diversification and, therefore, add flexibility in structuring our portfolio. We will not enter into a joint venture or partnership to make an investment that would not otherwise meet our investment policies. Investment in these securities is also subject to our policy not to be treated as an investment company under the Investment Company Act of 1940.

    Financing Policies.  Our debt to total market capitalization ratio, defined as our total consolidated debt as a percentage of the December 31, 1999 market value of our outstanding common shares and Units plus total consolidated debt and preferred shares and Units at liquidation value, was approximately 45.3% at December 31, 1999. Excluding construction-related indebtedness, this ratio was 42.1% at December 31, 1999. This ratio will fluctuate with changes in the price of our common shares and the number of outstanding common shares or other forms of shares of beneficial interest, and differs from the debt-to-book capitalization ratio, which is based upon book values. This percentage will increase as we use financing to continue construction of our development communities and acquire additional multifamily apartment communities. As the debt-to-book capitalization ratio may not reflect the current income potential of a company's assets and operations, we believe that, in most circumstances, the debt to total market capitalization ratio may provide an alternate indication of leverage for a company whose assets are primarily income-producing real estate and should be evaluated along with the debt service coverage and underlying components of our indebtedness.

    We currently have a policy of incurring debt only if the ratio of debt to total market capitalization would be 60% or less. Our declaration of trust and bylaws do not, however, limit the amount or percentage of indebtedness that we may incur. In addition, we may from time to time modify our debt

10

policy in light of current economic conditions, relative costs of debt and equity capital, market values of our communities, general conditions in the market for debt and equity securities, fluctuations in the market price of common shares, growth opportunities and other factors. Accordingly, we may increase our debt to total market capitalization ratio beyond the limits described above. To the extent that the board of trustees decides to obtain additional capital, we may raise capital through asset dispositions, additional equity offerings, debt financings or retention of funds from operations as allowable under the Code in order to maintain REIT tax status, or a combination of these methods. We presently anticipate that any additional borrowings would be made through the Operating Partnership, although we might incur indebtedness, the proceeds of which would be loaned to the Operating Partnership. Borrowings may be unsecured or may be secured by any or all of our assets, the Operating Partnership or any existing or new property owning partnership, and may have full or limited recourse to all or any portion of our assets, the Operating Partnership or any existing or new property owning partnership. Indebtedness incurred by us may be in the form of bank borrowings, tax-exempt bonds, purchase money obligations to sellers of apartment communities or other properties, publicly or privately placed debt instruments or financing from institutional investors or other lenders. The proceeds from any of our borrowings may be used for working capital to refinance existing indebtedness and to finance acquisitions, expansions or development of new communities and other properties, and for the payment of distributions. We have not established any limit on the number or amount of mortgages that may be placed on any single property or on our portfolio as a whole.

    We currently have a senior unsecured debt rating of BBB from Standard and Poor's and Baa2 from Moody's Investors Service. Our Series A Preferred Shares currently have a rating of BBB- from Standard and Poor's and baa3 from Moody's Investors Service. We intend to adhere to financing policies that will allow us to maintain these investment grade credit ratings.

    Conflict of Interest Policies.  As part of their employment agreements, each of Chris Wheeler, Jordan Clark, Mike Hefley, and Marvin Banks is bound by a non-competition covenant. These non-competition covenants provide that, during the term of employment and for a period of one year following termination of employment, under certain circumstances, each individual is prohibited from directly or indirectly competing with us with respect to any multifamily apartment residential real estate property management, development, construction, acquisition or disposition activities undertaken or being considered by us. These employment agreements also contain certain non-solicitation covenants wherein each individual subject to the agreement is prohibited, during the term of employment and for a period of one year following employment, from directly or indirectly (1) soliciting or inducing any of our present or future employees to accept employment with such individual or any person or entity associated with such individual, (2) employing, or causing any person or entity associated with such individual to employ, any of our present or future employees without providing us prior written notice of such proposed employment, or (3) either for himself or for any other person or entity, competing for or soliciting the third party owners with whom we have an existing property management agreement. The employment agreements terminate on January 1, 2001, but are automatically extended for additional one-year periods unless notice is given by us or the employee three months prior to the agreement's expiration that the agreement will not be renewed.

    We have adopted a policy that, without the approval of a majority of our trustees who are neither officers nor affiliated with us, we will not (1) acquire from or sell to any trustee, officer or employee or any entity in which a trustee, officer or employee of our company beneficially owns more than a 1% interest, or acquire from or sell to any affiliate of any of the foregoing, any of our assets or other property, (2) make any loan to or borrow from any of the foregoing persons, or (3) engage in any other transaction with any of the foregoing persons.

11

Risk Factors

Before you invest in our common shares, you should be aware that there are various risks, including those described below. You should consider carefully these risk factors together with all of the information included or incorporated by reference in this document before you decide to purchase our common shares. This section includes certain forward-looking statements.

    Development and construction risks could impact our profitability.  We intend to continue to develop and construct multifamily apartment home communities. Our development and construction activities may be exposed to the following risks:

•

We may be unable to obtain, or face delays in obtaining, necessary zoning, land-use, building, occupancy, and other required governmental permits and authorizations, which could result in increased costs and could require us to abandon our activities entirely with respect to the project for which we are unable to obtain permits or authorizations;



•

We may abandon development opportunities that we have already begun to explore and as a result we may fail to recover expenses already incurred in connection with exploring such development opportunities;



•

We may incur construction costs for a community which exceed our original estimates due to increased materials, labor or other costs, which could make completion of the community uneconomical and we may not be able to increase rents to compensate for the increase in construction costs;



•

Occupancy rates and rents at a newly completed development may fluctuate depending on a number of factors, including market and economic conditions, and may result in the community not being profitable;



•

We may not be able to obtain financing with favorable terms for the development of a community, which may make us unable to proceed with its development; and



•

We may be unable to complete construction and lease-up of a community on schedule, resulting in increased debt service expense and construction costs.

    Construction costs have been increasing in our target markets, and the cost to update acquired communities has, in some cases, exceeded our original estimates. We may experience similar cost increases in the future. Our inability to charge rents that will be sufficient to offset the effects of any increases in construction costs may impact our profitability.

    Acquisitions may not yield anticipated results.  We intend to continue to acquire multifamily apartment home communities on a select basis. Our acquisition activities and their success may be exposed to the following risks:

•

The acquired property may fail to perform as we expected in analyzing our investment; and



•

Our estimate of the costs of repositioning or redeveloping the acquired property may prove inaccurate.

    Policy of limiting debt level may be changed.  While our current policy is not to incur debt that would make our ratio of debt to total market capitalization greater than 60%, our declaration of trust and bylaws do not contain any such limitations. Our ratio of debt to total market capitalization as of December 31, 1999 was 45.3%. Because we do not have any debt incurrence restrictions in our declaration of trust or bylaws, we could increase the amount of outstanding debt at any time. In the event that the price of our common shares increases, we could incur additional debt without increasing the ratio of debt to total market capitalization and without a concurrent increase in our ability to service such additional debt.

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    Incurrence of additional debt and related issuance of equity may be dilutive to shareholders.  Future issuance of equity may dilute the interest of existing shareholders. To the extent that additional equity securities are issued to finance future developments and acquisitions instead of incurring additional debt, the interests of our existing shareholders could be diluted. Our ability to execute our business strategy depends on our access to an appropriate blend of debt financing, including unsecured lines of credit and other forms of secured and unsecured debt, and equity financing, including common and preferred equity.

    Insufficient cash flow could affect our debt financing and create refinancing risk.  We are subject to the risks normally associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments of principal and interest. We anticipate that only a small portion of the principal of our debt will be repaid prior to maturity. Although we may be able to use cash flow to make future principal payments, we cannot assure you that sufficient cash flow will be available to make all required principal payments. Therefore, we are likely to need to refinance at least a portion of our outstanding debt as it matures. There is a risk that we may not be able to refinance existing debt or that the terms of any refinancing will not be as favorable as the terms of the existing debt.

    Rising interest rates would increase interest costs and could affect the market price of our common shares.  We expect to incur variable rate debt under credit facilities in connection with the acquisition, construction and reconstruction of multifamily apartment communities in the future, as well as for other purposes. Accordingly, if interest rates increase, so will our interest costs to the extent the variable rate increase is not hedged effectively. In addition, an increase in market interest rates may lead purchasers of our common shares to demand a higher annual yield, which could adversely affect the market price of our outstanding common shares.

    Interest rate hedging contracts may involve material changes and may not provide adequate protection.  From time to time when we anticipate offerings of debt securities, we may seek to decrease our exposure to fluctuations in interest rates during the period prior to the pricing of the securities by entering into interest rate hedging contracts. We may do so to increase the predictability of our financing costs. Also, from time to time we rely on interest rate hedging contracts to offset our exposure to moving interest rates with respect to debt financing arrangements at variable interest rates. The settlement of interest rate hedging contracts has in the past and may in the future involve charges to earnings that may be material in amount. Such charges are typically driven by the extent and timing of fluctuations in interest rates. Despite our efforts to minimize our exposure to interest rate fluctuations, there is no guarantee that we will be able to maintain our hedging contracts at their existing levels of coverage or that the amount of coverage maintained will cover all of our outstanding indebtedness at any such time. If our efforts are unsuccessful, we may not meet our objective of reducing the extent of our exposure to interest rate fluctuations.

    Bond compliance requirements could limit income and restrict use of communities and cause favorable financing to become unavailable.  Some of our multifamily apartment communities are financed with obligations issued by various local government agencies or instrumentalities, the interest on which is exempt from federal income taxation. These obligations are commonly referred to as "tax-exempt bonds." The bond compliance requirements for our current tax-exempt bonds, and the requirements of any future tax-exempt bond financing, may have the effect of limiting our income from communities subject to such financing. Under the terms of our tax-exempt bonds, we must comply with various restrictions on the use of the communities financed by such bonds, including a requirement that a percentage of apartments be made available to low and middle income households. In addition, some of our tax-exempt bond financing documents require that a financial institution guarantee payment of the principal of, and interest on, the bonds. The guarantee may take the form of a letter of credit, surety bond, guarantee agreement or other additional collateral. If the financial institution defaults in its guarantee obligations, or we are unable to renew the applicable guarantee or otherwise post

13

satisfactory collateral, a default will occur under the applicable tax-exempt bonds and the community could be foreclosed upon.

    Failure to generate sufficient revenue could limit cash flow available for distributions to shareholders.  If our communities do not generate revenues sufficient to meet our operating expenses, including debt service and capital expenditures, our cash flow and ability to pay distributions to our shareholders will be adversely affected. The following factors, among others, may adversely affect the revenues generated by our apartment communities:

•

the national and local economic climates;



•

local real estate market conditions, such as oversupply of apartment homes;



•

the perceptions by prospective residents of the safety, convenience and attractiveness of our communities and the neighborhoods where they are located;



•

our ability to provide adequate management, maintenance and insurance; and



•

increased operating costs, including real estate taxes and utilities.

    Significant expenditures associated with each investment such as debt service payments, if any, real estate taxes, insurance and maintenance costs are generally not reduced when circumstances cause a reduction in income from a community. For example, if we mortgage a community to secure payment of debt and are unable to meet the mortgage payments, we could sustain a loss as a result of foreclosure on the community or the exercise of other remedies by the mortgagee.

    Unfavorable changes in market and economic conditions could hurt occupancy or rental rates.  The market and economic conditions in metropolitan areas of our current markets in the United States may significantly affect apartment home occupancy or rental rates. Occupancy and rental rates in those markets, in turn, may significantly affect our profitability and our ability to satisfy our financial obligations. The risks that may affect conditions in those markets include the following:

•

the economic climate which may be adversely impacted by plant closings, industry slowdowns and other factors;



•

real estate conditions such as an oversupply of, or a reduced demand for, apartment homes;



•

a decline in household formation that adversely affects occupancy or rental rates;



•

the inability or unwillingness of residents to pay rent increases;



•

the potential effect of rent control or rent stabilization laws, or other laws regulating housing, on any of our communities, which could prevent us from raising rents to offset increases in operating costs; and



•

the rental market which may limit the extent to which rents may be increased to meet increased expenses without decreasing occupancy rates.

    Any of these risks could adversely affect our ability to achieve our desired yields on our communities and to make expected distributions to shareholders.

    Difficulty of selling apartment communities could limit flexibility.  Real estate in metropolitan areas of the United States can be hard to sell, especially if market conditions are poor. This may limit our ability to change our portfolio promptly in response to changes in economic or other conditions. In addition, federal tax laws limit our ability to sell communities that we have owned for fewer than four years, and this may affect our ability to sell communities without adversely affecting returns to our shareholders.

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    Increased competition could limit our ability to lease apartment homes or increase or maintain rents.  Our apartment communities in metropolitan areas compete with numerous housing alternatives in attracting residents, including other rental apartments and single-family homes that are available for rent, as well as new and existing single-family homes for sale. Competitive residential housing in a particular area could adversely affect our ability to lease apartment homes and to increase or maintain rents.

    Significant new operations and acquired communities under management require integration with the existing business and, if not properly integrated, could create inefficiencies.  Our ability to manage growth effectively will require us, among other things, to successfully apply our experience in managing our existing portfolio of multifamily apartment communities to a larger number of properties. In addition, we must be able to successfully manage the integration of new management and operations personnel as our organization grows in size and complexity.

    Failure to succeed in new markets may limit growth.  We may make selected acquisitions outside of our current market areas from time to time, if appropriate opportunities arise. Our historical experience in our current markets located in the United States does not ensure that we will be able to operate successfully in other market areas new to us. We may be exposed to a variety of risks if we choose to enter into new markets. These risks include, among others:

•

a lack of market knowledge and understanding of the local economies;



•

an inability to obtain land for development or to identify acquisition opportunities;



•

an inability to obtain construction tradespeople; and



•

an unfamiliarity with local governmental and permitting procedures.

    Decrease of fee management business would result in decrease in revenues.  We manage properties owned by third parties for a fee. Most of our management contracts are terminable upon 30-days notice. There is a risk that the management contracts will be terminated and/or that the rental revenues upon which management fees are based will decline and management fee income will decrease accordingly.

    Share ownership limit may prevent takeovers beneficial to shareholders.  For us to maintain our qualification as a REIT for federal income tax purposes, not more than 50% in value of our outstanding shares of beneficial interest may be owned, directly or indirectly, by five or fewer individuals. As defined for federal income tax purposes, the term "individuals" includes a number of specified entities. Our declaration of trust includes restrictions regarding transfers of our shares of beneficial interest and ownership limits that are intended to assist us in satisfying such limitations. The ownership limit may have the effect of delaying, deferring or preventing someone from taking control of us, even though such a change of control could involve a premium price for our shareholders or otherwise could be in our shareholders' best interests.

    Limits on changes in control may discourage takeover attempts beneficial to shareholders.  Our declaration of trust, our bylaws and Maryland law may have the effect of discouraging a third party from attempting to acquire us which makes a change in control more unlikely. The result may be a limitation on the opportunity for shareholders to receive a premium for their common shares over then-prevailing market prices.

    Compliance or failure to comply with Americans with Disabilities Act and other similar laws could result in substantial costs.  The ADA generally requires that public accommodations, including office buildings and hotels be made accessible to disabled persons. Noncompliance could result in imposition of fines by the federal government or the award of damages to private litigants. If, pursuant to the ADA, we are required to make substantial alterations and capital expenditures in one or more of our

15

properties, including the removal of access barriers, it could adversely affect our financial condition and results of operations, as well as the amount of cash available for distribution to our shareholders.

    A number of additional federal, state and local laws exist that impact our communities with respect to access thereto by disabled persons. For example, the FHAA requires that apartment communities first occupied after March 13, 1990 be accessible to the handicapped. Noncompliance with the FHAA could result in the imposition of fines or an award of damages to private litigants.

    We cannot predict the ultimate cost of compliance with the ADA or other similar legislation. The costs could be substantial.

    Failure to qualify as a REIT would cause us to be taxed as a corporation which would significantly lower funds available for distribution to shareholders.  If we fail to qualify as a REIT for federal income tax purposes, we will be taxed as a corporation. We believe that we are organized and qualified as a REIT and intend to operate in a manner that will allow us to continue to qualify. However, we cannot assure you that we are qualified as such, or that we will remain qualified as such in the future. This is because qualification as a REIT involves the application of highly technical and complex provisions of the Code as to which there are only limited judicial and administrative interpretations, and involves the determination of various factual matters and circumstances not entirely within our control. In addition, future legislation, new regulations, administrative interpretations or court decisions may significantly change the tax laws or the application of the tax laws with respect to qualification as a REIT for federal income tax purposes or the federal income tax consequences of such qualification.

    If, in any taxable year, we fail to qualify as a REIT, we will be subject to federal income tax on our taxable income at regular corporate rates, plus any applicable alternative minimum tax. In addition, unless we are entitled to relief under applicable statutory provisions, we would be disqualified from treatment as a REIT for the four taxable years following the year in which we lose our qualification. The additional tax liability resulting from the failure to qualify as a REIT would significantly reduce or eliminate the amount of funds available for distribution to our shareholders. Furthermore, we would no longer be required to make distributions to our shareholders.

    Potential liability for environmental contamination could result in substantial costs.  We are in the business of acquiring, owning, operating and developing real estate properties. From time to time we will sell to third parties some of our properties. Under various federal, state and local environmental laws, we may be required, often regardless of our knowledge or responsibility but solely because of our current or previous ownership or operation of real estate, to investigate and remediate the effects of hazardous or toxic substances or petroleum product releases at those properties. We may also be held liable to a governmental entity or to third parties for property damage and for investigation and clean-up costs incurred by us in connection with any contamination. These costs could be substantial. The presence of such substances or the failure to properly remediate the contamination may materially and adversely affect our ability to borrow against, sell or rent the affected property. In addition, applicable environmental laws create liens on contaminated sites in favor of the government for damages and costs it incurs in connection with the contamination.

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ITEM 2. PROPERTIES

    As of December 31, 1999, we owned or had an interest in 81 completed communities consisting of 23,941 apartment homes, and owned or had an interest in eleven development communities consisting of 3,411 apartment homes. The communities, comprising a total of 27,352 apartment homes, are located in Texas, Georgia, Florida and Tennessee. The following table shows the locations of the communities and the number of apartment homes in each metropolitan area:

				Number of Apartment Homes
	Number of Communities
Location							Percent of Total Apt. Homes
	Completed	Development	Total	Completed	Development	Total
Houston, TX (1), (2)	21	1	22	6,848	382	7,230	26.4%
Atlanta, GA (2)	19	1	20	5,764	435	6,199	22.7%
Boca Raton, FL (2)	15	4	19	4,197	1,142	5,339	19.5%
Dallas, TX (2)	9	3	12	2,085	689	2,774	10.1%
Austin, TX	6	—	6	1,517	—	1,517	5.5%
Memphis, TN (3)	3	—	3	1,309	—	1,309	4.8%
Orlando, FL	2	2	4	511	763	1,274	4.7%
Nashville, TN	4	—	4	1,166	—	1,166	4.3%
San Antonio, TX	2	—	2	544	—	544	2.0%
Totals	81	11	92	23,941	3,411	27,352	100.0%

(1)

Includes a completed community comprising 318 apartment homes in which we have a 25% general partner interest.

(2)

These locations include development communities consisting of an aggregate 2,471 apartment homes owned by the Gables Residential Apartment Portfolio JV in which we have a 20% interest.

(3)

Includes a completed community comprised of 345 apartment homes in which we have a 25% general partner interest.

    Completed Communities.  We developed 40 communities consisting of 11,272 apartment homes and acquired 41 communities consisting of 12,669 apartment homes. We manage and operate all of the completed communities, which are typically two and three-story garden apartments, townhomes and higher-density apartments. As of December 31, 1999, the communities had an average scheduled monthly rental rate per apartment home of $862 and a physical occupancy rate of 96%. The average age of the communities is approximately nine years.

    Most of our communities offer many attractive features designed to enhance their market appeal, such as vaulted ceilings, fireplaces, dishwashers, disposals, washer/dryer connections, ice-makers, patios and decks. Recreational facilities include swimming pools, fitness facilities, playgrounds, picnic areas and tennis and racquetball courts. In many communities, we make amenities and services such as aerobic classes, resident social events, dry cleaning pickup and delivery, and the use of fax, computer and copy equipment available to residents. In-depth market research, including periodic focus groups with residents and feedback from on-site management personnel, is used to refine and enhance management services and community design. Additional information regarding our completed communities at December 31, 1999 follows:

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Completed Community Features as of December 31, 1999

	Number of Apartment	Approximate Rentable	Total	Year Constructed/		Year	Average Unit Size	Occupancy	Scheduled Rent at 12/31/99 Per
Community Name (1)
	Homes	Sq. Ft. (2)	Acreage	Renovated		Acquired	(Sq. Ft.)	at 12/31/99	Unit		Sq. Ft.
Houston, TX
Austin Colony (3)	237	231,621	11.0	1984		1998	977	97%	$	836	$	0.85
Baybrook Village	776	620,428	26.4	1981		1990	800	95%		573		0.72
Gables Bradford Place	372	320,322	13.3	1991		—	861	95%		726		0.84
Gables Bradford Pointe (3)	360	276,417	13.5	1990		—	768	95%		636		0.83
Gables Champions	404	367,588	29.7	1995		1997	910	96%		736		0.81
Gables CityPlaza	246	217,374	7.5	1995		—	884	99%		839		0.95
Gables Cityscape (3)	252	214,824	6.8	1991		—	852	98%		870		1.02
Gables CityWalk/Waterford Sq. (3)	317	255,823	8.7	1990/85		—/1992	807	98%		869		1.08
Gables Edgewater	292	257,339	12.2	1990		—	881	98%		782		0.89
Gables Meyer Park	345	297,054	11.0	1993		—	861	99%		821		0.95
Gables New Territory	256	233,652	15.0	1998		—	913	97%		837		0.92
Gables of First Colony	324	321,848	13.3	1996		1997	993	98%		893		0.90
Gables Piney Point (3)	246	227,880	7.5	1994		—	926	99%		869		0.94
Gables Pin Oak Green	582	593,478	14.4	1990		1996	1,020	95%		910		0.89
Gables Pin Oak Park	477	486,308	11.9	1992		1996	1,020	96%		952		0.93
Gables River Oaks	228	277,908	5.7	1993		1996	1,219	99%		1,411		1.16
Lions Head (3)	277	233,796	10.3	1983		1998	844	98%		690		0.82
Metropolitan Uptown (4)	318	290,141	8.9	1995		—	912	97%		1,032		1.13
Rivercrest I (3)	140	118,020	5.1	1982		1987	843	96%		750		0.89
Rivercrest II (3)	140	118,020	5.0	1983		1998	843	99%		738		0.88
Windmill Landing (3)	259	224,689	9.8	1984		1998	868	98%		687		0.79
Totals/ Weighted Averages	6,848	6,184,530	247.0				903	97%	$	815	$	0.90
Atlanta, GA
Briarcliff Gables	104	128,976	5.2	1995		—	1,240	95%	$	1,142	$	0.92
Buckhead Gables	162	122,548	3.5	1994	(5)	1994	756	100%		851		1.13
Dunwoody Gables (3)	311	290,396	10.4	1995		—	934	95%		862		0.92
Gables Cityscape	192	159,360	5.5	1989		1994	830	97%		886		1.07
Gables Mill	438	406,676	36.1	1988		1997	928	95%		831		0.90
Gables Northcliff (3)	82	127,990	12.7	1978		1997	1,561	95%		1,228		0.79
Gables at Sugarloaf	386	387,901	29.7	1998		—	1,005	94%		867		0.87
Gables Vinings	315	336,735	15.2	1997		—	1,069	96%		1,005		0.94
Gables Walk	310	367,226	19.7	1996-97		1997	1,185	94%		1,027		0.87
Gables Wood Arbor (3)	140	127,540	9.9	1987		—	911	94%		731		0.80
Gables Wood Crossing (3)	268	257,012	22.3	1985-86		—	959	97%		754		0.79
Gables Wood Glen (3)	380	377,340	23.8	1983		—	993	95%		721		0.73
Gables Wood Knoll (3)	312	311,064	19.6	1984		—	997	95%		738		0.74
Lakes at Indian Creek (3)	603	552,384	49.8	1969-72		1993	916	93%		658		0.72
Rock Springs Estates	295	298,302	28.7	1945-92		1997	1,011	96%		949		0.94
Roswell Gables I	384	417,288	28.3	1995		—	1,087	95%		893		0.82
Roswell Gables II	284	334,268	28.3	1997		—	1,177	95%		893		0.76
Spalding Gables (3)	252	249,333	11.2	1995		—	989	93%		899		0.91
Wildwood Gables (3)	546	619,710	37.9	1992-93	(5)	1991	1,135	95%		884		0.78
Totals/ Weighted Averages	5,764	5,872,049	397.8				1,019	95%	$	854	$	0.84

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Boca Raton, FL
Boca Place (3)	180	175,812	9.4	1984	1998	977	94%	$	843	$	0.86
Cotton Bay (3)	444	436,460	37.6	1986	1998	983	96%		715		0.73
Hampton Lakes (3)	300	317,004	11.0	1986	1998	1,057	94%		753		0.71
Hampton Place	368	352,528	14.1	1985	1998	958	95%		731		0.76
Kings Colony (3)	480	426,590	18.8	1986	1998	889	97%		775		0.87
Mahogany Bay (3)	328	330,459	25.4	1986	1998	1,007	97%		801		0.79
Mizner on the Green	246	311,176	8.9	1996	1998	1,265	97%		1,627		1.29
San Michele	249	332,683	32.4	1998	1998	1,336	92%		1,415		1.06
San Remo	180	329,978	11.8	1995	1998	1,833	97%		1,257		0.69
Town Colony (3)	172	147,724	10.0	1985	1998	859	98%		832		0.97
Vinings at Boynton Beach I	252	302,148	18.0	1996	1998	1,199	94%		915		0.76
Vinings at Boynton Beach II	296	357,653	15.9	1997	1998	1,208	96%		924		0.77
Vinings at Hampton Village (3)	168	202,752	8.6	1988	1998	1,207	94%		801		0.66
Vinings at Town Place (3)	312	260,192	13.0	1987	1998	834	96%		815		0.98
Vinings at Wellington	222	297,138	12.7	1998	1998	1,338	93%		1,026		0.77
Totals/ Weighted Averages	4,197	4,580,297	247.6			1,091	96%	$	915	$	0.84
Dallas, TX
Arborstone	536	383,360	24.5	1985	1993	715	94%	$	532	$	0.74
Gables at Pearl Street	108	117,688	3.6	1995	—	1,090	94%		1,373		1.26
Gables CityPlace	232	244,056	7.1	1995	1997	1,052	97%		1,355		1.29
Gables Green Oaks I	300	286,740	12.8	1996	—	956	95%		833		0.87
Gables Mirabella	126	114,902	1.4	1996	1997	912	92%		1,260		1.38
Gables Preston	126	138,107	10.6	1995	—	1,096	94%		1,067		0.97
Gables Spring Park	188	198,178	12.3	1996	—	1,054	96%		948		0.90
Gables Turtle Creek	150	150,930	3.1	1995	1996	1,006	92%		1,219		1.21
Gables Valley Ranch (3)	319	325,534	14.8	1994	—	1,020	95%		941		0.92
Totals/ Weighted Averages	2,085	1,959,495	90.2			940	95%	$	936	$	1.00
Austin, TX
Gables at the Terrace	308	292,292	18.6	1998	1998	949	96%	$	1,081	$	1.14
Gables Bluffstone	256	251,909	32.7	1998	—	984	97%		1,112		1.13
Gables Central Park	273	257,043	6.9	1997	—	942	98%		1,207		1.28
Gables Great Hills	276	228,930	23.7	1993	—	829	96%		851		1.03
Gables Park Mesa	148	161,540	24.3	1992	1997	1,091	95%		1,139		1.04
Gables Town Lake	256	239,264	12.0	1996	—	935	97%		1,212		1.30
Totals/ Weighted Averages	1,517	1,430,978	118.2			943	97%	$	1,095	$	1.16
Memphis, TN
Arbors of Harbortown (4)	345	341,258	15.0	1991	—	989	96%	$	857	$	0.87
Gables Cordova (3)	464	434,461	32.2	1986	—	936	96%		645		0.69
Gables Stonebridge (3)	500	439,646	34.0	1993-96	1996	879	97%		651		0.74
Totals/ Weighted Averages	1,309	1,215,365	81.2			928	96%	$	703	$	0.76
Nashville, TN
Brentwood Gables	254	287,594	14.5	1996	—	1,132	97%	$	850	$	0.75
Gables Hendersonville (3)	364	342,982	21.0	1991	—	942	93%		651		0.69
Gables Hickory Hollow I (3)	272	247,322	19.0	1988	—	909	96%		635		0.70
Gables Hickory Hollow II (3)	276	259,704	18.0	1987	—	941	96%		651		0.69
Totals/ Weighted Averages	1,166	1,137,602	72.5			976	95%	$	690	$	0.71
San Antonio, TX
Gables Colonnade I	312	284,196	12.0	1995	—	911	86%	$	806	$	0.89
Gables Wall Street	232	220,180	16.2	1996	—	949	91%		810		0.85
Totals/ Weighted Averages	544	504,376	28.2			927	88%	$	808	$	0.87

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Orlando, FL
Gables Celebration	231	267,417	8.8	1999	—	1,158	94%	$	1,236	$	1.07
Commons at Lake Bryan I (6)	280	289,436	16.5	1998	—	1,034	100%		—		—
Totals/ Weighted Averages	511	556,853	25.3			1,090	97%	$	1,236	$	1.07
Grand Totals/Weighted Averages	23,941	23,441,545	1,308.0			979	96%	$	862	$	0.88

(1)

Except as noted in note (4), we hold fee simple title to each of the communities. Except as noted in note (3) and (4), the communities are unencumbered.

(2)

In the Atlanta and Tennessee markets, rentable area is measured including any patio or balcony. In the Texas markets, rentable area is measured using only the heated area. In the Florida markets, rentable area is measured using only the air conditioned area.

(3)

The denoted communities secure indebtedness totaling $364.2 million as of December 31, 1999.

(4)

We hold an indirect 25% general partner interest in these communities. These communities secure indebtedness totaling $34.1 million at December 31, 1999.

(5)

Year renovated; these communities were originally constructed as follows: Buckhead Gables: 1964 and Wildwood Gables: 1972.

(6)

This community is leased to a single user group pursuant to a triple net master lease. Accordingly, scheduled rent data is not reflected.

    Development Communities.  The development communities have been designed to generally resemble the completed communities we developed previously and offer similar amenities. The development communities and recently completed communities reflect our continuing research of consumer preferences for upscale multifamily rental housing and incorporate and emphasize garage parking, increased privacy, high quality interiors, high speed internet access, and private telephone and television systems. Additional information regarding our development communities at December 31, 1999 follows:

										Actual or Estimated Quarter of
				Percent at December 31, 1999
Community	Number of Apartment Homes	Total Budgeted Cost								Const. Start	Initial Occupancy	Const. End	Stabilized Occupancy
				Complete		Leased		Occupied
		(millions)											(1)
Wholly-Owned Development Communities:
ORLANDO, FL
Gables Chatham Square	448	$	37	19	%	—		—		2Q '99	2Q '00	3Q '01	3Q '01
Gables North Village	315		40	8	%	—		—		2Q '99	4Q '00	4Q '01	1Q '02
DALLAS, TX
Gables State Thomas II	177		36	2	%	—		—		4Q '99	4Q '00	2Q '01	4Q '01
Wholly-Owned Totals	940	$	113
Co-Investment Development/ Lease-Up Communities (2), (3):
BOCA RATON, FL
Gables Crestwood	290	$	25	3	%	—		—		4Q '99	3Q '00	2Q '01	4Q '01
Gables Grande Isle	320		23	51	%	—		—		2Q '99	1Q '00	4Q '00	1Q '01
Gables Palma Vista	189		23	83	%	24	%	13	%	1Q '99	4Q '99	2Q '00	4Q '00
Gables San Michelle II	343		40	93	%	50	%	44	%	3Q '98	2Q '99	2Q '00	4Q '00
DALLAS, TX
Gables San Raphael	222		17	100	%	69	%	66	%	3Q '98	2Q '99	4Q '99	2Q '00
Gables State Thomas I	290		33	43	%	—		—		2Q '99	2Q '00	1Q '01	3Q '01
ATLANTA, GA
Gables Metropolitan I	435		49	95	%	52	%	47	%	2Q '98	3Q '99	2Q '00	4Q '00
HOUSTON, TX
Gables Raveneaux	382		28	98	%	65	%	55	%	3Q '98	2Q '99	1Q '00	3Q '00
Co-Investment Totals	2,471	$	238
Grand Totals	3,411	$	351

(1)

Stabilized occupancy is defined as the earlier to occur of (1) 93% occupancy or (2) one year after completion of construction.

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(2)

These communities were contributed into the Gables Residential Apartment Portfolio JV in which we have a 20% interest.

(3)

Total budgeted costs are being funded with 50% equity and 50% debt. The equity component is being funded 80% by the venture partner and 20% by us. As of December 31, 1999, we had funded $22.2 million of our budgeted $23.8 million equity commitment to the venture.

    Undeveloped Sites.  As of December 31, 1999, we owned eleven undeveloped sites and intend to develop multifamily communities at those sites in the future:

Undeveloped Sites	Metropolitan Area	Estimated Number of Apartment Homes
Gables at Sugarloaf II	Atlanta, GA	333
Gables at Sugarloaf III	Atlanta, GA	336
Gables Metropolitan II	Atlanta, GA	285
Gables Plaza	Atlanta, GA	101
Gables Meyer Park II	Houston, TX	296
Gables New Territory II	Houston, TX	248
Gables White Oak	Houston, TX	186
Gables Green Oaks II	Dallas, TX	200
Gables State Thomas III	Dallas, TX	150
Gables Colonnade II	San Antonio, TX	150
Gables Quail Ridge II	Memphis, TN	148
Total		2,433

    There can be no assurance of when or if the undeveloped sites will be developed.

    Development Rights.  As of December 31, 1999, we had six development rights:

Development Rights	Metropolitan Area	Estimated Number of Apartment Homes
Gables Northlake	Boca Raton, FL	480
Gables Racquet Club	Boca Raton, FL	140
Gables Stuart	Boca Raton, FL	400
Gables Westpark Village	Tampa, FL	1,000
Gables at Lake Bryan III	Orlando, FL	250	(1)
Gables Montclair	Atlanta, GA	183
Total		2,453

(1)

This land parcel is under option.

    There can be no assurance of when or if the development rights will be exercised.

    The following is a "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended. The projections contained in the tables above under the captions "Development Communities," "Undeveloped Sites" and "Development Rights" are forward-looking statements. These forward-looking statements involve risks and uncertainties, and actual results may differ materially from those projected in the forward-looking statements. Risks associated with our development, construction and land acquisition activities, which could impact the forward-looking statements made, include: development and acquisition opportunities may be abandoned; construction costs of a community may exceed original estimates, possibly making the community uneconomical; and construction and lease-up may not be completed on schedule, resulting in increased debt service and construction costs. Development of the undeveloped sites and development rights is subject to permits and other governmental approvals as well as our ongoing

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business review of the underlying real estate fundamentals and the impact on our capital structure. There can be no assurance that we will decide or be able to develop the undeveloped sites, complete development of all or any of the communities subject to the development rights, or complete the number of apartment homes shown above.

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ITEM 3. LEGAL PROCEEDINGS

    Neither we nor any of our communities is presently subject to any material litigation or, to our knowledge, is any litigation threatened against us or any of our communities other than routine actions for negligence or other claims and administrative proceedings arising in the ordinary course of business, some of which are expected to be covered by liability insurance and all of which collectively are not expected to have a material adverse effect on our business or financial condition.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

    There is no established public trading market for the Operating Partnership's Units. As of March 17, 2000, there were 101 holders of record of Units.

    The following table sets forth the quarterly distributions per Unit to holders of Units for the period indicated.

Quarter Ended	Dividend Declared
March 31, 1998	$	0.50
June 30, 1998	$	0.50
September 30, 1998	$	0.51
December 31, 1998	$	0.51
March 31, 1999	$	0.51
June 30, 1999	$	0.51
September 30, 1999	$	0.53
December 31, 1999	$	0.53
March 31, 2000	$	0.53

    The Operating Partnership currently intends to make quarterly distributions to holders of its Units. Distributions are declared at the discretion of the board of directors of Gables GP, the general partner of the Operating Partnership, and will depend on actual funds from operations of the Operating Partnership, its financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code, and other such factors as the board of directors may deem relevant. The board of directors may modify the Operating Partnership's distribution policy from time to time.

    Certain of our debt agreements contain customary representations, covenants and events of default, including covenants which restrict the ability of the Operating Partnership to make distributions in excess of stated amounts, which in turn restricts the Trust's discretion to declare and pay dividends. In general, during any fiscal year the Operating Partnership may only distribute up to 95% of its consolidated income available for distribution, as defined in the related agreement, exclusive of distributions of capital gains for such year. The applicable debt agreements contain exceptions to these limitations to allow the Operating Partnership to make any distributions necessary to allow the Trust to maintain its status as a REIT. We do not anticipate that this provision will adversely effect the ability of the Operating Partnership to make distributions or the Trust's ability to declare dividends as currently anticipated.

    On December 21, 1999, the Operating Partnership issued 33,955 Units valued at approximately $0.9 million in connection with the April, 1998 acquisition of four apartment communities comprising

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913 apartment homes located in Houston. These Units were issued in reliance on an exemption from registration under Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder.

    Each time the Trust issues shares of beneficial interest, it contributes the proceeds of such issuance to the Operating Partnership in return for a like number of Units with rights and preferences analogous to the shares issued. During the period commencing on October 1, 1999 and ending on December 31, 1999, in connection with issuances of common shares by the Trust during that time period, the Operating Partnership issued an aggregate 93,648 Units to the Trust. Such Units were issued in reliance on an exemption from registration under Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder.

ITEM 6. SELECTED FINANCIAL AND OPERATING INFORMATION

    The following table sets forth selected financial and operating information which should be read in conjunction with the Operating Partnerships's financial statements and notes included elsewhere in this document. The consolidated operating information for the years ended December 31, 1999, 1998 and 1997 has been derived from the financial statements audited by Arthur Andersen LLP, independent public accountants, whose report is included in this document. The consolidated operating information for the years ended December 31, 1996 and 1995 has been derived from the audited financial statements not included in Arthur Andersen's report.

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GABLES REALTY LIMITED PARTNERSHIP
SELECTED FINANCIAL AND OPERATING INFORMATION

			1999			1998			1997			1996			1995
			(Amounts in Thousands, Except Property and Per Unit Data)
Operating Information:
Revenues:
Rental revenues			$	221,689		$	199,292		$	132,371		$	104,543		$	72,703
Other property revenues				12,121			9,988			6,322			4,928			3,268
Total property revenues				233,810			209,280			138,693			109,471			75,971
Other revenues				11,787			8,120			5,436			7,353			6,242
Total revenues				245,597			217,400			144,129			116,824			82,213
Expenses:
Property operating and maintenance (exclusive of items shown separately below)				78,689			70,502			47,592			38,693			28,228
Depreciation and amortization				46,073			40,650			25,194			18,892			12,669
Property management (owned and third party)				8,893			7,977			5,696			5,617			5,348
Interest expense and credit enhancement fees				44,259			39,974			25,313			21,688			13,798
Amortization of deferred financing costs				919			984			992			1,348			932
General and administrative				5,796			6,242			3,248			3,045			2,869
Severance costs				2,800			—			—			—			—
Total expenses				187,429			166,329			108,035			89,283			63,844
Gain on sale of real estate assets				8,864			—			5,349			—			—
Loss on treasury locks				—			(5,637	)		(1,178	)		—			—
Income before extraordinary loss				67,032			45,434			40,265			27,541			18,369
Extraordinary loss				—			—			(712	)		(631	)		(955	)
Net income				67,032			45,434			39,553			26,910			17,414
Dividends to preferred unitholders				(14,083	)		(10,252	)		(4,163	)		—			—
Net income available to common unitholders			$	52,949		$	35,182		$	35,390		$	26,910		$	17,414
Weighted average Units outstanding—basic				32,277			30,212			23,441			20,194			14,644
Weighted average Units outstanding—diluted				32,796			30,340			23,591			20,283			14,660
Per Common Unit Information:
Income before extraordinary loss—basic			$	1.64		$	1.16		$	1.54		$	1.36		$	1.25
Net income—basic				1.64			1.16			1.51			1.33			1.19
Income before extraordinary loss—diluted				1.64			1.16			1.53			1.35			1.25
Net income—diluted				1.64			1.16			1.50			1.32			1.18
Distributions paid				2.08			2.02			2.47			1.93			1.83
Distributions declared				2.08			2.02			1.98			1.94			1.86
Other Information:
Cash flows provided by operating activities			$	105,221		$	90,555		$	69,961		$	51,956		$	29,329
Cash flows provided by (used in) investing activities				80,928			(359,263	)		(229,411	)		(213,923	)		(148,475	)
Cash flows (used in) provided by financing activities				(185,240	)		272,583			158,244			157,823			123,619
Funds from operations	(1	)		92,643			80,989			56,866			46,238			30,927
Gross operating margin	(2	)		66.3	%		66.3	%		65.7	%		64.7	%		62.8	%
Completed communities at year-end				81			86			61			48			38
Apartment homes in completed communities at year-end				23,941			25,288			18,479			15,244			11,946
Average monthly revenue per apartment home	(3	)	$	810		$	780		$	755		$	700		$	620

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Balance Sheet Information:
Real estate assets, before accumulated depreciation			$	1,589,384		$	1,682,122		$	1,056,438		$	784,932	$	591,611
Total assets				1,471,364			1,586,317			981,167			759,660		562,827
Total debt				755,485			812,788			435,362			390,321		286,259
Partners' capital and partners' capital interest				660,261			718,573			513,497			332,908		246,421
Funds From Operations Reconciliation:
Net income available to common unitholders			$	52,949		$	35,182		$	35,390		$	26,910	$	17,414
Real estate depreciation	(4	)		45,942			40,312			24,935			18,697		12,510
Extraordinary loss	(4	)		—			—			712			631		1,003
Gain on sale of real estate assets				(8,864	)		—			(5,349	)		—		—
Severance costs	(5	)		2,800			—			—			—		—
Loss on treasury locks	(6	)		—			5,637			1,178			—		—
Amortization of loss on used treasury locks				(184	)		(142	)		—			—		—
Funds from operations			$	92,643		$	80,989		$	56,866		$	46,238	$	30,927

NOTES TO SELECTED FINANCIAL AND OPERATING INFORMATION

    (1) We consider funds from operations ("FFO") to be a useful performance measure of the operating performance of an equity REIT because, together with net income and cash flows, FFO provides investors with an additional basis to evaluate the ability of a REIT to incur and service debt and to fund dividends and capital expenditures. We believe that in order to facilitate a clear understanding of our operating results, FFO should be examined in conjunction with net income as presented in the financial statements and data included elsewhere in this report. We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts ("NAREIT"). FFO, as defined by NAREIT, represents net income (loss) determined in accordance with generally accepted accounting principles ("GAAP"), excluding gains or losses from sales of assets or debt restructuring, plus certain non-cash items, primarily real estate depreciation, and after adjustments for unconsolidated partnerships and joint ventures. In addition, extraordinary or unusual items as well as significant non-recurring events that materially distort the comparative measurement of FFO are typically disregarded in its calculation. FFO presented herein is not necessarily comparable to FFO presented by other real estate companies due to the fact that not all real estate companies use the same definition. However, our FFO is comparable to the FFO of real estate companies that use the NAREIT definition. FFO should not be considered as an alternative to net income, an indicator of our operating performance or an alternative to cash flows as a measure of liquidity. FFO does not measure whether cash flow is sufficient to fund all of our cash needs, including principal amortization, capital expenditures, and distributions to unitholders. Additionally, FFO does not represent cash flows from operating, investing or financing activities as defined by GAAP. Reference is made to "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" for a discussion of our cash needs and cash flows.

    (2) Gross operating margin represents (a) total property revenues less property operating and maintenance expenses (exclusive of real estate depreciation expense) as a percentage of (b) total property revenues.

    (3) Average monthly revenue per apartment home is equal to the average monthly rental revenue collected during the period divided by the average monthly number of apartment homes occupied during the period.

    (4) Reflects real estate depreciation and extraordinary loss for both wholly-owned communities and joint ventures, as applicable.

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    (5) Pursuant to the NAREIT definition of FFO, this item is disregarded in the calculation of FFO as it represents a significant non-recurring event that materially distorts the comparative measurement of our performance over time. We believe the organizational changes that resulted in the charge are unusual and non-recurring in nature.

    (6) Pursuant to the NAREIT definition of FFO, this item is disregarded in the calculation of FFO as it represents a significant non-recurring event that materially distorts the comparative measurement of our performance over time. While we may utilize derivative financial instruments such as rate locks to hedge interest rate exposure by modifying the interest rate characteristics of prospective financing transactions, we believe the events and circumstances that resulted in these losses are non-recurring in nature.

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ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                 AND RESULTS OF OPERATIONS (Amounts in Thousands, Except Property and Per Unit Data)

All references to "we", "our" or "us" refer collectively to Gables Realty Limited Partnership and its subsidiaries.

    We are the entity through which Gables Residential Trust (the "Trust"), a real estate investment trust (a "REIT"), conducts substantially all of its business and owns, either directly or through subsidiaries, substantially all of its assets. We are focused within the multifamily industry in markets throughout the United States that have high job growth and are resilient to economic downturns. Our operating performance relies predominantly on net operating income from our apartment communities. Net operating income is determined by rental revenues and operating expenses, which are affected by the demand and supply dynamics within our markets. Our performance is also affected by the general availability and cost of capital and our ability to develop and acquire additional apartment communities with returns in excess of our blended cost of capital.

Business Objectives and Strategy

    The Trust's objective is to increase shareholder value by producing consistent high quality earnings to sustain dividend growth and annual total returns that exceed the multifamily sector average. To achieve that objective, we employ a number of business strategies. First, our long-term investment strategy is research-driven with the objective of creating a portfolio of high quality assets in approximately six to eight strategically selected markets that are complementary through economic diversity and characterized by high job growth and resiliency to national economic downturns. We believe such a portfolio will provide predictable growth in operating cash flow on a sustainable basis. Second, we adhere to a strategy of owning and operating high quality, class AA/A apartment communities under the Gables® brand. We believe that such communities, when located in highly desirable areas to live and supplemented with high quality service and amenities, attract the affluent renter-by-choice who is willing to pay a premium for location preference, superior service and high quality communities. The resulting portfolio should maintain high levels of occupancy and rental rates. This, coupled with more predictable operating expenses and reduced capital expenditure requirements associated with high quality construction materials, should lead to operating margins that exceed national averages for the multifamily sector and sustainable growth in operating cash flow. Third, our aim is to be recognized as the employer of choice within the industry. Our mission of Taking Care of the Way People Live is a cornerstone of our strategy, involving innovative human resource practices that we believe will attract and retain the highest caliber associates. Because of our long-established presence as a fully integrated apartment management, development, construction, acquisition and disposition company within our markets, we have the ability to offer multi-faceted career opportunities among the various disciplines within the industry. Finally, our capital strategy is to maximize return on invested capital while maintaining financial flexibility through a conservative, investment grade credit profile. We judiciously manage our capital and are able to recycle existing capital through asset dispositions. We believe the successful execution of these strategies will result in operating cash flow and dividend growth, producing annual total returns that exceed the multifamily REIT sector average.

    We believe we are well positioned to continue achieving our objectives because of our long-established presence as a fully integrated real estate company in our markets. This local market presence creates a competitive advantage in generating increased cash flow from (1) property operations during different economic cycles and (2) new investment opportunities that involve site selection, market information and requests for entitlements and zoning petitions.

    Portfolio-wide occupancy levels have remained high and portfolio-wide rental rates have continued to increase during each of the last several years. We expect portfolio-wide rental expenses to increase at

28

a rate slightly ahead of inflation but less than the increase in property revenues for the coming twelve months. Our ongoing evaluation of the growth prospects for a specific asset may result in a determination to dispose of the asset. In that event, we would intend to sell the asset and utilize the net proceeds from any such sale to invest in new assets expected to have better growth prospects, reduce indebtedness or, in certain circumstances with appropriate approval from the Trust's board of trustees, repurchase outstanding common shares. We maintain staffing levels sufficient to meet existing construction, acquisition, and leasing activities. If market conditions warrant, we would anticipate adjusting staffing levels to mitigate a negative impact on results of operations.

Forward-Looking Statements

    This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results or developments could differ materially from those projected in such statements as a result of the risk factors set forth under the "Risk Factors" section in Item 1, in the relevant paragraphs of "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this report. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our accompanying consolidated financial statements and notes thereto.

Portfolio Acquisitions

    On April 1, 1998, we acquired the properties and operations of Trammell Crow Residential South Florida ("South Florida"), which consisted of fifteen multifamily apartment communities containing a total of 4,197 apartment homes, and all of South Florida's residential construction and development and third party management activities. In consideration for those properties and operations, we (1) paid $155.0 million in cash, (2) assumed $135.9 million of tax-exempt debt, and (3) issued 2,348 common units of limited partnership interest ("Units") valued at $64.9 million. In addition, on January 1, 2000, we issued 470 Units valued at $10.4 million and paid cash of $0.3 million related to a deferred portion of the purchase price. The acquisition increased the size of our portfolio under management on April 1, 1998 from 28,000 to 40,000 apartment homes.

    In April, 1998, we acquired four multifamily apartment communities comprising a total of 913 apartment homes located in Houston, Texas ("Greystone"). In connection with that acquisition, we assumed $31.0 million of indebtedness at fair value and issued 665 Units valued at $18.0 million. In addition, in December, 1999, we issued 34 Units valued at $0.9 million related to a deferred portion of the purchase price that was contingent upon 1999 economic performance.

Common and Preferred Equity Activity

Secondary Common Share Offerings

    Since the IPO, the Trust has issued a total of 14,831 common shares in eight offerings, generating $347,771 in net proceeds which were generally used (1) to reduce outstanding indebtedness under interim financing vehicles utilized to fund development and acquisition activities and (2) for general working capital purposes, including funding of future development and acquisition activities.

Preferred Share Offerings

    On July 24, 1997, the Trust issued 4,600 shares of 8.30% Series A Cumulative Redeemable Preferred Shares (liquidation preference $25.00 per share). The net proceeds from this offering of $111.0 million were used to reduce outstanding indebtedness under interim financing vehicles. The Series A Preferred Shares may be redeemed at $25.00 per share plus accrued and unpaid dividends on

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or after July 24, 2002. The Series A Preferred Shares have no stated maturity, sinking fund or mandatory redemption and are not convertible into any other securities of the Trust.

    On June 18, 1998, the Trust issued 180 shares of 5.0% Series Z Cumulative Redeemable Preferred Shares (liquidation preference $25.00 per share) in connection with the acquisition of a parcel of land for future development. The Series Z Preferred Shares, which are subject to mandatory redemption on June 18, 2018, may be redeemed at any time for $25.00 per share plus accrued and unpaid dividends. The Series Z Preferred Shares are not subject to any sinking fund or convertible into any other securities of the Trust.

Issuances of Common Operating Partnership Units

    Since the IPO, we have issued a total of 4,421 Units in connection with the South Florida acquisition, the Greystone acquisition, the acquisition of other operating apartment communities, and the acquisition of a parcel of land for future development.

Issuance of Preferred Operating Partnership Units

    On November 12, 1998, we issued 2,000 of our 8.625% Series B Preferred Units to an institutional investor. The net proceeds from this issuance of $48.7 million were used to reduce outstanding indebtedness under interim financing vehicles. The Trust has the option to redeem the Series B Preferred Units after November 14, 2003. These Units are exchangeable by the holder into 8.625% Series B Cumulative Redeemable Preferred Shares of the Trust on a one-for-one basis; however, this exchange right is generally not exercisable until after November 14, 2008. The Series B Preferred Units have no stated maturity, sinking fund, or mandatory redemption.

Common Equity Repurchase Program

    In 1999, we announced a common equity repurchase program pursuant to which the Trust is authorized to purchase up to $100 million of its outstanding common shares or Units. The Trust has repurchased shares from time to time in open market and privately negotiated transactions, depending on market prices and other conditions, using proceeds from sales of selected assets. Whenever the Trust repurchases common shares from shareholders, we are required to redeem from the Trust an equivalent number of Units on the same terms and for the same aggregate price. After redemption, the Units redeemed by us are no longer deemed outstanding. Units have also been redeemed for cash upon their presentation for redemption by unitholders. As of December 31, 1999, we had redeemed 2,379 Units, for a total of $55,935, including 2,131 Units redeemed from the Trust. At December 31, 1999, $1,168 was accrued for unsettled Unit redemptions from the Trust.

Shelf Registration Statement

    We have an effective shelf registration statement on file with the Securities and Exchange Commission providing $500 million of equity capacity and $300 million of debt capacity. We believe it is prudent to maintain shelf registration capacity in order to facilitate future capital raising activities. To date, there have been no issuances under this shelf registration statement.

Other Financing Activity

Property Sales

    During 1999, we sold three apartment communities located in Atlanta comprising 676 apartment homes, two apartment communities located in Memphis comprising 490 apartment homes, one apartment community located in Houston comprising 412 apartment homes, and an outparcel of land from an existing development community located in Dallas. The net proceeds from these sales totaled

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$96.7 million and were used to pay down outstanding borrowings under interim financing vehicles and purchase common shares and Units under the Trust's common equity repurchase program.

Gables Residential Apartment Portfolio Joint Venture

    On March 26, 1999, we entered into a joint venture agreement with an affiliate of J.P. Morgan Investment Management, Inc. ("J.P. Morgan"). Our economic ownership interest in the joint venture is currently 20%. The business purpose of the joint venture is to develop, own and operate eight multifamily apartment communities, located in four of our nine markets. On March 26, 1999, we contributed our interest in seven of the development communities to the joint venture in return for (1) cash of $60,347 and (2) an initial capital account in the joint venture of $15,214. On December 2, 1999, we contributed our interest in the eighth development community to the joint venture in return for (1) cash of $4,774 and (2) an increase in the initial capital account in the joint venture of $1,233. As of the respective contribution dates, we (1) had commenced construction of four of the communities, (2) owned the land for the future development of three of the communities, and (3) owned the acquisition right for the land for the future development of one of the communities. The capital budget for the development of the eight communities is $238 million and is being funded with 50% equity and 50% debt. The equity component is being funded 80% by J.P. Morgan and 20% by us. Our portion of the equity is being funded through contributions of cash and property. As of December 31, 1999, we had funded $22.2 million of our budgeted $23.8 million equity commitment to the joint venture. We serve as the managing member of the venture and have responsibility for all day-to-day operating matters. We also serve as the property manager, developer and general contractor for construction activities.

Results of Operations

Comparison of operating results for the year ended December 31, 1999 to the year ended December 31, 1998

    Our net income is generated primarily from the operation of our apartment communities. For purposes of evaluating comparative operating performance, we categorize our operating communities based on the period each community reaches stabilized occupancy. A community is considered to have achieved stabilized occupancy on the earlier to occur of (1) attainment of 93% physical occupancy or

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(2) one year after completion of construction. The operating performance for all of our apartment communities combined for the years ended December 31, 1999 and 1998 is summarized as follows:

	Years Ended December 31,
	1999		1998		$ Change			% Change
Rental and other property revenues:
Same store communities (1)	$	151,175	$	148,245	$	2,930		2.0	%
Communities stabilized during 1999 but not 1998 (2)		9,023		6,767		2,256		33.3	%
Development and lease-up communities (3)		8,712		3,060		5,652		184.7	%
Acquired communities (4)		55,387		38,069		17,318		45.5	%
Sold communities (5)		9,513		13,139		(3,626	)	(27.6	)%
Total property revenues	$	233,810	$	209,280	$	24,530		11.7	%
Property operating and maintenance expenses (exclusive of real estate depreciation and amortization):
Same store communities (1)	$	50,103	$	49,321	$	782		1.6	%
Communities stabilized during 1999 but not 1998 (2)		2,176		1,527		649		42.5	%
Development and lease-up communities (3)		2,882		592		2,290		386.8	%
Acquired communities (4)		19,451		13,386		6,065		45.3	%
Sold communities (5)		4,077		5,676		(1,599	)	(28.2	)%
Total specified expenses	$	78,689	$	70,502	$	8,187		11.6	%
Revenues in excess of specified expenses	$	155,121	$	138,778	$	16,343		11.8	%
Revenues in excess of specified expenses as a percentage of total property revenues		66.3%		66.3%		—		0.0	%

(1)

Communities which were owned and fully stabilized throughout both 1999 and 1998.

(2)

Communities which were completed and fully stabilized during 1999 but not 1998.

(3)

Communities in the development/lease-up phase which were not fully stabilized during all or any of 1999.

(4)

Communities which were acquired or in renovation subsequent to January 1, 1998.

(5)

Communities which were sold subsequent to January 1, 1998.

    Total property revenues increased $24,530, or 11.7%, from $209,280 to $233,810 due primarily to increases in the number of apartment homes resulting from the acquisition and development of additional communities and increases in rental rates on same store communities throughout both periods. This increase in property revenues has been offset in part by the sale of six apartment

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communities in 1999. Additional information regarding the increases in total property revenues for three of the five community categories presented in the preceding table follows:

    Same store communities:

Market	Number of Communities	Number of Apartment Homes	Percent of Total	Occupancy During 1999	Change in Occupancy	Change in Revenues		Percent Change in Revenues
Atlanta	18	5,378	33.5%	95.0%	(0.6)%	$	2,145	4.4 %
Houston	14	5,221	32.6%	94.5%	(0.3)%		62	0.1 %
Dallas	9	2,085	13.0%	93.2%	(0.8)%		364	1.7 %
Nashville	4	1,166	7.3%	92.1%	(2.3)%		(132)	(1.5)%
Memphis	2	964	6.0%	93.4%	(1.5)%		119	1.7 %
Austin	3	680	4.2%	94.6%	0.8 %		475	6.4 %
San Antonio	2	544	3.4%	88.4%	(4.1)%		(103)	(2.2)%
Total	52	16,038	100.0%	94.1%	(0.7)%	$	2,930	2.0 %

    Communities stabilized during 1999, but not 1998:

Market	Number of Communities	Number of Apartment Homes	Percent of Total	Occupancy During 1999	Change in Revenues
Austin	2	529	65.4%	92.2%	$	1,514
Orlando	1	280	34.6%	100.0%		742
Total	3	809	100.0%	94.2%	$	2,256

    Development and lease-up communities:

Market	Number of Communities	Number of Apartment Homes	Percent of Total	Occupancy During 1999	Change in Revenues
Atlanta	1	386	44.2%	89.0%	$	2,441
Houston	1	256	29.3%	89.3%		1,368
Orlando	1	231	26.5%	79.1%		1,843
Total	3	873	100.0%	85.7%	$	5,652

    Other revenues increased $3,667, or 45.2%, from $8,120 to $11,787 due primarily to (1) an increase in property management revenues of $421, or 9.3%, from $4,533 to $4,954, resulting from a net increase in properties managed for third parties, primarily as a result of the South Florida acquisition, and (2) net development revenues of $2,929 in 1999, primarily related to the Gables Residential Apartment Portfolio JV.

    Property operating and maintenance expense (exclusive of depreciation and amortization) increased $8,187, or 11.6%, from $70,502 to $78,689 due to an increase in apartment homes resulting from the acquisition and development of additional communities and an increase in property operating and maintenance expense for same store communities of 1.6%. This increase has been offset in part by the sale of six apartment communities in 1999. The same store increase in operating expenses represents increased payroll costs, property taxes and maintenance costs, offset in part by reduced utilities, marketing and landscaping expenses.

    Real estate asset depreciation and amortization expense increased $5,451, or 13.6%, from $40,087 to $45,538 due primarily to the acquisition and development of additional communities. This increase

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in real estate depreciation and amortization expense is partially offset by the sale of six apartment communities in 1999.

    Property management expense for owned communities and third party properties on a combined basis increased $916, or 11.5%, from $7,977 to $8,893 due primarily to (1) a net increase of 3,000 apartment homes managed from 38,000 in 1998 to 41,000 in 1999, resulting primarily from the South Florida acquisition, (2) increased staffing and support related to our strategic initiatives for enhanced management information systems, and (3) inflationary increases in expenses. We allocate property management expenses to both owned communities and third party properties based on the proportionate share of total apartment homes and units managed.

    Interest expense and credit enhancement fees increased $4,285, or 10.7%, from $39,974 to $44,259 due to an increase in operating debt associated with the acquisition and development of additional communities, including the debt assumed in connection with the South Florida and Greystone acquisitions. These increases in interest expense have been offset in part as a result of the equity offerings and property sales consummated between periods, the proceeds of which have been partially used to reduce indebtedness.

    General and administrative expense decreased $446, or 7.2%, from $6,242 to $5,796 due primarily to a decrease in abandoned real estate pursuit costs and internal acquisition costs incurred in 1998 related to acquisitions. This decrease has been offset in part by (1) compensation and other costs for new positions associated with the South Florida acquisition and (2) increased compensation costs.

    Severance costs of $2,800 in 1999 represent charges associated with organizational changes resulting from management succession directives, including the resignation of the former chairman and chief executive officer effective January 1, 2000 and the resignation of the former chief operating officer effective May 21, 1999.

    Gain on sale of real estate assets of $8,864 in 1999 relates to the sale of three apartment communities located in Atlanta comprising 676 apartment homes, two apartment communities located in Memphis comprising 490 apartment homes, one apartment community located in Houston comprising 412 apartment homes, and an outparcel of land from an existing development community located in Dallas.

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Comparison of operating results for the year ended December 31, 1998 to the year ended December 31, 1997

    Our net income is generated primarily from the operation of our apartment communities. For purposes of evaluating comparative operating performance, we categorize our operating communities based on the period in which each community reaches stabilized occupancy. A community is considered to have achieved stabilized occupancy on the earlier to occur of (1) attainment of 93% physical occupancy or (2) one year after completion of construction. The operating performance for all of our apartment communities combined for the years ended December 31, 1998 and 1997 is summarized as follows:

	1998		1997		$ Change			% Change
Rental and other property revenues:
Same store communities (1)	$	119,156	$	114,400	$	4,756		4.2%
Communities stabilized during 1998 but not 1997 (2)		19,700		15,108		4,592		30.4%
Development and lease-up communities (3)		9,827		1,586		8,241		519.6%
Acquired communities (4)		60,597		7,421		53,176		716.6%
Sold communities (5)		—		178		(178	)	(100.0%	)
Total property revenues	$	209,280	$	138,693	$	70,587		50.9%
Property operating and maintenance expenses (exclusive of real estate depreciation and amortization):
Same store communities (1)	$	40,820	$	39,727	$	1,093		2.8%
Communities stabilized during 1998 but not 1997 (2)		6,539		5,035		1,504		29.9%
Development and lease-up communities (3)		2,220		427		1,793		419.9%
Acquired communities (4)		20,923		2,288		18,635		814.5%
Sold communities (5)		—		115		(115	)	(100.0%	)
Total specified expenses	$	70,502	$	47,592	$	22,910		48.1%
Revenues in excess of specified expenses	$	138,778	$	91,101	$	47,677		52.3%
Revenues in excess of specified expenses as a percentage of total property revenues		66.3%		65.7%		—		0.6%

(1)

Communities which were owned and fully stabilized throughout both 1998 and 1997.

(2)

Communities which were completed and fully stabilized during 1998 but not 1997.

(3)

Communities in the development/lease-up phase which were not fully stabilized during all or any of 1998.

(4)

Communities which were acquired subsequent to January 1, 1997.

(5)

Communities which were sold subsequent to January 1, 1997.

    Total property revenues increased $70,587, or 50.9%, from $138,693 to $209,280 due primarily to increases in the number of apartment homes resulting from the acquisition and development of additional communities and to increases in rental rates on communities stabilized throughout both

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periods ("same store"). Additional information regarding the increases in total property revenues for three of the five community categories presented in the preceding table follows:

    Same store communities:

Market	Number of Communities	Number of Apartment Homes	Percent of Total	Occupancy During 1998	Change in Occupancy		Change in Revenues			Percent Change in Revenues
Houston	14	5,045	37.7%	94.8%	0.3%		$	2,741		6.3%
Atlanta	12	3,470	25.9%	95.8%	0.9%			708		2.5%
Dallas	7	1,659	12.4%	94.0%	(0.3%	)		942		5.9%
Nashville	4	1,166	8.7%	94.5%	(1.5%	)		(178	)	(1.9%	)
Memphis	2	964	7.2%	94.9%	0.7%			231		3.4%
San Antonio	2	544	4.1%	92.4%	(0.5%	)		111		2.4%
Austin	2	532	4.0%	94.0%	(0.2%	)		201		3.7%
Total	43	13,380	100.0%	94.8%	0.2%		$	4,756		4.2%

    Communities stabilized during 1998 but not during 1997:

Market	Number of Communities	Number of Apartment Homes	Percent of Total	Occupancy During 1998	Change in Revenues
Atlanta	4	1,246	61.2%	95.0%	$	4,024
Memphis	2	490	24.1%	94.1%		509
Dallas	1	300	14.7%	91.2%		59
Total	7	2,036	100.0%	94.2%	$	4,592

    Development and lease-up communities:

Market	Number of Communities	Number of Apartment Homes	Percent of Total	Occupancy During 1998	Change in Revenues
Austin	2	529	31.5%	76.3%	$	3,569
Orlando	2	511	30.4%	48.7%		2,521
Atlanta	1	386	22.9%	29.5%		1,164
Houston	1	256	15.2%	34.8%		987
Total	6	1,682	100.0%	50.8%	$	8,241

    Other revenues increased $2,684, or 49.4%, from $5,436 to $8,120 due primarily to an increase in property management revenues of $1,501, or 49.5%, from $3,032 to $4,533, resulting from a net increase in properties managed for third parties primarily as a result of the South Florida acquisition, in addition to an increase in income from certain ancillary services.

    Property operating and maintenance expense (exclusive of depreciation and amortization) increased $22,910, or 48.1%, from $47,592 to $70,502 due to an increase in apartment homes resulting from the acquisition and development of additional communities and an increase in property operating and maintenance expense for same store communities of 2.8%. The same store increase in operating expenses represents increased payroll costs, property taxes and maintenance costs, offset in part by reduced utilities, marketing and insurance expenses.

    Real estate asset depreciation and amortization expense increased $15,375, or 62.2%, from $24,712 to $40,087 due primarily to the acquisition and development of additional communities.

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    Property management expense for owned communities and third party properties on a combined basis increased $2,281, or 40.0%, from $5,696 to $7,977 due primarily to (1) a net increase of 11,000 apartment homes managed from 27,000 in 1997 to 38,000 in 1998, resulting primarily from the South Florida acquisition, (2) inflationary increases in expenses, and (3) certain non-recurring expense savings in 1997. We allocate property management expenses to both owned communities and third party properties based on the proportionate share of total apartment homes and units managed.

    Interest expense and credit enhancement fees increased $14,661 or 57.9%, from $25,313 to $39,974 due to an increase in operating debt associated with the acquisition and development of additional communities, including the debt assumed in connection with the South Florida and Greystone acquisitions. These increases in interest expense have been offset in part as a result of the equity offerings consummated between periods, the proceeds of which were primarily used to reduce indebtedness.

    General and administrative expense increased $2,994, or 92.2%, from $3,248 to $6,242 due primarily to (1) compensation and other costs for new positions associated with the South Florida acquisition, (2) increased compensation costs, and (3) the expensing of internal costs of identifying and acquiring operating apartment communities effective March 20, 1998 in accordance with EITF No. 97-11.

    Loss on treasury locks of $5,637 in 1998 represents mark to market losses recorded upon the expiration of the terms of treasury lock agreements that were (1) entered into in anticipation of a projected debt offering, (2) subsequently extended in connection with modifications in the projected timing of the debt offering, and (3) terminated due to economic conditions affecting the unsecured debt market.

Liquidity and Capital Resources

    Net cash provided by operating activities increased from $90,555 for the year ended December 31, 1998 to $105,221 for the year ended December 31, 1999 due to (1) an increase of $12,355 in income (a) before certain non-cash items or non-operating items, including depreciation, amortization, equity in income of joint ventures, gain on sale of real estate assets, long-term compensation expense and loss on treasury locks, and (b) after operating distributions received from joint ventures, (2) a change in other assets between periods of $6,850, and (3) a change in restricted cash between periods of $2,665. Such increases were offset in part by a change in other liabilities between periods of $7,204.

    We had $80,928 of net cash provided by investing activities for the year ended December 31, 1999 compared to $359,263 of net cash used in investing activities for the year ended December 31, 1998. During the year ended December 31, 1999, we received cash of $65.1 million in connection with the contribution of interests in certain development communities to the Gables Residential Apartment Portfolio JV and $96.7 million in connection with the sale of real estate assets. During the year ended December 31, 1999, we expended $56.5 million related to development expenditures, including related land acquisitions, $6.7 million related to our investment in the Gables Residential Apartment Portfolio JV, $10.0 million related to recurring, non-revenue enhancing capital expenditures for operating apartment communities, and $7.7 related to non-recurring, renovation/revenue enhancing capital expenditures. During the year ended December 31, 1998, we expended $203.3 million related to acquisitions of operating apartment communities, including the South Florida acquisition, $138.1 million related to development expenditures, including related land acquisitions, $8.0 million related to recurring, non-revenue enhancing capital expenditures for operating apartment communities, and $8.9 million related to non-recurring, renovation/revenue enhancing capital expenditures.

    We had $185,240 of net cash used in financing activities for the year ended December 31, 1999 compared to $272,583 of net cash provided by financing activities for the year ended December 31, 1998. During the year ended December 31, 1999, we had net repayments of borrowings of

37

$57.3 million, net payments of distributions totaling $73.3 million, and payments for treasury share purchases and Unit redemptions in connection with our common equity repurchase program totaling $54.8 million. The repayments of borrowings were funded by the net cash provided by investing activities. During the year ended December 31, 1998, we had net borrowings of $210.5 million, which were used in conjunction with $136.2 million of proceeds from a common share offering and the Series B Preferred Unit offering primarily to fund acquisition and development activities discussed in the above paragraph. These proceeds from financing activities were offset in part by net payments of distributions totaling $68.7 million.

    As of December 31, 1999, we had total indebtedness of $755,485, cash and cash equivalents of $7,963, and principal escrow deposits reflected in restricted cash of $2,992. Our indebtedness has an average of 5.2 years to maturity at December 31, 1999. The aggregate maturities of notes payable at December 31, 1999 are as follows:

2000	$	81,780
2001		58,600
2002		130,280
2003		65,602
2004		79,383
2005 and thereafter		339,840
	$	755,485

    Distributions through the fourth quarter of 1999 have been paid from cash provided by operating activities. We anticipate that distributions will continue to be paid on a quarterly basis from cash provided by operating activities.

    We have met and expect to continue to meet our short-term liquidity requirements generally through net cash provided by operations. Our net cash provided by operations has been adequate and we believe it will continue to be adequate to meet both operating requirements and payment of dividends in accordance with REIT requirements. The budgeted expenditures for improvements and renovations to the communities, in addition to monthly principal amortization payments, are also expected to be funded from net cash provided by operations. We anticipate that construction and development activities as well as land purchases will be initially funded primarily through borrowings under our credit facilities described below.

    We expect to meet certain of our long-term liquidity requirements, such as scheduled debt maturities, repayment of short-term financing of construction and development activities and possible property acquisitions, through long-term secured and unsecured borrowings, the issuance of debt securities or equity securities, private equity investments in the form of joint ventures, or through the disposition of assets which, in our evaluation, may no longer meet our investment requirements.

$225 Million Credit Facility

    We have a $225 million unsecured revolving credit facility provided by a consortium of banks. The facility currently has a maturity date of May, 2002 with two one-year extension options. Borrowings under the facility currently bear interest at our option of LIBOR plus 0.95% or prime minus 0.25%. Such scheduled interest rates may be adjusted up or down based on changes in our senior unsecured credit ratings. We may also enter into competitive bid loans with participating banks for up to $112.5 million at rates below the scheduled rates. In addition, we pay an annual facility fee equal to 0.15% of the $225 million commitment. Availability under the facility is based on the value of our unencumbered real estate assets as compared to the amount of our unsecured indebtedness. As of

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December 31, 1999, we had $44.0 million in borrowings outstanding under the facility and, therefore, $181.0 million of remaining capacity on the $225 million commitment.

$25 Million Credit Facility

    We have a $25 million unsecured revolving credit facility with a bank that currently bears interest at LIBOR plus 0.95%. We expect to exercise one of our unlimited one-year extension options prior to the facility's current maturity in October, 2000. We had no borrowings outstanding under this facility at December 31, 1999.

$25 Million Borrowing Facility

    We have a $25 million unsecured borrowing facility with a bank. The interest rate and maturity date related to each draw on this facility is agreed to by both parties prior to each draw. We expect the facility, which currently matures in April, 2000, to be renewed for an additional one-year term at maturity. At December 31, 1999, we had $24.9 million in borrowings outstanding under this facility at an interest rate of 6.0%.

Restrictive Covenants

    Certain of our debt agreements contain customary representations, covenants and events of default, including covenants which restrict our ability to make distributions in excess of stated amounts, which in turn restricts the Trust's discretion to declare and pay dividends. In general, during any fiscal year we may only distribute up to 95% of our consolidated income available for distribution (as defined in the related agreement) exclusive of distributions of capital gains for such year. The applicable debt agreements contain exceptions to these limitations to allow us to make any distributions necessary to allow the Trust to maintain its status as a REIT. We do not anticipate that this provision will adversely effect our ability to make distributions or the Trust's ability to declare dividends as currently anticipated.

Inflation

    Substantially all leases at our communities are for a term of one year or less, which may enable us to seek increased rents upon renewal of existing leases or commencement of new leases in times of rising prices. The short-term nature of these leases generally serves to lessen the impact of cost increases arising from inflation.

Certain Factors Affecting Future Operating Results

    This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "believe," "expect," "anticipate," "intend," "estimate," "assume" and other similar expressions which are predictions of or indicate future events and trends and which do not relate solely to historical matters identify forward-looking statements. These statements include, among other things, statements regarding our intent, belief or expectations with respect to the following: (1) the declaration or payment of distributions, (2) potential developments or acquisitions or dispositions of properties, assets or other entities, (3) our policies regarding investments, indebtedness, acquisitions, dispositions, financings, conflicts of interest and other matters, (4) the Trust's qualification as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), (5) the real estate markets in which we operate, (6) in general, the availability of debt and equity financing, interest rates and general economic conditions, and (7) trends affecting our financial condition or results of operations.

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    Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. In addition to the factors discussed under the "Risk Factors" section in Item I, some of the factors that might cause such a difference include, but are not limited to, the following: (1) we may abandon or fail to secure development opportunities, (2) construction costs of a community may exceed original estimates, (3) construction and lease-up may not be completed on schedule, resulting in increased debt service expense and construction costs and reduced rental revenues, (4) occupancy rates and market rents may be adversely affected by local economic and market conditions which are beyond our control, (5) financing may not be available or may not be available on favorable terms, (6) our cash flow may be insufficient to meet required payments of principal and interest, and (7) existing indebtedness may mature in an unfavorable credit environment, preventing such indebtedness from being refinanced or, if financed, causing such refinancing to occur on terms that are not as favorable as the terms of existing indebtedness. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Recent Accounting Pronouncements

    See Note 5 to Consolidated Financial Statements.

Year 2000

    The Year 2000 issue occurs when business application software or embedded microcontrollers use two digits to specify the year, rather than four. As a result, computers with time-sensitive software programs may recognize a date using "00" as the year 1900 instead of the year 2000 which could result in system failures or miscalculations causing disruptions of normal business operations.

    Our efforts to address the Year 2000 issue prior to January 1, 2000 were divided into the following phases: (1) identifying all equipment that could have been affected by the Year 2000 issue, (2) contacting the vendors and third-party providers that maintained and/or supported such equipment to obtain a Year 2000 compliance certification, (3) assembling a list of items that would not be compliant and prioritizing the items to be either replaced or retrofitted, and (4) replacing or retrofitting items that were not Year 2000 compliant, and identifying and implementing alternative solutions to items that could not be replaced or retrofitted.

    We have not experienced any significant disruptions to date in mission critical systems and we believe those systems successfully responded to the Year 2000 date change. In addition, we are not aware of any significant Year 2000 issues with our third-party service providers or vendors. Costs of addressing the Year 2000 issue have not been material to our financial condition or results of operations, and were primarily related to equipment upgrades and allocation of personnel resources. In addition, we do not expect to incur any future material costs related to the Year 2000 issue.

    Although we believe our computer systems will continue to function properly going forward, there can be no assurance that such systems, or those systems of other companies on which we rely, will not experience some type of problem related to the Year 2000 issue, and that such problems will not result in material business interruptions, loss of revenues or other adverse effects. Accordingly, we will continue to monitor our mission critical systems and those of our third-party service providers and vendors throughout the year 2000.

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SUPPLEMENTAL DISCUSSION—Funds From Operations and Adjusted Funds From Operations

    We consider funds from operations ("FFO") to be a useful performance measure of the operating performance of an equity REIT because, together with net income and cash flows, FFO provides investors with an additional basis to evaluate the ability of a REIT to incur and service debt and to fund dividends and capital expenditures. We believe that in order to facilitate a clear understanding of our operating results, FFO should be examined in conjunction with net income as presented in the financial statements and data included elsewhere in this report. We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts ("NAREIT"). FFO, as defined by NAREIT, represents net income (loss) determined in accordance with GAAP, excluding gains or losses from sales of assets or debt restructuring plus certain non-cash items, primarily real estate depreciation, and after adjustments for unconsolidated partnerships and joint ventures. In addition, extraordinary or unusual items as well as significant non-recurring events that materially distort the comparative measurement of FFO are typically disregarded in its calculation. FFO presented herein is not necessarily comparable to FFO presented by other real estate companies due to the fact that not all real estate companies use the same definition. However, our FFO is comparable to the FFO of real estate companies that use the NAREIT definition. Adjusted funds from operations ("AFFO") is defined as FFO less recurring, non-revenue enhancing capital expenditures. FFO and AFFO should not be considered alternatives to net income as indicators of our operating performance or as alternatives to cash flows as measures of liquidity. FFO does not measure whether cash flow is sufficient to fund all of our cash needs, including principal amortization, capital expenditures and distributions to unitholders. Additionally, FFO does not represent cash flows from operating, investing or financing activities as defined by GAAP. Reference is made to "Management's Discussion and

41

Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" for a discussion of our cash needs and cash flows. A reconciliation of FFO and AFFO follows:

	1999			1998
Net income available to common unitholders	$	52,949		$	35,182
Gain on sale of real estate assets		(8,864	)		—
Severance costs (a)		2,800			—
Loss on treasury locks (b)		—			5,637
Amortization of loss on extension of used treasury locks		(184	)		(142	)
Real estate asset depreciation:
Wholly-owned real estate assets		45,538			40,087
Joint venture real estate assets		404			225
Total depreciation		45,942			40,312
Funds from operations—basic	$	92,643		$	80,989
Amortization of discount on long-term liability (c)		686			576
Funds from operations—diluted	$	93,329		$	81,565
Recurring, non-revenue enhancing capital expenditures:
Carpet	$	4,299		$	3,092
Roofing		25			246
Exterior painting		172			—
Appliances		460			394
Other additions and improvements		5,081			4,223
Total capital expenditures	$	10,037		$	7,955
Adjusted funds from operations—diluted	$	83,292		$	73,610
Average Units outstanding—basic		32,277			30,212
Average Units outstanding—diluted (c)		32,796			30,679

a)

Severance costs of $2,800 for the year ended December 31, 1999 represent charges associated with organizational changes resulting from management succession directives, including the resignation of the former chairman and chief executive officer and the former chief operating officer. The NAREIT definition of FFO disregards significant non-recurring events that materially distort the comparative measurement of FFO over time. We believe the organizational changes that resulted in the charge are unusual and non-recurring in nature. We also believe that organization changes could arise in the future that could result in similar charges. We believe these severance costs materially distort the comparative measurement of FFO and, therefore, have been disregarded in the calculation of FFO pursuant to the NAREIT definition of FFO.

b)

Loss on treasury locks of $5,637 for the year ended December 31, 1998 represents mark to market losses recorded upon the expiration of the terms of treasury lock agreements that were (1) entered into in anticipation of a projected debt offering, (2) subsequently extended in connection with modifications in the projected timing of the debt offering as a result of unanticipated capital transactions, including the South Florida acquisition, and (3) terminated due to economic conditions affecting the unsecured debt market. The NAREIT definition of FFO disregards significant non-recurring events that materially distort the comparative measurement of FFO over time. While we may utilize derivative financial instruments such as rate locks to hedge interest rate exposure by modifying the interest rate characteristics of prospective financing transactions, we believe the specific series of events and circumstances that resulted in the loss of hedge accounting for those treasury locks is unusual and non-recurring in nature. We also believe that different

42

events and circumstances could arise in the future that could result in similar losses. We believe these losses materially distort the comparative measurement of FFO and, therefore, have been disregarded in the calculation of FFO pursuant to the NAREIT definition of FFO.

c)

This obligation was settled with Units. Such Units are excluded from basic Units outstanding, but are included in the calculation of diluted Units outstanding.

    Effective January 1, 2000, NAREIT amended its definition of FFO to include in FFO all non-recurring items, except for those that are defined as extraordinary items under GAAP and gains and losses from sales of depreciable operating property. We will report the revised measure beginning with our first quarter of 2000 results.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    Our capital structure includes the use of variable rate and fixed rate indebtedness. As such, we are exposed to the impact of changes in interest rates. We periodically seek input from third party consultants regarding market interest rate and credit risk in order to evaluate our interest rate exposure. In certain situations, we may utilize derivative financial instruments in the form of rate caps, rate swaps or rate locks, to hedge interest rate exposure by modifying the interest rate characteristics of related balance sheet instruments and prospective financing transactions. We do not utilize such instruments for trading or speculative purposes.

    We typically refinance maturing debt instruments at then-existing market interest rates and terms which may be more or less than the interest rates and terms on the maturing debt.

    The following table provides information about our derivative financial instruments and other financial instruments that are sensitive to changes in interest rates and should be read in conjunction with the accompanying consolidated financial statements and notes thereto. For debt obligations, the table presents principal cash flows and related weighted-average interest rates in effect at December 31, 1999 by expected maturity dates. The weighted-average interest rates presented in this table are inclusive of credit enhancement fees. For interest rate protection agreements, the table presents the notional amounts and related weighted-average pay rates by fiscal year of maturity. There have been no substantial changes in our market risk profile from the preceding year and the assumptions are consistent with prior year assumptions.

	Expected Year of Maturity
	2000		2001		2002		2003		2004		Thereafter		1999 Total		1998 Total
Debt:
Conventional fixed rate	$	56,742	$	18,420	$	86,090	$	20,467	$	20,978	$	203,305	$	406,002	$	408,988
Average interest rate		6.73%		6.84%		8.28%		7.54%		7.22%		7.48%		7.50%		7.51%
Tax-exempt fixed rate	$	170	$	180	$	190	$	205	$	58,405	$	31,395	$	90,545	$	90,730
Average interest rate		7.63%		7.63%		7.63%		7.63%		6.26%		6.38%		6.31%		6.32%
Tax-exempt variable rate							$	44,930			$	105,140	$	150,070	$	150,070
Average interest rate								6.45%				6.31%		6.35%		4.88%
Credit facilities	$	24,868			$	44,000							$	68,868	$	123,000
Average interest rate		6.00%				6.69%								6.44%		6.38%
Variable-rate term loan			$	40,000									$	40,000	$	40,000
Average interest rate				8.25%										8.25%		5.96%
Total debt	$	81,780	$	58,600	$	130,280	$	65,602	$	79,383	$	339,840	$	755,485	$	812,788
Average interest rate		6.51%		7.80%		7.74%		6.79%		6.51%		7.01%		7.07%		6.64%
Interest Rate Swaps:
Pay fixed/Receive variable	$	65,000											$	65,000	$	109,530
Average pay rate		5.16%												5.16%		5.24%
Receive rate		LIBOR												LIBOR		LIBOR
Interest Rate Cap:
Pay fixed/Receive variable															$	44,530
Maximum pay rate																6.25%
Receive rate																LIBOR

    We estimate that the fair value of our debt approximates carrying value based upon our effective current borrowing rate for issuance of debt with similar terms and remaining maturities. At December 31, 1999 and 1998, the fair values of our interest rate swaps and caps were $460 and $(161), respectively.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    The financial statements and supplementary data are listed under Item 14(a) and filed as part of this report on the pages indicated.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

    Not applicable.

PART III

    Gables GP, the sole general partner of the Registrant, is a wholly-owned subsidiary of Gables Residential Trust (the "Trust"). The members of the board of directors of Gables GP are the same as the members of the board of trustees of the Trust. The "executive officers" of Gables GP are the same as the "executive officers" of the Trust. Other than the Trust, which beneficially owns 78.6% of the Registrant's outstanding common Units as of March 17, 2000, no person beneficially owns more than 5% of the Registrant's outstanding common Units. All applicable information required by this Part III with respect to the Registrant will be included in the Trust's Proxy Statement to be filed in connection with its 2000 Annual Meeting of Shareholders.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The information concerning the Directors and Executive Officers of the Registrant required by Item 10 shall be included in the Trust's Proxy Statement to be filed relating to the 2000 Annual Meeting of its shareholders and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

    The information concerning Executive Compensation required by Item 11 shall be included in the Trust's Proxy Statement to be filed relating to the 2000 Annual Meeting of its shareholders and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The information concerning Security Ownership of Certain Beneficial Owners and Management required by Item 12 shall be included in the Trust's Proxy Statement to be filed relating to the 2000 Annual Meeting of its shareholders and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    Not applicable.

45

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULE AND REPORTS ON FORM 8-K

14(a)(1) and (2) Financial Statements and Schedule

    The financial statements and schedule listed below are filed as part of this annual report on the pages indicated.

Report of Independent Public Accountants	52
Consolidated Balance Sheets as of December 31, 1999 and December 31, 1998	53
Consolidated Statements of Operations for the years ended December 31, 1999, 1998 and 1997	54
Consolidated Statements of Partners' Capital for the years ended December 31, 1999, 1998 and 1997	55
Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997	56
Notes to Consolidated Financial Statements	57
Schedule III—Real Estate Investments and Accumulated Depreciation as of December 31, 1999	74

14(a)(3) Exhibits

    Certain of the exhibits required by Item 601 of Regulation S-K have been filed with previous reports by the Registrant, referred to herein as the Operating Partnership, or the Trust (File No. 1-12590) and are incorporated herein by reference to the filing in the corresponding numbered footnote.

Exhibit No.			Description
3.1		—	Fourth Amended and Restated Agreement of Limited Partnership of the Operating Partnership (1)
3.2		—	Amended and Restated Declaration of Trust of the Trust (2)
3.3		—	Articles of Amendment to the Trust's Amended and Restated Declaration of Trust (3)
3.4		—	Articles Supplementary to the Trust's Amended and Restated Declaration of Trust creating the 8.30% Series A Cumulative Redeemable Preferred Shares (4)
3.5		—	Articles Supplementary to the Trust's Amended and Restated Declaration of Trust creating the 5.00% Series Z Cumulative Redeemable Preferred Shares (3)
3.6		—	Articles Supplementary to the Trust's Amended and Restated Declaration of Trust creating the 8.625% Series B Cumulative Redeemable Preferred Shares (1)
3.7	*	—	Second Amended and Restated Bylaws of the Trust
3.8		—	Articles of Incorporation of Gables GP, Inc. (5)
3.9		—	Bylaws of Gables GP, Inc. (5)
4.1		—	Indenture, dated as of March 23, 1998, between the Operating Partnership and First Union National Bank (6)
4.2		—	Supplemental Indenture No. 1, dated March 23, 1998, between the Operating Partnership and First Union National Bank (6)
4.3		—	The Operating Partnership 6.80% Senior Note due 2005 (6)
4.4		—	Supplemental Indenture No. 2, dated September 30, 1998 between the Operating Partnership and First Union National Bank (7)

46

4.5	—	The Operating Partnership 6.55% Senior Note due 2000 (7)
4.6	—	Supplemental Indenture No. 3, dated October 8, 1998, between the Operating Partnership and First Union National Bank (8)
4.7	—	The Operating Partnership 6.60% Senior Note due 2001 (8)
10.1	—	Articles of Incorporation of East Apartment Management, Inc. (5)
10.2	—	Bylaws of East Apartment Management, Inc. (5)
10.3	—	Articles of Incorporation of Central Apartment Management, Inc. (5)
10.4	—	Bylaws of Central Apartment Management, Inc. (5)
10.5	—	Interest rate protection agreement (notional amount of $44,530,000) between the Operating Partnership and NationsBank of North Carolina, N.A. dated January 25, 1994 (9)
10.6	—	Interest rate protection agreement (notional amount of $44,530,000) between the Operating Partnership and First Union National Bank of Georgia, dated August 21, 1996 (10)
10.7	—	Interest rate protection agreement (notional amount of $25,000,000) between the Operating Partnership and First Union National Bank of Georgia, dated as of May 23, 1997 (11)
10.8	—	Forward Treasury Lock Agreement (notional amount of $75,000,000) between the Operating Partnership and J.P. Morgan Securities, Inc. dated as of September 22, 1997 and amended on December 17, 1997 and February  11, 1998 (12)
10.9	—	Forward Treasury Lock Agreement (notional amount of $25,000,000) between the Operating Partnership and J.P. Morgan Securities, Inc. dated as of December 17, 1997 and amended on February 11, 1998 (12)
10.10	—	Forward Treasury Lock Agreement (notional amount of $50,000,000) between the Operating Partnership and J.P. Morgan Securities Inc., dated as of September 22, 1997 Operating Partnership and J.P. Morgan Securities Inc., dated as of September 22, 1997 and amended on May 28, 1998, July 24, 1998, August 19, 1998 and September 30, 1998 (13)
10.11	—	Interest Rate Swap Agreement (notional amount of $40,000,000) between the Operating Partnership and Morgan Guaranty Trust Company of New York, dated as of September 28, 1998 (13)
10.12	—	Loan Agreement, Conversion and Note Agreement, Security Deed Note and Deed of Trust Notes between Teachers Insurance and Annuity Association of America ("lender") and the Operating Partnership and Gables-Tennessee Properties (collectively, the borrower) for a $130,689,000 loan, dated December 29, 1995 (14)
10.13	—	First Amendment to Conversion and Note Agreement effective December 30, 1996 between the Operating Partnership, Gables-Tennessee Properties, the Trust and Teachers Insurance and Annuity Association of America (11)
10.14	—	Second Amendment to Conversion and Note Agreement effective August 13, 1997 between the Operating Partnership, Gables-Tennessee Properties, the Trust and Teachers Insurance and Annuity Association of America (11)
10.15	—	Unsecured Note No. 1 for $86,346,000 dated August 13, 1997 between the Operating Partnership, Gables-Tennessee Properties and Teachers Insurance and Annuity Association of America (11)
10.16	—	Unsecured Note No. 2 for $29,681,000 dated August 13, 1997 between the Operating Partnership, Gables-Tennessee Properties and Teachers Insurance and Annuity Association of America (11)

47

10.17		—	$225,000,000 Amended and Restated Credit Agreement dated as of May 13, 1998 by and among the Operating Partnership (as Borrower) and Wachovia Bank, N.A., First Union National Bank, Chase Bank of Texas, National Association, PNC Bank, National Association, Guaranty Federal Bank, F.S.B., AmSouth Bank of Alabama and Commerzbank AG, Atlanta Agency (collectively, as lenders) and Wachovia Bank, N.A. (as Agent) (3)
10.18		—	First Amendment to $225,000,000 Amended and Restated Credit Agreement dated as of May 13, 1998 by and among the Operating Partnership (as Borrower) and Wachovia Bank, N.A., First Union National Bank, Chase Bank of Texas, National Association, PNC Bank, National Association, Guaranty Federal Bank, F.S.B., AmSouth Bank of Alabama and Commerzbank AG, Atlanta agency (collectively, as lenders) and Wachovia Bank, N.A. (as agent) dated June 14, 1999. (15)
10.19	*	—	Second Amendment to $225,000,000 Amended and Restated Credit Agreement dated as of May 13, 1998 by and among the Operating Partnership and Gables-Tennessee Properties (as Borrowers) and Wachovia Bank, N.A., First Union National Bank, Chase Bank of Texas, National Association, PNC Bank, National Association, Guaranty Federal Bank, F.S.B., AmSouth Bank of Alabama and Commerzbank AG, Atlanta agency (collectively, as lenders) and Wachovia Bank, N.A. (as agent) dated November 23, 1999.
10.20		—	Promissory Note dated November 29, 1994 for a $53,000,000 mortgage loan from the Northwestern Mutual Life Insurance Company to the Operating Partnership (9)
10.21		—	Contribution Agreement with an effective date of March 16, 1998 between the Trust, the Operating Partnership and specified representatives of Trammell Crow Residential ("TCR") executed in connection with Gables' April  1, 1998 acquisition of the properties and operations of South Florida (16)
10.22		—	Amendment No. 1 to Contribution Agreement dated April 1, 1998 (17)
21.1	*	—	Schedule of Subsidiaries of the Operating Partnership
23.1	*	—	Consent of Arthur Andersen LLP
27.1	*	—	Financial Data Schedule for the fiscal year ended December 31, 1999

*

Filed herewith

(1)

The Trust's Current Report on Form 8-K dated November 12, 1998.

(2)

The Trust's Registration Statement on Form S-11 (File No. 33-70570), as amended.

(3)

The Trust's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.

(4)

The Trust's Current Report on Form 8-K dated July 24, 1997.

(5)

The Trust's Annual Report on Form 10-K for the fiscal year ended December 31, 1993.

(6)

The Operating Partnership's Current Report on Form 8-K dated March 23, 1998.

(7)

The Operating Partnership's Current Report on Form 8-K dated October 5, 1998.

(8)

The Operating Partnership's Current Report on Form 8-K dated October 8, 1998.

(9)

The Trust's Annual Report on Form 10-K for the fiscal year ended December 31, 1994.

(10)

The Trust's Annual Report on Form 10-K for the fiscal year ended December 31, 1996.

(11)

The Trust's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997.

(12)

The Trust's Annual Report on Form 10-K for the fiscal year ended December 31, 1997.

48

(13)

The Trust's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.

(14)

The Trust's Annual Report on Form 10-K for the fiscal year ended December 31, 1995.

(15)

The Trust's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.

(16)

The Trust's Current Report on Form 8-K dated March 16, 1998.

(17)

The Trust's Current Report on Form 8-K dated April 1, 1998, as amended.

    Gables Residential Trust's Proxy Statement is to be filed with the Securities and Exchange Commission not later than 120 days after December 31, 1999 (the end of the fiscal year covered by this Annual Report on Form 10-K).

14(b) Reports on Form 8-K

    None

14(c) Exhibits

    See Item 14(a)(3) above.

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SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Gables Realty Limited Partnership certifies that it has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GABLES REALTY LIMITED PARTNERSHIP By: Gables GP, Inc. Its: General Partner
By:	/s/ CHRIS D. WHEELER Chris D. Wheeler Chairman of the Board of Directors, President and Chief Executive Officer
	March 17, 2000

    Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of Gables GP, Inc. as general partner of Gables Realty Limited Partnership, and in the capacities and on the dates indicated.

Signatures	Title	Date
/s/ CHRIS D. WHEELER Chris D. Wheeler	Chairman of the Board of Directors, President and Chief Executive Officer (Principal Executive Officer)	March 17, 2000
/s/ MARVIN R. BANKS, JR. Marvin R. Banks, Jr.	Senior Vice President and Chief Financial Officer (Principal Financial Officer)	March 17, 2000
/s/ DAWN H. SEVERT Dawn H. Severt	Vice President and Chief Accounting Officer (Principal Accounting Officer)	March 17, 2000
/s/ MARCUS E. BROMLEY Marcus E. Bromley	Director	March 17, 2000
/s/ DAVID M. HOLLAND David M. Holland	Director	March 17, 2000
/s/ LAURALEE E. MARTIN Lauralee E. Martin	Director	March 17, 2000

50

/s/ JOHN W. MCINTYRE John W. McIntyre	Director	March 17, 2000
/s/ MIKE E. MILES Mike E. Miles	Director	March 17, 2000
/s/ JAMES D. MOTTA James D. Motta	Director	March 17, 2000
/s/ D. RAYMOND RIDDLE D. Raymond Riddle	Director	March 17, 2000
/s/ JOHN T. RIPPEL John T. Rippel	Director	March 17, 2000

51

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Gables Realty Limited Partnership:

    We have audited the accompanying consolidated balance sheets of Gables Realty Limited Partnership and subsidiaries as of December 31, 1999 and 1998 and the related consolidated statements of operations, partners' capital and cash flows for each of the three years in the period ended December 31, 1999. These financial statements and schedule are the responsibility of the management of Gables Realty Limited Partnership. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

    We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Gables Realty Limited Partnership and subsidiaries as of December 31, 1999 and 1998 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States.

    Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index to financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

/s/ Arthur Andersen LLP
Atlanta, Georgia
March 3, 2000

52

GABLES REALTY LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

(Amounts in Thousands, Except Per Unit Data)

	December 31, 1999			December 31, 1998
ASSETS:
Real estate assets:
Land	$	220,298		$	229,960
Buildings		1,177,628			1,218,782
Furniture, fixtures and equipment		91,835			87,238
Construction in progress		37,984			79,829
Investment in joint ventures		23,471			161
Land held for future development		38,168			66,152
Real estate assets before accumulated depreciation		1,589,384			1,682,122
Less: accumulated depreciation		(172,247	)		(138,239	)
Net real estate assets		1,417,137			1,543,883
Cash and cash equivalents		7,963			7,054
Restricted cash		8,871			8,017
Deferred financing costs, net of accumulated amortization of $3,563 and $3,946 at December 31, 1999 and 1998, respectively		4,007			4,696
Other assets, net		33,386			22,667
Total assets	$	1,471,364		$	1,586,317
LIABILITIES AND PARTNERS' CAPITAL:
Notes payable	$	755,485		$	812,788
Accrued interest payable		5,949			6,045
Preferred distributions payable		770			737
Real estate taxes payable		16,824			16,224
Accounts payable and accrued expenses—construction		5,555			8,402
Accounts payable and accrued expenses—operating		11,432			7,094
Security deposits		4,395			4,725
Other liability, net		10,693			11,729
Total liabilities		811,103			867,744
Limited partners' common capital interest (6,234 and 6,448 common Units), at redemption value		136,757			157,663
Preferred partner's capital interest (180 Series Z Preferred Units), at $25.00 liquidation preference		4,500			4,500
Commitments and contingencies
Partners' capital:
General partner (309 and 327common Units)		5,154			5,725
Limited partner (24,361 and 25,975 common Units)		348,850			385,685
Preferred partners (4,600 Series A Preferred Units and 2,000 Series B Preferred Units), at $25.00 liquidation preference		165,000			165,000
Total partners' capital		519,004			556,410
Total liabilities, partners' capital interest and partners' capital	$	1,471,364		$	1,586,317

The accompanying notes are an integral part of these consolidated balance sheets.

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GABLES REALTY LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in Thousands, Except Per Unit Data)

	Years ended December 31,
	1999			1998			1997
Revenues:
Rental revenues	$	221,689		$	199,292		$	132,371
Other property revenues		12,121			9,988			6,322
Total property revenues		233,810			209,280			138,693
Property management revenues		4,954			4,533			3,032
Development revenues, net		2,929			—			—
Equity in income of joint ventures		478			359			320
Interest income		674			417			371
Other		2,752			2,811			1,713
Total other revenues		11,787			8,120			5,436
Total revenues		245,597			217,400			144,129
Expenses:
Property operating and maintenance (exclusive of items shown separately below)		78,689			70,502			47,592
Real estate asset depreciation and amortization		45,538			40,087			24,712
Property management—owned		5,187			4,758			3,364
Property management—third party		3,706			3,219			2,332
Interest expense and credit enhancement fees		44,259			39,974			25,313
Amortization of deferred financing costs		919			984			992
General and administrative		5,796			6,242			3,248
Severance costs		2,800			—			—
Corporate asset depreciation and amortization		535			563			482
Total expenses		187,429			166,329			108,035
Gain on sale of real estate assets		8,864			—			5,349
Loss on treasury locks		—			(5,637	)		(1,178	)
Income before extraordinary loss		67,032			45,434			40,265
Extraordinary loss		—			—			(712	)
Net income		67,032			45,434			39,553
Dividends to preferred unitholders		(14,083	)		(10,252	)		(4,163	)
Net income available to common unitholders	$	52,949		$	35,182		$	35,390
Weighted average number of common Units outstanding—basic		32,277			30,212			23,441
Weighted average number of common Units outstanding—diluted		32,796			30,340			23,591
Per Common Unit Information:
Income before extraordinary loss—basic	$	1.64		$	1.16		$	1.54
Extraordinary loss—basic	$	—		$	—		$	(0.03	)
Net income—basic	$	1.64		$	1.16		$	1.51
Income before extraordinary loss—diluted	$	1.64		$	1.16		$	1.53
Extraordinary loss—diluted	$	—		$	—		$	(0.03	)
Net income—diluted	$	1.64		$	1.16		$	1.50

The accompanying notes are an integral part of these consolidated statements.

54

GABLES REALTY LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL

(Amounts in Thousands, Except Per Unit Data)

	General Partner			Limited Partner			Preferred Partners		Total Partners' Capital			Limited Partners' Common Capital Interest			Preferred Partner's Capital Interest
Balance, December 31, 1996	$	3,245		$	231,181		$	—	$	234,426		$	98,482		$	—
Contributions from the Trust related to:
Proceeds from exercise of share options		31			3,090			—		3,121			—			—
Proceeds from Share Builder Plan		—			61			—		61			—			—
Proceeds of 2,437 common share offerings, net of $3,463 issuance costs		625			61,892			—		62,517			—			—
Proceeds of 4,600 preferred share offering		(40	)		(3,969	)		115,000		110,991			—			—
Issuance of shares for trustee compensation		—			24			—		24			—			—
Issuance of share grants, net of deferred compensation		12			1,178			—		1,190			—			—
Contributions related to property acquisitions		147			(147	)		—		—			14,725			—
Conversion of redeemable Units to common shares		5			528			—		533			(533	)		—
Net income		354			29,535			—		29,889			5,501			—
Distributions declared ($1.98 per Unit)		(474	)		(39,659	)		—		(40,133	)		(7,297	)		—
Adjustment to reflect limited partners' redeemable capital at redemption value at balance sheet date		2			10			—		12			(12	)		—
Balance, December 31, 1997		3,907			283,724			115,000		402,631			110,866			—
Contributions from the Trust related to:
Proceeds from exercise of share options		37			3,670			—		3,707			—			—
Proceeds from Share Builder Plan		35			3,514			—		3,549			—			—
Proceeds of 3,311 common share offering, net of $1,861 issuance costs		875			86,655			—		87,530			—			—
Issuance of shares for trustee compensation		—			40			—		40			—			—
Issuance of share grants, net of deferred compensation		13			1,327			—		1,340			—			—
Proceeds of 2,000 preferred Unit offering		(13	)		(1,314	)		50,000		48,673			—			—
Contributions related to property acquisitions		829			(829	)		—		—			82,881			4,500
Conversion of redeemable Units to common shares		168			16,603			—		16,771			(16,771	)		—
Net income		352			27,688			—		28,040			7,142			—
Distributions declared ($2.02 per Unit)		(623	)		(49,714	)		—		(50,337	)		(11,989	)		—
Adjustment to reflect limited partners' redeemable capital at redemption value at balance sheet date		145			14,321			—		14,466			(14,466	)		—
Balance, December 31, 1998		5,725			385,685			165,000		556,410			157,663			4,500
Contributions from the Trust related to:
Proceeds from exercise of share options		12			1,220			—		1,232			—			—
Proceeds from Share Builder Plan		77			7,573			—		7,650			—			—
Issuance of shares for trustee compensation		1			71			—		72			—			—
Issuance of share grants, net of deferred compensation		17			1,667			—		1,684			—			—
Contributions related to property acquisitions		9			(9	)		—		—			919			—
Redemption of Units from the Trust for treasury share purchases		(501	)		(49,557	)		—		(50,058	)		—			—
Redemption of Units for cash		(59	)		59			—		—			(5,877	)		—
Net income		529			42,072			—		42,601			10,348			—
Distributions declared ($2.08 per Unit)		(669	)		(53,126	)		—		(53,795	)		(13,088	)		—
Adjustment to reflect limited partners' redeemable capital at redemption value at balance sheet date		13			13,195			—		13,208			(13,208	)		—
Balance, December 31, 1999	$	5,154		$	348,850		$	165,000	$	519,004		$	136,757		$	4,500

The accompanying notes are an integral part of these consolidated statements.

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GABLES REALTY LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in Thousands, Except Per Unit Data)

	Years Ended December 31,
	1999			1998			1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	67,032		$	45,434		$	39,553
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		46,992			41,634			26,186
Equity in income of joint ventures		(478	)		(359	)		(320	)
Gain on sale of real estate assets		(8,864	)		—			(5,349	)
Long-term compensation expense		1,040			1,072			574
Loss on treasury locks		—			5,637			1,178
Extraordinary loss		—			—			712
Amortization of discount on long-term liability		686			576			—
Operating distributions received from joint ventures		349			408			442
Change in operating assets and liabilities:
Restricted cash		(157	)		(2,822	)		4,616
Other assets		(5,370	)		(12,220	)		(1,055	)
Other liabilities, net		3,991			11,195			3,424
Net cash provided by operating activities		105,221			90,555			69,961
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition and construction of real estate assets		(74,171	)		(358,263	)		(241,585	)
Long-term land lease payments		—			(1,000	)		(1,000	)
Net proceeds from sale of real estate assets		96,712			—			13,174
Investment in joint venture		(6,734	)		—			—
Proceeds from contribution of real estate assets to joint venture		65,121			—			—
Net cash provided by (used in) investing activities		80,928			(359,263	)		(229,411	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions from the Trust related to:
Proceeds from common share offerings, net of issuance costs		—			87,530			62,517
Proceeds from preferred share offering, net of issuance costs		—			—			110,991
Proceeds from the exercise of share options		1,232			3,707			3,121
Share Builder Plan contributions		7,650			3,549			61
Proceeds from preferred Unit offering, net of issuance costs		—			48,673
Unit redemptions for cash		(5,877	)		—			—
Unit redemptions related to treasury share purchases		(48,890	)		—			—
Payments of deferred financing costs		(422	)		(1,713	)		(440	)
Treasury lock settlement payments		—			(6,723	)		—
Notes payable proceeds		44,802			538,522			233,849
Notes payable repayments		(102,105	)		(328,000	)		(188,808	)
Principal escrow deposits		(697	)		(697	)		(684	)
Preferred distributions paid		(14,050	)		(9,939	)		(3,739	)
Common distributions paid ($2.08, $2.02 and $2.47 per Unit, respectively)		(66,883	)		(62,326	)		(58,624	)
Net cash (used in) provided by financing activities		(185,240	)		272,583			158,244
Net change in cash and cash equivalents		909			3,875			(1,206	)
Cash and cash equivalents, beginning of period		7,054			3,179			4,385
Cash and cash equivalents, end of period	$	7,963		$	7,054		$	3,179
Supplemental disclosure of cash flow information:
Cash paid for interest	$	50,257		$	43,210		$	29,777
Interest capitalized		7,725			8,737			5,161
Cash paid for interest, net of amounts capitalized	$	42,532		$	34,473		$	24,616

The accompanying notes are an integral part of these consolidated statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in Thousands, Except Property and Per Unit Data)

1. ORGANIZATION AND FORMATION

    Gables Realty Limited Partnership (the "Operating Partnership" or "Gables") is the entity through which Gables Residential Trust (the "Trust"), a real estate investment trust (a "REIT"), conducts substantially all of its business and owns, either directly or through subsidiaries, substantially all of its assets. The Trust was formed in 1993 under Maryland law to continue and expand the operations of its privately owned predecessor organization. The Trust completed its initial public offering on January 26, 1994. Gables is a fully-integrated real estate company engaged in the multifamily apartment community management, development, construction, acquisition and disposition businesses. Gables also provides related brokerage and corporate rental housing services. Gables' third-party management businesses are conducted through two of its subsidiaries, Central Apartment Management, Inc. and East Apartment Management, Inc.

    As of December 31, 1999, the Trust was a 79.8% economic owner of the common equity of the Operating Partnership. The Trust controls the Operating Partnership through Gables GP, Inc. ("Gables GP"), a wholly-owned subsidiary of the Trust and the sole general partner of the Operating Partnership. This structure is commonly referred to as an umbrella partnership REIT or "UPREIT." The board of directors of Gables GP, the members of which are the same as the members of the Trust's board of trustees, manages the affairs of the Operating Partnership by directing the affairs of Gables GP. The Trust's limited partnership and indirect general partnership interests in the Operating Partnership entitle it to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to its ownership interest therein and entitle the Trust to vote on all matters requiring a vote of the limited partners. Generally, the other limited partners of the Operating Partnership are persons who contributed their direct or indirect interests in certain properties to the Operating Partnership, primarily in connection with the IPO, the South Florida acquisition and the Greystone acquisition (each as defined below). The Operating Partnership is obligated to redeem each common unit of limited partnership interest ("Unit") held by a person other than the Trust at the request of the holder for an amount equal to the fair market value of a share of the Trust's common shares at the time of such redemption, provided that the Trust, at its option, may elect to acquire each Unit presented for redemption for one common share or cash. Such limited partners' redemption rights are reflected in "limited partners' capital interest" in the accompanying consolidated balance sheets at the cash redemption amount at the balance sheet date. The Trust's percentage ownership interest in the Operating Partnership will increase with each redemption. In addition, whenever the Trust issues common shares or preferred shares, it is obligated to contribute any net proceeds to the Operating Partnership and the Operating Partnership is obligated to issue an equivalent number of common or preferred units, as applicable, to the Trust.

    Distributions to holders of Units are made to enable distributions to be made to the Trust's shareholders under its dividend policy. Federal income tax laws require the Trust to distribute 95% of its ordinary taxable income. The Operating Partnership makes distributions to the Trust to enable it to satisfy this requirement.

    As of December 31, 1999, Gables owned 79 completed multifamily apartment communities comprising 23,278 apartment homes, of which 38 were developed and 41 were acquired by Gables, and an indirect 25% general partner interest in two apartment communities developed by Gables comprising 663 apartment homes. Gables also owned three multifamily apartment communities under development at December 31, 1999 that are expected to comprise 940 apartment homes upon completion and an indirect 20% interest in eight apartment communities under development or in lease-up at December 31, 1999 that are expected to comprise 2,471 apartment homes upon completion.

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As of December 31, 1999, Gables owned parcels of land for the future development of eleven apartment communities expected to comprise an estimated 2,433 apartment homes. There can be no assurance that Gables will develop these parcels of land. Additionally, Gables has contracts or options to acquire additional parcels of land. There can be no assurance that Gables will acquire these land parcels; however, it is Gables' intent to develop an apartment community on each of these parcels of land, if purchased.

2. PORTFOLIO ACQUISITIONS

    On April 1, 1998, Gables acquired the properties and operations of Trammell Crow Residential South Florida ("South Florida"), which consisted of fifteen multifamily apartment communities containing a total of 4,197 apartment homes, and all of South Florida's residential construction and development and third party management activities. In consideration for those properties and operations, Gables (1) paid $155.0 million in cash, (2) assumed $135.9 million of tax-exempt debt, and (3) issued 2,348 Units valued at $64.9 million. In addition, on January 1, 2000, Gables issued 470 Units valued at $10.4 million and paid cash of $0.3 million related to a deferred portion of the purchase price. The acquisition increased the size of Gables' portfolio under management on April 1, 1998 from 28,000 to 40,000 apartment homes.

    The South Florida acquisition was accounted for under the purchase method of accounting in accordance with Accounting Principles Board Opinion No. 16. Accordingly, assets acquired and liabilities assumed were recorded at their estimated fair values. The accompanying consolidated statements of operations include the operating results of South Florida since April 1, 1998, the closing date of the acquisition. The following unaudited pro forma information for the year ended December 31, 1998 has been prepared assuming the South Florida acquisition had been consummated on January 1, 1998. The unaudited pro forma information (1) includes the historical operating results of the properties and operations acquired and (2) does not purport to be indicative of the results which actually would have been obtained had the South Florida acquisition been consummated on January 1, 1998 or which may be attained in future periods.

	Years Ended December 31,
	1999		1998
Total revenues	$	245,597	$	227,428
Net income available to common unitholders		52,949		34,632
Per common Unit information:
Net income—basic	$	1.64	$	1.12
Net income—diluted		1.64		1.12

    In April, 1998, Gables acquired four multifamily apartment communities comprising a total of 913 apartment homes located in Houston, Texas ("Greystone"). In connection with that acquisition, Gables assumed $31.0 million of indebtedness at fair value and issued 665 Units valued at $18.0 million. In addition, in December, 1999, Gables issued 34 Units valued at $0.9 million related to a deferred portion of the purchase price that was contingent upon 1999 economic performance.

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3. COMMON AND PREFERRED EQUITY ACTIVITY

Secondary Common Share Offerings

    Since the IPO, the Trust has issued a total of 14,831 common shares in eight offerings generating $347,771 in net proceeds which were generally used (1) to reduce outstanding indebtedness under interim financing vehicles utilized to fund development and acquisition activities and (2) for general working capital purposes, including funding of future development and acquisition activities.

Preferred Share Offerings

    On July 24, 1997, the Trust issued 4,600 shares of 8.30% Series A Cumulative Redeemable Preferred Shares (liquidation preference $25.00 per share). The net proceeds from this offering of $111.0 million were used to reduce outstanding indebtedness under interim financing vehicles. The Series A Preferred Shares may be redeemed by the Trust at $25.00 per share plus accrued and unpaid dividends on or after July 24, 2002. The Series A Preferred Shares have no stated maturity, sinking fund or mandatory redemption and are not convertible into any other securities of the Trust.

    On June 18, 1998, the Trust issued 180 shares of 5.0% Series Z Cumulative Redeemable Preferred Shares (liquidation preference $25.00 per share) in connection with the acquisition of a parcel of land for future development. The Series Z Preferred Shares may be redeemed by the Trust at any time for $25.00 per share plus accrued and unpaid dividends and are subject to mandatory redemption on June 18, 2018. The Series Z Preferred Shares are not subject to any sinking fund or convertible into any other securities of the Trust.

Issuances of Common Operating Partnership Units

    Since the IPO, the Operating Partnership has issued a total of 4,421 Units in connection with the South Florida acquisition, the Greystone acquisition, the acquisition of other operating apartment communities, and the acquisition of a parcel of land for future development.

Issuance of Preferred Operating Partnership Units

    On November 12, 1998, the Operating Partnership issued 2,000 of its 8.625% Series B Preferred Units to an institutional investor. The net proceeds from this issuance of $48.7 million were used to reduce outstanding indebtedness under interim financing vehicles. The Series B Preferred Units may be redeemed by the Trust at its option after November 14, 2003 and are exchangeable by the holder into 8.625% Series B Cumulative Redeemable Preferred Shares of the Trust on a one-for-one basis. This exchange right is generally not exercisable until after November 14, 2008. The Series B Preferred Units have no stated maturity, sinking fund, or mandatory redemption.

Common Equity Repurchase Program

    In 1999, Gables announced a common equity repurchase program pursuant to which the Trust is authorized to purchase up to $100 million of its outstanding common shares or Units. The Trust has repurchased shares from time to time in open market and privately negotiated transactions, depending on market prices and other conditions, using proceeds from sales of selected assets. Whenever the Trust repurchases common shares from shareholders, the Operating Partnership is required to redeem from the Trust an equivalent number of Units on the same terms and for the same aggregate price. After redemption, the Units redeemed by the Operating Partnership are no longer deemed outstanding.

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Units have also been redeemed for cash upon their presentation for redemption by unitholders. As of December 31, 1999, Gables had redeemed 2,379 Units for a total of $55,935, including 2,131 Units redeemed from the Trust. At December 31, 1999, $1,168 was accrued for unsettled Unit redemptions from the Trust.

4. OTHER FINANCING ACTIVITY

Property Sales

    During 1999, Gables sold three apartment communities located in Atlanta comprising 676 apartment homes, two apartment communities located in Memphis comprising 490 apartment homes, one apartment community located in Houston comprising 412 apartment homes, and an outparcel of land from an existing development community located in Dallas. The net proceeds from these sales totaled $96.7 million and were used to pay down outstanding borrowings under interim financing vehicles and purchase common shares and Units under Gables' common equity repurchase program.

Gables Residential Apartment Portfolio Joint Venture

    On March 26, 1999, Gables entered into a joint venture agreement with an affiliate of J.P. Morgan Investment Management, Inc. ("J.P. Morgan"). Gables' economic ownership interest in the joint venture is currently 20%. The business purpose of the joint venture is to develop, own and operate eight multifamily apartment communities, located in four of Gables' nine markets. On March 26, 1999, Gables contributed its interest in seven of the development communities to the joint venture in return for (1) cash of $60,347 and (2) an initial capital account in the joint venture of $15,214. On December 2, 1999, Gables contributed its interest in the eighth development community to the joint venture in return for (1) cash of $4,774 and (2) an increase in the initial capital account in the joint venture of $1,233. As of the respective contribution dates, Gables (1) had commenced construction of four of the communities, (2) owned the land for the future development of three of the communities, and (3) owned the acquisition right for the land for the future development of one of the communities. The capital budget for the development of the eight communities is $238 million and is being funded with 50% equity and 50% debt. The equity component is being funded 80% by J.P. Morgan and 20% by Gables. Gables' portion of the equity is being funded through contributions of cash and property. As of December 31, 1999, Gables had funded $22.2 million of its budgeted $23.8 million equity commitment to the joint venture. Gables serves as the managing member of the venture and has responsibility for all day-to-day operating matters. Gables also serves as the property manager, developer and general contractor for construction activities.

5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

    Gables is a fully-integrated real estate company engaged in the multifamily apartment community management, development, construction, acquisition and disposition businesses. Gables also provides related brokerage and corporate rental housing services. Gables' operating performance relies predominantly on net operating income from the multifamily apartment communities it owns which are located in nine cities in Texas, Georgia, Florida and Tennessee.

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Basis of Presentation

    The accompanying consolidated financial statements of Gables Realty Limited Partnership represent the consolidated accounts of Gables Realty Limited Partnership and its subsidiaries, including the management companies. Gables consolidates the financial statements of all entities in which it has a controlling financial interest, as that term is defined under generally accepted accounting principles ("GAAP"), through either majority voting interest or contractual agreements. All significant intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications

    Certain amounts in the 1998 and 1997 financial statements have been reclassified to conform to the 1999 presentation.

Use of Estimates

    The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Real Estate Assets and Depreciation

    Real estate assets are stated at the lower of depreciated cost or fair value, if deemed impaired. The cost of buildings and improvements includes interest, property taxes, insurance and allocated development overhead incurred during the construction period. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments are capitalized and depreciated over their useful lives. Depreciation is computed on a straight-line basis over the useful lives of the real estate assets with buildings and improvements depreciated over 19-40 years and furniture, fixtures and equipment depreciated over 5-10 years.

Investment in Joint Ventures

    Gables' 25% general partner interests in Arbors of Harbortown JV and Metropolitan Apartments JV and Gables' 20% interest in Gables Residential Apartment Portfolio JV are accounted for using the equity method of accounting.

Revenue Recognition

    Rental:  Gables leases its residential properties under operating leases with terms generally equal to one year or less. Rental income is recognized when earned, which materially approximates revenue recognition on a straight-line basis.

    Property management:  Gables provides property management services for properties in which it does not own a controlling interest. Income is recognized when earned.

    Development and construction services:  Gables provides development and construction services for properties in which it does not own a controlling interest. Income is recognized when earned on a percentage of completion basis.

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Cash and Cash Equivalents

    For purposes of the statements of cash flows, all investments purchased with an original maturity of three months or less are considered to be cash equivalents.

Restricted Cash

    Restricted cash is primarily comprised of residential security deposits, tax escrow funds, repairs and maintenance reserve funds and principal escrow bond funds.

Deferred Financing Costs and Amortization

    Deferred financing costs include fees and costs incurred to obtain financing and are capitalized and amortized over the terms of the related notes payable and written off upon their expiration.

Interest Rate Protection Agreements

    In the ordinary course of business, Gables is exposed to interest rate risks. Gables' senior management periodically seeks input from third party consultants regarding market interest rate and credit risk in order to evaluate its interest rate exposure. In certain situations, Gables may utilize derivative financial instruments in the form of rate caps, rate swaps or rate locks to hedge interest rate exposure by modifying the interest rate characteristics of related balance sheet instruments and prospective financing transactions. Gables does not utilize such instruments for trading or speculative purposes. Derivatives used as hedges must be effective at reducing the risk associated with the exposure being hedged, correlate in nominal amount, rate, and term with the balance sheet instrument being hedged, and be designated as a hedge at the inception of the derivative contract.

    Lump sum payments made or received at the inception or settlement of derivative instruments designated as hedges are capitalized and amortized as an adjustment to interest expense over the life of the associated balance sheet instrument. Monthly amounts paid or received under rate cap and rate swap hedge agreements are recognized as adjustments to interest expense as incurred. In the event that circumstances arise that indicate that an existing derivative instrument no longer meets the hedge criteria described above, the derivative is marked to market in the statement of operations.

    In anticipation of a projected seven-year debt offering, Gables entered into two forward treasury lock agreements in late 1997. The timing and amount of the projected debt offering was modified several times as a result of unanticipated capital transactions, including the South Florida acquisition. The treasury lock agreements were extended to align with the projected timing of the debt offering. The treasury lock agreement in place in September, 1998 was terminated due to certain economic conditions affecting the unsecured debt market. For the years ended December 31, 1998 and 1997, Gables recognized mark to market losses of $5,637 and $1,178, respectively, upon the expiration of the original and extended terms of the treasury lock agreements since the required hedge criteria no longer existed at those dates.

Property Management Expenses

    Gables manages its owned properties as well as properties owned by third parties for which Gables provides services for a fee. Property management expenses have been allocated between owned and

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third party properties in the accompanying statements of operations based on the proportionate number of owned and third party apartment homes managed by Gables during the applicable periods.

Income Taxes

    No federal or state income taxes are reflected in the accompanying financial statements since Gables Realty Limited Partnership is a partnership and its partners are required to include their respective share of profits and losses in their income tax returns. Gables provides management and other services through its management company subsidiaries. The taxable income of these management company subsidiaries, if any, is subject to tax at regular corporate rates. The tax attributes of these subsidiaries are immaterial to the accompanying consolidated financial statements.

Recent Accounting Pronouncements

    In June, 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" was issued, establishing accounting and reporting standards requiring that every derivative instrument, including certain derivative instruments embedded in other contracts, be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the statement of operations, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. SFAS No. 133, as amended by SFAS No. 137, is effective for Gables beginning January 1, 2001. The impact of SFAS No. 133 on Gables' financial statements will depend on the extent, type and effectiveness of Gables' hedging activities. SFAS No. 133 could increase volatility in net income and other comprehensive income.

6. NOTES PAYABLE

    Notes payable consist of the following:

	December 31,
	1999		1998
Unsecured senior notes	$	165,000	$	165,000
Tax-exempt variable-rate notes payable		150,070		150,070
Secured conventional fixed-rate notes payable		123,641		125,546
Unsecured conventional fixed-rate notes payable		117,361		118,442
Tax-exempt fixed-rate notes payable		90,545		90,730
Unsecured variable-rate credit facilities		68,868		123,000
Unsecured variable-rate term loan		40,000		40,000
Total notes payable	$	755,485	$	812,788

Unsecured Senior Notes

    In March, 1998, Gables issued $100,000 of senior unsecured notes which bear interest at 6.80%, were priced to yield 6.84%, and mature in March, 2005. In October, 1998, Gables issued (1) $50,000 of

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senior unsecured notes which bear interest at 6.55%, were priced to yield 6.59%, and mature in October, 2000 and (2) $15,000 of senior unsecured notes which bear interest at 6.60%, were priced at par, and mature in October, 2001.

Tax-Exempt Variable-Rate Notes Payable Totaling $44,930

    At December 31, 1999 and 1998, the variable-rate mortgage notes payable securing tax-exempt bonds totaling $44,930 were comprised of four loans, each of which is collateralized by an apartment community included in real estate assets. These bonds bear interest at variable rates of interest, adjusted weekly based upon a negotiated rate. The interest rates in effect at December 31, 1999 and 1998 were 5.5% and 4.1%, respectively. Tax-exempt variable rates are, and historically have been, significantly higher at year-end than during the year. The effective interest rates were 3.3%, 3.5% and 3.7% for the years ended December 31, 1999, 1998 and 1997, respectively. The bonds are currently enhanced by four letters of credit provided by a letter of credit facility entered into in October, 1997. The fee for the letters of credit under this facility is 0.95% per annum. The letter of credit facility has an initial term of five years with unlimited one-year extension options. Gables has exercised the first of its one-year extension options resulting in a maturity date for the facility of October, 2003. Three of the underlying bond issues mature in December, 2007 and the fourth matures in August, 2024.

Tax-Exempt Variable-Rate Notes Payable Totaling $105,140

    On April 1, 1998, Gables assumed five bond issues totaling $105,140 in connection with the South Florida acquisition. At December 31, 1999 and 1998, the interest rates on these bonds ranged from 4.75% to 5.70% (weighted average of 5.31%) and 3.45% to 4.05% (weighted average of 3.81%), respectively. Tax-exempt variable rates are, and historically have been, significantly higher at year-end than during the year. Effective interest rates averaged 3.3% for the year ended December 31, 1999 and 3.6% for the period April 1, 1998 to December 31, 1998. These five bond issues are enhanced by letters of credit provided by a letter of credit facility entered into on April 1, 1998 (the "South Florida Enhancement Facility"). The fee for the letters of credit is 1.0% per annum. The South Florida Enhancement Facility has an initial term of 10 years with three five-year extension options and is collateralized by (1) each apartment community induced for tax-exempt financing for which a letter of credit is issued and outstanding and (2) two additional communities. The maturity dates of the underlying bond issues range from August, 2006 to September, 2008.

Secured Conventional Fixed-Rate Notes Payable

    At December 31, 1999 and 1998, the fixed-rate notes payable were comprised of nine loans collateralized by eleven apartment communities included in real estate assets. The interest rates on these notes payable range from 6.75% to 8.77% (weighted average of 7.80%) and the maturity dates range from December, 2000 to December, 2015. Principal amortization payments are required based on amortization schedules ranging from 25 to 30 years.

    In January, 2000, Gables prepaid one of the fixed-rate notes payable scheduled to mature in December, 2000 which had a balance of $3,583 at December 31, 1999 and bore interest at a rate of 8.16%.

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Unsecured Conventional Fixed-Rate Notes Payable

    At December 31, 1999 and 1998, the unsecured fixed-rate notes payable were comprised of four loans. The interest rates on these notes payable range from 5.25% to 8.62% (weighted average of 8.32%) and the maturity dates range from December, 2002 to November, 2018. Principal amortization payments are required based on amortization schedules ranging from 20 to 30 years.

Tax-Exempt Fixed-Rate Notes Payable

    At December 31, 1999 and 1998, the tax-exempt fixed-rate indebtedness was comprised of five loans. One loan outstanding at December 31, 1999 and 1998 has a principal balance of $48,365 and is collateralized by three communities induced for tax-exempt financing and three additional communities. Principal amortization payments based on a 30-year amortization schedule are required on a monthly basis. These payments are retained in an escrow account and are not applied to reduce the outstanding principal balance of the loan. Principal payments through December 31, 1999 and 1998 are included in restricted cash in the accompanying balance sheets. The note payable bears interest at 6.38% and matures in August, 2004. The three underlying tax-exempt bond issues mature in August, 2024. The second loan, with an outstanding principal balance of $11,470 and $11,630 as of December 31, 1999 and 1998, respectively, represents a tax-exempt bond financing secured by one apartment community. The bond issue, which has a maturity of January, 2025, was credit enhanced for an annual fee of 0.60% and bears interest at 7.03%. Monthly escrow payments are required each year based on the annual principal payment due to the bondholders.

    On April 1, 1998, Gables assumed three bond issues totaling $30,735 in connection with the South Florida acquisition. Such bonds have an outstanding principal balance of $30,710 at December 31, 1999. Two of the bond issues bear interest at 4.75% and are enhanced by letters of credit provided by the South Florida Enhancement Facility previously described. The third bond issue, which initially bore interest at 5.75%, was refunded in May, 1999 to a fixed rate of 4.65% and is now enhanced by the South Florida Enhancement Facility. The maturity dates of the three bond issues range from February, 2004 to April, 2009. The bonds do not require principal amortization payments.

$225 Million Credit Facility

    Gables has a $225 million unsecured revolving credit facility that is provided by a consortium of banks. The facility currently has a maturity date of May, 2002 with two one-year extension options. Borrowings under the facility currently bear interest at Gables' option of LIBOR plus 0.95% or prime minus 0.25%. Such scheduled interest rates may be adjusted up or down based on changes in Gables' senior unsecured credit ratings. Gables may also enter into competitive bid loans with participating banks for up to $112.5 million at rates below the scheduled rates. In addition, there is an annual facility fee equal to 0.15% of the $225 million commitment. Gables' availability under the facility is based on the value of Gables' unencumbered real estate assets as compared to the amount of Gables' unsecured indebtedness. As of December 31, 1999, Gables had $44,000 in borrowings outstanding under the facility and, therefore, had $181,000 of remaining capacity on the $225 million commitment. As of December 31, 1998, Gables had $110,000 in borrowings outstanding under the facility.

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$25 Million Credit Facility

    Gables has a $25 million unsecured revolving credit facility with a bank that currently bears interest at LIBOR plus 0.95%. Gables expects to exercise one of its unlimited one-year extension options prior to the facility's current maturity in October, 2000. Gables had no borrowings outstanding under this facility at December 31, 1999 or 1998.

$25 Million Borrowing Facility

    Gables has a $25 million unsecured borrowing facility with a bank. The interest rate and maturity date related to each draw on this facility is agreed to between Gables and the bank prior to each draw. Gables expects the facility, which currently matures in April, 2000, to be renewed for an additional one-year term at maturity. At December 31, 1999 and 1998, Gables had $24,868 and $13,000, respectively, in borrowings outstanding under this facility at an interest rate of 6.0%.

Unsecured Variable-Rate Term Loan

    At December 31, 1999 and 1998, Gables had a $40,000 unsecured variable-rate term loan which bears interest at Gables' option of LIBOR plus 0.80% or prime minus 0.25%. This loan matures on November 22, 2001.

Restrictive Covenants

    Certain of Gables' debt agreements contain customary representations, covenants and events of default, including covenants which restrict the ability of the Operating Partnership to make distributions in excess of stated amounts, which in turn restricts the Trust's discretion to declare and pay dividends. In general, during any fiscal year the Operating Partnership may only distribute up to 95% of its consolidated income available for distribution (as defined in the related agreement) exclusive of distributions of capital gains for such year. The applicable debt agreements contain exceptions to these limitations to allow the Operating Partnership to make any distributions necessary to allow the Trust to maintain its status as a REIT. Gables does not anticipate that this provision will adversely effect the ability of the Operating Partnership to make distributions or the Trust's ability to declare dividends as currently anticipated.

    The tax-exempt bonds contain certain covenants which require a certain percentage of the apartments in such communities be rented to individuals based upon income levels specified by U.S. government programs, as defined.

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Maturities

    The aggregate maturities of notes payable at December 31, 1999 are as follows:

2000	$	81,780
2001		58,600
2002		130,280
2003		65,602
2004		79,383
2005 and thereafter		339,840
	$	755,485

Joint Venture Indebtedness

    The Arbors of Harbortown apartment community secures a $16.4 million tax-exempt bond obligation, which is recourse to Gables up to $1.0 million, bears interest at a variable low-floater rate, has a maturity date of April, 2013, and is payable in monthly installments of interest only. The recourse amount is fully cash-collateralized and held by the Arbors of Harbortown JV. The credit enhancement for the bond obligation expires in May, 2001.

    The Metropolitan Uptown apartment community secures a conventional fixed-rate loan with $17.7 million outstanding at December 31, 1999, 25% of which has been guaranteed by Gables. The loan has a maturity date of December 31, 2002 and bears interest at a rate of 7.18%.

    Each of the eight development communities owned by the Gables Residential Apartment Portfolio JV is secured by a construction loan with committed funding equal to 50% of the total budgeted development costs. The construction loans have an initial maturity of March 25, 2002 with two one-year extension options. As of December 31, 1999, there was an aggregate $60.0 million of indebtedness outstanding under these construction loans which currently bear interest at LIBOR plus 1.65%.

Interest Rate Protection Agreements

    The terms of the two interest rate protection agreements in place at December 31, 1999 are as follows:

Description of Agreement	Notional Amount	Strike Price		Effective Date	Termination Date
LIBOR, 30-day-"Knock-out Rate Swap"	25,000	5.76%	(a)	02/27/98	02/27/00
LIBOR, 30-day-"Rate Swap"	40,000	4.79%	(a)	11/30/98	09/29/00

(a)

The 30-day LIBOR rate in effect at December 31, 1999 was 6.49%.

Pledged Assets

    The aggregate net book value at December 31, 1999 of real estate assets pledged as collateral for indebtedness was $469,429.

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7. COMMITMENTS AND CONTINGENCIES

Office Leases

    Gables is party to office operating leases with various terms. Future minimum lease payments and rent expense for such leases are not material.

Contingencies

    The various entities comprising Gables are subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance. While the resolution of these matters cannot be predicted with certainty, management believes that the final outcome of such matters will not have a material adverse effect on the financial position or results of its operations.

8. EXTRAORDINARY LOSS

    Extraordinary loss of $712 for the year ended December 31, 1997 represents (1) the write-off of unamortized deferred financing costs and prepaid credit enhancement fees associated with the defeasance of the tax-exempt bond financing encumbering a property that was sold in January, 1997, and (2) the write-off of unamortized deferred financing costs associated with the February 28, 1997 retirement of a conventional mortgage note payable scheduled to mature on September 1, 1997.

9. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

    Disclosure about the estimated fair value of financial instruments is based on pertinent information available to management as of December 31, 1999. Such amounts have not been comprehensively revalued for purposes of these financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.

Cash Equivalents

    Gables estimates that the fair value of cash equivalents approximates carrying value due to the relatively short maturity of these instruments.

Notes Payable

    Gables estimates that the fair value of notes payable approximates carrying value based upon its effective current borrowing rate for issuance of debt with similar terms and remaining maturities.

Interest Rate Protection Agreements

    The estimated fair value of the two interest rate swap agreements is $460 at December 31, 1999. The estimated fair value for these agreements is based on the value of cash flows arising in the difference in the strike price per the agreements and projected LIBOR rates over the remaining term of these agreements.

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10. EARNINGS PER UNIT

    Basic earnings per Unit are computed based on net income available to common unitholders and the weighted average number of common Units outstanding. Diluted earnings per Unit reflect the assumed issuance of common Units under the Trust's share option and incentive plan and upon settlement of long-term liability, as applicable. The numerator and denominator used for both basic and diluted earnings per Unit computations are as follows:

	Years Ended December 31,
	1999		1998		1997
Basic and diluted income available to common unitholders (numerator):
Income before extraordinary loss—basic	$	52,949	$	35,182	$	36,102
Amortization of discount on long-term liability		686		—		—
Income before extraordinary loss—diluted	$	53,635	$	35,182	$	36,102
Net income—basic	$	52,949	$	35,182	$	35,390
Amortization of discount on long-term liability		686		—		—
Net income—diluted	$	53,635	$	35,182	$	35,390
Common Units (denominator):
Average Units outstanding—basic		32,277		30,212		23,441
Issuance of Units upon settlement of long-term liability		470		—		—
Incremental Units from assumed conversions of:
Stock options		41		128		150
Other		8		—		—
Average Units outstanding—diluted		32,796		30,340		23,591

    For the year ended December 31, 1998, 506 Units issuable upon settlement of long-term liability were not included in diluted earnings per Unit because the effect was anti-dilutive.

    Options to purchase 1,557 and 1,279 shares were outstanding at December 31, 1999 and 1998, respectively, but were not included in the computation of diluted earnings per Unit because the effect was anti-dilutive.

11. SEGMENT REPORTING

    Gables adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," during 1998. SFAS No. 131 established standards for reporting financial and descriptive information about operating segments in annual financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Gables' chief operating decision maker is its senior management group.

    Gables owns, operates and develops multifamily apartment communities in nine major markets located in Texas, Georgia, Florida and Tennessee. These apartment communities generate rental revenue and other income through the leasing of apartment homes to a diverse base of residents. Gables evaluates the performance of each of its apartment communities on an individual basis. However, because each of the apartment communities has similar economic characteristics, residents, and products and services, they have been aggregated into one reportable segment. These segments comprise 95%, 96% and 96% of Gables' total revenues for the years ended December 31, 1999, 1998 and 1997, respectively.

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    The primary financial measure for Gables' reportable business segment is net operating income ("NOI"), which represents total property revenues less property operating and maintenance expenses (as reflected in the accompanying statements of operations). Accordingly, NOI excludes certain expenses included in the determination of net income. Current year NOI is compared to prior year NOI and current year budgeted NOI as a measure of financial performance. The NOI yield or return on total capitalized costs is an additional measure of financial performance. NOI from apartment communities totaled $155,121, $138,778, and $91,101 for the years ended December 31, 1999, 1998 and 1997, respectively. All other segment measurements are disclosed in Gables' consolidated financial statements.

    Gables also provides management, brokerage, corporate apartment home and development and construction services to third parties. These operations, on an individual and aggregate basis, do not meet the quantitative thresholds for segment reporting per SFAS No. 131.

12. PROFIT SHARING PLAN

    Eligible employees of Gables may participate in a profit sharing plan pursuant to Section 401(k) of the Internal Revenue Code. Under the plan, employees may defer a portion of their salary on a pre-tax basis. Gables also has the discretion to make matching contributions, currently equal to 50% of an employee's first 4% salary deferral contribution. Expenses under this plan for the years ended December 31, 1999, 1998 and 1997 were not material.

    During January, 1996, Gables added the Gables Residential Trust Stock Fund as an investment option for the plan. The fund is comprised of the Trust's common shares. In connection with the addition of this fund to the plan, 100 common shares were registered for issuance under the plan. The plan trustee will purchase the Trust's common shares for the fund at the direction of the plan investment committee, either on the open market or directly from the Trust.

13. DISTRIBUTIONS AND SHARE BUILDER PLAN

    Gables has declared and paid distributions to common unitholders for the years ended December 31, 1999, 1998 and 1997 as follows:

Year	Per Unit Distributions
1999	$	2.08
1998	$	2.02
1997	$	1.98

    In January, 1995, the Trust adopted a dividend reinvestment and share purchase program pursuant to which shareholders could elect to reinvest dividends in additional common shares at a 2% discount to the then current market price of common shares and purchase additional common shares for cash (up to $20 per quarter) at 100% of the then current market price (the "Share Builder Plan").

    As of December 31, 1999, the Trust had issued all of the 500 shares registered for issuance under the Share Builder Plan. Given the Trust's current capital market strategy to repurchase shares under its common equity repurchase program, the Trust has resolved not to establish a new Share Builder Plan at this time. Accordingly, effective with the first quarter dividend payable on March 31, 2000, shareholders will no longer have a dividend reinvestment option available.

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14. 1994 SHARE OPTION AND INCENTIVE PLAN

    The Trust adopted the 1994 Share Option and Incentive Plan to provide incentives to officers, employees and non-employee trustees. The plan provides for the grant of options to purchase a specified number of common shares or the grant of restricted or unrestricted common shares. The total number of shares reserved for issuance under the plan, as amended, is the greater of 2,953 shares or 9% of the total number of outstanding common shares and Units. At December 31, 1999, the number of shares reserved for issuance was 2,953. The number of common shares which may be issued as restricted or unrestricted shares is equal to 50% of the number of shares available for issuance under the plan at such time. The Operating Partnership will issue a Unit for each common share of the Trust issued under the plan.

    To date, options have been granted in two or more series during each of 1994 through 1999 with an exercise price equal to the fair value of the Trust's common shares on the dates the options were granted. The options granted are generally exercisable in installments over three years, beginning one year after the date of grant. At December 31, 1999, 2,051 common shares are subject to outstanding options granted to the Trust's officers, employees and trustees. These outstanding options have exercise prices ranging from $19.125 to $27.625 and a weighted average remaining contractual life of 7.8 years at December 31, 1999.

    A summary of the options activity for the years ended December 31, 1999, 1998 and 1997 is as follows:

	1999				1998				1997
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Outstanding at beginning of year	2,022		$	25.39	937		$	22.59	904		$	21.82
Granted	210			23.88	1,305			27.01	235			25.04
Forfeited	(125	)		26.08	(56	)		25.63	(55	)		22.91
Exercised	(56	)		21.96	(164	)		22.18	(147	)		21.62
Outstanding at end of year	2,051		$	25.29	2,022		$	25.39	937		$	22.59
Exercisable at end of year	926		$	24.06	608		$	22.48	550		$	21.72

    Gables accounts for stock options issued under the plan in accordance with APB Opinion No. 25 "Accounting for Stock Issued to Employees" under which no compensation cost has been recognized since all options have been granted with an exercise price equal to the fair value of the Trust's common shares on the date of grant. Had compensation cost for these plans been determined consistent with Statement of Financial Accounting Standards No. 123 (SFAS 123) "Accounting for Stock-Based

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Compensation," Gables' net income and earnings per Unit would have been reduced to the following pro forma amounts:

		1999		1998		1997
Net income available to common unitholders:	As Reported	$	52,949	$	35,182	$	35,390
	Pro Forma		52,086		34,639		35,130
Basic earnings per Unit:	As Reported	$	1.64	$	1.16	$	1.51
	Pro Forma		1.61		1.14		1.50
Diluted earnings per Unit:	As Reported	$	1.64	$	1.16	$	1.50
	Pro Forma		1.61		1.14		1.49

    Because the SFAS 123 method of accounting has not been applied to options granted prior to January 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years.

    The weighted average fair value of options granted is $2.36, $1.92 and $2.14 for 1999, 1998 and 1997, respectively. The fair value of each option grant as of the date of grant has been estimated using the Black-Scholes option pricing model with the following weighted-average assumptions for grants in 1999, 1998 and 1997, respectively: risk free interest rates of 5.69%, 4.84% and 6.45%; expected lives of 6.86, 6.39 and 3.91; dividend yields of 8.88%, 7.55% and 7.99%, and expected volatility of 25%, 18% and 18%.

    The Trust has made the following grants of restricted shares and unrestricted shares under the plan:

Grant Date	Unrestricted Shares Granted	Restricted Shares Granted	Per Share Grant Value		Vesting Period for Restricted Shares
2-97	23	46	$	25.8750	Two equal annual installments, beginning 1-1-98
2-98	13	40		26.6875	Three equal annual installments, beginning 1-1-99
4-98	3	9		27.0625	Three equal annual installments, beginning 4-1-99
2-99	11	34		23.2500	Three equal annual installments, beginning 1-1-00
2-99	5	9		23.2500	Two equal annual installments, beginning 1-1-00
4-99	9	19		21.9375	Two equal annual installments, beginning 4-1-00
11-99	2	16		24.6250	One installment, on 12-1-02
1-00	12	36		22.6250	Three equal annual installments, beginning 1-1-01
3-00	6	20		21.8750	Three equal annual installments, beginning 1-1-01
3-00	3	5		21.8750	Two equal annual installments, beginning 1-1-01

    The value of the unrestricted shares granted is accrued as long-term compensation expense in the year the related service was provided. Upon issuance of the share grants, the value of the Units issued is recorded to partners' capital and the value of the restricted shares is recorded as a reduction to partners' capital as deferred compensation. Such deferred compensation is amortized ratably over the term of the vesting period.

15. SEVERANCE COSTS

    During 1999, Gables incurred severance costs associated with organizational changes resulting from management succession directives, including the resignation of the former chairman and chief executive officer effective January 1, 2000 and the resignation of the former chief operating officer effective

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May 21, 1999. The following is a summary of the activity that occurred during 1999 with respect to severance costs and the amount that is included in accounts payable and accrued expenses at December 31, 1999:

Severance costs accrued at December 31, 1998	$	—
Severance costs expensed in 1999		2,800
Severance costs paid in 1999		(1,440	)(a)
Severance costs accrued at December 31, 1999	$	1,360	(b)

(a)

Severance costs paid in 1999 include $214 of deferred compensation related to the accelerated vesting of restricted shares unvested at the effective date of separation.



(b)

The severance costs accrued at December 31, 1999 relate to the resignation of the former chairman and chief executive officer and will be paid in 2000.

16. RELATED PARTY TRANSACTIONS

    Gables provides management services to the joint ventures in which Gables has an ownership interest and management fees recognized for such services were $347, $225, and $241 for the years ended December 31, 1999, 1998, and 1997, respectively. Gables also provides development and construction services to the Gables Residential Apartment Portfolio JV and has recognized net development revenues of $2,495 for the year ended December 31, 1999 for such services.

17. QUARTERLY FINANCIAL INFORMATION (Unaudited)

    Quarterly financial information for the years ended December 31, 1999 and 1998 is as follows:

	Year Ended December 31, 1999
	First Quarter			Second Quarter		Third Quarter		Fourth Quarter
Total revenues	$	60,641		$	61,240	$	62,860	$	60,856
Gain on sale of real estate assets		666			—		4,019		4,179
Severance costs		(2,000	)		—		—		(800	)
Net income		12,504			14,517		19,402		20,609
Net income available to common unitholders		8,983			10,997		15,882		17,087
Net income per common Unit—basic		0.27			0.34		0.49		0.54
Net income per common Unit—diluted		0.27			0.34		0.49		0.54

	Year Ended December 31, 1998
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Total revenues	$	41,627		$	56,387		$	59,429		$	59,957
Loss on treasury locks		(1,811	)		(199	)		(3,627	)		—
Net income		9,198			11,706			10,086			14,444
Net income available to common unitholders		6,812			9,312			7,644			11,414
Net income per common Unit—basic		0.26			0.32			0.23			0.35
Net income per common Unit—diluted		0.26			0.32			0.23			0.35

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Schedule III

Gables Realty Limited Partnership
Real Estate Investments and Accumulated Depreciation as of December 31, 1999 (Dollars in Thousands)

									Gross Amount at Which Carried at Close of Period
			Initial Costs to Gables
							Costs Capitalized Subsequent To Acquisition											Year Original Construction Complete
Property Type and Location	Related Encumbrances		Land		Buildings and Improvements				Land		Buildings and Improvements		Total			Accumulated Depreciation			Year Gables Acquired
																(1)			(2)
Completed Apartment Communities:
Houston, TX	$	71,749	$	57,664	$	177,441	$	126,846	$	58,806	$	303,145	$	361,951		$	49,248	1981-1998	1987-1998
Atlanta, GA		78,576		62,033		86,145		191,892		62,264		277,806		340,070			46,591	1945-1998	1983-1997
Boca Raton, FL		135,850		56,079		302,171		7,329		56,079		309,500		365,579			17,197	1984-1998	1998
Dallas, TX		13,676		16,306		46,050		61,652		16,307		107,701		124,008			14,830	1985-1996	1993-1997
Austin, TX		—		9,988		32,242		59,869		9,988		92,111		102,099			8,349	1992-1998	1992-1998
Memphis, TN		29,474		4,177		23,674		27,320		4,177		50,994		55,171			12,255	1986-1996	1985-1996
Nashville, TN		34,931		4,032		—		57,520		4,087		57,465		61,552			17,784	1987-1996	1985-1994
San Antonio, TX		—		2,839		—		25,374		2,839		25,374		28,213			3,977	1995-1996	1994
Orlando, FL		—		5,712		—		45,406		5,751		45,367		51,118			2,016	1998-1999	1996
Total	$	364,256	$	218,830	$	667,723	$	603,208	$	220,298	$	1,269,463	$	1,489,761		$	172,247
Apartment Communities Under Construction:
Dallas, TX	$	—	$	10,561	$	—	$	3,723	$	10,561	$	3,723	$	14,284		$	—	n/a	1997-1999
Orlando, FL		—		9,128		—		14,572		9,128		14,572		23,700			—	n/a	1998
Total	$	—	$	19,689	$	—	$	18,295	$	19,689	$	18,295	$	37,984		$	—
Land Held for Future Development of Apartment Communities:
Houston, TX	$	—	$	7,851	$	—	$	—	$	7,851	$	—	$	7,851		$	—	n/a	1998
Atlanta, GA		—		16,504		—		—		16,504		—		16,504			—	n/a	1997-1998
Dallas, TX		—		12,015		—		—		12,015		—		12,015			—	n/a	1994-1999
Memphis, TN		—		606		—		—		606		—		606			—	n/a	1996
San Antonio, TX		—		1,192		—		—		1,192		—		1,192			—	n/a	1994
Total	$	—	$	38,168	$	—	$	—	$	38,168	$	—	$	38,168		$	—
Grand Totals	$	364,256	$	276,687	$	667,723	$	621,503	$	278,155	$	1,287,758	$	1,565,913	(3)	$	172,247

(1)

Depreciation of apartment communities is calculated on a straight line basis over an estimated useful life ranging from 19 to 40 years for buildings and improvements and an estimated useful life ranging from 5 to 10 years for furniture, fixtures, and equipment.

(2)

The year acquired represents the year Gables acquired a completed community or the year Gables acquired the land for the development of an apartment community.

(3)

Excludes Gables' investment in joint ventures totaling $23,471.

74

Schedule III

Gables Realty Limited Partnership

Real Estate Investments and Accumulated Depreciation
as of December 31, 1999

(Dollars in Thousands)

    A summary of activity for real estate investments and accumulated depreciation is as follows:

	Years ended December 31,
	1999			1998		1997
Real estate investments:
Balance, beginning of year	$	1,681,961		$	1,056,228	$	784,600
Additions:
Acquisitions, including renovation expenditures		7,660			462,237		179,346
Development costs incurred, including related land acquisitions		41,829			155,541		96,551
Capital expenditures for completed communities		10,037			7,955		4,878
Total additions		59,526			625,733		280,775
Contribution to Gables Residential Apartment Portfolio JV		(76,280	)		—		—
Sales		(99,294	)		—		(9,147	)
Balance, end of year(1)	$	1,565,913		$	1,681,961	$	1,056,228
Accumulated depreciation:
Balance, beginning of year	$	138,239		$	98,236	$	74,903
Depreciation		45,454			40,003		24,655
Sales		(11,446	)		—		(1,322	)
Balance, end of year	$	172,247		$	138,239	$	98,236
Reconciliation of depreciation above to statements of operations:
Depreciation in rollforward of accumulated depreciation above	$	45,454		$	40,003	$	24,655
Amortization of prepaid land lease payments(2)		84			84		57
Real estate asset depreciation and amortization expense reflected in the accompanying statements of operations.	$	45,538		$	40,087	$	24,712

(1)

Excludes Gables' investment in joint ventures totaling $23,471, $161, and $210 for the years ended December 31, 1999, 1998, and 1997, respectively.

(2)

Gables has leased two parcels of land pursuant to two long-term land lease agreements. The prepaid lease payments, net of accumulated amortization, are included in other assets in the accompanying balance sheets.

75

QuickLinks

DOCUMENTS INCORPORATED BY REFERENCE
PART I

ITEM 1. BUSINESS
Introduction
Business Objectives and Strategy
The Management Companies
Competition
Environmental Matters

Costs of Compliance with Americans with Disabilities Act and Similar Laws
Insurance
Employees
Tax Matters
Policies with Respect to Significant Business Activities
Risk Factors

ITEM 2. PROPERTIES

Completed Community Features as of December 31, 1999

ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
ITEM 6. SELECTED FINANCIAL AND OPERATING INFORMATION

GABLES REALTY LIMITED PARTNERSHIP SELECTED FINANCIAL AND OPERATING INFORMATION
NOTES TO SELECTED FINANCIAL AND OPERATING INFORMATION

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Amounts in Thousands, Except Property and Per Unit Data)
Business Objectives and Strategy
Forward-Looking Statements
Portfolio Acquisitions
Common and Preferred Equity Activity
Other Financing Activity
Results of Operations

Liquidity and Capital Resources
Inflation
Certain Factors Affecting Future Operating Results
Recent Accounting Pronouncements
Year 2000
SUPPLEMENTAL DISCUSSION—Funds From Operations and Adjusted Funds From Operations

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULE AND REPORTS ON FORM 8-K
14(a)(1) and (2) Financial Statements and Schedule
14(a)(3) Exhibits
14(b) Reports on Form 8-K
14(c) Exhibits

SIGNATURES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

EX-3.7

                                                                     Exhibit 3.7







                       SECOND AMENDED AND RESTATED BYLAWS

                                       OF

                            GABLES RESIDENTIAL TRUST




























                                October 21, 1996





                       SECOND AMENDED AND RESTATED BYLAWS
                                       OF
                            GABLES RESIDENTIAL TRUST


                                TABLE OF CONTENTS






                                                                                                               Page
                                                                                                               ----

                                                                                                            
ARTICLE I - MEETINGS OF SHAREHOLDERS                                                                             1

         1.01.    PLACE                                                                                          1
         1.02.    ANNUAL MEETING                                                                                 1
         1.03.    MATTERS TO BE CONSIDERED AT ANNUAL MEETING                                                     1
         1.04.    SPECIAL MEETINGS                                                                               1
         1.05.    NOTICE                                                                                         1
         1.06.    SCOPE OF NOTICE                                                                                1
         1.07.    QUORUM                                                                                         1
         1.08.    VOTING                                                                                         1
         1.09.    PROXIES                                                                                        1
         1.10.    CONDUCT OF MEETINGS                                                                            1
         1.11.    TABULATION OF VOTES                                                                            2
         1.12.    VOTING BY BALLOT                                                                               2
         1.13.    REPORTS TO SHAREHOLDERS                                                                        2
         1.14.    NOMINATIONS AND SHAREHOLDER BUSINESS                                                           2

ARTICLE II - TRUSTEES                                                                                            5

         2.01.    GENERAL POWERS                                                                                 5
         2.02.    OUTSIDE ACTIVITIES                                                                             5
         2.03.    MEETINGS                                                                                       5
         2.04.    SPECIAL MEETINGS                                                                               5
         2.05.    NOTICE                                                                                         5
         2.06.    QUORUM                                                                                         5
         2.07.    VOTING                                                                                         5
         2.08.    CONDUCT OF MEETINGS                                                                            5
         2.09.    RESIGNATIONS                                                                                   5
         2.10.    REMOVAL OF TRUSTEES                                                                            5
         2.11.    VACANCIES                                                                                      6
         2.12.    INFORMAL ACTION BY TRUSTEES                                                                    6
         2.13.    COMPENSATION                                                                                   6
         2.14.    NUMBER                                                                                         6

ARTICLE III - COMMITTEES                                                                                         6

         3.01.    NUMBER, TENURE AND QUALIFICATION                                                               6
         3.02.    DELEGATION OF POWER                                                                            6
         3.03.    MEETINGS                                                                                       6
         3.04.    QUORUM                                                                                         6
         3.05.    CONDUCT OF MEETINGS                                                                            6
         3.06.    INFORMAL ACTION BY COMMITTEES                                                                  6










                                                                                                               Page
                                                                                                               ----

                                                                                                            
ARTICLE IV - OFFICERS                                                                                            7

         4.01.    POWERS AND DUTIES                                                                              7
         4.02.    REMOVAL                                                                                        7
         4.03.    OUTSIDE ACTIVITIES                                                                             7
         4.04.    VACANCIES                                                                                      7
         4.05.    CHAIRMAN OF THE BOARD                                                                          7
         4.06.    PRESIDENT                                                                                      7
         4.07.    VICE PRESIDENTS                                                                                7
         4.08.    SECRETARY                                                                                      7
         4.09.    TREASURER                                                                                      8
         4.10.    ASSISTANT SECRETARIES AND ASSISTANT TREASURERS                                                 8
         4.11.    SUBORDINATE OFFICERS                                                                           8
         4.12.    SALARIES                                                                                       8

ARTICLE V - SHARES                                                                                               8

         5.01.    CERTIFICATES                                                                                   8
         5.02.    SHARE LEDGER                                                                                   8
         5.03.    RECORDING TRANSFERS OF SHARES                                                                  8
         5.04.    LOST CERTIFICATE                                                                               9
         5.05.    CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE                                             9
         5.06.    FRACTIONAL SHARES                                                                              9

ARTICLE VI - DIVIDENDS AND DISTRIBUTIONS                                                                         9

         6.01.    DECLARATION                                                                                    9
         6.02.    CONTINGENCIES                                                                                  9

ARTICLE VII -INDEMNIFICATION                                                                                    10

         7.01     INDEMNIFICATION OF TRUSTEES AND OFFICERS                                                      10
         7.02.    EXPENSES; INDEMNIFICATION PROCEDURE                                                           10
         7.03.    NONEXCLUSIVITY OF INDEMNIFICATION RIGHTS                                                      11
         7.04.    PARTIAL INDEMNIFICATION                                                                       11
         7.05.    MUTUAL ACKNOWLEDGMENT                                                                         12
         7.06.    INSURANCE                                                                                     12
         7.07.    SEVERABILITY                                                                                  12
         7.08.    EXCEPTIONS                                                                                    12
         7.09.    CONSTRUCTION OF CERTAIN PHRASES                                                               12
         7.10.    SUCCESSORS AND ASSIGNS                                                                        13
         7.11.    ATTORNEYS'FEES                                                                                13
         7.12.    INDEMNIFICATION OF SHAREHOLDERS                                                               13

ARTICLE VIII - NOTICES                                                                                          14

         8.01.    NOTICES                                                                                       14
         8.02.    SECRETARY TO GIVE NOTICE                                                                      14
         8.03.    WAIVER OF NOTICE                                                                              14








                                                                                                               Page
                                                                                                               ----
                                                                                                          
ARTICLE IX - MISCELLANEOUS                                                                                      14

         9.01.    BOOKS AND RECORDS                                                                             14
         9.02.    INSPECTION OF BYLAWS AND CORPORATE RECORDS                                                    14
         9.03.    CONTRACTS                                                                                     14
         9.04.    CHECKS, DRAFTS, ETC                                                                           14
         9.05.    LOANS                                                                                         15
         9.06.    FISCAL YEAR                                                                                   15
         9.07.    BYLAWS SEVERABLE                                                                              15

ARTICLE X - AMENDMENT OF BYLAWS                                                                                 15

         10.01.   BY TRUSTEES                                                                                   15
         10.02.   BY SHAREHOLDERS                                                                               15








                      ARTICLE I - MEETINGS OF SHAREHOLDERS

     1.01. PLACE. All meetings of the holders of the issued and outstanding
shares of beneficial interest of the Trust (the "Shareholders") shall be held at
the principal executive office of the Trust or such other place within the
United States as shall be stated in the notice of the meeting.

     1.02. ANNUAL MEETING. An annual meeting of the Shareholders for the
election of Trustees and the transaction of such other business as properly may
be brought before the meeting shall be held on the second Tuesday in May of each
year beginning in 1995 or at such other date and time as may be fixed by the
Board of Trustees. If the date fixed for the annual meeting shall be a legal
holiday, such meeting shall be held on the next succeeding business day. If no
annual meeting is held on the date designated, a special meeting in lieu thereof
may be held, and such special meeting shall have, for purposes of these Bylaws
or otherwise, all the force and effect of an annual meeting. Any and all
references hereafter in these Bylaws to an annual meeting or to annual meetings
shall be deemed to refer also to any special meeting(s) in lieu thereof.

     1.03. MATTERS TO BE CONSIDERED AT ANNUAL MEETING. Except as provided by
Title 8 of the Maryland General Corporation Law, as amended from time to time,
any business may be conducted and any proposals may be acted upon at an annual
meeting of Shareholders.

     1.04. SPECIAL MEETINGS. The Chairman of the Board, the President or a
majority of the Board of Trustees may call special meetings of the Shareholders.
Special meetings of Shareholders shall also be called by the Secretary upon the
written request of the holders of shares representing at least a majority of the
votes entitled to be cast at such meeting. Such request shall state the purpose
or purposes of such meeting and the matters proposed to be acted on thereat.

     1.05. NOTICE. Not less than ten (10) nor more than ninety (90) days before
the date of every meeting of Shareholders, written or printed notice of such
meeting shall be given, in accordance with Article VIII, to each Shareholder
entitled to vote or entitled to notice by statute, stating the time and place of
the meeting and, in the case of a special meeting or as otherwise may be
required by statute, the purpose or purposes for which the meeting is called.

     1.06. SCOPE OF NOTICE. No business shall be transacted at a special meeting
of Shareholders except that specifically designated in the special meeting
notice. Any business of the Trust may be transacted at the annual meeting
without being specifically designated in the notice, except such business as is
required by statute to be stated in such notice.

     1.07. QUORUM. At any meeting of Shareholders, the presence in person or by
proxy of Shareholders entitled to cast a majority of the votes shall constitute
a quorum; but this Section shall not affect any requirement under any statute or
the Declaration of Trust of the Trust, as amended (the "Declaration of Trust"),
for the vote necessary for the adoption of any measure. If, however, a quorum is
not present at any meeting of the Shareholders, the Shareholders present in
person or by proxy shall have the power to adjourn the meeting from time to time
to a date not more than 120 days after the record date without notice other than
announcement at the meeting until a quorum is present and the meeting so
adjourned may be reconvened without further notice. At any adjourned meeting at
which a quorum is present, any business may be transacted that might have been
transacted at the meeting as originally notified. The Shareholders present at a
meeting which has been duly called and convened and at which a quorum is present
at the time counted may continue to transact business until adjournment,
notwithstanding the withdrawal of enough Shareholders to leave less than a
quorum.





     1.08. VOTING. A plurality of the votes cast at a meeting of Shareholders
duly called and at which a quorum is present shall be sufficient to elect a
Trustee. A majority of the votes cast at a meeting of Shareholders duly called
and at which a quorum is present shall be sufficient to take or authorize action
upon any matter which may properly come before the meeting, unless more than a
majority of the votes cast is specifically required by statute, the Declaration
of Trust or these Bylaws. Unless otherwise provided by statute, the Declaration
of Trust or these Bylaws, each outstanding share (a "Share") of beneficial
interest of the Trust, regardless of class, shall be entitled to one vote upon
each matter submitted to a vote at a meeting of Shareholders. Shares directly or
indirectly owned by the Trust shall not be voted in any meeting and shall not be
counted in determining the total number of outstanding Shares entitled to vote
at any given time, but Shares held by the Trust in a fiduciary capacity may be
voted and shall be counted in determining the total number of outstanding Shares
at any given time.

     1.09. PROXIES. A Shareholder may vote the Shares owned of record by such
Shareholder, either in person or by proxy executed in writing by the
Shareholder or by such Shareholder's duly authorized attorney in fact. Such
proxy shall be filed with the Secretary of the Trust before or at the time of
the meeting. No proxy shall be valid after eleven (11) months from the date
of its execution, unless otherwise provided in the proxy.

     1.10. CONDUCT OF MEETINGS. The Chairman of the Board or, in the absence of
the Chairman, the President, or, in the absence of the Chairman and the
President, a Vice President, or, in the absence of the Chairman, President and
Vice Presidents, a presiding Officer elected at the meeting, shall preside over
meetings of the Shareholders. The Secretary of the Trust, or, in the absence of
the Secretary and Assistant Secretaries, the person appointed by the presiding
Officer of the meeting shall act as secretary of such meeting.

     1.11. TABULATION OF VOTES. At any annual or special meeting of
Shareholders, the presiding Officer shall be authorized to appoint a teller for
such meeting ("the Teller"). The Teller may, but need not, be an Officer or
employee of the Trust. The Teller shall be responsible for tabulating or causing
to be tabulated shares voted at the meeting and reviewing or causing to be
reviewed all proxies. In tabulating votes, the Teller shall be entitled to rely
in whole or in part on tabulations and analyses made by personnel of the Trust,
its counsel, its transfer agent, its registrar or such other organizations that
are customarily employed to provide such services. The Teller shall be
authorized to determine the legality and sufficiency of all votes cast and
proxies delivered under the Trust's Declaration of Trust, Bylaws and applicable
law. The presiding Officer may review all determinations made by the Teller
hereunder, and in doing so the presiding Officer shall be entitled to exercise
his or her sole judgment and discretion and he or she shall not be bound by any
determinations made by the Teller.

     1.12. VOTING BY BALLOT. Voting on any question or in any election may be
VIVA VOCE unless the presiding Officer shall order or any Shareholder shall
demand that voting be by ballot.

     1.13. REPORTS TO SHAREHOLDERS. Not later than 90 days after the close of
each fiscal year of the Trust, the Trustees shall deliver or cause to be
delivered a report of the business and operations of the Trust during such
fiscal year to the Shareholders, containing a balance sheet and a statement of
income and surplus of the Trust, accompanied by the certification of an
independent public accountant, and such further information as the Trustees may
determine is required pursuant to any law or regulation to which the Trust is
subject. A signed copy of the annual report and the accountant's certificate
shall be filed by the Trustees with the State Department of Assessments and
Taxation of Maryland, and with such other governmental agencies as may be
required by law and as the Trustees may deem appropriate.

     1.14.    NOMINATIONS AND SHAREHOLDER BUSINESS.

     (a) ANNUAL MEETINGS OF SHAREHOLDERS.

                  (1) With respect to an annual meeting of Shareholders,
         nominations for elections to the Board of Trustees and the proposal of
         business to be considered by the Shareholders may be made only (i) by
         or at the direction of the Board of Trustees or (ii) by any Shareholder
         who was a Shareholder of record at the time of giving of notice, who is
         entitled to vote at the meeting and who complied with the notice
         procedures set forth in this Section 1.14.







                  (2) For a proposal to be properly brought before an annual
         meeting by a Shareholder, other than a shareholder proposal included in
         the Company's proxy statement pursuant to Rule 14a-8 of the Securities
         Exchange Act of 1934, as amended, the Shareholder must have given
         timely notice thereof in writing to the Secretary of the Company, and
         such Shareholder or his representative must be present in person at the
         annual meeting. For the first annual meeting following the initial
         public offering of common shares of beneficial interest of the Company,
         a Shareholder's notice shall be timely if delivered to, or mailed and
         received at, the principal executive office of the Company not later
         than the close of business on the 20th calendar day (or if that day is
         not a business day for the Company, on the next business day) following
         the date on which notice of the date of the first annual meeting is
         mailed or otherwise transmitted to Shareholders. For all subsequent
         annual meetings, a Shareholder's notice shall be timely if delivered
         to, or mailed and received at, the principal executive offices of the
         Company (A) not less than 75 days nor more than 180 days prior to the
         anniversary date of the immediately preceding annual meeting of
         Shareholders or special meeting in lieu thereof (the "Anniversary
         Date") or (B) in the event that the annual meeting of Shareholders is
         called for a date more than 7 calendar days prior to the Anniversary
         Date, not later than the close of business on (1) the 20th calendar day
         (or if that day is not a business day for the Company, on the next
         succeeding business day) following the earlier of (x) the date on which
         notice of the date of such meeting was mailed to Shareholders, or (y)
         the date on which the date of such meeting was publicly disclosed, or
         (2) if such date of notice or public disclosure occurs more than 75
         calendar days prior to the scheduled date of such meeting, then the
         later of (x) the 20th calendar day (or if that day is not a business
         day for the Company, on the next succeeding business day) following the
         date of the first to occur of such notice or public disclosure or (y)
         the 75th calendar day prior to such scheduled date of such meeting (or
         if that day is not a business day for the Company, on the next
         succeeding business day).

                  (3) A Shareholder's notice to the Secretary shall set forth as
         to each matter the Shareholder proposes to bring before the annual
         meeting (i) a brief description of the proposal desired to be brought
         before the annual meeting and the reasons for conducting such business
         at the annual meeting, (ii) the name and address, as they appear on the
         Company's share transfer books, of the Shareholder proposing such
         business and of the beneficial owners (if any) of the shares registered
         in such Shareholder's name and the name and address of other
         Shareholders known by such Shareholder to be supporting such proposal
         on the date of such Shareholder's notice, (iii) the class and number of
         shares of the Company's capital stock which are beneficially owned by
         the Shareholder and such beneficial owners (if any) on the date of such
         Shareholder's notice and by any other Shareholders known by such
         Shareholder to be supporting such proposal on the date of such
         Shareholder's notice, and (iv) any financial interest of the
         Shareholder or of any such beneficial owner in such proposal.

                  (4) If the Board of Trustees, or a designated committee
         thereof, determines that any Shareholder proposal was not timely made
         in accordance with the terms of this Section 1.14, such proposal shall
         not be presented for action at the annual meeting in question. If the
         Board of Trustees, or a designated committee thereof, determines that
         the information provided in a Shareholder's notice does not satisfy the
         informational requirements of this section in any material respect, the
         Secretary of the Company shall promptly notify such Shareholder of the
         deficiency in the notice. Such Shareholder shall have an opportunity to
         cure the deficiency by providing additional information to the
         Secretary within the period of time, not to exceed five (5) days from
         the date such deficiency notice is given to the Shareholder, determined
         by the Board of Trustees or such committee. If the deficiency is not
         cured within such period, or if the Board of Trustees or such committee
         determines that the additional information provided by the Shareholder,
         together with the information previously provided, does not satisfy the
         requirements of this Section 1.14 in any material respect, then such
         proposal shall not be presented for action at the annual meeting in
         question.

                  (5) Notwithstanding the procedure set forth in the preceding
         paragraph, if neither the Board of Trustees nor such committee makes a
         determination as to the validity of any Shareholder proposal as set
         forth above, the presiding Officer of the annual meeting shall
         determine and declare at the annual meeting whether the Shareholder
         proposal was made in accordance with the terms of this Section 1.14. If
         the presiding Officer determines that a Shareholder proposal was made
         in accordance with the terms of this




         Section 1.14, the presiding Officer shall so declare at the annual
         meeting. If the presiding Officer determines that a Shareholder
         proposal was not made in accordance with the provisions of this Section
         1.14, the presiding Officer shall so declare at the annual meeting and
         such proposal shall not be acted upon at the annual meeting.

                  (6) This provision shall not prevent the consideration and
         approval or disapproval at the annual meeting of reports of Officers,
         Trustees and committees of the Board of Trustees, but in connection
         with such reports, no new business shall be acted upon at such annual
         meeting except in accordance with the provisions of this Section 1.14.

     (b) SPECIAL MEETINGS OF SHAREHOLDERS. Only such business shall be conducted
at a special meeting of Shareholders as shall have been brought before the
meeting pursuant to the Trust's notice of such meeting. Nominations of persons
for election to the Board of Trustees may be made at a special meeting of
Shareholders at which Trustees are to be elected pursuant to the Trust's notice
of meeting (i) by or at the direction of the Board of Trustees or (ii) provided
that the Board of Trustees has determined that Trustees shall be elected at such
special meeting, by any Shareholder who is a Shareholder of record at the time
of giving of notice provided for in this Section 1.14(b), who is entitled to
vote at the meeting and who complied with the notice procedures set forth in
this Section 1.14(b). In the event the Trust calls a special meeting of
Shareholders for the purpose of electing one or more Trustees to the Board of
Trustees, any such Shareholder may nominate a person or persons (as the case may
be) for election to such position as specified in the Trust's notice of meeting
if the Shareholder's notice complies with the requirements of Section 1.14(a)
and is delivered to the Secretary at the principal executive offices of the
Trust not earlier than the 90th day prior to such special meeting and later than
the close of business on the 60th day prior to such special meeting or the tenth
day following the day on which public announcement is first made of the date of
the special meeting and of the nominees proposed by the Trust to be elected at
such meeting.

     (c) GENERAL.

                  (1) The presiding officer of the meeting shall have the power
         and duty to determine whether a nomination or any business proposed to
         be brought before the meeting was made in accordance with the
         procedures set forth in this Section 1.14 and, if any proposed
         nomination or business was not made in compliance with this Section
         1.14, to declare that such defective nomination or proposal be
         disregarded.

                  (2) Notwithstanding the foregoing provisions of this Section
         1.14, a Shareholder also shall comply with all applicable requirements
         of state law and of the Exchange Act and rules and regulations
         thereunder with respect to the matters set forth in this Section 1.14.
         Nothing in this Section 1.14 shall be deemed to affect any rights of
         Shareholders to request inclusion of proposals in the Trust's proxy
         statement pursuant to Rule 14a-8 under the Exchange Act.


                              ARTICLE II - TRUSTEES

     2.01. GENERAL POWERS. The business and affairs of the Trust shall be
managed by its Board of Trustees.

     2.02. OUTSIDE ACTIVITIES. The Board of Trustees, each Trustee, and the
agents, Officers and employees of the Trust or of the Board of Trustees or of
any Trustee may engage with or for others in business activities of the types
conducted by the Trust; none of them has an obligation to notify or present to
the Trust or each other any investment opportunity that may come to such
person's attention even though such investment might be within the scope of the
Trust's purposes or various investment objectives. Any interest (including any
interest as defined in Section 2-419(a) of the Maryland General Corporation Law)
that a Trustee has in any investment opportunity presented to the Trust must be
disclosed by such Trustee to the Board of Trustees (and, if voting thereon, to
the Shareholders or to any committee of the Board of Trustees) within ten (10)
days after the later of the date upon which such Trustee becomes aware of such
interest or that the Trust is considering such investment opportunity. If such
interest comes to the interested Trustee's attention after a vote to take such
investment opportunity, the voting body shall reconsider such investment
opportunity if not already consummated or implemented.



     2.03. MEETINGS. The Board of Trustees may provide, by resolution, the time,
date and place, either within or without the State of Maryland, for the holding
of regular meetings of the Board of Trustees without other notice than such
resolutions.

     2.04. SPECIAL MEETINGS. Special meetings of the Board of Trustees may be
called by or at the request of the Chairman of the Board, the President or a
majority of the Trustees then in office. The person or persons authorized to
call special meetings of the Board of Trustees may fix any place, either within
or without the State of Maryland, as the place for holding any special meeting
of the Board of Trustees called by them.

     2.05. NOTICE. Notice of any special meeting to be provided herein shall be
given, in accordance with Article VIII, by written notice delivered personally,
telegraphed or telecopied to each Trustee at his or her business or residence at
least twenty-four (24) hours or by mail at least five (5) days prior to the
meeting. Neither the business to be transacted at, nor the purpose of, any
annual, regular or special meeting of the Board of Trustees need be specified in
the notice, unless specifically required by statute, the Declaration of Trust or
these Bylaws.

     2.06. QUORUM. A majority of the Board of Trustees then in office shall
constitute a quorum for transaction of business at any meeting of the Board of
Trustees, provided that, if less than a majority of such number of Trustees are
present at said meeting, a majority of the Trustees present may adjourn the
meeting from time to time without further notice. The Trustees present at a
meeting which has been duly called and convened and at which a quorum is present
at the time counted may continue to transact business until adjournment,
notwithstanding the withdrawal of enough Trustees to leave less than a quorum.

     2.07. VOTING. The action of the majority of the Trustees present at a
meeting at which a quorum is present shall be the act of the Board of Trustees,
unless the concurrence of a greater proportion is required for such action by
applicable statute, the Declaration of Trust or these Bylaws.

     2.08. CONDUCT OF MEETINGS. All meetings of the Board of Trustees shall be
called to order and presided over by the Chairman of the Board, or in the
absence of the Chairman of the Board, by the President (if a member of the Board
of Trustees) or, in the absence of the Chairman of the Board and the President,
by a member of the Board of Trustees selected by the members present. The
Secretary of the Trust shall act as secretary at all meetings of the Board of
Trustees, and in the absence of the Secretary and Assistant Secretaries, the
presiding Officer of the meeting shall designate any person to act as secretary
of the meeting. Members of the Board of Trustees may participate in meetings of
the Board of Trustees by conference telephone or similar communications
equipment by means of which all Trustees participating in the meeting can hear
each other at the same time, and participation in a meeting in accordance
herewith shall constitute presence in person at such meeting for all purposes of
these Bylaws.

     2.09. RESIGNATIONS. Any Trustee may resign from the Board of Trustees or
any committee thereof at any time. Such resignation shall be made in writing and
shall take effect at the time specified therein, or if no time be specified, at
the time of the receipt of notice of such resignation by the President or the
Secretary.

     2.10. REMOVAL OF TRUSTEES. Consistent with the Declaration of Trust, the
Shareholders may, at any time, remove any Trustee, with or without cause, by the
affirmative vote of two-thirds of all the votes entitled to be cast on the
matter, and may elect a successor to fill any resulting vacancy for the balance
of the term of the removed Trustee.

     2.11. VACANCIES. The Shareholders may elect a successor to fill a vacancy
on the Board of Trustees which results from the removal of a Trustee.
Furthermore, any vacancy occurring in the Board of Trustees for any cause other
than by reason of an increase in the number of Trustees may be filled by a
majority vote of the remaining Trustees, although such majority is less than a
quorum. Any vacancy occurring in the Board of Trustees by reason of an increase
in the number of Trustees may be filled by a majority vote of the entire Board
of Trustees. A Trustee elected by the Board of Trustees to fill a vacancy shall
hold office until the next annual meeting of Shareholders. A Trustee elected by
the Shareholders to fill a vacancy shall hold office for the unexpired term of
the Trustee he or she is replacing.




     2.12. INFORMAL ACTION BY TRUSTEES. Any action required or permitted to be
taken at any meeting of the Board of Trustees may be taken without a meeting, if
a consent in writing to such action is signed by all of the Trustees and such
written consent is filed with the minutes of the Board of Trustees. Consents may
be signed by different Trustees on separate counterparts.

     2.13. COMPENSATION. An annual fee for services and payment for expenses of
attendance at each meeting of the Board of Trustees, or of any committee
thereof, may be allowed to any Trustee by resolution of the Board of Trustees.

     2.14. NUMBER. The number of Trustees initially shall be three, which number
(i) shall automatically be increased to seven effective as of the date
immediately following the date of the closing of the Corporation's initial
public offering and (ii) may thereafter be increased or decreased from time to
time by the unanimous vote of the Trustees then in office or by a majority vote
of the holders of Shares entitled to vote; provided, however, that the total
number of Trustees shall not be fewer than three and not more than 15. No
reduction in the number of Trustees shall cause the removal of any Trustee from
office prior to the expiration of his or her term.


                            ARTICLE III - COMMITTEES

     3.01. NUMBER, TENURE AND QUALIFICATION. The Board of Trustees may appoint
from among its members an Executive Committee and other committees, composed of
two or more Trustees, to serve at the pleasure of the Board of Trustees.

     3.02. DELEGATION OF POWER. The Board of Trustees may delegate to these
committees in the intervals between meetings of the Board of Trustees any of the
powers of the Board of Trustees to manage the business and affairs of the Trust,
except those powers which the Board of Trustees is specifically prohibited from
delegating pursuant to Section 2-411 of the Maryland General Corporation Law.

     3.03. MEETINGS. In the absence of any member of any such committee, the
members thereof present at such meeting, whether or not they constitute a
quorum, may appoint a member of the Board of Trustees to act in the place of
such absent members.

     3.04. QUORUM. One-third, but not fewer than two (2), of the members of any
committee shall be present in person at any meeting of such committee in order
to constitute a quorum for the transaction of business at such meeting, and the
act of a majority present shall be the act of such committee.

     3.05. CONDUCT OF MEETINGS. Each committee shall designate a presiding
Officer of such committee, and if not present at a particular meeting, the
committee shall select a presiding Officer for such meeting. Members of any
committee may participate in meetings of such committee by conference telephone
or similar communications equipment by means of which all Trustees participating
in the meeting can hear each other at the same time, and participation in a
meeting in accordance herewith shall constitute presence in person at such
meeting for all purposes of these Bylaws. Each committee shall keep minutes of
its meetings, and report the results of any proceedings at the next succeeding
annual or regular meeting of the Board of Trustees.

     3.06. INFORMAL ACTION BY COMMITTEES. Any action required or permitted to be
taken at any meeting of a committee of the Board of Trustees may be taken
without a meeting, if a written consent to such action is signed by all members
of the committee and such written consent is filed with the minutes of
proceedings of such committee. Consents may be signed by different members on
separate counterparts.



                              ARTICLE IV - OFFICERS

     4.01. POWERS AND DUTIES. The Officers of the Trust shall be elected
annually by the Board of Trustees at the first meeting of the Board of Trustees
held after each annual meeting of Shareholders. If the election of Officers
shall not be held at such meeting, such election shall be held as soon
thereafter as may be convenient. Each Officer shall hold office until such
Officer's successor is duly elected and qualified or until such Officer's death,
resignation or removal in the manner hereinafter provided. Any two or more
offices except President and Vice President may be held by the same person.
Election or appointment of an Officer or agent shall not of itself create
contract rights between the Trust and such Officer or agent.

     4.02. REMOVAL. Any Officer or agent elected or appointed by the Board of
Trustees may be removed by the Board of Trustees whenever in its judgment the
best interests of the Trust would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed. The
fact that a person is elected to an office, whether or not for a specified term,
shall not by itself constitute any undertaking or evidence of any employment
obligation of the Trust to that person.

     4.03. OUTSIDE ACTIVITIES. The Officers and agents of the Trust are required
to spend only such time managing the business and affairs of the Trust as is
necessary to carry out their duties in accordance with the law and these Bylaws.
The Officers and agents of the Trust may engage with or for others in business
activities of the types conducted by the Trust; none of them has an obligation
to notify or present to the Trust or each other any investment opportunity that
may come to such person's attention even though such investment might be within
the scope of the Trust's purposes or various investment objectives. Any interest
(including any interest as defined in Section 2-419(a) of the Maryland General
Corporation Law as if the Officer or agent were a Trustee of the Trust) that an
Officer or an agent has in any investment opportunity presented to the Trust
must be disclosed by such Officer or agent to the Board of Trustees (and, if
voting thereon, to the Shareholders or to any committee of the Board of
Trustees) within ten (10) days after the later of the date upon which such
Officer or agent becomes aware of such interest or the date upon which such
Officer or agent becomes aware that the Trust is considering such investment
opportunity. If such interest comes to the attention of the interested Officer
or agent after a vote to take such investment opportunity, the voting body shall
reconsider such investment opportunity if not already consummated or
implemented.

     4.04. VACANCIES. A vacancy in any office may be filled by the Board of
Trustees for the unexpired portion of the term.

     4.05. CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at all
meetings of the Shareholders and of the Board of Trustees. The Chairman of the
Board may sign and execute all authorized bonds, contracts or other obligations
in the name of the Trust.

     4.06. PRESIDENT. Unless the Board of Trustees shall otherwise determine,
the President shall be the Chief Executive Officer and general manager of the
Trust and shall in general supervise and control all of the business and affairs
of the Trust. In the absence of the Chairman of the Board, the President shall
preside at all meetings of the Shareholders and of the Board of Trustees (if a
member of the Board of Trustees). The President may sign any deed, mortgage,
bond, contract or other instruments on behalf of the Trust except in cases where
the execution thereof shall be expressly delegated by the Board of Trustees or
by these Bylaws to some other Officer or agent of the Trust or shall be required
by law to be otherwise signed or executed. In general, the President shall
perform all duties incident to the office of President and such other duties as
may be prescribed by the Board of Trustees from time to time.

     4.07. VICE PRESIDENTS. The Board of Trustees may appoint one or more Vice
Presidents. In the absence of the President or in the event of a vacancy in such
office, the Vice President (or in the event there be more than one Vice
President, the Vice Presidents in the order designated at the time of their
election, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President and when so acting shall
have all the powers of and be subject to all the restrictions upon the
President. Every Vice President shall perform such other duties as from time to
time may be assigned to him or her by the President or the Board of Trustees.



     4.08. SECRETARY. The Secretary shall (i) keep the minutes of the
proceedings of the Shareholders and Board of Trustees in one or more books
provided for that purpose; (ii) see that all notices are duly given in
accordance with the provisions of these Bylaws or as required by law; (iii) be
custodian of the corporate records of the Trust; (iv) unless a transfer agent is
appointed, keep a register of the post office address of each Shareholder that
shall be furnished to the Secretary by such Shareholder and have general charge
of the Share Ledger of the Trust; (v) when authorized by the Board of Trustees
or the President, attest to or witness all documents requiring the same; (vi)
perform all duties as from time to time may be assigned to him or her by the
President or by the Board of Trustees; and (vii) perform all the duties
generally incident to the office of secretary of a corporation.

     4.09. TREASURER. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Trust and shall deposit all moneys and
other valuable effects in the name and to the credit of the Trust in such
depositaries as may be designated by the Board of Trustees. The Treasurer shall
disburse the funds of the Trust as may be ordered by the Board of Trustees,
taking proper vouchers for such disbursements, and shall render to the President
and the Board of Trustees, at the regular meetings of the Board of Trustees or
whenever they may require it, an account of all his or her transactions as
Treasurer and of the financial condition of the Trust. The Board of Trustees may
engage a Custodian to perform some or all of the duties of the Treasurer, and if
a Custodian is so engaged then the Treasurer shall be relieved of the
responsibilities set forth herein to the extent delegated to such Custodian and,
unless the Board of Trustees otherwise determines, shall have general
supervision over the activities of such Custodian.

     4.10. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The Board of Trustees
may appoint one or more Assistant Secretaries or Assistant Treasurers. The
Assistant Secretaries and Assistant Treasurers (i) shall have the power to
perform and shall perform all the duties of the Secretary and the Treasurer,
respectively, in such respective Officer's absence and (ii) shall perform such
duties as shall be assigned to him or her by the Secretary or Treasurer,
respectively, or by the President or the Board of Trustees.

     4.11. SUBORDINATE OFFICERS. The Company shall have such subordinate
Officers as the Board of Trustees may from time to time elect. Each such Officer
shall hold office for such period and perform such duties as the Board of
Trustees, the President or any designated committee or Officer may prescribe.

     4.12. SALARIES. The salaries, if any, of the Officers shall be fixed from
time to time by the Board of Trustees. No Officer shall be prevented from
receiving such salary, if any, by reason of the fact that such Officer is also a
Trustee of the Trust.


                               ARTICLE V - SHARES

     5.01. CERTIFICATES. Each Shareholder shall be entitled to a certificate or
certificates which shall represent and certify the number of shares of each
class of beneficial interest held by such Shareholder in the Trust. Each
certificate shall be signed by the President or by a Vice President and
countersigned by the Secretary or by an Assistant Secretary and may be sealed
with the seal, if any, of the Trust. Any signature or countersignature may be
either manual or facsimile signature. In case any Officer who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such Officer before such certificate is issued, it may be issued by the
Trust with the same effect as if he were such officer at the date of issue. All
certificates for each class of Shares shall be consecutively numbered. Each
certificate representing shares which are restricted as to their transferability
or voting powers, which are preferred or limited as to their dividends or as to
their allocable portion of the assets upon liquidation or which are redeemable
at the option of the Trust, shall have a statement of such restriction,
limitation, preference or redemption provision, or a summary thereof, plainly
stated on the certificate. In lieu of such statement or summary, the Trust may
set forth on the face or back of the certificate a statement that the Trust will
furnish to any Shareholder, upon request and without charge, a full statement of
such information.







     5.02. SHARE LEDGER. The Company shall maintain at its principal executive
office, at the office of its counsel, accountants or transfer agent or at such
other place designated by the Board of Trustees an original or duplicate Share
Ledger containing the names and addresses of all the Shareholders and the number
of shares of each class held by each Shareholder. The Company shall be entitled
to treat the holder of record of any Shares as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of the State of Maryland. Until a transfer is duly effected on the Share Ledger,
the Trust shall not be affected by any notice of such transfer, either actual or
constructive. Nothing herein shall impose upon the Trust, the Board of Trustees
or Officers or their agents and representatives a duty or limit their rights to
inquire as to the actual ownership of Shares.

     5.03. RECORDING TRANSFERS OF SHARES. If transferred in accordance with any
restrictions on transfer contained in the Declaration of Trust, these Bylaws or
otherwise, Shares shall be recorded as transferred in the Share Ledger upon
provision to the Trust or the transfer agent of the Trust of an executed stock
power (duly guaranteed if requested by the Trust) and any other documents
reasonably requested by the Trust, and the surrender of the certificate or
certificates representing such Shares. Upon receipt of such documents, the Trust
shall issue as needed a new certificate or certificates to the persons entitled
thereto, cancel any old certificates and record the transaction upon its books.

     5.04. LOST CERTIFICATE. The Board of Trustees may direct a new certificate
to be issued in the place of any certificate theretofore issued by the Trust
alleged to have been stolen, lost or destroyed upon the making of an affidavit
of that fact by the person claiming the share certificate to be stolen, lost or
destroyed. When authorizing such issue of a new certificate, the Board of
Trustees may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such stolen, lost or destroyed certificate or his
legal representative to advertise the same in such manner as it shall require
and/or to give bond, with sufficient surety, to the Trust to indemnify it
against any loss or claim which may arise by reason of the issuance of a new
certificate.

     5.05.    CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.

         5.5.1. The Board of Trustees may fix, in advance, a date as the record
date for the purpose of determining Shareholders entitled to notice of, or to
vote at, any meeting of Shareholders, or Shareholders entitled to receive
payment of any dividend or the allotment of any rights, or in order to make a
determination of Shareholders for any other proper purpose. Such date, in any
case, shall be not more than ninety (90) days and, in case of a meeting of
Shareholders not less than ten (10) days, prior to the date on which the meeting
or particular action requiring such determination of Shareholders is to be held
or taken.

         5.5.2. In lieu of fixing a record date, the Trustees may provide that
the share transfer books shall be closed for a stated period but not longer than
20 days. If the share transfer books are closed for the purpose of determining
Shareholders entitled to notice of or to vote at a meeting of Shareholders, such
books shall be closed for at least ten (10) days immediately preceding such
meeting.

         5.5.3. Unless otherwise required under applicable laws or regulations,
if no record date is fixed and the share transfer books are not closed for the
determination of Shareholders, (a) the record date for the determination of
Shareholders entitled to notice of, or to vote at, a meeting of Shareholders
shall be at the close of business on the day on which the notice of meeting is
mailed or the 30th day before the meeting, whichever is the closer date to the
meeting; and (b) the record date for the determination of Shareholders entitled
to receive payment of a dividend or an allotment of and rights shall be at the
close of business on the day on which the resolution of the Board of Trustees,
declaring the dividend or allotment of rights, is adopted.

         5.5.4. When a determination of Shareholders entitled to vote at any
meeting of Shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof, except where the
determination has been made through the closing of the share transfer books and
the stated period of closing has expired.

     5.06. FRACTIONAL SHARES. The Trust may issue fractional shares or provide
for the issuance of scrip, all on such terms and under such conditions as they
may determine.



                    ARTICLE VI - DIVIDENDS AND DISTRIBUTIONS

     6.01. DECLARATION. Dividends and other distributions upon the Shares may be
declared by the Board of Trustees as set forth in the applicable provisions of
the Declaration of Trust and any applicable law. Dividends and other
distributions upon the Shares may be paid in cash, property or Shares of the
Trust, subject to the provisions of law and of the Declaration of Trust.

     6.02. CONTINGENCIES. Before payment of any dividends or other distributions
upon the Shares, there may be set aside (but there is no duty to set aside) out
of any funds of the Trust available for dividends or other distributions such
sum or sums as the Board of Trustees may from time to time, in its absolute
discretion, think proper as a reserve fund to meet contingencies, for repairing
or maintaining any property of the Trust or for such other purpose as the Board
of Trustees shall determine to be in the best interests of the Trust, and the
Board of Trustees may modify or abolish any such reserve in the manner in which
it was created.

                          ARTICLE VII -INDEMNIFICATION

     7.01 INDEMNIFICATION OF TRUSTEES AND OFFICERS. Unless the Board of Trustees
otherwise determines prospectively in the case of any one or more specified
individuals, the Company shall indemnify any person who is or was a Trustee or
Officer of the Company, or is or was serving at the request of the Company as a
director or officer of another Corporation, partnership, joint venture, trust,
or other enterprise (each an "Indemnitee") on the terms and conditions set forth
below; provided, however, that no indemnification shall be provided for expenses
relating to any willful or grossly negligent failure to make disclosures
required by the next to last sentence of Sections 2.02 or 4.03 hereof as applied
to Trustees and Officers, respectively.

                  (a) THIRD PARTY PROCEEDINGS. The Company shall indemnify the
         Indemnitee to the full extent permitted now or hereafter by the
         Maryland General Corporation Law, as from time to time amended, subject
         to the exceptions provided in this Article VII. Without limiting the
         foregoing but subject to the provisions of these Bylaws, the Company
         shall indemnify Indemnitee if Indemnitee is or was a party or is
         threatened to be made a party to any threatened, pending or completed
         action or proceeding, whether civil, criminal, administrative or
         investigative (other than an action by or in the right of the Company)
         by reason of Indemnitee's past, present or future service as a Trustee
         or Officer of the Company, or, at the Company's request, of another
         enterprise or entity in which the Company had, directly or indirectly,
         an interest at the time of such service, against expenses (including
         attorney's fees), judgments, fines and amounts paid in settlement (if
         such settlement is approved in advance by the Company, which approval
         shall not be unreasonably withheld) actually and reasonably incurred by
         Indemnitee in connection with investigating, preparing for, defending
         or settling such action or proceeding. The Company hereby agrees to
         indemnify Indemnitee's spouse (whether by statute or at common law and
         without regard to the location of the governing jurisdiction) and
         children as express third-party beneficiaries hereunder to the same
         extent and subject to the same limitations applicable to Indemnitee
         hereunder for claims arising out of the status of such person as a
         spouse or child of Indemnitee, including claims seeking damages from
         marital property (including community property) or property held by the
         Indemnitee and such spouse or property transferred to such spouse or
         child.

                  (b) PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. Subject to
         the provisions of these Bylaws, the Company shall indemnify Indemnitee
         if Indemnitee was or is a party or is threatened to be made a party to
         any threatened, pending or completed action or proceeding by or in the
         right of the Company or any subsidiary of the Company to procure a
         judgment in its favor by reason of Indemnitee's past, present or future
         service as a Trustee or Officer of the Company, or, at the Company's
         request, as the director or officer of another enterprise or entity in
         which the Company had, directly or indirectly, an interest at the time
         of such service, against expenses (including attorneys' fees) and, to
         the fullest extent permitted by law, amounts paid in settlement, in
         each case to the extent actually and reasonably incurred by Indemnitee
         in connection with the defense or settlement of such action or
         proceeding.



     7.02.    EXPENSES; INDEMNIFICATION PROCEDURE.

                  (a) ADVANCEMENT OF EXPENSES. The Company shall advance all
         expenses incurred by Indemnitee in connection with the investigation,
         defense, settlement or appeal of any civil or criminal action or
         proceeding referenced in Section 7.01(a) or (b) hereof (but not amounts
         actually paid in settlement of any such action or proceeding).
         Indemnitee hereby undertakes to repay such amounts advanced only if,
         and to the extent that, it shall ultimately be determined that
         Indemnitee is not entitled to be indemnified by the Company as
         authorized hereby. The advances to be made hereunder shall be paid by
         the Company to Indemnitee within twenty (20) days following delivery of
         a written request therefor by Indemnitee to the Company.

                  (b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a
         condition precedent to his or her right to be indemnified under these
         Bylaws, give the Company notice in writing as soon as practicable of
         any claim made against Indemnitee for which indemnification will or
         could be sought under these Bylaws. Such notice shall contain the
         written affirmation of the Indemnitee that the standard of conduct
         necessary for indemnification hereunder has been satisfied. Notice to
         the Company shall be directed to the Chief Executive Officer of the
         Company in the manner set forth below. Indemnitee shall give the
         Company such information and cooperation as it may reasonably require
         and as shall be within Indemnitee's power. A delay in giving notice
         under this Section 7.02(b) shall not invalidate the Indemnitee's right
         to indemnity under these Bylaws unless such delay prejudices the
         defense of the claim or the availability to the Company of insurance
         coverage for such claim. All notices, requests, demands and other
         communications under these Bylaws shall be in writing and shall be
         deemed duly given (i) if delivered by hand and receipted for by the
         party addressed, on the date of such receipt or (ii) if mailed by
         domestic certified or registered mail with postage prepaid, on the
         third business day after the date postmarked.

                  (c) PROCEDURE. Any indemnification provided for in Section
         7.01 shall be made no later than forty-five (45) days after receipt of
         the written request of Indemnitee. If a claim under any statute, or
         under any provision of the Company's Declaration of Trust or these
         Bylaws providing for indemnification, is not paid in full by the
         Company within forty-five (45) days after a written request for payment
         thereof that complies with the requirements of these Bylaws has first
         been received by the Company, Indemnitee may, but need not, at any time
         thereafter bring an action against the Company to recover the unpaid
         amount of the claim and, subject to Section 7.11 of these Bylaws,
         Indemnitee shall also be entitled to be paid for the expenses
         (including attorneys' fees) of bringing such action. It shall be a
         defense to any such action (other than an action brought to enforce a
         claim for expenses incurred in connection with any action or proceeding
         in advance of its final disposition) that Indemnitee has not met the
         standards of conduct that made it permissible under applicable law for
         the Company to indemnify Indemnitee for the amount claimed, but
         Indemnitee shall be entitled to receive interim payments of expenses
         pursuant to Subsection 7.02(a) unless and until such defense may be
         finally adjudicated by court order or judgment from which no further
         right of appeal exists. It is the parties' intention that if the
         Company contests Indemnitee's right to indemnification, the question of
         Indemnitee's right to indemnification shall be for the court to decide,
         and neither the failure of the Company (including its Board of
         Trustees, any committee or subgroup of the Board of Trustees,
         independent legal counsel, or its shareholders) to have made a
         determination that indemnification of Indemnitee is proper in the
         circumstances because Indemnitee has met the applicable standard of
         conduct required by applicable law, nor an actual determination by the
         Company (including its Board of Trustees, any committee or subgroup of
         the Board of Trustees, independent legal counsel, or its shareholders)
         that Indemnitee has not met such applicable standard of conduct, shall
         create a presumption that Indemnitee has or has not met the applicable
         standard of conduct.

                  (d) NOTICE TO INSURERS. If, at the time of the receipt of a
         notice of a claim pursuant to Section 7.02(a) hereof, the Company has
         trustee and officer liability insurance in effect, the Company shall
         give prompt notice of the commencement of such proceeding to the
         insurers in accordance with the procedures set forth in the respective
         policies. The Company shall thereafter take all necessary or desirable
         action to cause such insurers to pay, on behalf of the Indemnitee, all
         amounts payable as a result of such proceeding in accordance with the
         terms of such policies.



                  (e) SELECTION OF COUNSEL. In the event the Company shall be
         obligated under Section 7.01 hereof to pay the expenses of any
         proceeding against Indemnitee, the Company, unless the Indemnitee
         determines that a conflict of interest exists between the Indemnitee
         and the Company with respect to a particular claim, shall be entitled
         to assume the defense of such proceeding, with counsel approved by
         Indemnitee, which approval shall not be unreasonably withheld, upon the
         delivery to Indemnitee of written notice of its election so to do.
         After delivery of such notice, approval of such counsel by Indemnitee
         and the retention of such counsel by the Company, the Company will not
         be liable to Indemnitee under these Bylaws for any fees of counsel
         subsequently incurred by Indemnitee with respect to the same
         proceeding, provided that (i) Indemnitee shall have the right to employ
         his own separate counsel in any such proceeding in addition to or in
         place of any counsel retained by the Company on behalf of Indemnitee at
         Indemnitee's expense; and (ii) if (A) the employment of counsel by
         Indemnitee has been previously authorized by the Company, (B)
         Indemnitee shall have concluded that there may be a conflict of
         interest between the Company and Indemnitee in the conduct of any such
         defense or (C) the Company shall not, in fact, have employed counsel to
         assume the defense of such proceeding, then the reasonable fees and
         expenses of Indemnitee's counsel shall be at the expense of the
         Company.

     7.03. NONEXCLUSIVITY OF INDEMNIFICATION RIGHTS. The indemnification
provided by these Bylaws shall not be deemed exclusive of any rights to which
Indemnitee may be entitled under the Company's Declaration of Trust, any
agreement, any vote of Shareholders or disinterested trustees, the Maryland
General Corporation Law, or otherwise, both as to action in Indemnitee's
official capacity and as to action in another capacity while holding such
office. The provisions of this Article VII shall constitute a contract with each
Indemnitee who serves at any time while these provisions are in effect and may
be modified adversely only as provided in Article X hereof, and each Indemnitee
shall be deemed to be serving as such in reliance on these provisions.

     7.04. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of these Bylaws to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him in the investigation, defense, appeal or settlement of any civil
or criminal action or proceeding, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such expenses, judgments, fines or penalties to which Indemnitee is entitled.

     7.05. MUTUAL ACKNOWLEDGMENT. By accepting any potential benefits under this
Article VII, each Indemnitee acknowledges that in certain instances, Federal law
or applicable public policy may prohibit the Company from indemnifying its
trustees and officers under these Bylaws or otherwise. Indemnitee understands
and acknowledges that the Company has undertaken and may be required in the
future to undertake with the Securities and Exchange Commission to submit the
question of indemnification to a court in certain circumstances for a
determination of the Company's right under public policy to indemnify
Indemnitee.

     7.06. INSURANCE. The Company shall have the power to purchase and maintain
insurance on behalf of any Indemnified Person against any liability, whether or
not the Company would have the power to indemnify him or her against such
liability.

     7.07. SEVERABILITY. Nothing in this Article VII is intended to require or
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Article VII shall not constitute a breach
thereof. The provisions of this Article VII shall be severable as provided in
this Section 7.07. If this Article VII or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify Indemnitee to the full extent permitted by
any applicable portion of this Article VII that shall not have been invalidated,
and the balance of this Article VII not so invalidated shall be enforceable in
accordance with its terms.

     7.08. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Article VII to indemnify the Indemnitee in the following circumstances:



                  (a) EXCLUDED ACTS.  The Company shall not be obligated to
         indemnify Indemnitee for any acts or omissions or transactions from
         which a director may not be relieved of liability under the Maryland
         General Corporation Law; or

                  (b) CLAIMS INITIATED BY INDEMNITEE. The Company shall not be
         obligated to indemnify or advance expenses to Indemnitee with respect
         to proceedings or claims initiated or brought voluntarily by Indemnitee
         and not by way of defense, except with respect to proceedings brought
         to establish or enforce a right to indemnification under this Article
         VII or any other statute or law or otherwise as provided by Maryland
         General Corporation Law Section 2-418 in accordance with Section
         7.01(b) hereof, but such indemnification or advancement of expenses may
         be provided by the Company in specific cases if the Board of Trustees
         has approved the initiation or bringing of such suit; or

                  (c) INSURED CLAIMS. The Company shall not be obligated to
         indemnify Indemnitee for expenses or liabilities of any type whatsoever
         (including, but not limited to, judgments, fines, ERISA excise taxes or
         penalties and amounts paid in settlement) to the extent that Indemnitee
         has otherwise actually received payment, or payments have been made on
         behalf of Indemnitee, with respect to such expense or liability (under
         any insurance policy, provision of the Company's Declaration of Trust
         or Bylaws, or otherwise) of amounts otherwise indemnifiable hereunder;
         or

                  (d) CLAIMS UNDER SECTION 16(b). The Company shall not be
         obligated to indemnify Indemnitee for expenses and the payment of
         profits arising from the purchase and sale by Indemnitee of securities
         in violation of Section 16(b) of the Securities Exchange Act of 1934,
         as amended, or any similar successor statute.


     7.09.    CONSTRUCTION OF CERTAIN PHRASES

                  (a) For purposes of this Article VII, references to the
         "Company" shall include any constituent corporation (including any
         constituent of a constituent) absorbed in a consolidation or merger
         which, if its separate existence had continued, would have had power
         and authority to indemnify its trustees, officers, employees or agents,
         so that if Indemnitee is or was a director, officer, employee or agent
         of such constituent corporation, or is or was serving at the request of
         such constituent corporation as a director, officer, employee or agent
         of another corporation, partnership, joint venture, trust or other
         enterprise, Indemnitee shall stand in the same position under the
         provisions of this Article VII with respect to the resulting or
         surviving corporation as Indemnitee would have with respect to such
         constituent corporation if its separate existence had continued.

                  (b) For purposes of this Article VII, references to "another
         enterprise" or "other enterprises" shall include employee benefit
         plans; references to "fines" shall include any excise taxes assessed on
         Indemnitee with respect to an employee benefit plan; and references to
         "serving at the request of the Company" shall include any service as a
         trustee, officer, employee or agent of the Company which imposes duties
         on, or involves services by, such trustee, officer, employee or agent
         with respect to an employee benefit plan, its participants, or
         beneficiaries.

     7.10. SUCCESSORS AND ASSIGNS. This Article VII shall inure to the benefit
of Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.

     7.11. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Article VII to enforce or interpret any of the terms
hereof, Indemnitee shall be entitled to be paid all court costs and expenses,
including reasonable attorneys' fees, incurred by Indemnitee with respect to
such action, unless as a part of such action, the court of competent
jurisdiction determines that each of the material assertions made by Indemnitee
as a basis for such action were not made in good faith or were frivolous. In the
event of an action instituted by or in the name of the Company under this
Article VII or to enforce or interpret any of the terms of this Article VII,
Indemnitee shall be entitled to be paid all court costs and expenses, including
attorneys' fees, incurred by Indemnitee in defense of such action (including
with respect to Indemnitee's counterclaims and cross-claims made




in such action), unless as a part of such action the court determines that each
of Indemnitee's material defenses to such action were made in bad faith or were
frivolous.

     7.12.    INDEMNIFICATION OF SHAREHOLDERS.

                  (a) INDEMNIFICATION. Subject to the provisions of this Section
         7.12, the Company shall indemnify each Shareholder or former
         Shareholder (a "Shareholder Indemnitee") (a) who has been successful,
         on the merits or otherwise, in the defense of a proceeding to which
         such Shareholder Indemnitee was made a party by reason of such status,
         against reasonable expenses incurred by such Shareholder Indemnitee in
         connection with such proceeding and (b) against any claim or liability
         to which such Shareholder Indemnitee may become subject by reason of
         such status. In addition, the Company shall pay or reimburse, in
         advance of final disposition of a proceeding, reasonable expenses
         incurred by a Shareholder Indemnitee made a party to a proceeding by
         reason of such status. The Company may provide to a Shareholder
         Indemnitee such other and further indemnification or payment or
         reimbursement of expenses as may be permitted by the Maryland General
         Corporation Law.

                  (b) NOTICE. Any Shareholder Indemnitee shall, as a condition
         precedent to such Shareholder Indemnitee's right to be indemnified
         under these Bylaws, give the Company notice in writing as soon as
         practicable of any claim made against Shareholder Indemnitee for which
         indemnification will or could be sought under these Bylaws. Notice to
         the Company shall be directed to the Chief Executive Officer of the
         Company in the manner set forth below. Shareholder Indemnitee shall
         give the Company such information and cooperation as it may reasonably
         require and as shall be within Shareholder Indemnitee's power. All
         notices, requests, demands and other communications under these Bylaws
         shall be in writing and shall be deemed duly given (i) if delivered by
         hand and receipted for by the party addressed, on the date of such
         receipt or (ii) if mailed by domestic certified or registered mail with
         postage prepaid, on the third business day after the date postmarked.

                  (c) EXCEPTIONS. Any other provision herein to the contrary
         notwithstanding, the Company shall not be obligated pursuant to the
         terms of this Section 7.12 to indemnify a Shareholder Indemnitee in the
         following circumstances:

                                    (i) CLAIMS INITIATED BY SHAREHOLDER
                  INDEMNITEE. The Company shall not be obligated to indemnify or
                  advance expenses to Shareholder Indemnitee with respect to
                  proceedings or claims initiated or brought voluntarily by
                  Shareholder Indemnitee and not by way of defense, except with
                  respect to proceedings brought to establish or enforce a right
                  to indemnification under this Section 7.12 or any other
                  statute or law or otherwise as provided by Maryland General
                  Corporation Law Section 2-418; or

                                    (ii) INSURED CLAIMS. The Company shall not
                  be obligated to indemnify Shareholder Indemnitee for expenses
                  or liabilities of any type whatsoever (including, but not
                  limited to, judgments, fines, ERISA excise taxes or penalties
                  and amounts paid in settlement) to the extent that Shareholder
                  Indemnitee has otherwise actually received payment, or
                  payments have been made on behalf of Shareholder Indemnitee,
                  with respect to such expense or liability (under any insurance
                  policy, provision of the Company's Declaration of Trust or
                  Bylaws, or otherwise) of amounts otherwise indemnifiable
                  hereunder; or

                                    (iii) CLAIMS UNDER SECTION 16(b). The
                  Company shall not be obligated to indemnify Shareholder
                  Indemnitee for expenses and the payment of profits arising
                  from the purchase and sale by Indemnitee of securities in
                  violation of Section 16(b) of the Securities Exchange Act of
                  1934, as amended, or any similar successor statute.



                             ARTICLE VIII - NOTICES

     8.01. NOTICES. Whenever notice is required to be given pursuant to these
Bylaws, it shall be construed to mean either written notice personally served
against written receipt, or notice in writing transmitted by overnight courier,
by mail, by depositing the same in a post office or letter box, in a post-paid
sealed wrapper, addressed, if to the Trust, at 2859 Paces Ferry Road, Overlook
III, Suite 1450, Atlanta, Georgia 30339 (or any subsequent address selected by
the Board of Trustees), attention President, or if to a Shareholder, Trustee or
Officer, at the address of such person as it appears on the books of the Trust
or in default of any other address at the general post office situated in the
city or county of his or her residence. Unless otherwise specified, notice sent
by mail shall be deemed to be given at the time the same shall be thus mailed.

     8.02. SECRETARY TO GIVE NOTICE. All notices required by law or these Bylaws
to be given by the Trust shall be given by the Secretary of the Trust. If the
Secretary and Assistant Secretary are absent or refuse or neglect to act, the
notice may be given by any person directed to do so by the President.

     8.03. WAIVER OF NOTICE. Whenever any notice is required to be given
pursuant to the Declaration of Trust or Bylaws of the Trust or pursuant to
applicable law, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice. Neither the business to be
transacted at nor the purpose of any meeting need be set forth in the waiver of
notice, unless specifically required by statute. The attendance of any person at
any meeting shall constitute a waiver of notice of such meeting.


                           ARTICLE IX - MISCELLANEOUS

     9.01. BOOKS AND RECORDS. The Company shall keep correct and complete books
and records of its accounts and transactions and minutes of the proceedings of
its Shareholders and Board of Trustees and of executive or other committee when
exercising any of the powers or authority of the Board of Trustees. The books
and records of the Trust may be in written form or in any other form that be
converted within a reasonable time into written form for visual inspection.
Minutes shall be recorded in written form, but may be maintained in the form of
a reproduction.

     9.02. INSPECTION OF BYLAWS AND CORPORATE RECORDS. These Bylaws, the minutes
of proceedings of the Shareholders, annual statements of affairs and any voting
trust agreements on record shall be open to inspection upon the written demand
on the Trust by any Shareholder or holder of a voting trust certificate at any
reasonable time during usual business hours, for a purpose reasonably related to
such holder's interests as a Shareholder or as the holder of such voting trust
certificate.

     9.03. CONTRACTS. The Board of Trustees may authorize any Officer or
Officers, agent or agents, to enter into any contract or to execute and deliver
any instrument in the name of and on behalf of the Trust, and such authority may
be general or confined to specific instances.

     9.04. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Trust shall be signed by such Officers or agents of the Trust and in such
manner as shall from time to time be determined by resolution of the Board of
Trustees.




     9.05.    LOANS.

         9.5.1. Such Officers or agents of the Trust as from time to time have
been designated by the Board of Trustees shall have authority (i) to effect
loans, advances, or other forms of credit at any time or times for the Trust,
from such banks, trust companies, institutions, corporations, firms, or persons,
in such amounts and subject to such terms and conditions, as the Board of
Trustees from time to time has designated; (ii) as security for the repayment of
any loans, advances, or other forms of credit so authorized, to assign,
transfer, endorse, and deliver, either originally or in addition or
substitution, any or all personal property, real property, stocks, bonds,
deposits, accounts, documents, bills, accounts receivable, and other commercial
paper and evidences of debt or other securities, or any rights or interests at
any time held by the Trust; (iii) in connection with any loans, advances, or
other forms of credit so authorized, to make, execute, and deliver one or more
notes, mortgages, deeds of trust, financing statements, security agreements,
acceptances, or written obligations of the Trust, on such terms and with such
provisions as to the security or sale or disposition of them as those Officers
or agents deem proper; and (iv) to sell to, or discount or rediscount with, the
banks, trust companies, institutions, corporations, firms or persons making
those loans, advances, or other forms of credit, any and all commercial paper,
bills, accounts receivable, acceptances, and other instruments and evidences of
debt at any time held by the Trust, and, to that end, to endorse, transfer, and
deliver the same.

         9.5.2. From time to time the Trust shall certify to each bank, trust
company, institution, corporation, firm or person so designated, the signatures
of the Officers or agents so authorized. Each bank, trust company, institution,
corporation, firm or person so designated is authorized to rely upon such
certification until it has received written notice that the Board of Trustees
has revoked the authority of those Officers or agents.

     9.06. FISCAL YEAR. The Board of Trustees shall have the power, from time to
time, to fix the fiscal year of the Trust by a duly adopted resolution.

     9.07. BYLAWS SEVERABLE. The provisions of these Bylaws are severable, and
if any provision shall be held invalid or unenforceable, that invalidity or
unenforceability shall attach only to that provision and shall not in any manner
affect or render invalid or unenforceable any other provision of these Bylaws,
and these Bylaws shall be carried out as if the invalid or unenforceable
provision were not contained herein.


                         ARTICLE X - AMENDMENT OF BYLAWS

     10.01. BY TRUSTEES. The Board of Trustees shall have the power, at any
annual or regular meeting, or at any special meeting if notice thereof be
included in the notice of such special meeting, to alter or repeal any Bylaws of
the Trust and to make new Bylaws, except that the Board of Trustees shall not
alter or repeal (i) Section 7.01 without the consent of any Indemnified Persons
whose rights to indemnification, which rights are based on conduct prior to such
amendment, would be adversely affected by such proposed alteration or repeal;
(ii) this Section 10.1; or (iii) Section 10.2.

     10.02. BY SHAREHOLDERS. Unless the Declaration of Trust provides otherwise,
the Shareholders, by affirmative vote of a majority of the shares of the Trust
generally entitled to vote in the election of Trustees, shall have the power, at
any annual meeting, or at any special meeting if notice thereof is included in
the notice of such special meeting, to alter or repeal any Bylaws of the Trust
and to make new Bylaws, except that the Shareholders shall not alter or repeal
Section 7.01 without the consent of any Indemnified Persons adversely affected
by such proposed alteration or repeal.






                                    AMENDMENT

                                     TO THE

                       SECOND AMENDED AND RESTATED BYLAWS

                                       OF

                            GABLES RESIDENTIAL TRUST


                                 March 13, 2000


     On March 13, 2000, the Board of Trustees of the Gables Residential Trust
(the "Company") amended the Second Amended and Restated Bylaws of the Company
by:

     1. Deleting therefrom ARTICLE I, Section 1.05 in its entirety and inserting
the following in lieu thereof:

     "1.05 NOTICE. Not less than ten (10) nor more than ninety (90) days before
each meeting of Shareholders, the Secretary shall give to each Shareholder
entitled to vote at such meeting and to each Shareholder not entitled to vote
who is entitled to notice of the meeting, written or printed notice stating the
time and place of the meeting and, in the case of a special meeting or as
otherwise may be required by any statute, the purpose for which the meeting is
called, either by mail, by presenting it to such Shareholder personally, by
leaving it at the Shareholder's residence or usual place of business or by any
other means permitted by Maryland law. If mailed, such notice shall be deemed to
be given when deposited in the United States mail addressed to the Shareholder
at the Shareholder's address as it appears on the records of the Trust, with
postage thereon prepaid.";

     2. Deleting therefrom ARTICLE I, Section 1.09 in its entirety and inserting
the following in lieu thereof:

     "1.09 PROXIES. A Shareholder may cast the votes entitled to be cast by the
shares of beneficial interest owned of record by the Shareholder in person or by
proxy executed by the Shareholder or by the Shareholder's duly authorized agent
in any manner permitted by Maryland law. Such proxy or evidence of authorization
of such proxy shall be filed with the Secretary of the Trust before or at the
time of the meeting. No proxy shall be valid more than eleven (11) months from
its date, unless otherwise provided in the proxy."; and


     3. Deleting therefrom ARTICLE VIII, Section 8.01 in its entirety and
inserting the following in lieu thereof:

     "8.01 NOTICES. Except as otherwise provided in Section 1.05 of Article III
of these Bylaws, whenever notice is required to be given pursuant to these
Bylaws, it shall be construed to mean either written notice personally served
against written receipt, or notice in writing transmitted by overnight courier,
by mail, by depositing the same in a post office or letter box, in a post-paid
sealed wrapper, addressed, if to the Trust, at 2859 Paces Ferry Road, Overlook
III, Suite 1450, Atlanta, Georgia 30339 (or any subsequent address selected by
the Board of Trustees), attention President, or if to a Shareholder, Trustee or
Officer, at the address of such person as it appears on the books of the Trust
or in default of any other address at the general post office situated in the
city or county of his or her residence. Unless otherwise specified, notice sent
by mail shall be deemed to be given at the time the same shall be thus mailed."

EX-10.19

                                                                  EXHIBIT 10. 19


                      SECOND AMENDMENT TO CREDIT AGREEMENT


         THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Second Amendment") is
dated as of the 23rd day of November, 1999 among GABLES REALTY LIMITED
PARTNERSHIP (the "Borrower"), WACHOVIA BANK, N.A., as Administrative Agent (the
"Administrative Agent"), FIRST UNION NATIONAL BANK, as Syndication Agent, CHASE
BANK OF TEXAS, NATIONAL ASSOCIATION, as Documentation Agent and WACHOVIA BANK,
N.A., FIRST UNION NATIONAL BANK, CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, PNC BANK, NATIONAL
ASSOCIATION, AMSOUTH BANK OF ALABAMA and GUARANTY FEDERAL BANK, F.S.B.
(collectively, the "Banks");


                              W I T N E S S E T H:


         WHEREAS, the Borrower, the Administrative Agent and the Banks executed
and delivered that certain Amended and Restated Credit Agreement, dated as of
May 13, 1998, as amended by First Amendment to Credit Agreement dated as of June
14, 1999 (as so amended, the "Credit Agreement");

         WHEREAS, the Borrower has requested and the Administrative Agent and
the Banks have agreed to certain amendments to the Credit Agreement to permit
Gables-Tennessee Properties ("Gables-TN") to bc released as a Guarantor and to
become a joint and several co-Borrower with Gables Realty Limited Partnership
(the "Parent"; Gables-TN and the Parent being referred to collectively as the
"Borrower"), subject to the terms and conditions hereof;

         NOW, THEREFORE, for and in consideration of the above premises and
other good and valuable consideration, the receipt and sufficiency of which
hereby is acknowledged by the parties hereto, the Borrower, the Administrative
Agent and the Banks hereby covenant and agree as follows:

         1. DEFINITIONS. Unless otherwise specifically defined herein, each term
used herein which is defined in the Credit Agreement shall have the meaning
assigned to such term in the Credit Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference contained in the
Credit Agreement shall from and after the date hereof refer to the Credit
Agreement as amended hereby.





          2.  Assumption, Release and Global Amendments.

         (a) Gables-TN hereby assumes all rights and obligations as a "Borrower"
under the Credit Agreement, on a joint and several basis with the Parent,
including all obligations to make payments on the Notes as and when due, and all
other payment and indemnification obligations of a Borrower under the Credit
Agreement and the Notes, as fully as if it had executed and delivered each such
document as an original Borrower, and the Parent and Gables-TN hereby agree to
execute and deliver to the Administrative Agent replacement Notes for each of
the Banks, jointly executed by them.

         (b) Gables-TN hereby is released from all of its rights and obligations
as a "Guarantor" under the Guaranty.

         (c) The Administrative Agent and the Banks hereby consent to the
foregoing, and release Gables-TN as a Guarantor, substituting Gables-TN as an
additional joint and several Borrower.

         (d) The term "Borrower", wherever used in the definitions of the terms
set forth below and in (or for purposes of) the Sections referenced below, in
all references to the Credit Agreement in each of the Loan Documents, and in the
Borrowing Base Certificate and the Compliance Certificate, hereby is deleted,
and the term "Parent" is substituted therefor (but the Borrowing Base
Certificates and the Compliance Certificates submitted hereafter need not
actually be revised accordingly, but shall be deemed to have been so revised):




         Definition                                            Section
         ----------                                            -------

                                                            
         Change in Control                                     1.02
         Consolidated Debt                                     4.04
         Consolidated Fixed Charges                            4.06
         Consolidated Fixed Charges Coverage Ratio             4.08
         Consolidated Interest Expense                         5.01
         Consolidated Income Available for Debt Service        5.03
         Consolidated Income Available for Distribution        5.04
         Consolidated Total Assets                             5.05
         Debt Rating                                           5.06
         Fiscal Year                                           5.07 (clause (v) only)
         General Partner                                       5.09 (clause (E) only)
         Joint Venture                                         5.22
         Joint Venture Share                                   5.27
         Material Adverse Effect                               5.28
         Subsidiary
         Total Assets Value
         Total Debt (clauses (iii) and (vi) only)
         Wholly Owned Subsidiary


         (e) The term Borrower, wherever used in the Credit Agreement, other
than in the definitions and Sections listed above in paragraph (d), hereby is
changed to "Borrowers".

                                       2



         3. AMENDMENTS TO SECTION 1.01. Section 1.01 of the Credit Agreement
hereby is amended by deleting the definition of "Borrower" and adding the
following definitions of "Borrowers", "Gables-TN" and "Parent" in the
appropriate alphabetical sequence:

                           "Borrowers" means, individually and collectively, as
                  the context shall require, the Parent and Gables-TN, as joint
                  and several obligors for all purposes under this Agreement and
                  the Notes.

                           "Gables-TN" means Gables-Tennessee Properties, a
                  Tennessee general partnership, and its successors and
                  permitted assigns.

                           "Parent" means Gables Realty Limited Partnership, a
                  Delaware limited partnership, and its successors and permitted
                  assigns.

         4. AMENDMENT TO SECTION 4.01. Section 4.01 of the Credit Agreement
hereby is deleted, and the following is substituted therefor:

                           SECTION 4.01. PARTNERSHIP OR CORPORATE EXISTENCE AND
                  POWER. The Parent is a limited partnership duly created and
                  validly existing under the laws of Delaware, Gables-TN is a
                  general partnership duly created and validly existing under
                  the laws of Tennessee, GBP is a trust duly created, validly
                  existing and in good standing under the laws of Maryland, the
                  General Partner is a corporation duly organized, validly
                  existing and in good standing under the laws of Texas, and
                  each of the foregoing is duly qualified to transact business
                  in every jurisdiction where, by the nature of its business,
                  such qualification is necessary, and has all partnership
                  powers and all governmental licenses, authorizations, consents
                  and approvals required to carry on its business as now
                  conducted, except where any such failure does not have and is
                  not reasonably expected to cause a Material Adverse Effect.

         5. REPLACEMENT OF NOTES. EXHIBIT A-1 and EXHIBIT A-2 to the Credit
Agreement hereby are deleted, and EXHIBIT A-1 and EXHIBIT A-2 hereto are
substituted therefor.

         6. RESTATEMENT OF REPRESENTATIONS AND WARRANTIES. The Borrowers hereby
restate and renew each and every representation and warranty heretofore made by
it in the Credit Agreement and the other Loan Documents as fully as if made on
the date hereof (except to the extent such representations and warranties
expressly relate to an earlier date) and with specific reference to this Second
Amendment and all other loan documents executed and/or delivered in connection
herewith.

         7. EFFECT OF AMENDMENT. Except as set forth expressly hereinabove, all
terms of the Credit Agreement and the other Loan Documents shall be and remain
in full force and effect, and shall constitute the legal, valid, binding and
enforceable obligations of the Borrowers.


                                       2


         8. RATIFICATION. The Borrowers hereby restate, ratify and reaffirm each
and every term, covenant and condition set forth in the Credit Agreement and the
other Loan Documents effective as of the date hereof.

         9. COUNTERPARTS. This Second Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered (which may be by telecopier pursuant to
Section 14 below) shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.

         10. SECTION REFERENCES. Section titles and references used in this
Second Amendment shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreements among the parties hereto
evidenced hereby.

         11. NO DEFAULT. To induce the Administrative Agent and the Banks to
enter into this Second Amendment and to continue to make advances pursuant to
the Credit Agreement, the Borrowers hereby acknowledge and agree that, as of the
date hereof, and after giving effect to the terms hereof, there exists (i) no
Default or Event of Default and (ii) no right of offset, defense, counterclaim,
claim or objection in favor of the Borrowers arising out of or with respect to
any of the Loans or other obligations of the Borrowers owed to the Banks under
the Credit Agreement.

         12. FURTHER ASSURANCES. The Borrowers agree to take such further
actions as the Administrative Agent shall reasonably request in connection
herewith to evidence the amendments herein contained to the Borrowers.

         13. GOVERNING LAW. This Second Amendment shall be governed by and
construed and interpreted in accordance with, the laws of the State of Georgia.

         14. CONDITIONS PRECEDENT. This Second Amendment shall become effective
only upon (i) execution hereof by the Administrative Agent; (ii) execution and
return to the Administrative Agent at the telecopier number set forth below of a
copy hereof by the Borrowers and the Banks; (iii) execution and return to the
Administrative Agent at the telecopier number set forth below of a copy of the
Consent and Reaffirmation of Guarantors at the end hereof and (iv) execution by
the Borrowers and delivery to the Administrative Agent or replacement Notes for
each Bank in the form attached hereto as Exhibits A-1 and A-2. Executed copies
hereof shall be sent by facsimile to counsel for the Administrative Agent,
Jones, Day, Reavis & Pogue, Attention: Christopher l. Carson, at Telecopier
number 404-581-8868, Confirmation number 404-581-8035.

                       [SIGNATURES CONTAINED ON NEXT PAGE]



                                       3



         IN WITNESS WHEREOF, the Borrower, the Administrative Agent and each of
the Banks has caused this Second Amendment to be duly executed, under seal, by
its duly authorized officer as of the day and year first above written.





                                                                       
GABLES-TENNESSEE PROPERTIES (SEAL)                                         GABLES REALTY LIMITED
                                                                           PARTNERSHIP
                                                                     
By:      Gables Realty Limited Partnership,
         a general partner                                                 By:      Gables GP, Inc., its sole general
         By:      Gables GP, Inc., its sole general partner                         partner

          By:     /s/ Marvin R. Banks, Jr.                                 By:      /s/ Marvin R. Banks, Jr.
                  -----------------------                                           ------------------------------
                  Marvin Banks, Jr.                                                 Marvin Banks, Jr.
                  Sr. Vice President                                                Sr. Vice President


WACHOVIA BANK, N.A.,                                                       GUARANTY FEDERAL BANK, F.S.B.,
as Administrative Agent and as a Bank                                      as a Bank


By:  /s/ Mary F. Hughes
   ---------------------------------------                                 By:  /s/ Randall S. Reid
       Name:  Mary F. Hughes                                                  ---------------------------------------
             -----------------------------
                                                                              Name: Randall S. Reid
       Title:  Vice president                                                 -----------------------------
             -----------------------------                                    Title:Vice President
                                                                              -----------------------------

CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION,                                                      FIRST UNION NATIONAL BANK,
as Documentation Agent and as a Bank                                       as Syndication Agent and as a Bank



By:  /s/ Susan M. Tate
   ---------------------------------------                                 By: /s/ Daniel J. Sullivan
       Name:   Susan M. Tate                                                  ---------------------------------------
             -----------------------------                                    Name:  Daniel J. Sullivan
       Title:  Vice President                                                 -----------------------------
             -----------------------------                                    Title:  Director
                                                                              -----------------------------


PNC BANK, NATIONAL ASSOCIATION,                                            AMSOUTH BANK OF ALABAMA,
as a Bank                                                                  as a Bank



By:  /s/ Wayne P. Robertson
   ---------------------------------------                                 By: /s/ J.R. Miller
       Name:  Wayne P. Robertson                                               ---------------------------------------
             -----------------------------                                     Name:  J.R. Miller
       Title:  Vice President                                                  -----------------------------
             -----------------------------                                     Title:   Vice President
                                                                                    -----------------------------





                                       5





COMMERZBANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES, as a Bank



By:  /s/ E. Marcus Perry
   _______________________________________

       Name:  E. Marcus Perry
             _____________________________

       Title:  Assistant Vice President
             _____________________________

By:  /s/ David Buettner
   _______________________________________

       Name:   David Buettner
             _____________________________

       Title:  Assistant Treasurer
             _____________________________

                                       6




                                                                     EXHIBIT A-1


                              SYNDICATED LOAN NOTE

                                Atlanta, Georgia

                                November 23, 1999

         For value received, GABLES REALTY LIMITED PARTNERSHIP, a Delaware
limited partnership and GABLES-TENNESSEE PROPERTIES, a Tennessee general
partnership (collectively, the "Borrower"), jointly and severally promise to pay
to the order of __________________________________________ (the "Bank"), for the
account of its Lending Office, the principal sum of
_______________________________ AND NO/100 DOLLARS ($ ), or such lesser amount
as shall equal the unpaid principal amount of each Syndicated Loan made by the
Bank to the Borrowers (or either of them) pursuant to the Credit Agreement
referred to below, on the dates and in the amounts provided in the Credit
Agreement. The Borrowers promise to pay interest on the unpaid principal amount
of this Syndicated Loan Note on the dates and at the rate or rates provided for
in the Credit Agreement. Interest on any overdue principal of and, to the extent
permitted by law, overdue interest on the principal amount hereof shall bear
interest at the Default Rate, as provided for in the Credit Agreement. All such
payments of principal and interest shall be made in lawful money of the United
States in Federal or other immediately available funds at the office of Wachovia
Bank, N.A., 191 Peachtree Street, N.E., Atlanta, Georgia 30303-1757, or such
other address as may be specified from time to time pursuant to the Credit
Agreement.

         All Loans made by the Bank, the respective maturities thereof, the
interest rates from time to time applicable thereto, and all repayments of the
principal thereof shall be recorded by the Bank and, prior to any transfer
hereof, endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; PROVIDED that
the failure of the Bank to make any such recordation or endorsement shall not
affect the obligations of the Borrowers hereunder or under the Credit Agreement.

         This Syndicated Loan Note is one of the Syndicated Loan Notes referred
to in the Amended and Restated Credit Agreement dated as of even date herewith
among Gables Realty Limited Partnership, the Banks listed on the signature pages
thereof and Wachovia Bank, N.A., as Administrative Agent, as amended by First
Amendment to Credit Agreement dated as of June 14, 1999 and Second Amendment to
Credit Agreement dated of even date herewith (which added Gables-Tennessee
Properties as a Borrower) (as the same may hereafter be amended and modified
from time to time, the "Credit Agreement"). Terms defined in the Credit
Agreement are used herein with the same meanings. Reference is made to the
Credit Agreement for provisions for the optional and mandatory prepayment and
the repayment hereof and the acceleration of the maturity hereof, as well as the
obligation of the Borrower to pay all costs of collection, including reasonable
attorneys fees, in the event this Syndicated Loan Note is collected by law or
through an attorney at law.


                                       4


         The Borrowers hereby waive presentment, demand, protest, notice of
demand, protest and nonpayment and any other notice required by law relative
hereto, except to the extent as otherwise may be expressly provided for in the
Credit Agreement.


         IN WITNESS WHEREOF, each of the Borrowers has caused this Syndicated
Loan Note to be duly executed, under seal, by its duly authorized officer as of
the day and year first above written.

                                                           
GABLES-TENNESSEE PROPERTIES (SEAL)                            GABLES REALTY LIMITED
By:      Gables Realty Limited Partnership,                   PARTNERSHIP                           (SEAL)
         a general partner                                    By:  Gables GP, Inc., its sole general partner
         By:  Gables GP, Inc., its sole general
              partner


By:                                                           By:
         ---------------------------------------                    ---------------------------------------
         Marvin Banks, Jr.                                          Marvin Banks, Jr.
         Vice President                                             Vice President










                                       8


                          Syndicated Loan Note (cont'd)


                   SYNDICATED LOANS AND PAYMENTS OF PRINCIPAL



                     BASE RATE                AMOUNT            AMOUNT OF
                  OR EURO-DOLLAR                OF             PRINCIPAL       MATURITY        NOTATION
DATE                    LOAN                   LOAN              REPAID          DATE          MADE BY




                                                                               

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________





                                       9


                                                                     EXHIBIT A-2


                             MONEY MARKET LOAN NOTE

                             As of November 23, 1999



         For value received, GABLES REALTY LIMITED PARTNERSHIP, a Delaware
limited partnership and GABLES-TENNESSEE PROPERTIES, a Tennessee general
partnership (collectively, the "Borrower"), jointly and severally promises to
pay to the order of _________________, a _______________ (the "Bank"), for
the account of its Lending Office, the principal sum of ONE HUNDRED TWELVE
MILLION, FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($112,500,000), or such
lesser amount as shall equal the unpaid principal amount of each Money Market
Loan made by the Bank to the Borrower (or either of them) pursuant to the
Credit Agreement referred to below, on the dates and in the amounts provided
in the Credit Agreement. The Borrowers promise to pay interest on the unpaid
principal amount of this Money Market Loan Note on the dates and at the rate
or rates provided for in the Credit Agreement referred to below. Interest on
any overdue principal of and, to the extent permitted by law, overdue
interest on the principal amount hereof shall bear interest at the Default
Rate, as provided for in the Credit Agreement. All such payments of principal
and interest shall be made in lawful money of the United States in Federal or
other immediately available funds at the office of Wachovia Bank, N.A., 191
Peachtree Street, N.E., Atlanta, Georgia 30303-1757, or such other address as
may be specified from time to time pursuant to the Credit Agreement.

         All Money Market Loans made by the Bank, the respective maturities
thereof, the interest rates from time to time applicable thereto, and all
repayments of the principal thereof shall be recorded by the Bank and, prior to
any transfer hereof, endorsed by the Bank on the schedule attached hereto, or on
a continuation of such schedule attached to and made a part hereof; PROVIDED
that the failure of the Bank to make any such recordation or endorsement shall
not affect the obligations of the Borrower hereunder or under the Credit
Agreement.

         This Money Market Loan Note is one of the Money Market Loan Notes
referred to in the Amended and Restated Credit Agreement dated as of even date
herewith among Gables Realty Limited Partnership, the Banks listed on the
signature pages thereof and Wachovia Bank, N.A., as Administrative Agent, as
amended by First Amendment to Credit Agreement dated as of June 14, 1999 and
Second Amendment to Credit Agreement dated of even date herewith (which added
Gables-Tennessee Properties as a Borrower) (as the same may hereafter be amended
and modified from time to time, the "Credit Agreement"). Terms defined in the
Credit Agreement are used herein with the same meanings. Reference is made to
the Credit Agreement for provisions for the optional and mandatory prepayment
and the repayment hereof and the acceleration of the maturity hereof, as well as
the obligation of the Borrowers to pay all costs of collection, including
reasonable attorneys fees, in the event this Money Market Loan Note is collected
by law or through an attorney at law.


                                       10


         The Borrowers hereby waive presentment, demand, protest, notice of
demand, protest and nonpayment and any other notice required by law relative
hereto, except to the extent as otherwise may be expressly provided for in the
Credit Agreement.


         IN WITNESS WHEREOF, each of the Borrowers has caused this Money Market
Loan Note to be duly executed, under seal, by its duly authorized officer as of
the day and year first above written.



                                                  
GABLES-TENNESSEE PROPERTIES (SEAL)                   GABLES REALTY LIMITED
                                                  
By:      Gables Realty Limited Partnership,          PARTNERSHIP                           (SEAL)
         a general partner                           By:  Gables GP, Inc., its sole general partner
         By:  Gables GP, Inc., its sole general
                 partner


By:                                                  By:
         --------------------------------------           -------------------------------------------
         Marvin Banks, Jr.                                Marvin Banks, Jr.
         Vice President                                   Vice President





                                       11



                         Money Market Loan Note (cont'd)

                  MONEY MARKET LOANS AND PAYMENTS OF PRINCIPAL



- -------------------------------------------------------------------------------------------
                                   AMOUNT     AMOUNT OF              STATED
                INTEREST             OF       PRINCIPAL             MATURITY        NOTATION
DATE              RATE              LOAN       REPAID                 DATE          MADE BY



                                                                    

_______________________________________________________________________________________________________


_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________




                                       12








































                     CONSENT AND REAFFIRMATION OF GUARANTORS

         Each of the undersigned (i) acknowledges receipt of the foregoing
Second Amendment to Credit Agreement (the "Second Amendment"), (ii) consents to
the execution and delivery of the Second Amendment by the parties thereto, the
release of Gables-TN as a Guarantor under the Guaranty and its addition as a
Borrower under the Credit Agreement and (iii) reaffirms all of its obligations
and covenants under the Guaranty Agreement dated as of May 13, 1998 executed by
it, and agrees that none of such obligations and covenants shall be affected by
the execution and delivery of the Second Amendment. This Consent and
Reaffirmation may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which counterparts, taken
together, shall constitute but one and the same instrument.


                                         GABLES GP, INC.                 (SEAL)


                                         By:    Marvin R. Banks, Jr.
                                              __________________________________
                                                Title: Senior Vice President


                                         GABLES RESIDENTIAL TRUST   (SEAL)


                                         By:    Marvin R. Banks, Jr.
                                              __________________________________
                                                Title: Senior Vice President


                                       13

EX-21.1

                                                                    EXHIBIT 21.1

          SCHEDULE OF SUBSIDIARIES OF GABLES REALTY LIMITED PARTNERSHIP




                                                            JURISDICTION OF         OTHER NAMES UNDER WHICH
SUBSIDIARY                                                   ORGANIZATION             SUBSIDIARY DOES  BUSINESS
- ----------                                                  ---------------         ---------------------------

                                                                              
Central Apartment Management, Inc.                            Texas                   Gables Residential
                                                                                      Services and Gables
                                                                                      Corporate
                                                                                      Accommodations

East Apartment Management, Inc.                               Georgia                 Gables Residential
                                                                                      Services and Gables
                                                                                      Corporate
                                                                                      Accommodations

Gables-Tennessee Properties, L.L.C.                           Tennessee               None

Gables Central Construction, Inc.                             Texas                   None

Gables East Construction, Inc.                                Georgia                 None

Candlewood-Indian Creek Limited Partnership                   Georgia                 None

Pin Oak Green                                                 Texas                   None

Pin Oak Park Apartments                                       Texas                   None

GRT Villas Limited Partnership                                Texas                   None

Boca Place Associates, Ltd.                                   Florida                 None

Boynton Beach I Limited Partnership                           Florida                 None

CM Bay Associates                                             Florida                 None

Hampton Lakes Associates                                      Florida                 None

Hampton Lakes II Associates                                   Florida                 None

Hampton Place Joint Venture                                   Florida                 None

Kings Colony Associates, Ltd.                                 Florida                 None

Mizner I Limited Partnership                                  Florida                 None

San Michele Joint Venture                                     Florida                 None

San Remo Limited Partnership                                  Florida                 None










                                                            JURISDICTION OF         OTHER NAMES UNDER WHICH
SUBSIDIARY (cont'd.)                                         ORGANIZATION             SUBSIDIARY DOES  BUSINESS
- --------------------                                        ---------------         ---------------------------

                                                                              
TCRDAD Vinings at Boynton Beach II                            Florida                 None

TCRDAD Wellington Limited Partnership                         Florida                 None

Town Colony Associates                                        Florida                 None

Town Colony II Associates                                     Florida                 None

Vinings Realty Partners LLC                                   Florida                 None

Gables Lions Head Limited                                     Texas                   None

Gables Rivercrest II Limited                                  Texas                   None

EX-23.1

                                                                    EXHIBIT 23.1


                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS



As independent public accountants, we hereby consent to the incorporation of
our reports, included in the Form 10-K, into Gables Realty Limited
Partnership's previously filed Registration Statements on Form S-3 (File
Nos. 333-30093 and 333-68359).

/s/ Arthur Andersen LLP

Atlanta, Georgia
March 28, 2000

EX-27.1

 


<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF GABLES REALTY LIMITED PARTNERSHIP FOR THE YEAR ENDED DECEMBER 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.

<CIK> 0001039797
<NAME> GABLES REALTY LIMITED PARTNERSHIP
<MULTIPLIER> 1,000

                             
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1999
<PERIOD-START>                             JAN-01-1999
<PERIOD-END>                               DEC-31-1999
<CASH>                                          16,834
<SECURITIES>                                         0
<RECEIVABLES>                                        0
<ALLOWANCES>                                         0
<INVENTORY>                                          0
<CURRENT-ASSETS>                                     0
<PP&E>                                       1,589,384
<DEPRECIATION>                                 172,247
<TOTAL-ASSETS>                               1,471,364
<CURRENT-LIABILITIES>                                0
<BONDS>                                        755,485
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                             0
<OTHER-SE>                                     660,261
<TOTAL-LIABILITY-AND-EQUITY>                 1,471,364
<SALES>                                              0
<TOTAL-REVENUES>                               245,597
<CGS>                                                0
<TOTAL-COSTS>                                  142,251
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                              45,178
<INCOME-PRETAX>                                 67,032
<INCOME-TAX>                                         0
<INCOME-CONTINUING>                             67,032
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    52,949
<EPS-BASIC>                                       1.64
<EPS-DILUTED>                                     1.64